It also aims to be a hub for science, technology and innovative projects

AFTER years of being the ‘world’s factory’, the Suzhou Industrial Park (SIP), together with Suzhou city, is now embarking on a transformation to become the ‘world’s office’ in a bid to re-invent itself.

The goal was made known at a media briefing during which Suzhou government officials shared their plans for the city as well as the landmark Sino-Singapore project, SIP.

By ‘world’s office’, Suzhou party secretary Jiang Hong Kun was referring to a hub for services, such as in software outsourcing, financial, logistics & exhibition and commercial tourism. There will also be a new focus on science and technology projects and innovative activities.

‘Following the global financial crisis period, the world economy is undergoing major adjustments and restructuring,’ said Mr Jiang, in Mandarin. ‘China, which has often been deemed the world’s factory, also hopes to achieve economic transformation. As for Suzhou, it has also been heavily focused on manufacturing in the past and our hope is to tap on the opportunities available to speed up the economic development and move towards more advanced manufacturing and scientific activities.’

The transformation of Suzhou and SIP will see a deepening and broadening of relationships between Singapore and China, as governments from both sides have signed a letter of intent to deepen the cooperation. Separately, cooperation for 31 projects have been inked. Among the Singapore organisations involved are the National University of Singapore, which will be setting up an incubator office at the SIP, the Singapore Exchange, and the Singapore Nanotech Association. Altogether, the 31 projects would lead to total investments exceeding US$1.6 billion.

Currently, about 60 new jobs have been created by 44 Chinese and foreign companies in SIP. They include positions in electronics, precision engineering, education, finance and biomedical sectors.

At a symposium attended by the private sector, Suzhou mayor Yan Li also highlighted the nanotechnology and environment sectors among the emerging industries that his city is promoting. Minister of State for Trade & Industry Lee Yi Shyan suggested that both sides also encourage the exchange of talent to facilitate cross-learning. Started in 1994, the SIP has become a benchmark for other industrial parks in China and an expression of the strong Sino-Singapore ties built over 20 years. Beyond the SIP, Suzhou itself is Singapore’s leading trading partner in China’s Jiangsu region.

The SIP is managed by the China-Singapore Suzhou Industrial Park Development Co (CSSD), which is preparing for a listing within the next one to two years. Officials said the option is still open as to whether the listing site will be in Singapore or China.

Source: Business Times, 9 Jul 2010

CAPITALAND’S wholly owned service residence business unit, The Ascott Limited, has secured contracts to manage two more properties, one each in Xi’an and Shenzhen.

This follows the group’s recent expansion into Chengdu with the opening of Somerset Riverview, Chengdu in April.

The latest additions – Somerset Gaoxin, Xi’an and Somerset Grandview, Shenzhen – are scheduled to open in 2012 and 2013 respectively.

Lee Chee Koon, Ascott’s managing director for North Asia, said: ‘China is an important market for Ascott.

‘Besides growing in cities such as Beijing and Shanghai, we have been expanding rapidly in other cities like Xi’an and Shenzhen where there is high demand for service residences.’

The group’s Citadines Xi’an Central and Somerset Garden City, Shenzhen have achieved occupancy of above 80 per cent.

It will open Ascott Maillen Shenzhen this year, and two more Citadines-branded service residences in Xi’an by 2012.

The two latest Somerset-branded properties will increase the group’s portfolio to more than 5,500 apartment units in 29 properties across 13 cities.

Somerset Gaoxin, Xi’an is Ascott’s first Somerset- branded service residence in the city. It is located on Tang Yan Road, which is within the new commercial centre of the Xi’an Hi-tech Development Zone.

The project is part of a mixed development which comprises a clubhouse and a retail podium.

Somerset Grandview, Shenzhen is on Xinsha Road, close to the Futian Central Business District. The property is next to the Shenzhen Golf and Country Club and close to high-end office towers, shopping malls, and food and beverage outlets.

Both the 233-unit Somerset Gaoxin, Xi’an and 128- unit Somerset Grandview, Shenzhen will offer a range of apartment types from studios to three-bedroom units, catering to the different needs of both short- and long-stay travellers.

All apartments come with a fully equipped kitchen, ensuite bathroom and separate living and work areas.

Source: Business Times, 8 Jul 2010

(BEIJING) China has no plans to launch a new round of property market tightening in the third quarter, a senior official said in remarks published yesterday, refuting earlier media reports.

Wang Yulin, deputy research head with the Ministry of Housing and Urban-Rural Development, said the government would step up efforts to implement tightening measures which have already been announced to rein in the red-hot housing market, including curbs on purchases of multiple homes and restrictions on lending to property developers.

Minister of Land and Resources Xu Shaoshi said on Sunday that property prices would fall in Q3 as the tightening campaign continued, which was interpreted by some media as indicating that China was planning a new round of curbs.

‘Such media reports embellished his remarks,’ Mr Wang told the Oriental Morning Post in Shanghai. He added that China’s property market would not experience a hard landing this year. — Reuters

Source: Business Times, 8 Jul 2010

Prices in 70 Chinese cities rose 12.4% in May, the 2nd-fastest pace on record

(BEIJING) China’s home prices are set to fall as much as 20 per cent in a ‘healthy’ correction, said Michael Klibaner, head of China research at Jones Lang LaSalle Inc.

China’s property boom is ‘cash-driven’ rather than ‘leverage-fuelled’, which means there’s only a low chance of the type of forced selling that exacerbated the US housing market collapse, he said in a Bloomberg Television interview yesterday.

That view contrasts with Harvard University’s Kenneth Rogoff’s prediction on Tuesday of a ‘collapse’ in China’s property market that will hit the nation’s banking system.

Property prices in 70 Chinese cities rose 12.4 per cent in May, the second- fastest pace on record, heightening concern a bubble is forming in the nation’s housing market.

Shanghai’s new-home sales fell 70 per cent from a year ago in June, Changjiang Securities Co said in a report on Tuesday, adding to signs government measures including increased interest rates and down payments on second mortgages are cooling the market.

‘We actually expect a very healthy correction, something in the order of 15 or 20 per cent in terms of price correction,’ Mr Klibaner said yesterday.

‘But we don’t see any reason why there will be a risk of a crash at the moment.’ Jones Lang LaSalle is the second-largest publicly traded commercial property broker.

As China’s economy develops, ‘especially at the speed it’s growing, it’s going to have bumps’, said Mr Rogoff, speaking in an interview with Bloomberg Television on Tuesday.

‘You’re starting to see that collapse in property and it’s going to hit the banking system,’ said Mr Rogoff, 57, the former chief economist of the International Monetary Fund.

Mr Klibaner’s forecast echoes the view of Nomura Holdings Inc economists Sun Mingchun and Sun Chi, who said China’s average home price may fall as much as 20 per cent in the next 12 to 18 months.

That won’t have a big impact on China’s economy, they said in a July 5 report.

Chinese authorities intensified a crackdown on property speculation after announcing the economy expanded at an 11.9 per cent annual pace in the first quarter, the most since 2007. — Bloomberg

Source: Business Times, 8 Jul 2010

(HONG KONG) Chinese developer Glorious Property says it is cautious about the outlook for sales later this year, after the central government unveiled harsh measures to rein in the red-hot property sector.

The Shanghai-based developer logged contracted sales of 4.2 billion yuan (S$862 million) in the first six months of this year, up about a third from the same period a year earlier, senior executives said yesterday. In June alone, contracted sales were 890 million yuan, up from about 220 million yuan in May, they said, adding that there were uncertainties for the remainder of the year.

‘We are quite cautious about the second half. We’ll mainly be monitoring property policies – whether the government adopts a tightening or loosening attitude,’ CEO Cheng Lixiong told a news conference here.

In mid-April, China announced a series of property measures to tighten the market, such as raising minimum downpayments and mortgage rates for second homes, and raising downpayments for first-home buyers purchasing huge apartments.

Urban property prices rose an annual 12.4 per cent in May, easing from April when prices climbed at a record pace, government data showed. Compared with April, May prices were up 0.2 per cent, also trending lower.

The tightening measures, coupled with Europe’s debt crisis, are also prompting the developer to put its plans to issue a dollar bond on hold. ‘The debt market is too volatile now. We feel that it’s not the right time to issue the bonds because of demand uncertainty and the costs of issuing,’ Mr Cheng said. — Reuters

Source: Business Times, 6 Jul 2010

Most of the speculative and arbitrage capital from overseas that has entered China in recent months has ended up in the property and equity markets, an official at the country’s foreign-exchange regulator said in rare comments as the agency usually plays down the effect of hot money inflows into China.

An investigation that began in February has uncovered 190 cases of hot money inflows involving US$7.35 billion ($10.23 billion), Mr Deng Xianhong, a vice-director at the State Administration of Foreign Exchange (Safe), said in an interview published yesterday in the state-run People’s Daily.

“A situation of continuous foreign exchange fund inflows forms easily,” Mr Deng said.

“Higher interest rates for the yuan compared to foreign currencies and expectations of yuan appreciation create very strong attractions for overseas capital … The resulting higher domestic stock and property prices and strengthened expectations of a stronger yuan lead to further foreign exchange fund inflows,” he said.

Rather than attracting hot money, the yuan exchange rate should be a means of getting rid of inflows of such funds, Mr Deng said.

The comments come after the People’s Bank of China (PBOC) loosened the yuan’s exchange-rate mechanism on June 19 in a surprise move.

The PBOC set the US dollar-yuan central parity rate at 6.7733 yesterday, compared to 6.7720 on Friday.

China’s property prices have risen steadily over the past year, leading Beijing to introduce a series of measures to cool the sector, including higher minimum downpayments and other requirements.

Home prices were up for the 12th straight month in May from a year earlier, though the rate of increase slowed slightly from the previous month.

The benchmark Shanghai Composite Index has fallen 28 per cent this year as Beijing withdraws the stimulus measures introduced to cushion the effects of the financial crisis.

China yesterday also revised up its first-quarter current account surplus to US$53.6 billion from US$40.9 billion, according to a statement on the Safe website.

Source: Today, 6 Jul 2010

With yuan’s value set to rise, affluent Chinese are turning to foreign markets like S’pore and London

LONDON: China’s notorious property bubble could become its next big export, with a stronger yuan giving the newly rich the buying power to splash out in the world’s most sought-after property markets.

Buoyed by hopes of gains in the yuan after its peg to the United States dollar was shed on June 19, Chinese investors are chasing discounted apartments from London to Singapore with a view to reducing their exposure to an overheated domestic market.

A report by property broker DTZ in late May showed that Chinese buyers made up 17 per cent of foreign property purchases in Singapore in the first quarter, making them the third most prolific overseas buyers in the city-state.

‘They want their capital to be global… It’s a kind of diversification of risk,’ said DTZ’s head of consulting for North Asia Alva To.

Despite its vast state wealth and status as one of the world’s strongest economies, China has so far been eclipsed by Middle Eastern investors, private equity funds and other sovereign buyers from South Korea or Singapore in terms of influence on overseas real estate markets.

Chinese property investors have so far mostly confined their acquisitions to domestic markets, pushing average prices up by 77 per cent in five years and forcing the government to enact tough measures to keep homes affordable.

With property tightening measures at home and the yuan’s value set to firm, analysts see more buyers branching out into overseas markets that promise attractive gains with fewer restrictions.

‘The whole economic situation (in China) is prone to change, and so people are looking for a safe haven for their money,’ said Mr James Moss, managing director of upmarket British real estate services company Curzon Investment Property.

He disclosed that his client base was now 75 per cent Chinese, from 95 per cent expatriate British investors five years ago.

China abandoned a 23-month-old peg to the US dollar earlier last month and, even though analysts do not expect the currency to be fully convertible any time soon, further appreciation is likely, boosting the overseas purchasing power of Chinese investors.

Data from real estate broker Knight Frank showed more than one in 10 new residential properties in London were sold to Chinese or Hong Kong buyers in the year to March, the highest share of the market by any offshore investors.

In Hong Kong, a fifth of luxury apartments are purchased by mainland Chinese, said DTZ’s Mr To.

A relentless rise in domestic property prices since house ownership was legalised in 1998 has fostered a strong preference for bricks and mortar over volatile equities among the Chinese, already known as strong savers and investors.

‘I’m looking for investment opportunities outside China to save enough money for my daughter when she grows up,’ said Ms Tracy Ma, 38, a Chinese executive who owns an apartment in Shenzhen in China’s south, neighbouring Hong Kong.

China’s gross aggregate savings rate now tops 50 per cent of gross domestic product, by far the highest of any big economy, with disposable income among the urban population rising 10 per cent last year, official data showed.

More than 90 per cent of China’s households own the home they live in, while more than a quarter own a second property, a report from Asian brokerage CLSA said.

REUTERS

Source: Straits Times, 2 Jul 2010

CHINA’S economy is likely to experience a soft landing even as the government works to shrink a property bubble, according to a Barclays Capital report.

This will be despite housing prices making an expected decline of 20-30 per cent over the next few quarters, Barclays said.

‘In countries with different characteristics, a correction of that magnitude could clearly risk a hard landing, but China may be exceptional.’

The impact of Chinese consumption from the price declines may be smaller than expected, since about half of the Chinese population are based in rural areas where there is no active property trading.

‘Low-income and migrant workers would benefit from housing price declines, as they are likely to be home buyers,’ added Barclays in its quarterly report.

Although asset bubbles are usually linked to current account deficits – which make economies fragile when the flow of international capital stops – China would not be affected, since it has been heavily investing its capital abroad. A country’s level of current account indicates trends in its foreign trade.

‘Arguably, the most important difference . . . lies in the banks, which are unlikely to be forced on the defensive and limit lending since, being state-owned, credit decisions will be determined by top-down political directives,’ said Barclays, adding that the greater risk from the asset bubble deflation is an implementation one.

Chinese wage increases are unlikely to create significant inflationary pressures in the short term, since these are limited to a few coastal areas and profit margins could absorb some of the wage rises, Barclays noted.

‘The change in labour market dynamics is a long-run, secular process that should play out over the years, not months.’

Barclays expects China’s gross domestic product to grow 10.1 per cent this year, and ease to 9 per cent in 2011.

GDP growth in Asia is expected to slow to 7.6 per cent in 2011 from 8.8 per cent this year, partly as the impact from fiscal stimulus begins to wane, said Peter Redward, head of emerging Asia research at Barclays.

As for Singapore, growth is expected to be supported by the strength of the cyclical upturn in the global electronics industry, said economist Leong Wai Ho.

It is unlikely to be affected by the debt problems in Europe, as exports to countries in South Europe make up just about one per cent of total exports, he added.

Source: Business Times, 26 Jun 2010

(BEIJING) New commercial home prices in 36 major Chinese cities continued to climb month-on- month in May despite the government’s attempt to cool the property market, the National Development and Reform Commission (NDRC) said yesterday.

Average new commercial home prices in 36 popular cities were priced at 8,479 yuan (S$1,719) per square metre in May, up 0.81 per cent from the April figure, according to the NDRC.

However, the May growth rate in those 36 major cities was 2.65 percentage points lower than the April figure.

According to the National Bureau of Statistics figures released on June 10, home prices in 70 large- and medium-sized Chinese cities rose by 12.4 per cent year- on- year in May.

To rein in house prices, the Chinese government has tightened scrutiny of developers’ financing, limited loans for third-home purchases, raised minimum mortgage rates and tightened down-payment requirements for second-home purchases. — Xinhua

Source: Business Times, 24 Jun 2010

But commodity markets are unlikely to join the ride, say analysts

(SINGAPORE) Property developers in Singapore and Asia could benefit if China nudges its currency up, as Chinese consumers snap up real estate overseas with a stronger yuan in hand.

But there is less positive reading on the commodities market – which reacted to China’s currency reform with a sharp price jump – as analysts note that an appreciation of the yuan might not boost demand for commodity imports ahead.

Over the weekend, China said that it would make the currency more flexible by getting rid of its 23-month peg to the US dollar, though it firmly ruled out a one-off revaluation.

But the knee-jerk reaction seen on Asian markets on Monday gave way to a region-wide sell-off yesterday, as temporary amnesia over Europe’s debt problems vanished overnight.

The Hang Seng Index dipped 0.45 per cent, the Straits Times Index lost 0.46 per cent, the Nikkei 225 slid 1.2 per cent, and the Shanghai Composite gained just 0.1 per cent.

Analysts were not surprised by the latest reform on the yuan, saying that the move could help to curb a build-up in the asset bubble, and are now expecting a mild yuan appreciation in the second-half of the year.

DBS economists expect the currency to appreciate by as much as 2 per cent this year, on the back of an uncertain global economic outlook and debt issues surrounding the eurozone.

Singapore property firms such as CapitaLand – which has about 35 per cent of its revised net asset value coming from China – should gain from a revaluation of China assets and stronger Chinese interest in properties here, said a Citi Investment Research note.

DMG & Partners Securities also noted that property developers such as SC Global and Wing Tai would win from greater demand in high-end properties.

Some analysts have also turned sanguine on commodity plays on hopes that a stronger yuan would lift demand for resources.

‘Commodity prices were strongly correlated with the last yuan appreciation episode in 2005- 2008,’ said Citi, which sieved out Singapore listings Golden Agri Resources and Indofood Agri Resources as its top picks for the region.

But HSBC’s China economist Qu Hongbin said in a report that since this currency reform was pitched at resuming flexibility, there will be no ‘meaningful impact’ on Chinese demand for commodities.

An RBS report also noted that a modest increase in the purchasing power of the yuan is unlikely to cause a sharp rise in Chinese commodity imports.

‘Most hard commodities have traded in a more than 20 per cent range in the past few weeks and intra-day moves for the exchange traded commodities of 3-5 per cent,’ the RBS report yesterday said.

‘Against an uncertain macro backdrop, we believe it is unlikely that modest and gradual yuan revaluation would provide the catalyst for significant commodity price gains in 2010.’

Other beneficiaries include Chinese banks. Morgan Stanley raised its positions in ICBC and Bank of China to overweight the banking sector, on hopes that a less aggressive stance in tightening measures in China should prompt better loans growth over the next six months.

The impact on Singapore equities is mixed, since some companies here may only benefit from the forex translation, and not operational gain, Yeo Kee Yan, vice-president of DBS Vickers Group Research, told BT.

Because S-chips such as Midas Holdings and China Animal Healthcare have all its revenue exposure in yuan, their net profit should improve by as much as the extent of yuan strengthening, DBS said.

But companies such as Broadway Industrial and Yangzijiang Shipbuilding could see a negative impact, said DMG’s report.

Broadway’s accounts receivables are mostly denominated in the US dollar, which means the company could see higher staff costs. This currently accounts for up to 20 per cent of its cost of goods sold.

As for Yangzijiang, there could be marginal impact from a stronger yuan against the US dollar because its contract revenue is set in US dollars.

Source: Business Times, 23 Jun 2010