The Waldorf isn't the first, and won't be the last big Chinese purchase.

For China, First the Waldorf, Then the World

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Last month, while holidaying in New York City, I happened upon the glare of a dozen live television cameras while walking past the Waldorf Astoria. The fuss was over Alibaba's investment roadshow, then unfolding inside the hotel's famed ballroom.

The chaotic scene now strikes me as ironic given that the venue Jack Ma chose to stage China's big coming-out party will soon be in Chinese hands. In a head-turning deal, Anbang Insurance Group shelled out $1.95 billion for the 1,232-room Park Avenue landmark. The purchase immediately brings to mind Japan's vanity shopping spree in the 1980s, which included California's Pebble Beach golf course, New York's Rockefeller Center and loads of Renoirs and Picassos. The U.S. survived that round of acquisitions, and its economy is far more vibrant than Japan's today. A Chinese wave of overseas investment, however, is likely to be far more disruptive and unsettling.

Part of the problem involves America's own China policies. For years, the U.S. has demanded that the mainland let its currency appreciate. Since the day Lehman Brothers collapsed in September 2008, the yuan has risen 11.4 percent. Obviously, a stronger yuan means a cheaper America. Already, Americans living in cities from Seattle to Queens, New York, have seen their neighborhoods transformed by Chinese demand (some of it from Communist Party officials stashing ill-gotten gains in overseas real estate, no doubt). In Hong Kong, Sydney and Vancouver, such house-buying sprees have led to rising prices and increasing resentment among locals.

Exchange rates are hardly the only issue, however. Japan's 1980s land grabs reflected little more than bubble-era hubris: high-profile transactions that led to more publicity than profit. China has even deeper pockets -- as well as a Beijing-led desire to dominate new markets. The nation is brimming with $4 trillion of currency reserves, untold numbers of newly-minted billionaires and a vast array of government-loyal entrepreneurs ready to sign checks for the good of the motherland.

Any Chinese buying spree will almost surely involve more than cherry-picking this property or that one. Despite official rhetoric, the Beijing regime shows little patience for building the country's roster of global corporate powerhouses. China figures it's easier to buy established overseas names -- IBM's personal computer business, for example -- than to build its own. No doubt Hewlett-Packard, which is spinning off its personal-computer division, will see the prefix "+86" -- China's country code -- on some incoming calls soon.

China hopes to buy its way into a dominating positions in markets from technology to agriculture to aerospace to biotechnology to retail to entertainment to education. The breadth of Tokyo's corporate assault had lawmakers buzzing about a Japan Inc. colonizing the U.S. in the 1980s. China's may feel like an all-out invasion to Wall Street and Main Street alike.

Needless to say, this will not go down easily. Political concerns have scotched deals in the past, such as Chinese oil giant CNOOC's attempted purchase of Unocal in 2005. But Washington couldn't kill last year's bid by Shuanghui International Holdings for hog producer Smithfield Foods on national-security grounds, and no one's suggesting there's any reason to block the Waldorf sale. More and more of these deals are inevitably going to go through.

Washington must resist the urge to indulge in the protectionism it abhors in less-developed nations. Nevertheless, it's time to craft clearer laws on which companies can and can't be bought and why. That includes more precise definitions of what constitutes "national interests" and "national security" concerns, to ensure legal certainty. The U.S. also should demand greater detail on where funds are coming from. Part of the exercise, of course, will be discerning where balance sheets of state-connected Chinese companies begin and the Communist Party ends.

Like it or not, China's outward expansion could eventually reach all sectors and facets of Americana as we know it. Is the U.S. ready? I see no evidence it is.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Willie Pesek at wpesek@bloomberg.net

To contact the editor on this story:
Nisid Hajari at nhajari@bloomberg.net