Chinese coastal capital spreads to Sichuan

Departing from the economic model in the rest of China, namely massive foreign investment, Chinese investment dominates Chengdu.

The real estate market in the once-sleepy capital of China's north-west capital of Sichuan is attracting a lot of investor interest from Wenzhou in China's eastern Zhejiang province. Some 40% of properties sold last year in Chengdu were sold to outsiders - and a lot of these went to deep-pocketed Wenzhou citizens on the prowl for bargains, say Chengdu citizens.

"Wenzhou people come to Chengdu for property as if they were picking dishes in a restaurant," says one local real estate agent with a mixture of irritation and admiration.

About Rmb280 million is estimated to have been poured into the city by Wenzhouese last year, while at a December property fair in Wenzhou, some Rmb60 million of transactions relating to Chengdu properties took place - 10% of the total.

Locals have mixed feelings. On the one hand, the extra capital is welcome. The feeling they are being outsmarted on their home turf, less so. "Chengdu residents are too accustomed to the easy life and fail to match the sharp business practices of the interlopers," says Hu Haoyi of local consulting company Sinowin.

Wenzhou is an unusually entrepreneurial place. Starved of government investment because of its dodgy position opposite the 'renegade province' of Taiwan, Wenzhou people have had to do everything themselves. Though decried in the mainland for their low cultural attainments, they have transformed the little town into a hive of industry generating apparel, especially buttons, and low-end electronic goods.

Given the large number of Wenzhouese who have made the adventurous journey to Europe, it not surprising that as they get richer they are looking at easier pickings in China's hinterland - the recipient in recent years of enormous amounts of government aid.

Chengdu is their newest plaything, now estimated to be the fifth most popular place as a destination of their know-how and capital, according to mainland figures. It is not just real estate which is reeling under their attack: the leather and lamp making industries, two trademark Chengdu industries, are now almost monopolized by Wenzhou merchants.

The atmosphere in Chengdu is quite different to that of Wenzhou. Chengdu is often seen as one of the more unspoilt cities of China, with its pleasant tea houses and ear-picking practices. In fact, the tea houses are rustic rather than elegant, and you have to prepare yourself for patrons sprawled across the comfortable sofas, shoes off, and offhandedly spitting sunflower seeds on the floor.

The city has succeeded in attracting some high profile Western investment. Intel is to set up a $325 million chip producing plant there, Airbus Industries has some parts made there, Land Cruisers are produced in a Toyota plant, while four giant Carrefour supermarkets, one Metro and several downtown Parkson's dominate the retail space. Most of the top hotel chains, such as Sofitel, Holiday Inn and the Sheraton have set up their 5-star offerings and several more projects, by the Hilton and Kempinski chains, are underway.

Yet, according to figures from the Chengdu investment bureau, foreign investment lags Chinese in Chengdu by a wide margin. As of end-2003, foreign companies had ploughed $7 billion dollars cumulatively into the province, with another $3 billion contracted for but not yet carried out. About 48% of that investment is from Hong Kong, 12% from the US, 10% from Taiwan, 8% from the Virgin Islands, 4% from Singapore and another 4% from Japan, such that there are now 6,000 foreign-invested companies in Sichuan, according to the Sichuan Provincial Investment Promotion Bureau.

In contrast, Rmb30 billion was invested by non-Sichuanese in 2003, up a great deal from the Rmb18.7 billion invested in 2002 - and almost twice as much as the Rmb800 million invested in 2003 by foreign companies.

Yet this windfall also has a downside.

"There's been a quite a bit of speculation. In real estate, for example, there are ways to manipulate prices, for example, by trading heavily with each other to drive up prices," says one agent. There are concerns that such price manipulation and market rigging will be detrimental to Chengdu. "We certainly welcome Wenzhou investors. But we hope that their investments are for the long term, not simply to speculate," the Zhao Jiangming real estate bureau in Chengdu recently told a journalist.

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