Global investor Barry Sternlicht told CNBC on Wednesday he remained cautious about investing in China.
“We are not direct investors in China,” said the CEO of Starwood Capital Group in an interview on “Squawk Box”. “It’s not a matter of China, as much as it is of countries where we think the bridge is stacked or that we cannot guarantee the political risk of the investment. Fair enough, why bother?”
Sternlicht’s comments on Wednesday follow Beijing’s recent regulatory crackdown on all kinds of industries, including tech and private education companies. The developments have brought to light the concerns of many foreign investors about their activities in China, where the Communist government can be unpredictable in exercising its considerable power over corporations.
Sternlicht, whose company focuses primarily on global real estate, have for years warned of the challenges of investing in China. For example, in a Bloomberg interview in 2015, he said that the central planning of the Chinese government was “not always so obvious to the foreign investor” and suggested that he would not earn a sufficient return for the risk he takes.
Starwood Capital has, however, 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 this Shimao business, Sternlicht told travel news site Skift last year that his business was “not ready to venture” into China. “It’s not my comfort zone,” he added.
More generally, Sternlicht said he was concerned about the economic implications of the US-China relationship at this time, particularly regarding 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 “cease its military pressure and coercion, diplomatic and economic ”towards the autonomous democratic island.
Taiwan occupies a key place in the global economy due to its dominance in the semiconductor industry. However, China claims Taiwan as part of its own territory.
While claiming that the United States is unlikely to enter a “physical war” with China over Taiwan, Sternlicht feared that the Biden administration would tighten economic sanctions and escalate the trade war that has started under former President Donald Trump.
“It would strategically be a nightmare for the United States,” Sternlicht said. “Semiconductors will be more important than oil for this country,” he added. “Forget the reservations. We need a reserve of semiconductors because your washing machine will stop working. It is a serious problem. “
“That’s really the risk to the equity market because we’ll most likely start with a sanction, global sanctions against China. They think at 100-year intervals. We have investors buying companies for weeks or even months, then they will be waiting for us, “he added. … They have a huge competitive advantage. “