China: Overview

RENTAL YIELDS

Last Updated: Feb 19, 2008

Moderate yields on China apartments

Yields on apartments in the five prime cities -- Beijing, Shanghai, Guangzhou, Shenzhen, and Chengdu -- is generally 5%.

Beijing apartments slightly earn more at an average of 5.5%. Prices are around $2,138 per sq. m. Shanghai apartments, on the other hand, are more expensive at $2,544 per sq. m, but earn lower rental income of around 5%. Guangzhou apartments have average yields of 5% as well, with much lower prices of aroun $1,485 per sq. m.

Chengdu apartments are cheapest among the five cities at $945 per sq. m. Average gross rental yield is still close to the other cities' at 4.43%.

Rental income on Shenzhen apartments are also 5%, selling for $1,354 per sq. m. Villas in Shenzhen, however, have much lower yields at 3.1%. These are quite expensive at $4,880 per sq. m, reaching up to around $3.4M for villas with 450 sq. m.

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TAXES AND COSTS

Last Updated: Jun 22, 2007

Taxation differs in each municipality in China

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	5%	5%	5%
Click here to see a worked example
Source: Disclaimer

Rental Income: In general, leasing property is subject to business tax, individual income tax, and real estate tax. In Shanghai, gross rental income is taxed at an integrated rate of 5%.

Capital Gains: Net gains from transfer of property are taxed at a flat rate of 20%.

Inheritance: There is no inheritance or gift tax in China.

Residents: Rental income earned by resident individuals is taxed at a rate of 10%.

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BUYING GUIDE

Last Updated: Nov 16, 2006

Buying costs are moderate in China

Total round-trip transaction costs are around 4.86% to 13.65% of the property value. Most of the costs are shouldered by the buyer, including the 3% - 5% Deed Tax and Business Tax of 5%. There are three procedures needed to register property which is usually completed in 32 days.

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LANDLORD AND TENANT

Last Updated: Jun 19, 2006

Chinese law is pro-landlord

The Chinese system is generally pro-landlord.

Rent: There is no rent control in major centers such as Beijing, Shanghai, Guangzhou, and Shenzhen. Rent adjustments are subject to the provisions of the contract.

Guaranty Money: The landlord typically collects guarantee money (security deposit) of two to three months rent on top of a month's advance payment. If the tenant prematurely terminates the contract, he loses the guarantee money and down payment.

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ECONOMIC GROWTH

Last Updated: Oct 18, 2007

Asia’s Rising Dragon

China is now an emerging dragon. It has the worlds fastest growing economy. With 1.3 billion people, it is the world's most populous nation, and has the second biggest land area. Its economy is expected to overtake that of the US within a decade. It is a military superpower with one of the worlds biggest standing armies, and a permanent seat on the UN Security Council.

After winning a war against nationalist forces, the Chinese Communist Party (CCP) established The Peoples Republic of China in 1949. The nationalists fled to Taiwan, and established The Republic of China. The CCP considers Taiwan a renegade province that must be reunited with the mainland, by force if necessary.

After stagnating for more than two decades under the strict authoritarian rule of Mao Zedong, China saw economic reforms under Deng Xiaoping. Deng rose to power in 1978, two years after Maos death. In the early 1980s collective farming was dismantled and private enterprises were allowed to flourish.

China is currently one of the worlds top exporters. It was admitted to the World Trade Organization (WTO) in 2004, and in return, must open its market to foreign competition.

Chinas economic growth for the past two decades has been impressive, averaging 9.4% p.a. Real GDP per capita rose 740% between 1980 and 2006, to about US$1,926. With careful steering of the economy, inflation was reduced to below 3% in 2005, down from 24% in 1994. The average inflation rate between 1997 and 2005 was below 1%, an incredible feat given China's breakneck growth.

However there are problems. The privatization of state enterprises has led to much unemployment. Inequality between rural and urban areas is widening. Pollution and economic degradation are also major concerns.

The biggest concern is the lack of political freedom. Economic liberalization has not been matched by political reform. The internet is censored, blogs are carefully monitored with dissidents are heavily prosecuted. Human rights abuses and corruption within the CCP are also widespread.