China has hacked our government, devastated or severely challenged our industries and enjoyed one of the greatest wealth transfers in history – from our households to its. China also benefits from by far the largest trade surplus with the United States and also owns 11 percent of our national debt.

Sometimes it seems to be increasingly China’s world, and we just happen to live in it. Some, such as columnist Thomas Friedman and Daniel A. Bell, author of the newly published “The China Model,” even suggest we adjust our political system to more closely resemble that of the Chinese.

Yet, a funny thing has happened on the way to global domination – the Chinese are coming here with their money, and, often, with their families. Rather than seeing China as the land of opportunity, more Chinese have been establishing homes in America, particularly in California, where they account for roughly one-third of foreign homebuyers, with upward of 70 percent paying cash. Overall Chinese investment in U.S. real estate has grown from $50 million in 2000 to $14 billion in 2013, surpassing all other foreign investors.

Dragon on the prowl 

Populists and unions have long decried U.S. investment in China as a killer of American jobs, but Chinese investment in the U.S. now exceeds American investment in China. The reasons for this shift are complex and reveal as much about China as about us. The Chinese are coming here for many reasons, including an unaffordable, risky real estate market at home, a growing cost disadvantage in manufacturing due to rising wages, quality-of-life considerations and growing deep-seated fears about potential government confiscations and arrests.

The political equation may prove the most critical. President Xi Jinping’s current “tigers and flies” anti-corruption campaign seems superficially enlightened, but is regarded by some Chinese as little more than window dressing for a massive purge. As one Chinese told me in Shenzhen last year, it’s simply a matter of one group of crooks replacing another, a political cleansing dressed up as reformism.

In another unwelcome development, an incipient “cult of personality” has been building around Xi. This development, as well as new crackdowns against dissent, may not reach the maniacal Mao Zedong-era level, but both individuals and companies have reason to look for somewhere safe to park their money.

Not all the investment – some $46 billion since 2000 – has been in real estate. Chinese companies have gobbled up Internet businesses in the Silicon Valley, manufacturing firms, energy firms and, most notably, the $4.7 billion 2013 purchase by Chinese interests of Smithfield Foods. This makes sense for a country with 20 percent of the world’s people but only 9 percent of its arable land.

Lust for Land 

Americans love their land and are fortunate to have lots of it. China has always been land poor, and the tendency is to invest in real estate first. At home, this has caused massive property inflation. Prices in Hong Kong rose a remarkable 117 percent from 2008-12, eroding the city’s quality of life while placing homeownership at peril for locals. The mainland megacities Shenzhen, Beijing and Shanghai see the highest housing prices, adjusted for incomes, among the world’s largest cities. The median multiple – housing price relative to median income – for these cities exceeds 10, higher even than such elite markets as Vancouver, Canada, Sydney, Australia or San Francisco. Overall, notes demographer Wendell Cox, Chinese houses cost roughly three times, relative to income, than in the United States.

Not surprisingly, many Chinese investors see American property as relatively cheap. That may be one reason why they account for more than 85 percent of applicants for EB-5 visas – which require sizable investment in U.S. businesses – with most putting their money into real estate. Some 1,200 Chinese families are financing, to the tune of $600 million, a 17 million-square-foot high-rise development on the west side of Manhattan.

These investors are manna for real estate speculators, but not so beneficial for locals seeking to buy property, or to rent. In cities preferred by mainland Chinese investors – including Vancouver, Singapore, Hong Kong and Sydney – prices have risen to astronomical levels. Although the large size of the U.S. market does mute some of the impacts, certain American regions, such as New York City, have been impacted, with Chinese particularly aggressive in the outer boroughs, where many affluent people seek out more reasonable housing.

This process is particularly evident in the luxury core of Manhattan, which attracts the ultrarich from all over the world. In some New York luxury buildings, less than one in 10 owners are full-time residents; for most it’s just one of several places around the world. Similarly, London prices are being pushed by an onslaught of buyers, primarily Asian, who now, by one estimate, purchase two-thirds of the city’s newly built houses and are primary players in the massive densification of this leading global city.

This movement represents, in part, an estimated 150,000 mostly affluent Chinese who annually migrate primarily to the United States, Canada and Australia. These land-rich countries offer significant legal protections for assets that do not exist in China, but also a better quality of life, without the smog, congestion and social indifference one experiences in Chinese cities.

In Southern California, the pattern diverges from the high-density, luxury developments of New York and London, or even San Francisco. Some Chinese may choose to buy apartments in downtown Los Angeles, but, for the most part, their investments here have been in suburban real estate. If New York or London appeals to the ultrarich looking for a pied a terre, Southern California counters with single-family homes, a mild climate and a large, highly successful Chinese-American community.

You can see this process in places like the San Gabriel Valley, where mansionization and rapid development has been sparked by Chinese investors. In recent years, this trend has appeared as well in Orange County – most particularly, Irvine. Once a heavily white middle-class suburb, this well-positioned community is already 40 percent Asian and becoming increasingly expensive.

I witnessed this recently while house hunting. Stonegate, a new Irvine development we looked at, had price tags well over $1 million, beautiful floor plans and well-designed amenities – and, essentially, no yards. Upward of 80 percent of buyers in the new Arcadia development, according to a report in Bloomberg, are overseas Chinese.

Double-edged sword 

Irvine prices – as much as $100 a square foot higher than even some very affluent communities nearby – clearly contribute both to the area’s soaring wealth and the benefit of owners. But they also serve to depress the homebuying options for the mainstream, largely American-born middle-class market. U.S. China Real Estate Association President Bill Seto has expressed concerns “that the Chinese are pricing the middle class, and even some wealthy Americans, out of certain markets, especially when it comes to housing.”

It seems likely the Chinese wave will force O.C. buyers further south, toward newer, but less centrally located, areas or to older parts of the county that retain both good schools and sizable lots. More than one Orange County real estate agent even spoke of an incipient “white flight” by families who did not want to live in higher-density developments or send their kids to schools that were majority Asian and thus considered too competitive.

Yet, overall, Chinese investment represents an enormous shot in the arm for an economy that is just now recovering from the previous decade’s housing bust, helping also to rescue owners of distressed properties. The region desperately needs new entrepreneurial and financial resources. Unlike many white-owned businesses, Chinese family firms are not so likely to decamp so readily to North Carolina or Utah, in part due to cultural affinities that keep them here; nor are they likely to suffer the kind of sticker shock that drives others outside the state.

Dependence on Chinese investors also holds some perils. As occurred when Japan’s firms sold off many of their real estate investments in the 1990s, changes in China’s economy, which is slowing and facing major corrections in its stock and property markets, could depress real estate prices and slow the flood of investment. In a U.S. economy already suffering from slow growth, deindustrialization and an ever mounting tsunami of regulation, the loss of stimulus from China could be a devastating.

In the final analysis, we have little choice other than to welcome these investors. Without their interest and energy, our economy will likely atrophy, and our communities, particularly along the coast, become increasingly geriatric. Living in China’s world may have its perils, but the alternatives seem far worse.

Originally published in the Orange County Register

Cross-posted at New Geography.