What’s driving Chinese investments in domains?

This has become one of the most debated questions in the domain market: exactly why are the Chinese buying so aggressively?

It's not a matter of mere curiosity. To investors, addressing this question is a way of better understanding the market: what's driving it, how much growth potential there is, and where potential weaknesses are. To be a successful investor in any market, you need to understand the rationale behind other investors' buying and selling decisions. The domain market is no different.

Andrei Polgar from DomainingTips.com recently gave his own assessment of the market, addressing the possible reasons behind the continued buying frenzy from China.

Here are a few reasons why he believes Chinese buyers are investing in domains so aggressively:

1) Rising wealth in China
A stronger middle class has opened up investment opportunities to a growing portion of the Chinese population, Polgar argues. As household incomes increase, he says, more Chinese are considering domain investments simply because they can – a point that Polgar feels many analysts miss.

2) Seeking assets outside of China
With the declining yuan and Chinese stock market, many Chinese are looking to move their money to assets that aren't based in China. Domains are an attractive option, because they don't come with as many restrictions as other foreign investments.

3) Risk/reward
Aside from the fears associated with Chinese markets, there is also the sheer potential of domains that appeals to many Chinese buyers. Many view the domain market as having lower risk, combined with greater growth potential, than other investment opportunities back home. Polgar writes, "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."

4) Access to lending
Polgar also points to increased access to financing as a key driver. Many Chinese buyers, he argues, are investing not just with their own capital, but with money they've borrowed.

5) Fear of loss
Another reason that many analysts underestimate, Polgar argues, is that Chinese investors simply don't want to miss out on a potentially lucrative opportunity. Those who missed out on the "first phases of the Internet landrush" – due largely to investment restrictions and other reasons – now view the domain market as the "next big thing." They don't want to miss their chance again.

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