Real Estate

In China, free-trade zones are the rage, sending real-estate investors into a frenzy despite a lack of clarity on how they will operate and what types of trade would be allowed. The extent to which business will shift in the extremely limited mainland market is a hot topic of dispute. سيارات
When Shanghai's zone was approved in July and officially announced at the end of September, just before the weeklong National Day vacation that began on October 1, it created the biggest sensation.
"It's just supposition until we know what's really going on there."
According to local sources, property values in and near the free-trade zone have risen 15 to 20% since the declaration in July. However, it needs to be seen whether those advantages are justified by the zone's underlying business potential. Some detractors claim that the zone's introduction has had the effect of driving up property values rather than easing trade.
"Many people were excited about this, and they compared it to the numerous policy restrictions elsewhere, with this going in the opposite direction of the tightening," said Robert Ciemniak, the founder and chief analyst of Real Estate Foresight, an independent property research firm. "It's just supposition until we know what's really going on there."
According to Mr. Ciemniak, there has been a profusion of free-trade zones, both possible and confirmed, backed by various groups within the administration. Dalian and Xiamen, both on the Chinese coast, have been suggested as potential locations. Wuhan, Tianjin, and Ningxia are all trying to create their own zones.
Ciemniak stated, "There is politics playing out inside [the government]." "Some things will work out nicely, while others will not."
The Qianhai area near to Shenzhen, China's wealthiest city in terms of per capita income, is already being developed by Guangdong Province, which borders Hong Kong. Despite government efforts to attract financial firms, however, demand for space from banks and other industry participants has been low, with firms claiming that there is no need to build secondary locations because Hong Kong is already a free-trade port.
The Shanghai zone encompasses 29 square kilometers (11 square miles), but excludes Pudong, a former wetland that was transformed into a financial center in the 1990s. Many of the structures sat vacant for years and have just recently started to fill up.
Shanghai property has been the laggard among China's four "Tier 1" cities during the last year, with prices in September being surpassed by those in Beijing as the most expensive in the country. According to figures from the brokerage Soufun, Shanghai grew by only 8.9% in the 12 months to September, compared to 26.9% in Beijing, 24.8 percent in Guangzhou, and 21.2 percent in Shenzhen.
HSBC had a more upbeat assessment on the zone's potential for reviving Shanghai's economy, which had been lagging behind the national average since 2008.
So far, the China (Shanghai) Pilot Free Trade Zone's main announcement has been that it will open up investment in six key service sectors: banking, shipping, commercial services, including value-added telecommunications, professional services, such as law firms and human resources, cultural services, such as entertainment, and social services, such as education and healthcare.
However, there is a 10-page "bad list" of activities as well. Investment in most types of media is among those on the black list, as are several limitations on financial and insurance operations.
"We're not convinced if the FTZ, as announced, accelerates or contains changes," said Commerzbank analysts Ashley Davies and Liu Peiqian. "Is the glass half full or half empty for reform hopefuls?"
"According to their research, "On the surface, the establishment of the Shanghai FTZ appears to be a symbol of China's commitment to reform. Expectations of continued transformation, on the other hand, were already in place. The free trade zone restricts reforms to a narrow geographic area and may impose quotas on them. As a result, it could represent a compromise between those who want a more open China and those who want change to be more gradual."
Shanghai's goal is to become a global financial hub by 2020, a goal that will be accelerated by a two-to-three-year experiment that would enable full convertibility of the Chinese currency, the yuan, in the zone, as well as interest-rate deregulation. However, authorities are warning that the yuan would only be permitted to trade freely if "risk is controlled," and it's unclear what that means.
"This leads us to believe that investment quotas will apply to the free trade zone," Commerzbank analysts said. "If this is the case, the Shanghai FTZ will be extremely difficult to navigate. To monitor cash flows, China will almost certainly require two regulators: one for China and one for the FTZ."