Foreign players head to Chongqing to seek assurance as well as opportunities in the wake of former party chief’s fall from grace
Sandy Li 30 April 2012
Foreign investors are flocking to Chongqing to assess the impact of the downfall of former party boss Bo Xilai on property development and infrastructure projects.
Their fears stem from the 18-month property downturn in Shanghai after the arrest of Chen Liangyu, Shanghai’s former party secretary and Politburo member, for corruption in 2006.
Chen was jailed for 18 years after being convicted of taking more than 2.39 million yuan (HK$2.93 million) in bribes and for abusing his power.
“In the worst-case scenario, Chongqing’s property market may see the same ripples that Shanghai witnessed,” said an investment manager at a Hong Kong-based fund management firm who is flying to Chongqing to take stock of the post-Bo investment climate in the city.
It is not just fear, however, that’s taking him to Chongqing. He also wants to find opportunities.
“Who knows, there might be bargains out there,” said the investment manager who did not want to be identified. “Distressed assets, such as serviced apartments and hotels, would be our target, given that local banks have begun cutting loans to high-risk projects.”
Under Bo’s stewardship, the annual foreign investment in Chongqing jumped to US$10 billion last year, from US$1.2 billion in 2007.
Leland Sun, whose investments range from office and retail space to hotels and small-scale financing in Chongqing, acknowledged the gloom overhanging the city.
“[But] my understanding is that there has been no significant pullback by foreign investors yet, property or otherwise,” said Sun, who flew to Chongqing last week to assess the investment climate.
“There has been no noticeable slowdown in terms of property construction and business activity, especially in the [core area of] Yuzhong district and Liangjiang.”
Sun, who is also managing director of Hong Kong-based mortgage financier Pan Asian Mortgage, agrees with many experts that Chongqing’s economic growth rate would inevitably slow this year along with the rest of the mainland.
Like other mainland cities, Chongqing has used the so-called local-government financing vehicles (LGFVs) to primarily fund its infrastructure projects.
But even with a moderate decline in property prices, the municipal-government investment vehicles are expected to be able to support their current level of debt as the loan-value ratios of LGFVs have not exceeded 50 per cent and demand for low- to mid-market housing remains strong.
“Neither Beijing nor the Chongqing local government would want to jeopardise the millions of dollars of foreign money currently invested in Chongqing or the enormous pipeline of capital ready to come in,” Sun said.
Thomas Lam Ho-man, head of Greater China research at realtor Knight Frank, has predicted that Chongqing home prices could fall 10 to 15 per cent by the end of the year.
But Longfor Properties, which made a quarter of its record property sales of 38.3 billion yuan last year in Chongqing, sees no immediate cause for concern.
“We see the investment prospect in Chongqing as stable. Marketing of our projects in the city will be on schedule,” said a Longfor executive
Eight residential projects, comprising 3.56 million square metres, are under construction in Chongqing, accounting for about 16 per cent of the developer’s land bank.
Last week, Shui On Land flew a delegation comprising 10 Chongqing government officials - including Liu Tong and Wei Chuanzhong - to Shanghai to attract multinational firms to lease its mega commercial project Chongqing Tiandi, and to assure foreign investors about political and economic stability in the city.
Liu and Wei are deputy chiefs of Yuzhong district that houses the Chongqing Tiandi project, estimated at eight billion yuan.
“That Chongqing officials joined the delegation to promote Chongqing Tiandi in Shanghai shows Shui On Land’s project in Chongqing has not at all been affected by the changes in the political climate, and that we have confidence in the huge growth potential of the city,” Shui On Land said in response to queries from the South China Morning Post. “We received very positive feedback from potential buyers and investors during the launch.”
The Chongqing Tiandi event had been planned months before the unravelling of the Bo saga, said a company spokeswoman.
The 3.6 million square metre Chongqing Tiandi cluster is Shui On Land’s biggest project by floor area. It comprises 800,000 square metres of grade A office space, enough to accommodate a thousand large firms. In the first phase, a total floor area of 130,000 square metres will be leased out to multinational companies.
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Investors take stock of Bo saga
Foreign players head to Chongqing to seek assurance as well as opportunities in the wake of former party chief’s fall from grace
Sandy Li
30 April 2012
Foreign investors are flocking to Chongqing to assess the impact of the downfall of former party boss Bo Xilai on property development and infrastructure projects.
Their fears stem from the 18-month property downturn in Shanghai after the arrest of Chen Liangyu, Shanghai’s former party secretary and Politburo member, for corruption in 2006.
Chen was jailed for 18 years after being convicted of taking more than 2.39 million yuan (HK$2.93 million) in bribes and for abusing his power.
“In the worst-case scenario, Chongqing’s property market may see the same ripples that Shanghai witnessed,” said an investment manager at a Hong Kong-based fund management firm who is flying to Chongqing to take stock of the post-Bo investment climate in the city.
It is not just fear, however, that’s taking him to Chongqing. He also wants to find opportunities.
“Who knows, there might be bargains out there,” said the investment manager who did not want to be identified. “Distressed assets, such as serviced apartments and hotels, would be our target, given that local banks have begun cutting loans to high-risk projects.”
Under Bo’s stewardship, the annual foreign investment in Chongqing jumped to US$10 billion last year, from US$1.2 billion in 2007.
Leland Sun, whose investments range from office and retail space to hotels and small-scale financing in Chongqing, acknowledged the gloom overhanging the city.
“[But] my understanding is that there has been no significant pullback by foreign investors yet, property or otherwise,” said Sun, who flew to Chongqing last week to assess the investment climate.
“There has been no noticeable slowdown in terms of property construction and business activity, especially in the [core area of] Yuzhong district and Liangjiang.”
Sun, who is also managing director of Hong Kong-based mortgage financier Pan Asian Mortgage, agrees with many experts that Chongqing’s economic growth rate would inevitably slow this year along with the rest of the mainland.
Like other mainland cities, Chongqing has used the so-called local-government financing vehicles (LGFVs) to primarily fund its infrastructure projects.
But even with a moderate decline in property prices, the municipal-government investment vehicles are expected to be able to support their current level of debt as the loan-value ratios of LGFVs have not exceeded 50 per cent and demand for low- to mid-market housing remains strong.
“Neither Beijing nor the Chongqing local government would want to jeopardise the millions of dollars of foreign money currently invested in Chongqing or the enormous pipeline of capital ready to come in,” Sun said.
Thomas Lam Ho-man, head of Greater China research at realtor Knight Frank, has predicted that Chongqing home prices could fall 10 to 15 per cent by the end of the year.
But Longfor Properties, which made a quarter of its record property sales of 38.3 billion yuan last year in Chongqing, sees no immediate cause for concern.
“We see the investment prospect in Chongqing as stable. Marketing of our projects in the city will be on schedule,” said a Longfor executive
Eight residential projects, comprising 3.56 million square metres, are under construction in Chongqing, accounting for about 16 per cent of the developer’s land bank.
Last week, Shui On Land flew a delegation comprising 10 Chongqing government officials - including Liu Tong and Wei Chuanzhong - to Shanghai to attract multinational firms to lease its mega commercial project Chongqing Tiandi, and to assure foreign investors about political and economic stability in the city.
Liu and Wei are deputy chiefs of Yuzhong district that houses the Chongqing Tiandi project, estimated at eight billion yuan.
“That Chongqing officials joined the delegation to promote Chongqing Tiandi in Shanghai shows Shui On Land’s project in Chongqing has not at all been affected by the changes in the political climate, and that we have confidence in the huge growth potential of the city,” Shui On Land said in response to queries from the South China Morning Post. “We received very positive feedback from potential buyers and investors during the launch.”
The Chongqing Tiandi event had been planned months before the unravelling of the Bo saga, said a company spokeswoman.
The 3.6 million square metre Chongqing Tiandi cluster is Shui On Land’s biggest project by floor area. It comprises 800,000 square metres of grade A office space, enough to accommodate a thousand large firms. In the first phase, a total floor area of 130,000 square metres will be leased out to multinational companies.
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