Monday, 9 February 2009

In Shift, Chinese Move More Money Overseas......

This is article from New York Times, dated Feb 2nd 2008.

Because of massive economic growth, China was known for magnet of overseas investment. However, due to slow down and economy growth and unclear future, Chinese are moving more money overseas.

- Statistically, inflow of investment is declining while outflow is increasing --- making Q4 2008 total outflow to $240 billion.

- Chinese government's committed effort to maintain Yuan's value (against US dollar) is also accelerating outflow of Chinese money to overseas.

- Since import decline is larger than export, China's trade surplus is increasing. But it is offset by outflow of private capital to overseas. In fact, China's quarterly currency reserve in Q4 2008 has declined by 74% to $45 billion, equivalent of spring 2004.

- It appears that wealthy Chinese investors are overseas investment are "safer" than one in China, driven by declining stock/property value, unemployed migrant farmers (20 million), slowing export and economy.

- Online real estate brokerage firm announced foreclosure property tour in US markets. It is filled up quickly and 400 investors are on wait-list. As Chinese investor think that China property has not hit the bottom, US properties seems like bargain and stable.

- Other notable trend is; high-yield bond from US corporation; managing export receivable in overseas bank account; purchasing diamond and gold in Hong Kong.

- This trend of declining receivable of foreign currency "could" cause Chinese government's purchasing ability of US treasury (then who pays for Obana's stimulus plan?).

While Chinese government does not publicly admit, wealthy Chinese investors feel uncertain about China's future as export driven model is clearly not working as it used to. It is very important to observe how Chinese government domestic consumption/investment stimulus plan revive the Chinese economy. I personally think that there are more than 50% chance that China goes into recession (or less than 5% GDP growth).

Lastly, US real estate is clearly seen as "safe heaven" among overseas investors now (see below link). Inflow of overseas capital will certainly help US property market to hit the bottom sooner......

Foreign Investors love US Commercial Properties.

Happy Investing!!!!!

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