Knowledge is power for Chinese companies's overseas investment

A poster that reads "Creating London's next financial district and Asian Business Port" on derelict land at the Royal Albert Dock in east London. In recent years, European property has been a hot area for Chinese companies. [Photo/Agencies]

A comprehensive understanding of the local market, regulations and business culture is crucial for Chinese companies that invest in overseas projects, especially when it comes to property.

As every market is unique, it is essential for Chinese companies to determine the specifics of each market. It is also the best way to get accustomed to local requirements and circumstances.

In recent years, European property has been a hot area for Chinese companies. Many Chinese developers are being driven by challenges in the domestic market and global branding needs.

Europe was the most popular destination for Chinese overseas property investment in 2014, accounting for $5.5 billion, Jones Lang LaSalle Inc, a professional services and investment management company specializing in real estate, said in a report. London topped the list of cities with $4 billion, followed by Sydney and New York City.

But the European property market is complex and legally demanding. Chinese investors must carefully investigate each market and do business in the European way, meaning that they are fully compliant with all legal and ethical requirements and the business culture.

Failure to do this can mean trouble. For example, a plan valued at 500 million pounds ($772 million) involving a Chinese developer rebuilding London's famed Crystal Palace appears to have fallen apart in mid-February. The plan by Shanghai-based Zhongrong Property Group Co Ltd was abandoned after the local Bromley Council, which had to approve the bid, refused to renew an exclusive development deal.

The main problems were different business cultures, local procedures and appeals.

Privately held Zhongrong Property Group announced in July 2013 that it would replicate the building in a park. It asked the Bromley Council for a 125-year lease with 100 percent control of the land and building before committing to the proposed development.

But the plans would have required the repeal of the 1990 Crystal Palace Act, which restricts construction in the park.

The council was unlikely to agree without being fully confident about the proposals, as it is the custodian of the park. Local residents also campaigned for noncommercial use for the segment of the park in question.