Hong Kong and China
Name Wu Xiaoyan
Student ID 52759755
The Integration of China and Hong Kong
Mainland Chinese come to Hong Kong (mentioned as HK below) to invest property for two reasons since 1997, one is to earn money and another is to migrate. But the policy that non HK people can migrate by investing property was canceled in 2010. Nevertheless, does the trade of real estate will be affected by the cross culture and business trades to be done in near future?
Most people suppose that the quality of mainland Chinese who will invest property in HK tend to decrease for the policy that non HK people can migrate by investing property was canceled, but the ratio that mainland Chinese of real estate buyers peaked in the second quarter in 2011 which the policy had be canceled for a half year. At the same time, the price of real estate experienced a steady growth. What are the other reasons for this situation? [pic]
Figure 1 Ratio that mainland Chinese of real estate buyers from 2003 to 2011.
Mature investment environment
First of all, real estate is one of the most important mainstay industries of HK. Mainland Chinese get more information and channels to get familiar with this market since mainland China and HK have been getting more integrated from 1997. In 2011, Chinese investors under a very strict policy of invest property as the government tends to keep the price of estate down. They need to find some new markets and HK is a convenient and excellent place in their opinions for its mature development in property investment. Besides, the financial industry in China is immature so the investors consider even if they put the money in the bank they tend to under a potential inflation risk. They desire a mature market for maintaining value of money and many property companies in HK give them more discounts for selling more property.
The second reason may be the exchange rate of RMB to HKD. With this rate steady increased from the mid of 2010, mainland Chinese purchase all the things in HK will be cheaper than HK people. That is merely a form of discount and it is attractive to mainland Chinese who originally has the willing to invest on property. [pic]
Figure 2 Exchange rate of RMB to HKD
Since the cross university education system developed, many investors tend to buy flat for their children to go to school or work in HK in future. The more integration shows, the more attraction for mainland Chinese of advantages of HK. Education and financial industry is the key point for Chinese people concern about. Investors all have a good financial background so they wish the next generation can enjoy high standard of study and life in future.
However, the ratio that mainland Chinese of real estate buyers fell down to about 10% in the end of 2011, that means the HK people always the leader of property price. What are the challenges they need to face originally? As the figures show below, the GNI per-capital/month of HK people in 2012 is HK$ 21437 and the population in one family is about 3 people. That means one family need to buy a three hundred and fifty feet flat at least and the pre-tax price will be two point four million. We assume the living expenses without rent and interest fees for a family is ten thousand which include the education fees of children, also there are two people can get the per-capital income in this family, they have to spend eight years to buy such a limited flat. Also that income class is not the popular income and the expense we assumed is very strict. For many HK people they need to spend all life to buy a house for their next generation. The challenge of HK is not just for the young generation but also for the HK government. Government take the responsibility to keep the economics developed in a healthy...