Don’t make the mistake of assuming, like many people do, that Chinese investors are simply mindlessly buying certain types of inventory because they don’t know better. I assure you, their reasons for buying are extremely rational.

A lot of them are doing it because they are interested in acquiring assets outside their country. Perhaps due to fears that their currency will be devalued, perhaps because they fear that a financial crisis is on the horizon or maybe for another reason. The bottom line is that in a country with a population of over a billion people, a lot of them want to move assets abroad and this tends to have an amazing effect on any asset class they choose to target. Short domains, in our case.

Another reason, perhaps the one I should have started with, is represented by the fact that… well, they have money. Believe it or not, that wasn’t always the case. A couple of decades ago for example, one could have not even dreamed of the fact that China would end up having a strong middle class or any meaningful middle class at all. However, at this point and beyond, the Chinese middle class is getting stronger and stronger. Incomes go up, the education level goes up and needless to say, more and more people find themselves in a situation in which they decide that they want to invest.

Another reason is represented by the fact that more than a few Chinese investors don’t believe they have all that many worthwhile investment opportunities at home. I mean just look at the way in which capital has been allocated when it comes to Chinese real estate. Ghost cities have literally been built and all in all, it should come as no surprise that Chinese investors are looking for something better from a risk/reward perspective.

The next reason refers to something not-so-sustainable: the fact that lots of Chinese investors have, perhaps for the first time in their career, access to financing. Yes, there are Chinese investors (and not just one or two) who buy domains not with their own capital but with money they borrowed. At one point or another, this over-eagerness to lend that materialized in China over the past few years will come back to haunt them in my opinion.

The final reason I would like to refer to and this is something related specifically to online assets such as domain names: Chinese investors are buying aggressively because they do not want to miss out. When it comes to domain names for example, few Chinese investors have been able to acquire for example highly desirable assets back in the 90s. Chinese investors know that they have missed out on let’s call it the first phases of the Internet landrush, if you will, and want to make sure that they will not miss out again.

Due to cultural barriers and what not, it is hard for a lot of us to understand how Chinese investors make a decision. It is important, as investors in general and domain investors in particular, that we get to know one another and keep an open mind.