Dubai debacle

Construction workers on site in the business district of Dubai, United Arab Emirates. Photo: CFP

By Chen Yang and Sun Zhe

Dubai's debt crisis has ravaged the investments of companies around the world, but domestic enterprises appeared to have survived relatively unscathed.

In November 2007, Hu Bin, chairman of Shanghai Zhongzhou Group, spent $28 million buying Shanghai Island, a 30,000-square-meter attol in Dubai's World Islands, which is comprised of more than 300 man-made islands.

Hu planned to invest 1.2 billion yuan ($175.8 million) to build 70 villas and a vacation resort on the island. The project started in 2008 and was expected to be finished in 2010. Now it has been put on hold.

"I bought the island at a relatively low price before the property bubble started to expand, so I did not lose much in the crisis," he told Beijing News. The project was suspended due to weak market demand, and it will restart when the economy recovers.

"If the financial crisis had not broken out, Shanghai Island would have made several billion dollars in sales revenues," he said.

Hu is not the only victim of Dubai's debts crisis as many Chinese merchants have lost money due to the collapse of Dubai World.

Property investors' nightmare

Chinese businessmen's losses due to the financial meltdown probably total 1 billion yuan ($146.5 million), said Hu Weidong, communication manager of China Town Real Estate, a property agency based in Dubai.

There are around 150,000 Chinese citizens living in Dubai, and nearly 20,000 of them are merchants from Wenzhou, Zhejiang Province.

Wenzhou businessmen have been interested in Dubai's property market since 2002, said Zhang Zhong, director of the Wenzhou Chamber of Commerce's website.

The 6,000 or so people from Wenzhou who bought property in Dubai have been the worst off, said Chen Zhiyuan, head of Wenzhou Commerce Association in Dubai.

Wenzhou businessmen's investments in Dubai amount to 5 billion yuan ($732.4 million), and theyre involved in both the traditional trade like garments, glasses and construction materials, as well as the real estate market, said Zhou Dewen, head of Wenzhou Small- and Medium-Sized Enterprise's Business Development and Promotion Association.

The property market had brought Wenzhou businesspeople a higher return on invested capital than normal trade due to the surging real estate prices, and investors who got in before 2008 have earned a lot money, according to Wang Weisheng, chairman of Arab Asia Business TV based in Dubai.

Wang said an independent villa that was sold at 8,000 yuan ($1,171) per square meter in 2001 saw the price rise to more than 40,000 yuan ($5,856) per square meter before the financial crisis. Now the housing prices have dropped to 10,000 to 20,000 yuan ($2,928).

Hu said he bought a 95-square-meter apartment for 740,000 yuan ($108,410) in 2006 and sold it at 1.3 million yuan ($190,450) one year later.

In late 2007, he bought a 130-square-meter office, and now the property has lost 30 percent of its value.

Normal trade not affected

Although Wenzhou property investors lost money in Dubai, many of them do not have plans to sell now.

"Most of Wenzhou investors are long-term, and they normally wait a considerable amount of time before they cash in on their property," said Zhang of the Wenzhou Chamber of Commerce.

Zhang also said normal trade business has not been affected by the debt crisis.

Dubai's crisis may have a negative impact on Zhejiang's export of construction materials, but should not affect trade much, Zhejiang TV quoted an anonymous official in the Department of Commerce of Zhejiang Province as saying.

Some Guangdong businesspeople view the crisis as an opportunity since rent and operating costs have fallen dramatically.

"There are about 30,000 Guangdong businessmen in Dubai working as traders," said Guo Yaojia, general manager of Gulf Chinese Trading Corporation based in Guangzhou, the capital of Guangdong Province.

Chinese goods sell well in the Gulf district, and it is still a good place to do business, said Sun Fenggang, manager of Guangzhou Easttong Electronic Instrument Factory.

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