Curt Palmer
Concepts: Chinese companies have invested $280 million and created more than 1,200 jobs in South Carolina alone. Today some 33 American states, ports, and municipalities have sent representatives like Ling to China to lure jobs once lost to China back to the U.S.: Besides affordable land and reliable power, states and cities are offering tax credits and other incentives to woo Chinese manufacturers. Beijing, meanwhile, which has mandated that Chinese companies globalize by expanding to key markets around the world, is chipping in by offering to finance up to 30% of the initial investment costs, according to Chinese business sources. They like the strategic location of our region, the convenient access to materials coming in mostly scrap metal and pig iron and the ability to export to North and South America through the port of Corpus Christi," he says. There are other incentives. On April 9 the U.S. Commerce Department imposed import duties of up to 99% on the type of seamless pipe that is to be manufactured by Tianjin Pipe a reprisal prompted by the United Steelworkers union. The Chinese company, the world's largest maker of steel pipe, had said it could not afford to export to the U.S. if tariffs were over 20%. Now its pipe will be made in America. "It's just another reason they have to have a U.S.-based production facility," says Johnston. Even without tariffs, Tianjin had been looking to expand as are many Chinese companies once they reach about $100 million in annual sales. "Chinese companies, as they get bigger, have to start thinking about their global positioning," says Clarence Kwan, who runs the Chinese Services Group at Deloitte, which advises Chinese companies on doing business in the U.S. Officially the Chinese government has given approval to over 1,200 Chinese investments in the U.S., but that number is considered low because it doesn't count those made via Hong Kong where many Chinese companies earn equity capital from being publicly traded or tax havens like the Virgin Islands, where Chinese investment may stop first before flowing to the U.S. Plus, investments below $100 million don't need Beijing's nod and may be approved at the local level. Even if it doesn't, business is business. "Good products are borderless," he notes though the annual numbers are doubling, there is a growing perception in China that the United States is not enthusiastic about Chinese investment. Washington must recapture the high ground on this topic by pointing to the healthy growth in those investment flows to date and by making clear that U.S. policy will remain accommodative. A bipartisan congressional executive statement is needed to send an unequivocal message of support for increased investment from China. It is especially important that the U.S. Congress plays a positive role in this messaging given its oversight role and recent activism on foreign investment. A review of U.S. efforts to attract investment from China and other countries is needed. The current laissez-faire approach stems from an era when the United States dominated global FDI flows; it assumes that the United States remains unrivaled in its attractiveness and functions as though all foreign investors come from similar countries that do not need much on-the ground assistance. That situation has changed. More proactive measures are needed, not just at the state and local level, where earnest efforts are afoot, but also at the national level, where formal and informal barriers to foreign investment arise. The formal U.S. process of screening for national security concerns is generally well designed, but it is in urgent need of protection from politicization. If political interference is not tempered, some of the benefits of Chinese investment catalogued in this study such as job creation, consumer welfare, and even contributions to U.S. infrastructure renewal risk being diverted to U.S. competitors. Many Americans including many officials in Washington believe that because China has so many state-owned enterprises, market forces and profit motives do not necessarily apply in that country. Therefore, they suspect that if a Chinese firm is coming to America, it must be for some political purpose rather than simply to make money. This conclusion is wrong, and if we are to maximize U.S. interests, such misapprehensions must be corrected. But making clear that behind all of the rhetoric of statism and central planning, China’s firms typically put self-interest and profit above else, is no easy task. The proponents and beneficiaries of Chinese investment in the United States including deal makers, venture partners, sellers, and localities need to bear more of the burden of demonstrating this market orientation. By issuing the kind of bipartisan statement suggested earlier, U.S. policy makers can contribute to this reappraisal of Chinese objectives. And, of course, economists and policy analysts must redouble their efforts to make China comprehensible to both U.S. leaders and the general public. The United States and China are at a turning point in their economic relationship. In the past, direct investment flowed predominantly from the “developed world” to the “developing world,” from countries such as the United States to China. In the future, China will invest sums abroad as vast as those that foreigners continue to place in China. How well the United States adjusts to this sea change will have a profound impact on its economic interests in the decades ahead, and set the tone for the larger U.S. China relationship. This study will help America maximize its benefits from the boom without sacrificing security by dissecting the patterns and motives behind China’s direct investment flows and discussing their potential impacts on the United States. Bottom-line at the end of the day the US needs Foreign Investment. We are already broke or have economic concerns. Our future is unknown and if we let them in we can increase jobs and also charge taxes, making it a win-win situation for all parties.