Beijing clamps down on overseas investment

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The Chinese government has officially curbed Chinese investment into overseas property development by implementing rules that are likely to have a significant impact Down Under.

The State Council of the People’s Republic of China issued the first rules on overseas investment by Chinese companies last Friday. A new list of “banned investments” includes casinos and defence technology, while overseas property development and hotels were classified as “restricted”.

China’s National Development and Reform Commission (NDRC) said the property sector was “not the real economy” and that companies investing overseas in real estate could be harming China’s financial stability by increasing capital outflows.

Companies that violate the foreign investment rules would be penalised, the State Council said.

Chinese developers and investors purchased $2.4bn worth of Australian residential development sites in 2016, which represents 38% of all the residential property development sold in Australia last year, according to a report from Knight Frank.

The average size of a property development site sold to Chinese companies in 2016 was 21,045 square metres, an 18-fold increase from four years ago, the report said.

China’s regulators have recently placed the country’s four biggest offshore private investors – HNA Group, Dalian Wanda, Fosun International, and Anbang – under greater scrutiny. However, Friday’s rules were the first indication that the crackdown would extend beyond the big four.

Two weeks ago, Dalian Wanda began restructuring its business, which includes billion-dollar apartment projects at Sydney’s Circular Quay and the Gold Coast, plus the Hoyts cinema chain.

There are many other Chinese companies active in the Australian property and hotel market, and many have significant holdings. Dahua Group, for example, spent $347m in Melbourne and $400m in Sydney last year to acquire multiple suburban sites that will be transformed into master-planned estates.

The State Council said China will instead encourage companies to invest in projects that contribute infrastructure to its hallmark development strategy, the Belt and Road Initiative (BRI).

Related Stories:
Foreign Developers Are Transforming Melbourne
Chinese Will Spend Billions On Real Estate In 2017

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