Foreign Property Investment Half of China’s Total

October 11, 2006 at 10:25 pm (China, Economics)

Foreign direct investment in China’s property market in the first half of this year reached $2.77 billion, about 60 percent of China’s total real estate investment, said Jones Lang LaSalle, a real estate consultancy company. Almost all of the overseas investment in China’s property market is betting on the appreciation of the yuan.

In China’s strictly controlled capital market, real estate is the only place where foreigners can directly drop their money. The hot money from abroad pushed up property prices, and the hiking prices assimilated most Chinese’s life savings.

Chinese authorities have released several regulations to cool the property market, including rules discouraging foreign investment. Those rules were mostly disobeyed by local governments, who seized the property industry as their pivotal source of tax and revenue.

Even if being correctly carried out, those rules can’t quench the investment fever. Overseas investment did exacerbate the property fever, but the skyrocketing housing prices are rooted on the overall demand. The urbanization generated much more housing demand than the market was able to provide. And this trend won’t stop in the following 10 years.

Despite the seeming decisive stance of China’s government to curb the market, real estate is still the best haven where idle American pension funds can rest.

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