Capital control blues for Chinese investors of Forest City

KUALA LUMPUR (March 21): Beijing’s capital controls have left Chinese investors of the Forest City development in Malaysia in the lurch.  

After making payments for their Forest City properties, these mainland investors are now faced with the grim prospect that they cannot send money out of China to continue making payments or even get their money back, the South China Morning Post (SCMP) reported.   

Many of these Chinese investors liked the fact that they were investing in an “overseas home” and the offer of an affordable project “near Singapore” was the main selling point, SCMP reported. 

Laura Zhang, a middle-class Chinese, is one such investor. She told SCMP that Forest City’s“flagship project in Malaysia was not only an asset that would appreciate in value but also one that offered a tropical, garden city lifestyle, access to high quality international education for her son, and a chance for the whole family to become permanent residents of another country”.

And the price of only 20,000 yuan (RM12,814) per sq m, a quarter of that in downtown Beijing, was difficult to resist.

But her nightmare began when she found out that “no the mainland bank would help her pay for her overseas property dream”and “attempts to transfer money to the vendor’s bank account in Hong Kong in January”, failed, SCMP reported.  

Another investor in the same boat with Zhang is Vicky Wu. “Now we understand all further instalments need to be paid abroad. But this is not allowed due to the foreign exchange controls from the Chinese government,” she told SCMP.

The Hong Kong daily also reported that about 40 people, including Zhang and Wu, have now joined a WeChat group “to quit Forest City and get refunds”.

Forest City’s developer Country Garden is the second-largest in China. Aside from Forest City, Country Garden has three other developments in Malaysia, namely Central Park and Danga Bay, which like Forest City are also in Johor, and Diamond City in Semenyih, Selangor.

Forest City, covering 14 sq km of land on four artificial islands in Johor and with a gross development value of RM444 billion, has been successful in attracting Chinese buyers by offering affordable prices and access to Malaysia’s visa programme for long-term stays.

On March 1, The Edge Financial Daily reported Country Garden Group Malaysia regional president Jason Fu Jinling as saying that most of its developments, with the exception of Danga Bay, had attracted more local interest than from China.

“Last year, we did focus a lot on Chinese investors for Forest City, but this year, we are going to open up more sales galleries in countries such as Indonesia, Thailand and the US,” he said.