Financial liquidity filters where is allowed and convenient. In China, real estate development internal curbs, are beginning to be balanced by purchases abroad. The one-house-for-family policy does not impede the wealthy and the institutional Chinese investors to acquire overseas properties. At reasonable prices, Chinese investors can buy historical and lucrative assets. This path is now increasingly being pursued by a combination of private and public interests.
If a bubble has to grow, let it be abroad, not at home. Move money away from home and fight the inflation. In addition, a new opportunity arises for China’s allocation of its huge foreign reserves. The big names of international finance are involved. The Beijing sovereign fund, CIC, China International Corp, has inked deals in distressed assets with Carlyle, Wells Fargo, and American International Group.
After the downfall ignited by the sub-prime crisis, the US market needs injections of money. This matches very well with Chinese needs and ambitions. “They refinanced the property and reconstituted the entire capital stock”, said Robert Underhill, head of the New York branch of Shorenstein, an old and very reputed real estate organization. The most visible results see prestigious buildings – in Manhattan, London, Hong Kong and Australia – falling in Chinese hands. Mainland wealthy families play a role, too.
They bet on today’s low prices of western real estate, or diversify their portfolio, or prepare their son’s future near an American University. One of the most fashionable activity for rich Chinese is to join the shopping tour on real estate organized by specialized intermediaries. Total investment from China in the USA grew from 18 in 2009 to $ 127 million in 2010. It represents little but promising vital oxygen for a $ 3.2 trillion indebted market.
A similar situation applies to Hong Kong and London: It is estimated that capitals from China contributed to the property market’s trading volume for 80 and 20%, respectively. In London, CIC funded the refinancing of an 8.45% share in Canary Wharf, the gigantic construction project on the old docks. The investment, even if meaningful, is less charming than the recent purchase of a Chateau and its vineyard, the fifth of its kind, in Burgundy. Chinese billionaire Yin Guolong presented the winery as a gift to his 20-year-old son. It is a profitable combination of love, pleasure, and business: a sign that drinking wine is not as intriguing as to sell it.