Transcript A Look at China Geography

ASIA/PACIFIC & INTERNATIONAL REAL ESTATE
4. A Look at China
Page 57
Slide 4-1
Geography
Page 58
Slide 4-2
12th Five Year Plan
Inclusive growth
Restructure the economy
Reduce social inequality
Protect the environment
Strategic Emerging Industries (SEIs)
Page 60
Slide 4-3
Holding local governments
accountable for meeting
green development targets
Tracking energy
consumption per unit of
GDP
Reducing emissions with
“blue sky day” targets
Greening of China
Page 61
Slide 4-4
7 Strategic Emerging Industries
Biotechnology
New energy
High-end equipment manufacturing
Energy conservation, environment protection
Clean-energy vehicles
New materials
Next generation IT
Page 61
Slide 4-5
FDI
$776 billion FDI in China
$332 billion Chinese FDI Abroad
China Investment Corporation—
$3.2 trillion
Guanxi
Page 47
Slide 4-6
Rising Renminbi?
When will the renminbi achieve hardcurrency status?
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Renminbi-denominated international deals
Capital flows freely in and out
Foreign banks hold reserves
Free-floating, fully convertible
Could reshape the world’s financial markets
Unleash individual and sovereign wealth
Page 65
Slide 4-7
Dim Sum Bonds
Page 66
Renminbi-denominated
bonds
Avoids government
restrictions on foreign
debt, but government
controls
Invest in China and Hong
Kong-based companies
Fixed-asset investments
only
Slide 4-8
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 4-9
Cooling the Market
Market swings
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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 4-10
Government Actions
1st home—30 % down payment
2nd home—60% down payment
3rd home—no mortgage financing
Developers cannot bid on more land if
already own idle land
Overseas residents one home for own use
Hong Kong—additional Stamp Duty
Page 67
Slide 4-11
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 4-12
Granted
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
Page 68
 Renewable leases
 70 years residential
 50 years industrial
 40 years commercial
 Renewal regulations TBD
 Major source of revenue
for local government
Slide 4-13
Rental Property
Pro-landlord
Regulated by local governments, no national
laws
2–3 months rent security deposit
No automatic renewal
Landlord can terminate at any time
No subleasing
Page 68
Slide 4-14
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 years subject to
5.5% tax on entire transaction
Page 69
Slide 4-15
Real Estate Professionals in China
Sales agents must be licensed
National Ministry of Construction oversees
Open listing real estate market
Negotiable commissions paid by the seller
Agents do not share property information
Agencies post listing on own web sites
Storefront real estate firms
Page 70
Slide 4-16
Inflation hedge
Income from rentals
Safe haven investments
Avoid ownership
restrictions
Build a family legacy
Education for children
The Big Story
Chinese Buyers
Abroad
Page 47
Future emigration, career
development
Slide 4-17
China’s Millionaires
 1 million+ millionaires
 Sources of wealth
 55% private-business
owners
 20% property
speculators
 15% stock market
investors
 10% high-salaried
executives
Page 73
 Prefer real estate
investment
 4 of 5 wealthy parents
want to send children
abroad for studies
 To English-speaking
countries—USA, UK,
Canada
Slide 4-18
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 4-19
Doing Business in China
Beyond the Basics
Names
Connections—
Guanxi
Negotiations and
contracts
Interpreters
Women in business
Demeanor
Business cards
Business dining
Meetings
A few taboos
Page 78-83
Slide 4-20