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Shopping Abroad: China’s Rich Seek Shelter from Stock Market Storm in Foreign Property

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Around 91,000 wealthy Chinese sought second citizenship between 2000 and 2014, a factor that is fueling demand to buy foreign property

Jane Wardell and Kate Holton report: Realtors in Australia, Britain and Canada are bracing for a surge of new interest in their already hot property markets, with early signs that wealthy Chinese investors are seeking a safe haven from the turmoil in Shanghai’s equity markets.

“There is anecdotal evidence that Chinese buyers have intensified their interest in ‘safe haven’ global property markets, including London, as a result of the recent stock market volatility.”

Sydney realtor Michael Pallier said in the past week alone he has sold two new apartments and shown a A$13.8 million ($10.3 million) house in the harbourside city to Chinese buyers looking for an alternative to stocks.

“A lot of high net worth individuals had already taken money out of the stock market because it was getting just too hot,” Pallier, the principal of Sydney Sotheby’s International Realty, said. “There’s a huge amount of cash sitting in China and I think you’ll find a lot of that comes to the Australian property market.”

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“It is unusual to see the Chinese block buying, it implies that this is a capital movement rather than just individuals looking to park money.”

Around 20 percent has been knocked off the value of Chinese shares since mid-June, although attempts by authorities to stem the bleeding are having some effect.

Many wealthy Chinese investors had already cashed out. Major shareholders sold 360 billion yuan ($58 billion) in the first five months of 2015 alone, compared to 190 billion yuan in all of 2014 and an average of 100 billion yuan in prior years, according to Bank of America Merrill Lynch.

While much of that money may initially be parked in more liquid assets like U.S. Treasury bonds and safe-haven currencies such as the Swiss franc, there is growing evidence that foreign property sales may receive a boost.

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“Chinese investors had already sunk around $5 billion into U.S. real estate in the first six months of 2015, more than the $4 billion they invested in the whole of 2014.”

“There is anecdotal evidence that Chinese buyers have intensified their interest in ‘safe haven’ global property markets, including London, as a result of the recent stock market volatility,” said Tom Bill, head of London residential research at Knight Frank.

Ed Mead, executive director of realtor Douglas & Gordon in London, said his firm had seen two buyers from China looking to buy whole blocks of flats.

State Department officials said they are reviewing the sale of the famous hotel to a Chinese insurance company with possible ties to the country's Communist Party. JUSTIN LANE/EPA

State Department officials said they are reviewing the sale of the famous hotel to a Chinese insurance company with possible ties to the country’s Communist Party. JUSTIN LANE/EPA

“It is unusual to see the Chinese block buying, it implies that this is a capital movement rather than just individuals looking to park money.”

RICH EXODUS

Since 2000, China has had the world’s largest outflow of high net worth individuals. Around 91,000 wealthy Chinese sought second citizenship between 2000 and 2014, according to a report by residence investment broker Lio Global, a factor that is fueling demand to buy foreign property. Read the rest of this entry »

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‘Not the Only Gorilla in the Jungle’: Japan Overtakes China as Largest U.S. Bondholder

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Japan’s purchases will help soothe lingering concerns that U.S. bond prices could decline as China slows its buying. 

Min Zeng in New York, Lingling Wei in Beijing and Eleanor Warnock in Tokyo report: Japan dethroned China as the top foreign holder of U.S. Treasurys for the first time since the financial crisis, following a wave of purchases by buyers shifting money to the U.S. as Japan’s economic policies push down interest rates there.

“China is currently the 800-pound gorilla in the U.S. Treasury market. However, it is not the only gorilla in the jungle.”

–James Sarni, a managing principal at investment manager Payden & Rygel, which oversees $90 billion of assets

In reclaiming its status as the largest foreign creditor to America in U.S. official data, Japan is japan-chart-WSJreasserting itself as Beijing holds its Treasury portfolio steady amid a weakening Chinese economy.

“U.S. debt bears higher yields than government bonds offered in other rich nations, thanks to the perception of stronger U.S. growth prospects and to central-bank bond purchases that have driven yields near zero across Europe and in Japan.”

Private investors and official institutions in Japan owned $1.2244 trillion of U.S. government securities at the end of February, compared with $1.2386 trillion at the end of January, according to the latest monthly data released by the Treasury on Wednesday.

China held $1.2237 trillion of Treasury debt at the end of February, compared with $1.2391 trillion a month earlier.

Over the past year, Japan has boosted its holdings by a net $13.6 billion, while China’s holdings dropped by $49.2 billion.

“The single largest holder of U.S. long-term debt is the Federal Reserve, with more than $2 trillion. The amount has surged from $755 billion at the end of 2007, fueled by Fed purchases of long-term securities in response to the financial crisis”.

The Treasury data, released with a two-month lag, don’t capture all of the Treasury-bond holdings China may have parked at middlemen in places such as the U.K. and Belgium. Many analysts and investors believe China has considerable holdings bought through such intermediaries. The Treasury notes on its website that “it is difficult to draw precise conclusions about changes in the foreign holdings of U.S. financial assets by individual countries” from the capital-flow data.

“The shift also reflects changes sweeping China. The world’s most-populous nation has in recent months largely held its Treasury portfolio in place, reflecting a slowdown in the growth of its $3.73 trillion foreign-exchange reserve, the world’s largest, and an effort to shift those reserves toward higher-yielding assets.”

The Japanese purchases have helped drive long-term U.S. bond yields near record lows despite an economic expansion that averaged 2.7% annually over 2013-14. Those low yields have, in turn, helped keep down interest rates for Americans on everything from home loans to credit cards. Read the rest of this entry »


Reality Check: China Now Owns a Record $1.317 Trillion of U.S. Government Debt

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Matt Egan  reports:  China stepped up its purchases of U.S. government debt late last year, increasing its holdings of Treasurys to an all-time record of $1.317 trillion in November, government data released this week revealed.

The statistics underscore how reliant the U.S. and Chinese economies are on one another even as political tensions occasionally emerge.

According to figures inadvertently released Wednesday evening on the U.S. Treasury Department website, China’s holdings of Treasurys increased by 0.9% in November to $1.317 trillion, up from $1.305 trillion in October. Year-over-year, China’s holdings rose 11.3% from $1.183 trillion.

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Dollar Slips as Fed Worries Continue

Expectations that the Federal Reserve will have to keep its easy-money policies in place for longer following the partial U.S. government shutdown pushed the dollar close to its lowest point of the year against the euro and U.S. Treasury debt prices to their highest point since July.

Yields on the 10-year Treasury note, which move inversely to prices, were down to 2.55%, while the dollar continued its slide against the euro, which rose to $1.3695 from $1.3675 late Thursday in New York, edging closer to this year’s high of $1.3711 reached on Feb. 1. The dollar fell further against the pound, which traded just above the $1.62 level for the first time in two weeks, and resumed its drop against the yen, fetching ¥97.65 from ¥97.93.

About three hours before the start of trading, U.S. futures pointed to a relatively subdued open on Wall Street, where stocks staged a late-session comebackThursday that helped push the S&P 500 to a record close of 1733.15. The front-month contracts for the Dow Jones Industrial Average and the S&P 500 were both up 0.1%, at 15331.00 and 1729.80, respectively. Changes in futures don’t always accurately predict early market moves after the opening bell.

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China to U.S.: We’re not impressed

The Congressional vote to avoid a debt default did not win positive reviews from China.

The Congressional vote to avoid a debt default made partners in China reconsider enabling its addicted client

America’s largest overseas creditor wasn’t exactly blown away by the deal Congress struck to avoid a potential default.

“[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system,” government-run Chinese news agency Xinhau Thursday.

Wednesday’s vote, the commentary said, “was no more than prolonging the fuse of the U.S. debt bomb one inch longer.”

And a Chinese credit rating agency Dagong downgraded the United States, saying the deal did little to change the outlook for the country’s financial condition.

Read the rest of this entry »


Why China Wants to Dump the Dollar

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Chriss W. Street writes:  China’s Dagong credit rating agency on October 17th downgraded its United States sovereign credit rating to A- and maintained its negative outlook on America’s solvency. Dagong warned that despite Washington’s last-minute resolution of the debt ceiling deadlock, “The fundamental situation that the debt growth rate significantly outpaces that of fiscal income and gross domestic product remains unchanged.”

China’s official state-run news agency, Xinhua, reiterated its statements that because of the continuing risk of a U.S. debt default, it is “a good time for the befuddled world to start considering building a de-Americanized world.” This language is code for China wanting to abandon the U.S. dollar as the world’s “reserve currency” and move international financial transactions to the renminbi, the currency of the People’s Republic of China.

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Analysis: Beijing should cut back its lending to Washington

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Mr Social Justice meets Mr. Economic Reality

David Li writes: China is America’s single largest foreign creditor, holding about 8 per cent of the stock of US Treasuries. Most Chinese netizens and opinion makers are not knowledgeable about the country’s budget dispute. But almost all Chinese people understand that the US government has been playing the world economic game to its advantage.

The US issues, at rates of almost zero, Treasuries that are bought by investors all over the world. So long as the federal government increases the debt stock at a pace slower than the US gross domestic product growth rate (usually 2-4 per cent a year) minus the real interest rate (zero, or even negative in recent years), it can roll over the debt almost for ever, never worrying about paying it back.

What is intriguing to most Chinese analysts is that Congress and the White House do not seem to understand the game’s benefits. The evidence is the US budgetary mess. Bitter fights over government budgets are commonplace among politicians all over the world. This is a good thing. But a technical default OF some of the existing Treasury bonds would be the beginning of the end for the wonderful game the US federal government has been playing. Read the rest of this entry »


What If China Stops Buying U.S. Government Debt?

Gordon G. Chang reports: Just about everyone worries that Beijing, perturbed by the ongoing squabble inWashington, will sour on Treasuries.  This concern is embedded in the provocative title of Eamonn Fingleton’s recent Forbes posting: “If Republicans Want to Shut Down Washington, They’ll Have to Ask China’s Permission First.”

The Republicans in fact did not seek Beijing’s approval, and neither did Democrats.  Are both sides making a mistake by not taking into account China’s “feelings,” as the Communist Party demands everyone do?

It’s clear Chinese officials are watching closely.  “The United States, the world’s sole superpower, has engaged in irresponsible spending for years,” observed Xinhua News Agency in an editorial on Wednesday.  “With no political unity to redress its policy mistake, a dysfunctional Washington is now overspending the confidence in its leadership.”

The official organ’s warning, entitled “On Guard Against Spillover of Irresponsible U.S. Politics,” hints that Beijing leaders are thinking of further diversifying their portfolios away from dollar-denominated debt.  If the Chinese don’t continue buying Treasury securities, the Federal government will have to find others to take up the slack.  Many, including the respected Congressional Research Service,argue that Treasury may then have to pay substantially more for borrowed funds and higher interests rates could result in lower long-term growth. Read the rest of this entry »


2013 Treasury Statement: Under Obama, U.S Gov’t Debt Held by Public Up 90%

President Barack Obama (AP Photo/Susan Walsh)

President Barack Obama (AP Photo/Susan Walsh)

(CNSNews.com) – Terence P. Jeffrey reports: The U.S. Treasury released its last Daily Treasury Statement for fiscal 2013 yesterday afternoon, revealing that during the presidency of Barack Obama the U.S. government debt held by the public has increased 90 percent.

At the close of business on Jan. 20, 2009, the day Obama was inaugurated, the U.S. government debt held by the public was $6,307,311,000,000, according to the Daily Treasury Statement for that day.

At the close of business on Sept. 30, 2013—the last day of fiscal 2013—the Daily Treasury Statement said the U.S. government debt held by the public was $11,976,279,000,000.

The $11,976,279,000,000 in U.S. government debt held by the public on Sept. 30, 2013 was $5,668,968,000,000 more than the $6,307,311,000,000 in debt held by the public on Obama’s first inauguration day.

That is an increase of 89.879 percent—or approximately 90 percent. Read the rest of this entry »