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In January 2015 during an event at Harvard Business School, Wu Xiaohui, CEO of Anbang Insurance Group, explained his firm’s expansion plans with an unusual analogy: “Why can a substance like water cover 70 percent of the surface of the earth and exist in perpetuity?” he asked. “A company is a living organization. Could it exist as water does?” The answer to the second question, Wu hopes, is yes. He was in Cambridge, Massachusetts, alongside business partner, friend and HBS alum Stephen Schwarzman, chairman and CEO of alternative-investment giant Blackstone Group, to recruit new employees for Anbang’s growing empire. Wu’s business, which began operations in Beijing in 2004 as a small automobile insurer, has expanded in the past decade to become a $123 billion holding company with assets on four continents. But before Anbang poured nearly $2 billion into the New York City real estate market with its October 2014 purchase of the iconic Waldorf Astoria hotel from Blackstone-controlled Hilton Hotels & Resorts, most U.S. real estate investors had never heard of the company. Now many see Anbang as a harbinger of a tougher competitive environment and shrinking opportunities.

In the months since the Waldorf deal, Wu has embraced the rushing and spreading qualities of water — a core value of Anbang’s internal culture, he says — and jumped into two other major real estate transactions. In March the Chinese insurer agreed to buy Strategic Hotels & Resorts and its 16 luxury hotels from Blackstone for $6.5 billion. At about the same time, Starwood Hotels & Resorts Worldwide announced that Anbang was the leader of a mysterious consortium that had bid $12.8 billion in cash for its portfolio, attempting to squeeze hospitality company Marriott International out of the deal. Marriott ultimately prevailed in the battle for Starwood, but with a bid that included $3 billion more in cash than its original offer. The outcome has some U.S. real estate investors nervous, because Anbang isn’t alone. The recent rush of cash-flush Chinese investors is affecting the tenor of negotiations for deals around the country.

“They may be pushing up prices more aggressively than fundamentals dictate in some cases,” says Kenneth McCarthy, New York–based chief economist at global commercial real estate services firm Cushman & Wakefield. “If you don’t bid aggressively, you don’t get the asset.”

Many of the most recent trophy property deals in the U.S. have involved a Chinese buyer or partner. In 2013, Shanghai investment firm Fosun International bought One Chase Manhattan Plaza; SOHO China, one of China’s largest developers, purchased a more than $700 million stake in Manhattan’s General Motors Building; and state-owned Greenland Holding Group Co. invested $1 billion in a residential and entertainment project in downtown Los Angeles. Last year China’s Sunshine Insurance Group Co. paid a record $2 million per room for New York’s Baccarat Hotel, and Bank of China bought a nearby office tower at 7 Bryant Park for $600 million.

The loudest voice warning about the influx of Chinese investment in U.S. real estate and other parts of the economy may belong to Republican presidential candidate Donald Trump. He has argued that Chinese companies get an unfair advantage in the U.S. and that their country is a currency manipulator. “America fully opened its markets to China, but China has not reciprocated,” Trump contends on his campaign website. As with much of what the Republican front-runner says, this rhetoric has an air of hyperbole. But when it comes to concerns about U.S. investors competing with China in their home market, Trump may have a point. Chinese individuals’ push into the residential real estate market — spending $28.6 billion in the past year alone — has garnered headlines, but less attention has been paid to the influx of Chinese investment in U.S. commercial real estate. The wave of new money, which is coming from a variety of sources, including sovereign funds and private development groups, has provided opportunities for some domestic developers, but many U.S. investors have been forced out, especially in major metropolitan areas.

Some analysts have suggested that Anbang’s decision to walk away from the Starwood deal is a sign of a slowdown in Chinese money coming into the U.S. But if recent statistics are any guide, the momentum will be hard to reverse. Chinese companies spent $21.4 billion on commercial real estate outside their home country last year, 41 percent more than in 2014, according to Cushman & Wakefield. These investments were spread between development sites and existing properties around the world, with the U.S. receiving the biggest piece of the pie: $4.4 billion. China is now the second-largest foreign investor in the U.S., after Canada. Although its share of the market is still tiny — a total of $530 billion changed hands for commercial real estate in the U.S. in 2015 — China is drawing attention for purchasing iconic properties at eye-popping prices.

After buying the Waldorf, Anbang acquired the office tower at Manhattan’s 717 Fifth Avenue from Blackstone in 2015, paying $415 million. Sunshine Insurance made its own headlines last year when it bought the Baccarat from Greenwich, Connecticut–based Starwood Capital Group (which founded Starwood Hotels) for more than $230 million.

These deals have happened against a backdrop of slowing growth and increasing volatility in the Chinese economy. After averaging double-­digit annual GDP growth from 2001 to 2011, China is expected to see only a 6 to 7 percent increase in 2016. This slowdown, and the government’s opaqueness when it comes to explaining what’s behind the economic numbers, have made some market observers nervous. Many predict further currency devaluation. Meanwhile, China’s equity markets are still feeling the effects of last August’s devaluation and the subsequent stock slump. This has led to capital flight by wealthy individuals, state-owned enterprises and large private companies alike. For its part, the Chinese government has encouraged some state-connected investors to put money in outside markets. Insurance companies are allowed to invest as much as 15 percent of total assets under management overseas. Currently, they invest only about 1.4 percent. According to Chicago-­based property consulting firm JLL, if every Chinese insurer reached that 15 percent maximum, the total investment would be $240 billion.

Historically low U.S. interest rates have sent Chinese investors that previously flocked to Treasuries looking for better yields. The jump to real estate is not a big one. Investors of all stripes have long seen owning U.S. real estate as a great way to diversify and ensure long-term returns. In December, President Barack Obama signed a law that made it easier for certain foreign parties to invest in publicly traded real estate investment trusts — one indirect way that many Chinese investors are entering the market.

Properties and portfolios in gateway markets such as New York, Los Angeles and San Francisco typically offer solid capitalization rates (expected rates of return based on property value and net operating income from leases), especially in the office, multifamily and hospitality sectors. Owning a property in one of these locations also provides access to high-caliber tenants, good infrastructure and often a bit of a buffer from economic downturns. It takes a city like New York a few years to bounce back from a financial crisis, but it can take years longer in less developed markets.

Ying Geneve DuBois, a partner at law firm Holland & Knight who represented Sunshine Insurance in the Baccarat deal, says pent-up demand and the desire of many Chinese investors to set down roots in gateway markets will likely outlast any potential slowdown caused by economic uncertainty at home or yield compression in the U.S. “I think this is only the beginning,” DuBois says.

For high-net-worth individuals buying U.S. homes, a major impetus is access to an American education for their children. Large companies have a different educational goal as they prepare to face a growing consumer economy back home. “They invest here and want to help certain brands or businesses to expand here, but it’s a global world and the long-term plan is not to isolate development in China and development in the U.S.,” says DuBois. “It’s only natural that if a brand and business is doing well in the U.S., it’s something they can bring to China as well.”

Some experts worry that the current market presents a muddled set of motivations on the part of Chinese investors and raises questions about their intentions for the buildings and companies they purchase. Others are concerned about the potential for catastrophe in the U.S. should China’s economy falter. For U.S. investors, though, the primary problem is the shrinking pool of opportunities as cash-rich Chinese buyers push prices ever higher.

The phenomenon is worrisome for another reason: The last time a major Asian nation focused this many resources on U.S. real estate, it didn’t end well. In the 1980s, Japanese investors snapped up trophy properties at sky-high prices only to run for the exits a few years later as their home economy slumped and the U.S. real estate market began to crash.

There are no perfect correlations in economics, of course. The China of 2016 is different in many ways from 1980s Japan, and the U.S. real estate market is thought to have a few years of upside left. But cycles can provide a historical guide, and some experts point to the fact that asset bubbles tend to correlate with credit expansion; China is experiencing rapid expansion at this time.

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