Which Chinese regions rely the most on real estate investment?

China Business News took a look at the first half a year’s data on regional FAI, and ranked provinces or main cities for their FAI reliance on real estate investment.

Here are the top five:

1. Shanghai 55%
2. Beijing 52%
3. Hainan 46%
4. Guizhou 33%
5. Chongqing 33%

Yet experts point out that metropolises such as Beijing and Shanghai are already developed, hence will have high levels of investment in real estate.

A better measure of a local economy’s reliance on real estate investment, would be to take real estate investment as a share of GDP. Shown in graph below.

IMG_1237-0.JPG
This alters the ranking as follows:

1. Hainan 36%
2. Guizhou 27%
3. Yunnan 25%
4. Chongqing 24%
5. Fujian 22%

The national average being 15.62%.

Based on this measurement, Beijing and Shanghai are not even in the top ten. An analyst with Centaline Property said that because these are two developed cities with complete infrastructure and facilities in place, so there’s less room for FAI growth. Hence, real estate investment as a share of economic growth will fall.

Tianjin in recent years has seen massive investment in industry which has propelled its FAI higher than Beijing and Shanghai. However, due to Tianjin not being a top tier city, it doesn’t attract as many property buyers. Hence, less reliance on the real estate market.

The southern and coastal provinces have already experienced many years of development, so already have solid infrastructure and facilities in place. However due to the expansion in the real economy, areas such as the service industry and commerce, funds are flowing into real estate. Thus real estate investment in places like Fujian and Zhejiang still form a large share of GDP growth.

Worth noting that the article refers to infrastructure and facilities being ‘complete’ in first tier cities. Yet any expat would vouch, perhaps these are not complete verses developed countries’ standards.

For example, even in Beijing and Shanghai, one cannot drink tap water, toilets cannot cope with paper, and in heavy rains and flooding, people still drown after being sucked down through the drains. Why? Because the manhole covers are opened when the drainage system cannot cope with the volume of rainfall.

(Article not to be copied or reproduced without permission or citation).

Chiecon originally first and only site to publish this story in English. Same story published later on mainstream news websites:-

WSJ

12th Aug 2014: http://blogs.wsj.com/chinarealtime/2014/08/12/property-pile-up-which-chinese-provinces-rely-most-heavily-on-real-estate/

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