Bad news for Forest City

An economist sees Beijing prolonging capital control measures, preventing those who have bought units in the Johor project from taking their money out of China.

PETALING JAYA: An economist has predicted that China will prolong its capital flight control measures, which is bad news for Chinese real estate developer Country Garden and its Forest City project in Johor.

Hoo Ke Ping, the author of several books on international economics, told FMT the outcome of the recently concluded G20 meeting could result in China’s decision to maintain those measures for an indefinite period.

“At the G20 meeting, the finance ministers of the major economies didn’t renew their stance against protectionist measures,” he noted.

“So what you are likely to see is the United States implementing protectionist measures, which will in turn affect China’s trade. If this happens, China’s foreign reserves will dwindle and Beijing is likely to prolong capital control measures.”

He said this would mean those who bought properties in Forest City might not be able to repay their bank loans because they would be prevented from taking their money out of China.

Forest City is a RM100 billion futuristic smart city project that caters mainly to investors from China.

Hoo said Forest City wouldn’t face tough times if all the Chinese buyers had bought their units with cash or if they had stashed a lot of money outside China. But this wasn’t the case with most Chinese investors, he added.

Hoo’s latest comments come less than a month after a press interview in which he predicted that many housing projects catering to Chinese buyers would end up being abandoned.

For now, he said, Country Garden’s best hope was to seek the help of the Chinese ambassador to Malaysia, Huang Huikang.

He said the company could ask Huang to appeal to Beijing to relax regulations for buyers of Forest City units, such as allowing those who have already repaid half of their loans to continue servicing them.

But he said the outcome of the recent G20 meeting made it unlikely that Beijing would accommodate such an appeal.

It was recently reported that some buyers of Forest City properties were seeking refunds after failing to raise money from banks in China following Beijing’s imposition of its strict measures to control capital flight. FMT