Steve Hemingway

I have now returned from my second visit to the Chinese mainland, from Zhuhai and from Shenzhen, both in Guangdong. On this occasion I opened another Chinese bank account, tried, unsuccessfully to obtain a mortgage on a property, obtained a Chinese Power of Attorney granting the right to a PRC national to act on my behalf in matters relating to the purchase and financing of residential real estate, and got myself a notarized Chinese name (He Ming Wei), which I'd love to be able to type in Chinese but can't. I also learned that lawyers' fees seem expensive compared to all other costs of doing business, even in China.

I also discovered how it is possible for me, as a foreigner, to trade on the various PRC stock exchanges, over the internet, I opened a HK bank account with 24-hour phone and web access, with multi-currency (including RMB) facilities. I discovered that it is in fact possible to obtain credit on wholly-owned properties in China, that there a number of Chinese banks that have internet banking (including the Guangdong Development Bank, now owned by Citibank).

I also was lead to believe that a HK-registered company was treated for many purposes as a PRC national for the purpose of owning property. This is something I need to verify, as the exact status of HK companies and residents is, I found, difficult to pin down.

I negotiated a lease on one of my properties with a State Owned Enterprise that wished to become the tenant of the office that they had previously occupied as an owner. The lease was, to me, pretty much the same as a commercial lease in the UK but was, if anything, more favourable to the landlord. For example the interest penalty on late payment of rent was set at 1% per day and the total number of days' arrears that the tenant was permitted to accrued during the course of a year was only fifteen. I am assured that all leases, commercial and residential, have to be registered with the appropriate registry which will somehow help in the event that the rent is late.

I had several interesting discussions on where in China was best to invest. Chongqing came up several times, as did Chengdu. One person even suggested that I would be better off investing in Guangzhou. My own instinct is that Chongqing is the most promising alternative to Zhuhai, but that the connections I have built up with the latter currently outweigh the higher capital growth that might be available in the former, although I will keep an open mind for the moment. The critical issue for me is the scale of my Chinese property investments. As I have already indicated, I am actively seeking to recruit a syndicate who would be prepared to enter into a pooled investment with me, and investors who wish to purchase as individuals but would like me to act as an agent to arrange the legal paperwork required to register properties in their own name.

Google adwords produced my first serious enquiry. An exporter of Chinese goods, called, having seen an adwords link alongside some content in the Shanghai Daily News (as far as he could remember).

He had been involved in purchasing and refurbising upmarket apartments in Shanghai. He didn't know much about Zhuhai, although he was aware of Macau and its status. He asked some sensible questions, including the hardest one of all, which was about my own motivation and objectives.

There are actually a number of services that Freshfield/Herts Lettings could provide to a would-be investor in China:

1. membership of a syndicate which pools funds to purchase a diversified portfolio of Chinese properties. This could be set up in a number of ways, but the cheapest and simplest would probably via a PRC national who held the properties in trust for members of the syndicate. Ideally the trustee would be a member of the syndicate and well-known to them. This could only work with a small, close-knit group: even the most carefully-drafted trust deed would offer only limited protection against a trustee who was determined to misbehave.

2. access to an agency service which would faciltiate UK investors invest real estate in Zhuhai (and possibly elsewhere in Guangdong) . This would be a natural extension of my existing business, a letting agency, although it would extend to sourcing new properties which I do not do at the moment. My interest would in the fees I could earn. My preference would be for explicit, transparent fees paid by the client (investor) but I can see that there would be a pressure to share commission with the PRC-based agent handling the sale, and possibly the financing of it.

3. shares in a property investment fund, probably structured as a Hong Kong registered company, which would be to invest in mainland properties. In this case Freshfield would charge a management charge with possibly some carried interest, private-equity style. This is the only service where the investment is geared without the investor having to take on debt personally.
   

I would very much welcome your reaction to these ideas, and in particular, an indication of which, in your view, would add the most value.

Regular readers will remember my obsessive interest in reforming the Town and Country Planning Act of 1947, which, you will recall, is, in my opinion, one of the most economically damaging laws on the statute book. This article by Edward Davey and Tim Leunig offers what appears to me a clean mechanism for allocating land for development. Martin Wolfe has written about this in the past, but the article by Davey and Leunig gives an explicit market mechanism, which solves many of the problems of valuation that other proposals suffer from. The wonderful thing is that it entirely gets rid of the need for planners and valuers!

If only it were that easy. The government has missed such targets for years. There is no reason to think that Britain will build 240,000 houses next year. It may even fail to hit the previous target of 190,000 houses. The reason is simple: central government has created a planning system that gives local authorities no incentive to grant planning permission. Local people generally oppose new housing and the gains councils make from “section 106” payments – made by developers to help offset the cost of local infrastructure created by a new project – are tiny.

The government has proposed a planning supplement to give councils a “modest” proportion of the rise in land values from development. Yet when this was tried before, it failed. When one company owns the land continuously its value is hard to ascertain. Further, landowners can sit on the land until the planning supplement is abolished. This policy could mean less, not more, housebuilding. No wonder Monday’s green paper promises not to introduce the supplement until at least 2009 and then only if government is unable to come up with a better plan.

I have spent the last two weeks in Ecuador. I took over 500 photos, and travelled to Guayaquil, Quito, Otavalo and the Galapagos Islands. I will post the photos to Flickr and write some blog entries about my experience as soon as I get some of my urgent admin backlog under control.

This article made think about how serious problems with security on different social networking systems are and alerted me to the fact that I could link my Flickr account to my Facebook account.

Ecuador is an interesting place. The president and congress are considered corrupt. Presidents last a short time, usually displaced by popular discontent to be replaced by someone even worse.

Most corrupt regimes are fairly long-lasting. Dictators the world over, once they work out who to bribe, usually manage to remain in power for decades. Just think of Fidel Castrol, Kim Jong Il, Robert Mugabe and, sadly, the new regime in South Africa.

Ecuador, in contrast, seems to change presidents as often as most people change their underpants. The last one seems to have been displaced by some kind of popular uprising, which makes the place a lot more democratic than, say, China. The current president seems to be some kind of disciple of Hugo Chavez, and is proposing to abandon the dollarisation of the economy, settling instead for some kind of Mercosurian version of the Euro. He has hardly has been elected before he was caught on some kind of videotape planning to manipulate the government bond market, renege on sovereign debt etc. etc.

In fact the country, although poor by European standards, seems to be getting on with things. There are plenty of cars on the roads, I didn't see any Brazilian-style shanty towns, the population, especially of Guayquil, seemed egregiously well-fed. I can imagine that the local branch of Weight Watchers is pretty busy.

I would guess that there is a an extreme inequality of distribution of income. I warned recently that I could be robbed at any time. There are innumerable guards with sub-machine guns hanging around the doorways to the banks. Guards are paid to mind motor cars overnight. People's drives have heavy railings to stop people stealing their vehicles.

From the point of view of the tourist, Ecuador has a lot going for it. Friendly people, cheap food and accommodation, familiar currency, familiar language. From the point of view of the investor, or of the average citizen, I'm not so sure.

sex and intelligency. A favourite topic of mine.

I bet MIT wished that they had never agreed to allow their students to participate in this study.

This article about Bruce Hyman is pretty extraordinary.

It exposes the deep flaws in the system of Family Courts we have in the UK. Justice is a precious thing, and it seems clear to me that it is an elusive commodity in these courts. This article is typical of the many I have seen criticizing the system.

I need these things:

1. Funding - I will pay a good commercial rate of interest to anyone who can help to fund my China real estate investments.

2. Help with accounting. Some experience required, but no need to be fully qualified,

3. Webmaster support. Just the chance to improve your web construction and SEO skills,

4. Inbound links - ask me for the pages on my commercial site where I would most like links to, and the appropriate anchor text to use. I am happy to reciprocate from here or from it (herts-lettings.com).

5. Moral support and someone to bounce ideas off, about investment in China.

If you can provide any of them, then please get in touch. Send an email to steve.hemingway[at]gmail.com. Thank goodness google mail servers have such excellent spam filtering. You can also ring me on +44 845 299 0113.

何 铭 威

in pin yin: he ming wei

Fully notarised and registered in China. Necessary for me to own real estate there. I am practicing writing it furiously.

A search for Property in mainland China now goes straight to my page on buying property in China. The page still has a PR of zero, but still gets in the searches I want to cover.

I am getting a steady stream of enquiries now; the experience has restored my faith in Google as a channel to get business through.

I am in discussion with a lot of people about building up the China property project, to the extent that I am spending less and less time on the UK side of Herts Lettings. I am going to have to fully split the businesses soon.

This blog entry reckons that Meraki is poised to offer an alternative to ISPs and mobile operators.

This article indicates that traditional 'muni-wi-fi' has many problems, but even the FT's dopey IT correspondent was able to set up his Meraki mesh network, so there is strong evidence not only that it works, but that you don't need a maven to set it up (and presumably to keep it going).

I'm not going to throw away my 802.11g routers yet, but I am definitely interested. Even in my modest brick and wood house coverage is pretty patchy, so a mesh system sounds an ideal alternative to having to run cables everywhere just to connect the routers that serve the area that would otherwise be dead spots of coverage.

If you live near me (SG3 6PG approx) in Knebworth and you are interested in sharing my cable modem connection, drop me a line to an obvious address, or give me a call 0845 299 0113.

I returned from Galapagos just over a week ago. The place is very interesting, and worth a visit, but I thought I'd use this platform to mention a few of the things that I wish I'd known about before going:

1. Do choose your tour company carefully and make sure they have professional guides who speak your language,
2. do make sure the hotel, if it is part of the package a good one. Ours was pretty dreadful and we tried to move, but everywhere was fully booked. The one we would have liked to go to was the Silberstein
3. try to avoid getting full board. The hotel food might be the best on the island, but then again it might not.
4. get someone to tell you *exactly* what the trip will involve, what equipment is required, whether you should hire snorkels, wetsuit etc. etc. before going, whether there will be facilities to get changed into a swimsuit at the destination, whether food will be provided, what it is going to be, what size the boat will be, will you be able to shelter from the sun on the journey etc. etc.
5. make sure you take proper equipment. The Galapagos islands in August are bloody cold for somewhere on the equator and at sea level.
6. probably bring your own wet suit and snorkel if you plan to swim much
7. do not sign up to one of the six-hours-of-internet-use-for-a-suspiciously-cheap-price internet cafes that seem to be everywhere. You will find that using up your minutes will be as much fun as watching a prickly pear cactus grow. I bought a half an hour in one but it really made dial-up seem fast: I think the internet is via satellite or GPRS. It is certainly not 3G, WiMax, Wifi mesh, ADSL, cable.
8. if you are seriously interested in the flora and fauna, bring a suitably technical book with you. The guides we had, apart from speaking almost no English, did not give the impression that they had studied natural history to any very advanced level.
9. if you can, avoid going as part of a package. All the expeditions are provided by local boat operators, and are available to be booked by the public, probably at less cost than you pay through a tour (generally very expensive),

10. Take the reviews of the Royal Palm hotel with a pinch of salt, except perhaps the one posted on 09/26/05.