Almost 30 years ago China began gradually opening its markets for foreign investment. In the second half of 1990s it began gradually opening its real estate market. The results so far shows that substantial progress has been made; at the same time there is a lack of coordination between different market segments: residential and commercial, high- and middle-income buyers, capital liberalization and state regulations, coast and internal provinces, everything and everywhere seems developing by its own unique logic without substantial dose of interrelated coordination. The impression is that there is not one but several real estate markets in China, and that lessons drawn from one cannot be directly applied to the others.

The facts are indisputable. China has made enormous leap ahead in its market development during last decades, and especially during past 6-7 years. First during 1980s peasants have been given right to cultivate the land; in late 1990s urban dwellers have been given right to buy apartments they live in. Foreign companies and foreigners have been given right to invest in land and buildings. These rights may not be as absolute and as protected as in some Western countries; rights over land may be limited in time and within the scope of business purposes, investment regime may still be restrictive rather than permissive, but some day in a hindsight all these problems may look like temporary obstacles on the large highway of unstoppable Chinese modernization.

China seems to be giving preference not to temporary business opportunists, but to businesspersons with long-ahead ranging interests. Not just the government, the market also gives upper hand for those who are there to stay. A closer look to any of the 4-5 biggest cities in the country shows that any of them at least once, and some of them several times, have experienced sudden downs in residential prices and commercial rents, and in the real estate investment returns. Usually these drops occur in one segment of the market, while at the same time other segments are booming, thus confirming our thesis about coexisting different real estate markets.

The central government is still a strong and usually unpredictable force that may suddenly change the way the market actors perceive current situation. Thus a sudden move in 2004 to restrict bank financing for new residential projects led to drop in demand for several months. China is a closed political system, meaning many market actors cannot have sufficient information about supply-demand relationship until they don't get strong signals from customers, usually leading to huge losses due to oversupply.

Chinese market is still immature, meaning big fortunes can be made and lost in a matter of months. Ninety out of one hundred top developers have been ruined during the last 10 years. There are predictions that up to half of the current top developers will give up their leading positions in the next 10 years. No matter what may happen in terms of political regime changes, Chinese markets will be unpredictable for many years and even decades ahead. The U.S. economic history of late 19th and early 20th century can provide a good example of the level of uncertainty most market actors are experiencing now.

China country profile:

• Area: 9.59 million sq km.
• Climate: extremely diverse; tropical in south to sub-arctic in north.
• Arable land: 15.4%.
• Natural hazards: frequent typhoons; damaging floods; tsunamis; earthquakes; droughts; and land subsidence.
• Population: 1.3 billion (July 2005 est.).
• Population growth rate: 0.58% (2005 est.)
• Life expectancy at birth: 72.27 years.
• Total fertility rate: 1.72 children born/woman (2005 est.).
• Literacy for age 15 and over: 90.9%.
• GDP real growth rate: 9.1% (official data) (2004 est.).
• GDP per capita: purchasing power parity of $5,600 (2004 est.)
• Labor force by occupation: agriculture 49%, industry 22%, services 29% (2003 est.).
• Distribution of family income (Gini index): 44 (2002)
• Main trading partners: U.S., Japan, Taiwan, South Korea, Germany.
• Internet users: 94 million (2004).

(Source: CIA - The World Factbook 2005)

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See also the directory of companies providing real estate services in, and general real estate information of China.