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Barry Sternlicht says the ‘deck is stacked’ in China and he’s not a fan of investing there

International investor Barry Sternlicht instructed CNBC on Wednesday he continues to carry a cautious view on investing in China.

“We’re not buyers instantly in China,” the chairman and CEO of Starwood Capital Group mentioned in an interview on “Squawk Field.” “It isn’t a China factor, a lot as nations the place we predict the deck is stacked or we will not underwrite the political danger of the funding. It is simply, why hassle?”

Sternlicht’s feedback Wednesday observe Beijing’s current regulatory crackdown on all method of industries, together with know-how and personal schooling corporations. The developments thrust again into the highlight considerations many abroad buyers have had about working in China, the place the communist authorities could be unpredictable in exerting its far-reaching energy over companies.

Sternlicht, whose agency largely focuses on international actual property, has for years warned concerning the challenges of investing in China. For instance, in a 2015 Bloomberg interview, he mentioned the Chinese language authorities’s central planning is “not at all times that apparent to the overseas investor” and steered he would not get sufficient return for the danger he is taking up.

Starwood Capital has, nonetheless, partnered with Chinese language developer Shimao Property Holdings to function a lodge three way partnership within the nation, which is residence to the world’s second-largest financial system. In accordance with a 2017 press launch, Shimao owned 51%, whereas Miami-based Starwood owned 49%.

Past that Shimao enterprise, Sternlicht instructed the journey information website Skift final 12 months that his agency was “not able to be adventurous” in China. “It isn’t my consolation zone,” he added then.

Extra broadly, Sternlicht mentioned he holds considerations concerning the financial implications of U.S.-China relations proper now, significantly because it pertains to Beijing’s current encroachments on Taiwan.

Earlier this month, the U.S. State Division mentioned in an announcement it was nervous about China’s “provocative army exercise close to Taiwan” and urged Beijing to “stop its army, diplomatic, and financial stress and coercion” towards the democratic self-ruled island.

Taiwan holds a key place within the international financial system due to its dominance within the semiconductor business. Nonetheless, China claims Taiwan as a part of its personal territory.

Whereas saying the U.S. is unlikely to go to “bodily conflict” with China over Taiwan, Sternlicht nervous that the Biden administration could ratchet up financial sanctions and intensify the commerce conflict that started underneath former President Donald Trump.

“It could strategically be a nightmare for the US,” Sternlicht mentioned. “Semiconductors can be extra necessary than oil for this nation,” he added. “Overlook reserves. We’d like a semiconductor reserve as a result of your washer will cease working. It is a critical subject.”

“That’s, actually, the danger to the fairness market as a result of we are going to probably begin with a sanction, international sanctions towards China. They suppose in 100-year intervals. We’ve buyers that purchase corporations for weeks, not even months, so they may wait us out,” he added. … They’ve an enormous aggressive benefit.”



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