Over the last few months, China's stock market has been on the decline. For the first time in years, the government is expected to miss 7-8% growth. The Chinese stock market is very young in comparison to England and the United States. For the first time ever, many households have started to invest into the Chinese stock market. With the decline, many first time Chinese investors are extremely nervous.
For other world markets, even 5% growth would be a celebrated situation, but for China it has sent the government scrambling. One strategy the government has used is to devalue its currency. With a softer yuan the Chinese government is hoping that its exports will increase. No one expects a Greek style collapse of the Chinese economy, but with the stock market being so young, it is difficult to predict the results of the forces. It is also unclear what strategies the Chinese government will employ to help the situation.
In recent years, investors from China have come to Boston to buy up property. In many cases, these investors buy sight unseen properties for high prices. As a result of the cash buying from Chinese investors, the market has made properties too expensive for local residents or even local investors. It may seem bizarre to Americans that Chinese investors would use so much cash to buy a place that they have never seen before, but it all has to do with China’s economy versus the United States' economy. There are a number of Chinese investors that believe in the U.S. economy more than China’s. The last thing that investors want is to have their money stuck in China where they may not be able to get the money out. So even if they make an investment in the United States that will lose a percentage, some feel it still makes sense for them to get their money out of China.
One of the reasons for Boston being such an attractive place is that it has a great rental base and high rents. With so many universities and the greatest medical services in the world, there are always renters. If Chinese investors buy property with cash then there are no mortgage payments. Other than expenses of a property manager, rental agency, and maintaining the place, all the money is profit. And with the current market of property values rising, many investors will get a great return in their investment.
With China’s economy being unpredictable, it could lead to many more investors in China to look elsewhere to put their money. Real estate has always been an area the Chinese investors have loved to put their money. It will be no surprise if there are more Chinese investors looking to buy real estate in the United States and Boston remaining an attractive place for them. However, if China slows or halts the money leaving the country, it may greatly hinder Chinese investors from buying properties in Boston. The world economy is now more connected than ever and what happens in China will have many ripple effects throughout the world.