Tuesday, February 7, 2017
News reports indicated China has tightened capital controls, but it doesn’t seem to be working. Their foreign exchange reserves unexpectedly fell below $3 trillion. There has been a steady drop as it fell by $12.3 billion in January to $2.998 trillion, compared with a drop of $41 billion drop in December. China had lost over $300 billion in 2016, and over $500 billion in 2015. News reports indicate Beijing is concerned at the speed of the outflow. This outflow hurts its ability to defend its own currency. It is possible if the outflow continues then the government will devalue their own currency. The US dollar has been rising and the yuan has dropped by almost 7% since last year. At the same time their gold reserves have increased. What does this mean for the Antelope Valley? Well many Chinese investors are investing in California. There has been a huge influx of Chinese purchases of real estate in San Francisco, Los Angeles and the Antelope Valley. Land is still cheap and it takes no effort to maintain dirt. There has also been interest in farm land to grow traditional agricultural products, as well as, marijuana. Stay tuned. China has lots and lots of money, and California seems to be a nice resting place for their investments.
Wednesday, February 1, 2017
China is facing a looming demographic crisis due to its rapidly aging society according to a UN Study. There soon will be an estimated 360 million Chinese over the age of 60 in 2030. That is 25% of the population, which is also larger than the entire US population. China may not have the resources to care for a large retired population. Their economy has slowed, and affluent Chinese are increasingly investing in retirement properties overseas both for their parents and their own golden years. They have benefited from a property boom at home and they would like to retire somewhere safe, environmentally clean, safe and comfortable. The yuan’s value has decline against the dollar, so they have been pouring money into foreign investment in Europe and the US. Overall Chinese investment in foreign commercial and residential real estate jumped from $5.6 billion in 2012 to $34.4 billion last year, according to recent studies. A recent survey also indicated Chinese who had either emigrated or were considering emigrating, of those 60% said they would buy an overseas property in the next three years, with the US, UK, Canada and Australia as the top destinations. More than half indicated they were concerned about the continuing depreciation of the yuan. Outbound tourism has shot up 200% in 2015 from 2014. Retirees expect to live full lives in their golden years and the west appears to be their desire destination. Chinese also like living with people of their own culture just like others. California has one of the largest Chinese populations in the US. Many also look to vacant land as an investment vehicle, since there is no maintenance on land parcels. They can sell the property later for a profit and then buy a home in California. The investment becomes a safe haven from the yuan and home government. Also what make Antelope Valley a good prospect is the new medical facilities. Retirees like access to safe state of the art medical care. The desert valley may fit the bill. Also China has dense cities with crowded apartments. Antelope Valley and many parts of California are the opposite of that. Additionally, a foreign investment benefits their children and grandchildren. In China property ownership is a leasehold and not fee simple like the US. A leasehold maybe only 70 years in China, so you can’t will the estate to your children which is so common in the US. There are still cultural barriers to Chinese foreign investment, but some of the positives may outweigh the negatives. An investment can be turned into cash when appropriate.