My relationship with China is conflicted, to say the least.
On one hand, I was raised in a fiercely anti-communist family, and Communists still run China. When I grew up, my natural libertarian aversion to all “isms” only strengthened my dislike of China’s rulers.
On the other hand, age has given me a little wisdom: Chinese Communists aren’t much different from any other ruling elite in history. They may claim to be followers of Karl Marx and Mao Tse-tung, but realistically, they’re treading the same path as the Romans, Charlemagne and Victorian Britain. They want to make their country powerful and become rich in the process. The only thing left of their “communism” is strict control by the party, and even that is increasingly negotiable.
And boy oh boy … they sure have succeeded in making themselves rich. The Chinese middle class is now significantly larger than America’s. China’s ruling elite are hardly the ragamuffin revolutionaries who terrified Western elites from Moscow or Beijing in the 20th century.
In fact, the Chinese pursuit of demon lucre has been so successful that it’s creating opportunities for us “diguozhuyi de zougou,” or imperialist running dogs…
It’s no secret that there’s serious money to be made in the Chinese economy. My colleagues write about it constantly. It’s driven by the “rapid development” phase of China’s economic history — when companies make real earnings by producing real things that people want and need.
But not everyone has the means or the stomach to invest directly in China. Fortunately, that’s not necessary if you want to benefit from China’s economic ascendancy — indeed, even profit from their possible economic collapse.
Upside of an Economic Collapse
China’s economy collapsed in a big way in recent months. Chinese stocks have crashed 40% since June, wiping away trillions of dollars in market value. To begin with, the Chinese equities market was artificially inflated … by its government.
Of course, the Chinese government knows it has to deliver growth and prosperity to keep people happy; so when China’s real estate boom began to slow down some years back, everyone turned to the stock market as an alternative. The Chinese central bank all but forced brokers to sell stocks cheaply — even on credit — to keep that market in bull territory.
You don’t have to be a Nobel economist to know that such a strategy can’t last. Eventually share prices revert to a market equilibrium, and leveraged investors who bought high will lose their shirts or worse. Wealthy Chinese certainly know this, and from it they can deduce two things:
- They need to look outside China to grow — even to protect — their wealth.
- They’d better act now, before the Chinese government targets them as scapegoats to appease the masses who lost their money in the stock market.
They acted on those insights … and so should you.
The World Is Turning Chinese
A tsunami of Chinese money is heading for global real estate as nervous investors look for alternatives to the country’s stock markets. Chinese buyers have already spent billions in the U.S., U.K. and Australia, causing property prices to rise in key cities.
Just like Americans, Chinese investors are starting to think that money in the bank isn’t safe. It won’t gain any value if the renminbi is devalued, as it must be one day. So smart Chinese are looking to offshore real estate as a more solid investment.
Chinese buyers are already the leading foreign buyers of U.S. homes. Sales reached a record $29 billion in the 12 months before March 30, rising to more than a quarter of all foreign purchases by value, according to the National Association of Realtors.
But the Chinese are moving into uncharted territory as well. In addition to predictable places like London, New York, Sydney and Vancouver, Chinese buyers are pushing up real estate prices in places like The Bahamas, Brazil, Costa Rica, Ireland, Panama, Spain and Portugal as well. New target areas (like Kenya!) are popping up every month.
Those are all places with well-developed offshore-facing real estate industries who know how to deal with foreign buyers — especially Americans. I’m already getting private reports from people who bought property in such places that Chinese money is starting to push up the value of their real estate portfolios … and not just in dollar terms.
Buy Low, Sell High — in Two Ways
This sets up a simple equation.
Chinese money is going to drive up values in places where American buyers can get in quickly because of established foreigner-friendly real estate infrastructure. A smart buyer who can acquire well-placed property now stands to benefit not only from rising prices, but also from the fact that foreign real estate may be sold in any currency.
That means you can hedge against the inevitable economic collapse. Want Singapore dollars for your Panama City condo? It can be arranged.
So, smart buyer, what are you waiting for? Buy like the Chinese … make foreign real estate part of your own Plan B, and avoid the economic collapse.
Offshore and Asset Protection Editor