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

Global investor Barry Sternlicht instructed CNBC on Wednesday he continues to carry a cautious view on investing in China.

"We're not investors directly in China," the chairman and CEO of Starwood Capital Group stated in an interview on "Squawk Box." "It's not a China thing, so much as countries where we think the deck is stacked or we can't underwrite the political risk of the investment. It's just, why bother?"

Sternlicht's feedback Wednesday comply with Beijing's latest regulatory crackdown on all method of industries, together with know-how and non-public training companies. The developments thrust again into the highlight considerations many abroad traders have had about working in China, the place the communist authorities will be unpredictable in exerting its far-reaching energy over companies.

Sternlicht, whose agency largely focuses on world actual property, has for years warned about the challenges of investing in China. For instance, in a 2015 Bloomberg interview, he stated the Chinese authorities's central planning is "not always that obvious to the foreign investor" and urged he wouldn't get sufficient return for the threat he's taking up.

Starwood Capital has, nonetheless, partnered with Chinese developer Shimao Property Holdings to function a resort three way partnership in the nation, which is residence to the world's second-largest economic system. According to a 2017 press launch, Shimao owned 51%, whereas Miami-based Starwood owned 49%.

Beyond that Shimao enterprise, Sternlicht instructed the journey information website Skift final 12 months that his agency was "not ready to be adventurous" in China. "It's not my comfort zone," he added then.

More broadly, Sternlicht stated he holds considerations about the financial implications of U.S.-China relations proper now, significantly because it pertains to Beijing's latest encroachments on Taiwan.

Earlier this month, the U.S. State Department stated in a assertion it was fearful about China's "provocative military activity near Taiwan" and urged Beijing to "cease its military, diplomatic, and economic pressure and coercion" towards the democratic self-ruled island.

Taiwan holds a key place in the world economic system as a result of of its dominance in the semiconductor trade. However, China claims Taiwan as half of its personal territory.

While saying the U.S. is unlikely to go to "physical war" with China over Taiwan, Sternlicht fearful that the Biden administration might ratchet up financial sanctions and intensify the commerce battle that started underneath former President Donald Trump.

"It would strategically be a nightmare for the United States," Sternlicht stated. "Semiconductors will be more important than oil for this country," he added. "Forget reserves. We need a semiconductor reserve because your washing machine will stop working. It's a serious issue."

"That is, really, the risk to the equity market because we will most likely start with a sanction, global sanctions against China. They think in 100-year intervals. We have investors that buy companies for weeks, not even months, so they will wait us out," he added. … They have a enormous aggressive benefit."

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