Olympic year boosts Beijing, published in Global Property News
Published in Global Property News
China's capital Beijing is in a state of high excitement as it prepares to welcome more than 4 million visitors to the first Olympic Games in the country's history. Yet in the eight years since the games were awarded to the city, China has transformed itself economically and socially in ways that were unimaginable back then.
Beijing itself has enjoyed unparalleled infrastructure investment since 2000, with a motorway, two ring roads new subway lines and a railway constructed, a new airport terminal with its own high speed rail connection to the city centre, quite apart from the dozens of sporting venues all over the city.
More than $40bn has been spent on upgrading the city's facilities, providing employment for hundreds of thousands of Chinese workers. Around 35,000 people were employed on the airport terminal alone. "Beijing changes just about every day," says Zhou Hong Bin, NAI's China regional director.
The financial structure of many Olympic projects has broken with tradition. The metroline, costing around $750m, was funded through a joint venture between five domestic Chinese companies rather than with government finance. Although there is still close supervision from the government, such private finance initiatives may signal a new openness to other kinds of investment not yet seen in the country.
All over China there are ambitious infrastructure projects and commercial property developments in progress. In the past 18 months alone more than 58,000 miles of roads linking towns and villages have been built, to improve rural living standards.
Retail brands are expanding fast, with chains such as department store Parkson finding favour with fund managers like Gartmore China Opportunities, which registered 69.4 percent gains in 2007. Clothing chain Li Ning, named after its founder, the gold medal-winning Chinese gymnast, now has more than 4,000 stores and has a market cap of almost $2bn after its shares doubled in value during 2007.
China's financial sector has remained immune to the sub-prime collapse and the credit crunch, with groups such as China Construction Bank and Industrial and Commercial Bank performing well, benefitting from the rising income levels of the Chinese urban middle class. "Between 2001 and 2005 per capita urban incomes in China grew by 15 per cent a year," says Charlie Awdry at Gartmore China Opportunities. "More people are moving to the cities and in the cities incomes are rising. They are much more confident about using credit cards and taking out mortgages."
According to Zhou Hong Bin, the Beijing hospitality sector has seen the most dramatic effects from the Olympic Games. Both hotel rooms and services apartments have seen significant rental increases in recent months, an effect expected to last until the games are over. Zhou argues that Beijing is now growing at an equal pace with Shanghai, as it benefits from the Olympics, from increased Foreign Direct Investment and from massive government spending. The commercial real estate market, he adds, should remain stable or even grow slightly during 2008.
