(Hexun.com) Recently,several key cities vied for precious land, and several real estate enterpriseshad intense capital competitions in the capital market simultaneously.

According to thelatest news, during the development process of the financial system, theinsurance capital business became a new favorite of the real estate industry,and several real estate enterprises wanted more than participation, and theyattempted to establish their own insurance companies. Completely contrary tothe previous situation that insurance capital purchased real estateenterprises, real estate enterprises were trying to acquire insurance enterprises.

Oceanwide Holdings,which was the first to engage in financial layout, was intensifying thebuilding of troika, i.e. property insurance, life insurance and reinsuranceupon completion of the financial layout such as securities and trust; sinceApril, Country Garden Holdings, Future Holdings, etc. intended to acquire DahSing Life Assurance Company Limited, and Fujian real estate enterprise RongxinGroup was also establishing a joint venture insurance company.

According to theanalysis of insiders, compared with the land reserve competition with a strongshort-term influence, the process of capital layout will influence the futuredevelopment of real estate enterprises in a longer period. It is necessary forthe real estate industry with an average liability ratio of 70%-80% toestablish perfect capital matrix, in order to obtain the long-term development.

Several real estateenterprises intended to open an independent insurance “account”

The couple ofinsurance + real estate is nothing new nowadays, and the most famous case isthe planned acquisition of Vanke by Qianhai Life Insurance. In addition,several insurance companies including Anbang, Ping’an and Sino Life alsointended to acquire real estate enterprises. According to incompletestatistics, up till now, there are over 30 real estate enterprises with theinsurance companies in the top ten shareholders among 134 real estate companieslisted in the stock exchange (A share).

But in recent years,the CP relationship suddenly changed, and several real estate enterprises havebegun to actively engage in the insurance industry and even acquire insurancecompanies with independent accounts.

On April 25, Rongxin ChinaHoldings Co., Ltd. announced that, its subordinate wholly-owned subsidiaryRongxin Investment would establish a joint venture with BOE Technology, PingtanState-owned Assets, Pingtan Investment and Beijing Watertek on April 26, 2016with its business scope covering life insurance, reinsurance and insuranceagency. Rongxin will contribute 400 million Yuan, accounting for 20% of thetotal shares.

In April, according toHong Kong news, Country Garden with a scale of 100 billion would participate inthe acquisition of Dah Sing Life Assurance, and the relevant insurance assetswere estimated at HKD 7.8 billion. Last week, Country Garden CFO Wu Jianbinreplied that, the company would consider transactions of industrialcomplementation, while the outer circle thought it as an indirect admission ofthe fact.

Previously, severalreal estate enterprises including Wanda, Evergrande, Oceanwide Holdings, ShumYip Group Limited and Galaxy Group had made prior insurance layout by becomingan important shareholder of the insurance company or establishing aself-operated insurance company.

It is reported by themedia that, according to the data of CIRC, among the top ten life insurancecompanies with the largest premium income, seven major shareholders from thefive insurance companies including Ping’an Life Insurance and CPIC LifeInsurance are real estate enterprises or mainly engaged in the real estatedevelopment.

The Director ofInvestment and Consulting Service Department of Cushman & Wakefield NorthChina Liu Bing once expressed that, the main reasons for mutual attractionbetween insurance company and real estate company were as follows: firstly, thereal estate industry was still a good investment choice compared with insurancecapital; secondly, insurance capital tended to directly participate in thecontrol right over real estate enterprises and make investments in thehigh-quality projects in addition to financial investment; thirdly, indirectentry into the residential market may be realized by shareholding in realestate enterprises; fourthly, real estate enterprises were short of funds, soinsurance capital with a low cost becomes competitive.

According to insiders,many real estate enterprises were actively establishing their insurance businessplatform, due to the great profit space of insurance business. However, thereal estate industry was capital-intensive with great emphasis on cash flow, socompared with participation in insurance capital, establishment of aself-operated insurance company was more favorable to real estate enterprisesto enhance their capability to control capital.

At the 2016 NationalInsurance Regulation Working Conference held recently, Chairman of CIRC XiangJunbo said that, the national premium income reached 2.4 trillion Yuan in 2015with a year-on-year increase of 20%, and a new high was set in the speed ofindustrial development in the past seven years. The profits of insurancecompany were estimated at 282.36 billion Yuan with a year-on-year increase of38%. The insurance capital utilization realized an income of 780.36 billionwith a year-on-year increase of 45.6% and an average return on investment of 7.56%.

Collaboration ofmultiple parties

Although many realestate enterprises have reached consensus on the entry into the insuranceindustry, it is not easy for developers to rapidly realize coordinateddevelopment between insurance business and real estate industry.

According to theattribute of insurance business, the business scope of insurance companies isdivided into fundamental business and expanded business, and according to riskcharacteristics, it is divided into property insurance company and lifeinsurance company.

Generally speaking,the complete insurance business layout shall cover troika, i.e. property insurance,life insurance and reinsurance, and a number of companies such as Evergrande,Oceanwide and Fosun Group are actively establishing or improving the aforesaidlayout. For instance, Oceanwide Holdings has established the business platformof Asia-Pacific Property & Casualty Insurance, and applied for the licenseof Asia Pacific Reinsurance Co., Ltd. and Asia Pacific Internet Life InsuranceCo., Ltd. The company will greatly increase its capital power upon completionof the three insurance business platforms.

An insider pointed outthat, personal insurance business including life insurance business was one ofthe important businesses in the future, and life insurance was one of theintegration points with high collaboration between the real estate and insuranceindustry, among which community finance was typical collaborative business.

The owner group withfamily as unit has huge demands in medical treatment, finance, endowment,health preservation and education. Within the O2O business circle at a radiusof 1-5km driven by “Internet +”, there is great potential for space imaginationof these demands in the community level such as community finance under rapiddevelopment. The insurance business has also become a target of thetransformation strategy of real estate enterprises.

At the end of lastyear, Oceanwide Holdings announced that, its indirect wholly-owned subsidiaryWuhan Branch planned to establish Asia Pacific Internet Life Insurance Co.,Ltd. jointly with five partners including Yinchuan Baota Fine Chemicals Co.,Ltd. and Giant Investment Co., Ltd., which indicated that Oceanwide Holdingshas expanded towards life insurance business.

In addition, OceanwideHoldings is also developing its property insurance business centered on Asia-PacificProperty & Casualty Insurance. Currently, Oceanwide Holdings is promotingthe increase of 8 billion Yuan in the capital of Asia-Pacific Property &Casualty Insurance. Upon completion, the registered capital of Asia PacificReinsurance will be increased from 2 billion Yuan to 10 billion Yuan, and willbe qualified for operation of investment insurance products. The funds will beused for the establishment of Internet insurance company and sales company,non-insurance equity investment, and domestic real estate and trust plan.

The real estate andsecurities industry respectively accounted for 52.9% and 51.2% of the operatingprofits of Oceanwide Holdings in 2015, and the real estate and securities wereimportant sources of profits. Although the real estate industry still accountedfor a large proportion, in the long run, the company faced higher pressure ofexpenses with great increase in the operating income, and the insurancebusiness would stimulate the business growth of Oceanwide Holdings.

GF Securities pointedout in the recent research report that, under the pattern of “finance +industry + strategic investment” of Oceanwide Holdings, the great increase inthe real estate income would actively promote business collaboration, andimprovement of the license layout and capital power of the financial plate willbe conducive to the diversification of operating income and profits.

According to relevantanalysis, for developers, the insurance capital with a large scale and a lowcost can provide more financial support for the real estate enterprises,developers can have more opportunities to acquire land at a low price andrealize acquisition and expansion, and the two can complement each other'sadvantages and realize in-depth cooperation. Real estate enterprises andinsurance companies may also share customer resources and increase customer viscosity.

Board Chairman LuZhiqiang Attended the Press Conference of the 4^th Session of the 12^thCPPCC

At 14:30 on March 11,the 4^th Session of the 12^th CPPCC held a press conferenceat the Multi-function Hall of the Media Center. Five entrepreneur members wereinvited to answer questions raised by reporters concerning the active role ofboosting confidence in economic development in the structural adjustment,transformation and upgrading, and enhancement of quality and efficiency.

Lu Zhiqiang:Enterprises shall conform to thecurrent trendin “going global”

[CCTV reporter] I havea question for Mr. Lu Zhiqiang. We noticed that China has continuously expandedforeign investment over recent years, and the Chinese enterprises haveexpedited their “going global” process. There are both successful cases andunsuccessful ones. In your opinion, what other risks are the Chineseenterprises facing in going global?

[Member of the StandingCommittee of CPPCC, Vice-chairman of All-China Federation of Industry andCommerce, Chairman and President of China Oceanwide Holdings Group Lu Zhiqiang]Thanks for your question. The government supports the Chinese enterprises to goglobal to expand the international market and participate in the globalresource allocation, which is an inevitable choice and tendency when China'seconomy and the Chinese enterprises have developed to a certain scale. The Chineseenterprises went global as early as 20-30 years ago. In recent years,especially in the recent three years, with the release of a great many nationalpreferential policies in favor of going global, the Chinese enterprises haverealized rapid development in the world. It is favorable to the enhancement of nationaleconomy and improvement of enterprise development.

There are somesuccessful and unsuccessful cases of state-owned enterprises and privateenterprises in recent years, and we have learnt both good and bad experience,which shall be summarized. In my opinion, I have accumulated much from thegoing-global experience of Oceanwide. I have the following thoughts aboutrisks.

Firstly, enterprisesthat have gone global shall conform to the current trend. We shall master thetendency of international economic development, global economic development andchanges in the international exchange rate. Many enterprises just suffered fromlosses due to lack of understanding.

Secondly, when youplan to make investments in foreign countries, you need to get a deepunderstanding of the society, basic legal form, market form, local customs,consumption concept and traditional habit of the country. Some enterprisessuffered from losses due to lack of understanding. Enterprises shall integrate themselvesinto the society and market. That is to say, firstly you need to become aqualified American enterprise when you plan to invest in the USA. A qualifiedEuropean enterprise is capable of investing in Europe, and a qualified Asian orSoutheast Asian enterprise is capable of investing in Asia or Southeast Asia. Onlywhen the Chinese enterprises make a success in foreign countries can theinternational market and consumers have a good recognition of China and theChinese enterprises.

Thirdly, enterprisesthat have gone global often neglect their brand, service mode and products. Anenterprise shall not be deemed as internationalized just because it hasinvested in one or two projects or bought one or two enterprises in foreigncountries. An enterprise will become internationalized only when its productsand brands enjoy a high reputation or influence in the international market.

On the contrary, we shalllearn from many outstanding enterprises in advanced countries in terms of internationalization,since we fall short in several fields. For instance, as we know, numeroushotels have been established since the reform and opening-up, but most of themhave been managed by foreign companies with Chinese staff employed. Objectivelyspeaking, their management is better than ours. In certain sense, it bringsmuch pressure to the Chinese enterprises, and the Chinese enterprises need tomake more efforts in this regard.

Besides, going-globaland internationalization can be both challenges and development objective tothe Chinese enterprises. The Chinese enterprises shall adhere to thegoing-global and internationalization strategy in order to realize their developmentobjective. With unremitting endeavor, the Chinese enterprises will become largeenterprise groups with global influence, which is the contribution of the Chineseeconomy and Chinese enterprises to the global economy and market.