January 8, 2010
By KEVIN BRASS
When Angel Calzadilla, a Florida real estate agent, received an e-mail a few weeks ago from a man who said he was a Chinese executive and wanted to buy a house, he suspected a scam.
“I thought it was fishy,” said Mr. Calzadilla, who is based in Fort Lauderdale, where Chinese buyers are a rarity.
But the executive was real. He hired a lawyer, transferred $750,000 into a trust account for the purchase and is now searching, with Mr. Calzadilla’s help, for a four-bedroom house in the range of $500,000 to $1 million.
Agents and industry executives around the United States are reporting similar experiences. Chinese buyers, once a novelty in many areas, are growing increasingly common, heralding what some believe — and many hope — may be an important new buying group.
Early last year, in the depths of the financial downturn, several groups of investors from mainland China toured properties around the United States, setting off a wave of media coverage. The tours were organized by companies like SouFun, a Beijing-based real estate Web site owned by Telstra, the Australian telecommunications conglomerate.
Many in the U.S. real estate industry hoped that the trips were an early indication that a wave of Chinese buyers was on its way. But, so far at least, the Chinese have mostly been what the agents call Lookie Lous — checking out properties but not buying.
“A lot of these buyers are very cautious right now,” said Kelvin Wong, owner of Resource Real Estate Services in Temple City, California, outside Los Angeles. “They are coming over and taking a look at what is going on to be prepared for when opportunity comes.”
And that will be when market conditions stabilize, according to experts like Paul Brewbaker of TZ Economics, a research and consulting company based in Honolulu.
“Trust me, there are going to be a lot more Chinese investors over here,” he said. “We’re very much in the early stages of this.”
Several factors are fueling the optimism. Thanks to China’s fast-growing economy, its population of millionaires is now the fourth largest in the world, moving past Britain in 2008, according to the 2009 Merrill Lynch-CapGemini World Wealth Report.
Prices in many parts of the United States dropped 25 percent to 35 percent last year, but it is the secure, established nature of the U.S. residential sector — especially in comparison to the wild gyrations of many Asian property markets — that is particularly attractive to Chinese investors.
“They come to the U.S. not for the huge profit, it’s for the stabilized market,” said Kenneth Li, an agent with Century 21 in Houston who deals with many Chinese buyers.
In many ways, the interest in U.S. property is part of a general economic shift. Direct investment by Chinese companies in the United States grew to $1.2 billion in 2008 from $385 million in 2002, a 220 percent increase, government data shows.
Officially, China strictly limits its citizens on the amount of money they can invest overseas, usually the equivalent of about $50,000 a year. But industry executives say there are a variety of methods for wealthy Chinese to avoid the restrictions, including overseas bank accounts and trusts.
In 2007 Chinese buyers accounted for 7.5 percent of international buyers in the United States, according to a survey by the National Association of Realtors. Although that number dropped to 5.4 percent last year, agents in California and Texas report a sharp increase in contacts from China in the same period.
Forty-one percent of the Chinese purchases of residential property in the United States last year were in California, according to the national realtors group. In the past three years, the Chinese population in the state grew by more than 80,000 to about 1.2 million, according to the U.S. Census Bureau.
Many buyers have children studying in the United States or have relatives here, said John Wu, president of the Chinese American Real Estate Professionals Association, in San Gabriel, California.
Typically, he said, the buyers are not looking for ostentatious properties, but rather for houses that can be easily rented or resold. “They really buy houses with more flexibility,” Mr. Wu said. “They understand the market here.”
The West Coast is not the only area seeing activity. In New York, for example, interest from China is “infinitely stronger now,” said Chaim Katzap, chief executive of Lion’s Property Development Group, an investment advisory firm based in New York with offices in Beijing and Shanghai.
Mr. Katzap met with several investor groups from China last year. Like other executives, he reports the interest did not translate into big deals but, “they keep calling.”
Copyright 2010 The New York Times Company
Thursday, January 7, 2010
JAPAN: Kan Jolts Yen On First Day As FinMin
01.07.10, 05:43 AM EST
TOKYO -- Japan's new finance minister is wasting little time making waves, jolting the foreign exchange market Thursday by calling for a weaker yen as doubts surface about his ability to guide a recovery in the world's No. 2 economy.
In unusually explicit remarks for a Japanese finance minister, Naoto Kan vowed to work closely with the central bank to steer the currency toward an "appropriate" level around 95 yen to the dollar.
He welcomed the yen's recent retreat from the 14-year high of 84.83 to the dollar hit in November but indicated it hadn't fallen far enough. "I hope currency markets correct themselves further, weakening the yen," he said.
That sent the dollar surging to a high for the day of 92.87 yen from 92.20 yen just before the comments.
Prime Minister Yukio Hatoyama formally installed Kan as new finance minister Thursday, replacing an experienced fiscal conservative with a popular politician known more for candor and mettle than crafting economic policy.
Kan takes over from Hirohisa Fujii, whose health problems led the 77-year-old to resign Wednesday after just four months as the top finance official.
Kan, who will retain his post as deputy prime minister, is an unlikely appointment. While the choice may lift the government's sagging public approval ratings, his background and outspoken views are already causing anxiety about Japan's fragile recovery.
The 63-year-old is a vocal advocate of slashing public works spending - a key component of Hatoyama's economic stimulus - and will instead appropriate money for social programs. Investors worry that such spending could rise, swelling Japan's already massive public debt, given Kan's opposition to Fujii's insistence on capping government bond issuance to 44 trillion yen ($475 billion) next fiscal year.
He has also been critical of the Bank of Japan, which he views as too optimistic on the economy.
A former health minister, Kan gained prominence in Japan for exposing in 1996 a government cover-up of HIV-tainted blood products that caused thousands of hemophilia patients to contract the virus that causes AIDS.
He may have credibility as a social activist, but observers wonder whether Kan is up to the task of stemming deflation and bolstering growth.
"Unlike Fujii ... Kan does not seem to have a good background on economic and fiscal policy," said Masaaki Kanno, chief economist at JP Morgan Securities Japan.
"Unless Kan shows strong leadership to organize growth strategies, involving the BOJ, Japan's economy will not be able to get out of the trap of deflation and mounting government debt."
Fujii, by contrast, was a career bureaucrat in the Finance Ministry and had previously served as its chief in 1993-94.
The role of the finance minister will be crucial to boosting the government's popularity ratings, which have tumbled since the Democrats swept into power in September. Japan's economy has been hobbling toward a weak recovery since the 2008 financial crisis, and public debt is ballooning to near 200 percent of gross domestic product.
Hatoyama himself has taken personal blows as he battles a campaign contribution scandal, and tries to shake off a reputation for indecisiveness over moving a major U.S. military base on the southwestern island of Okinawa.
The prime minister had wanted Fujii, the oldest Cabinet member, to remain in the finance post and asked him stay to help push the budget through parliament.
Fujii, who has a history of high blood pressure, spent several tough weeks late last year churning out a record 92.29 billion yen ($1 trillion) spending plan. The government is also trying to pass a 7.2 trillion yen ($78 billion) stimulus package.
The budget's fate will be Kan's first major test once the Diet convenes on Jan. 18.
"I believe we will sufficiently make it through the Diet session," Hatoyama said, expressing confidence in his new pick.
Although currency markets reacted Thursday, bond and stock markets remained relatively quiet, holding back to see what Kan actually does. In the longer-term, the new finance minister will need to tackle Japan's mountain of debt, said Kyohei Morita, chief Japan economist at Barclays ( BCS - news - people ) Capital in Tokyo.
"We hope he will work earnestly toward that goal with an understanding that there are no short cuts," Morita said in a report. "A more cautious handling of market communications would also be appreciated."
Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
TOKYO -- Japan's new finance minister is wasting little time making waves, jolting the foreign exchange market Thursday by calling for a weaker yen as doubts surface about his ability to guide a recovery in the world's No. 2 economy.
In unusually explicit remarks for a Japanese finance minister, Naoto Kan vowed to work closely with the central bank to steer the currency toward an "appropriate" level around 95 yen to the dollar.
He welcomed the yen's recent retreat from the 14-year high of 84.83 to the dollar hit in November but indicated it hadn't fallen far enough. "I hope currency markets correct themselves further, weakening the yen," he said.
That sent the dollar surging to a high for the day of 92.87 yen from 92.20 yen just before the comments.
Prime Minister Yukio Hatoyama formally installed Kan as new finance minister Thursday, replacing an experienced fiscal conservative with a popular politician known more for candor and mettle than crafting economic policy.
Kan takes over from Hirohisa Fujii, whose health problems led the 77-year-old to resign Wednesday after just four months as the top finance official.
Kan, who will retain his post as deputy prime minister, is an unlikely appointment. While the choice may lift the government's sagging public approval ratings, his background and outspoken views are already causing anxiety about Japan's fragile recovery.
The 63-year-old is a vocal advocate of slashing public works spending - a key component of Hatoyama's economic stimulus - and will instead appropriate money for social programs. Investors worry that such spending could rise, swelling Japan's already massive public debt, given Kan's opposition to Fujii's insistence on capping government bond issuance to 44 trillion yen ($475 billion) next fiscal year.
He has also been critical of the Bank of Japan, which he views as too optimistic on the economy.
A former health minister, Kan gained prominence in Japan for exposing in 1996 a government cover-up of HIV-tainted blood products that caused thousands of hemophilia patients to contract the virus that causes AIDS.
He may have credibility as a social activist, but observers wonder whether Kan is up to the task of stemming deflation and bolstering growth.
"Unlike Fujii ... Kan does not seem to have a good background on economic and fiscal policy," said Masaaki Kanno, chief economist at JP Morgan Securities Japan.
"Unless Kan shows strong leadership to organize growth strategies, involving the BOJ, Japan's economy will not be able to get out of the trap of deflation and mounting government debt."
Fujii, by contrast, was a career bureaucrat in the Finance Ministry and had previously served as its chief in 1993-94.
The role of the finance minister will be crucial to boosting the government's popularity ratings, which have tumbled since the Democrats swept into power in September. Japan's economy has been hobbling toward a weak recovery since the 2008 financial crisis, and public debt is ballooning to near 200 percent of gross domestic product.
Hatoyama himself has taken personal blows as he battles a campaign contribution scandal, and tries to shake off a reputation for indecisiveness over moving a major U.S. military base on the southwestern island of Okinawa.
The prime minister had wanted Fujii, the oldest Cabinet member, to remain in the finance post and asked him stay to help push the budget through parliament.
Fujii, who has a history of high blood pressure, spent several tough weeks late last year churning out a record 92.29 billion yen ($1 trillion) spending plan. The government is also trying to pass a 7.2 trillion yen ($78 billion) stimulus package.
The budget's fate will be Kan's first major test once the Diet convenes on Jan. 18.
"I believe we will sufficiently make it through the Diet session," Hatoyama said, expressing confidence in his new pick.
Although currency markets reacted Thursday, bond and stock markets remained relatively quiet, holding back to see what Kan actually does. In the longer-term, the new finance minister will need to tackle Japan's mountain of debt, said Kyohei Morita, chief Japan economist at Barclays ( BCS - news - people ) Capital in Tokyo.
"We hope he will work earnestly toward that goal with an understanding that there are no short cuts," Morita said in a report. "A more cautious handling of market communications would also be appreciated."
Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
CHINA: Chinese Decision on Rates Seen as ‘Turning Point’
January 8, 2010
By KEITH BRADSHER
HONG KONG — China’s central bank raised a key interest rate slightly Thursday for the first time in nearly five months, in what economists interpreted as the beginning of a broader move to tighten monetary policy and forestall inflation.
After breaking stride a year ago during the global economic slowdown, the Chinese economy resumed galloping growth over the summer. Government investments, real estate construction and consumer spending are all rising briskly, thanks to a surge in lending by government-controlled banks.
Even exports have begun to recover despite continued economic weakness in the European Union and the United States, China’s two biggest overseas markets.
Raising interest rates may help discourage speculative investments by Chinese companies and individuals in real estate projects and other areas of economic activity. China’s dilemma is that higher rates may also prompt overseas investors seeking higher returns to redouble their efforts to push money into China, despite the country’s stringent capital controls.
The People’s Bank of China announced Thursday that the yield from its weekly sale of three-month central bank bills had inched up to 1.3684 percent. The yield had been stuck at 1.328 percent since Aug. 13.
An increase of less than 0.05 of a percentage point might sound small, but economists said it was a harbinger of more interest rate increases to come.
They cited expectations that consumer and producer prices would rise in the months ahead, particularly compared with low price levels a year ago, when demand temporarily slumped in China as well as the rest of the world.
“It is a turning point,” said Ben Simpfendorfer, an economist in the Hong Kong offices of Royal Bank of Scotland. “There is a convergence of events that will lead to higher rates.”
The increase in the interest rate turned mainland China’s stock markets into Asia’s worst performers Thursday. The CSI 300 index of shares on the Shanghai and Shenzhen stock markets slumped 1.98 percent.
Air freight capacity out of mainland China and Hong Kong was almost fully booked in December, according to shippers, making it likely that China would post strong exports when it released a flood of monthly and annual economic data next week. But in interviews this week, senior corporate executives voiced a range of opinions about whether this strength would continue into the new year, or whether the surge in December represented a flurry of restocking by retailers who went into the Christmas season with meager inventories.
Victor Fung, the nonexecutive chairman of Li & Fung, a Hong Kong-based trading and supply chain management company that is one of the world’s largest, said that overseas demand had not been strong enough to sustain the strength in China's shipments seen last month. But he added that his own staff was somewhat more optimistic than he is, as are some investment bank economists.
Thursday's slight increase in interest rates could prove even more significant if it marks the start of an effort by Chinese regulators to limit bank lending. Chinese banks have not only lent heavily at home, but stepped up lending in other countries as well, taking market share from Western banks hobbled by the global financial crisis.
Top officials at the People's Bank of China concluded an annual two-day policy review on Wednesday with a lengthy statement that had particularly strong cautions against bank lending to sectors of the economy with overcapacity or excessive energy use. Chinese bank regulators also warned banks in late November to show more caution in lending and raise more capital to underpin the surge in lending they have already done; the publicly traded Bank of China is widely expected to take the lead in raising money this year.
Thursday's interest rate increase is not the first since the bottom of the economic downturn. After cutting interest rates on the same 3-month central bank bills by 2.4 percentage points in the last quarter of 2008 as the world's financial system trembled, the People's Bank nudged up interest rates by 0.363 from late June to early August last year in a series of increasingly large weekly increases.
But the central bank has been on hold ever since, watching for more evidence of the economy's health. Thursday's increase appeared to confirm that the central bank was starting to become concerned again about rising prices, economists said.
Central banks around the world have a history of taking small steps at first when they begin raising interest rates after a long period of keeping them low in response to an economic downturn. Because China does not have a well-developed bond trading market, the yields on the weekly sales of central bank bills are widely watched as a barometer of the central bank’s intentions.
The central bank sells its bills mainly to banks, which pay in renminbi that the central bank then effectively takes out of circulation, slowing growth in the country’s money supply.
Weekly sales of central bank bills are part of a process that economists describe as “sterilization” of China’s extensive intervention in currency markets.
As U.S. dollars and other foreign currencies pour into China from its trade surplus and foreign investment, the central bank prints vast sums of renminbi and issues them to buy those dollars and other currencies.
To prevent all those extra renminbi from feeding inflation, the central bank then claws back the renminbi from the market through a series of measures that include the sale of central bank bills. China also requires commercial banks to keep large reserves on deposit at the central bank, partly to keep the banks from lending too recklessly but also so that the central bank can use that money to finance further purchases of dollars and other foreign exchange.
The goal of sterilization is to keep inflation under control in China while keeping the renminbi weak. That helps make China’s exports competitive overseas and preserves jobs in China, while contributing to unemployment in countries producing rival goods.
The U.S. dollars and other currencies go into China’s foreign exchange reserves, which stood at $2.27 trillion at the end of September; monthly figures through the end of December are due for release next week. China has the biggest foreign exchange reserves of any country, by far.
Because the central bank has essentially borrowed at home to finance that accumulation of reserves, there is considerable worry in China about losses on those reserves if the value of the U.S. dollar weakens further.
Comments on Internet bulletin boards in China about possible currency losses on the foreign exchange reserves are quickly deleted by censors, a sign of officials’ sensitivity.
China’s foreign-exchange regulators have redoubled their efforts in the past two months to prevent inflows of so-called hot money — capital that moves on a short notice to any country providing better returns.
With the exception of investments that bring the transfer of scarce technologies or management expertise, China has a dwindling need for foreign capital. A domestic savings rate of close to 40 percent has made ample money available for new projects.
The central bank is already buying more than $300 billion a year of foreign currencies, mainly dollars, to keep the renminbi weak and preserve the competitiveness of Chinese exports in foreign markets. So the central bank has had little appetite to buy more foreign currencies so as to allow foreigners to invest in China’s growth while preventing the renminbi from appreciating.
Copyright 2010
By KEITH BRADSHER
HONG KONG — China’s central bank raised a key interest rate slightly Thursday for the first time in nearly five months, in what economists interpreted as the beginning of a broader move to tighten monetary policy and forestall inflation.
After breaking stride a year ago during the global economic slowdown, the Chinese economy resumed galloping growth over the summer. Government investments, real estate construction and consumer spending are all rising briskly, thanks to a surge in lending by government-controlled banks.
Even exports have begun to recover despite continued economic weakness in the European Union and the United States, China’s two biggest overseas markets.
Raising interest rates may help discourage speculative investments by Chinese companies and individuals in real estate projects and other areas of economic activity. China’s dilemma is that higher rates may also prompt overseas investors seeking higher returns to redouble their efforts to push money into China, despite the country’s stringent capital controls.
The People’s Bank of China announced Thursday that the yield from its weekly sale of three-month central bank bills had inched up to 1.3684 percent. The yield had been stuck at 1.328 percent since Aug. 13.
An increase of less than 0.05 of a percentage point might sound small, but economists said it was a harbinger of more interest rate increases to come.
They cited expectations that consumer and producer prices would rise in the months ahead, particularly compared with low price levels a year ago, when demand temporarily slumped in China as well as the rest of the world.
“It is a turning point,” said Ben Simpfendorfer, an economist in the Hong Kong offices of Royal Bank of Scotland. “There is a convergence of events that will lead to higher rates.”
The increase in the interest rate turned mainland China’s stock markets into Asia’s worst performers Thursday. The CSI 300 index of shares on the Shanghai and Shenzhen stock markets slumped 1.98 percent.
Air freight capacity out of mainland China and Hong Kong was almost fully booked in December, according to shippers, making it likely that China would post strong exports when it released a flood of monthly and annual economic data next week. But in interviews this week, senior corporate executives voiced a range of opinions about whether this strength would continue into the new year, or whether the surge in December represented a flurry of restocking by retailers who went into the Christmas season with meager inventories.
Victor Fung, the nonexecutive chairman of Li & Fung, a Hong Kong-based trading and supply chain management company that is one of the world’s largest, said that overseas demand had not been strong enough to sustain the strength in China's shipments seen last month. But he added that his own staff was somewhat more optimistic than he is, as are some investment bank economists.
Thursday's slight increase in interest rates could prove even more significant if it marks the start of an effort by Chinese regulators to limit bank lending. Chinese banks have not only lent heavily at home, but stepped up lending in other countries as well, taking market share from Western banks hobbled by the global financial crisis.
Top officials at the People's Bank of China concluded an annual two-day policy review on Wednesday with a lengthy statement that had particularly strong cautions against bank lending to sectors of the economy with overcapacity or excessive energy use. Chinese bank regulators also warned banks in late November to show more caution in lending and raise more capital to underpin the surge in lending they have already done; the publicly traded Bank of China is widely expected to take the lead in raising money this year.
Thursday's interest rate increase is not the first since the bottom of the economic downturn. After cutting interest rates on the same 3-month central bank bills by 2.4 percentage points in the last quarter of 2008 as the world's financial system trembled, the People's Bank nudged up interest rates by 0.363 from late June to early August last year in a series of increasingly large weekly increases.
But the central bank has been on hold ever since, watching for more evidence of the economy's health. Thursday's increase appeared to confirm that the central bank was starting to become concerned again about rising prices, economists said.
Central banks around the world have a history of taking small steps at first when they begin raising interest rates after a long period of keeping them low in response to an economic downturn. Because China does not have a well-developed bond trading market, the yields on the weekly sales of central bank bills are widely watched as a barometer of the central bank’s intentions.
The central bank sells its bills mainly to banks, which pay in renminbi that the central bank then effectively takes out of circulation, slowing growth in the country’s money supply.
Weekly sales of central bank bills are part of a process that economists describe as “sterilization” of China’s extensive intervention in currency markets.
As U.S. dollars and other foreign currencies pour into China from its trade surplus and foreign investment, the central bank prints vast sums of renminbi and issues them to buy those dollars and other currencies.
To prevent all those extra renminbi from feeding inflation, the central bank then claws back the renminbi from the market through a series of measures that include the sale of central bank bills. China also requires commercial banks to keep large reserves on deposit at the central bank, partly to keep the banks from lending too recklessly but also so that the central bank can use that money to finance further purchases of dollars and other foreign exchange.
The goal of sterilization is to keep inflation under control in China while keeping the renminbi weak. That helps make China’s exports competitive overseas and preserves jobs in China, while contributing to unemployment in countries producing rival goods.
The U.S. dollars and other currencies go into China’s foreign exchange reserves, which stood at $2.27 trillion at the end of September; monthly figures through the end of December are due for release next week. China has the biggest foreign exchange reserves of any country, by far.
Because the central bank has essentially borrowed at home to finance that accumulation of reserves, there is considerable worry in China about losses on those reserves if the value of the U.S. dollar weakens further.
Comments on Internet bulletin boards in China about possible currency losses on the foreign exchange reserves are quickly deleted by censors, a sign of officials’ sensitivity.
China’s foreign-exchange regulators have redoubled their efforts in the past two months to prevent inflows of so-called hot money — capital that moves on a short notice to any country providing better returns.
With the exception of investments that bring the transfer of scarce technologies or management expertise, China has a dwindling need for foreign capital. A domestic savings rate of close to 40 percent has made ample money available for new projects.
The central bank is already buying more than $300 billion a year of foreign currencies, mainly dollars, to keep the renminbi weak and preserve the competitiveness of Chinese exports in foreign markets. So the central bank has had little appetite to buy more foreign currencies so as to allow foreigners to invest in China’s growth while preventing the renminbi from appreciating.
Copyright 2010
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