- CNTV English - CCTV News

Foreign investors shy from buying

01-11-2012 11:41 BJT

By Hu Yuanyuan

BEIJING, Jan. 11 (Xinhuanet) -- It's a frustrating time for overseas investors in Chinese real estate, especially those looking to turn a quick profit.

A migrant worker passes a poster for housing developments in Shaoyang, Hunan province.
The country's economic growth slowed last year due to tight control of the property
market and a recession in world business. (Photo: Lu Jianshe / for China Daily)

One potential investor, a managing director in Hong Kong for a leading US fund, looked into many real estate projects in China last year but did not sign any deals.

Instead, he sold a number of big projects ahead of pre-set investment deadlines.

He requested anonymity because of company policy against speaking to the media. But he was clear about his exasperation at not being able to achieve his objectives.

"Despite the ongoing correction in China's property market, investment opportunities are not as competitive as the EU and US," he said.

All investment decisions for his global real estate fund are made by its New York office.

"We have to compete with other teams in the EU and US where there are more bargains because of the recession," he said.

"Our investment in China, in fact, is more on the long-term perspective and for risk diversification in our global investment portfolio."

Significant outflow

His case is quite representative. John Wong, director of investment services at Colliers International (Beijing), a real estate consultancy, said that overall, more international real estate capital was withdrawn from China than came in last year.

In Beijing, for instance, approximately 10 en bloc sales transactions were concluded and disclosed in 2011 but there was little foreign participation. Domestic investors - State-owned enterprises, financial institutions and private developers - continued to denominate the market, while overseas investors' involvement became more constrained, according to a recent report by Colliers International.

China's real estate sector and stocks are the major fields that have been favored by international hot money, the funds flowing from one country to another to earn a short-term profit. Those funds are leaving China.

A key indicator for analysts is the amount of foreign exchange bought by Chinese banks, and the amounts declined in November for the second consecutive month. (The release of December figures is expected later this month.)

The percentage of change does not sound like much, but it is significant when the purchases in a month total hundreds of trillion yuan.

After a strong September, the value of purchases fell in October for the first time in four years - down 0.09 percent, 24.9 billion yuan. In November, purchases dropped 0.11 percent, the largest monthly decline since December 2007.

Less taste for risk

The reasons for the capital outflow, analysts said, include global investors' lessened appetite for risky assets amid the global economic recession, growing worries over a hard landing by China's economy and the yuan's recent depreciation.

Ding Zhijie, dean of the School of Banking and Finance at the University of International Finance and Economics, said the yuan's decline demonstrates the shortage of dollar liquidity.

"Since the worsening European debt crisis sent global financial markets into turmoil by the end of September, it's an obvious trend that global capital has been flowing into dollar-dominated assets," Ding said. The US dollar has been in great demand in the market, he said.

According to the State Administration of Foreign Exchange, the annual inflow of hot money to China during the past decade averaged nearly 25 million U.S. dollars. Total accumulated inflow 2003-10 hit 300 billion U.S. dollars, betting on appreciation of the yuan.

Most of this capital sought haven for speculative profits in the property market, the stock market and the underground banking system.

"Lower growth in Europe in the course of fiscal austerity and the banks' needs to increase capital coverage would affect East Asia," Bert Hofman, the World Bank's chief economist for East Asia and the Pacific, said in November. He said that less credit from European banks could mean reduced capital flows to the Asia-Pacific region.

Lu Zhengwei, chief economist with Industrial Bank, said investors' worries about an economic hard landing and the risks of local government debt also contributed to the outflow of hot money.

The country's economic growth slowed last year, from 9.7 percent in the first quarter to 9.5 percent in the second and 9.1 in the third. Most economists have estimated China's economy will grow 8 to 8.5 percent this year, dragged down by falling exports and investment.


Hot Videos view more

The celebrations are still continuing as the victorious coach, Joachim Loew, has been honored for his achievement in his hometown of Freiburg.
Germany coach Loew honored in hometown of Freiburg

Chinese men´s national team continued its preparations for next year´s Asian Cup, as they managed a one-all draw against visitors Jordan during a football friendly in Harbin, the capital city of Northeast China´s Heilongjiang Province.
China held to 1-1 draw by Jordan

The defending world champs came into the contest with a perfect 6-and-oh record, but they would be in for a tough first half before opening things up in the second.
USA beat Slovenia 119-76 in quarter-finals

Hot Stories more

UK authorities believe killer of James Foley is a British national

Across the UK the hunt is on for James Foley’s killer, who authorities believe is a British national. As Richard Bestic reports from London, Prime Minister David Cameron cut short his summer break to lead his government’s response.

Israeli war jets renews Gaza strike as truce talks stalled

Three Palestinians were killed and 40 others wounded in the intensive Israeli war jets´ airstrikes on the Gaza city on Tuesday night, shortly before an end of a 24-hour ceasefire in the Gaza Strip,

Missouri police arrest dozens after violent night

As the protests in the town of Ferguson, Missouri turned violent with police facing ´heavy gunfire´ from some ´criminal elements´, cops fired tear gas, stun grenades and arrested 31 demonstrators on Monday night.

Picture in news more

More Video News

Choose TV Program