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Buying Property In China

China is the largest Nation on Earth with a population of over 1.3 Billion people and is also the Worlds oldest civilization with a culture going back 6,000 years. Situated in and comprising the majority of Central and East Asia, it comprises two states: The Peoples Republic of China (including Hong Kong and mainland China) and the Republic of China (including Taiwan). Between them they border a huge number of Asian countries including Russia, India, Bangladesh, Vietnam, Burma and North Korea. China is vast and so is the choice of where to make an investment in China property.

Culturally and politically China was ruled for many millennia by successive dynasties, including the Han, Liao, Jin, Ming, Tang and Qin dynasties. During this period, the four great inventions of China came into being and affect the lives of everybody: Paper; Printing; The Compass and Gunpowder.

The Qing Dynasty ended in 1912 with the Republic of China. This was a time of great upheaval for China and was dominated by in fighting before unification in 1928 under the Kuomintang government. This was disrupted again by the intervention of foreign powers and World War II, leading to the defeat of the Kuomintang and retreat to Taiwan and the establishment of Communism as the dominant force politically, hence, the two countries and differing political structures.

Geographically, mainland China is very varied but consists of large mountainous regions, alluvial plains, a vast coastline and the great Mongolian plateau. The two great rivers of the Yangtze and Huang He dominate the farming communities as they built along the shorelines.

Language is diverse but the most common dialect is Mandarin but others include Cantonese and Shanghainese. Mandarin is considered to be the language to learn as it is understood by the largest number of people verbally and is the only widely-used written language.

Although, due to Communism, the majority of Chinese people consider themselves to be Atheist a large number also consider themselves to be Buddhist, Confucianist or Taoist. Because of the dominance of Confucianism in imperial China it still has a major influence on the customs and values of the modern population. Also very influential was the long-standing Communist leader, Chairman Mao Tse-Tung, who took office in 1945 and led the party until his death in 1976. His philosophy and legacy may have been tainted by accusations of despotism but his dominance is beyond doubt.

Modern China has tried to move forward and embrace some forms of Capitalism and trade more openly with the rest of the World, to the point where it is anticipated that it may become the Worlds largest economy. As a country of immense history it holds great interest for the traveller and its growing economy make it an investment hot-spot.

Property in China

For many years the property market in China was not open to overseas investors although this began to change as the ruling party realised that they would need to attract outside investment and business to rejuvenate a very stale and stagnant economy. After building up closer relations with some of the powerful western companies, there was a natural progression from commercial property investment to residential property in China.

As the residential property market began to develop, initially because of overseas investment and interest from non-nationals, there was a major increase in activity. In the more popular areas of the country such as Shanghai and Beijing, the presence of multi-national business has swamped the residential market with companies willing to pay a high price to house key members of staff. In the few years prior to 2005 this created a number of property hot spots, resulting in a number of property bubbles.

The Chinese government were forced to introduce new legislation in 2005 aimed at curbing short term / speculative investment in the market place. This resulted in residential property prices falling by an average of 15% in 2005, with many of the short term investors forced to sell properties at less than market price. While the short term investment concerns have been dampened in the short term, there is still great value and opportunity on a longer term basis - with the government committed to steadier long term growth, rather than short term volatile price fluctuations.

Why invest in Property in China

As overseas investment continues to pour into China, it is interesting that the government is looking to take a greater control of the economy. Conscious that an over heating economy is a recipe for medium to long term disaster, a number of regulations were introduced to slow down what could become an out of control situation.

While the economy is strongly aligned with that of the US, there are three major reasons for the continued prosperity of the area and for property in China :-

Overseas Investment

As long as the Chinese ruling party continue to encourage overseas investment, the economy will continue to grow at a steady pace - currently forecast at between 5% and 8% per annum. Cheap labor, available property and under developed employment regulations add further to the attractions for overseas investors. The fact that many products are shipped to China for assembly, then shipped back to their country of origin further highlights the difference in labor costs.

World Trade Organization

The fact that the Chinese government have decided to join the World Trade Organization offers valued security and confidence to many investors looking at the Chinese market. The strict regulations and condition associated with membership of the WTO ensure an open and fair trading relationship (the lack of openness had been of concern for many investors prior to recent years).

Infrastructure Spend

While it would have been easy for the Chinese authorities to accept new investment, without developing the country's infrastructure, much of the inward investment and increased economic growth has been re-invested into developing the aging transport and services sector. The fact that much need services and transport facilities are now available increases the potential investment possibilities in the more rural areas of the country, which can have a major impact on local economies.

Outlook

As the country continues to embrace the ideals of overseas investment, while retaining strong influence on the local inhabitants, the economic situation looks better than it has been for many years. The strong alignment with the strong US economy adds further strength to the growth story, which after a period of relatively low control, is now strongly influenced by legislative changes introduced by the authorities. The fact that the authorities are willing to intervene to avoid a boom and bust scenario adds further stability.

The location of the country, and influence over the Far East region ensures that China will remain at the forefront of international trade for some time to come. Perfectly situated for access by sea or land, and surrounded by some of the most important trading partners in the world, China is well positioned to take advantage of the country's growing presence in the world market place.

Submitted by:

Parag Sheth

The author of this article moderates at Totally Property - an overseas investment property forum that specialises in property in China.




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