Research Alert Investment opportunities in China’s second tier cities: The cases of Chengdu, Xiamen and Nanning
November 2008
Overview past five years. Chengdu’s property market has undoubtedly benefited from the impressive economic While there is a raging financial crisis worldwide, China growth. Between 2004 and 2008, its grade A offices’ will inevitably be affected. However, its strong economic monthly average rental has grown 50% from RMB100/sq fundamentals are still attractive to investors with a long m to RMB150/sq m while stock tripled from 150,000 sq m term time frame. In a market downturn like this, these to 450,000 sq m. investors tend to focus on quality real estate picks in the first tier cities. However, China’s second tier cities, being Chengdu’s economic pared with relatively less affected by external turmoil, present the national average prospects and value of their own that need not be RMB % GDP per capitaper GDP ofChengdu capita perGDPof China overlooked. 30,000 18 growth GDPofChengdu of growthChina GDP 16 25,000 We look at the cases of Chengdu, Xiamen and Nanning, 14 and we argue that there is a variety of dynamics at play 20,000 12 in these areas. Their parative advantages 10 15,000 need to be explored accordingly before a suitable long 8 term investment assessment is made. 10,000 6
