HONG KONG (AFP) - Chinese investors' penchant for Hong Kong real estate is well-known and as they take aim at the city's most prestigious buildings and office space, mainland cash is driving one of the world's priciest markets to break new records.
With the Communist Party's hand seen behind the latest record purchase, some analysts raised questions about where the enormous cash flows would go as the Chinese government strengthens control over the former British colony.
Beijing's growing restrictions on overseas investment including in property have held back some Chinese conglomerates as the country's leaders seek to stem capital flight and counter a weak yuan.
But the sale last week of a landmark skyscraper by Hong Kong's richest man Li Ka Shing to a China-led consortium for a record of more than US$5 billion (S$6.8 billion) indicates the city's property sector continues to boom.
"(Chinese companies) want to let the world know, 'we are going international, we have establishments in Hong Kong and have been able to buy such good assets'" says Antonio Wu, deputy managing director of Colliers International.
"Trophy assets always help to build a brand." Li's sale of The Center was the world's largest commercial property deal for a single building, according to data from services firm CBRE.
The city's fifth-tallest building, it was featured in Hollywood blockbuster The Dark Knight.
'THE BEST PLACE'
Chinese companies often use the office towers and floors they have snapped up as their headquarters and as a base for expansion - in some instances kicking out other tenants as they grow - while benefiting from limited supply and climbing prices.
Mainland firms' occupation of Hong Kong offices surged 52 per cent in the decade to 2015, according to real estate firm JLL.
"To grow your business offshore, Hong Kong is still the best place," said Denis Ma, head of research for Hong Kong at JLL.
The city remains the most "attractive gateway" as a first step for Chinese companies to expand their global reach, he added.
Cash-rich Chinese firms have targeted highly visible buildings in urban neighbourhoods - most prominently Evergrande's purchase of a harbourfront tower - and office space in the prime Central district.
The Center was seen as an especially rare commodity, combining both the sought-after Central location and an iconic asset available en bloc.
Meanwhile, a number of foreign banks have been priced out of Central, and housing across the space-starved city remains unaffordable for many, an issue growing increasingly political.
Some analysts say the shopping spree in Hong Kong is also part of Beijing's strategy to tighten its grip on the territory.
State-owned enterprises began to buy up properties to boost their businesses in Hong Kong in the 1980s, ahead of the 1997 handover from Britain, says Victor Shih, associate professor of political science at the University of California, San Diego.
"It's to integrate the economies of Hong Kong and that of China, to make the whole process of reunification smoother," he argues.
Corporate filings reveal a Chinese Communist Party organisation is at the top of the ownership chain of The Center.
A statement from Li's CK Asset Holdings named the buyer as C.H.M.T. Peaceful Development Asia Property Limited, incorporated under the British Virgin Islands and set up as a "special purpose vehicle" specifically for the acquisition.
Its largest shareholder is Beijing-based China Energy Reserve and Chemicals Group, according to the South China Morning Post and Wall Street Journal.
The energy behemoth links back to the party - one of its four major shareholders, China Hualian International Trade Company, is owned by the China Economic Cooperation Center, corporate filings show.
The entity, according to various Chinese government sites, is controlled by the International Liaison Department, a Communist Party arm known for handling its foreign affairs.
Shih said such big deals could challenge the party's internal governance at a time when President Xi Jinping is warning against corruption and profligate spending.
He points out The Center will generate millions of dollars of rent each year.
"The challenge for (the party) is whether they have the personnel and the framework to audit and monitor what must be enormous cash flows going through them," says Shih.
Numerous mainland officials, their family members and businesses have set up shell companies in Hong Kong to siphon wealth to an off-shore location to diversify their risks, Shih added, creating a mutual dependency between the two economies.
"Hong Kong remains one of the biggest loopholes in China's capital control," he said.