WN: Chinese investment pours into US, but at a cost
Chinese investors have been in the limelight during the just concluded 2015 SelectUSA Investment Summit in Washington DC.
"Fuyao has three investments in the US states of Michigan, Alabama and South Carolina, with good profits. Since 2013, we have made new investments in the state of Ohio and Illinois," said Fuyao Glass Industry Group chair Cao Dewang during the two-day summit.
Fuyao Glass Industry Group is the largest automotive glass supplier in China with about 70% of the market share. In 2014 Fuyao set up a new American subsidiary in Moraine, Ohio and bought a factory in the state of Illinois, expanding its glass production with US$200 million.
Similarly, many Chinese enterprises have begun or expanded their investment in the US in the last few years, at an average annual growth rate of 41% from 2009 to 2013, according to data from the Commerce Department.
China tops the list of delegations for the 2015 SelectUSA Investment Summit which concluded Tuesday, with about 150 investors coming from mainland China and Hong Kong. The US federal, state and local governments have been doing their best to attract these investors' attention through all kinds of incentives and receptions.
Sindy Yeh, senior manager of Arlington Economic Development, told Xinhua that 65 Chinese companies were invited for an Odyssey dinner cruise on Sunday to explore the potential investment opportunities in Arlington, Virginia, an urban county close to Washington DC.
In 2013, the state government of South Carolina provided incentives from US$4 million dollars cashback to tax credits to secure a US$218 million dollar investment from textile company Keer, John Ling, managing director of the Asia office of South Carolina's commerce department, told Xinhua.
Huge markets, advanced technology, a robust legal system, lower financing costs as well as high returns are the major reasons for investing in the United States, said Chinese real estate tycoon Wang Jianlin, chairman of Wanda Group, in a video broadcast at the summit.
Wang said Wanda's first investment in the United States acquiring AMC Entertainment in 2012 has made a profit of nearly 400%, as AMC was listed on the NASDAQ after the acquisition and its share price has doubled now.
Wanda will make further investment in the United Stated and encourage other Chinese entrepreneurs to explore the potential of the US market and make investments, Wang said.
Nonetheless, investing in the US is not all roses. There are risks as the two countries have different political, business and cultural environments. Chinese enterprises have lost US$36.8 billion dollars from 2005-2013, according to China Global Investment tracker, jointly launched by American Enterprises Institute and the Heritage Foundation.
"I'm not sure there's much understanding of our political system, and they (Chinese entrepreneurs) need to build relationships with policymakers when they invest here," Nancy McLernon, president of the Organization for International Investment (OFII), an association representing the interests of US subsidiaries of global companies, told Xinhua.
"Investing in the US market is a big trend, but you must make very good market research beforehand, or you will lose money here," Victor Yuan, senior vice president of Sany Heavy Industry Corporation, told Xinhua.
Sany Heavy Industry Corporation, a leading construction company in China, has built a manufacturing base in the state of Georgia in 2007 with an investment of US$60 million.
Yuan said when Chinese entrepreneurs come to invest in the US, they have to change their mind about how to do business. In China, government plays quite an important role for the development of enterprises, while in the US the role of the government is quite limited. "To solve a problem here you need to look for help from the market instead of a mayor," Yuan said.
To manage a company in the US is also quite different from in China. "The US companies advocate the importance of individual, while Chinese companies put more emphasis on the collective and authority," said Yuan.
High labor costs and limited financial resources for small and medium enterprises from China which do not have enough money also put great pressure on Chinese investors to succeed in the US.
Labor costs here are still high for manufacturers compared with in China. "To avoid this disadvantage, some important parts of the construction equipment that Sany produces in the US are still imported from China," said Yuan.
Cao Dewang, chairman of Fuyao Glass, also drew attention to the credit system here in the US. "At present our company's credit stand is 2A+, which makes our finance cost quite low, at 3.5%. However, if your company can't get an A score, you may have to face loan interests of 10%-15%, which is too high to bear," he added.
