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Prescient warning in 2013: "Chinese real estate developers should be more cautious when trying to scoop up foreign property"

It now seems a prescient warning, this October 2013 article from Beijing Review, China's only English language weekly, published by China International Publishing Group, which very much reflects establishment views.

Chinese real estate developers should be more cautious when trying to scoop up foreign property was the headline on the 10/28/13 article/column by Lan Xinzhen. It was actually a mixture of reportage and analysis, with the headline more provocative than even the analysis, much less the reporting.

It was keyed to the announcement that "China's real estate heavyweight Greenland Group [was] preparing to invest in a high-profile Atlantic Yards apartment project in Brooklyn, New York," with the company taking a 70 percent ownership stake.

At the point, the terms were not clear: soon, it seemed that Greenland had gotten a bargain or, at least, seller Forest City Ratner/Forest City Enterprises was taking a hit.

An ambitious, growing company

The article quoted Greenland Chairman Zhang Yuliang as optimistic: "The U.S. economy is recovering, with sufficient liquidity, stable return and upbeat prospects for the country's property market."

Of course, Zhang in 2013 also told the Wall Street Journal he thought the project could take eight years to finish.

The company was growing, and the Beijing Review article uses a very interesting term:
Established in 1992, Greenland is a Shanghai-based state-owned conglomerate. In 2012, Greenland Group ranked 359th among Fortune magazine's list of the Top 500 global enterprises... Having raked in exorbitant profits by real estate development in China, Greenland branched out since 2012 into countries that include South Korea, Australia and Germany.
Greenland Chairman Zhang attributed the company's faster-than-expected global expansion to China's growing economic power and global influence, which has created a good environment for companies that have an eye on the global property market. "On the flip side, many countries and regions have yet to recover from the financial crisis; therefore they strongly welcome Chinese investment. The past several years have been the best time for Chinese companies to go global," he said.
(Emphasis added)

Warning about risks

But the article ends with a warning of risks:
What triggered the financial crisis in 2008 was a sluggish real estate market in the United States, something Chinese companies should be mindful of during their overseas foray. Most Chinese developers partner with local developers when exploring foreign markets. This has to a certain extent averted risks. Problematic issues, however, may occur when those developers further expand their market share.
The U.S. model has developers highly dependent on financial institutions, a model that Chinese developers may find hard to adapt to. Besides, facing a volatile global market, Chinese developers must have a strong cash flow to weather risks. Other potential risks include exchange rate fluctuations and a different taxation system.
Now we know that Greenland overestimated its chances, and was unprepared with the curve ball produced by a glut of Downtown Brooklyn residential space and the loss of 421-a tax break. So partnering with an established developer didn't help.

The article sounds prescient, at least with the next paragraph:
The sales of foreign real estate are more complicated. How to factor in the characteristics and development cycles of foreign markets is a major issue for domestic developers. As tempting as it seems, the yield of foreign markets for Chinese developers remains to be seen.
Indeed, there were far more complications than anyone could predict. The article, however, closes in with a choice of reportage that gives the company the last word:
To that end, Greenland Chairman Zhang said his global strategy involves gaining the right level of competency to "go global."
"What makes the company a multinational in a real sense is its ability to weather global risks and handle global management."
That let Zhang vouch for his company's savvy. It hasn't turned out like that.

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