After the People’s Bank of China made a policy decision to devalue its country’s currency, the yuan, the Chinese market has been doing some interesting things, both at home and globally. For a while now, Chinese investors have looked at U.S. real estate as an alternative asset class, but with the downturn in Chinese economic growth in the past few months, there is the potential to see more U.S.-Chinese investment in the future, even though those investments may be more expensive following the yuan’s devaluation.

The devaluation of the yuan signaled more market volatility in China, which left Chinese investors facing a key decision: ride the Chinese market wave, or invest in now more expensive (but safe) U.S. real estate assets? Many are choosing the latter. Daniel Chang, of Sotheby's, noted that "’lots of [his] clients have been hit heavily by the equity market...but that only makes them more determined to diversify out of China’" (Shen).

 

Both Chinese individuals and firms, especially private firms, are investing in U.S. real estate assets, most notably in commercial real estate, such as offices and hotels. A recent example of Chinese investment in the U.S. real estate market is the acquisition of the Waldorf Astoria by a Chinese insurer for US$1.95 billion. This acquisition by China’s Anbang Insurance Group is important for many reasons: “it set a record for the largest acquisition of a U.S. real estate asset by a Chinese buyer, as well as being the most expensive purchase ever of a U.S. hotel” and it also signaled the “arrival of China’s state-owned insurance companies into the U.S. market, where the country’s private companies are already the leading foreign property buyers” (Cole).

 

In recent years, the state of China has loosened restrictions regarding acquisitions of foreign real estate, partly because its own domestic real estate market is contracting. With China’s recent GDP levels of 5-7% (low for China), we should expect to see more Chinese state-owned firms looking to diversify their assets and currencies into U.S. real estate assets.