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By: Kun Zhao, Esq.
The second China Overseas Investment Summit was held from August 22nd to 23rd 2012 in Hong Kong. More than 1,200 government officials, investors, and experts from over 40 countries and regions attended the two-day conference under the theme of “Global Economic Transformation and New Approaches to China’s Overseas Investment,” echoing the country’s “going global” strategy.
According to Rhodium Group, which closely tracks Chinese foreign direct investment in the U.S., the U.S. has attracted$20.9 billion in investments from China since 2000. Investment from China is set to hit record levels in 2012. China has become the second fastest growing source of foreign direct investment (FDI) in the United States with an average annual growth rate of 72 percent from 2006 to 2011. During that time, Chinese FDI has diversified substantially, reaching into many sectors of the U.S. economy. Chinese companies are investing more than ever in the US and their investments have funded the creation of many American jobs. Recent mega-deals include Dalian Wanda Group’s acquisition of cinema chain AMC Entertainment Holdings for $2.6 billion, Superior Aviation’s $1.8 billion bid for Hawker Beechcraft, and China Petrochemical Corporation (Sinopec)’s acquisition of Ohio-based Devon Energy for $2.5 billion.
Pin Ni, president of the American arm of the private Wanxiang Group, which employs about 6,000 employees in the U.S., said that “negative views of China and political tensions between the two governments deter some companies.” However, that view has not impeded substantial FDI in the U.S. Ni stated that “[o]ur labor costs are higher (in the U.S) but our overall costs are lower because it’s more efficient here.” Ni set up Wanxiang America from a home office in Mt. Prospect, Illinois, in 1994, essentially as a sales outlet for a parent company in China. It now has 27 manufacturing facilities across 14 states with annual revenues of more than $2 billion, and supplies most of the major American auto manufacturers.
The US government has launched a new effort through the SelectUSA program (www.selectusa.commerce.gov) in 2011 to attract business investment and increase employment. The program offers information assistance for global investors concerning federal programs and incentives for investing in the U.S. It also provides information concerning business incentives offered by different states and territories. It aims to help resolve issues involving federal regulations, programs, or activities during the investment process.
Other than Chinese state-owned enterprises, an increasing number of Chinese private companies, such as Haier and Lenovo, seek to set up shop in the U.S. and establish their own brand presence. Their main challenge is learning to comply with complex regulations and customizing products to suit American consumers.