To understand China’s insatiable appetite for buying offshore property, it’s an over-simplistic view for us to think they have so much cash they want to rule the world.
You are so wrong.
To understand their psychology, we need to take a step back to examine some deep-seeded cultural beliefs whilst paring back a layer to look at the inner motivations of the Chinese mindset.
No Crazy Rich Asians here.
Despite two decades of unprecedented prosperity, the high level of distrust with China’s governing leaders run high.
It is only just over 40 years ago when the late Deng Xiaoping understood that China needed to develop, which would require a stable external environment that was conducive to international trade and investment.
As a result of “reform and opening” and greater engagement with the international community, China has enjoyed a remarkable period of economic and social development unprecedented in human history.
China has increased their per capita income by 25 fold and as a result, have lifted themselves out of poverty – more than 70% of the total poverty reduction in the world.
China today is one of the largest economies of the world with a rapidly improving military.
For the first time ever in modern history, China triumphantly showed the world how a capitalist economy could thrive under a communist government.
My grandfather never ate Japanese food because he was so deeply resentful for the atrocities of the Second Sino-Japanese War, so it is no wonder so many still remember the traumatic Maoist principles that ruled China during her darkest years.
Famine, illiteracy and inequitable distribution of resources was her daily reality.
My relatives in Hong Kong still choke up when they speak to me about this.
This should give you a broader insight into why the wealthy Chinese are willing to invest their money in Australia despite unfavourable foreign policies, taxes and exchange rates.
They understand that to hold their wealth abroad, in a land with economic and political stability comes at a price – they simply regard this is as the price for entry.
This is again reinforced when the Chinese continue to buy apartments even in spite of ABS and Corelogic property research data showing lacklustre property value growth in units across Australia’s capitals.
As one buyer’s agent in Sydney stated “If you’re an owner of an apartment within a medium- to high-density building that was constructed within the past 20 years, you’ve contracted Australian real estate’s equivalent of the bubonic plague.”
You see, even at a loss, the Chinese still regard holding their wealth in bricks and mortar a safe option.
Capital controls and restriction in liquidity has certainly dampened enthusiasm but this has served to increase Chinese resourcefulness and is no surprise that opportunistic finance companies have ballooned.
The greatest challenge by far has certainly been getting their capital out. The First Emperor of China understood that to unite the land, it was going to be difficult, but not impossible.
Speaking to our sources, it is not uncommon for Chinese entrepreneurs to have $1million AUD deposited into their accounts overnight without moving any capital offshore or triggering the PRC’s attention. Thinking different pays off.
Foreign ownership of Australian agricultural land rose by more than two million hectares in the past year, but the longer-term trend is reasonably stable, according to a report released by the Australian Taxation office.
So why do the Chinese love land? Because they can’t buy much of it back in their homeland. It’s plain and simple. Another source also advised us that in China, to own land is a status symbol, like a Vuitton bag.
So in summary, what do Chinese property buyers really want?
My advice to clients is that from a very young age, I have come to learn that what a Chinese client says they want is only 5% of the overall objective.
To do the deal and show them you’re smarter than an average “gwei lou”, articulate to them how you understand the political and economic landscape that is not just expressed in pop media.
Remember that we buy with our heart, then justify with the mind.
And right now, Chinese buyers want security.