China’s liquidity squeeze casts shadow over Iskandar Malaysia

By Tan Siew Mung & Yimie Yong / The Edge Property | June 4, 2017 8:00 AM SGT
“Invest in the next Shenzhen” and “Right next to Singapore” are some of the taglines used by China-based developers to promote their property projects in Johor Bahru and Iskandar Malaysia.
Banking on the scarcity of land in Singapore and the prospect of improved connectivity with Johor, Chinese developers with deep pockets started pouring billions of ringgit into the southern state in 2013, building homes at a rapid pace. Their entry into the Johor property market in a big way was hailed as a move that would give the decade- old Iskandar Malaysia — which aspired to be, for Singapore, what Shenzhen’s manufacturing and industrial base is to Hong Kong — a new lease of life.
Some of the mega property projects undertaken by Chinese developers there include Country Garden Holdings Co’s Forest City, which has an estimated gross development value (GDV) of RM450 billion ($145.6 billion); R&F Properties Co’s Princess Cove (GDV: RM24.5 billion); and Greenland Group’s property projects in Tebrau and Danga Bay (GDV: RM20 billion).
Unfortunately, it has not always been plain sailing. Singapore’s reluctance to open its borders to allow greater ease of travel and a housing glut are some of the speed bumps faced by the Chinese companies. Now, China’s move to curb capital outflows since 2H2016 has cast a pall over some of these projects.
“I maintain my view that the Chinese government will continue its stringent policy in the next few years. Capital outflows have fallen recently, but that was mainly due to the government stepping up capital controls. Besides, the renminbi is still under pressure,” says Prof Zhang Zun, dean of the economics faculty of Fudan University.
He tells The Edge Malaysia in a phone interview that the recent meeting between US President Donald Trump and Chinese President Xi Jinping has not changed China’s cautious stance on capital controls.
China allows its citizens an annual foreign exchange quota of US$50,000 ($69,083). An official with a Chinese bank in Malaysia had said earlier that the Chinese government has stepped up scrutiny of foreign exchange purchases, and might bar remittances intended for buying properties abroad.
Property agents The Edge Malaysia spoke to say Chinese investors generally had ample funds, with some even paying cash when they bought properties in Johor.
“Foreign buyers who do not have a steady income in Malaysia face difficulty getting a mortgage from local banks, so they will normally look for...