China’s plummeting stock exchange and recent currency devaluation has seen the value of architecture fees fall four per cent and salaries cut
Billions were wiped off the value of global markets after a rapid sell-off of Chinese shares – dubbed ‘Black Monday’ (24 August) – which raised fears the world’s largest economy could be slowing down.
Farrells Asian arm – TFP Farrells – said government attempts to halt the crisis by devaluing the Yuan currency had seen the value of architectural feels drop four per cent overnight.
Gavin Erasmus, director of the firm’s Hong Kong and Shanghai offices, said: ‘We have recently signed up new projects, have a strong order book and are busy, but we have suffered from the sudden devaluation the Yuan.
‘As a result, our China fees have instantly been devalued by four per cent. If there is intent for the currency to move further down we could see an impact over the next period of being down by as much as 10 per cent.’
China’s slowing economic growth – which saw construction fall 16 per cent in the first half compared with last year – has meanwhile see salaries cut at another major firm.
It is understood Aedas issued an internal memo to staff in its Hong Kong office announcing pay cuts of between five and 20 per cent starting last month.
Around 275 of the studio’s 627 Hong Kong team were impacted, according to Sourceable, with directors working in mainland china also suffering a 10 per cent reduction in income.
The memo said: ‘Aedas’ workload has reduced and in these challenging times we need to adjust our costs to suit our current workload and the prospects for new work in this difficult market. This is a very tough decision to make.’
It has also been reported that around 100 staff member were laid off in July (see EJinsight).
Anatole Pang, financial expert at the China-Britain Business Council, argued some developers could suffer but was optimistic the impact on the country’s ‘real economy’ would be limited.
He said: ‘The crash will likely affect a narrow strand of urban speculators in the stock market, many of whom have been reported as trading on margin.’
He continued: ‘An unwinding of this could lead to some impact on higher end urban consumption and potentially on select urban house prices as some households liquidate property to meet their debt obligations.’
He added: ‘It is unlikely to impact the real economy or most foreign firms.’
Broadway Malyan director Jeremy Salmon agreed opportunities for international firms remained strong despite the downturn.
He said: ‘The impact of the China stock market correction is all about context and whether you are interested in short or long term gain.
‘Ultimately for practices looking to grow opportunities in China, you cannot get away from the fundamentals and they are a massively urbanising and aspirational nation looking to raise standards of living.’
He added: ‘That means significant long-term opportunity for focused practices who can package and deliver the design services that are relevant and that the market still wants to buy.’
Looking ahead, Erasmus was positive high-profile public schemes – such as his firm’s 465,000m² Shanghai Shipyards regeneration (pictured) – would continue.
He said: ‘As a result of this crash, I think China will have to demonstrate they have the engine to grow domestically and show confidence in their economy. Strategic developments in the key regions should continue.’