China has recently started clamping down the outflow of capital after a $108 billion drop in China's foreign currency reserves. That is the biggest drop in the foreign currency reserves in a period of three years. Since then, many are concerned that such measures will discourage Chinese from investing in real estate markets around the world.
In a more recent report, China shows just how serious it is on keeping money from leaving China. According to Reuters, Europe's biggest lender HSBC has just changed its policy when it comes to lending money to some Chinese nationals. Specifically, this institution will no longer be providing mortgages to some Chinese nationals who buy real estate in the United States as part of Beijing strategy to keep capital at bay.
An HSBC spokesperson in New York told the publication on Wednesday that the new policy went into effect the previous week, about a month after the suspension of Standard Chartered and DBS Group Holdings Ltd from doing some foreign exchange business. Volatile stock market and economic conditions have urged Chinese investors to put their money in real estate in other parts of the world. Realtors of big cities like New York, Los Angeles, and Vancouver have admitted that more than 80 percent of rich Chinese buyers of luxury real estate have relations with the mainland.
Moreover, real estate agents in the United States say that these Chinese investors often preferred to pay for properties in cash, adding that they are actually the biggest overseas buyers.
According to Reuters, data from the country's National Association of Realtors reflect how big the Chinese investment is. It was reported that they have actually bought altogether $28.6 billion of properties in 2015 alone and that is more than $6 billion higher than the $22 billion worth of properties the Chinese bought in 2014.
At the moment, HSBC has not yet clarified which clients, specifically, would be affected by the new policy.