Money from China for Foreign Real Estate: Fuggedaboutit

Bloomberg News is out with a story today, China’s Army of Global Homebuyers Is Suddenly Short on Cash, on how Chinese buyers of real estate outside China are having to back out of their real estate deals because they can’t get their money out of China. This should come as no surprise to our readers as we have been saying this was happening and would continue to happen. In Getting Money Out of China: The Reality Has Changed, I quoted a few lines of mine from a National Post article, where I urged realtors to wake up to the new reality of selling property to buyers from China:

Lawyer Dan Harris ­— an expert on facilitating trade with Chinese businesses — said that China has aggressively clamped down on capital flight.
Harris said U.S. realtors are calling his firm more and more often for help in getting cash out of China for luxury home sales that were easily completed in the past.
“If anyone thinks the Chinese government will not stop people from sending $3 million out to buy a house in Vancouver? Wow. I don’t know what they know that I don’t.”

The article led to an influx of two types of callers and emailers. One, mostly realtors, who called to let me know their sales to China buyers were going just fine and I had no idea what I was talking about. And two, people whose deals with Chinese buyers were not closing and asking for my help in getting the buyer’s money out of China.

What Bloomberg says in its article is both true and important. Chinese citizens are limited to taking out only $50,000 a year from China and they are now required to sign a document stating the money they are taking out will not be used to purchase real estate.

If you are looking to do a deal (not just real estate) with a Chinese citizen or a Chinese company, it behooves you to ask upfront from where your potential China buyer will be getting their money to fund the deal and whether they have funds outside the PRC should they be unable to get sufficient funds out of China. It has even become common to ask them to show you their out of PRC bank account statement as proof.

Having this information is important in your decision in choosing a deal partner. Do you want to sell your house or your product line or your business to a Chinese buyer for $5 million? Or might you be better off selling your house or your product line or your business to another buyer for $4.9 million?

What are you seeing out there?

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China Business