Outbound Investment in Logistics, Hotels to Rise

Chinese investments in the logistics and hotel sectors of economies involved in the Belt and Road (or B&R) Initiative will likely double in the coming five years.

With the development of foreign trade economy, logistics has become a hot industry. Adam Rush attributed his forecast to positive investor sentiment toward the booming global logistics segment.

From the time the B&R Initiative was proposed in 2013, participating economies have received a total of $121 billion worth of Chinese real estate investment in deals worth $5 million or more each, according to Real Capital Analytics.

Volume has surged through the first 11 months of 2017 to a record $4.82 billion, up from the $1.20 billion recorded in 2016 and nearly 30 percent above the previous high in 2013.

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This surge came in spite of Chinese buyers of overseas real estate turning more reserved because of regulatory tightening at home as well as in destination countries.

For instance, in Australia, there has been a huge drop in market share, from 18 percent in 2016 to 2 percent in 2017.

In June of 2017, Logicor, a Spanish logistics firm, which owned 13.6 million square meters of properties in B&R economies, was bought by Chinese sovereign wealth fund CIC for $13.8 billion.

The most recent deal was Chinese aviation major HNA's acquisition of Singapore's logistics provider CWT Ltd whose major assets are located in B&R economies.

According to data from Cushman & Wakefield, the return on investment or RoI in logistics in B&R economies ranges from 7 to 10 percent. This is higher than the RoI in other real estate segments.

The same holds true for the hotel sector. Rapid growth in overseas travel from China has created strong demand for quality hotels.

In the past two years, Chinese non-realty overseas investments have been slowing because of tighter capital controls and the depreciation of the yuan.

However, with the Chinese currency strengthening steadily against the US dollar of late, and with more clarity emerging on related policies, Chinese investors are actively seeking overseas investment opportunities again, including in real estate.

"The last six to eight weeks have seen a real increase in inquiries about overseas projects," Rush said.

Meanwhile, the nature of Chinese real estate enterprises investing abroad has also experienced a dramatic shift.

"In the first two or three years (of the B&R Initiative), 90 percent of our clients were SOEs (State-owned enterprises). Last year, more private sector firms entered the (real estate) market (abroad) and now the ratio is 50:50," Rush said.

To cope with regulatory tightening abroad, Chinese-led projects are targeting local buyers. Real estate investors like China Shipping International are beginning to increase their overseas market share by developing hotels and residential services focused on local demand.

The transfer of China's investment projects will be beneficial to the development of the overall economy. As Rush said "Projects that appeal to the local market supplemented with a bit of Chinese demand will be more sustainable." 

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China, France Can Become Ideal Market Economies

French President Emmanuel Macron sent his special representative Jean-Pierre Raffarin, a veteran French politician, to attend the Belt and Road Initiative Forum for International Cooperation in Beijing in May, only a few days after winning the French election, signaling he would visit China at an appropriate time soon. In fact, he announced his intention of visiting China when he met with President Xi Jinping at the G20 Summit in Hamburg, Germany, in early July.

Although it took six months for him to embark on his three-day state visit to China, which started on Monday, it gave him enough time to prepare for his first trip to Asia as French president. Macron has been making efforts to expand cooperation with the Belt and Road Initiative, which is aimed at boosting connectivity among Asia, Europe and Africa. He met some of the senior officials who attended the high-level forum on the Belt and Road Initiative in Paris in September, and recently pledged to deepen cooperation with the participants in the initiative.

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Macron visited Xi'an in Shanxi province, the starting point of the ancient Silk Road, on Monday before holding formal talks with Xi. Hopefully, his endeavors will help him understand China better and lead to fruitful and in-depth discussions between the two leaders.

He has also sent his own message across to China-through his book Revolution, whose Chinese translation went on sale in China to coincide with his visit. In the book, he has vowed to reshape the change-resistant but challenge-laden France and European Union by launching radical reforms. He has also urged the West to view China as an opportunity, instead of a threat.

The 40-year-old Macron has highlighted reforms at the right time, as this year China will celebrate the 40th anniversary of the launch of opening-up and reform, which led to unprecedented economic development and transformed the country into the world's second-largest economy.

China has vowed to deepen market-oriented reform in the country, while promoting globalization and helping improve global governance regime. These pledges are in line with Macron's policy recommendations for France and the EU.

Xi first visited the EU headquarters in Brussels in early 2014, and entered into an agreement with the bloc that both sides would establish a reform partnership. So while pushing their respective reform agenda at home, China and France can work together to strengthen globalization and free trade, and Xi and Macron are expected to touch upon the issue during their talks.

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 Macron is not alone in promoting reform, and deepening cooperation with China. A widely-circulated video filmed by a French national, who after working for years in China could not adjust to the life in France upon his return, shows French citizens are willing to usher in WeChat, a social media communication app, and mobile payment schemes. The French video-maker introduced WeChat and other mobile apps that are popular in China to France.

Macron should take such public needs into consideration while implementing new reforms in France and the EU, especially because China is making efforts to improve its business environment. And to attract more Chinese investment to further invigorate its economy, France should refrain from acting like the United States, which has been misusing so-called security reasons to stop China's investments in the US despite their beneficial impact on the American economy.

Macron is a reformer, but he also supported other EU leaders in launching an investment screening system in the name of protecting the strategic sectors. The French president would do good to realize that such moves carry the risk of stemming inbound investment and forcing other countries to take counter measures.

Given the state of the global economy and rising anti-globalization sentiments in many parts of the world, it is crucial for China and France to set an example for other countries by functioning like true market economies which welcome reform and open trade.

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Xi promises wider opening-up as Fortune forum opens

In order to create more opportunities and make a greater contribution to the world, Chinese President Xi Jinping told world business leaders gathering in China on Wednesday that the country would continue to open up and improve its business climate.

Xi made the remarks in a congratulatory letter to the 2017 Fortune Global Forum, which opened in the southern China city of Guangzhou on Wednesday.

In his letter, Xi said that China would develop the open economy to a higher level, promote the Belt and Road Initiative, and push for a new pattern of all-round opening up.

Looking forward, he said that China would enjoy robust development momentum, the people would have a greater sense of gain and the country would be more integrated into the world.

The president said that China's economy had the foundation, condition and impetus to maintain stable growth and sound momentum.

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He reiterated that China would not close its doors to the world, and would only become more and more open, with its business environment becoming more open, transparent and regulated.

"China will continue to forge global partnerships, expand the common interests with others countries, further liberalize and facilitate trade and investment, and push for an economic globalization that is more open and inclusive, more balanced, more equitable and beneficial to all," Xi said.

Xi welcomed global businesses to invest in China to share the opportunities brought by the country's reform and development.

The three-day 2017 Fortune Global Forum has chosen "Openness and Innovation: Shaping the Global Economy" as its theme, drawing 1,100 participants, mostly world business leaders, including senior executives from the world's top firms such as Alibaba, Tencent, Ford, HSBC and JP Morgan.

It is the fifth time that a Chinese city has hosted the forum. Canadian Prime Minister Justin Trudeau and Papua New Guinea's Prime Minister Peter O'Neill addressed the opening.

Vice Premier Wang Yang delivered a keynote speech, in which he highlighted the significance of sticking to globalization, innovation and inclusive growth.

"China's economy is undergoing profound transformations, and the country's future development will prioritize quality and efficiency, which will be driven by innovation and openness," Wang said.

He attributed China's growth to opening-up and promised to stick to this path.

"China will substantially ease market access and formulate a timetable for opening up in key areas," Wang said, adding that the country would protect the rights and interests of foreign businesses, and create a fair market environment.

Alan Murray, editor-in-chief of Fortune magazine, said the forum comes at a time when technology is reshaping the business world in ways never seen before, and rising nationalism and growing distrust in businesses and other institutions are posing a threat to globalization.

Jing Ulrich, managing director and vice chair of Asia Pacific at JPMorgan Chase, said it was very important for China to say it would hold on to developing an open economy, especially at a time when global protectionism is on the rise.

"Some countries turned to protectionism. By opening up, China asserts its leadership position as the world's second largest economy and a champion of globalization," she said, at the sidelines of the forum. "China shows the world a correct path to development."

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