China – End of the Wild West?

Per PERE, the Chinese State has taken measures to reign in Gray Rhinos and quell their investment activity in the west. Over the past few years, Chinese institutions (namely insurance companies) have shelled out billions of dollars for U.S. real estate in markets like New York and San Francisco. After years of wild investing, Beijing now wants these institutions to pull back in the name of their economy. Newly released guidelines (read “mandates”) are aimed at the stability of the yuan, and the reduction of risk to the US market if the property bull cools off. Now, firms like Angang Insurance Group and Dalian Wanda are being encouraged to make more tempered and pragmatic investment decisions. The Chinese State’s efforts have resulted in a 82% drop Y-o-Y in the direct real estate investment market, according to the Ministry of Commerce data. So what exactly has Beijing done?

Last Friday, formal guidelines restricting – and in some instances banning – Chinese companies from engaging in overseas mergers and acquisitions in certain sectors were issued by the government. The National Development and Reform Commission, China’s state planning body, listed three categories: those that are banned (such as industries related to gambling); those that are restricted (including property, film and sports); and those encouraged (mainly investments that support the Belt & Road initiative).

So how will this effect the supply of EB-5 capital? Well – we aren’t sure that it will. In the short term, if more EB-5 visas are not made available then immigrant investors will continue to turn to other countries to meet their needs. But that’s another story. As it pertains to investment preference, if potential EB-5 investors have followed the herd of Gray Rhinos then another EB-5 capital supply boom may not return until Beijing modifies it’s thinking.

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