Importantly, and despite some recent mixed signals, Chinese foreign investment has been encouraged by the Chinese government for building “soft power,” which is (building the image of China and expanding its influence. The government has changed regulations to encourage outbound investment, such as the October 2014 change in rules to raise the threshold for government approval from $100 million to $1 billion. Similarly, regulations on insurance companies were changed in 2014 to permit up to 30% of the company's assets to be invested in real estate, and up to 15% of the assets to be invested overseas.

Finally, many Chinese investors see synergies for using their foreign investment to take advantage of the Chinese market. With a population of almost 1.4 billion people, and the creation of a middle-class over the past decade, the Chinese market is vast. Chinese travelers are expected to spend more than $72 billion at home and abroad in 2016. So everything related to travel, tourism, lodging, and entertainment plays into this growing market. The Chinese, like most Asians, are also extremely brand conscious whether the branding is on hotels, movie chains, or designer clothing. The recent investment in American hotel chains and hotels are part of this approach as are the acquisition of movie theater chains and entertainment companies which will play into the Chinese movie going population, which is projected to surpass the US market in 2017.

GlobeSt.com: Why is the US attracting so much Chinese investment?

Butler: While the US has been among the top 5 targets for Chinese investment over the past few years, it is only recently emerged as the number 1 destination for Chinese money, finally surpassing Australia, Hong Kong and other international destinations. In 2016, China replaced Canada as the source for the largest amount of foreign commercial real estate investment in the US.

No one should underestimate the importance of the political and economic stability enjoyed by the United States, making it a haven for foreign investment. As alluded to above, the US also offers large, high-yielding commercial real estate investments, which are hard-to-find in other locations. And the United States has also been a “friendly” destination for Chinese investors, both in terms of the ease with which they can make the investment, and inviting place in which they can send their children to school or family members to seek healthcare, or seek political refuge if the tide turns against them at home.

GlobeSt.com: What is the impact of China's restrictions on inbound and outbound investments?

Butler: China's investment in the US and other countries outside China expanded tremendously when the Chinese government loosened restrictions in 2014. But Beijing's concerns about large capital outflows have led to newly announced regulations designed greater scrutiny over certain transactions, such as “extra large” foreign acquisitions of more than $10 billion, investments by state-owned firms of more than $1 billion, or investments by any Chinese company of more than $1 billion if not related to the company's core business. The impact of this prospective regulation is unknown. It may put a significant damper on foreign investment from China, or it may ironically scare Chinese investors to get more money out of the country faster.

Some people think that the playing field is not even for US investors, noting greater restriction on investments in China. Most of these complaints are directed against difficulties of US companies going to China and trying to market their products there. This situation drives demand for reciprocity, protectionism and retaliation. Such policies in China may cause reactions in the US that are detrimental to both US and Chinese interests.

GlobeSt.com: Is this Chinese investment good for the US economy?

Butler: “Capital goes where it's welcome and stays where it's well treated,” said Walter B. Wriston, former chairman and CEO of Citicorp, and widely regarded as one of the leading commercial bankers of his time. Subject to what limits may be required to avoid abuse or public harm, the US is committed to free market principles. Unless causing a major economic disruption or bubble, the inflow of capital into the US is the ultimate vote of confidence in the country and its economy. Capital inflows provide liquidity. Capital investment stimulates economic growth and provides jobs, infrastructure, opportunities.

Foreign investment also serves to align the economic interests of the foreign investors, and their country, with the interests of the people and country of the targeted investments. This is particularly true with real estate investments, which are inherently immobile. They cannot be taken down and shipped to China. So the value of the investment will depend upon the economic vibrancy of the country where the real estate is located.

In any event, when one looks back over the past 50 years, there have been a number of cycles when many Americans were afraid that foreigners were buying too much of America—office buildings, potato farms, sea coast properties. And in some instances (such as the “Japanese Bubble” of the late 1980s) the foreign investment may have made an inevitable downturn worse in the US economy. But generally speaking, most experts feel that the foreign investment was a good thing in the long-term for the US economy.

Jeffer Mangels Butler

LOS ANGELES—It is clear: Chinese investment in the US—and especially in Los Angeles—is only going to continue to grow. Issues in the Chinese economy will continue to fuel outbound capital, while economic dynamics in the US will continue to position this market as a great landing pad for that capital. To uncover the drivers behind all of this capital and what this means for the Chinese market, we sat down for an exclusive interview with Jim Butler, hotel lawyer and consultant at Jeffer Mangels Butler &Mitchell. Here, he tells all about Chinese investment in the US.

GlobeSt.com: What is driving Chinese foreign investment (outbound from China)?

Jim Butler: Chinese investors will deploy a record $212.7 billion in investments outside China. This trend is driven by a number of factors: Chinese real estate and stock market bubbles are bursting; The Chinese economy is slowing down so foreign investment (as in the US) are more attractive; The yuan has been depreciating against the dollar, making US dollar-denominated investments more attractive

Restrictions on investments outside of China were greatly loosened recently, and Chinese with this new freedom, investors now seek diversification of risk and geography. The US only receives a portion of the Chinese overseas investments, but it is one of the favored destinations. Many Chinese investors, ranging from very wealthy individuals to insurance companies, find themselves with significant amounts of cash that need to be deployed into large, high-yielding investments. US commercial real estate is one of the few markets and asset types, which can meet these requirements (large, high-yielding).

Importantly, and despite some recent mixed signals, Chinese foreign investment has been encouraged by the Chinese government for building “soft power,” which is (building the image of China and expanding its influence. The government has changed regulations to encourage outbound investment, such as the October 2014 change in rules to raise the threshold for government approval from $100 million to $1 billion. Similarly, regulations on insurance companies were changed in 2014 to permit up to 30% of the company's assets to be invested in real estate, and up to 15% of the assets to be invested overseas.

Finally, many Chinese investors see synergies for using their foreign investment to take advantage of the Chinese market. With a population of almost 1.4 billion people, and the creation of a middle-class over the past decade, the Chinese market is vast. Chinese travelers are expected to spend more than $72 billion at home and abroad in 2016. So everything related to travel, tourism, lodging, and entertainment plays into this growing market. The Chinese, like most Asians, are also extremely brand conscious whether the branding is on hotels, movie chains, or designer clothing. The recent investment in American hotel chains and hotels are part of this approach as are the acquisition of movie theater chains and entertainment companies which will play into the Chinese movie going population, which is projected to surpass the US market in 2017.

GlobeSt.com: Why is the US attracting so much Chinese investment?

Butler: While the US has been among the top 5 targets for Chinese investment over the past few years, it is only recently emerged as the number 1 destination for Chinese money, finally surpassing Australia, Hong Kong and other international destinations. In 2016, China replaced Canada as the source for the largest amount of foreign commercial real estate investment in the US.

No one should underestimate the importance of the political and economic stability enjoyed by the United States, making it a haven for foreign investment. As alluded to above, the US also offers large, high-yielding commercial real estate investments, which are hard-to-find in other locations. And the United States has also been a “friendly” destination for Chinese investors, both in terms of the ease with which they can make the investment, and inviting place in which they can send their children to school or family members to seek healthcare, or seek political refuge if the tide turns against them at home.

GlobeSt.com: What is the impact of China's restrictions on inbound and outbound investments?

Butler: China's investment in the US and other countries outside China expanded tremendously when the Chinese government loosened restrictions in 2014. But Beijing's concerns about large capital outflows have led to newly announced regulations designed greater scrutiny over certain transactions, such as “extra large” foreign acquisitions of more than $10 billion, investments by state-owned firms of more than $1 billion, or investments by any Chinese company of more than $1 billion if not related to the company's core business. The impact of this prospective regulation is unknown. It may put a significant damper on foreign investment from China, or it may ironically scare Chinese investors to get more money out of the country faster.

Some people think that the playing field is not even for US investors, noting greater restriction on investments in China. Most of these complaints are directed against difficulties of US companies going to China and trying to market their products there. This situation drives demand for reciprocity, protectionism and retaliation. Such policies in China may cause reactions in the US that are detrimental to both US and Chinese interests.

GlobeSt.com: Is this Chinese investment good for the US economy?

Butler: “Capital goes where it's welcome and stays where it's well treated,” said Walter B. Wriston, former chairman and CEO of Citicorp, and widely regarded as one of the leading commercial bankers of his time. Subject to what limits may be required to avoid abuse or public harm, the US is committed to free market principles. Unless causing a major economic disruption or bubble, the inflow of capital into the US is the ultimate vote of confidence in the country and its economy. Capital inflows provide liquidity. Capital investment stimulates economic growth and provides jobs, infrastructure, opportunities.

Foreign investment also serves to align the economic interests of the foreign investors, and their country, with the interests of the people and country of the targeted investments. This is particularly true with real estate investments, which are inherently immobile. They cannot be taken down and shipped to China. So the value of the investment will depend upon the economic vibrancy of the country where the real estate is located.

In any event, when one looks back over the past 50 years, there have been a number of cycles when many Americans were afraid that foreigners were buying too much of America—office buildings, potato farms, sea coast properties. And in some instances (such as the “Japanese Bubble” of the late 1980s) the foreign investment may have made an inevitable downturn worse in the US economy. But generally speaking, most experts feel that the foreign investment was a good thing in the long-term for the US economy.