Chinese Investment Pulling Out Of U.S. In Record Numbers

Chinese capital’s retreat from the U.S. real estate market has now hit historic levels, and shows no sign of slowing.

Chinese investors sold $854M more in American real estate in the fourth quarter than they bought, according to a Real Capital Analytics survey reported by the Wall Street Journal. It is the third straight quarter in which China has been a net seller in the U.S., the longest such stretch on record.

President Xi Jinping has directed investment firms to recapture capital that had been invested abroad to shore up the slowing growth of the Chinese economy.

Before then, Chinese investors’ appetite for U.S. properties was voracious, especially for urban trophy buildings, which they bought at record prices. Chinese capital had been flowing into the U.S. at such a pace that even with three quarters of net selling, it still ended 2018 as net buyers by $2.68B. The eye-popping prices often paid by Chinese firms may mean that some buildings could sell for less than they were purchased, but still may net a profit for firms like HNA Group, Anbang Insurance Group and Dalian Wanda Group.

The Chinese yuan has lost value against the U.S. dollar over the past few years, so bringing the money home will increase its relative value, the WSJ reports. Part of Chinese pullback can also be attributed to worsening diplomatic relations between China and the U.S., which escalated into a trade war in 2018.

But as the eastern power has receded from the country’s market, other foreign capital sources have stepped in. Canada passed China as the biggest foreign investor in the country last year with $44B in purchases, according to RCA. The number represents a massive increase from the $14.6B in American property Canadian capital purchased in 2016.

Chinese investors will not stop buying in the U.S. altogether, the WSJ reports. Instead, it will be focusing on more stable, less headline-grabbing property types such as neighborhood shopping centers and industrial properties, favoring stability over prestige and potential return, according to RCA.

https://www.bisnow.com/national/news/capital-markets/china-investment-pullback-still-going-getting-worse-97222