Fitch Ratings has affirmed China Overseas Land & Investment Limited's (COLI) Long-Term Issuer Default Rating (IDR), senior unsecured rating and the rating on the COLI-guaranteed senior unsecured notes at 'A-'.

The Outlook on the IDR is Stable.

COLI's IDR incorporates support from its ultimate parent, China State Construction Engineering Corporation Ltd (CSCEC, A/Stable). We expect the support from CSCEC to COLI's immediate parent, China Overseas Holding Limited (COHL), to flow through to COLI, due to its strategic importance to China's housing industry.

COLI's Standalone Credit Profile (SCP) of 'bbb+' is supported by its market leadership, a healthy financial structure and strong financial flexibility over economic cycles. The Stable Outlook reflects Fitch's expectation that COLI's operations, financials and liquidity will remain stable.

Key Rating Drivers

Strategic Importance of Homebuilding Operations: The operations of CSCEC and COLI are closely aligned with the duties of China's Ministry of Housing and Urban-Rural Development (MOHURD) in regulating and developing construction and housing activities in urban and rural areas in China. State-owned enterprises (SOEs) are leading the renovation and upgrade of China's pre-1990 housing stock, which is a long-term task that requires expertise. CSCEC - with input from COLI - works closely with MOHURD and is the only SOE with market-leading positions in both construction and housing.

Strong Parent Supports Subsidiary: COLI's IDR benefits from the stronger credit profile of CSCEC through COHL. COHL has 'High' strategic, 'High' operational and 'Medium' legal incentives to support COLI, under our Parent and Subsidiary Linkage Rating Criteria. COLI makes significant financial contributions to COHL and is CSCEC's only homebuilding platform, after CSCEC injected all property assets in 2015. COLI is the only property SOE with an integrated operation with its parent. A substantial portion of COHL's bank loans have cross-default clauses with key subsidiaries, including COLI.

Sales Recovery in 2023: COLI's total sales rose by 55% yoy in 5M23, outpacing the industry's 8% increase, according to the National Bureau of Statistics of China. Its attributable sales ranked in the top three in 2022 and 5M23, rising from the top six in 2020 and 2021, based on China Real Estate Information Corporation data.

We expect COLI's sales to rise by 20% in 2023, which implies sales of CNY29.5 billion or 3.5% yoy growth each month from June to December, considering the company's sizable sellable resources and land bank in higher-tier cities. About 76% of its total sellable resources were in Tier 1 and major Tier 2 cities as of end-2022. Management said COLI has about CNY790 billion (including those of China Overseas Grand Oceans Group Ltd (BBB/Stable) of available sellable resources for 2023 - excluding land acquired this year -against projected sales of about CNY350 billion.

Land Banking to Support Growth: COLI budgeted for its land banking expenditure in 2023 to increase by a double-digit percentage, but it has only acquired four parcels for CNY7.7 billion, equivalent to 5% of sales in 5M23 (2022: 48%). Management said this was mainly due to strong land auction competition in higher-tier cities where buyers of land are decided by lottery.

Management expects more opportunities for land acquisition in the second half of the year, as many developers prefer to bid in the first half so that the land may contribute to sales in the same year. That said, we believe COLI's sellable resources can support at least three years of sales.

Leverage Higher but Remains Healthy: We believe COLI can maintain leverage - net debt/net property assets - around 30%, based on our assumption of a 2023 sales recovery, a sustained strong cash collection rate of over 90% and flat land acquisition expenditure. COLI's leverage rose to 31% in 2022 from 26% in 2021, due mainly to a large reduction in sales while land and construction expenditure fell by a smaller extent. It maintained land acquisition activities in 2022, with total land premium (including M&A) remaining high at CNY121.4 billion, or 48% of total sales in the year.

Retaining Offshore Funding: About 37% of COLI's debt was offshore borrowing at end-2022, including 22% from Hong Kong dollar bank loans and 14% from US dollar senior notes. COLI plans to refinance the majority of its Hong Kong dollar bank loans with HIBOR-based floating-rate loans to avoid locking in high fixed rates, and to repay the near-term US dollar maturities using proceeds from lower-cost offshore yuan-denominated bonds or cash on hand. We expect limited impact on COLI's SCP from potential funding cost increase, given the company's high rating headroom.

Derivation Summary

COLI, one of China's top homebuilders, has displayed resilience through several industry downturns during its 44-year operating history. It has maintained low leverage and consistently generated higher net margins than peers because of its strong market position and effective cost management.

We compare COLI with top homebuilder peers, including China Vanke Co., Ltd. (BBB+/Stable), China Resources Land Ltd (CR Land, BBB+/Stable) and Poly Developments and Holdings Group Co., Ltd. (BBB+/Stable, SCP: bbb). COLI's leverage is among the lowest while its balance-sheet transparency is among the highest.

COLI has larger attributable sales than CR Land and lower exposure to joint ventures (JVs) and non-controlling interests (NCI). However, CR Land has a stronger investment-property portfolio that generates stable recurring income, providing better protection against business cycles. Vanke's scale is larger and return efficiency is higher, but Vanke has much higher exposure to JVs and NCI, indicating weaker balance-sheet transparency. Poly's leverage is high relative to peers, reflecting a one-notch lower SCP.

Key Assumptions

Fitch's Key Assumptions Within Our Rating Case for the Issuer:

Total contracted sales to increase by 20% in 2023 (5M23: +55%) and flat sales in 2024. Our assumption of 20% sales growth in 2023 is in line with management guidance;

Attributable gross floor area (GFA) acquired/GFA sold at 0.7x in 2023 (2022: 0.7x) and 1x in 2024;

Construction expenditure to account for 35% of sales in 2023 and 30% in 2024;

Weighted-average interest cost to increase by 50bp in 2023, before falling by 30bp in 2024 (2022: 3.57%), based on Fitch's forecast of US dollar policy rate movements and 20% of COLI's debt from HIBOR-based floating-rate loans, and expectations of stable borrowing costs for the rest of COLI's debt;

Dividend payout ratio at 30% in 2023 and 2024 (2022: 30.8% of core net profit which excludes after-tax fair value gain of investment properties and net foreign exchange gains and losses).



Factors that could, individually or collectively, lead to positive rating action/upgrade:

Positive rating action on COHL, whose rating is linked to the ultimate parent CSCEC's rating.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Negative rating action on COHL, whose rating is linked to the ultimate parent CSCEC's rating;

A perceived weakening of incentives for COHL to support COLI.


Factors that could, individually or collectively, lead to the SCP being revised higher:

A revision higher is not expected over the next 12 to 18 months due to the high cyclicality and regulatory risks in China's property sector.

Factors that could, individually or collectively, lead to the SCP being revised lower:

Deterioration in COLI's net debt/net property assets to above 35% over a sustained period could lead to a lower SCP.

For the rating on CSCEC, the following sensitivities were outlined by Fitch in its ratings action commentary of 21 September 2022:

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Positive rating action on the Chinese sovereign (A+/Stable);

Increasing likelihood of support from the Chinese sovereign.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Negative rating action on the Chinese sovereign;

Decreasing likelihood of support from the Chinese sovereign.

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit

Liquidity and Debt Structure

Ample Liquidity: COLI had readily available cash of CNY84.5 billion, and restricted cash (including regulated pre-sale proceeds) of CNY25.8 billion, at end-2022. This can sufficiently cover short-term debt of CNY39.4 billion, including capital market debt that is puttable in 2023.

Fitch expects the group to maintain strong liquidity to fund development costs, land-premium payments and debt obligations, given diversified funding channels onshore and offshore, long-term relationships with banks and financial institutions, and a flexible land-acquisition strategy. COLI issued various medium-term notes and corporate bonds in 2022, totalling CNY23.5 billion with costs from 2.25% to 3.5%.

Issuer Profile

COLI, incorporated in 1979, has been listed on the Hong Kong stock exchange since 1992 and is one of China's top property developers.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit

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