Flourishing Property and Real Estate in China
The stock markets in China have increased by one percent this past week according to the Wall Street Journal. This is most likely due to the fact that investors are still enjoying their holiday-buzz from last week’s Guoqingjie, also known as “Golden Week,” an annual national holiday celebrated in Mainland China, Hong Kong, and Macau during the first week of October. However, despite the global buzz and international media coverage this past week regarding the US presidential debates between Donald Trump and Hilary Clinton on all social media platforms, Chinese fund managers were more interested on the impact of the new property measures that have been introduced during the “Golden Week” holidays.
A number of Chinese cities, including Beijing, Guangzhou, Shenzhen, Suzhou, Chengdu, and Wuhan announced new restrictions on property purchases and mortgage down payment. Depending on the city, the measures that were implemented differ. For example in Beijing, the governor of China’s central bank stepped up rhetoric against some of the rising house prices and decided to continue credit growth. “These measures were implemented as part of an effort to ward off the property speculation,” stated Zhou Xiaochuan, governor of the People’s Bank of China (PBoC). Being the world’s second largest economy by nominal GDP and the world’s largest economy by purchasing power parity, it is only natural that the Chinese government would focus its attention on the property and real estate market since its influence towards the economy is extremely significant and powerful.
Why should you be interested now?
So why should you be interested in the Chinese property and the real estate sector now? Despite the economic recession, the property prices have increased significantly in a very short time span in China. This is mainly due to issues regarding China’s national debt which is over 280% of the national GDP according to Forbes magazine. These statistics may seem alarming but compared to the national debt of the United States which is over 330%, the Chinese economy is relatively stable and the banks remain strong. As a matter of fact, according to an articles published on BBC News (Vaswani, September 28th, 2016) and South China Morning Post (Li, September 27th, 2016), it can be concluded that Chinese banks are currently being encouraged by the government to grant loans to more companies and consumers in order to bring more life back to the economy and regain the acceleration the Chinese market once had. In other words, the Chinese government is trying to pump life back into the economy like they did in the past. China has previously implemented this method from 2008 to 2009 right after the global financial crisis affected by Lehman Brothers back in 2007 and this method was very successful. Thus, the government is hoping that the same formula will work its magic once again.
These drastic measures indicate that banks are granting and handing out loans for property and mortgages now more than ever. The Chinese government hopes that this will create a win-win chain reaction for all; banks will lend money, more people and businesses will purchase property and real estate, real estate and property prices will increase in value, people will feel wealthier, people will spend more money, and the economy will grow.
Even though the economy is in recession, funding resources are easy to find. Hence, right now is the best opportunity to invest in real estate or expand your companies and enterprises to China, a vast market with so much potential for growth and endless opportunities.