Zhang Xin, the founder of Soho China: Chinese house prices will not fall sharply

Zhang Xin, co-founder and chief executive of Soho China, the biggest real estate developer in Beijing, interviewed CNBC to share her vision of the Chinese property market in a tightening policy environment and the risk of a real-estate bubble bursting.　　Q: How will the Chinese government's recent interest rate hike affect Soho China? A: If you are going to buy a house, it will be a serious blow. If you are selling a house, you will also be severely hit. But luckily, we do commercial real estate, and in the commercial real estate sector, the power to push sales comes from liquidity. If people have a lot of money to invest in, they will buy a floor office building. So we still see a lot of liquidity. I think if you think about why the government wants to raise interest rates, it will find that this is about tackling inflation because hot money is entering China because they say the renminbi will appreciate. As a result, higher interest rates will attract faster inflows of hot money. Where will the money go?　　Typically, they enter the real estate sector and enter commercial real estate in Beijing and Shanghai. Q: Many economists still worry that there is a real estate bubble in China, but you seem to have a different view-you say there is no bubble. Do you still think it's a good time to buy real estate in China?　　How do you know you haven't made the wrong call? A: I think there's a bubble. I think I've been misread in my previous interview. I have always felt that there is a bubble in China's real estate market, capital efficiency is low, but this is due to the overall macro environment.　　The reason for people to have more confidence in the overall bubble environment is that the economy continues to grow. So if the economy is growing, the bubbles will always be squeezed out and digested.　　But it's clear that once the economy stops growing, the real problem will come soon, and that's why it's important to be careful about choosing the gold position--like Beijing and Shanghai--as a strategy for operating in China. Q: Are you worried that the real estate bubble we see in China will burst?　　How big a price adjustment do you expect? A: I think the government is making every effort to control this bubble, and they face a dilemma. On the one hand, they need economic growth, so they are stimulating economic growth. On the other hand, money and stimulus policies always end up in real estate. This has pushed up real estate prices, creating what people call a bubble. I think the government will use all the administrative means to control it, such as not to let people buy a second housing.　　You can only use a mortgage to buy a house, not a loan to buy a second set. Q: How much do you expect prices to fall? Many people say the decline will be as high as 50%.　　From what you say, it won't happen? A: I do not believe that house prices will fall by 50%. I mean, if it really falls to 50%, it could fall to 80% if the situation is really that grim. That's what people are guessing. My guess is that no matter how tight it is, house prices will not fall so far, because normally the crisis happens when people have no hope ofPeople think the situation is always good.　　If people are always worried about tomorrow's problems, then you won't see the crisis. Q: Soho China has benefited greatly from China's real estate boom.　　Do you think you can continue to perform well under the austerity policies of China during the economic slowdown? A: This year we have surpassed last year's pre-sale results. Last year our pre-sale amount nearly 14 billion yuan, this year we already reached 20 billion dollars. So I think this is the year we set a new record in sales, so overall our sales are very good. Our staff is doing very well.