ASIA NEWS: International aspirations

At the end of February, Zug, Switzerland-based alternative assets firm Partners Group said in its twice-yearly publication Private Markets Navigator that it would avoid investments in China’s overheated eastern cities and instead focus on tier II cities in the centre of the country. The firm cited Chongqing as a prime example of a tier II municipality it would favour.

So it should come as little surprise that when PERE was offered an interview with Huang Mao Jun, deputy secretary of the Chongqing municipal administration of land resourcing and housing and chief executive officer of the Chongqing Land Exchange, at last month’s MIPIM conference, we took it. He was at the annual real estate festival in Cannes, France, for the first time with the purpose of opening a dialogue with the international investment community.

The municipality, which has China’s largest population with more than 32 million people, expects “urbanisation, industrialisation and internationalisation” to reflect economic growth of more than 15 percent over the next five years. In that time, it expects more than $100 billion of investment each year into its various markets and, judging by the effort Chongqing state officials put in to last month’s event, it wants a significant proportion of that capital to come from overseas – for its real estate at least. Not only did the municipality take a large stand at the conference, but it also sponsored a luncheon for approximately 100 people at the week-long conference’s first full day in its bid for attention.

“The real estate sector of Chongqing already has foreign investment,” said Huang via an interpreter, “but we expect more. That is why we decided to attend MIPIM for the first time.”

High on Huang’s agenda is finding capital sources to quench the housing thirst in the municipality, particular in the city itself, which he expects to house more than 20 million people over the next 10 years from approximately 7.5 million currently. Despite exponentially growing domestic sources of capital, he insisted international funding also is needed. “There are a lot of equity funds in China, but for our city we need to attract more investment both internationally and domestically to accelerate our development,” he added.

Huang explained that the state is able to facilitate two kinds of housing: “commodity housing” and “government-provided housing,” both of which should attract international capital. However, he noted that there are differences between how international capital accesses each. For commodity housing – read privately developed housing – international investors can enter as equity buyers. But for government-provided housing – read housing developed by state-owned companies – investments by foreigners are not made through equity transactions but through loans to the developers, which in turn pay interest on the debts.

So how did the conference go for Huang and his team? “We have reached our objectives so far,” he said. “We have attracted the attention of European, US and Southeast Asian investors.” No doubt we’ll be hearing plenty more about Chongqing then