Singapore-based property company CapitaLand plans to double its investment in China over the next few years by acquiring or merging retail malls.

The listed group has already poured 6 billion yuan (US$726 million) into China over the past 10 years, approximately 8 percent of its global total, making the country its second largest overseas market behind Australia.

But this movement into the merger of retail malls marks a change in tack for CapitaLand's Chinese investments, which formerly focused on the launch of office and apartment buildings.

"We will possibly double the investment in the next several years to expand our property business in China," Lim Ming Yan, president of CapitaLand China Holdings Group, told China Daily.

"We are seeking opportunities to acquire retail malls in Shanghai since it is a big commercial metropolis. Negotiations are under way."

The company's wholly-owned subsidiary, CapitaRetail China Investment Pte Ltd, recently signed a co-operative contract with the Shenzhen International Trust & Investment Co Ltd (SZITIC) to acquire a 51 percent equity stake in the six project companies anchored by the Wal-Mart chain of supercentres at a cost of 998 million yuan (US$121 million).

It also acquired a 100 percent equity stake in two retail malls from the Beijing Hualian Group Investment Holding Co Ltd for 1.746 billion yuan (US$211 million) early this month.

"What we have done in China will create an opportunity for the acquisition of future assets," said Liew Mun Leong, chief executive officer of CapitaLand Group.

CapitaRetail China has been granted the first right to acquire a majority of the retail malls anchored by Wal-Mart, which SZITIC may propose to develop, and Beijing Hualian.

Wal-Mart has a committed long-term strategy for China, with the intention of opening 20-30 new supercenters in the next few years.

Liew said CapitaLand also has the opportunity to create property funds to meet the increasing demand of retail and institutional investors for such financial products.

"Looking ahead, the properties could form the portfolio of a China retail property fund which has listing potential," he said.

At present, CapitaLand relies mainly on overseas private funds to collect capital for the projects in China.

"But the procedures of using the overseas capital is very complicated, involving taxation and other matters," Lim said.

"We have no property development fund or long-term investment fund in China at the moment. But we believe the market environment will change as investors' demand grows," he said.

Should a retail property fund be set up, it is likely to be listed within two years, according to Goh Soon Yong, general manager of Raffles City Shanghai, who is now in charge of the retail mall acquisition in China.

(China Daily February 7, 2005)