China Real Estate

Real Estate in China

First Published Date: May 11, 2015

As China becomes more and more a part of the global trading economy, it is natural to expect that its increased openness will continue increasing and that its economy will behave similarly to those of other major powers. This is not necessarily going to be the case, not least because the way that an economy behaves, its DNA, and its part in the global economy all depend on more factors than simply China’s entry to the worldwide club. So, currently, we can see that China is seeing major growth in its economy, while other nations labour under a recession or enter a cautious recovery.

The major test of China’s development as an economy will be time. It is only recently that the country has embraced capitalism, and although any interested party could not have failed to notice that it is headed squarely to become the world’s biggest economy by the middle of this century, it would be fanciful to assume that the forty years between now and then will all be smooth sailing. In ensuring that China continues to develop in the present way, it is going to be necessary to have a strong real estate sector, one which is competitive enough to bring in outside investment. Currently, the signs are good for that sector of the Chinese economy.

Looking at the major Chinese real estate companies gives some interesting results. Poly, considered one of its most prominent real estate big-hitters, recently posted its results for the first half of 2009 and, in a year which we should take care to remember has been touched by major recession, showed a massive increase in net profit. Set against the revenues of the first half of 2008, Poly posted an increase of more than 54%, taking its numbers to 8.29 billion yuan (US$1.21bn) and a profit of 1.396 million yuan (US$200m). In comparison with real estate sectors in other countries, China is certainly showing results which point to a thriving real estate economy going forward.

The most definitive question on the Chinese real estate economy, however, remains how it will deal with any bust or recession in the national economy. Perhaps due to the nascent nature of its free market economy, China has not suffered from the global financial crisis in anything approximating the same way as most of its G8 partners. This means that we have yet to see how the country, and the real estate market will deal with it should it happen again any time soon.

However, at this stage it seems only right to give China the benefit of the doubt as to its financial results. Having seen how the rest of the world does free market capitalism and real estate, China has delivered its own approximation of the medium and has shown an impressive level so far. Will this continue? As of this moment it is difficult to say, as we have not seen China’s free market operate under all conditions as we have with the more long-standing free market economies. Those tests are still to come