Beijing Capital Land (BCL) said it will buy another 1 million square meters of land this year in second-tier cities on the mainland.

 

That echoes an industrial trend of tapping the potential of more than 90 medium-sized cities on the Chinese mainland.

 

"We plan to add 2 million square meters to our land bank for 1 billion yuan (US$125 million) this year," said Chairman Liu Xiaoguang yesterday.

 

Half of that land to be purchased will be in second-tier cities, he said.

 

"We will continue to expand in smaller cities," Liu said, saying the company has already had projects in such cities as Taiyuan in Shanxi Province and Wuxi in East China's Jiangsu Province, covering 1.77 million square meters in total.

 

BCL last week purchased a parcel of land in Chengdu, Southwest China's Sichuan Province, for 390 million yuan (US$48.75 million).

 

Chongqing is likely to be the next target, where BCL is in talks for a couple of projects, he said. He hoped projects outside Beijing, BCL's long-time base, would contribute 50 percent to sales over the next three years.

 

Currently, Beijing projects earn 62 per cent of the firm's sales, Executive Director Tang Jun said.

 

After acquiring 1.5 million square meters of new land in 2005, BCL now has a land bank of 3.92 million square meters, located in Beijing, Tianjin, Taiyuan, Wuxi and Chengdu.

 

Most of the land is for residential projects.

 

Analysts said it was no surprise that the developer was eager to enter second-tier markets.

 

"These markets have a lot of potential as the mainland's economic boom will gradually reach them," said Liao Qun, chief economist of CITIC Ka Wah Bank.

 

"More and more developers, at home and abroad, will flock to smaller cities," Liao said.

 

By contrast, housing markets in Beijing, Shanghai and Guangzhou are becoming competitive and have not completely shrugged off the shadow of the central and local governments' cooling-down measures.

 

BCL also bowed to that setback last year; it yesterday posted a nearly 20 percent decrease in last year's profit, to 211 million yuan (US$26 million).

 

Sales also dropped by 30 percent to 1.1 billion yuan (US$137.5 million).

 

Macro policies to tame rampant property prices in big cities were blamed for the firm's lack-lustre performance.

 

"Due to the implementation of severe measures put in place from 2004, some of our projects were deferred," Liu said.

 

But he said the situation began to turn around in the second half of last year.

 

BCL will launch 10 projects in 2006, involving about 695,500 square meters.

 

The firm expects these projects to notch up 5 billion yuan (US$625 million) in revenue, the company said.

 

(China Daily April 4, 2006)