Capital outflows seen dropping back, but investors still eyeing overseas property

By Xiao Xin Source:Global Times Published: 2017/4/20 23:13:39

Outbound capital flows have eased substantially, according to the latest official figures, but that's barely enough to signal a return to stability, given domestic investors' persistently strong appetite for buying overseas assets, property in particular.

In the first quarter of 2017, net foreign exchange sales by domestic commercial banks totaled $40.9 billion, a plunge of 67 percent over the previous year, according to data released by the State Administration of Foreign Exchange (SAFE) on Thursday.

This certainly indicates reduced pressure from capital outflows as expectations for continued yuan weakness have been lowered.

However, the fact that the yuan has firmed against the US dollar so far this year does not appear to have altered the investment trend that has seen domestic investors eagerly snapping up overseas properties.

To capitalize on the trend, Berkshire Hathaway HomeServices, Warren Buffett's real estate franchise brand, announced a marketing agreement on Monday with, China's top international property site, in the hope of attracting wealthy Chinese buyers to purchase homes in the US.

Buffett is known as the "god of stock investing" in China, and he has a huge following in the world's second-largest economy. So the new agreement is expected to add fuel to Chinese investors' demand for US property.

Chinese investors overtook Canadians to become the top foreign buyers of US residential property in 2013, according to the US-based National Association of Realtors. In the year ended March 2016, Chinese buyers represented 26.7 percent of international sales, according to the association.

"Chinese buyers spend in the 'mid-$900,000s' on average for US homes, triple what US buyers spend, often using them as second homes or to house children attending US colleges and universities," Reuters reported on Monday, quoting Peter Turtzo, senior vice president of international operations at Berkshire Hathaway HomeServices.

In addition to the US, other markets including Europe, Australia and Southeast Asia are among the most-sought after destinations for Chinese buyers keen on hoarding properties not only at home but increasingly abroad.

One of the factors behind the trend is rising concerns over runaway home prices within China, and another is fears of renewed capital flight.

SAFE spokeswoman Wang Chunying pledged at a news conference on Thursday that China will not step back onto the old path of foreign exchange control, so it is likely that foreign property purchasing will remain popular among wealthy Chinese investors, thus posing a challenge for the Chinese authorities in seeking balanced cross-border flows and ensuring financial stability.

The author is a reporter with the Global Times.


blog comments powered by Disqus