Standing at the crossroads
	As we enter into the second half of the year, uncertainties over the strength and direction of China’s real estate market have dampened developer and buyer sentiment. Government regulations aimed at reducing price levels across the residential market have suspended purchase decisions. Consequently, developers facing falling transaction volume amid a tight credit market are now experiencing greater financing challenges. The commercial market, on the other hand, has registered a fantastic year thus far. Companies – both foreign and domestic – have expanded headcounts, while almost every international retailer has set its sights on building a presence in China. Such trends, however, may lose pace next year, with China’s economy expected to be hit with a slew of headwinds in 2012. These include the effects of 2011’s tightening of monetary policy, a slowdown in exports under the threat of RMB appreciation and a debt crisis in the eurozone. While these trends may have conjured-up pessimism in the market, they are also creating opportunities. Developers have slowed expansion plans, thereby causing land prices to fall substantially. Investors who believe that the housing needs of China’s 1.3 billion people have yet to be fully met may be presented with a window of opportunity to capitalise on land prices. It is prudent to assume that if government regulations are lifted and/or buyer sentiment picks up, the residential market will be presented with a supply shortage in two to three years, making developments in the market during that time well placed. Furthermore, a slowdown in China’s economy should not be startling. China’s economy registered an average growth rate of over 10% per annum between 2000 and 2010, and it likely needs a breather as it looks to reinvent itself. While core drivers to growth, such as fixed-asset investment and manufacturing exports, may weaken, an effective reorientation of China’s economy towards stronger domestic consumption – hinged largely on the appreciation of the RMB – should build greater business confidence and sustainability in the long run, thereby supporting a healthier commercial market. As China’s economy and real estate market stand at the crossroads of change, investors are likely to remain vigilant. While risks may reside in the market, so do rewards, and possibly one of the last opportunities to get into the game on a competitive footing. For investors, more so now than in years past, the age-old adage still applies: cash is king.