Proposal: Performance of Property Investment In Main Chinese Tier 1 And Tier 2 Cities

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Contents

CHAPTER 1: INTRODUCTION3

Overview of Chinese Economy3

Economic Performance5

Current Condition of China's Real Estate Market & Issues6

Strong demand in small and medium sized cities6

Tier 1 vs. Tier 2 cities8

Regulatory Enviorment9

Justification of the Study12

Aims and Objectives13

Research Questions13

Structure of the Dissertation14

Summary14

CHAPTER 2: LITERATURE REVIEW16

Real Estate Investment Environment16

National condition of China's real estate market17

Robust growth rate17

Upgrade in credit ratings18

High inflow of foreign investments18

Lopsided growth19

Rising unemployment20

Strong infrastructural development21

Property Cycle21

Risk and Return24

CHAPTER 1: INTRODUCTION

Overview of Chinese Economy

China has succeed in achieveing tremendous scueess on econmics grounds by starting a process of economics reforsms as well as open policy in the late 1970s. However, it's economy was adversely affected by the global economic crisis through sharply falling exports and private investment. Underpinned by the government's expansionary fiscal and monetary policies, economic growth rebounded strongly after the second quarter of 2009. The recovery was moved essentially by domestic demand, particularly public investment that gained from the stimulus policies, while cgovernment as well as private onsumption, played a crucial role too in the recovery. Exports also bottomed out and started to recover in the second half of 2009. The country rebounded strongly in 2010, outperforming all other major economies in terms of GDP growth. It also becomes the world's largest exporter. Also, in a welcomed move, the Chinese Central Bank in mid-June 2010 announced that China would increase its exchange rate flexibility by allowing resumption of a gradual appreciation of the renminbi. The move was an attempt to rebalance the economy by increasing the Chinese household income and providing necessary incentives to reorient investment toward industries that serve the Chinese consumer. Also by late 2010/early 2011, China had become the world's second-largest economy - behind the United States. Still, China's credit-fuelled stimulus program led to high inflation in 2010 and 2011. 

In March 2011, the government adopted its 12th Five-Year Plan in which it pledged to continue reforms and increase domestic consumption. By early September 2011, Fitch Ratings warned it might downgrade China's credit rating by the end of 2012 on the basis of an expected material deterioration in bank asset quality. Fitch did downgrade the outlook on China's long-term local currency debt to negative from stable in April 2011 due to concerns about the country's financial stability after a lending surge over the past two years. Fitch's China rating is AA minus, its fourth highest level. An economic slowdown in Europe was expected to further drag Chinese growth in 2012. But by July 2012, a Reuter's poll of economists found that China's economy likely bottomed out in the second quarter of 2012. The analysts predicted that country's economy would be expected recover discreetly in the third quarter of current year 2012 as a direct outcome of policy stimulus. Still, they predicted growth for the year would still be weaker than in 2011. China's central bank cut interest rates twice in a month's time. The country has also reduced the amount of cash banks must keep in reserves three ...