CompaniesChina Evergrande GroupFollowChina Evergrande New Energy Vehicle Group LtdFollowChina Life Insurance Co LtdFollowShow more companiesNov 8 (Reuters) - Chinese authorities have asked Ping An Insurance Group to take a controlling stake in embattled Country Garden (2007.HK), the nation’s biggest private property developer, four people familiar with the plan said.
China’s State Council, which is headed by Premier Li Qiang, has instructed the local government of Guangdong province, where both companies are based, to help arrange a rescue of Country Garden by Ping An, said two of the sources who have direct knowledge of the matter.
A spokesperson for Ping An (601318.SS) said the company had not been approached by the government and denied the information reported by Reuters.
Ping An has “not been asked by (the) Government to takeover Country Garden. We categorically deny this story. It is untrue,” the company said in a statement to Reuters.
It reiterated its denial in a public statement after Reuters first published this report.
A Reuters spokesperson said: “We stand by our reporting.”
The insurer, which vies with China Life (601628.SS) for the title of the country’s biggest insurance group by market value, declined to make its founder and chairman, Ma Mingzhe, available for an interview. Ma, who also uses the English first name Peter, did not respond to an emailed Reuters request for comment.
China’s State Council Information Office and the Guangdong local government did not respond to requests for comment. Country Garden declined to comment.
Ping An’s Hong Kong-listed shares finished 5.4% lower in heavy trade, wiping about $2.1 billion off its market value. Country Garden shares surged 12.2%, valuing the company at about $3 billion, and stocks of other Chinese developers also jumped.
A state-engineered rescue of Country Garden by Ping An would be one of the most significant interventions to date by authorities to support the cash-squeezed and highly indebted property sector, which accounts for one-quarter of China’s economic activity and has sparked fears of a broader financial crisis.
“If this is true, it will have a very significant positive impact on the property and capital markets,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
“Only equity injections, such as corporate takeovers or nationalisations, are likely to turn around the confidence of home buyers and investors and materially change the situation.”
MITIGATING RISKAuthorities are keen that any risks posed by Country Garden’s liquidity problems should not spill over to the wider economy, said three of the sources.
While in China companies can rarely ignore a request from the central government, the three sources said Ping An has been asked to come up with details of the plan and will have leeway to negotiate terms of any deal.
Talks between authorities and core Ping An leaders began in late August and are still at an early stage, said two of them.
Ping An has been…
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