Chinese stock market crashes, but San Gabriel Valley doesn’t burn
To Jonathan Ming Ren Liu, assistant president of America Asia Travel Center, the recent Chinese stock market crash is just a distant story on his television.
On a recent weekday morning, five buses roar to life behind the travel agency’s Monterey Park office as more than 200 Chinese tourists line up to board, bound for places including Disneyland, Las Vegas and the Grand Canyon. The next day, the agency is expecting more than 600 riders.
In the weeks after China’s main stock index lost $3 trillion — nearly a third of its value — investors around the world braced for an economic earthquake.
In the San Gabriel Valley, where an influx of Chinese immigrants and money has spurred a surge in cash-offer real estate sales and an explosion of sprawling multistory strip malls covered with Chinese language signs, the web of connections to China is more extensive and integral than anywhere else in the country.
The Chinese stock market’s relative isolation and a small recovery sparked by drastic Chinese government intervention have kept immediate global damage to a minimum, and so far the main effect on Liu’s business, he said, has been enlivened office gossip.
But concerns about the Chinese economy’s long-term stability have left some economists and investment gurus jittery.
The San Gabriel Valley’s booming tourist business is where market reverberations pose the most likely short-term threat, experts say.
Chinese visits to Los Angeles County exploded in the last few years, said Sheena Yu, director of China Services for the Los Angeles Tourism & Convention Board. The county saw 686,000 tourists from China in 2014, a 20% increase from 2013. Another record high is expected this year.
Chinese tourism and the investment it encourages have driven up housing prices and spurred development even during the recent recession. The San Gabriel Valley’s tourism and hospitality sector added nearly 4,000 jobs last year, according to the Los Angeles County Economic Development Corp. More than a dozen hotels are under construction or proposed in Chinese enclaves across the region.
Recent regional tourism surveys don’t show any signs of a slowdown yet, in part, because vacations are booked months in advance, Yu said.
But China’s stock losses fell primarily on small, middle-class investors, who form a large proportion of the tourism market, and the airline industry is watching closely, said Zhihang Chi, vice president and general manager of Air China’s North America division.
“We’re not really sure what will happen, but we know for sure it’s not a good thing,” Chi said. “With such a big loss of wealth, travel tends to be the first thing cut.”
So far, there’s no sign of that in Monterey Park, where tourism traffic to the Lincoln Plaza Hotel sustains a small neighborhood of tourism-oriented businesses.
A few steps from the hotel’s doors, Andy Lau books cruises and transportation for guests at Lincoln Tours & Cruise Center. Nearby ginseng, jewelry and liquor stores sell U.S. products highly prized as gifts in China. Down the street, a business called Express to China ships packages for Chinese tourists who have purchased too many gifts and souvenirs to fit in their suitcases.
“In China, they are hurting,” Lau said. “But over here, we are doing fine.”
Beyond tourism, structural ramifications for the San Gabriel Valley’s economy could be on the horizon if unstable economic conditions change the way investment money flows to California.
California has seen $7.2 billion in Chinese direct investment since 2000, according to an analysis by the Rhodium Group, a research firm that monitors Chinese investment. The state could see up to $60 billion in Chinese direct investment by 2020, experts say.
Those figures don’t account for the economic effects of Chinese home-buying in Arcadia or the number of Chinese students paying higher tuition to attend U.S. schools, said Leslie Appleton-Young, chief economist for the California Assn. of Realtors.
“We are not only living in a global capital market, it’s a global real estate market,” she said. “We’re all impacted by things that happen far, far away from where we live.”
The San Gabriel Valley’s vibrant economy has been driven in part by the Chinese government’s gradual relaxation of restrictions on outbound investment over the last few years — part of an effort to integrate more with the world economy, said Mike Margolis, an attorney who works with Chinese investors. But economic instability could reverse that trend.
“If there’s a change in the regulatory climate and an absence of further relaxing, that might be a bad sign,” Margolis said.
Robert Kleinhenz, an economist for the Los Angeles County Economic Development Corp., predicts that any ripple effects on California from China’s crash will be temporary. Stock market jitters could actually spur more investment in California, he said.
“When China gets past this blip, there’s a lot of growth to be had, and we’re going to see that growth turn into tourism and investment dollars,” Kleinhenz said. “Los Angeles will be one of the main beneficiaries.”
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