Chinese investment surfacing in the South? Yes, finally.
By Mike Randle
This is our annual "Made in the South" issue and it's timely because there is a new player in the South's manufacturing universe. For almost two decades, economic developers and politicos in the South and the U.S. have been chasing Chinese projects with little or nothing to show. Want proof we've been chasing ghosts in China for years? Okay, go ahead and name a Chinese brand that's made in the South? Tick. . .tick. . .tick. Give up?
Well, there are two that come to mind and the first is Haier, the consumer electronics and home appliances manufacturer. Haier made history when it became the first Chinese manufacturer to open a plant in the U.S. when its $40 million Camden, S.C., facility opened in 2001. Today, Haier operates plants in North Carolina and Arkansas in the South. So while other countries such as Japan and Germany and dozens of others have been manufacturing in the U.S. for decades, the Chinese have only been here for 13 years. And until now, their presence has been almost nonexistent, or so scant it can barely be measured.
The other brand that comes to mind is Chinese computer maker Lenovo, which purchased IBM's personal computer division in 2004 and last year bought IBM's server business. Lenovo's North American headquarters is located in Morrisville, N.C., and the company opened a computer manufacturing operation in Guilford County, N.C., a year ago.
Okay, there's two. Bet you can't name another. Over the past five years, Chinese companies have invested about $1 billion a year in the U.S., or about 25 times less than what one foreign company is investing in one project in Southwest Louisiana. South Africa-based Sasol is building a $25 billion gas-to-liquids industrial complex near Lake Charles.
Recent data suggests, though, that you are going to be hearing more about Chinese brands being made in the South, particularly if the first half of this year is any indication. This reshoring event -- where over 50 percent of companies are looking to reshore plants from China to the U.S., according to the Boston Consulting Group -- looks like it is bringing Chinese investment along with it.
In the first quarter of 2014, Chinese investment in the U.S. topped $6 billion, or six times any full year's total in the past five years. The South's share of that was $4.3 billion. If that continues and China's total is $24 billion for this year -- which is unlikely -- it would rank right at the top with the Netherlands, France and the U.K. and their investments in the U.S. in typical years. One of the largest Chinese investments in the last year was the takeover of Motorola Mobility and IBM's x86 server unit by North Carolina-based Lenovo, a Chinese computer maker.
Second quarter numbers aren't available yet, but in this issue are several Chinese project announcements made in the South this summer. Here are the highlights:
- Golden Dragon's GD Copper USA copper tubing plant opened in Alabama's poverty-stricken Black Belt, the first major industry development in one of the poorest counties in the South in 45 years. The $100 million, 500,000-square-foot facility is located in Wilcox County, Ala.
- Hong Kong-based FIT USA is opening a boot-making factory in Jefferson City, Tenn., that will house 109 workers.
- Shandong Tranlin Paper, a China-based pulp and paper company, is investing $2 billion to establish its first U.S. manufacturing plant in the U.S. in the Richmond, Va., MSA in Chesterfield County. The deal will create 2,000 jobs.
- China-based TDC Cutting Tools is opening a plant in Oconee, S.C., investing $8.2 million and hiring 38 workers.
- China's first major investment in Louisiana was announced this summer. Yuhuang Chemical is building a $1.85 billion methanol facility on the Mississippi River in St. James Parish.
China is not a significant player in the U.S. or the South yet. But we all know about China's potential. I dug up an article published in August of last year by Yahoo Finance titled, "China will invest $1 trillion globally; How much will U.S. get?" The article predicted that China's vast cash reserves will be shared dramatically in the next decade. "When you think about U.S.-China relations, you probably think about the $200 billion worth of goods that the U.S. imports from China and the huge sums of U.S. Treasuries that China owns -- $1.3 trillion at last count." The story continued, "Well things are about to change dramatically," according to author Orville Schell. The U.S. "will have to reckon with China" in the future.
We believe the future is now and the first half of this year proves it. What the article did not mention are the two main reasons we believe China is about to go on a huge investment jag in the American South. Reshoring is real and China is seeing multiple plants making goods for U.S. consumption close daily in the country. Reshoring is already making a huge dent in their economy. For example, that $200 billion in Chinese imports Schell mentioned? That figure has plummeted. In fact, in February the U.S.’s goods trade deficit with China shrank more than any other month since January 2002, the earliest data in the Census Bureau database.
For the first time ever, China is forced to invest in the U.S., and 2014 will be the first year of many to come when, finally, Chinese investments surfaced.