Southern Perspective Shenzhen

Anyone that has looked into buying real estate in China knows that the pricing can fluctuate wildly.

In my Chinese home town of Shenzhen, this is true like no other city.

Prices for real estate in Shenzhen have risen steadily since I arrived here over five years ago.

While prices for flats in Shenzhen are still not so close to the astronomical prices that flats in Hong Kong command, prices here do rival that of those in Beijing and Shanghai.

Shenzhen is an interesting area because of the proximity to Hong Kong and there is reason to believe that there is a significant flow on so called “hot money” from Hong Kong into China via Shenzhen.

China has taken significant steps to try to avoid the inflow of speculative money by placing tight regulations on the RMB and newer restrictions on the flow of investment capital into the country.

China’s central bank recently stated that they would begin to increase the monitoring of suspected speculative money into and out of the country.

The State administration of Foreign Exchange also announced that they would tighten the regulations on individual persons and the transferring of yuan and foreign currencies between bank accounts.

Some experts have expressed doubt that these new measures would have the desired effect on the inflow of hot money.

Because of China’s relatively low priced real estate, speculative capital will follow the old mantra, where there’s a will, there’s a way.

The problem comes into the picture when inflation begins to pressure China’s central bank and it is forced into making a decision about whether to appreciate the yuan or raise interest rates, neither of which is appealing to the Chinese central government.

The central government would be smart to encourage Chinese investors to begin to acquire more investments internationally in order to avoid the continuing growth of a potential asset bubble in some of the major Chinese cities.

While many cities in China still appear to be interesting places for speculative investment, the question of whether or not the assets are still a good value and at what point the asset bubble may burst and how Chinese investors can protect themselves.