The U.S. Charm Offensive in China

Mayors and governors are wining and dining Chinese investors | Any “company that wants to be global can’t miss out on the U.S.”

Dexter Roberts

Snyder has been to China twice in less than a year


Even as politicians in Washington erect barriers to prevent Chinese telecommunications companies from expanding in the U.S., mayors and governors are courting businesses on the mainland. Shanghai alone has entertained trade and investment delegations from at least 14 states since March, according to the U.S. Consulate. One visitor, Michigan Governor Rick Snyder, embarked in September on a 10-day China tour. The purpose: “Make the case that Michigan provides the most strategic location in North America for Chinese companies to expand,” he said on the eve of the trip.

While politically sensitive investments by Huawei and ZTE have grabbed headlines, Chinese capital is streaming into the U.S. with little fanfare. Sinopec is shelling out $2.5 billion for stakes in U.S. oil and gas fields, while Chinese investors have inked a deal to buy cinema chain AMC Entertainment and are negotiating to acquire jetmaker Hawker Beechcraft. Chinese direct investment in the U.S. should almost double to $8 billion in 2012, an annual record, says Thilo Hanemann, research director at Rhodium Group, a China-focused consultant. At least 37 states and most major cities now host Chinese enterprises operating in industries such as auto parts, aluminum production, and financial services. Rhodium estimates Chinese companies support close to 30,000 jobs in the U.S.

Bargain-basement prices are a big lure. Wanxiang Group, a private maker of auto parts, has invested in some two dozen ailing factories mainly in the Midwest and has recently been putting money into clean tech. In May, it closed a deal to invest $1.25 billion in Great Point Energy, a company in Cambridge, Mass., that converts coal to natural gas. The U.S. is a “gold mine” of opportunities for Wanxiang, says its president, Pin Ni. “Any Chinese company that wants to be a global company can’t miss out on the U.S. market.”

Wanxiang has also been in negotiations for a controlling stake in A123 Systems, a maker of lithium-ion batteries that filed for bankruptcy on Oct. 16. Its interest has sparked controversy: The Waltham (Mass.)-based A123 had secured a $249 million federal grant to build factories in the U.S. “We need to be sure that when the federal government invests close to a quarter of a billion dollars in grants to a company, that the technology developed as a result of this taxpayer support doesn’t end up in China,” said Senator Charles Grassley (R-Iowa) in an Oct. 11 statement on his website. He raised a concern about “foreign government access” to breakthrough technology. Rhodium’s Hanemann says such suspicions will persist regardless of whether Chinese buyers are private or government-owned. Says Hanemann: “Those issues will always haunt Chinese companies investing overseas.”

The bottom line Despite protests in Washington, Chinese investment in the U.S. is on course to hit a record $8 billion this year.


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