Listed firms, State enterprises may lose focus on core businesses
The move by a publicly traded domestic company to sell real estate assets to solve its financial problems shows that the Chinese economy relies too heavily on the property sector, which is not good for growth, an expert said on Wednesday.
Though real estate is still a hot sector in China that might help some companies with their financials, focusing primarily on the sector will drag down their research and development capabilities and competiveness, Feng Liguo, an expert at the Beijing-based China Enterprise Confederation, told the Global Times.
Feng's comment followed news of Shenzhen-listed Nanjing Putian Telecommunications Co's plan to sell two apartments in Beijing, in a bid to improve its financials.
The two apartments, which are located in Xicheng district, are shown in its accounts at a net book value of 1.3 million yuan, compared with an assessed value of 22.73 million yuan as of July 31.
The figures were included in a company announcement on an official information disclosure website cninfo.com.cn on Wednesday.
Nanjing Putian Telecommunications said the sale will give it more working capital and improve its earnings.
The company has been facing financial problems, posting losses of 18.98 million yuan in 2014 and 16.59 million yuan in 2015, which drew official warnings from the Shenzhen Stock Exchange in early March that the company might be delisted.
The picture remained dark in the first six months of 2016, when the company lost 21.11 million yuan, according to filings.
Feng said Nanjing Putian Telecommunications is not the only company turning to the hot real estate sector for gains. Large State-owned or private companies like grain trader COFCO Corp and China Minmetals Corp have also used revenue from their property businesses to support their main operations.
"But I don't think it is normal because it shows the Chinese economy is too reliant on the real estate sector," Feng said.
In addition, Feng said, companies' drive to invest in the real estate sector will harm their main businesses as they will lack the cash to concentrate on research and development and innovation.
