Outbound Chinese investment to U.S. falls to 7-year low

This company courting Anbang's hotel portfolio wants it all. That means the 15 hotels already on offer, plus Manhattan's Waldorf Astoria.
The fate of New York City's Waldorf-Astoria Hotel (acquired by Anbang for $1.9 billion in 2014) is still up in the air. Photo credit: Hilton

More than a year after the country's August 2017 crackdown on outbound investment, direct investments from China to the United States dropped to $4.8 billion in 2018, down 84 percent from $29 billion in 2017 and 90 percent from $46 billion in 2016. According to New York-based research firm Rhodium Group, it was the lowest level in seven years.

Forbes magazine attributed the drop to both the restrictions on investment and the current trade war between the two nations. Over the year, Chinese investors like Anbang Insurance, Dalian Wanda, Fosun International and HNA Group dropped at least $13 billion of U.S. assets with some headline-making deals.

Offloading Assets

HNA agreed to sell its holdings in Radisson Hospitality AB and Radisson Holdings to a consortium headed by Jin Jiang International Holdings, which is controlled by the Shanghai government. At the time, Bloomberg estimated HNA could earn at least $2 billion from the sale. HNA also sold its shares in Hilton and its spinoffs for a combined $8.5 billion in the spring, and began unloading its shares in Spain's NH Hotel Group to Thailand’s Minor International in a transaction valued at €619 million

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In August, Anbang put up for sale a luxury hotel collection it acquired two years ago, pricing it at $5.5 billion, looking to raise money following its seizure by the Chinese government in February. China’s insurance regulator announced at the time that Anbang would be overseen for at least a year by a group that includes China’s central bank, its securities and banking regulators, the country’s foreign exchange regulator and other government agencies. The takeover could last for another year if Anbang fails to complete an equity restructuring and resume operations. By September, Las Vegas’ Lockwood Development Partners was working with a number of unspecified hotel franchisees to take some of those assets, but the fate of New York City's Waldorf-Astoria Hotel (acquired by Anbang for $1.9 billion in 2014) was still up in the air, making the property's three-year, $2 billion renovation all the more difficult. 

Last spring, Dalian Wanda Group dropped its partnerships with foreign hotel operators, including Hyatt, IHG, AccorHotels Group and Hilton, to focus on building its own hotel brands. The group is allowing existing hotel contracts with these partners to expire and will manage its newly developed hotels under its own operating company. 

Looking Ahead

Rhodium Group estimates another $20 billion in China divestitures of U.S. assets is still pending, but global research group Mergermarket suggests the number could be higher. Anbang reportedly hired Bank of America to advise on the sale of its remaining U.S. hotel portfolio, worth an estimated $10 billion. HNA, meanwhile, has hired China Development Bank to advise on the sales of its foreign assets (including hotels, real estate and airlines), which could amount to $50 billion.

Then again, some divestments may not have to go through at all. In November, Chinese Minister of Commerce Zhong Shan said the ministry would support private companies in their efforts to expand overseas, a sign that Beijing might be softening its stance on outbound investment. The ministry did not, however, specify if that support would extend to investments in the U.S., and given the current frosty business relationship between the two nations, we may see Chinese companies pass up opportunities to acquire American portfolios or iconic properties that would otherwise attract interest. With the "Belt and Road" initiative poised to boost Chinese trade within Asia and into Africa and Europe, American hoteliers may be out in the cold.

 

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