Abstract
Executive Summary. Despite the large volume of foreign direct investments in Chinese commercial real estate markets, there has been little academic research done to analyze and characterize the risk structure of Chinese commercial properties. This paper examines the risk characteristics of direct property investments in Chinese first-tier cities. It applies macro variable models to analyze the risk structure of office properties in Beijing, Shanghai, and Guangzhou. It then tests a selection of instruments that could be used by investors to hedge the risk of investing in these three markets. It concludes with recommendations that could help investors deal with the risk of direct investments in China's property markets.