Much of the increase reflects the construction of new luxury housing and second homes for the city’s wealthiest residents. Concerned that real estate speculation is putting housing out of reach for a growing portion of the population, the government is taking steps to deter speculation and encourage construction of low-income housing. In March 2009, the Ministry of Construction issued new guidelines designed to slow foreign investment in real estate, without providing details. Foreign capital is pouring into China’s real estate market — $8.23 billion was invested in 2010, a 52% increase from 2009.
In 2010, China’s government ordered that70% of new apartments built is smaller than90 square meters, in hopes of diverting more investment into increasing the supply of affordable housing. Several other measures to increase taxes on short-term property gains and limit new mortgages have also been passed since 2009. While local officials often ignored many of these measures in the past, the federal government is now sending teams of inspectors out to monitor compliance.
Responding to encouragement from the central government to improve efficiency and raise capital, several of China’s leading state owned construction companies have already completed initial public offerings (IPOs) in 2009. Despite a brief scare in March 2009, when the Shanghai Stock Exchange plunged almost 10% in one day, investor interest in shares of construction companies is strong, thanks to the building boom in China and the government’s plan to finance huge infrastructure projects in the coming years.
China Communications Construction Group Ltd., the largest harbor construction company in China and the world’s largest maker of container cranes, led the way. The company raised about $2.1 billion in December 2010, selling 24.5% of its shares on the Hong Kong Stock Exchange. The sale was viewed as an unqualified success, with strong initial demand from investors and sustained price gains since the listing, and is encouraging other companies to go public.
China Metallurgical Group, often referred to as MCC (it was formerly China Metallurgical Construction Corp.), is expected to raise about $3 billion in late 2009. MCC, listed as the fifth-largest Chinese contractor by trade publication Engineering News & Record(ENR), helped build Shanghai’s Pudong International Airport and also builds industrial facilities such as steel mills and mines.