A lot of the new crop of biotech companies popping up in Philadelphia raised chinese money - one of the founders there told me it was because chinese investors had a "more enlightened view of valuations." I wonder how these changes will begin to affect biotech. Considering some of the recent intellectual property drama with chinese national employees, could there have been risks around IP from taking money from Shanghai based venture firms? It's a complicated issue as international financing always is, but I do wish people were allowed to invest anywhere/accept money from anywhere without government interference
Standard procedure has been: if you want their investment or their business, you have to surrender your data/IP upon request.
And they probably came to these Biotech companies with a juicy offering of capital. So expect some Biotech breakthroughs in the near future, but not necessarily coming from the West.
Pretty sure that's only true if you actually set up operations in China. Not that they might not try to get the IP anyway, but it's definitely not a given.
It makes complete sense for a Chinese investor to want to invest in biotech in the US and not China, btw. The US is a world leader in biotech and the American market is... very lucrative in the biotech area as well.
Nope, it goes for companies setup stateside as well. For example, Faraday Future, a now-failed electric car startup was headquartered in California, but had very strong IP transfer methods in place to get technology developed here back to the China "sister company" also run by the Chinese investors. The same setup is used at a couple of other China-funded startups I've run into in the last couple years as well. Basically, if you take Chinese investment money it's highly likely to come with some very strong strings attached.
I can never understand how people are complaining about this stuff. You willingly and knowingly sign a contract with the terms stated right there. Whose fault is that? The Chinese?
If you signed a contract handing over your large profitable company in exchange for some magic beans who exactly is the bad person here?
Don't sign the contract if you don't agree to the conditions. The real people to blame for IP transfer don't seem to cop a single mention by most.
> I can never understand how people are complaining about this stuff. You willingly and knowingly sign a contract with the terms stated right there. Whose fault is that? The Chinese?
Have you ever done business with/in China? Contracts are treated like toilet paper, and most of the stuff OP is talking about probably may not have been written there in the first place.
It's definitely possible that the tech transfer provisions were there in clear black ink, and so the founders knew exactly what they were signing up for.
It's also possible that the condition was "we will invest on condition that we nominate the COO", and the COO then proceeds to filter all research/designs/etc back to the sister company. It's also possible that the contract says funding injections will be provided at milestone X, and up until that point the investor is saying "sure, no problem", then at the 11th hour the investor threatens to withhold it until you give them copies of all your research.
Having worked there and experienced all of this first hand, I think it's unlikely that it's as simple as you imagine.
Given the Western way of doing business, it does come as a shock when China spins up a complete clone of your business with government money, including IP and R&D. It's malicious intent. They have no motivation to see the business succeed.
It's not like it's spelled out in the contract: "we will use free loans from the Chinese govt to take your tech, undercut your markets and put you out of business. We have no intentions of letting your business thrive and survive."
We're getting smarter about it but this is way of doing business is very foreign to the West. The West sees investors as capital assets and not active market players. When Peter Thiel invests in a company he is not looking to spin up his own competing clone. He wants the business to succeed. Not so in China, who has a vested interest in running US businesses into the ground.
Should other countries cede sovereignty and do exactly what others dictate to them? The West needs be smarter about how to compete and deal with the global landscape rather than crying about it incessantly and childishly trying to divert blame. Nothing illegal happened in the examples above, Western CEO's willingly handed over their property knowing full well what happens. And they did it to profit.
India flagrantly walks all over IP too. They have a massive export business stealing new pharmaceuticals and selling generics to the world. This is the reality of the world.
Either get smarter at how to manage this stuff or give up. The US is hardly in a position to suddenly want an international arbiter deciding who is playing fair or not given the history of torn up treaties and general aversion to international governance.
It's not a game of baseball, countries are free to make their own rules and decide whether they respect yours or not.
As a Westerner I fully agree with this. US seems to have this conceit that China, India and other emerging economies will play by the post-WW2 global trade rules we set up, if we just continue to nudge and pressure them in that direction. But it's been obvious for a while now their intent is to play by their own rules. US whinging about something so blatantly obvious, unsurprising and foreseeable is pretty lame.
I mean, it is, just not in those words. What we're talking about here is a vulnerability in the contract, in the software-security sense. Everyone should be reading contracts the same way they read source code during a security audit: under the assumption that all parties involved have malicious intent and are trying to destroy one-another 100% of the time. So when a contract says "we can do X", it must be read as "we can do X to make us succeed at your expense." Just like when code says "this module can do X", it must be read as "an attacker having gained control of this module can do X to succeed at your expense."
Here's the problem - there's usually a stipulation of good faith. A Chinaman investing money in your company with the intent to clone it like that is not in good faith, and would be so adjudicated by any American court of competent jurisdiction. Even if, however, your contract is technically enforceable in American court, it's not easy to go get some one from China to punish.
In America, you're very much expected to be a "right guy" when dealing with others. Regardless of what the piece of paper says, you will (deservedly) gain a bad reputation is you exhibit bad behavior, and become a person with whom no one wishes to transact. Word will get around. I think this system of doing things is highly effective, contracts aside. Interestingly enough, this is strongest in the South, followed by the Midwest, and only occurs to a lesser degree on the coasts. I sill haven't figured out why.
China has a very different perspective. Her business culture involves things like committing embarrassing acts in each other's company, a sort of mutually assured destruction. For better or for worse, when these two cultures mix, American businessmen end up the suckers.
Americans have significanlty more patents than other nations in history. I'd view it as a random consequence and an action taken by the handful of criminals all nations have.
It’s a culture difference: in China, it’s the victims fault for letting the perpetrator take advantage of them, while in the west it’s the perpetrator’s fault even if the process was completely legal.
Please don’t assume US companies are stupid. They know what they are selling and whether they are paid enough. In most cases it’s just about giving away some about-to-be-obsolete tech for some big money.
Do you have a list of biotech companies in Philly? I haven't heard of any (though I haven't really searched). I'm really curious how the tech scene in Philly is in general.
Huge number of car t and gene therapy companies. Spark therapeutics, carisma, tmunity, limelight, century just launched with a 250 million round. Lost of Penn spinouts basically.
"accept money from anywhere without government interference"
In banking its known as KYC (know your customer), I don't know if the same rules apply to private financing. Anyway the idea is knowing where's the money come from, is it from drugs? Corruption? There needs to be some 'interference' or all your nations SMEs become money laundering operations.
Wow, a "more enlightened view of valuations” sounds a bit scary. I hope your founder acquaintance realize that valuation is not all that matters. Accepting more funding from investors that are not that “enlightened” in other matters is a sure way to get in all kinds of trouble.
I share those same concerns - I think that in biotech the rapid dilution that happens early with professional CEOs bought in early means that there is less interest in building long term value - so short term wins like these can be worth it to founders that expect to be promoted to chief visionary officers. That might be harsh but I have co cerns about the incentives at some of these firms
It basically says money is leaving China, and there are reasons to expect the movement to increase, so the government has put restrictions on money movement and is selling its international reserves.
There is no further detail on the restrictions or the selling. The detail is all on the capital movement.
What those companies do not want is to invest big money into "advisors" that help them to be complient with GDPR. A law that was not even made by their own government.
Complience not only means "get consent". There is a long list of things you have to do, regardless of who or what you are tracking. And then you still don't have certainty if you are all legal, because there are so many details that courts will have to interpret first. And then they may be interpreted differently in different EU countries (because we all have our own national version of GDPR!)
So, in conclusion, study this: https://gdpr.eu/ or simply block users you don't care about anyways.
certainly not, if media companies would just go back to publishing rather than selling ads and using dark patterns we'd be able to actually see their content.
It'll probably help in California, where 38% of the Chinese money is going. But only 266k properties were purchased in 2018 by ALL foreign buyers https://www.gbreb.com/GBREBDocs/GBAR/News/Informer/2018/2018... (page 22 has purchase locations by country of origin)
out of 5.33 million existing home sales and 667k new home sales in the same year https://www.nar.realtor/research-and-statistics/quick-real-e... . So if you figure California and Florida look like they're disproportionately attracting foreign investment, there isn't that much left over for the rest of the country to be impacted with.
A lot of Chinese money involves families paying for housing ostensibly bought by a legal resident or green card purchaser, usually a student who comes over and then ends up owning one or two properties and sheltering family assets.
These purchases aren't usually reflected in the stats. It is more unusual for non-residents to end up owning property with no guarantees they can use it. Same in Australia and Vancouver.
Exactly, I have a friend who's from China. His parents bought his house in SF as a "graduation present," though the deed is under his name so it's technically his. However, if he were to lose his H1B, then it's essentially a foreign owned asset at that point.
He describes it as a cultural exchange as parents in China want to help him be successful. He also says that in China, corrupt banks make money disappear all the time. So it makes sense to me.
Yeah my neighbor. She comes from China, goes to school at a local university has no relatives here except a brother also in school. First thing she did was buy a house. She also drives a BMW 3-Series. How? When I asked, her parents sends her money every month. Her parents put the down payment on the house. Everything is in her name. So it happens quite often
This can be perfectly legit, or not of course. How come such transfers don't attract irs or govt attention? I can't give my son more than the max annual gift of 15k without it being taxable. I've always wondered why international money transfers can seemingly ignore these rules. I expect the parents are somehow hiding that it's a gift to the kid.
> 15K is not taxable. > 15K ought to be reported and will count against your lifetime exclusion. If you are likely to leave less than 11.4 million dollars, then the >15K you give every year is never taxed.
Yes. But I'd bet that the parents just claim the kid owned that account. Tax rules in other countries like China may not require a gift tax, so you could just give it to your kid in china, and then move that account to the us, so it doesn't look like a gift. Indeed, this article says they are thinking of adding gift taxes in China. https://www.huffpost.com/entry/china-considering-to-collect-.... So I'm sure people would follow this practice and avoid us gift taxes and limits.
According to new data from Statistics Canada, immigrants own 43 per cent of all residential properties in Toronto and 37 per cent in Vancouver, while making up 46 per cent of Toronto’s population and 41 per cent of Vancouver’s. An additional 4.8 and 3.4 percent of residential properties have foreign owners in Vancouver and Toronto respectively. And these statistics do not seem to include people coming in on student visas.
Even without students the numbers are pretty high comparatively. In contrast, "of all the metropolitan areas in the [United States], Miami had the highest rate of immigrant homeownership (26 percent), as well as the largest percentage of immigrants in its population (41 percent)."
So it sounds like people that study and work in those cities buy houses and live in them. Wouldn't it be good city planning to permit the construction of enough homes for everyone that studies and works in the area? Housing is only a zero sum game when there's not enough of them.
It would indeed be excellent city planning to do what you are suggesting. Other ideas include taxing vacant properties; restricting immigrants to ownership of a single property for N years; taxing immigration more heavily and investing in municipal infrastructure; or following Australia's lead and restricting non-residents to the purchase of newly-built housing.
And it's an great question why so many cities fail to take these steps. My guess is that inertia wins partly because it becomes politically inexpedient to blame immigrants for anything once cities have a certain percent of non-native residents, and partly because rising home prices make older homeowners happy while pushing the marginalized and disaffected younger voters into other ridings.
They might buy them but they don’t necessarily use them. A lot of the housing stock in Vancouver is vacant even if purchased, screwing up the neighborhood economy greatly.
That depends if there is a ratchet in said market. Housing availability has a large leverage in sticky upward prices, especially with large amounts of low interest debt availability.
How often, in general, do you think parents buy houses (or the down payment at least) for their children in a hot market like SF? AFAIK, quite often, especially in expensive places like SF. It doesn't just happen to parents of international students as well, I know there are boomer parents buying houses for their children.
I remember reading an article about the obsession with Chinese money in Vancouvers housing market was totally overstated since it was in the single percentage points.
People just can’t accept there’s a ton of people who want to live downtown than ever before (reverse ‘white flight’) and the housing market is incredibly constrained in supply for a ton of other reasons that can’t be blamed on foreign boogiemen.
Not to mention those small percentage of foreign investors are making regular Canadians wealthier than they ever would be normally which goes right back into the economy which creates jobs and industry for other Canadians. The solution then is increasing supply or not expecting to live in a big place whole living in expensive downtown areas, not whining about demand.
> I remember reading an article about the obsession with Chinese money in Vancouvers housing market was totally overstated since it was in the single percentage points.
Valuations are set at the margins, so single digits percentage of ownership could easily translate into a huge change in prices if the Chinese have different criteria for buying a house (which they obviously do since the goals - asset protection vs. a place to live - are different).
Vancouver housing prices are falling, largely due to the tax on empty homes and a large retreat in foreign buyers. Whether it was the Chinese or domestic buyers, people buying Vancouver real estate to park assets (as opposed to live in) had a large impact on prices.
A lot of it turns out to have been money laundering by people trying to either hide income for tax reasons (eg : US 1%) or less legitimate sources - all operating through countries which are good at hiding ownership histories (Eg : China)
It doesn't mean the money's coming from China - it could be coming from the USA or other countries with high incentive for tax evasion. Or it could be coming from money laundering from large scale organized crime.
(RCMP did a fairly thorough trace and report on this not too long back)
Speaking as someone who moved away from Vancouver BC as it became unaffordable. And my income is higher than most Canadians.
Additionally the government only started collecting data around foreign ownership well after the steepest part of the bubble curve was over so who knows what the actual sales numbers were when the prices just started rising.
Considering the "new normal" interest rates around the world and the direction things are going (down), I have doubts housing prices will decrease in any developed country for the upcoming 5 years.
Housing prices in Las Vegas and Southern California are declining. This is a first time for LV since the Great Recession. Declines like this have historically preceded every recession.
Do you anticipate housing prices will weather such a recession which many predict is looming on the horizon? That would be a first.
Armchair economist here and more familiar with the situation in Europe. The US has the highest interest rates among all developed economies (since December last year) so I assume that is starting to feel into the housing markets.
The FED seems ready to drop rates at the first signs of economic bad news and consensus is that it will this year. Party will go on until inflation skyrockets, no idea when though but I doubt it's too soon. (not before elections)
We're in preparation to move to SoCal so we've been watching prices for the last year. The trend has definitely been downward for housing in our price range.
It's flat where I live (south Orange county, California) for homes in the $500k-$1M mark. Newer development has stickier prices than older homes. However, there's a lot of local business development happening and, in the case of a single organization that I am aware of, many high-paying jobs are moving into the immediate area in the next 18-24 months. That single organization is stated to be investing over a billion in this new facility alone. It'll be very interesting to see what this does to the local market.
Vancouver will suffer from “be careful what you wish for”. If house prices drop it will kill the economy because people will will be locked in their underwater homes for the rest of their lives. Deflation will destroy the entire economy.
The problem with deflation (and hyper-inflation) is that people are irrational, not that the economies are illegitimate. The danger is that people acting irrationally causes a vicious feedback loop. That feedback loop could potentially take down the best of economies
Deflation doesn't cause people to behave irrationally. The problem is that rational reactions to deflation such as hoarding cash, avoiding debt, and cutting spending become a drag on the economy.
hoarding cash, avoiding debt, and cutting spending
Most of the people around here immediately buy something as soon as "they can afford it" - with credit. I find it hard to believe that these same people would suddenly hoard cash.
Wikipedia says
The Great Depression was regarded by some as a deflationary spiral.[35] A deflationary spiral is the modern macroeconomic version of the general glut controversy of the 19th century. Another related idea is Irving Fisher's theory that excess debt can cause a continuing deflation. Whether deflationary spirals can actually occur is controversial, with their possibility being disputed by freshwater economists (including the Chicago school of economics) and Austrian School economists.
It sounds more like a theoretical concern than an immutable law of nature to me.
The problem with economic theory is that it assumes people are rational. There is absolutely zero historic record to support that. Until economics embraces reality it's foolish for the rest of us to hold a false god so high.
One can only dream that prices correct that much. But while expensive for Canada, prices are not wholly unreasonable for such a desirable city. And the population here is expected to increase by a million (33%) by 2050. That just won't be handled on the supply side the way zoning is done. So long term I expect prices to continue on the upward trajectory. Speaking as a renter with no house in the race.
Except if you have a high end tech job in Vancouver that only pays 80k/year or less.
Unless you are already rich, it makes sense to get a T1 and head off south to Seattle where the houses are still pricey but the salaries are much higher.
I'm not sure exactly what that had to do with my comment, but I've long told anyone who will listen in tech that you can double your salary by moving to the US or working remote for a US company with no Canadian office. Why anyone in tech remains in Canada makes no sense to me.
They're not, but Vancouver is a very international city and owning a single family home is hardly a fundamental right. People who choose to live in Vancouver on Vancouver salaries pretty much have no hope of owning a home. That most locals can't afford it doesn't make it unsustainable unfortunately as long as there are enough people willing to live there anyway.
Sure, but as as tech worker, I don't think I could make it living there, at least not with the lifestyle I'm used to in the Seattle area. Vancouver is also one of the cities to get hit big whenever Asia has a cold, it took their real estate market more than a decade to recover from Japan. In the late 90s they would advertise condos for $150k or so.
When China's bubble finally pops, it will be Japan 2.0+ for Vancouver.
Home prices have not fallen meaningfully since those measures were taken except at the very high end. At a certain point naysayers may have to admit they were wrong about the sky falling.
Increased density allowances continue to prop up lot values on single family homes, which allows homeowners to not be underwater but also increase housing supply when they are torn down and duplexes/condos are built in place.
Overall I feel like most people are happy with the outcome thus far.
I'm not sure the consequences of falling home prices will be as catastrophic for the economy as it sounds.
At the moment the high price of real estate is putting a lot of strain on almost every other sector of the economy: tourism (cheaper to visit other beautiful places like Banff), tech (it's expensive to attract talent with high cost of living), services (similar deal). It's also driven out a lot of younger families which can have delayed impacts on the economy.
On the other hand, it's been great for the construction industry, tax revenue, and infrastructure investment. The high price of land has also justified investments in density which will result in a lasting increase of land value even if the market cools.
There are also a lot of people who have sold their expensive homes and taken the money to cheaper areas, like Victoria and Nanaimo, distributing the windfall a bit.
A lot of us are hopeful it will happen as that’s when we will buy so ️
Some will win some will lose and I have little sympathy for those who entered the market in the last 5 years expecting it to keep increasing as it has.
Your statement comes across as rather heartless. What about those of us who entered in the last 5 years just because they were ready to settle down in an area they liked?
Sales and land values are plunging in Vancouver and even with the accordingly significantly decreased property transfer tax revenues the economy is great and the BC NDP government has posted a big surplus.
It'll destroy chiefly the minority rich though, the minority capitalists. And since they are in fewer numbers than the workers, I don't know if it'll impact the greater economy so much. Somewhere in this, Vancouver might become being a neat place to be I think.
Unlike the situation in Marx's time, many workers have their retirement savings in "capitalist" equity devices like home ownership and the stock market. 2008 was terrible for them in America. The divide between workers who can only access linear growth and capitalists who can access exponential growth no longer exists.
As a Canadian living in Markham, I am also deeply concerned about the growing inequality (or at least its growing visibility) and the damage it can do to our social fabric.
That being said, modulo some extreme reconfiguration of Canadian society, workers need someone to pay them. I think we should be _very_ cautious about unduly alienating capitalists in an indiscriminant manner.
It would also mean less wealth in the us. I'm not sure how the two get balanced. But I guess things are more skewed toward to more affordable zoning as government regulation, when it exists, limits construction.
Sure is nice to live in a non-zoned area. I built an addition to my garage and poured a large concrete pad next to my driveway without consulting any government authority, here in western Kansas.
The article doesn't talk about what's happening with the trade deficit. It seems like it would be important to know what's happening there because Chinese exports to the US are how China (as a whole) earns US money to invest?
Apparently the trade deficit was higher in May in anticipation of tariffs. [1] Is newer data available?
There may be more data, but a trade deficit is not an inherently bad thing in fact with most nations it strengthens US soft policy by adding US currency and use of US currency to the local economy.
For China, this means they can buy gold in USD (that has slowed recently but they usually purchase large amounts of gold regularly) or offer investment cash in USD (for businesses or housing abroad). How the cash is used could be negative like buying US housing to hold or rent but a trade deficit is generally positive for the US.
Living and traveling around SE Asia, I've seen first hand where Chinese money is going. Massive amounts of construction (and destruction) in Vietnam, Cambodia and Laos.
While books could be written about whether this is good or bad in aggregate, there are certainly bad things about it. Trade is good.[0] International investment if a form of trade.
To present an argument crafted to appeal on HN: Chinese investors not investing necessarily means that investments have fewer buyers, the market is less competitive, price discover is weaker, and the price of investments is lower and more volatile. This makes it harder to get investment in a startup, riskier and less rewarding to work at one, and increases the likelihood that startups will fail.
That sounds rather biased. Do you have any kind of source that shows (1) your statement is true, i.e. those investments indeed come with strings attached, and (2) this is actually different from other country's practices? Even if there is a source that confirms both, I'm still not sure it's good that trade stops rather than that the terms are altered. From my limited knowledge of this topic, trade is generally good for both parties.
Well I can see what s/he means: same as with an employer-employee relation, there is a certain power balance. They give you money, it would be bad for you to stop earning an income. Losing (or missing out on) an investor because of some nationalistic ideal about keeping China submissive to the USA...
And it doesn't seem so important when you look at your own, isolated case: anyone could have trained this neural net, it's not rocket science, what does it matter if we 'transfer' the python script that we used?
I can see their point, even if I think it's an overgeneralization and if I suspect every other country does the same (just that with China, we care about the human rights being violated there, or at least, that is my worry).
