Why China's stock market crash might be good for LA's economy

Stock markets in China have lost trillions in value in the past few weeks, which is bad news for China, but it could be good for Southern California if Chinese investors choose to funnel even more of their money into our local economy. 

Chinese investment into Los Angeles County doubled from 2009-2014, according to the Los Angeles County Economic Development Corporation. About $2.8 billion went into downtown L.A. alone during the last five years, according to Michael Soto, who tracks local Chinese investment for Transwestern. 

“The U.S. investment climate looks less volatile, and at least in the short run looks like it’s safer,” said Mike Margolis, a partner at Blank Rome, who frequently advises Chinese investors. "Real estate for Chinese investors has always been a treasured asset class, and real estate prices are considered still to be low even in major cities like Los Angeles, San Francisco and New York."

Robert Kleinhenz, chief economist at the Los Angeles County Economic Development Corporation, says it is too early to know what effect the recent market downturn will have, but he says if Chinese investors take money out of China and put it into L.A. real estate, that can only help the Los Angeles economy.

“If we continue to see these problems with China’s financial markets over a longer period of time, we may see what is already an established presence of Chinese investment in Southern California continue to grow,” said Kleinhenz. 

One has to be careful about reading too much into any stock market, especially in the case of China. The market is not the economy, and the economy is not the market. Despite a very bad few weeks, if you would have invested in the Shanghai Composite index a year ago, you would still have made a hefty return of around 70-percent.

But, only Chinese investors have taken that ride. Foreign investors are barred from the Chinese exchanges.