China research trip – A look at the Chinese property market and shadow banking sector

There is a lot of debate surrounding the future of China’s economy. There are the pessimists, who will cite the inevitable collapse of a debt-powered housing bubble.  There are others that say these concerns are overblown and that despite slowing, China is still the world’s second largest economy and its growth rate is far superior than anything seen in the developed world.

From time to time we visit China in order to try and work out for ourselves what the future could hold. China is such an important part of the global economy, it is vital that investors in bond markets have some understanding of the fundamentals that drive the Chinese economy.

Our last video on China highlighted the differences in the banking systems of the US and China and what lessons policy makers in the West could learn from the Chinese authorities. More recently, Matthew Russell (M&G Fund Manager) and I went to Beijing on a research trip to find out more about the current state of the Chinese economy. In particular, we wanted to develop a better understanding of two areas which are often looked upon as potential trouble spots: China’s property market and its shadow banking sector. We’ve put together a video to share some of our thoughts on these and related issues.


The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

Discuss Article

  1. Justin Pugsley says:

    That was a very interesting video and thanks for sharing that.

    Just one thing I wondered about was the buying of property mentioned in the video in Beijing, that it was likely to be by people who will live in these apartments — because rental yields are 2%, but mortgages are 6%, therefore it will deter speculators / investors.

    I’m not entirely sure that is necessarily the case, because Chinese property speculation has different characteristics than say the UK variety, where renting out is often used to pay mortgages.

    In Hong Kong for example that’s not the case & new apartments have been bought up by Chinese investors on a vast scale and are deliberately left empty.

    A/ New properties are favoured and left empty so as not to make them ‘second hand’.
    B/ They’re primarily bought for capital gains purposes not for rental income.
    C/ If Chinese property investors behave in that way in Hong Kong, I suspect they’re doing the same in places like Beijing & Shanghai.

    Anyway, it’s just a thought.

    Posted on: 24/11/14 | 5:51 pm

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