In the first nine months of 2012, as China prepared to usher in its new leadership, an estimated $225 billion leaked out of the country. Unsurprisingly, Chinese real estate developers are following that flighty capital abroad.
The Wall Street Journal reports that Shanghai-based Greenland Group is building a residential and hotel development in Sydney. Another Chinese developer, China Vanke, is building a project in San Francisco, as we discussed recently. Both cities happen to be popular destinations for Chinese investors.
Some of the cash that has fled China is likely the fruits of corruption, as ostensibly low-paid officials who had collected money under the table fretted the Communist Party’s new chiefs would not turn a blind eye to their past misdeeds. (Chinese nationals are only allowed to move $50,000 a year out of the country. Here is how they smuggle out more.)
Overseas property is a natural home for the money that has flooded out of China. Owning real estate abroad helps citizens who need to flee get overseas residency permits.
But the trend the Chinese developers have spotted is not entirely new.
Chinese buyers also spent $7 billion on US real estate in 2011, according to the National Association of Realtors. Even back then, it seems, government officials and wealthy businesspeople were shunting money out of China in preparation for the country’s leadership transition.
Chinese buyers of luxury real estate in Southern California that year were “people who have their own businesses, or maybe were part of the government,” a local realtor said at the time.