Forest City affected by China’s crackdown on capital flight

forest-city-johorKUALA LUMPUR: The Forest City project in Johor may be facing difficulties.

Project developer Country Garden Holdings has closed all sales centres in mainland China amid Beijing’s intensified crackdown on capital flight, the South China Morning Post reported.

The newspaper’s reporters visited the project’s biggest Shanghai showroom on Tianshan Road, which only opened in October 2016, to find the gate locked and the showroom empty.

A notice on the glass door said the showroom was “under renovation” but no renovation activities could be seen inside, the report said.

A spokesman for the China-based Country Garden confirmed to the South China Morning Post that it had shut all sales centres in mainland China for renovation. However, he denied it had anything to do with China’s capital controls.

A statement from Country Garden, carried by Reuters, read: “Country Garden Group resolutely abides by relevant foreign exchange related rules and actively adapts it overseas development strategy to adapt to a constantly changing national and international policy and legal environment.”

There were “dozens” of sales centres in China, according to the spokesman. The company says it will also set up new Forest City showrooms in other countries including the Middle East, India, Vietnam, Thailand and Japan to expand its reach to other markets, Reuters reported.

The company has been aggressively promoting Forest City to China residents.

But the South China Morning Post report quoted Raymond Cheng, Hong Kong-based property analyst at CIMB Securities, as saying that the Forest City project was losing its shine.

“The project doesn’t have much appeal to Malaysians while China’s crackdown on capital outflows will certainly slow its sales in China,” he said.

He added that there probably would not be enough demand from Chinese buyers to keep sales going.

A Country Garden executive, who spoke on the condition of anonymity, told Reuters the company was going to integrate some Chinese projects into the Shanghai showroom to boost domestic sales as capital controls were hurting Chinese sales of Forest City apartments.

Its 4,000 square metre Ryde Garden project in Sydney was not affected, the executive added, as customers there are predominately domestic buyers, though many of them are Chinese nationals residing in Australia.

Forest City is a futuristic smart city project to be built on four man-made islands spanning 1,385.6ha. Costing RM100 billion, it is expected to be completed within 20 years and will have a range of facilities, including housing units, offices and shopping malls.

According to the South China Morning Post report, the government of China in January banned its citizens from converting yuan into other currencies for overseas property purchases to curb capital outflows.

Wu Bijun, general manager of Country Garden’s finance centre, who will become the company’s chief financial officer in April, told the newspaper in January that its projects in Malaysia had been affected by the government’s crackdown on capital outflows.

Alan Ho, a former sales agent at Country Garden’s Malaysia company, said about 90% of Forest City buyers were from China.

Forest City has to date recorded contracted sales of about 20 billion yuan (RM12.9 billion), according to the report.