Business / Industries

Eastern cities increase reliance on realty

By ZHENG YANGPENG (China Daily) Updated: 2014-08-13 09:06

Eastern cities increase reliance on realty

Contrary to popular belief, it is the eastern metropolises in China that seem to be increasingly reliant on real estate investment, a new study released on Tuesday said.

According to a survey conducted by China Business News, cities like Shanghai and Beijing rely more on property investment than other regions.

According to first-half GDP data, real estate investment accounted for 55 percent of Shanghai's fixed-asset investment during the period, while in Beijing the share was 52 percent. Both were much higher than other regions' share, at around 20 percent.

But analysts said the property investment to fixed-asset investment ratio may skew the picture. The development phase of the two cities means there is not much room for industrial and infrastructure investment, which makes realty investment the key pillar. Investment also takes up a smaller share of these economies as they become more and more consumption- and service-oriented.

The CBN used another method to gauge property investment dependency: property investment to GDP ratio. Under this method, Beijing and Shanghai fell off of the list, while eastern and southern regions like Fujian and Hainan, western Guizhou, Chongqing and Yunnan made it into the top 10 list.

A boost in tourism-related property was a key reason for Hainan's high reliance on property investment, which accounted for an astonishing 36.4 percent of the province's GDP.

The small tropical island embraced a sizzling property boom after 2010, when it launched a campaign to become an "international tourism island" and more than 100 national developers flocked there to acquire and set up projects.

A similar situation occurred in Yunnan, where popular tourists sites such as Xishuangbanna and Lijiang have attracted many developers. Property investment accounted for 25.5 percent of the province's GDP. Some coastal regions, such as Fujian and Zhejiang, entered the top 10 as the entrepreneurial hotbeds switched to property development after profit margins from manufacturing started declining rapidly.

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