China Merchants Land Gets RMB 174 Million for Xi'an Project

China Merchants Land & Investment (00978.HK) secured a RMB 174 million ($24 million) capital injection for a residential project in Xi'an, a move that reduces its financial exposure as other major Chinese cities begin to ease homebuying restrictions.

"The capital injection de-risks the project's development and strengthens our balance sheet," the company said in a filing.

The transaction involves Shenzhen Haiyuejin acquiring a 30 percent equity interest in the project company, China Merchants Garden City, implying a total valuation of approximately RMB 580 million. The deal comes as policymakers take steps to stabilize the sector, with the southern metropolis of Shenzhen recently easing mortgage rules and allowing eligible households to purchase a second home, according to a government announcement on April 29.

This move highlights a key strategy for developers: bringing in partners to share costs and reduce balance-sheet risk on a project-by-project basis. For China Merchants Land, securing funding now allows it to advance the Xi'an development while preserving capital, a crucial advantage when national new home prices are still struggling to find a bottom despite recent policy support.

A Sector-Wide Strategy

The joint-venture model is becoming increasingly common across China's embattled property sector. Developers are seeking to minimize their capital outlay on any single project, opting instead to co-invest with state-backed firms or private capital to navigate the tight liquidity environment. This transaction reduces China Merchants Land's holding in the Xi'an project from 100 percent to 70 percent, effectively sharing future risks and rewards.

The deal follows a broader trend of localized stimulus measures. While Xi'an has not announced similar large-scale easing to Shenzhen, the move by Shenzhen authorities is seen as a potential template for other Tier-1 and Tier-2 cities. According to a Reuters report, the measures are aimed at better meeting residents' homebuying needs and supporting the stable and healthy development of the market.

Xi'an Market Context

The capital, Xi'an, has historically been a more resilient market compared to coastal hubs, but it has not been immune to the nationwide downturn. The RMB 174 million investment from Shenzhen Haiyuejin provides a much-needed vote of confidence in the local market's prospects. The funds are earmarked for a residential development, though specific details on the project's scale and timeline were not disclosed.

The transaction underscores the cautious but strategic deployment of capital in the current environment. Investors are favoring partnerships with established developers like China Merchants Land, a subsidiary of the state-owned conglomerate China Merchants Group, seeing them as safer bets than more heavily indebted private peers.

This article is for informational purposes only and does not constitute investment advice.