Harvest plans new China fund, expects deals soon

HONG KONG, Dec 9 (Reuters) - Harvest Capital Partners, a property investment firm backed by state conglomerate China Resources Group, aims to raise a new fund next year as its two existing property funds totalling $1 billion are fully invested.

The firm, headquartered in Hong Kong and mainly funded by investors from the United States, the United Kingdom and Japan, also intends to pick one or two projects offloaded by foreign real estate private equity funds in China in the very near future, said Rong Ren, chief executive of Harvest Capital.

Ren, a former investment banker with more than 14 years of experience in the financing and property industries, expects China’s real estate market to recover as early as the third quarter of 2009. His firm will continue to focus on investments in top-tier Chinese cities, especially Beijing.

“Bubbles can happen in some cities but not be a widespread phenomenon,” Ren said at a media briefing.

“Once the confidence level is back, the market will recover,” he said.

Global investors, including Morgan Stanley GS.N and American International Group Inc AIG.N, have poured into China's property market in the past few years because they believe the potential for profit more than compensates for the risk from regulatory uncertainties.

However, some overseas investors are rushing to sell their projects due to a lack of capital amid the global credit crunch, which Ren said will lead to attractive deal opportunities.

On Tuesday, Ren also called on the Chinese government to encourage banks to lend money to developers and consumers in a country with roughly $2 trillion of personal savings.

“China’s banks and markets have far too much liquidity ... But the markets lack confidence right now,” said Ren.

Some Chinese banks have identified property as unsafe for lending given the plunge in property prices in many parts of the world, including Shanghai and Beijing.

Ren said he is avoiding Shanghai, where rampant speculation in the recent boom years sent prices sharply higher. He said he prefers Beijing, Chongqing, Dalian, Tianjin and Suzhou.

Besides support from China Enterprises Group, which controls several listed units including China Resources Enterprise Ltd 0291.HK, major investors of Harvest Capital include Liberty International Plc LII.L, one of Britain's biggest commercial property investors.

Editing by Sharon Lindores