Chinese Investors spending up big in NZ

[Shane D]

I like your post, and you sound like you know your markets, Im wondering what impacts you see if chinas property market deteriorates?
im making things up here, but the likely outcome is: increased ch interest rates (to what level i don't know) will this then mean they stop investing in NZ and subsequently our inflation drops (to whatever degree) or will this mean that they sell up in order to regain some capital? or will they shift their borrowing strategy from local to foreign banks? Im interested in your thoughts on the outcome...
(I use they very loosely to indicate any investor borrowing from chinese banks and not in some kind of xenophobic way).

You have a lot of wrapped up in those sentences above and I tend to agree with most of what you are saying. History often repeats itself. Do you remember the 1997 Asia Crisis and how the shock waves were felt here in NZ?

I think a bursting Chinese property bubble would drive up interest rates initially and lending would become very difficult as banks always pull back and get super conservative with lending in high risk economic environments. So our major banks sourcing money from overseas would be paying higher interest. Similar thing happened during the GFC in 2008.

I think the China bubble busting would negatively effect NZ property prices (more so in Auck) as Chinese investors sell up to shore up losses in China. History repeating 1997 Asian Crisis. And bank funding possibly get harder and more expensive to secure.

I have no idea if Chinese investors are mostly borrowing from NZ or Chinese banks to fund their NZ property purchases so can't comment on your last question.

It would be great to hear others thoughts on your questions.

Shane

[elguapo]

I think a bursting Chinese property bubble would drive up interest rates initially and lending would become very difficult as banks always pull back and get super conservative with lending in high risk economic environments. So our major banks sourcing money from overseas would be paying higher interest. Similar thing happened during the GFC in 2008.

Agree, rates would go up and lending would be almost impossible to secure.

I have no idea if Chinese investors are mostly borrowing from NZ or Chinese banks to fund their NZ property purchases so can't comment on your last question.

A lot of Chinese funding is from the shadow banking system, families and groups pool money and provide money that way. That is often people's life savings/pensions, so if that comes under threat expect panic on a large scale.

I think the China bubble busting would negatively effect NZ property prices (more so in Auck) as Chinese investors sell up to shore up losses in China. History repeating 1997 Asian Crisis. And bank funding possibly get harder and more expensive to secure.

If the China bubble bursts, what Chinese investors do is just about the least of the worries IMO. Your talking about our largest export market here, and also our main source of future growth. Almost all our other markets are either in recession or just hovering above it. It would be very bad for everyone.

[mortgage broker]

I don't think the Chinese bubble bursting will be anything like a bubble bursting(as in the US). Yes they might feel some pain but their manufacturing base is not going to be affected much. We will still be buying from China for a while to come and hence they will have money coming in to their pockets. If the property market corrects itself in a quick way we might find funds slipping into the country once the dust settles a bit. Those in China who will still have funds coming in from businesses that export, may be more inclined to look for investments abroad.

[speights boy]

Hamish,
A hypothetical.
If you knew the China credit maket / property market bubble was going to burst on on a certain date, would you take any action before hand ?

[elguapo]

I don't think the Chinese bubble bursting will be anything like a bubble bursting(as in the US). Yes they might feel some pain but their manufacturing base is not going to be affected much. .

Might feel some pain? Construction is 25% of Chinese GDP!

[eri]

There is much debate about the origin of Auckland's new arrivals, with China usually singled out

but economist and philanthropist Gareth Morgan challenges these assumptions.

He says the largest source of migrants last year - and every year for the past two decades - was the UK.

Compared to 8600 net arrivals from China last year, 14,000 people arrived from the UK.

"While focusing on migration patterns from Asia seems to be a hobby for many, it won't get you very far if you want to understand fundamental pressures in the housing market," he says.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11269054

[speights boy]

At least when one of our Govt Ministers is summonsed to a meeting with a wealthy migrant investor from the UK, they don't need to speak through an interpreter....unless they are from Glasgow I guess.

That is one difference,

[speights boy]

A mysterious Chinese investor is taking legal action over a failed plan to build a $100 million infant formula plant in the Waikato.

In today’s National Business Review print edition, chief reporter Duncan Bridgeman reveals the investor, Bill Liu, also known as William Yan – who was famously granted New Zealand citizenship by then association immigration minister Shane Jones – is seeking a High Court injunction to enable his company to take possession of a property near Lake Karapiro.

The company behind the plan, South Waikato Processing, faces liquidation.

Behind the paywall.
Receivership for company behind bungled $100m milk powder plant

[elguapo]

Interesting, I hadn't heard of that outfit. Edit, scratch that, it's Arapuni Milk, there is a whole cast of characters trying to pick over the scraps of that!

[Davo36]

Looks like a big chunk of our waste collection businesses are now owned by China and Hong Kong entities:

Transpacific’s sale of NZ waste business to Beijing Capital approved

on Wednesday 11 June 2014

ASX-listed Transpacific Industries Group Ltd said yesterday it had obtained consent from the NZ Overseas Investment Office and all Chinese regulatory approvals for the $950 million sale of its New Zealand business to Beijing Capital Group. The sale is expected to be completed on 30 June.
Beijing Capital Group is one of China’s leading state-owned infrastructure enterprises, with specialist expertise in water treatment, waste management, mass transit railway & toll roads. It’s also one of China’s most prominent real estate developers.
At 31 December, the company’s total assets exceeded $US21 billion and it had $US3.7 billion of annual revenue.
Transpacific chief executive Robert Boucher said proceeds from the sale would allow the company to redeem its $A250 million of step-up preference securities, refinance its syndicated debt facility and fund future investments with a strong capital base. The company would also consider resuming dividends in the near term.
“The sale of our New Zealand business gives Transpacific increased financial flexibility. We will look to enhance our Australian waste management businesses, capture long-term growth opportunities and generate improved shareholder value.”
Transpacific entered the New Zealand market in 2006 when it bought the NZX-listed Waste Management (NZ) Ltd for $870 million.
Australian private equity firm Ironbridge Capital bought the competition, Enviro Waste Services Ltd, in 2007 and sold it in January last year for $501 million to Cheung Kong Infrastructure of Hong Kong, one of the largest owners of infrastructure assets in the world, founded by billionaire Sir Li Ka-shing.
Attribution: Company release, Transpacific & Enviro Waste websites.

Link

[speights boy]

This criminal was certainly spending big in our country.
I am sure it was very frustrating for our law enforcement people.

Of course China will be doing everything they can to assist us in bringing him before the courts....

Police let drug boss flee so they could make huge seizure, arrests

One of the key suspects in a sophisticated drug syndicate was allowed to flee New Zealand for fear of jeopardising the covert investigation which led to a record-breaking $190 million haul.

Da Wen Shao has not returned but is alleged to sit in the upper echelon of the Auckland organised crime ring charged with smuggling 263kg of pseudoephedrine into the country in a single importation.

Homes, cars and cash worth more than $20 million were seized and restrained under the Criminal Proceeds (Recovery) Act.

According to the court file, Shao was a "substantial customer" of the casino until he was banned for loan sharking in December 2012.
In the eight months earlier, he had a gambling turnover - the total of money spent and winnings - of $13.2 million.

www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11272935

[Davo36]

I think the bulk of methamphetamine comes from China these days.

[elguapo]

263kg of pseudoephedrine i

Come on, he just had a bad cold!

[speights boy]

Yeah
And turning over $13.2m in the casino in 8 months, and buying millions of $ of property was all legit.

"Move along.....nothing to see here"
"Very important for skilled labour and our continued growth"

groan.

[elguapo]

I think Canada has seen the same problem, they have recently made it much tougher for these er, 'high rollers' to get through the door I believe. How have they been allowed to pass the sniff test here? Blinded by the money? Naivety? See no evil etc? Donations in the right direction? Perhaps a mixture of all of those?