News / Asia

    Chinese Move Money Abroad as Economy Slows

    FILE - One57, a new luxury skyscraper apartment building under construction on New York City's West 57th street, April 24, 2014. In places like New York, Miami and London, Chinese investors are dominating the market for land and buildings, especially in the luxury sector. 
    FILE - One57, a new luxury skyscraper apartment building under construction on New York City's West 57th street, April 24, 2014. In places like New York, Miami and London, Chinese investors are dominating the market for land and buildings, especially in the luxury sector. 
    Shannon Van Sant

    The Chinese have been moving money abroad at record levels as China’s economy continues to slow, boosting real estate prices around the world while raising concerns. 

    In places like New York, Miami and London, Chinese investors are dominating the market for land and buildings, especially in the luxury sector. 

    Sam Chandan, a professor at the Wharton School of the University of Pennsylvania in the eastern U.S., said, “Chinese investors are the newest players on the scene, but they have very quickly grown to become the dominant player in those gateway markets. We have very clear examples of this. In a market like New York City, the largest hotel sale in U.S. history was a Chinese life insurance company.”

    China imposes restrictions

    But the flight of money has caused concerns in Beijing, which recently began a clampdown that could impede the overseas investments.

    China has said it would launch a system to monitor foreign exchange businesses at banks, and that people trying to purchase more than the maximum $50,000 in foreign currency a year would be placed on a watch list. 

    Another obstacle may be China’s recent stock market volatility, which has left potential buyers with less cash on hand to buy property. 

    A Chinese national flag flies at the headquarters of the People's Bank of China, the country's central bank, in Beijing, China, Jan. 19, 2016.
    A Chinese national flag flies at the headquarters of the People's Bank of China, the country's central bank, in Beijing, China, Jan. 19, 2016.

    Terrence Oved, a lawyer with Manhattan real estate and commercial litigation firm Oved & Oved LLP, said, “With respect to many of the Chinese investors, the Chinese stock market fluctuation and the downward pressure has eliminated the paper gains of a lot of these Chinese foreign investors that has allowed them to go shopping in New York, Miami and [elsewhere in] the United States.”

    He said many buyers are adopting a wait and see approach to the Chinese economy. 

    US banks react

    Some large banks are also becoming more cautious regarding Chinese investors. International banking giant HSBC announced last month it would no longer provide mortgages to some Chinese nationals, who are already dominating real estate markets abroad. HSBC - Europe’s biggest lender - has not clarified which specific clients would be impacted by the new rules.

    But while HSBC has introduced new rules that could restrict purchases, other banks are jumping in to fill the void.

    FILE - A worker uses an ATM at a branch of HSBC.
    FILE - A worker uses an ATM at a branch of HSBC.

    The Royal Bank of Canada said it would ease its cap on mortgages to buyers without a local credit history. In the U.S., some Chinese are investing in real estate development projects to qualify for the EB-5 visa program, which gives foreign nationals green cards in exchange for investing in projects that employ 10 or more people. Real estate buyers are also drawn to the economic stability, education and rule of law of U.S. and European markets.

    US real estate attractive

    Spencer Levy, head of Americas Research at CBRE, said he expects foreign demand for U.S. real estate to continue. “Once you get past the volatility that we see in the market today, I expect it to increase. I think that the investment opportunities that Chinese are going to see abroad in the U.S. and elsewhere, are very strong.”

    Levy says he thinks Chinese buyers will continue to buy in the U.S. because of the continued strength of the U.S. real estate market and economy. Chinese buyers used to focus on gateway markets such as New York and San Francisco, but now increasing numbers are turning to secondary markets like Houston to purchase property. 

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    Comment Sorting
    Comments
         
    by: David Wong
    February 23, 2016 7:11 AM
    To say the dollar is the only convertible currency is ignorant. Globalization has just started. Unless developed countries understand its implications and respond accordingly, it would be a lose-lose situation between the developed and the developing countries.

    by: Ricardo from: Brazil
    February 22, 2016 11:59 AM
    The massive inflow of foreign capital in the U.S, can influence the economy in two ways: It will be a positive way, if the capital is intended for long-term investments. This type of investment provides an increase in jobs and strengthens the economy.

    The capital inflows will be negative, if is intended to speculation. This type of capital might cause an inflationary bubble, and be very harmful to the country. This type of capital is what fueled the Brazilian economy for a few years, when it left the country caused a deep resection that can last for decades.

    The wisest measure the U.S. government could do is to impose heavy taxes and limits to speculative foreign capital. President Obama is a wise leader, I suppose he is aware about this fact.

    by: Marcus Aurelius II from: NJ USA
    February 22, 2016 9:57 AM
    Like rats deserting a sinking ship they know the smell of death and when to flee for their money if not their lives. The flight of capital to quality has been going on for awhile and now it's starting to hurt enough to get noticed. No one in their right mind should accept Yuan or Rubles as a convertible currency. They are entirely worthless. Euros may be next. Globalization has run its course. It has depleted the US of so much money that the economic engine that drives all others has stalled out.

    Now it's time for all that wealth to come back to where it should have stayed all along, the US. This is where ideas are created. Manufacturing moved off shore to evade American laws related to fair wages, fair working conditions, and protecting the environment. Those who continue to bet elsewhere will lose their money including those on Wall Street.
    In Response

    by: Anonymous
    February 24, 2016 12:56 AM
    Marcus, you are a disgrace to America ever time you write nonsense.

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