11 November 2014
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As the Chinese economy continues to become more important globally, we are seeing a shift in Asian investment in the United States, particularly in California. Chinese investors will become even more active and influential over the next 10 years, and will continue adapting to Western business practices while retaining a critical sensitivity to their Chinese roots and the demographics of the Chinese population in the United States.
The ineluctable demographics
China’s demographics are inescapable. It has the largest land mass in Asia and third largest in the world. It’s the most populous nation, with more than 1.3 billion people. And by some measures, China is on track to replace the U.S. as the largest economy in the world by December 2014.
As the Chinese economy has exploded, so has the number of individual Chinese millionaires, billionaires and state- and privately-owned companies with huge cash reserves to invest outside China. Additionally, a large rising middle class now finds itself with money to travel internationally. Over the past five years, Chinese tourism in the U.S. has tripled–and is expected to increase significantly in the next 10 years.
During this same period, Chinese foreign investment has expanded dramatically, with the U.S. as a favored target. We’ve written extensively about the popularity and success about the EB-5 program in China, but it represents only a drop in the bucket, both in terms of immigration–the EB-5 program provides less than 1% of total immigrant visas each year–and in investment. Chinese foreign direct investment in the U.S. since 2000 now totals approximately $40 billion, and it has grown from a mere $58 million in 2000 to about $14 billion in 2013.
The Chinese investors of today are much shrewder than only a year or two ago. Increasingly, they are the largest banks, construction companies, insurance companies and pension funds in the world, who have virtually unlimited resources–and who find U.S. real estate and technologies to be “cheap.” These investors have learned that the most experienced advisors are essential to avoid the mistakes some of their predecessors made.
This situation creates great opportunities for mutually beneficial relationships and profit opportunities, particularly in the hospitality industry. What are some of those opportunities?
The opportunities
The Chinese and U.S.-based clients we work with are interested in investments involving:
- Tourism catering to the Chinese traveler, including hotels, resorts and golf
- Condo hotels — particularly in Chinese communities such as the San Gabriel Valley, Irvine and Milpitas
- Purchasing luxury homes for wealthy Chinese immigrants
- Purchasing commercial real estate of all types
- EB-5 immigrant financing
- Traditional bank financing
- Construction and development projects, particularly as Chinese construction companies “buy” their way into the U.S. market with major projects
Wherever there are big changes, there will be big opportunities for those who are prepared to respond to emerging trends. We see interesting situations developing for both China-based investors in the U.S. and for U.S.-based companies who may advise, sell properties or otherwise partner with or serve the U.S.-bound Chinese and Asian investors.
This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We’ve done more than $87 billion of hotel transactions and have developed innovative solutions to unlock value from hotels. Who’s your hotel lawyer?
Our Perspective. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $125 billion of hotel transactions, involving more than 4,700 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or +1 (310) 201-3526.
Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group®. He is recognized as one of the top hotel lawyers in the world and has authored or co-authored The HMA & Franchise Agreement Handbook, How to Buy a Hotel Handbook, and The Lenders Handbook. Jim has led the Global Hospitality Group® in more than $87 billion of hotel transactional experience, involving more than 3,900 hotel properties located around the globe. Jim has more than 30 years of experience representing and advising Asian investors, with a particular emphasis on Chinese investors over the last five years given the dramatic increase of outbound investments by Chinese nationals and companies into the United States. +1-310-201-3526 or jbutler@jmbm.com