China is yet again in the spotlight due to its capital control and the undesired ripple effects on its the citizens’ foreign investments.
Beijing’s intensifying efforts to restrict the outflow of money have dashed the dream of many Chinese who have bought property in Malaysia’s Forest City development, reported The New York Times.
Kitty Zhu, 39, who operates a cosmetic center in Zhuhai, is one of hundreds of Chinese who have invested in an apartment in the US$40 billion (RM177.2 billion) mixed-use project. But now they are unable to repay their remaining balance due to China’s strict capital controls.
“I‘ve lost confidence in this project and I don’t want to pay any more,” said Zhu, who has already forked out nearly US$44,000 (RM194,920) of the US$334,000 (RM1.48 million) purchase price. “I told my salesman that I want a refund, but he just avoids me.”
Another person who expressed regret for being lured by Forest City is 27-year-old banker Rafael Liu and his father, who have paid a deposit of over 30 percent for an apartment costing more than US$130,000 (RM575,899).
“I am not paying any more,” said Liu, who said they have no idea on their next step, as they don’t want to pay the 30 percent penalty for a refund, while filing a legal case would come with high legal fees.
Notably, China’s government has imposed curbs on foreign currency transactions, including overseas property purchases, to keep money within its borders. Last Friday (24 March), state-owned bank UnionPay announced that it would ban the use of its cards for cross-border real estate purchases.
Aside Forest City in Malaysia, Beijing’s capital controls could negatively affect property markets across the world. Based on data from Jones Lang LaSalle (JLL), the Chinese pumped in US$33 billion in residential and commercial real estate in other countries last year.
It is also expected to impact Chinese developers with overseas developments that typically market their foreign projects to buyers back home.
“It is a major problem for some developers that have mega projects overseas, as it appears they sell, and were intended to sell, mainly to Chinese investors rather than local buyers,” said Nigel Stevenson, an analyst with GMT Research in Hong Kong.
For instance, Country Garden, the Chinese developer constructing Forest City in Malaysia has temporarily closed its sales centers in mainland China earlier this month, after the capital outflow limits were introduced.
Touted as “a dream paradise”, Forest City, is a large-scale futuristic metropolis with a special duty-free shopping zone sited on four man-made islands spanning nearly eight miles. Recent drone video shows a completed hotel and spaceship-like showroom, while several residential blocks are under construction.
Among projects by China’s investors and developers:
3. R and F Princess Cove Phase 1 Residence, Johor Bahru
Image sourced from New York Times
Radin Ghazali, Content Writer at PropertyGuru, edited this story. To contact her about this or other stories email radin@propertyguru.com.my
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