Capital from China. It has to go somewhere — and plenty of it comes to the shores of the US. While it’s true that the average yuan making its way across the Pacific to the US ends up invested in US treasuries, an increasing portion of that capital flow is finding its way into commercial property.
Mainland China’s investors have hiked their rates of investment into US primary commercial real estate markets. Eclipsing rates of investment by Malaysia and Hong Kong for the first time, the Chinese mainland has for the first time sourced more capital for US CRE deals than its Asian neighbors and shows no signs of backing off.
Driving the trend in part is China’s insurance industry, which has experienced explosive growth in the 21st century. The risk business in China is one of the clearest examples of capitalism’s power to reshape expectations. In 1999, China’s then $10 billion in life insurance premiums took a mere seven years to grow to $46 billion, and the industry is still considered in its infancy. Fed by IPOs and joint ventures with foreign insurers (such JVs having been prevented by government regulation before China’s adoption of the World Trade Organization (WTO) frameworks), the actuarial arts are now an eye-popping feature of the Chinese economy.