| SINGAPORE/HONG KONG, March 7
SINGAPORE/HONG KONG, March 7 Malaysian casino
operator Genting Bhd envisions red and gold pagodas
and a panda exhibit on the 87-acre plot of Las Vegas land it
bought this week, a new gambling playground for rich Chinese
moving their money overseas.
A 90-minute flight away, in San Francisco, China's biggest
property developer has formed a joint venture to develop two
high-rise condominium towers that are likely to draw wealthy
Chinese buyers. It is China Vanke Co Ltd's first
foray into the U.S. market, and probably not its last.
Combined, the two deals are worth about $1 billion, which
could rise to at least $3 billion as Genting builds out its
resort, which is due to open in 2016. That's just a fraction of
the $102 billion in outbound investment from Asia-Pacific
companies in 2012, according to Thomson Reuters data.
But it signals a strategic shift.
Instead of hunting for natural resources, the driving force
behind many of Asia's biggest foreign acquisitions over the past
year, these companies are investing in the United States to
cater to Chinese consumers abroad.
Beijing bars individuals from moving more than about $50,000
a year out of the country. Yet vast sums leak out illegally.
Estimates vary widely on just how much, but research group
Global Financial Integrity said it could have been as much as
$472 billion in 2011 alone.
The money goes to places such as Hong Kong, Singapore,
Sydney, London and San Francisco, where a heavy flow of Chinese
buyers has driven up property prices. But until the Genting and
Vanke deals, there was little evidence that large Asian
companies were chasing the cash to the United States.
"You have Chinese money sitting in U.S. houses and Chinese
money sitting in U.S. banks. If you're smart, you start setting
up places for Chinese people to stay and things for them to
buy," said Derek Scissors, an economist at the Heritage
Foundation think-tank in Washington, who tracks Chinese foreign
RISK TO RIVALS
Scissors said the Genting and Vanke deals represent another
step in the progression of Chinese investment in the United
States since the global financial crisis.
First, individual Chinese investors started pouring money
into U.S. property in late-2009. Then, a couple of years later,
Chinese property developers began scouring for deals, largely
unsuccessfully. The Genting and Vanke transactions are early
signs that Asian companies see ways to tap Chinese demand beyond
China, something few U.S. firms seem to have recognized.
The property that Genting bought had been abandoned since
2008, and the deal is the biggest new investment on the Las
Vegas Strip since then. In that time, China's
gambling capital of Macau has opened four new casinos - two of
them built by U.S. gaming company Las Vegas Sands Corp.
Genting has casinos in cities such as Singapore, which is
popular with Chinese visitors, but not in Macau, the world's
biggest gambling hub. The firm is not guaranteed success in
Vegas, a market with thinner margins and tougher competition
than in its power base in Singapore where it operates one of
only two casinos.
Its arrival could spell trouble for casino rivals, too.
Ratings agency Fitch warned that Genting's arrival was a
"risk" for U.S. operators because its project will add 3,500
hotel rooms in a city where occupancy was flat last year and the
average daily rate up a tepid 2.8 percent.
"We believe the property will target high-end Asian
customers, which has been the principal catalyst for gaming
revenue growth on the Strip since 2010," Fitch said, adding that
high-end properties run by Wynn Resorts, Sands and
others were "especially vulnerable to the increased competition
For Vanke, venturing into the United States makes sense now
because Beijing is clamping down on property speculation at
home. New restrictions announced on Friday may speed the flow of
Chinese property investment abroad.
Vanke "will go anywhere mainland Chinese want to go," said
Jinsong Du, a property analyst at Credit Suisse in Hong Kong.
"Their target customer is not overseas Chinese. Their target
customer is mainland Chinese who want to migrate to overseas, or
have a home outside the country."
Vanke President Yu Liang, however, said the company had no
intention of building a Chinese community overseas. "What we are
looking for is overseas resources and market, not Chinese
immigrants. We place emphasis on the concept of harmony," he
Other Asian companies might learn from the example set by
Vanke and Genting.
Jonathan Galaviz, managing director at Galaviz and Co, a
California-based research and strategic advisory firm, said real
estate and hotel companies such as Singapore's CapitaLand Ltd
and Hong Kong's Sun Hung Kai Properties Ltd
run the risk of losing global relevance as they lack a U.S.
In an emailed statement Sun Hung Kai said it aims for a
balance between steady cash flow and fast asset turnover.
"Geographically, Hong Kong remains our focus. The Group is also
positive about the long-term outlook for the mainland and will
continue to expand its business there." A spokeswoman for
CapitaLand declined to comment.
"Companies like these, and others in Asia, need to also
recognize they are investing in potentially overheated markets
in mainland China - and elsewhere in Asia - and diversifying
some asset holdings in America would be something smart to do,"