A MASSIVE development project in Johor’s Iskandar Malaysia region is in trouble after China’s government clamped down on the outflow of money for investment in overseas properties.

The US$100-billion (RM430 billion) ‘Forest City’ development – flagged as a Malaysian version of China’s Shenzhen city with hotels, offices, golf courses, tech parks and thousands of ritzy new apartments  – is largely funded by Chinese developers and buyers.

A Bloomberg report said that developers’ sales offices in China that once brought in buyers by the hundreds are now pushing developments in Chinese cities instead, while some buyers who paid deposits for yet-to-be-built homes are considering cancelling their purchases.

As part of China’s new capital control policy, the government announced in December that Chinese citizens are allowed an annual foreign exchange quota of $50,000, but they must sign a pledge that they won’t use their quotas for offshore property investment.

Violators would be added to a watch list, denied access to foreign currency for three years and be subject to a money-laundering investigation.

The policies are expected to threaten residential property sales around the world, especially in the Iskandar region where Chinese financing makes up as much as 90% of developments, said the report.

But while many Chinese buyers are worried that they will be penalised under China’s news foreign exchange rules, Country Garden Holdings Co, the developers of Forest City, have said the controls have not had a material effect on sales and construction at Forest City is continuing. It has completed a luxury hotel and handed over the first batch of 132 apartments on May 1.

Iskandar Malaysia is the government’s effort to leverage Singapore’s success by building a new metropolis near the causeway that connects the island state to Johor Bahru.

When the 20-year project was announced in 2006, it envisaged a total investment of RM383 billion ringgit and much of the early investment came from Singapore. – June 23, 2017.