I’m back from China, after a fast-paced and extremely informative trip. In case anyone is interested, I’ll share some observations. If not, feel free to pass.

China is a fantastic market. There is no doubt that their economy will pass ours, its only a matter of time, and not much time at that. Estimates I heard are 2030.

My Fidelity account exec hooked me up with a VP from China Construction Bank in Shanghai. After a very informative discussion, he assigned a senior analyst to stay with me and show me around. She is a very impressive young lady, BS in Engineering from Wuhan University, MS from University of Shanghai, MBA from MIT, and smart as a whip. She knows the construction and housing situation inside and out, has access to documents and answers direct and to the point, besides being cute.

Some parts of China have suffered from overbuilding, but in specific places where the government is not so much interested in population growth, such as Beijing. That’s seems to be a thing of the past, the Chinese have learned how to plan better, and housing is clearly a growth industry here. Chinese have identified several less crowded cities that they want to grow into metropolises despite the fact that they already have populations of 5-10 million. These cities are growing faster than housing can be built to support the demand. The immigration comes not only from industrial and job growth, but also from a desire of country-side Chinese who want to live in more urban settings. Chinese government helps that along by, among other tricks, closing the schools in areas where they was to close up.

And that brings me to a facet of China that I hadn’t realized: the Chinese personality and its effect in the economy. Just as Chinese gambling tradition built Macau, the Chinese personality is also very homestead-oriented. Chinese people want to own houses. They also demand excellent schools for their children, and will go to great lengths to get them, including moving from one end of China to the other. These needs are being met by encouraging growth in several mandated cities, including boosting the economy & jobs, building housings and new apartments, with excellent schools, health facilities and recreation. China has a HUGH!!! Population, and it is rapidly becoming middle-class, with ambition and money to spend.

The government has encouraged foreign investment in housing and the future looks very strong.

I’m taking a minimal position in the fund I talked about, expecting to watch and add to it as time goes on. The tariff issue is still going on, but it seems clear that China wants ts solved, they are just haggling over the price. The effect of the tariff was is that growth in China is now estimated as 6.3% OVERALL!!! For 2019 (MY GOD, AMERICA, EAT YOUR FREAKING HEART OUT WITH A LOCAL ESTIMATED GROWTH RATE of 2.1%),

I needed 2 days to rest up from this trip, but if you want more, let me know.

State Specific Question About: CALIFORNIA (CA)

Moshe,

Thank you for the information. I'd certainly like more, specifically on landlord /tenant laws in China. In this country, we know that these laws vary widely with some states much more restrictive on landlords (Mass, NY, Cal,Oregon,Washington for example).

Is China like this or do they have a more unified system? How are evictions handled? Things like that.

RE: landlord/tenant laws.

I don't know, and i don't care.

I have often written about the fact that I have learned how to choose tenants, and I haven't been to court in decades. I believe the Chinese personality doesn't require much legal enforcement. But I am not investing to be a landlord. I am investing in a fund that does it for me, and I expect them to do the handling of tenants, according to local custom.

I also believe that it is valid to say that it doesn't male any difference what state you are in, landlording is the same everywhere; you just have to learn the local way of doing things. A successful landlord will be successful everywhere, it does not depend on what the local laws are, you just have to learn what they are and work within them.

Funny Palio, seems that Wuhan is the premier university in China.

Did you apply?

RE: landlord/tenant laws in China

Make that ALMOST everywhere. Once in a a while, some jurisdiction passes some law that is really oppressive, but that usually doesn't last before it runs into the laws of economics.

" Did anyone talk about Huawei? "

No. To what would it be relevant?

Don't know if this would interest you or not but I read something this morning on internet about China investors selling more than bying in the US now.

I think it was on msn.

Had something to do with China government control.

Thanks for the re-cap, Moshe! Good luck in your venture(s) there!

- John...

"No. To what would it be relevant?"

China may be a lucrative place to invest, but I don't want to invest where the government has too much control. A great investment could be a bad investment tomorrow if the government decides they made a mistake or want to change direction. The same issues would be why I would not want to invest in some cities and states in the US.

How many times have US companies invested in other countries and then have had their investments taken over by the governments of those countries?

RE: Huawei

What would make that relevant to investing in Chinese housing?

RE fear of investing in ...:

I understand, but I have some experience in international affairs. You have to know when to hold 'em and when not to.

13 years ago there was few non government owned multiplex housing, the demands put on the workforce of 10 plus hours 7 days a week made immigration a very popular dream. Then came the Olympics and the -tent suburbs- were displaced further away so the appearance was diluted as those residents were pushed further away from the central manufacturing epicenter, now to support the companies demands the wages had to be increased to offset the transportation expenses.

If California had water it could grow but the metropolitan areas are already very densely populated so growth is awkward, the recent wildfires vividly put the water shortage into perspective. I only spoke with a few chinese citizens then but I would imagine there is no such thing as a housing court in the communist party, now there is the People's Republic which has a Supreme People's Court. Sounds like Judge Judy who follows tenants stories but has little understanding of tenant law of common sense in housing court matters.

"What would make that relevant to investing in Chinese housing?"

I did not suggest it was directly relevant nor am I'm suggesting that's a reason not to invest in Chinese real estate. I was just curious if this was something they spoke about or whether you had observed anything in passing about it as this is a fairly significant issue impacting trade relations between the two countries.

As Moshe stated -> "China is a fantastic market. There is no doubt that their economy will pass ours, its only a matter of time, and not much time at that. Estimates I heard are 2030."

Thanks to the USA starting a few decades ago. We are our own worse enemies at times. Enough said.

John

New Jersey

I remember the 1980s. Experts regularly stated that the Japanese economy was sure to surpass the USA within a decade. Three lost decades and rampant inflation later.... ;-)

The Orient is an interesting place, for certain. Your visit sounds fascinating. It sounds like something I'd like to do some time.

I'm not trying to discount your experience or knowledge: that would be foolish. But perhaps because I am an unsophisticated Mid-Western state whose motto is "Show Me" I'm not quite ready to worry about China either taking over or missing vast swatches of opportunity there.

They have over 1.3 billion people, and their per capita GDP is $8,800. The USA per capital GDP is $59,000.

The also have population pyramid mess as a result of decades of "one child per family" policy. Their economy may surpass the USA's by 2030, but this chart says that is about the same year their population plateaus and starts to shrink within a decade. Their population is also aging rapidly in proportion to the number of young people. This may be a significant challege when it comes to caring for their aging parents. Culturally, it appears Oriental people seem to value and respect family more than in the USA, but if there's only 1 kid in a house with two parents.... populationpyramid.net/china/2018/

The USA's pyramid isn't perfect, but we're on a long-term growth projection. populationpyramid.net/united-states-of-america/2018/

Economic growth comes from two main factors: increase in population and increases in productivity. The Chinese population graph says they're on the wrong pathway for growth driven by population increase, so it would be all productivity-driven. The USA, on the other hand, shows a steady upward trajectory in both populating, and our aging population should be at least replaced, if not surpassed by younger generations.

Chinese government and economy are a strange mix: communist politics and socialist market economy. I don't know what to make of that. Could be amazing if handled well....if not.... *shrugs

We're certainly got several potential large messes in the making in the USA too, with far left ideas gaining a lot of traction and massive unfunded liabilities.

All this to say my crystal ball is murky on the future. I'm not here to argue or say you're wrong (or that you're right). This is "food for thought", nothing more. I wish you well in your endeavors. Keep us posted how it goes.

It is unfathomable the damages done by Mao. 45 Million of his own people starved to death. Purge of every "right thought" or thinking by a corrupt gov't and regime.

The best hope for China is a middle class-- who will eventually fear losing it-- to poverty. The current gov't grew up during the "little red book" era and the "purge" so that's a big plus-- no one wants to go back to that.

One problem I have is their expansion into "making islands". Mao in 1960 said China needs islands in order to survive nuclear war-- through attrition of those caught in a nuclear war Chain has the population to survive an all out war-- but they must have the islands.

The Russians gave up on China's great leap forward and now other Foreigners have come to it's aid.

A few observations regarding this mornings postings:

1. I dealt with a very sincere and knowledgeable young lady who was able to show me (not tell me) what is going on.

2. The cost of my trip was pretty reasonable: $1500 air fare, hotel in Shanghai like any big city, Hilton in Suzhou $82, my mentor drove us around in her car, meals are less than or (in Shanghai) equal to Los Angeles. Whole trip was not more than $5,000. I will submit to my CPA, but its not a ig deal. I hope to make profit even this year, so cost of trip can offset some profit.

3. I don't think that the past of Mao is of any relevance. This is 2019 and the middle class is HERE!!! in China, in the millions. You can't miss it. They are obvious, on the street, in the stores and offices, on the roads, in the schools, EVERYWHERE!!! in numbers that cannot be imagined on the US scale.

4. Sid has disclaimed responsibility for opinion, so I will just eat some of his food for thought. My opinion is that his is an unsophisticated analysis based on what I saw. The future of China is unable to be ignored by anyone who has walked on the street in Shanghai. My task is to figure out how to fit myself into the the Chinese profit picture.

We're trying to get our money back into this country and your looking to go outside or other direction. Don't get that. I've studied China extensively for 40 years and just when you think the country is heading right BAM!!!!! They shoot a bullet into your head.

You might want to re-study China with a little more emphasis on the more recent parts of the last 40 years. It is now a part (albeit a distant part) of the western world.

What has changed is freedom, prosperity, western access and greed. While the freedom may not be equal to what you are accustomed to, it is livable, increasing and in response to demands of a VERY LARGE population.

Keep in mind that there are certain laws operating here. One is that people will act in their own best interests, especially in regard to money (study Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776) Its essential for understanding what markets are and how they operate.

Another is the availability of access to western ideas. China (now) has internet (somewhat restricted, but still operative), access to western newspapers, TV including satellite dishes capable of receiving western stations, students who have studied in west, scholars and businessmen who travel all over and now have relatives in US, books and teachers who teach about western ideas.

English is taught to all young people. and, not like American high-school Spanish or French; it means speaking, reading, writing essays and articles plus study of western history and politics.

Don't forget greed. Chinese businessmen want to make customers and get (even steal, if necessary) new western ideas and engineering.

All of these forces are becoming so strong that even the Chinese government cannot long resist them. Add to it, the force to be exerted by young people who are growing up with western ideas, western clothes and fashions, western music and an extremely strong desire to be like the west.

These forces, as China becomes even more prosperous and powerful, will be impossible to deny. We really are becoming a global society, and China is pushing hard to get out in front.

That what I went to look at, not trivia like recycling or traffic laws. The Chinese have their own way of doing things, but it works well for them and is evolving to their own standards as they grow and mature.

I want a piece.

Fascinating discussion; thanks to all for posting. I wonder how long atrophy or entropy rear their head and the Chinese kids (now middle class or better) become entitled.

Best of luck with your venture.