Chinese growth trends to note
139.2 million outbound tourists, Chinas hottest export
Consumer demand is growing so fast that China just can’t contain it. Burgeoning consumer demand and an increasingly globally minded populace saw China became the largest global source of outbound tourists in 2015. 120 million Chinese travelled out of China last year, spending a whopping $229 billion overseas and charting a 19.5% increase y-o-y on the 109 million outbound tourists in 2014.
This growth is set to continue growing. Total tourists and spending are estimated to grow 16% and 21% y-o-y respectively in 2016 & 2017, which basically adds up to another year of 139.2 million projected outbound Chinese travelers!
The spending power of China’s internationally mobile HNWIs, business travelers, and middle-class is having such an impact on travel markets that it’s dominating business class air travel. The Global Business Travel Association Foundation estimates that business class spending by Chinese travelers will increase to $322 billion in 2016 and rise to $420 billion by 2019, overtaking the US market as the largest source of business travel bookings.
China’s silver screens worth US$8.2 billion in 2016
Western film companies are increasingly eager to cash in on China’s movie market and, let’s face it, they have 8.2 billion reasons to do so – that’s the amount of revenue (in US dollars) that Citigroup research expects will be spent in mainland box offices in 2016.
That 28% y-o-y increase means China is closing in on the US – the world’s largest film market, which is expected to see approximately US$11 billion of box office revenue in 2016.
With this huge potential market in mind, Western movie companies have been offering more parts to Chinese actors and actresses, and featuring mainland locations prominently in their latest releases. However Chinese companies are also funneling investment into film studios, with firms such as Dalian Wanda and Hony Capital particularly active. Dalian Wanda, helmed by China’s richest man Wang Jianlin, has recently acquired a major stake in Legendary Entertainment, the studio company that brought us Jurassic World, The Dark Knight, and the Hangover.
Overseas education remains a key driver for investor demand
China looks set to retain its place as the world’s largest source of international students. Competition for top-end positions in China is as fierce as ever, and the allure of a Western education abroad remains strong. An estimated 460,000 mainlanders studied overseas in 2014 alone, up 11% y-o-y compared with 2013.
The Chinese student market is so important that it is being regarded as ‘priority number one’ by Times Higher Education Rankings, with universities bending over backwards to market their courses in China and expand the range of courses on offer to Chinese students. As such, many governments, including the UK, US, Canada, and South Korea, have moved mountains to make visa processing simpler and more accessible for the thousands of potential Chinese students looking overseas.
With policies such as these, and a strong demand outlook, extra support is being provided to property investment demand, since Chinese parents often prefer setting their children up with their own homes while studying abroad.
Financial sector reforms will open up capital floodgates
As more Chinese companies and citizens look outwards for business and investment opportunities, China’s financial system will be moving to adapt to meet their needs. Further reforms to open up China’s financial system to the outside world are expected in 2016.
Measures such as expanding the Hong Kong-Shanghai Stock Connect, permitting non-residents to issue financial products on domestic markets, and giving foreign investors easier access to China’s capital markets will all feature prominently, as Chinese authorities look to promote full convertibility of the RMB with foreign currencies within the next five year plan.
Simply put, removing controls on capital outflows and allowing investors to move their money in and out of China whenever, wherever they want.
Outbound property investment to soar 50% y-o-y
Chinese companies are slated to ramp up their overseas investments over the next 12 months, and total investment will likely exceed the US$104 billion recorded up to the end of November 2015.
2015 has seen a marked policy shift, with numerous measures implemented, such as an expansion of QDII quotas and other changes to free the wheels of outbound investment, and this is only going to expand under the newly-announced 13th Five Year Plan. Coupled with the financial sector reforms, plus increasing demand from business and individuals for overseas property investments, it’s likely to be another bumper year of outbound investment.
Colliers International estimates China’s 2015 total outbound investment in property alone totalled US$29 billion, and will increase by 50% y-o-y in 2016.
Chinese investment in key global cities
China to be closer than ever, with more routes set to open
The Chinese diaspora is set to grow. As China’s populace becomes increasingly internationally-minded and dispersed, airline operators are providing more connections.
Major airlines – including China Airlines, China Southern Airlines, United Airlines, Singapore Airlines, AirAsia, and Hainan Airlines – are setting up new routes to ferry China’s business and leisure travelers to increasingly diverse locations. It’s this trend that has seen air traffic doubling at major airports in China like Shanghai’s Pudong Airport, and also is also witnessing rapid growth at emerging hubs, such as Kunming. An important emerging trend to note is that new routes are not only linking up with major gateways, such as London and New York, but also with second- and third-tier cities in Europe and North America, such as Budapest, Birmingham, and Boston.
This clearly illustrates Chinese investors’ widening horizons as they become tuned into investment opportunities away from more traditional investment hubs.
The beautiful game to boom in China
Almost by presidential decree, football is about to become big business in China. President Xi Jinping is an avowed football fan, and away from the dry statements about five year plans, top-level initiatives are being drawn up to boost the development of the game in the mainland.
Government support, plus the prospect of the growth of soccer and the marketing revenue and TV viewers associated with the sport in China, has already sparked huge investments in football clubs:
Alibaba’s Jack Ma famously invested US$192 million in Guangzhou Evergrande, which recently made the finals of the World Club Championship, and major automaker SAIC is about to invest RMB 1.5 billion in Shanghai SIPG Football Club, too.
Football fever is driving Chinese investors overseas too – Dalian Wanda scooped up 20% of Atletico Madrid, whilst China Railway bought a stake in Inter Milan.
Demographic policy changes to alter real estate demand
China reached a demographic turning point in 2015, when it became clear that the % share of young people in the population started to drop, while the % of old people started to increase.
Concerned about a dwindling workforce, the Chinese government released a spate of policies recently, including the stunning abolishment of the one-child policy, as the country promotes a new, more laissez-faire approach to family planning. The acknowledgement of the demographic problem and the roll-back on one of the government’s main policies is a major change in China and one that’s likely to feature at the forefront of investor’s minds, particularly when it comes to property investments.
Real estate developers like China Vanke have long been targeting China’s growing market of retirees for years, and marketing campaigns are now increasingly playing on the new policy rule on extra children. This turnabout will see more Chinese couples thinking in larger dimensions for living space to support their future families. This shift in mentality, combined with overseas property investment being more accessible than ever, will also likely generate a wave of couples and retirees who will be thinking more seriously about moving overseas, which may expand the range of investible properties buyers’ sights.