By: Edwin Fuller
Founder and President of Laguna Strategic Advisors

The Chinese are on a U.S. buying spree like no other. Since the beginning of the year, Chinese investors have announced interest in, or closed on, several multi-billion-dollar deals on a variety of American enterprises, including GE’s appliance division, Strategic Hotels & Resorts (owner of numerous luxury properties here and abroad), a construction manufacturer, the Chicago Stock Exchange, Carlson Hotels (owner of the Radisson brand), Hollywood’s Legendary Entertainment Group, Google’s smart phone hardware division (Motorola) and Starwood Hotels HOT +0.33% & Resorts (ultimately acquired by Marriott International MAR +0.32% after a heated bidding war). According to CNBC, the average deal announced so far this year amounts to $1.5 billion, eight times greater than last year.

This year’s pace comes on top of the all-time high, record-breaking $15 billion they plowed into the U.S. in 2015, which was a 30% increase over the previous year.

At the top of their investment targets are U.S. companies in the tech, health care and residential and commercial property sectors especially in tourism and hospitality.  According to a report by the National Committee on U.S.-China Relations and the Rhodium Group, “investments in 2015 included hotels (among them the Red Lion Hotels, Waldorf Astoria New York, Waldorf Astoria Chicago and the Hyatt Regency Orange County), golf courses (including more than 20 Myrtle Beach golf courses in South Carolina) and travel logistics (such as new operations by Hainan Airlines in San Jose).”

Chinese nationals the largest international buyers of U.S. residential and commercial property

Meanwhile, the Asia Society and the Rosen Consulting Group reported that, after having invested more than $110 billion in U.S. real estate over the past five years, Chinese nationals are today the largest international buyers of U.S. residential and commercial property. And there’s no end in sight. According to their study, Chinese U.S. property investment is expected to double to $218 billion in the second half of this decade.

Folks who were around in the mid-1980s will tell you we’ve been down this road before. In those days, it was widely believed that Japanese investors rarely turned down a U.S. real estate opportunity, buying up such trophy properties as Rockefeller Center in New York and the Pebble Beach golf complex in California. By 1991, however, their appetite waned as financial conditions in Japan changed dramatically and the U.S. property market went into a tailspin. This time is different however, noted the Asia Society study, citing “the combination of the high volume of Chinese investment and breadth of its participation across all real estate categories.”

Big property deals such as Anbang insurance group’s offer for Starwood make a lot of noise, but the Asia Society study points out that residential purchases by the Chinese has far outpaced their investment in commercial land and buildings.

The motivation for residential purchases

Over the past five years, Chinese buyers spent about $17 billion on U.S. commercial real estate while spending roughly $93 billion on homes in the U.S. over the same period. Last year they paid about $832,000 per U.S. home in high profile cities like New York, Chicago, Miami, Los Angeles, Las Vegas and San Francisco.

The Society indicated that Chinese purchase of residential property is primarily motivated by a desire for second homes; primary residences for those moving to the U.S. on EB-5 investor visas or as rental or resale investments.  Concerns about the stability of the renminbi exchange rate have accelerated the pace of Chinese commercial investment abroad since the middle of 2015.

Motivations aside, China’s interest in investing in the U.S. has legs that carry implications for our enterprises and communities alike. When coupled with the 100 million mainland Chinese travelers expected to visit the U.S. annually by 2020 it’s clear the U.S. travel and hospitality industry and business community at large need to prepare for a changing landscape.

Expect more Chinese lodging brands

For the travel and hospitality industry, it won’t be long before we see mainland Chinese hoteliers exporting their national lodging brands to the U.S. and other countries to complement the high-profile global brands in which they’ve invested.  As their countrymen increasingly travel the world, just like generations of Americans and Europeans before them, they will want to stay in hotels with which they’re familiar back home.  Soon, it will be commonplace to find hotel brands developed by hoteliers like Jinling Hotels & Resorts or Jin Jiang International Holdings sitting side by side U.S. brands like Hilton, Sheraton, Hyatt or Marriott in cities throughout the U.S.

Across the country, already more than 100,000 Americans get their weekly paychecks from a company based in China.  That number will grow exponentially in coming years.  As mainland Chinese investors continue to buy U.S. companies and brands and establish their own enterprises here, they will be eager to become members and leaders of the local chamber of commerce, to join the neighborhood PTA, represent their companies on area social and charitable boards and so on—just as our nationals who work and live abroad do in the countries in which they reside.

All this should make for interesting days ahead for us all. Let’s make the most of the opportunity.

As Published