The financial crisis is forcing Wall Street's giants to sell oversea assets to avoid becoming another "Lehman". Experts say the ensuing withdrawal of foreign funds will put pressure on China's capital markets and the RMB exchange rate.
Lehman is said to be looking for a buyer for its businesses in China. AIG is planning to raise funds through selling assets. A potential hurricane threatens to sweep through the real estate industry with transactions involving billions of US dollars. Lehman Brothers has announced it will sell its share in the Huhai Commercial Building, and AIG plans to sell its Shanghai Center.
Morgan Stanley's for sale list is even more astonishing. Its first investment project in Shanghai, hotel-apartment complex Jinlin World, is up for sale for 1.1 billion yuan. The New World Building, Huashan Xiadu, and Maoxing Century Park are also on the list.
Stanley is said to be looking to unload its real estate holdings in Hongkong for 5.5 billion HK dollars, including 5 hotel-apartment buildings and the Zhonghuan Yingzhi Building. Citibank is to sell two high-rise blocks in the Minhang district of Shanghai. A Merrill Lynch development project in Shanghai's West Nanjing Road is also up for sale.
Additionally, the tendency for Qualified Foreign Institutional Investors (QFII) to quit the A-share market is becoming more pronounced. The flight from the stock markets began as early as September-October 2007 when Warren Buffett substantially divested his holdings in Sinopec, and Li Ka Shing reduced his investment in Honk Kong listed China Southern Airlines.
Experts say this financial phenomenon represents a flight to safety by investors. Funds cashed in may not be immediately transferred home, but will be ready to be moved at a moments notice.
Mei Xinyu, a researcher at the Ministry of Commerce, recently warned of the risks associated with the withdrawal of hot money. He said, domestically, a sense of menace is pervading real estate market, the stock market is fluctuating sharply and the RMB exchange rate is reaching the peak of a period of appreciation; internationally, the subprime lending crisis is getting worse. The RMB will face depreciation pressure if oversea investors and foreign enterprises sell their holdings in China and transfer money home. A large-scale withdrawal of hot money will have an inestimable impact on China's finances.
Statistics issued by the People's Bank of China in August show that foreign exchange deposits have fallen by 50 percent?since the beginning of the year, indicating that foreign investors are already withdrawing funds from China.
(China.org.cn by Fan Junmei September 23, 2008)
