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China’s “One Belt One Road” The Dragon Spreads its Wings over Asia

By Andrew Haskins and Terry Suen, Colliers International

Executive Summary

Despite capital controls, total Chinese investment in overseas property assets reached an all-time high of USD39.5 billion in 2017, up by 8% over 2016. Chinese investment in Asian property assets grew 34% to USD12.5 billion, and was focused on Hong Kong, Japan and Singapore. Chinese interest in Hong Kong will probably moderate in 2018, but we think it will stay high in Singapore where the office and residential markets have entered a multiyear upcycle. Singapore remains one of our preferred Asian investment property markets.

Looking ahead over five years, China's ambitious "One Belt, One Road" project, coupled with the firm Chinese economy and RMB strength, ought to drive Chinese investment in emerging South East and South Asian markets. Large-scale investment in central Asian markets should come later. OBOR investment will be led by big infrastructure projects usually handled by state-owned groups. Such projects should stimulate growth in wealth in cities and regions along the project’s chief corridors, enhancing existing investment opportunities.

South East Asian countries mostly look attractive for property investment, although Indonesia perhaps stands out for long-term growth potential and the Philippines for breadth of development opportunities. Shortage of quality property stock suggests that development projects with local partners will generally represent the most effective strategy for accessing the markets. We expect these projects to target industrial and residential property in particular.

While the OBOR project covers India and the country has huge long-run growth potential, Chinese capital is unlikely to be a driving force in India for political reasons. Pakistan is a big beneficiary of OBOR infrastructure investment, but it is too early to consider this country as a major investment destination.

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