Wednesday, January 28, 2015

BILLIONAIRE....CORRUPTIONS.SLOWDOWN..INVESTMENTS CHINA

In my last two articles I portrayed the picture of the Global Real Estate bubble and also the slowdown of the Chinese economy due to over production of capacity from real estate to many prime industries. In continuation to the same I am quite surprised that Chinese people are buying less of their own property and investing in overseas properties and the deals volumes is very much eye catching. Do you know who is saving the western economies real estate market? We get happy after finding that the US real estate and European real estate markets are performing and there are green shoots of recovery. Well we need to get into depth to figure out how is the real buyer behind these rosy numbers. These growths are not fixed and are very much volatile since overseas investors and the taxation laws can play the game of dice and win the game. So let’s find out who are buying:
  • Around 90% of the deals are cash paid by the Chinese.
  • From April 2013 to march 2014 Chinese people have brought 24% of the total property sold of US$92.2billion worth of US real estate.
  • The average closing value of the Chinese property buyers stood at US$523000, or 2.6 times higher than the recorded among American people. 
  • Now come to Australia where the Chinese spent US$5.9 billion on property in 2013 which accounts for 11.4% of the Non –Australian Buyers.
  • Permanent residencies levels have also surged with policies of immigration have become lenient. For example in Portuguese its being found that after the immigration polices got changed the number of application for home purchase files by Chinese people is around 1429 out of 1681 application in total. It turns out to be 85% of the same.
The European housing market is survived due to the Chinese buyers since many euro states like Greece, Spain, Hungry have introduced similar immigration policies.Immigration policies have created way for the stagnant real estate market in the western world and also an opportunity for investments for the Chinese in buying business in these countries.
Education has also become a growing rationale behind the Chinese buyers. Its being found that they are buying these properties so that their next generation grows and stays in these countries exploring business opportunities across the globe.

Well the above numbers and the rationales are well enough to hide the facts that China’s recent policy of removing corruption from the economy has pushed these people to get out of the country and also diversify their investments and assets across the globe rather keeping the vaults of Chinese banks. The anti-corruption bell might have been heard by the world market recently but the same was heard by the Chinese people a long back.
The tough anti-corruption campaign is apparently driving many officials to take desperate measures. Nanfang Zhoumo or "Southern Weekly," the critical newspaper from the Chinese city of Guangzhou, listed 32 known cases of suicide by civil servants or officials in 2014. 

Those keen on concealing and securing their assets would, until recently, send their relatives to live abroad. Once family members became legal residents, they would funnel the ill-gotten gains to offshore tax havens, leaving the bureaucrats with few assets in China. Officials involved in such schemes were known as "luo guan" or "naked officials." Now I hope one gets the clear idea about the sudden surge of the overseas real estate buyers coming mainly from China. But the story does not get over here. The more surprise in the wings is that china did not leave the hopes and kept on chasing the Naked Officials. According to state-run news agency Xinhua, some 200 public employees of the southern province have asked their families to return, while 866 agreed to accept demotion, including nine at mayoral level. So it’s well clear that corruption has made billionaires that they are okay with demotions.  Since the year 2000, funds and company shares worth an estimated four billion USD have been illegally funnelled out of China. By comparison, common Chinese citizens are not allowed to transfer more than 50,000 USD abroad without special permission.

If we remember that we all purchased and loved to read about the rising numbers of billionaires in china in various magazines and also we found that many financial investments companies opened up their shops to get inflows from these billionaires.

Around 6th March the Financial Times reported that annual meeting of the National People’s Congress, the country’s legislature, will include 86 renminbi billionaires (equivalent to being worth over £97,725). According to the FT’s calculations, the country’s wealthiest politicians saw their wealth quadruple over the past eight years, while the richest 1000 people in the country saw their wealth triple – suggesting that most ordinary people in China are right that the best way to get rich is via political connections.

In 2012, it was estimated that the richest 70 members of China’s NPC have a larger combined wealth ($89.8bn in 2011) than that of all 535 members of the US congress, the president and his Cabinet and the nine Supreme Court judges. All the above data and the analysis reflect clearly about the inflow and outflow of capital in china and why Chinese economy is bracing for a slowdown. The economy has been fuelled based on corruption and the consumption growth was based upon the same. Now when the anti-corruption policy has been launched the outflow of capital and the original bones of the economy are coming out in daylight.

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