Building a Great Wall around money from China

After years of unloading massive amounts of cash in NYC, Chinese investors are now pulling back amid new capital controls out of Beijing

May 15, 2017 12:00 PM
(Illustration by Brian Stauffer)

From TRD New York: Anbang Insurance Group’s bid for Starwood Hotels & Resorts Worldwide last year dropped like a bomb in the real estate and hospitality worlds. The Beijing-based insurance giant offered $13 billion for the company, seemingly out of nowhere.

The March 2016 bid came as the hotel megachain Marriott International was in the final throes of negotiating to buy Starwood for $12.2 billion. After a counteroffer by Marriott, Anbang upped its bid to $14 billion and seemed poised to be closing in on the priciest acquisition of a U.S. company ever made by a Chinese firm.

But those closely following Anbang had reason to doubt that it would seal the deal.

About a week after Anbang’s offer, news reports in China surfaced that government regulators would likely quash the deal because it would push Anbang’s overseas assets above the allowable 15 percent threshold for an insurance company.

And sure enough, on March 31, Anbang withdrew its bid without explanation. Starwood ultimately sold to Marriott as originally planned.

At the time, the failed deal seemed — at least to those not familiar with Chinese domestic policy — to be a case of an unpredictable investor stretching beyond its means. But in hindsight, it seems more like a foreshadowing of something bigger and more economically ominous: a regulatory crackdown by Beijing on capital leaving China. And that crackdown is now threatening the flow of cash into New York’s real estate market, among other U.S. industries and cities. [More]

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