The Real Deal New York

Money gushes out of China over fears of weakening renminbi

Over the last year, nearly $1 trillion has left the country

February 15, 2016 10:21AM

The Waldorf-Astoria Hotel

The Waldorf Astoria Hotel

With fears over the falling value of their currency, the Chinese are looking to send their large sums abroad, and this could mean continued investment in New York real estate.

Chinese families and companies have been using legal methods — such as real estate investment — and illegal means, through a process known as “smurfing,” to move nearly $1 trillion out of China over the last year.

Two years ago, Chinese investors started investing heavily in New York commercial real estate market, and in 2015 were behind $5.4 billion in deals — including Anbang Insurance’s nearly $2 billion purchase of the Waldorf Astoria. The Real Deal dubbed 2015 “the year of the Chinese investor.”

But when China devalued the renminbi by four percent last August, it sent stocks spiraling. With worries over the Chinese economy and global stock market, it seemed that Chinese money in New York real estate could be drying up.

If the government cannot stop the hemorrhaging of losing currency, it could undermine confidence in the Chinese economy and hurt the country’s banking system, which is already struggling to deal with lending binge over the past 10 years, the New York Times reported.

“The currency has become a very near-term threat to financial stability,” Charlene Chu, an economist at Autonomous Research, told the Times.

To counteract the downward pressure on its currency, the Chinese central bank bought large sums of renminbi and sold dollars from its currency reserve to do. China’s reserves went from $4 trillion a year and a half ago to $3.23 trillion this January.

The country has been actively trying to stave off the money flowing out of the country, with the Times noting that the government is preventing citizens from using bank cards to purchase overseas life insurance policies. [NYT]Dusica Sue Malesevic