Property Grunt

Tuesday, February 03, 2009

Jews with Chopsticks

This trouble is coming here. But it is trouble you can make money on.

This is in today's NYT.

In Shift, Chinese Move More Money Overseas

Below are points of interest.

Some Chinese are so eager to turn their yuan into other assets that when an online real estate brokerage organized a tour of foreclosure auctions in the United States, it received so many applications that it had to turn away nearly 400 people.

In Shanghai, cash-rich Chinese companies are buying high-yield bonds issued by distressed American companies at a time when many Western investors are steering clear of bonds even from solid companies.

All over the world, Chinese companies are sending home fewer of the billions of dollars they earn from exports, parking them in overseas bank and brokerage accounts instead.

And in Hong Kong, wealthy mainlanders are turning up at jewelry stores in growing numbers seeking diamonds, big ones.

“They’re looking for five-carat diamond rings and six-carat diamond earrings — three carats for each ear,” said Yollanda Lam, the marketing manager for the King Fook jewelry store chain here.

Together, these trends represent a potentially tectonic shift. As Chinese citizens are starting to send more money out of the country, foreign investors are pulling money out too, and slowing the pace of new investment.

“There is a recognition for sure that China is slowing down, so why keep your money there?” said Henry Lee, a Hong Kong fund manager.

Nobody knows how long this trend will last. If China’s series of economic stimulus measures are successful, then the Chinese economy could rebound later this year and start drawing back money on the same scale that it did over the last decade.

Chinese people with money know that the party is over. The question now is what to do with their party favors. And it looks like they have to go overseas to protect their money. How much?

Total outflows in the fourth quarter were as much as $240 billion, but this is using the broadest possible definition and includes everything from capital flight to a slowdown in repatriation of overseas profits by Chinese companies. There is no good data assessing the motives of those moving money out of China.

$240 Billion!

Awhile back I did two entries on Chinese and real estate.

Peasants with money
This was about my perspective on the development boom in Chinatown and how
the Chinese are playing a central role.

A Better Tomorrow

This is my take on how take advantage of the Chinese market which included shelling
a 100 grand to attract Chinese customers.

Below is proof by entries were, no pun intended. on the money., an online real estate brokerage, is offering a tour for at least 40 people to San Francisco, Los Angeles, Las Vegas and New York City, starting on Feb. 24, and found that demand outstripped the spaces available. “The people in the group are obviously interested in diversifying their investments, and the United States certainly is a very attractive location since real estate prices there have dropped drastically,” said Zhao Xingyu, a manager organizing the tour.

Chinese real estate industry executives say that there was considerable speculation here in recent years by overseas investors, especially overseas Chinese. Those purchases contributed to a bubble that peaked last spring and has gradually deflated since, removing the incentive for further real estate investments here.

The rich Chinese see the writing on the wall. They realize this situation can only go down.

Most troubling for China would be if a sizable portion of these disparate streams represented capital flight — people taking their money out because they worry about the stability of the country.

Though there are myriad reasons to move capital around, there is also cause for concern: Chinese authorities announced Monday that 20 million migrant workers had lost their jobs. If they do not find new work, these workers could form a volatile class of unemployed.

Even more crucial, Chinese individuals and companies placing more of their money outside China could affect one of the constants of international finance over the last five years: China’s central role in bankrolling American trade and budget deficits.

Rich Chinese people have been here before. It was called the Cultural Revolution. So they know that this time to engage in a flight to quality. And what is more safe than the good old USA?

Real estate brokers I urge you to go forward and embrace the Chinese community. If you don't know Mandarin, hire someone who does. Reach out to this community because they are looking for a place to stash their cash. They will see you through the downturn.

If you can't harbor the thought of listening Chinese people talk because it sounds like two cats in an alley fighting over a chicken bone or you feel like you are being overwhelmed by their numbers or you just can't stand Chinese people. Too bad.

Think of them as Jews with Chopsticks because they are the ones with the money now. And if you want to eat, you have to go to them.

So suck it up and be nice. It's just a job. Piss them off and you could find
yourself hitting the bricks.

This applies to you to Miley Cyrus.