Chris Devonshire-Ellis, Founding Partner of Dezan Shira & Associates, on China

The GDP figure of 7.7% is the main national average and everyone is very keen on quoting that, but in reality it means very little. China is a huge country and the main average mean that it is adding all the GDP figures together from different provinces and cities. What China does not do is publish figures that are lower than that average. Conversely, some individual provinces do provide figures that are higher than the average value. That means Western and Central China cities in Sichuan, Xinjiang and Gansu provinces, are announcing GDP growth rates of 12%, 13% or even 14%, which is good and could be expected, because investment into inner cities is increasing both in terms of communication and infrastructure. Thus, one would expect to see higher rate of GDP growth in China's Inland cities and its Western cities. However, it also means that if investments in Inland, Western and Central China are higher than 7.7%, then it must mean that GDP growth rate in cities such as Shanghai, Beijing and Guangzhou is actually nowhere near 7.7%. Actually, I would put Shanghai's GDP growth rate more around 4-5% mark, possibly also Beijing and Guangzhou. There are indicators that suggest it is probably the case. In case, officials had published these readings, they would have viewed that as a negative play.  New York for example achieved 4% last year and everyone was happy so for the Chinese to suggest  Shanghai is doing nearly double that is clearly absurd.  

China's growth rate across the country is erratic, fluctuating and I would suggest that growth on the Eastern sea board is slow, probably, around 4-5% mark, whereas in the central part is far higher than that.

To sum it all up, growth remains sluggish in China's more developed cities; however, it is expanding at fast pace in the less developed cities. These provinces are now receiving funding and infrastructure investments to bring them up to standards of the eastern sea board. Therefore, I would not take too much notice of main average GDP figures for China, as the question of growth in China is much more complicated than that.

There are lots of ghost cities and areas within China's largest cities which are essentially over-built. The reason is really down to infrastructure spending in order to get GDP growth rate levels up to meet government targets. Thus, that is the result of central planning; as the provincial and local governments are being put under pressure to maintain GDP growth rate figures that are unrealistic.

With regards to the housing market, that is a different issue. The housing market continues to surge and there is, without doubt, a bubble in China. For example, a 5-bedroom house on the banks of the lake Ontario, near Toronto will cost approximately C$ 1 million, while a 2-bedroom apartment in Pudong, a district of Shanghai, will be selling for about C$2.5 million. Clearly there is a bubble; the reason for this is that China has not opened up its capital accounts, which means that money is not freely convertible. It is not easily transferable out of China as well, and bank rates are low. Chinese investors do not have anywhere to invest their money, thus the only place they can do that is to reinvest back into the property market, which is increasingly speculative. This problem will not go away until China opens up the capital account. However, the danger is that when they do open it the property prices will start to decrease in value and a lot of people will be left with negative equity or will be unable to pay their mortgage payments to bank. That leads into social stability problems in China as the government is really caught into vicious circle. They do not want to break the property bubble as they do not want to leave people with a negative equity or unable to pay their mortgages. That would be an outrage; although, on the other hand they have not been able to find a way out of this circle either. In the meantime, the property prices continue to go up and they are now at ridiculous levels. The Chinese government has not been able to come up with a solution to this problem so far, of course the longer it goes on the worst it is going to be. In my opinion, most property prices will be falling sharply when the markets start to open up. 

To sum up, it is not the best time to invest in the Chinese property; on the contrary, it is time to withdraw from China's housing market and cash in if you can.