4. A Look at China Page 57

Geography Page 58

12th Five Year Plan Inclusive growth Restructure the economy Reduce social inequality Protect the environment Strategic Emerging Industries (SEIs) Page 60

Tracking energy consumption per unit of GDP Holding local governments accountable for meeting green development targets Tracking energy consumption per unit of GDP Reducing emissions with “blue sky day” targets Greening of China Page 61

7 Strategic Emerging Industries Biotechnology New energy High-end equipment manufacturing Energy conservation, environment protection Clean-energy vehicles New materials Next generation IT Page 61

FDI $776 billion FDI in China $332 billion Chinese FDI Abroad China Investment Corporation— $3.2 trillion Guanxi Page 47

Rising Renminbi? When will the renminbi achieve hard-currency status? Renminbi-denominated international deals Capital flows freely in and out Foreign banks hold reserves Free-floating, fully convertible Could reshape the world’s financial markets Unleash individual and sovereign wealth Page 65

Renminbi-denominated bonds Avoids government restrictions on foreign debt, but government controls Invest in China and Hong Kong-based companies Fixed-asset investments only Dim Sum Bonds Page 66

Real Estate in China Government owns all land, grants leases Regulations emanate from national level Provincial and local implementation can vary considerably Page 66

Cooling the Market Market swings Government action to cool market Fear of real state bubble Home buyers priced out of market Widespread dissatisfaction with property prices Competition from speculators Government action to cool market Page 67

Government Actions 1st home—30 % down payment 2nd home—60% down payment 3rd home—no mortgage financing Developers cannot bid on more land if already own idle land Overseas residents one home for own use Hong Kong—additional Stamp Duty Page 67

Financing Many cash deals Age limit on mortgage borrower—65 years Minimum interest rate—1.1 times People’s Bank of China benchmark rate Seller must pay off mortgage before the property can be sold Page 68

Land Rights Allocated for a specific purpose Granted Land Rights Allocated for a specific purpose Cannot be sold, transferred, pledged, or mortgaged Granted for residential or commercial purposes May be pledged, mortgaged, leased, inherited, and transferred Renewable leases 70 years residential 50 years industrial 40 years commercial Renewal regulations TBD Major source of revenue for local government Page 68

Rental Property Pro-landlord Regulated by local governments, no national laws 2–3 months rent security deposit No automatic renewal Landlord can terminate at any time No subleasing Page 68

Can Foreigners Own Real Estate in China? Work or study in China for more than a year Personal residence, cannot be rented out One house only One non-residential property for business Property held less than 5 years subject to 5.5% tax on entire transaction Page 69

Real Estate Professionals in China Sales agents must be licensed National Ministry of Construction oversees Open listing real estate market Negotiable commissions paid by the seller Agents do not share property information Agencies post listing on own web sites Storefront real estate firms Page 70

The Big Story Chinese Buyers Abroad Inflation hedge Income from rentals Safe haven investments Avoid ownership restrictions Build a family legacy Education for children Future emigration, career development The Big Story Chinese Buyers Abroad Page 47

China’s Millionaires 1 million+ millionaires Sources of wealth 55% private-business owners 20% property speculators 15% stock market investors 10% high-salaried executives Prefer real estate investment 4 of 5 wealthy parents want to send children abroad for studies To English-speaking countries—USA, UK, Canada Page 73

What Does This Mean For You? New and growing stream of business Establish and maintain a robust referral network Professionalism, reliability, trustworthiness earns repeat and referral business Graduates may stay on to establish careers and build businesses Page 47

Doing Business in China Beyond the Basics Names Connections— Guanxi Women in business Business cards Meetings Negotiations and contracts Interpreters Demeanor Business dining A few taboos Page 78-83