Chinese investors are concerned.
Chinese investors have been a major investor in the US housing market over the last decade.  They find diversification, stability, and safely here in the states.  Here's what currently has them concerned.

  • Chinese currency devaluation - Chinese investing abroad became more expensive with the government's devaluation of the Chinese Yuan.  In the short run, we may see an increase in investment as Chinese investors rush capital abroad in anticipation to future devaluations.  In the long run, it makes everything foreign more expensive for the Chinese decreasing demand.
  • Their slowing economy - The Chinese government reports a 7% GDP by years end, Wall Street believes its closer to 4-5%.  This economic slowdown will ripple through the entire Asian region and is significant enough to contribute to the US Federal Reserve policy of holding rates steady.
  • Chinese Stock Market Volatility - The recent stock market volatility in China has as much to do with the Chinese government intervention as it does underlying fundamentals.  The Chinese government has been reducing transparency and changing the rules as they go along.  The Chinese government was also counting on strong stock market growth to support their restructuring efforts, but with the massive 2015 selloff, those plans are now in peril. 
  • Chinese Housing Market - Having been through a recent housing bubble here in the states, the market there seems to be building a massive bubble.  The standard Chinese home buyers are more conservative with 30% down payments, creating a better protected property market with less leverage.  But its the marginal home buyers that create bubbles, and when their actions are forced to change, bubbles pop.  The developer / supply side also carries a lot of risk in China.  High leverage, land sales relied upon as a funding tool by local governments, loss making SOE's (State Owned Enterprises) that have been relying on real estate divisions to keep afloat, regional oversupply problems, and the low quality construction depreciation issues are some main concerns.


Gary Lee, CFA | Baird & Warner
25 West Chicago Avenue | Hinsdale, IL 60521
Cell: 630.449.2110
Email: [email protected]