China’s New Limits on Money Outflows Hit a Would-Be Paradise

China’s New Limits on Money Outflows Hit a Would-Be Paradise

- in Real Estate
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Chinese officials are scrambling to keep money in its borders, and the efforts are hitting big companies and people like Ms. Zhu alike. China spent $1 trillion shoring up its currency since 2014 as big companies and regular investors shifted their money out of the country over worries about slowing economic 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, among other investments. On Friday, the overseas arm of UnionPay, the state-owned firm that dominates bank card payment processing in China, said it would prohibit the use of its cards for cross-border property acquisitions.

The moves could hit a large group: The Chinese invested $33 billion in overseas commercial and residential property deals last year, according to Jones Lang LaSalle, a real estate services firm. 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.

A model condominium unit at Country Gardens’ Forest City showroom in Johor Bahru last month.

Credit
Edgar Su/Reuters

“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 in Hong Kong. “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 Chinese-language statement sent this month to the Reuters news agency and reviewed by The New York Times, Country Garden said it decided to temporarily close its international property sales centers in mainland China for repositioning and upgrading “in order to better meet the existing foreign exchange policies and regulations.”

A Country Garden spokeswoman said the closure of the sales centers was “not a knee-jerk reaction” to the policy and reflected a shift to selling internationally. Speaking to reporters in Hong Kong on Wednesday, Yeung Kwok-keung, the chairman and founder of Country Garden, skirted the question and struck the same point.

”This project is for sale to the entire world,” Mr. Yeung said.

Forest City bills itself as “a dream paradise for all mankind.” A promotional video for the project highlights a special duty-free shopping zone and its proximity to Singapore, and includes video of tropical fish and sea turtles swimming in turquoise waters.