Tmall Haofang is the latest example of how e-commerce has upended consumption and retail sales in the world’s second-largest economy. One in every two mobile phones sold in China is an internet-enabled smartphone, which allows consumers to shop anywhere, and pay for their purchases any time.

The ubiquity of e-commerce has expanded the available universe of purchases for the average Chinese consumer, from fresh produce and seafood to holiday packages and even large items like luxury cars and real estate. Online shopping has been given a further shot in the arm by the coronavirus pandemic, as bricks-and-mortar shops, showrooms and sales centres close to contain the spread of the disease.

To attract homebuyers to adapt to the new way of shopping, Tmall Haofang has prepared 10 billion yuan (US$1.46 billion) in subsidies to fund the developers’ discounts. That is likely to intensify the price war among developers, as they pull out all stops to attract buyers.

The sales channel, launched on September 16, is likely to expand on November 11, the annual online shopping festival known as Singles’ Day, packed with discounts and special offers that have surpassed Black Friday and Cyber Monday since its inception in 2009.

Alibaba operates several online shopping portals, with Tmall acting as the market place comprising branded stores, while Taobao is the venue for ordinary sellers.

Tmall Haofang said it will use 3D technology, live streaming and offer financial services to allow buyers to complete every step of their purchase experience online, without having to step into a show room or bank. About 150,000 units of residential properties were traded on e-commerce site Taobao in 2019, according to Lu Weixing, general manager of Tmall‘s property business.

The additional sales avenue is particularly vital to China’s real estate developers, which are among the most leveraged in the world, as they have tend to finance their construction with bank loans before they are allowed to sell completed property to buyers, for cash. Developers are making up for lost time, as they struggle to generate cash to repay their outstanding loans.

Developers are under pressure to keep their debt-to-asset ratio at 70 per cent after excluding advance receipts, net debt-to-equity at 100 per cent, and short-term borrowings at no more than cash reserves. Failing to meet those “red lines” specified by the People’s Bank of China may result in them being cut off from access to new loans from banks, the state-owned Economic Information Daily reported in late August.

“Developers will offer more discounts, betting on Tmall’s reputation, to shore up their sales and collect as much cash as quickly as possible,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute.

“They need to drum up their sales to gain access to cash to meet the central bank’s requirement, and the upcoming ‘property gala night’ on the new platform will be their best shot.”

China’s economy shrank 6.8 per cent in the first quarter, its worst in decades, before rebounding 3.2 per cent in the three months ended June. As a result, several top developers have either reported lower contracted sales in the first half, or sustained them at lower margins, to generate cash flows.

China Evergrande, the biggest home seller in the county, raised panic among investors last week when a letter – denounced as “fabricated” by the developer – was circulated online showing that it had appealed for the speedy approval of a 2016 business reorganisation plan involving another Shenzhen-based developer, to avoid cash flow issues.

Even though Evergrande stressed the stability of its finances – adding that it had not defaulted once on a loan in 24 years – the size of its borrowings disclosed at more than 800 billion yuan gave some investors cause for pause. Evergrande’s shares fell 14 per cent over two days last week after the fabricated letter surfaced, wiping out HK$30 billion in market value.