Canada is Destination for some indebted Chinese

For Some Chinese Fleeing Debt or Prosecution, Canada Beckons

Last week the B.C. government announced a suspension of the Fast Track nomination option in the business stream of the province's nomination program, but said that was to review the program to see if it's accomplishing its goals.

The province said so far 141 people have taken advantage of the program, but only 26 have completed their end of the deal since 2007.

Those that fail on their end keep their permanent resident status, but lose their deposit. If the money was borrowed anyway, this is still an excellent trade.

Countries like Canada, Australia, and the U.S. are slow to respond to the corrupting influence of mega money being thrown around, because they are usually the ones doing it, not on the receiving end.

The report quoted a Beijing-based emigration consultant claiming to know two customers who racked up loans through their companies, moved the money offshore, declared bankruptcy and were in Canada within months using immigrant investor programs.

When contacted by The Tyee, Aoji Immigration Company spokesperson Zhang Jian denied the information in the Global Times report and said he had no record of the person quoted in HR files.

Citizenship and Immigration Canada said it has temporarily closed its federal immigrant investment program, and said provinces are now in charge of any such programs. As China faces an economic slowdown, more business owners have been missing as they flee not just banks, but black market lenders.

The article implies there are two classes here, one of bad luck aggressive businesspersons and the other of intentionally fraudulent persons. Both will appear the same on the surface having run up shadow debt just prior to departure.

Trump Tower Developer Suing Investors

Trump Tower developer suing 7 disgruntled investors to close deals they now regret

Developers of Toronto’s Trump International Hotel & Tower have launched lawsuits against seven investors in an effort to force them to close on deals for condo-hotel suites some claim haven’t turned out to be the Hollywood gold buyers were expecting.

Trump's companies have filed bankruptcy 4 times. What were these people thinking?

Dozens of purchasers of suites in the 65-storey luxury hotel are now trying to get deposits back and renege on final payments averaging over $500,000.

At the same time a London Ontario doctor is suing Talon 750k for misrepresentation from the deposits on the suites he bought in 2009

Most were caught up in the get-rich-quick mentality of Toronto’s booming condo market and intended to flip the units or use them to generate retirement income.

Talon has been facing an escalating buyer revolt since last February as the glitzy Trump Hotel set to open and buyers found out that maintenance fees, property taxes and other incidentals on the project’s 276 hotel-condo units had skyrocketed from Talon’s earlier projections.

It's like they've never invested in real estate before.

Emergency doctor Ganesh Ram alleges in his lawsuit that his costs jumped 40 per cent, with property taxes alone (the hotel-condos are considered commercial rather than residential units) now at $30,000 a year. While revenues from the hotel were meant to more than offset those kind of costs, buyers say they’ve been told hotel occupancy is running anywhere from 10 to 50 per cent and room rates are averaging about $300 per night instead of the $600 and up Talon had originally touted.

Can anyone point to an investor hotel where the numbers did work out? They certainly haven't worked up in Whistler.

Toronto lawyer Javad Heydary has been advising eight Korean purchasers and has been contacted by representatives of more than 40 other buyers seeking to rescind offers. He’s had a team of eight lawyers examining the deals.

What Heydary found came as a shock, especially to some buyers who readily admit they were so blinded by the flash and cash of Donald Trump that they didn’t do proper due diligence: Buyers weren’t purchasing so much a condo as a share in a high-end hotel that, so far at least, is losing money.

Some buyers are sophisticated investors. But many others are hard-working immigrants who just want their life savings back — 20 per cent deposits now sitting in trust and due to be released to Talon on closing.

Even casinos have a minimum to get into the VIP room.

Is it different this time? Sydney Morning Herald asks

Is housing recovery just a pipe dream? They are just being cute here with the first line:
"CAN the Australian housing market recover as it has in the past or is it different this time?"

Is it different this time?

Ask any foreign money manager what scares them about Australia's stockmarket and they will invariably say the risk of a housing collapse because of gross overvaluations. It makes a lot of sense. Virtually all the Western world has seen house prices crumble since 2007 while Australia's residential market has defied gravity, recording only gentle declines. The median house price in Australia is six times the median household income - 30 per cent greater than the US and the long-term average.

The long-term economic impact of Australian housing on the general economy is hinged to how much oversupply there is, if any. Even if prices fall to 50% of peak prices. As long as there is still demand to build something employment will not take a hit.

The bulls like myself believe that history will repeat itself and lower interest rates will eventually trigger a building cycle that in turn will drive domestic economic growth. The bears counter this by saying it is different this time because household debt still sits at a lofty 172 per cent of gross income. They believe any spare income from lower interest rates will be used to pay down debts and not ploughed into the property market.

In the early 1990s, household debt was only about 50 per cent of gross income, providing a sturdier platform for a housing boom.

I saw a quote the other day that bears repeating. Legitimate methods for getting rich should not include running others into debt. (I paraphrase.)

Housing starts in Australia have sunk to a multi-year low of about 125,000 and are predicted to spike to 140,000 in 2013 with the moribund Sydney market, surprisingly, leading the charge. The long-term average for Australia is about 150,000 starts, but underlying demand is currently closer to 170,000 given population growth.

Bets are Investments, Investments are Bets

New Yorker examination of Macau (from April, 2012)
The God of Gamblers

In surveys, Chinese casino gamblers tend to view bets as investments and investments as bets. The stock market and real estate, in the Chinese view, are scarcely different from a casino. The behavioral scientists Elke Weber and Christopher Hsee have compared Chinese and American approaches to financial risk. In a series of experiments, they found that Chinese investors overwhelmingly described themselves as more cautious than Americans. But when they were tested the stereotype proved to be a fallacy, and the Chinese took consistently larger risks than Westerners of comparable wealth. (The gap applies only to investing; asked about decisions in health care and education, the groups were indistinguishable.)

Living in China, I’ve come to expect that Chinese friends make financial decisions that I find uncomfortably risky: launching businesses with their savings, moving across the country without the assurance of a job. One explanation, which Weber and Hsee call “the cushion hypothesis,” is that traditionally large Chinese family networks afford people confidence that they can turn to others for help if a risk does not succeed. Another theory is more specific to the boom years. “The economic reforms undertaken by Deng Xiaoping were a gamble in themselves,” Ricardo Siu, a business professor at the University of Macau, told me. “So people got the idea that taking a risk is not just O.K., it has utility.” For those who have come from poverty to the middle class, he added, “the thinking may be, If I lose half my money, well, I’ve lived through that. I won’t be poor again. And in several years I can earn it back. But if I win? I’m a millionaire!”

Unlike Las Vegas, where most of the profits come from coins fed into slot machines, three-quarters of the revenue in Macau is derived from the enormous bets made in the V.I.P. rooms, where high rollers play around the clock. Casinos rely on outside companies, known as “junkets,” to solve some of the practical problems inherent in running a casino in Macau. It is illegal to advertise gambling in mainland China, and Chinese citizens are barred from carrying more than the equivalent of about three thousand dollars on any single trip to Macau. Most troubling, from the casinos’ perspective, is that it’s illegal to try to collect a gambling debt in the People’s Republic. Working through junket operators is a legal bypass around those problems, because the operators will recruit rich customers from across China, issue them credit, and then handle the complicated business of collection. The system is an attractive arrangement for customers who need to secrete large quantities of cash out of China. If a corrupt official or executive wants to hide the proceeds, a junket is a way to hand over cash on one side of the border and recover it on the other, in chips that can then be played and cashed out in clean foreign currency. (Another option is to smuggle it by hand across Macau’s relaxed borders, a practice known in laundering circles as “smurfing,” for the army of small-time couriers involved.)

Night was falling, and Siu offered me a lift back to the station in his black Lexus S.U.V., parked in the dirt beside us. “There used to be a helicopter taking me to the Venetian anytime I wanted to go,” he said. “Now I’m getting my feet dirty. Real estate is even more lucrative. It’s better than gambling or drugs or anything.” He pointed out the new houses in progress. “It costs a few million to build one of these, and then I can sell it for ten million.”

And this is just pure entertainment gold:

When an F.B.I. agent named Jack Garcia posed as a representative of Colombian FARC guerrillas and asked for weapons, Horng sent him a catalogue, and Garcia ordered anti-tank missiles, grenade launchers, submachine guns, and AK-47s. To lure Horng and others to the United States for arrest, the agency staged a mock wedding for a male and a female agent involved in the sting. Horng and other guests received elegant invitations to a celebration aboard a yacht moored off Cape May, New Jersey.

“I was the best man,” Garcia, who is now retired, told me. “We picked them up for the bachelor party and drove them straight to the F.B.I. office.” Fifty-nine people were arrested. (Horng pleaded guilty and is serving three and a half to four years.) Based on that case and on other information, the Treasury Department blacklisted Banco Delta Asia, in Macau, for participating in money laundering. The bank denied the claim, but it has been barred from access to the U.S. financial system.

Buyers are becoming militant about pricing

Buyers have heard from economists that a 20% decline is coming and they would like to take it now, thank you. Toronto home buyers want back in the drivers seat

In another case, a three-bedroom semi was listed at $569,000, then reduced to $539,000 and sold for $534,000. “My client is motivated. It’s done,” says Mr. Babiak, who points out that other semis in the same area and price range are still sitting there.

He points to Peter Hall, the chief economist at Export Development Canada, who is expecting more robust growth in the U.S. economy than most of his peers. If he’s right, says Mr. Babiak, that should bode well for Canada’s housing market and the correction that has been taking place since the spring could indeed turn into a rebound by next spring.

Not sure I follow this. Demand for bonds seems to be the main thing driving the Canadian housing market.

A Leg in Vancouver, In Case One Breaks at Home

Wary of Future, Professionals Leave China in Record Numbers

Zhang Ling, the owner of a restaurant in the coastal city of Wenzhou, is one such worrier. His extended family of farmers and tradesmen pooled its money to send his son to high school in Vancouver, Canada. The family hopes he will get into a Canadian university and one day gain permanent residency, perhaps allowing them all to move overseas. “It’s like a chair with different legs,” Mr. Zhang said. “We want one leg in Canada just in case a leg breaks here.”

In 2010, the last year for which complete statistics are available, 508,000 Chinese left for the 34 developed countries that make up the Organization for Economic Cooperation and Development. That is a 45 percent increase over 2000.