Interesting Dynamics in Chinese Real Estate

Fifteen years ago, a friend of mine asked me to help him invest in some toilet business as the building boom was coming in China.  At the time, he sold half of his Discovery Bay real estate development in Hong Kong.  It certainly did, and may have over shot by a mile!

A few weeks ago, I was traveling in Qingdao (of Tsingtao Beer fame) and noted massive apartment houses coming up on both sides of the highway to the airport.  According to the driver, most of the new buildings downtown and in the outlying areas were dark at night.   Meanwhile, he wants a better place for his family but could not afford the ones now empty.   I saw a similar situation in Chengdu, Xian and Shanghai in 2009.

The speculation frenzy is not unlike the U.S. real estate boom before 2001 to 2007 that ended badly.   Over the radio was recording of a conversation between a loan broker and a loan applicant.  For $1,000, the broker guaranteed the applicant a loan as he has friends in the bank.   Meanwhile, local governments depend on money from land leases, and developers were getting bank financing to build houses not many could afford.


About joseph1ng

Trained as a historian at Stanford, certified as an accountant, geeky by nature, CFO with U.S. and Chinese companies. Lived in Beijing, Shanghai, Tokyo but mostly in the Silicon Valley. China's $3 trillion foreign currency reserve will be deployed buying brands to bridge their supply chain to consumers.
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