Is Obama Right About US Investment Appeal Versus China?

Jan 31 2014, 12:26am CST | by

Is Obama Right About US Investment Appeal Versus China?

In his State of the Union address this week, President Obama said that the U.S. is now the world’s best investment destination, but according to China’s richest man – who acquired a $1 million New York hotel project last year – America still could do better.

In his address, Obama noted the progress that the U.S. economy had made since 2009, with lower unemployment along with a rebounding manufacturing sector, and said that, “for the first time in over a decade, business leaders around the world have declared that China is no longer the world’s number one place to invest; America is.”

However, just a week earlier, the Chairman of one of China’s leading global investors, Wang Jianlin stated a preference for investing in the Great Britain rather than in the United States. ”If we compare [the United States and the European Union], the U.S. is more open than the EU,” said the head of China’s Dalian Wanda Group. “But the U.K. is the most open.”

Measuring Who’s On Top

Obama based his assertion of America’s new competitive edge over China on a survey by consulting firm AT Kearney which ranked the U.S. first on its list for project foreign investment in 2014. However, Wang is not alone in questioning America’s top-ranked status.

In a competing survey of investment destinations, financial consultancy Ernst & Young placed the U.S. fifth, after India, Brazil, China and Canada – in that order. The U.K. failed to place in the top ten for E&Y’s ranking. A study released by the United Nations Conference on Trade and Development (UNCTAD) showed the U.S. coming second after China as the most appealing place to invest. The U.K. placed ninth on that report.

Cameron Gets Chummy with China

Wanda’s Chairman made his comments regarding his preferred investment locations while speaking at the World Economic Forum in Davos, Switzerland. Wang has already committed to several billion dollars in projects in both the U.S. and U.K., including picking up American theatre chain AMC for $2.6 billion during 2012.

During the Davos summit, British Prime Minister David Cameron met with Wang to follow up on earlier discussions the pair had held when Cameron led a U.K. trade mission to China. While in Switzerland, Britain’s leader announced that Wang’s Chinese conglomerate would be investing up to US$5 billion more in the U.K.

According to a report by Reuters, following their discussions, Cameron announced,

“When I met Chairman Wang Jianlin during my recent trade visit to China, I encouraged him to make further investment into Britain. So I’m delighted that Wanda has decided to invest 2-3 billion pounds (US$3.3 to 5 billion) in regeneration projects so soon after my visit.”

Why We Care What Wang Says

Beyond buying a New York hotel in June last year, Wang Jianlin has been making a name for himself among China’s most aggressive international investors.

Wang holds top position in Forbes most recent China rich list with a personal net worth estimated at 14.1 billion dollars. The former army officer has built his fortune through investment in China’s ballooning property market, where his Dalian Wanda Group owns 85 shopping malls and 51 five star hotels. Wang estimates that his Dalian Wanda group has cash reserves of 33 billion dollars.

Before the New York acquisition, Wanda had made headlines in 2012 by acquiring U.S. theatre chain AMC for $2.6 billion.

Competing in the Global Investment Market

During an economic forum in Dalian ,China during September last year, Wang announced his intention to invest $5 billion per year outside of China for the next five years. However, the U.S. has not been the only target for Wanda’s billions.

In the same month as its New York hotel deal, Wanda also took on a $1.1 billion hotel project in London, and Wang’s firm spent another $510 million to acquire British luxury yacht maker Sunseeker. Wanda competitor Greenland Group, which bought the $4 billion Atlantic Yards project in New York during October, also announced two $900 million London property acquisitions earlier this month.

As cash-rich Chinese companies and individuals are investing more of their money overseas, it seems that Wang and Greenland are not the only ones with a preference for U.K. investment. While the U.S. has seen its share of deals, property consultancy Jones Lang LaSalle reported in December that Chinese investment in the London market alone is up 1500% since 2010, reaching $1.63 billion during the first three quarters of 2013.

So while Obama may be correct about the U.S. becoming a more attractive investment destination than it was a few years back, America needs to realize that its competing with a cash-hungry world and potential investors have many investment locations to choose from.

Source: Forbes Business


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