China has been a key investment market for Allianz in the past 12 months, even as many other institutional investors have been cautious about increasing their exposure in the country due to negative headlines and asset price inflation.
Rushabh Desai, head of Asia Pacific at Allianz Real Estate says the German insurer will avoid speculating on non-real estate matters in China, such as the country’s infrastructure growth. Instead, the firm is banking on the structural drivers in China, such as demographics and urbanization, that together form five mega trends in the country.
“Asia is seeing four to five mega trends, especially China. The first is demographics. China is seeing an ageing population, and so demographics is a mega trend we are keeping an eye out on in terms of what it means for the residential market and office market. We are also seeing the rise of the middle class; more and more consumption is increasing in China. We did an investment in an outlet mall in China that made sense, given this mega trend. Urbanization is another one. People are still moving to Shanghai and Beijing, instead of living in smaller cities. That helps create demand on the office side, with the increase in working population. Then, shopping is today is a very different world that it used to be. E-commerce is playing such a large role that logistics is going to be very important for China in the next five to ten years, so we want to be able to take advantage of that. And lastly, the rise of data has become very important. Data centers have come up in China that are serving the local business, and data centers do have some regulatory requirements so it is important to keep it locally. We are starting to keep an eye out on that as well.”
“What we try avoiding is speculating on regulations – something that we will never do. We will also try to not speculate on infrastructure growth because typically in large countries like China and India, infrastructure growth is slower than anticipated. So, it is important for us not to speculate on non-real estate related fundamentals. Even if we do speculate, we will speculate on the real estate, the expansion of the central business districts, the growth in the working population and not on some of the non-real estate things.”