slide 4-1 asia/pacific & international real estate 4. a look at china page 57
TRANSCRIPT
Slide 4-1
ASIA/PACIFIC & INTERNATIONAL REAL ESTATE
4. A Look at ChinaPage 57
Slide 4-2
Geography
Page 58
Slide 4-3
12th Five Year Plan
Inclusive growth
Restructure the economy
Reduce social inequality
Protect the environment
Strategic Emerging Industries (SEIs)Page 60
Slide 4-4
Greening of China
Holding local governments accountable for meeting green development targets
Tracking energy consumption per unit of GDP
Reducing emissions with “blue sky day” targets
Page 61
Slide 4-5
7 Strategic Emerging Industries
BiotechnologyNew energyHigh-end equipment manufacturingEnergy conservation, environment protectionClean-energy vehiclesNew materialsNext generation IT
Page 61
Slide 4-6
FDI
$776 billion FDI in China
$332 billion Chinese FDI Abroad
China Investment Corporation—$3.2 trillion
Guanxi
Page 47
Slide 4-7
Rising Renminbi?
When will the renminbi achieve hard-currency status? Renminbi-denominated international deals Capital flows freely in and out Foreign banks hold reserves Free-floating, fully convertible
Could reshape the world’s financial marketsUnleash individual and sovereign wealth
Page 65
Slide 4-8
Dim Sum Bonds
Renminbi-denominated bonds
Avoids government restrictions on foreign debt, but government controls
Invest in China and Hong Kong-based companies
Fixed-asset investments only
Page 66
Slide 4-9
Real Estate in China
Government owns all land, grants leases
Regulations emanate from national level
Provincial and local implementation can vary considerably
Page 66
Slide 4-10
Cooling the Market
Market swings Fear of real state bubble Home buyers priced out of market Widespread dissatisfaction with property prices Competition from speculators
Government action to cool market
Page 67
Slide 4-11
Government Actions
1st home—30 % down payment 2nd home—60% down payment 3rd home—no mortgage financingDevelopers cannot bid on more land if
already own idle landOverseas residents one home for own useHong Kong—additional Stamp Duty
Page 67
Slide 4-12
Financing
Many cash deals
Age limit on mortgage borrower—65 years
Minimum interest rate—1.1 times People’s Bank of China benchmark rate
Seller must pay off mortgage before the property can be sold
Page 68
Slide 4-13
Land Rights
Allocated for a specific purpose Cannot be sold,
transferred, pledged, or mortgaged
Granted for residential or commercial purposes May be pledged,
mortgaged, leased, inherited, and transferred
Renewable leases 70 years residential 50 years industrial 40 years commercial
Renewal regulations TBD Major source of revenue
for local government
Page 68
Granted
Slide 4-14
Rental Property
Pro-landlordRegulated by local governments, no national
laws 2–3 months rent security depositNo automatic renewalLandlord can terminate at any timeNo subleasing
Page 68
Slide 4-15
Can Foreigners Own Real Estate in China?
Work or study in China for more than a year
Personal residence, cannot be rented out
One house only
One non-residential property for business
Property held less than 5 year subject to 5.5% tax on entire transaction
Page 69
Slide 4-16
Real Estate Professionals in China
Sales agents must be licensedNational Ministry of Construction overseesOpen listing real estate marketNegotiable commissions paid by the sellerAgents do not share property informationAgencies post listing on own web sitesStorefront real estate firms
Page 70
Slide 4-17
The Big StoryChinese Buyers
Abroad
Inflation hedge Income from rentalsSafe haven investmentsAvoid ownership
restrictionsBuild a family legacyEducation for childrenFuture emigration, career
development
Page 47
Slide 4-18
China’s Millionaires
1 million+ millionaires Sources of wealth
55% private-business owners
20% property speculators
15% stock market investors
10% high-salaried executives
Prefer real estate investment
4 of 5 wealthy parents want to send children abroad for studies
To English-speaking countries—USA, UK, Canada
Page 73
Slide 4-19
What Does This Mean For You?
New and growing stream of business
Establish and maintain a robust referral network
Professionalism, reliability, trustworthiness earns repeat and referral business
Graduates may stay on to establish careers and build businesses
Page 47
Slide 4-20
Doing Business in ChinaBeyond the Basics
NamesConnections—Guanxi
Women in businessBusiness cardsMeetings
Negotiations and contracts
InterpretersDemeanorBusiness diningA few taboos
Page 78-83