Where will rich Chinese invest now that Chinese stock gains are evaporating, the Chinese economy is slowing down and the Chinese currency is set for further devaluation? Foreign direct investment goes where economies are growing and stable.
Follow the money is age old advice for knowing why something is happening. In this case we would like to follow the money that goes into foreign direct investment. Foreign direct investment is done by folks with lots of money and the intention to stay a course and make a profit. If you are looking for offshore investment ideas, take a look at where foreign direct investment goes year after year after year. There have been changes afoot regarding where foreign direct investment is going. A very useful reference in this regard is the just published United Nations study, World Investment Report 2013.
We published this article in February of 2014. The rankings may have changed but the message remains the same. When the opportunity to earn and protect wealth fades money moves from one country to another. This is now happening as the Chinese economic miracle starts to fade.
The Case So Far
We touched on Chinese investment in America in an article of the same title. We provided an example of a Chinese company setting up a cotton mill in the American South.
Who would have thought? Chinese companies are starting up cotton mills in America. Chinese investment in America makes sense to these businesses because for every dollar required to manufacture in the USA it costs 96 cents to manufacture in China.
Where else will rich Chinese invest? The Street reports that Chinese investors considered the Waldorf-Astoria a safe haven for their money.
American real estate is becoming a refuge for Chinese investors, particularly insurance companies that may amass $3.32 trillion in premiums by 2020, who are seeking reliable returns as the world’s second-largest economy slows and its stock markets decline, according to both advisers and industry executives.
Developers, financial institutions and high net-worth individuals are seeking “safe investments in income-producing commercial and residential investments rather than luxurious real estate purchases for personal use,” said international real estate attorney Edward Mermelstein, who has spent 20 years advising clients on such transactions.
As rich Chinese invest in America experts see this as a flight of capital to a safe market. So long as rich Chinese investors and companies are able to convert their Yuan to US dollars we can expect to see a continued flight of capital out of China. As the Yuan devalues the situation will only get worse.
Where Is the Profit for US Investors in This Scenario?
This requires a little homework. Where is the money going? If you own property that you want to sell this could be way to unload it to a willing buyer. Or, if a Chinese company is setting up to manufacture in the USA what do they need and who sells it to them. A Chinese company, China Railway Rolling Stock Corp. won a contract to build 284 rail cars for the Massachusetts Bay Transport Authority. This company will need to do business in the USA and its new business partners could prosper. Do your homework as to where rich Chinese will invest in the USA and get there first in line for profits.