The benefits of placing bets in these second-tier cities are many, stated Nicholas Brooke, chairman of Professional Property Services, in a session focused on less-familiar locales. He cited the lighter bureaucracy, the movement of many of these cities to diversify into the service sector and the lower cost base compared to tier-one locales.
Naturally, along with the benefits come issues that need to be resolved before foreign players sign on the dotted line, issues such as whether or not the city's mayor is "a leader, a champion" of development." Brooke added that many of these off-the-highway locales suffer from "inconsistent interpretations of laws and regulations."
But the looser approach to laws was cited by others as a plus, implying a freedom from red tape. "There is flexibility in policies," stated Catherine Yin, general manager of Beijing Yintai Property Co. "But they are difficult to understand clearly. You have to have a local partner" to act essentially as a government liaison.
"Each city performs differently," commented Rong Ren, CEO of Harvest Capital Partners, indicating yet another reason for incoming investors to do their homework. "Each locale has different opportunity, and each has a different consumer behavior as well as different preferences toward foreign investors. Do your study."
But, for the offshore player focused on China inroads, Ren said, the outlook for second-tier cities "is bullish and the trend should last for another 15 years."
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