There’s a big shift happening in the world of international trade.
For years, China shipped manufactured goods to the rest of the world, which eagerly bought iPods and Barbie dolls. Now, Chinese companies are sitting on big cash reserves, and they’re looking to invest that money in real estate in big world cities like New York.
Take the Oosten, for example. It’s a $250 million condominium building now under construction on the Brooklyn waterfront and covers a whole city block. The name Oosten means “east” in Dutch, but the builder, Xinyuan, is Chinese. When it’s done, the building will include a lap pool, a daycare center, and landscaped roof decks. From the fourth floor, there are killer views of the Manhattan skyline.
It will be close to a year before the Oosten is finished, but people are already buying apartments. Many of them, like Wenzhou Xie, are Chinese, living in China. Xie is a mining executive in Hong Kong.
Xie recently took time out from a business trip to ink the deal. He told me the idea of purchasing property that is literally on the other side of the globe may seem farfetched to Americans, but among high earning Chinese, foreign property is considered to be one part of a balanced portfolio.
“So this is like a small piece of diversification for us, right?” Xie said.
To be clear, Xie has no plans to live in this apartment. He expects to collect a $3,000 rent check every month.
“I think that’s gonna be able to most likely cover my mortgage. After the initial downpayment there shouldn’t be any cash outlay from me,” he says.
And in a few years, when he wants to sell, he’s confident he’ll make a tidy profit.
China-watchers say these may just be the first drops in a heavy rain of Chinese money that’s beginning to fall on big world cities like New York. In a speech last November, China’s leader, Xi Jinping, said China’s outbound investment would top $1.25 trillion over the next decades.
For years, China had strict capital controls, meaning it was difficult to get legal clearance to move money out of the country. But in 2013 and 2014, Beijing loosened those rules. Very quickly, Chinese capital has started to flood into big world cities.
“So that means that there’s this whole new group of competitors and potential purchasers for real estate around the globe,” says Joel Rothstein, a partner at the international law firm Paul Hastings.
Last October, Hilton Hotels agreed to sell the Waldorf-Astoria for almost $2 billion, to a company with no history in New York, China’s Anbang Insurance.
Across the river, in Brooklyn, The Oosten is thought to be the first major construction project by a Chinese company without a local partner. It’s unlikely to be the last. Xinyuan says it’s actively scouting new opportunities to develop property in America.
Marketplace is on a mission.
We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.
Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?