Invest in Real Estate Beyond Shanghai and Beijing

Implications: Shanghai has a lot to offer the foreign investor who are still able to deal in China despite the approvals needed. But the story has moved on to the 2nd tier cities and increasingly the 3rd tier cities, investors just need an investment committee comfortable dealing in cities they have never heard of.

Analysis: The result of the macro economic controls and high interest rates means that local developers need access to partners with money. Getting money into China is still a key hurdle but most foreign investors are able to get over that one provided they show the patience and wherewithall to deal with Chinese bureaucracy.

Foreign investors like the Shanghai real estate story, they are comfortable with the city and exposure to the Renminbi appreciation.

But there is another story emerging and that is for the 2nd and now 3rd tier cities that offer good returns for residential development. Net IIRs of over 30% and equity multiples of over 2 are on offer for a bit of development risk. It involves getting out to some of China's more 'exotic' parts, these cities resemble the Shanghai of 10 years ago when few foreign investors understood it, but the rewards are certainly there for those that take the trouble and some great projects and local partners are there already.