I’m starting to think about re-balancing my stock portfolio for 2019 (I usually actually do the re-balancing around beginning of March).

My account exec has sent me some information about the Chinese housing market that looks interesting. Chinese issues took a beating this last year because of Trump’s tariff issues, but there is now progress in talks on agreement and the sector seems to be coming back strong.

It seems that between 2011 and 2013 China used more cement than the United States did during the whole of the 20th century. The pace of the underlying demand for housing is evidently very strong in what is still an emerging economy. The government has spent the last few years attempting to control home prices from spiraling upwards, and it seems to have had limited success. Housing provision, in terms of quantity and quality, is expected to fall short of aspirations as incomes continue to rise.

Population growth is 0.5% per year. More than that, Chinese people seem to have a strong desire to own property. That helps to explain why individual investments by Chinese in the US are often concentrated on buying houses. The reports claim that highest housing demand is in “lower tier cities” other than Beijing and Shanghai. They particularly mention a place called Suzhou as an example of fast-growing cities, which provide an alternative for households seeking relatively more affordable homes, albeit still expensive on local salaries. Included is the attraction of a prized residency permit which gives access to higher-level schools and healthcare. These cities benefit from good connections the larger neighboring cities through a rapidly expanding transport infrastructure. For example, China’s high-speed rail network is already larger than the combined high-speed networks of the rest of the world and it is set to become even bigger.

I am presently pondering how to investigate this idea further.

Anyone have ideas?

I'm a strong believer in me being in control.

I'm a market so far away with a foreign govt which could just confiscate property of foreigners of they wanted, that is too risky for me.

If I did want to invest I'd go with a long established large local company. This is sort of like a REIT in that you have no control other than the ability to make whatever return they can give you. Hong Kong has several there. I'd think China did too.

For me though, too many rules, too much risk that's out of my control.

NEVER OWN PROPERTY IN A FOREIGN LAND

" a foreign govt which could just confiscate property of foreigners of they wanted, "

China doesn't do that. They are so deeply invested in the world economy that they have maintained outstanding standards to encourage foreign investment. As for currency valuations, frankly, it is UD currency that is risky now. If China does do any revaluation because of tariff negotiations, it will be upwards, not down.

I don't think of REITs. My account exec is proposing US mutual funds that invest in that sector, subject to US SEC rules. Anticipated returns are in excess of 60% for 2019.

Hong Kong RE is already unbelievably high. If you think that CA is expensive, look at HK. China is still relatively cheap, especially outside of Beijing and Shanghai and mainland suburbs of HK, while the acceleration of the economy is unbelievably fast There is no dobt that China will surpass the US economy in the next 25 years. I think it is worth looking at.

As specified before, I am not thinking about owning property in a foreign land, even though I already have some such investments. Owning property is not the only way to invest in the housing sector, maybe not even the best way.

I would say that if you are asking here about investing in china that you don't have enough information to make an educated decision. For a consumer of mutual funds the winning approach is an index fund with low fees. Over 70% of fund advisors do not beat the market as defined by the S&P. That is in a mutual fund is approachable. From that prospective look at a comparable sector- say emerging markets or international funds. In my portfolio international and emerging markets did terrible in 2018 compared to the dip at the end that socked sp500 funds. Also if your other basket is in actual real estate then owning a foreign property real estate fund might not be diverse enough. Lastly look at what, if any incentive the adviser has for making the recommendation, where is his bias?

" I would say that if you are asking here about investing in china that you don't have enough information to make an educated decision. "

YES, but I am looking for ideas about what information would be helpful to make that educated decision. I expect to GET enough information to be educated.

" the winning approach is an index fund with low fees. "

Thats not true. Warren Buffet advises that for people who don't know how to invest. It has a certain amount of safety in return for low yield, but a better yield than CDs. For people who are more mature about investments, its NOT the winning strategy. It has its advantage (see above) but an approach of well-chosen funds beats Buffet's advice for novices. You may be sure than Buffet doesn't invest that way. In fact, a well-chosen Buffet fund beats the index fund strategy, including the high fees of a Buffet fund.

I beat the S&P all the time.

My emerging market funds, and China fund took a beating, too, in the 2nd half of 2018, due to the tariff issues. But that may be over with prospect of agreement.

My basket is NOT in actual RE. Sure, I own apartments, but I am old and more willing to sit at home in front of a computer than I am to go out and fix things, or even worry about them, plus I have made so much more money in market-based investments that my market basket now far outweighs my RE basket in value. I already have enough diversification ion my basket so that I am able to take large positions in very active sectors without worry.

And finally, my account exec does not make any profit from what I buy. I have enough money invested with his firm that I am a preferred client, I don't even pay commissions, and I get early and private advice. My exec is there to make sure that I am happy and don't take my business elsewhere. He is pretty sharp (Dartmouth B.A., Columbia MBA), has access to very good research, and knows what I am interested in.

Thanks for your advice. I was really looking for advice about how one would objectively evaluate the housing market in China, given the undeniable size of the Chinese economy and its growth. I am already up to speed and successful in Mutual Funds. But I like having someone else to bounce ideas off of.

I am learning.

Suzchou (for example) has population 4.3 million, metropolitan population of 10.58 million. Its urban population grew at an unprecedented rate of 6.5% between 2000 and 2014, which is the highest among cities with more than 5 million people. With high life expectancy and per capita incomes, Suzhou's Human Development Index ratings is roughly comparable to a moderately developed country, making it one of the most highly developed and prosperous cities in China.

The economy is based primarily on its large manufacturing sector including iron and steel, IT and electronic equipment, and textile products. The city's service sector is well-developed, primarily owing to tourism, which brought in a total of RMB 152 billion of revenue in 2013. Suzhou's overall GDP exceeded RMB 1.3 trillion in 2013 (up 9.6 percent from the year previous). [9.6% GDP growth per year, America, eat your heart out.] The municipal government has enacted various measures to encourage foreign investment in a number of manufacturing (e.g. pharmaceutical, electronic goods, automobile) and service (e.g. banking, logistics, research services) sectors. Included among these measures is a preferential tax policy for limited partnership venture capital enterprises in the Suzhou Industrial Park. The city has phenomenally well-planned transportation infrastructure, including railways, highways, air transport, water transport, metro (light rail, subway, tram, bus).

If these are not the conditions for excellent growth, I don't know what is. What I seem to be learning is that the future of China is fantastic.

My suggestion: do lots of homework if you are thinking of doing this. This is not for the faint of heart or people just starting out investing.

My MIL lived in China for a few years while her husband was there for work. She had a lot of stories about the American community's dealings with Chinese factories and stuff. Basically, the upshot was, it was frustrating to deal with them, because from their perspective, it was all about the bottom line. If you could cut corners to save five cents per widget, they would totally do it... even if that corner-cutting was the difference between a stable, desirable product and a piece of junk.

But in general, I'd be very cautious about dealing with a country that's too far skewed into orangey-red territory on the global corruption index. Not necessarily because of the bribery/graft itself, but because I'd be cautious about trusting their data in the first place.

As far as China specifically goes--- the Great Leap Forward and Cultural Revolution took place in many of our lifetimes. (1947-1951, 1958-1962, 1966-1976. Any country whose leadership says that 30 million landlords and rich peasants need to be destroyed-- and then proceeded to do so-- and is still in the business of disappearing people-- and is currently saber-rattling in the South China Sea-- doesn't sound like the sort of place that's ideal for investment...

Nicely put, Deanna, and thank you for the enlightening post.

China seems to have issues with water resources and drought so I'd consider infrastructure data. I heard news about the California Almond industry being a major supplier to the Chinese who opted to outsource the production due to water concerns.

With China, you have a country that is communist dictatorship politically but constantly flirting with being capitalist economically. The concrete usage is no surprise. businessinsider.com/these-chinese-cities-are-ghost-towns-2016-2 I would not consider a strong "buy" signal that they spent hundreds of billions to construct cities where no one lives...yet.

That said, their plans to urbanize the massive rural populations could mean a migration the likes of which no one has ever seen. How would a billion people who have never lived together in such modern close proximity react to living in New York-like conditions? Maybe these cities will draw population into them and away from Suzhou? I don't know.

Are there opportunities? Yes, no doubt. Chinese people are buying up more coastal US real estate than American's are. Govt may have its plans with their massive ghost cities, but private money is flowing outside of China. cnbc.com/2019/01/08/chinese-middle-class-buying-up-american-residential-real-estate.html

On a Financial show I heard that China just added Trillions to their economy to stimulate it ( I think I heard 47 Trillion) .

The USA during its downturn went from 4 trillion to 7 trillion at the Fed Reserve to stimulate economy

this from Bloomberg: Binhai “Only about one-third of the apartments here are occupied,”

Yesterday Europe added tariffs on Chineese steel, etc to join the Trump effort

Sure Moshe, drop some money in there. Let us know how well it works for you. Don't invest more than you can afford to lose.

I didn't have to go any further than promised returns over 60%. Danger, danger, Will Robinson.

I won't even buy food from China. I sure won't buy a building.

I think that I am going to take a minimum position in this sector, for a start. I'm going to China for a week to see the situation for myself.

I wouldnt take any position at all if I though it was danger. Some of the reasons posted above are not worth taking seriously: nationalization of private property; fear of foreign investment; better investments in US (not at these returns and favorable outlook); fear of tariffs (seems like we have just gone through that, so that there are now bargains to be had. as we see, the market in Chinese issues dropped temporarily in the tariff war, China has blinked, and new seems to be a good time to invest. Bottom line is that we are able to win a tariff war over China, they need us more than we need them, for the time being); China adds trillions, so what is the result? Accelerated growth; corruption in China (look at how much profit has come from China in last years [decades], and growth of Chinese companies, must be doing something right); China favors home-grown companies: yes, so US mutual fund that invests in well-chosen Chinese companies?; political dictatorship? But Chinese companies are making money, lots of it, their stocks have been excellent growth. In short, its a huge market, too big to ignore. But thanks for the advice; Im going to go and look around.

I have gotten 60% returns on Chinese funds over a few years, now, until mid-2018. The 2018 loss is now recovering.

I remember the story about vacant apartments in China. I am surmising that it depends on locations, and that is the basis of this fund, looking at secondary cities that have high (phenomenally high) growth. So, I going to Souzchou to look that over.

Moshe, kudos on your success. You are clearly above the grade of a consumer investor, as is Warren Buffet. Sounds like your adviser is capable and not out to gouge you. I wish older investment norms prevailed. I would say we agree that investing beats RE for producing income. I used to argue w/ a friend that it was not worth putting funds at risk when you could sit on a 6% bond return. That ship has sailed! Their argument was that RE always increases in value. That has not been the case where I am. Most here seem to be in it for cash flow with no exit plan (myself included). My funds are in retirement accounts and I just have to make trough the intervening years. I'd be interested to hear from someone about good net returns with property in an IRA, but that seems overly complicated.

Cost of trip is actually rather minor because of low costs (presently) in China.

I'm not looking at RE investments, I'm looking at local housing market conditions. I don't intend to buy any property, I intend to consider investing in marketable funds that own shares of local companies that build, own and rent housing, expecting to make my profit from the increased market value of shares over time resulting from profitable company growth.

Unlike other countries, China changes its laws very quickly (nobody can say no to the gov't).

You need to know the new updated RE investment laws, or you sink your money with no way to retrieve it.

Investors beware!

Add the language barrier, the RE sharks, the bureaucracy, the RE laws, no financing...can you handle all that?

Let us know how it went.

My money will be invested on the NYSE, so what do I need to know about China's RE investment laws? China has a good record of very sensible actions encouraging foreign investment. Pity that US can't be as rational.

I don't need to speak Chinese. I will make my trades from my computer, with my Windows browser set for English US. The Chinese companies contained in the fund's portfolio will handle the language, the bureaucracy, the RE laws and arrange for whatever financing they need, like selling shares on the NYSE.

I'm going to China, leaving tomorrow, to look over the housing environment. Coming back on next Sunday.

My account exec has hooked me up with an executive of a big apartment construction firm in Shanghai.

I have two sons, one I mentioned in the ladder and pants message, the other has lived in Asia since he graduated from college. He's now 46. He now lives in Mainland China in Shenzhen.

Don't even ask me why kids do things like this, because I have no idea!

China is the Wild West. The thing I found most striking was that they use bamboo for scaffolding when building skyscrapers.

I would not invest in China. He has said some things are going on in China that are worrisome.

" He has said some things are going on in China that are worrisome. "

Such as? Thats the kind of information I may be looking for. Is it relevant to my project?

Using Bamboo for (skyscraper) scaffolding ?

Well that should tell ya something.

I was told a few years back that the two places in the world that were vastly over building were UAE and China. But with the economy being shaken up for about 14 months, I have to wonder if China isn't that bad of a bet.

There would be a couple of different other risk involved including currency risk and that it is a foreign nation.