Chinese investors moving outbound FDI to EU real estate

Chinese investors moving outbound FDI to EU real estate

07 Aug 2018

Chinese FDI In Europe

As per recent reports by the CoinDesk, Chinese investors continue to buy properties overseas, mainly, due to the new regulations restricting investments in the digital currency. There are many Chinese cryptocurrency millionaires who are diversifying in real estate outside China and they are trading through cryptocurrency. It includes the investors who want to buy properties through bitcoin to move money overseas through trade deals.  The US and UK real estate markets are in the highest demand in such deals, as the highest number of such traders are from Asia, mostly China who want to move money through the Hong Kong route outside.

The Chinese government-imposed restrictions on property buying overseas but buyers are still seeking options outside as China’s real estate growth is negative and in the last 6 months, real estate in China had the weakest growth due to tighter fund regulations and the imposition of new rules on property developers. In June 2018, growth was 8.4 percent (9.8 percent in May) as per Reuter’s calculations (NBS). The government authorities claimed they will reduce subsidies on property buying in leading cities of China to diversify funds to other underdeveloped regions, and also impose restrictions on buying overseas.

FDI outbound to Europe

In 2018, most investors from China are shifting investments from North America to EU where the statistics reveal the FDI from China to EU was $16.63 billion in the first half of 2018 as compared to $2.5 billion in North America. Baker Mackenzie – the global law firm claims the new mergers and acquisitions by China show divesting trends from North America worth $9.6 billion where most investments went to top locations of the EU. At least $1.6 billion went to the UK and $1.5 billion to Germany, Sweden, and France. These investments were made into real estate, hospitality, automotive sector, health, and various other areas.

MSCI Real Estate market report claims the property market, globally, grew 15 percent to $8.5 trillion last year. The UK and Germany, market size increased over $100 billion and Germany becomes the 4th largest real estate market in the world replacing China in 2017.  Some of the upcoming growth markets in Europe are Sweden, Switzerland, Spain, and Norway – as measured by the GDP. Spain has the highest growth where the currency impact capital value growth and residual impact is extensively seen.  The US was the largest growing market in the world in 2017 but China is now investing at least 9 times more in Europe. Sweden is the leading investment location of China in 2018 followed by the UK.  Germany and France are other key locations of China’s FDI. The outbound FDI of China reduced 92 percent in North America from US$24 billion to US $2 billion and the investment in EU was up to $20 billion in the first six months itself.

Trade policies and global trade tension are responsible for low local investment but overseas investment grew in the EU. The Brexit uncertainty has lowered pound rates and this has increased the cost of imports and increased opportunities for overseas UK investors.  

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