Global investor Barry Sternlicht told CNBC on Wednesday that it remains cautious about investing in China.
“We are not investors directly in China,” said the chairman and CEO of Starwood Capital Group in an interview with the “Squawk Box”. “It’s not a China thing, as much as countries where we think the deck is stacked or we can’t hedge the political risk of investing. It’s just why bother?”
Sternlicht’s comments on Wednesday follow Beijing’s recent regulatory crackdown on all types of industries, including tech and private education companies. The developments that have returned to the limelight fear that many foreign investors are operating in China, where the communist government can wield unpredictable power over corporations.
Sternlicht, whose company mainly focuses on global real estate, has been warning of the challenges of investing in China for years. For example, in a 2015 Bloomberg interview, he said that the Chinese government’s central planning “is not always that obvious to foreign investors” and suggested that he would not get enough return for the risk he is taking.
However, Starwood Capital has teamed up 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%.
Aside from this Shimao project, Sternlicht told travel news site Skift last year that his company “is not ready to be adventurous in China.” “This is not my comfort zone,” he then added.
More broadly, Sternlicht said he was concerned about the economic impact of US-China relations at the moment, particularly in connection with Beijing’s recent attacks on Taiwan.
In a statement earlier this month, the US State Department said it was concerned about China’s “provocative military activity near Taiwan” and called on Beijing to end “military, diplomatic and economic pressure and coercion” on the democratic self-governing island.
Taiwan occupies a key position in the world economy due to its dominance in the semiconductor industry. However, China claims Taiwan as part of its own territory.
Sternlicht said the US was unlikely to wage a “physical war” with China over Taiwan, but feared that the Biden administration could tighten economic sanctions and intensify the trade war that began under former President Donald Trump.
“It would be a strategic nightmare for the United States,” said Sternlicht. “Semiconductors will be more important than oil to this country,” he added. “Forget reserves. We need a semiconductor reserve because your washing machine has stopped working. This is a serious problem.”
“This is really the risk to the stock market because we will most likely start with a sanction, global sanctions against China. You think in 100-year intervals. We have investors buying companies for weeks, not even months, so we’ll be waiting, “he added. … They have a huge competitive advantage.”