January 2, 2022
Over the last 20 years, the Chinese economy has roared from a long slumber to become a major player on the world’s financial scene, influencing markets through investment and speculation in a variety of industries. China’s economic success has largely been the result of a careful balancing act between socialist policies and state control of many industries, and free-market philosophies that allow foreign experts and capital to enter the country, while Chinese entrepreneurs and capital travel the world in search of opportunities and profits.
Chinese companies, which are all tied to the Chinese government to varying degrees, have acquired more than $120 billion in American assets since 2002. Fifteen Chinese companies account for 60% of all investments, although those investments have been dispersed throughout the US, with major acquisitions worth $50 million or more in forty states. And although Chinese investment peaked in 2016, it’s still quite high and will no doubt continue to be so if current trends are considered.
In order to determine how Americans – from major investors on Wall Street to middle-class consumers on Main Street—are affected by Chinese investments in US markets and companies, it’s important to consider the major sectors in which the Chinese are investing: real estate and construction, electronics, automotive, and finance, among others. As Chinese investment in each of these sectors is considered, how Americans are affected will also be examined and finally, the future of these trends will be discussed.
As mentioned above, there are many Chinese principals involved in the US real estate and construction markets, so let’s take a look at a few of the more important ones and how they affect American investors and consumers.
The China Investment Corporation, which is a sovereign wealth fund, is among the most visible Chinese organizations involved in real estate investment on the East Coast. In January 2017, China Investment Corp. acquired a 45% stake in the iconic 1211 Avenue of the Americas building, also known as the News Corp Building, in New York City for $2.3 billion. Although 1211 is the best known of China Investment Corp’s property holdings, the company also owns several other notable properties in New York City.
Two other notable Chinese corporations that have sizable American real estate holdings in their portfolios are China Life Insurance and HNA Group. China Life has real estate holdings in multiple states, while HNA – which is quite diversified with investments in real estate, financial services, and logistics, among other sectors – owns 25% of Hilton Worldwide.
Chinese investment in American real estate is not limited to major entities, either. A trend has emerged in recent years of middle to upper-class Chinese citizens making private real estate investments in the US, primarily in apartments and single-family homes. In 2018 dollars, Chinese buyers accounted for approximately 25% of foreign investment in American real estate; by comparison, Canada was number two at 9%. With that said, foreign buyers overall only comprise 3% of all US home sales, so there’s still plenty of room for American investors and buyers.
Still, the sizable increase of Chinese investment in American real estate is a trend that Americans need to be cognizant of in the future, which is influenced by economic and political currents in China and the US. For example, recent problems with the Chinese corporation Evergrande have already sparked issues in Chinese real estate that could cascade into the US. As Chinese investors look to put their capital in what they perceive as safer bets in American real estate, the trend could further push up home prices in the US, especially in states where Chinese investment is concentrated, such as California, New York, and New Jersey. San Mateo County, California is a perfect example of this trend, as the area witnessed a 30% increase in employment but only a 10% increase in housing since 2012.
Although US real estate may be the number one Chinese investment in actual dollars, Chinese investment in American tech is arguably more important. Chinese investment in American tech and electronics companies began as part of the Chinese government’s program to upgrade their technological knowledge and skills, but has evolved to become a vital component in the government’s long-term economic and political goals and philosophies.
Alibaba Group Holdings Limited, often referred to as the “Amazon of China”, has led Chinese efforts to invest in US tech and electronics. Alibaba was the creation of a Chinese citizen named Jack Ma, who started the company out of his home, but it now has a market cap of $584.4 billion and a net income of $21.9 billion on $109.5 billion in revenue in March 2021. With that vast amount of capital, Alibaba has expanded into an array of subsidiaries, many of which are in the US.
There’s a good chance that you’ve used the services of a company Alibaba is invested in, or maybe you even have investments in Alibaba and didn’t know it. Alibaba is heavily invested in both Lyft and Snapchat, among other US tech startups, but the investment works the other way as well. In January 2021, US-based investment company T Rowe Price owned 2.31% of Alibaba and Blackrock held just over 2% of the company, so there’s a good chance that if you are invested in the stock market you have an interest in Alibaba. Chinese investment in US tech companies is a trend that’s sure to continue, as is Chinese investment in other American industries.
The auto industry is another important sector that Chinese firms have been heavily investing in during the last ten years. The New York-based Rhodium Group states that Chinese firms have invested more than $4.3 billion in the US auto industry, with about 75% of the capital going into companies and factories in Michigan and about 8% in California in 2018. Chinese companies are also investing their capital into production on American soil. The Chinese auto manufacturer BYD America produces EV vehicles in California, injecting millions of dollars into that state and employing thousands of people.
Finally, Chinese investment in the US debt is perhaps the most complicated yet influential of all other types of American investment. The Chinese government and Chinese firms combine to be the second-largest holder of US Treasury securities after Japan, with about $1.1 trillion in holdings. China’s position on the US bond market has the potential to incredibly impact American investors and consumers, as they could almost instantly manipulate bond prices and influence interest rates and the currency supply with a quick sell-off.
October 14, 2020
The gig economy, also referred to as the freelance economy, provides an alternative to traditional employment, allowing skilled professionals to complete tasks or services through short-term contracts. With this, self-employed individuals can take on multiple clients or projects at once, contributing their skills to a variety of companies. With unemployment skyrocketing due to the recent pandemic, the gig economy has flourished. According to Upwork, ⅓ of the American workforce has turned to freelance amidst COVID-19, contributing $1.2 trillion to the U.S. economy. From Marketing, IT, ride-sharing, and more, the gig economy provides opportunities for people of virtually all professions and skillsets.
Benefits of Gig Economy:
The gig economy provides flexibility to both workers and businesses, eliminating geographic barriers while allowing employees to pick their projects and weekly hours. According to a study by Edelman Intelligence, flexibility is the main reason people freelance full-time, whereas extra income remains the key driver for part-time freelancers. For businesses, utilizing freelance and contract workers may reduce long-term costs, as these employees do not require an annual salary or benefits. Hiring temporary workers may also save money on training, as companies can hire for a specific skill, instead of a long-term employee who may have to learn on the job.
2. Worker Satisfaction
Gig workers tend to be more satisfied with their careers compared to full-time employees, as 79% of full-time independent workers claim to be happier working on their own than at a traditional job, as stated in a study by MBO Partners. Key drivers of this satisfaction include working on more meaningful projects, having flexibility, as well as being self-employed, according to BCG Henderson.
Unlike full-time positions where employees receive an annual salary, freelancer’s yearly incomes are inconsistent and unpredictable, as they remain dependent on the length of their contracts and the number of gigs they have. Once a project comes to a close, gig workers must search for other opportunities to make up for their pay cut. Due to this financial uncertainty, only 44% of gig workers rely on their work in the freelance economy as their primary source of income, according to Edison Research.
2. Fewer Protections and Benefits
A downside of the gig economy remains the lack of company benefits and employee protections. Without signing a full-time contract, companies have no obligation to provide contractors and freelancers benefits, leaving them with no safety net if they were suddenly unable to work. Due to this lack of protection, many workers who rely on gigs as their primary source of income end up purchasing their own insurance. However, these plans can be expensive, making them difficult to afford with an unsteady income.
The Future of Freelance
With a study by Mckinsey showing 1 in 6 traditional workers wanting to become a primary independent earner, the future of the gig economy looks promising. By the year 2028, 50.9% of the total U.S. workforce will be freelancers, as forecasted by Statista. As the freelance economy grows, more gig workers are advocating for laws to ensure benefits and protections to freelance and contract employees. Though there are many hurdles to overcome as the market grows, it looks as if the gig economy is here to stay.
September 16, 2020
Many businesses are thinking inside the box, offering subscription services to consumers for a monthly or annual fee. According to Mckinsey and Company, 15% of online shoppers have signed up for a subscription service to receive products repeatedly. From razors, makeup, television shows, and even beer, the subscription e-commerce market continues to expand, taking over a myriad of product and service categories.
There are several types of subscription services available to consumers. Here are a few of the most popular models used by today’s businesses.
The subscription service business model remains popular amongst software companies, providing different payment options based on necessary features, business size, and the number of digital devices. From SaaS, IaaS, and PaaS, these pay-as-you-go plans are flexible based on the organization’s individual needs, making it easy to adjust services on a month-to-month basis as company priorities evolve.
Subscription boxes are used by many retailers to provide consumers with a selection of products each month. From clothing, makeup, and even food, a majority of these subscription boxes are highly personalized to each customer’s tastes and preferences. With this, subscribers can enjoy the goods they know and love, while trying new products catered specifically to them.
Though not every e-commerce follows a subscription service model, businesses specializing in grocery and toiletry items have utilized this method of distribution to simplify shopping. In addition to e-commerce, traditional brick-and-mortar stores, such as Walmart and Target, have released subscription boxes ranging from beauty products to health and wellness items.
These subscriptions are a combination of services and e-commerce, giving consumers access to entertainment platforms for a monthly fee. Popular subscriptions such as Spotify, Netflix, Hulu, and Apple TV let subscribers choose from thousands of shows, movies, songs, and podcasts accessible from any device. Many of these services offer different types of plans, providing fewer advertisements or the ability to create multiple accounts for a higher monthly payment.
Advantages of a Subscription Business Model
By offering services or goods to subscribers at a set monthly price, businesses can better predict their monthly revenue. This helps companies make more informed decisions regarding their inventory, preventing issues with supplies. Though losing subscribers remains inevitable, automatic billing cycles eliminate revenue leaks, offering convenience and predictability to both customers and businesses.
2. Improves Customer Acquisition and Retention
Subscription services help attract customers by showcasing monthly prices, making goods appear more affordable and appealing. This also lowers the barrier for entry, allowing consumers to instantly access products or services, despite paying a greater amount over the course of their subscription. In addition to attracting subscribers, this business model promotes customer loyalty and retention as businesses have more opportunities to communicate directly with current subscribers, showing them options to upgrade their plans to improve their overall experience.
3. Marketing Opportunities
Subscription business models provide businesses with a myriad of marketing opportunities. The digital nature of these services allows companies to engage directly with customers using email, creating opportunities for upselling and cross-selling. Understanding consumer preferences helps businesses personalize campaigns to maintain and build customer loyalty.
Staying Ahead of the Competition
As a growing number of businesses offer subscription-based products and services, the market has become highly competitive. To stand out, businesses must find ways to differentiate themselves from competitors, offering exclusive features, brands, and discounts to their target audience. With this, personalization remains a key factor in attracting new customers, as potential subscribers search for the best options for their lifestyle and price range.