November 4th//PT China, Real Estate

How Will the Presidential Election 2016 Affect Chinese Real Estate Investors in the US?

By Sean Mei, Founding Partner, Partners Trust China

As in the rest of the world, Chinese individuals and media have been riveted by the spectacle that is the 2016 US presidential race. Especially in the last month, news is dominated by daily developments in the election and is followed with great interest. The election is the ultimate reality TV in China as much as it is in the USA.

What follows are admittedly unscientific observations, based on conversations with investors in Shanghai where Partners Trust China is based, as well as in Beijing and Hong Kong during the past 6 weeks.

Firstly, the sample size presented here is extremely small, however, these are real quotes during conversations that have taken place with real potential investors interested in real estate in the US and so may still offer some useful insights.

The Chinese on Trump. What’s to like? Most believe that he “will be entirely driven by his business background and as a result may be more pragmatic” in dealing with China and Chinese than Clinton, despite his sometimes anti-China rhetoric. “He is colorful, entertaining and direct”, something that Chinese citizens do not often see in politics and politicians. Some of the folks polled who have direct ties to Chinese government, believe that “Trump may be more focused on domestic matters and may as a result not intrude as much in international affairs”, which for China is in fact beneficial. Trump’s stance against the Trans Pacific Partnership, which China is not part of, is also looked upon positively.  Then there is the “huge” and inexplicable popularity of Ivanka Trump. Almost everyone expressed how she in particular might represent the best quality of Trump himself, with a sense that “having raised such an accomplished daughter means that perhaps Trump is not all that bad.” So that is the good news. On the negative side, comments range from “he is completely unpredictable”, “short-sighted and brash, rushing to judgment without regard for long-term impact” and “he seems to be ‘winging-it’ rather than have any plan at all and even if he had a plan, he does not seem disciplined enough to stick to it”. In essence, Chinese believe he would become the ultimate ‘wild card’ in both domestic and international politics.

The Chinese on Clinton. There probably could not be a more polar opposite. On the positive side, comments range from “she is obviously experienced in international affairs and is measured” to “based on her track record she is more predictable” and “she will be better at building relations and finding compromise in complex situations.” On the flip side of this, most Chinese seem to agree that Clinton may actually be “less sympathetic to China and Chinese” than Trump. “She may push political agendas rather than a pragmatic economic agenda”, “is a proponent of America at least maintaining if not increasing its status as a world power” and “may meddle more with other countries’ affairs.” “Her tax plan to tax the wealthy would potentially also have negative impact on the wealthy Chinese investors who would buy US real estate.” While most believe that she would not be as much of a ‘wild card’ in general, she has still been awfully quiet about her true intentions regarding international trade and international affairs.

The issues that dominate the headlines in the US, while quite entertaining to Chinese citizens, do not appear to impact their views as much. Trump’s offensive comments are less of an issue in China, not because they are deemed less offensive, but because they are more difficult to relate to. Sexual assault, immigrant issues and conspiracy paranoia are at least ostensibly much less commonplace in China. Similarly, Clinton’s email server issues are less of a concern, as there is a sense of “no harm no foul”, and also “what politician does not keep some secrets or displayed poor judgment?”

The concerns that do matter greatly to Chinese investors is what the potential impact is of each candidate on the investment climate in the US, the world economy, potential restrictions on trade, immigration and taxes. Specifically, as China’s economy has hit some serious obstacles in the past year and a half and wealthy Chinese are seeking safe havens, what does a Clinton or Trump Presidency mean for the US as the top destination for real estate investments? Which President would create a more favorable investment climate?

The opinions are almost equally divided. The two camps present these views.

Clinton would create a more favorable real estate investment climate for Chinese because:

  • “The investment conditions as they are now would generally remain the same. It is stable and more predictable than can be expected if Trump were President.”
  • “US economic growth may continue on a slow trajectory but as a safe haven destination, that is a good thing.”
  • “immigration policies would not drastically change and would also remain more predictable.”

Trump would create a more favorable real estate investment climate for Chinese because:

  • “Trump would introduce tax cuts that benefit large corporations and reduce capital gains. This would benefit many wealthy Chinese who can actually identify with Trump with similar concerns about property taxes, capital gains etc.. “
  • Furthermore, it is increasingly difficult to distinguish between ‘domestic’ and ‘foreign’ multinational companies. What benefits US large corporations, may also be attractive to Chinese multinationals doing business in the US and attract more Chinese to relocate to the US.

So, as a real estate professional in California and strictly from the standpoint of real estate investment climate, should you root for Clinton or Trump? From the Chinese investor standpoint in this specific matter, it appears to be a virtual toss-up. In any case, wealthy Chinese are seeking a safe haven regardless of who the President is. The only concern is that other destinations around the world are specifically positioning themselves to vie for these investment funds. An unpredictable US, may drive more Chinese to look harder elsewhere.

Personally, and strictly as a personal opinion, I believe China, much like Russia, is quietly rooting for Trump, which probably should tell you something. Chinese individual investors however would prefer that there are not too many drastic changes in the US in the next few years, as they are seeking ways to invest in US real estate and may have a slight preference for Clinton for that reason alone. With so much uncertainty in China’s economy as well as the world’s financial markets, there is a lot to be said for a stable and more predictable USA.

Chinese investors are definitely not envying the choice that US citizens must make by November 8th. From Partners Trust China, we wish all of you in the US and by extension all of us here in China, best of luck in what promises a rollercoaster ride to the finish line. As the (purportedly) Chinese curse goes, “May you live in interesting times!”…. I for one think we are in the midst of one of the most interesting of times in all of human history.

Posted in PT China, Real Estate .

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