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Economy

One of China's biggest developers sets its sights on Thailand

Country Garden eyes major project despite Beijing's clampdown on outbound investment

Bangkok's rising skyline is attracting outside developers and stoking fears of a property bubble. (Photo by Keiichiro Asahara)

BANGKOK In a modern office block in Huay Kwang district, the team settling down to a routine Monday morning is employed by the new Thailand branch of Country Garden Holdings, China's largest property developer by contracted sales.

This is the Chinese company's latest foray in Southeast Asia, and a string of projects are planned for the Thai capital next year.

"In addition to Bangkok, Country Garden is also scouting for sites in Pattaya and Phuket," said a veteran of the Thai property market, referring to two seaside resorts that attract millions of foreign visitors each year.

The developer is expected to launch a new brand overseas soon, replacing Country Garden with a rejuvenated and more international vibe.

"Many people in Thailand are not aware of Country Garden," said one property executive. "And those in the know associate it with a suburban Chinese developer of mediocre properties."

The Guangdong-based company -- which has expanded into Australia, Indonesia, India, Laos, Malaysia, Russia, Vietnam, the U.S. and the U.K. since 2012 -- is recruiting locally as Country Garden Thailand.

Bangkok continues to see a property boom that some fear may be turning into a bubble. The hottest properties are condominiums near mass transit systems and residential developments in outlying areas of Greater Bangkok.

One of the leading Thai developers, Sansiri, has been keen to attract foreign buyers. It hopes they will spend 10 billion baht ($305 million) this year -- a figure that has been adjusted up from 7.5 billion baht earlier in the year. The Thai-listed company racked up 5.7 billion baht in foreign sales in 2016, an increase of 55% on the year.

Market watchers are not surprised by Country Garden's interest in the Thai property boom. About 37% of Sansiri's foreign demand last year came from Hong Kong and 31% from China, according to its president, Srettha Thavisin. The government caps foreign ownership in individual condominiums at 49%.

"Country Garden's [initial] projects in Thailand should be smaller scale so that it doesn't invite Chinese government scrutiny," said Alan Jin, an analyst with Mizuho Securities Asia in Hong Kong. Beijing, he notes, is keeping an eye out for projects that require major funding and borrowing. This has reined in overseas expansion in the property sector. "But it doesn't mean that they have to kill all the projects abroad," he said.

A document released in August by China's State Council revealed that regulators had blocked a string of foreign acquisitions out of concern that the companies involved were taking on too much debt. The document also laid out limits on overseas investments in hotels, cinemas, real estate and other areas. Those already on the government's radar include Wanda Group, Anbang Insurance Group, Fosun International and HNA Group, which have all expanded rapidly through debt-fueled foreign acquisitions.

It therefore came as little surprise when Jeff Lin, Country Garden's chief strategy officer, told Bloomberg in September that the company is "hitting the pause button on international expansion" and delaying some investments. Country Garden had been looking at six cities in India but has put those plans on hold for now.

Country Garden, which will join Hong Kong's benchmark Hang Seng Index on Dec. 4, has an impressive top-line spreadsheet. Last year, it more than doubled contracted sales to 308.8 billion yuan ($46.6 billion), making it the third-largest developer by revenue after China Evergrande Group and China Vanke. In the first nine months of 2017, Country Garden's contracted sales reached 428.2 billion yuan, ahead of Vanke's 396.1 billion yuan and Evergrande's 378 billion yuan.

Deutsche Bank expects Country Garden to achieve 530 billion yuan in contracted sales this year, growing 72% on the year.

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