Chinese Money in the U.S. Dries Up as Trade War Drags On

https://www.nytimes.com/2019/07/21/us/politics/china-investment-trade-war.html

by pseudolus • 7 years ago

120 122 7 years ago

ashleyn• 7 years ago

I wonder if this will help make housing more affordable due to reduced foreign investment.

panpanna• 7 years ago

A lot of rich common wealth Asians moved to Canada and created a similar situation x10. Then government created new laws to tax empty buildings.

Did it solve the housing issue? Not entirely, but it sure helped a bit.

remote_phone• 7 years ago

Vancouver will suffer from “be careful what you wish for”. If house prices drop it will kill the economy because people will will be locked in their underwater homes for the rest of their lives. Deflation will destroy the entire economy.

rat99882• 7 years ago

It would also mean less wealth in the us. I'm not sure how the two get balanced. But I guess things are more skewed toward to more affordable zoning as government regulation, when it exists, limits construction.

admiralspoo• 7 years ago

Less foreign inflows means the dollar gets devalued, and US exports become more competitive against everyone, including China.

usaar333• 7 years ago

Couldn't it also make housing less affordable as less investment means less homes get built?

conceptpad• 7 years ago

Building isn't the bottleneck in the system - it's land that is zoned for residential development.

Tiktaalik3• 7 years ago

This is why the government and non-profits need to be involved in constantly building housing.

So long as population is growing we'll always need more homes, regardless of whether it's a good investment or not.

sct202• 7 years ago

It'll probably help in California, where 38% of the Chinese money is going. But only 266k properties were purchased in 2018 by ALL foreign buyers https://www.gbreb.com/GBREBDocs/GBAR/News/Informer/2018/2018... (page 22 has purchase locations by country of origin) out of 5.33 million existing home sales and 667k new home sales in the same year https://www.nar.realtor/research-and-statistics/quick-real-e... . So if you figure California and Florida look like they're disproportionately attracting foreign investment, there isn't that much left over for the rest of the country to be impacted with.

trevelyan3• 7 years ago

A lot of Chinese money involves families paying for housing ostensibly bought by a legal resident or green card purchaser, usually a student who comes over and then ends up owning one or two properties and sheltering family assets.

These purchases aren't usually reflected in the stats. It is more unusual for non-residents to end up owning property with no guarantees they can use it. Same in Australia and Vancouver.

samsonradu2• 7 years ago

Considering the "new normal" interest rates around the world and the direction things are going (down), I have doubts housing prices will decrease in any developed country for the upcoming 5 years.

cptskippy2• 7 years ago

Housing prices in Las Vegas and Southern California are declining. This is a first time for LV since the Great Recession. Declines like this have historically preceded every recession.

Do you anticipate housing prices will weather such a recession which many predict is looming on the horizon? That would be a first.

SkyMarshal2• 7 years ago

They already are in some places (Silicon Valley), you can see it on sites like Zillow.com.

msie• 7 years ago

I doubt it. The impact of foreign investment is overblown. The majority of buyers are domestic.

dmix2• 7 years ago

I remember reading an article about the obsession with Chinese money in Vancouvers housing market was totally overstated since it was in the single percentage points.

People just can’t accept there’s a ton of people who want to live downtown than ever before (reverse ‘white flight’) and the housing market is incredibly constrained in supply for a ton of other reasons that can’t be blamed on foreign boogiemen.

Not to mention those small percentage of foreign investors are making regular Canadians wealthier than they ever would be normally which goes right back into the economy which creates jobs and industry for other Canadians. The solution then is increasing supply or not expecting to live in a big place whole living in expensive downtown areas, not whining about demand.

11thEarlOfMar• 7 years ago

The reduction in Chinese investment in the US has as much to do with China policy as it does with the trade war:

https://www.newsadvance.com/archives/capital-flees-china/art...

dgellow• 7 years ago

I’m in Germany: 451: Unavailable due to legal reasons

denysonique• 7 years ago

Same in the UK. Thank you eurocrats.

marcosdumay• 7 years ago

It basically says money is leaving China, and there are reasons to expect the movement to increase, so the government has put restrictions on money movement and is selling its international reserves.

There is no further detail on the restrictions or the selling. The detail is all on the capital movement.

auslander• 7 years ago

I'm in Private mode.

latchkey• 7 years ago

Living and traveling around SE Asia, I've seen first hand where Chinese money is going. Massive amounts of construction (and destruction) in Vietnam, Cambodia and Laos.

o-__-o4• 7 years ago

Everyone hated TPP now we are realizing TPP prevented exactly this by forcing trade agreements between the East Asian countries including China

point78• 7 years ago

Sounds like a good thing to me?

magwa101• 7 years ago

Pretty small numbers, looks meaningless, less than a percent, that will likely be replaced by other sources (EU etc.).

vikramkr3• 7 years ago

A lot of the new crop of biotech companies popping up in Philadelphia raised chinese money - one of the founders there told me it was because chinese investors had a "more enlightened view of valuations." I wonder how these changes will begin to affect biotech. Considering some of the recent intellectual property drama with chinese national employees, could there have been risks around IP from taking money from Shanghai based venture firms? It's a complicated issue as international financing always is, but I do wish people were allowed to invest anywhere/accept money from anywhere without government interference

tmcronn• 7 years ago

Standard procedure has been: if you want their investment or their business, you have to surrender your data/IP upon request.

And they probably came to these Biotech companies with a juicy offering of capital. So expect some Biotech breakthroughs in the near future, but not necessarily coming from the West.

api2• 7 years ago

Coming from the west, but not released here.

opportune• 7 years ago

Pretty sure that's only true if you actually set up operations in China. Not that they might not try to get the IP anyway, but it's definitely not a given.

It makes complete sense for a Chinese investor to want to invest in biotech in the US and not China, btw. The US is a world leader in biotech and the American market is... very lucrative in the biotech area as well.

majia• 7 years ago

Please don’t assume US companies are stupid. They know what they are selling and whether they are paid enough. In most cases it’s just about giving away some about-to-be-obsolete tech for some big money.

yeswecatan• 7 years ago

Do you have a list of biotech companies in Philly? I haven't heard of any (though I haven't really searched). I'm really curious how the tech scene in Philly is in general.

vikramkr3• 7 years ago

Huge number of car t and gene therapy companies. Spark therapeutics, carisma, tmunity, limelight, century just launched with a 250 million round. Lost of Penn spinouts basically.

brianzelip• 7 years ago

Allevi 3D bioprinters are based in Philly, https://allevi3d.com/.

brainpool• 7 years ago

Wow, a "more enlightened view of valuations” sounds a bit scary. I hope your founder acquaintance realize that valuation is not all that matters. Accepting more funding from investors that are not that “enlightened” in other matters is a sure way to get in all kinds of trouble.

vikramkr3• 7 years ago

I share those same concerns - I think that in biotech the rapid dilution that happens early with professional CEOs bought in early means that there is less interest in building long term value - so short term wins like these can be worth it to founders that expect to be promoted to chief visionary officers. That might be harsh but I have co cerns about the incentives at some of these firms

benj111• 7 years ago

"more enlightened view of valuations"

You mean they were willing to pay more.

"accept money from anywhere without government interference"

In banking its known as KYC (know your customer), I don't know if the same rules apply to private financing. Anyway the idea is knowing where's the money come from, is it from drugs? Corruption? There needs to be some 'interference' or all your nations SMEs become money laundering operations.

skybrian2• 7 years ago

The article doesn't talk about what's happening with the trade deficit. It seems like it would be important to know what's happening there because Chinese exports to the US are how China (as a whole) earns US money to invest?

Apparently the trade deficit was higher in May in anticipation of tariffs. [1] Is newer data available?

[1] https://www.reuters.com/article/us-usa-economy-trade/u-s-tra...

jjwhitaker• 7 years ago

There may be more data, but a trade deficit is not an inherently bad thing in fact with most nations it strengthens US soft policy by adding US currency and use of US currency to the local economy.

For China, this means they can buy gold in USD (that has slowed recently but they usually purchase large amounts of gold regularly) or offer investment cash in USD (for businesses or housing abroad). How the cash is used could be negative like buying US housing to hold or rent but a trade deficit is generally positive for the US.

skybrian2• 7 years ago

Yes, it's not inherently bad. My main point is that if Chinese imports to the US drop, you would expect less Chinese investment in the US.

(But then again, maybe that's nothing compared to all the assets built up from previous decades of trade deficits.)

api2• 7 years ago

If this deflates real estate I dont see a big problem here.

wsfintech• 7 years ago

Comprehensive data points on why this is happening. Formulate your own conclusions.

* "Every Chinese citizen is only allowed to exchange up to US$50,000 in foreign currency a year at their bank, and also faces major hurdles to buying foreign exchange within that quota" https://www.scmp.com/economy/china-economy/article/3017203/c...

* "New Restrictions on High Tech Technology Transfers to China" https://www.chinalawblog.com/2018/11/new-restrictions-on-hig...

* "Something Just Broke In China As Repo Rate Soars To 1,000% Overnight" https://www.zerohedge.com/news/2019-07-19/something-just-bro...

* "Transfering money is getting more and more difficult, even perfectly legitimate business transactions." https://www.reddit.com/r/China/comments/c5qwd7/transfering_m...

* "China’s Banks Are Running Out of Dollars" https://www.wsj.com/articles/chinas-banks-are-running-out-of...

* "China’s Economic Growth Hits 27-Year Low as Trade War Stings "https://www.nytimes.com/2019/07/14/business/china-economy-gr...

* "China No Longer Expected to be World’s Largest Retail Market in 2019" https://wccftech.com/china-no-longer-expected-to-be-worlds-l...

* "Hong Kong’s GDP grinds to near halt at dismal 0.5 per cent growth" https://www.scmp.com/news/hong-kong/hong-kong-economy/articl...

briantakita• 7 years ago

Looks like the Hong Kong Triads are currently attacking protesters.

https://twitter.com/search?q=hong%20kong%20triads

yumraj• 7 years ago

Does anyone think that that's a bad thing? If so, why?

dodobirdlord2• 7 years ago

While books could be written about whether this is good or bad in aggregate, there are certainly bad things about it. Trade is good.[0] International investment if a form of trade.

To present an argument crafted to appeal on HN: Chinese investors not investing necessarily means that investments have fewer buyers, the market is less competitive, price discover is weaker, and the price of investments is lower and more volatile. This makes it harder to get investment in a startup, riskier and less rewarding to work at one, and increases the likelihood that startups will fail.

[0] https://ustr.gov/about-us/benefits-trade

patientplatypus• 7 years ago

How do you say Smoot-Hawley in Mandarin again?

skunkpocalypse2• 7 years ago

it is pronounced "troll"

Chinese Money in the U.S. Dries Up as Trade War Drags On

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