Although China’s stock markets have been hogging the headlines of late, it is real estate that has long been the focus for most Chinese investors. Unfortunately China’s residential property hasn’t had a great run over the past year and a half, but there are signs of things improving.
In July, China’s property prices experienced their fastest growth in 18 months, with only 29 of the 70 main cities reporting falls, compared with 34 in June. The growth contributed to Moody’s predicting a property market recovery in the second half of 2015. This will be assisted by the subsequent announcement that downpayment requirements for second homes will be lowered from 30% to 20% in Chinese cities. China’s property market has significantly more impact on consumer sentiment than its stock market, so the positive signs are welcome.
Although the Shanghai stock exchange is still around 40% higher than it was a year ago, the recent plummet has spooked a lot of Chinese to look for alternative places to invest their cash. While many will resort back to domestic property, more and more are looking for stable and transparent assets abroad.
A Financial Times survey of China’s high net worth individuals found 61% plan to increase their overseas investments in the next two years. Almost half plan to invest more than 30% of their assets abroad. Their main motivation is not for higher yields, but to protect their money – most expected a maximum return of 5% on their investments.
The U.S. is the preferred investment destination for 42% of respondents, made attractive by its robust economy, looser visa restrictions and high quality education. America’s reputation has even seen one of its leading investment banks, Goldman Sachs, counterfeited in Shenzhen. Hong Kong, Australia, Canada and the UK are the next most popular destinations.
Housing is, and will remain, the most attractive investment option domestically and abroad for the growing pool of Chinese investors. 77% of those surveyed by FT owned at least one overseas home. Vancouver has seen an 80% increase in houses selling over $3 million over the past year, of which 70-75% of purchasers have Mainland China connections according to estimates. Although the RMB has dipped a little lately, it is still up on most currencies compared to 12-months ago, which will make overseas investments an increasingly appealing option for China’s growing wealthy classes. We hope you enjoy this week’s Skinny.
Majority of Chinese See Benefits From Trade: 69% of Chinese consumers view greater availability of products from different parts of the world as a good thing, versus 10% who don’t according to Gallup. The most positive are 15-24 year olds at 79% and 25-34 year olds at 73%.
Baidu Wants to Use Your Phone To Make Malls Smarter: China Mall 2020: Baidu’s new app Connect will link shoppers with brick and mortar stores. It can track locations to the accuracy of a metre, even inside shopping malls, sending them relevant promotions and communications while collecting valuable data. Shopper movements can also be tracked in-store to help shop designers better understand and position products and promotions.
Despite Success Of Alibaba, Chinese Online Shoppers Among Most Paranoid When It Comes To Ecommerce Security – And For Good Reason: About one in four of China’s 430 million online shoppers prioritise security when choosing an online vendor according to WorldPay. 70% say they feel more secure shopping when payment authentication and certificate logos are clearly displayed.
China’s Norwegian Salmon Boycott Hits Chinese Consumers: China’s boycott of Norwegian salmon following the Nobel Peace Prize award snafu in 2010, has seen Chinese consumers pay a higher price for poorer quality salmon brought in from Vietnam and Hong Kong. Norway’s market share has actually increased since 2010.
Fake Rice Made With Paper Found In Guangdong: Fake rice made with tiny bits of rolled up paper were discovered in Guangdong after a woman noticed her lunch was harder to chew than normal. The incident follows reports of fake plastic rice earlier this year.
12.5% Of Beverages Failed Chinese Inspections In First-Half Of Year: One in eight beverages sold in China inspected by the China Food & Drug Administration this year did not meet minimum standards. Excessive bacteria was the top reason, followed by poor quality, illegal or excessive additives, heavy metal pollution and chemical residue. Ice cream and aquatic products were the worst performing foods.
German Food Exports To China Surge 47% In First Half: Chinese trust for German-made cars and machines is transferring to other products, with food and beverage exports to China growing 47% between January and June this year. Overall imports grew less than 1% on the back of weak demand for cars.
Alibaba Brings The Taste Of Napa Valley Wine To China: Robert Mondavi Wines has launched an exclusive flagship store on Tmall.com to officially kick off Alibaba’s newly launched “Tmall Vineyard Direct.” Chinese tourists account for about one-third of the 200,000 visitors to Mondavi’s winery each year and the vineyard has been offering Chinese language tours since 2013. In related news, Xinjiang wine maker Changyu has purchased 70% of Spanish wine maker Dicot for $29.5 million.
Chinese Tourists Continue To Spend Despite Economic Turmoil: The share of Chinese households with annual disposable income above $55,000 tripled in just five years, contributing to growing numbers of consumers who can afford to travel. While Chinese tourists have declined to Hong Kong, more than twice as many Chinese visited Thailand than a year earlier and Japan’s July visitors from China more than doubled in 12-months. Australia had 16% more Chinese tourists this July, who are on track to top the 6% they contributed to the country’s 2014 economic growth this year.
Wanda Realm Fuyang Bring Luxury Flourish To China: High end hotels continue to penetrate China’s low-tier cities with Wanda opening a luxury Realm hotel in Fuyang, Anhui province.
Downpayment Requirements For Second Homes Lowered In China: China is hoping to increase house sales by lowering minimum down payments for second home purchases from 30% to 20% – the same as first homes. The new policy applies across China, with the exception of Tier 1 cities Beijing, Shanghai, Guangzhou and Shenzhen who can determine their own rates.
Wealthy Chinese Prepare To Take Capital Abroad: Almost half of China’s high net worth individuals plan to invest more than 30% of their assets abroad. 61% overall plan to increase their overseas investments in the next two years.
Shenzhen Goldman Sachs Is China’s Latest Fake: A local financial leasing company in Shenzhen is using both Goldman Sachs’ English and Chinese name as its own. American banks aren’t the only target for counterfeiters: a fake branch of China Construction Bank, the world’s second largest bank by assets, was discovered last month in the city of Linyi, Shandong Province.
Alibaba Launches Subscription Video Streaming, Priced At $57 Per Year: Alibaba has launched its Netflix-style subscription video service, TBO – Tmall Box Office. Users can stream a mix of Chinese and foreign movies and U.S. TV shows. It is the first time a service has been launched in China that locks all content behind a paywall. Monthly or yearly subscriptions are priced as low as ¥1 (16c) a day.
Volkswagen Teases Car Buyers in China Using Art, Opens “Rain Room”: VW has launched its “Rain Room” in Shanghai where torrential rain fills the 150 square metre room, but digitally detects where people are and stops the rain on that exact spot to ensure they stay dry. VW aims to have consumers associate art, design and technology with its brand. China is an increasingly tough market for car makers, as the number of consumers planning to make a purchase over the next year fell to 18.7% in August according to MNI. This is down from 20.7% in July but above the 16.2% in June.