Do not write off China. This was the overarching message at PERE's fourth annual China Forum, held in Shanghai in late May. While there was admission of a slowdown in the pace of investments and general wariness about China amid macroeconomic headwinds, many delegates and speakers were confident that sufficient opportunities can still be found.
For domestic opportunistic fund managers, the window of investing in distressed assets and non-performing loans appears to have opened, judging by the RMB1.27 trillion ($193 billion; €171 billion) worth of non-performing loans that were estimated to have hit the Chinese commercial banks in 2015, according to data from the China Banking Regulatory Commission.
Benjamin Lee, managing partner at Phoenix Property Investors, said the firm has started to look for debt and mezzanine lending deals, especially in Tier 2 cities where the developers do not have access to sufficient bank credit.
Many delegates pointed towards the tendency of international investors to paint China with a broad brush stroke. Bryan Southergill, director and head of Asia real estate for KKR, noted that managers in fact need to take a block-by-block and city-by-city approach.
Despite popular perception, many Tier 2 cities, for instance still look like promising markets for investments in the, residential and logistics sector. The Chinese city of Nanjing, for example, is said to have recorded the highest volume of residential sales in the first quarter of this year in comparison to other cities, Tim Wang, managing director and head of real estate for China at The Blackstone Group, told the audience in his panel.