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

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  • Global investor Barry Sternlich told CNBC on Wednesday that he is cautious about investing in China.
  • “We are not directly investors in China,” said the chairman and CEO of Starwood Capital Group.
  • “It’s not about China, so much as a country where we think the deck is stacked or that we can’t reduce the political risk of investing. Why is it just bothering?”

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global investors Barry Sternlich told CNBC on Wednesday that it is cautious about investing in China.

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“We are not directly investors in China,” the chairman and CEO of Starwood Capital Group said in an interview on “Squawk Box.” “It’s not about China, so much as a country where we think the deck is stacked or that we can’t reduce the political risk of investing. Why is it just bothering?”

Sternlich’s remarks follow Beijing’s recent regulatory crackdown on all manner of industries, including technology and private education firms, on Wednesday. Many foreign investors balked at the events leading up to the headlines about working in China, where the communist government can be unpredictable in exerting its far-reaching power over businesses.

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Sternlich, whose firm focuses largely on global real estate, has warned about the challenges of investing in China for years. For example, in A 2015 Businesshala interview, he said the Chinese government’s central plan “is not always clear to the foreign investor” and suggested it would not get a substantial return for the risk it was taking.

However, Starwood Capital has partnered with Chinese developer Shimao Property Holdings to operate a hotel joint venture in the country, which is home to the world’s second largest economy. According to a 2017 press release, Shimao owned 51%, while Miami-based Starwood owned 49%.

Beyond that Shimao venture, Sternlich told travel news site Skift last year that his firm was “not ready to be adventurous” in China. “It’s not my comfort zone,” he added then.

Broadly speaking, Sternlich said he is concerned about the economic implications of US-China relations right now, especially as it relates to Beijing’s recent encroachments on Taiwan.

Earlier this month, the US State Department said in a statement It was concerned about China’s “provocative military activity near Taiwan” and urged Beijing to “stop its military, diplomatic and economic pressure and coercion” towards the democratic self-governing island.

Taiwan occupies an important position in the global economy due to its dominance in the semiconductor industry. However, China claims Taiwan as part of its territory.

Stating that the US is unlikely to go to a “material war” with China over Taiwan, Sternlich worried that the Biden administration could intensify economic sanctions and intensify the trade war that began under former President Donald Trump. Is.

“It would be a nightmare for the United States strategically,” Sternlich said. “Semiconductors will be more important to this country than oil,” he said. “Forget storage. We need semiconductor reserve because your washing machine will stop working. This is a serious issue.”

“It is, in fact, a risk to the equity market because we will most likely start with global sanctions against China. They think in a span of 100 years. We have investors who buy companies for weeks, not even months. , so they will wait for us, ”he said. … They have a huge competitive advantage.

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