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Beijing land ban on Richard Li firm

HONG KONG: Richard Li Tzar-kai's property arm has been banned from buying or selling land in Beijing as part of government efforts to crack down on perceived land speculation.

Pacific Century Premium Developments (PCPD) and its subsidiaries are temporarily prohibited from land transactions, a sign Li's previously rocky relationship with mainland authorities is set to continue.

Beijing, Shanghai and seven provinces - Zhejiang, Shandong, Fujian, Hunan, Guangxi, Jilin and Ningxia - March 12 named developers who had delayed construction work on 18 sites.

However, PCPD was the only developer prohibited from land deals.

The central government is concerned that developers who delay construction intend to benefit from short-term speculation rather than legitimate development.

PCPD, through a subsidiary, acquired a high-end residential site at Gongti Beilu in Beijing for 510 million yuan (HK$578 million) in 2006, and was required to start construction work by September 2007.

However, in October last year, the subsidiary was sold to Shui On Construction and Materials for US$118 million, generating a profit of HK$235 million for PCPD.

According to the Beijing Municipal Bureau of Land and Resources, the local government will fine the subsidiary and suspend PCPD's right to buy and sell sites. The statement did not mention how long the suspension will last nor the size of the fine. A PCPD spokesman said the company had contacted the bureau for further information about the decision.

Vincent Lo Hong-shui, the chairman of Shui On Construction, said in Beijing March 12 that construction work had begun after the company bought the site and he would investigate who should pay the penalty.

Last year a news programme on China Central Television accused PCPD and other developers of speculating on development sites.

It is not the first time relations between Li and the mainland government have been on shaky ground.

In June 2006, Li decided to sell PCCW's core assets to Macquarie Group of Australia for HK$60 billion without receiving approval from Beijing-backed China Netcom, the second-largest shareholder in PCCW.

"The latest issue shows PCPD and its related companies do not have good relations with the mainland government compared with other Hong Kong developers such as Shui On and Wharf Holdings," said Castor Pang Wai-sun, a strategist at Sun Hung Kai Financial.

He said the mainland government appeared determined to continue cooling measures in the overheated property market, despite recent easing in transaction volumes and property prices.

"They don't want to see any speculation in land and property. Foreign companies who focus on property investment rather than development will be affected," Pang said.

The Beijing bureau said China Resources Land had delayed construction of a residential project in the city's Mentougou district.

If the developer did not start construction by March 31, its right to acquire and sell in Beijing would be suspended, it said.

China Resources Land was unavailable to comment. Its shares fell 2.3 per cent to end at HK$16.98.

Shares in PCCW dropped 1.32 per cent to close at HK$2.24 yesterday, while PCPD fell 1.73 per cent to HK$2.84.

Beijing, Shanghai and seven provinces - Zhejiang, Shandong, Fujian, Hunan, Guangxi, Jilin and Ningxia - yesterday named developers who had delayed construction work on 18 sites.

However, PCPD was the only developer prohibited from land deals.

The central government is concerned that developers who delay construction intend to benefit from short-term speculation rather than legitimate development.

PCPD, through a subsidiary, acquired a high-end residential site at Gongti Beilu in Beijing for 510 million yuan (HK$578 million) in 2006, and was required to start construction work by September 2007.

However, in October last year, the subsidiary was sold to Shui On Construction and Materials for US$118 million, generating a profit of HK$235 million for PCPD.

According to the Beijing Municipal Bureau of Land and Resources, the local government will fine the subsidiary and suspend PCPD's right to buy and sell sites. The statement did not mention how long the suspension will last nor the size of the fine. A PCPD spokesman said the company had contacted the bureau for further information about the decision.

Vincent Lo Hong-shui, the chairman of Shui On Construction, said in Beijing yesterday that construction work had begun after the company bought the site and he would investigate who should pay the penalty.

Last year a news programme on China Central Television accused PCPD and other developers of speculating on development sites.

It is not the first time relations between Li and the mainland government have been on shaky ground.

In June 2006, Li decided to sell PCCW's core assets to Macquarie Group of Australia for HK$60 billion without receiving approval from Beijing-backed China Netcom, the second-largest shareholder in PCCW.

"The latest issue shows PCPD and its related companies do not have good relations with the mainland government compared with other Hong Kong developers such as Shui On and Wharf Holdings," said Castor Pang Wai-sun, a strategist at Sun Hung Kai Financial.

He said the mainland government appeared determined to continue cooling measures in the overheated property market, despite recent easing in transaction volumes and property prices.

"They don't want to see any speculation in land and property. Foreign companies who focus on property investment rather than development will be affected," Pang said.

The Beijing bureau said China Resources Land had delayed construction of a residential project in the city's Mentougou district.

If the developer did not start construction by March 31, its right to acquire and sell in Beijing would be suspended, it said.

China Resources Land was unavailable to comment. Its shares fell 2.3 per cent to end at HK$16.98.

Shares in PCCW dropped 1.32 per cent to close at HK$2.24 March 12, while PCPD fell 1.73 per cent to HK$2.84. -- South China Morning Post

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