China real estate outlook - Policy goals to support investment themes

China real estate outlook 2020: affirmative policy goals will continue to support key investment themes in real estate.

08 Apr 2020

Given the real challenges facing the economy, we will be watching China's commitment to its medium-term objectives. And even as China's rise on the global stage attracts its fair share of geopolitical skirmishes, affirmative policy goals will continue to support the development of key investment themes in real estate.

Much at stake, but China will not break

Every year in March, we look towards the annual National People's Congress (NPC) in
China and attempt to make sense of the signals that could guide our macro views. At the point of this writing, China has postponed the 2020 NPC sessions due to the COVID-19 pandemic.

Signposts we are watching for as we assess real estate opportunities in China

  1. Significance of China meeting its 13th Five-Year Plan (2016-2020) goal of doubling household disposable income (from 2010 levels by the year 2020) vis-a-vis the real challenges facing the economy in the long-term. This was a target set way back in 2012 and the political resonance remains high, as the achievement of such will be considered a key highlight of the 100th anniversary of the Chinese Communist Party in 2021.
  2. 20th Congress of the Chinese Communist Party in 2022 as investing in China's real estate calls for a strong grasp of the political situation and recognizing the key figures and policies that could influence the dynamics of the property and capital markets.
  3. 14th 5-year plan scheduled for approval in 2021. This Five Year Plan will be a blueprint of China's developmental goals for the next half decade and guides the policy actions of Beijing. For real estate investors, the plan is critical, as there will be indications as to where new growth areas will be, and how investors should position their strategies and allocate their capital accordingly in the medium term. 

Opportunities in China real estate in the next 5 years

Much of the country’s growth has been driven by local initiatives and developments over the years rather than by Beijing.

There is an obvious heterogeneity among provinces, cities municipalities and counties, from the cultural aspects to the administrative features. In general, we are strong believers in the logistics story in China.

However, aside from the widely acknowledged ecommerce and middle class drivers, there are opportunities in other specialized segments of the industrial sector.

Where are the gaps in China's real estate industrial sector as it sets out to achieve the "Made in China 2025 " ambition?

Beyond the manufacturing sector, more importantly, consumerism, proliferation of electronic commerce and solid residential population growth are driving the underlying demand for commercial real estate. The development of the Greater Bay Area is expected to further enhance the economic growth and connectivity for South China, especially Shenzhen, and we believe real estate investors will do well to increase their exposure to South China.

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