Developers urged to localise when going overseas

Mainland developers must localise when venturing abroad and wean off rich mainlanders' global hunt for cheap homes, say industry advisers.

Developers, including China Vanke, Guangzhou R&F and Dalian Wanda Group, have recently made their first moves to go beyond the mainland, following in the footsteps of industry pioneers such as Greenland Group, Vantone and Country Garden.

More are expected to jump on the bandwagon in the next few years as the mainland real estate market comes off its peak after more than a decade of rapid price rises that have increased the risks in the industry to a dangerous level amid a slowdown in the broader economy.

China's rich have also been casting around beyond the country to make property investments. Their buying spree has pushed up prices overseas, raising the hackles of local residents and prompting some countries, such as Singapore, Australia and Canada, to tighten rules and make it harder for the Chinese to emigrate and buy homes.

"Non-localisation is the biggest risk of Chinese developers," said Philip Zhang, a partner at Zhong Lun law firm in New York. "If that risk can be reduced, they won't face any more danger than other developers do."

But if not, they could face the fate of Japanese investors in the United States in the 1980s, he warned.

Zhang suggested Chinese developers employ local talent, adopt local business practices and hire local professionals, including lawyers.