China’s money limits hitting would-be paradise
CHINA’S intensifying efforts to keep money from leaving the country have cast doubt over big Hollywood deals and other marquee investments.
Now, they are blocking Kitty Zhu from buying her dream home.
Zhu, 39, who runs a cosmetic centre in Zhuhai, is one of hundreds of Chinese investors who have bet money on an ambitious residential project in Malaysia. More than 2,000 kilometres from China, the $40 billion Forest City housing complex – when completed – will combine green beachfront property with amenities for children and the elderly, according to its developer.
But while the developer is Chinese, the payments must be made in Malaysia. Zhu and other buyers say they have run into problems making payments on their Forest City apartments.
“I’ve lost confidence in this project, and I don’t want to pay any more,” said Zhu, who has paid nearly $44,000 of the $334,000 purchase price. “I told my salesman that I want a refund, but he just avoids me.”
Chinese officials are scrambling to keep money in China’s borders, and the efforts are hitting big companies as well as people like Zhu. China spent $1 trillion shoring up its currency since 2014 as big companies and investors shifted their money out of the country over worries about slowing growth and the prospect of better returns elsewhere. In response, China has put new limits on the ways Chinese can invest and use their credit cards abroad.
The limits now appear to be hitting Chinese efforts to buy real estate globally. In December, China’s currency foreign-exchange regulator said it would take a harder look at how some were buying property. On Friday, the overseas arm of UnionPay, a state-owned firm that dominates bank card payment processing in China, said it would prohibit the use of its cards for crossborder property buys.
The moves could hit a large group: The Chinese invested $33 billion in overseas commercial and residential property deals last year. Building homes in overseas markets like Hong Kong, Malaysia, Australia or New York City, and marketing them to investment-minded buyers back home, has become a cottage industry for China’s larger property developers, who also promote the strategy as a way to help export China’s industrial overcapacity.
“It is a major problem for some developers that have megaprojects overseas, as it appears they sell, and were intended to sell, mainly to Chinese investors rather than local buyers,” said Nigel Stevenson, an analyst at GMT Research. “Anecdotally it does seem much harder for Chinese buyers to transfer money offshore to pay for properties,” he added.
Country Garden, the Chinese developer building Forest City in Malaysia, has also been affected. In a statement sent this month to the Reuters news agency and reviewed by the New York Times, Country Garden said it had decided to temporarily close its international property sales centres in mainland China for repositioning and upgrading “in order to better meet the existing foreign exchange policies and regulations”.