Firsthand account from tier II China

May 19, 2011 / By  

One of the fun parts of my job is being able to travel extensively around China.

Recently I had the opportunity to visit Chongqing and Shenyang for the first time because we’ve opened new offices in these two Tier II cities.

Of course they are both provincial capitals, and important cities in their geographic region; Chongqing as one of the 4 Municipalities (along with Shanghai, Beijing, and Tianjin), and Shenyang, the capital of Liaoning. But it was very interesting to see how completely different they were. Chongqing is fairly unique among Chinese cities for being fairly hilly – think Hong Kong or San Francisco, while flying into Shenyang it looked like the American mid-west – very flat and covered in wheat fields.

One key difference that I’ve been mentioning to investors in the last few weeks though, is the huge difference in what we saw with residential policy implementation. Keep in mind this is a small sample size, but the transaction volume data seem to back it up.

I visited the sales office of a high end residential development in a very good location in each city. They were from two different, large, listed developers. In Chongqing, at 11 AM on a Wednesday morning the sales room was packed and I had to wait for an agent to talk to me. I was basically told that if I had cash, they would sell me an apartment. Very interesting. Transaction volumes had been picking up from late March.

In Shenyang, on a Tuesday afternoon at 4:45, the sales office was pretty quiet (they closed at 5:00). The agent, said sales had been slow since late January and they did not have much lee-way about regulations.

Similarly in Qingdao last week, my colleagues found that policy implementation at high end residential sales offices was fairly strict.

My take – it’s always about implementation. That policy implementation is quite strict in cities other than the Tier I’s, is probably a good indication that the impact is starting to be felt, and we may not be due for another round of tightening as market rumours were indicating recently.

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