U.S. immigration focuses on U.S. economic development: In 2014, China became a net exporter of capital for the first time. Entering 2015, the momentum of internationalization for Chinese enterprises has remained unabated. Especially in the U.S. market, which many domestic companies consider to have the highest threshold, Chinese enterprises have maintained a rapid growth trend for several consecutive years.
However, overall, the development of Chinese enterprises in the U.S. is still in its primary stage. The scale and proportion of Chinese investment in the U.S. still lag significantly behind those of Europe, Japan, and even South Korea, which is not commensurate with China's economic status. Chinese President Xi Jinping is about to pay a state visit to the United States. On the basis of enhancing mutual trust, China-U.S. economic and trade cooperation is expected to reach a new level.
Investment in the U.S. Is Accelerating; Trickles Will Become a River
A report released in July by the U.S.-based Rhodium Group shows that Chinese investment in the U.S. has shown an accelerating trend in recent years. Direct investment by Chinese enterprises in the U.S. has increased from less than $1 billion before 2008 to $12 billion in 2014, breaking the $10 billion mark for the second consecutive year. This trend is expected to continue in 2015. Five years ago, the number of employees hired by Chinese enterprises in the U.S. was only 15,000; now it has surged to 80,000.
Currently, the total amount of Chinese investment in the U.S. has exceeded $46 billion. Daniel Rosen, co-founder of Rhodium Group, expects that by 2020, Chinese investment in the U.S. will reach $200 billion.
In terms of investment methods, mergers and acquisitions as well as the establishment of joint ventures are favored by more Chinese enterprises. According to a survey of over 100 Chinese enterprises by the China General Chamber of Commerce-U.S.A., 42% of companies choose M&A as their primary investment model.
Du Jun, CEO of Huahai U.S. Inc., said that rapid market entry through M&A is a very good method for Chinese enterprises to enter the United States. The acquisition of the U.S. company Sandoz not only filled the gap in Huahai U.S.'s pharmaceutical preparation business, but the Sandoz sales team, familiar with the U.S. market culture, also provided a solid platform for Huahai to achieve independent sales.
Although a group of Chinese enterprises have successfully developed in the U.S. market, the proportion of total Chinese investment in the U.S. is still not commensurate with China's status as the world's second-largest economy. Data from the Bureau of Economic Analysis under the U.S. Department of Commerce shows that from 2010 to 2013, investment from China accounted for less than 1% of all foreign investment in the United States.
Stephen Orlins, President of the National Committee on United States-China Relations, said that investment is an important bridge for both China and the U.S. to enhance communication and mutual trust. Compared with the economic scale of the two countries, China's current investment in the U.S. can only be considered a trickle, but it is expected to converge into a rushing river in the future.
Private Enterprises Become the Main Force; Two-way Complementary Features Emerge
In this wave of Chinese investment in the U.S., private enterprises have acted as the main force. The report from the China General Chamber of Commerce-U.S.A. shows that the relatively mature industry structure and operational rules of the U.S. have provided greater opportunities for Chinese private enterprises. Currently, investment by private enterprises in the U.S. accounts for more than 80% of the total Chinese investment in the U.S.
Since entering the U.S. in 1994, as an auto parts supplier, Wanxiang Group's U.S. company has successfully entered the mainstream U.S. market by implementing strategies such as "localization of marketing, localization of management systems, and localization of capital." It has now established 28 factories in the U.S. and has grown into the largest Chinese-funded enterprise in the U.S. Midwest.
Ni Pin, President of Wanxiang Group's U.S. company, said that there are significant differences in the economic structures and development stages of China and the U.S., and the economies are highly complementary. Against the backdrop of global economic integration, the resource integration effect brought about by this complementarity will be transformed into unique comparative competitive advantages in corporate operations.
If early Chinese investment in the U.S. was more reflected in the supplementation of the high-end by the low-end of the industrial chain, then now, both Chinese and U.S. enterprises, and high-end and low-end sectors, have shown characteristics of two-way complementarity.
The United States is a technological powerhouse, but it does not possess leading technology in all fields. In the words of BYD Chairman and President Wang Chuanfu, BYD's investment in the U.S. electric bus field has "filled a technological gap in the United States."
Wang Chuanfu said that in the field of electric buses, BYD has no competitors in the U.S. market, and currently, BYD's battery technology is 3 to 5 years ahead of other companies in the same industry globally.
In the recently widely watched China-U.S. high-speed rail cooperation, the Chinese side is undoubtedly the party with the technological advantage.
Another noteworthy trend is that cost management has also become a key factor for some Chinese enterprises in deciding to invest in the U.S. As the world's second-largest automotive glass manufacturer, Fuyao Glass has launched an investment project of over $400 million in the U.S. The company's chairman, Cao Dewang, explained that due to various factors such as the cost of U.S. resources like oil and electricity being lower than in China, even though U.S. labor costs are significantly higher than in China, Fuyao Glass can currently achieve production costs in the U.S. that are lower than in China.
Communication and Mutual Trust Need to Be Strengthened; Investment Cooperation Benefits Both Sides
It is undeniable that due to the prejudices of some U.S. politicians, the path for Chinese enterprises to invest in the U.S. is not always smooth. A survey by the China General Chamber of Commerce-U.S.A. shows that 11% of the surveyed Chinese enterprises have abandoned investment projects due to concerns about "government scrutiny."
And this concern is not groundless. In 2013 alone, 21 M&A investment cases by Chinese enterprises in the U.S. were investigated by the Committee on Foreign Investment in the United States (CFIUS), led by the U.S. Department of the Treasury, making China the country subject to the most CFIUS reviews globally for two consecutive years.
Maurice Greenberg, Chairman and CEO of C.V. Starr & Co., Inc., said that Chinese investment in the U.S. has brought capital and promoted employment, which is a good thing for the United States. However, currently, when China and the U.S. invest in certain industries in each other's countries, including technology, they are still subject to some regulatory restrictions. Greenberg hopes that most of the restrictions can be lifted. The more mutual investment between China and the U.S., the more beneficial it will be for both economies.
Michael Bloomberg, founder of Bloomberg L.P. and former Mayor of New York City, stated that China-U.S. economic cooperation is not a zero-sum game, and both sides can achieve a win-win situation through good communication and cooperation.
In fact, under the current highly uncertain global economic situation, as the world's top two economies, China and the U.S. have an increasingly broad and profound impact on the global economy. Abandoning prejudices, strengthening communication, and deepening economic and trade cooperation between China and the U.S. will not only benefit the economies of both countries but will also inevitably benefit the world.
