U.S.presidential candidates talk tough on fighting what they see as China's unfairtrade policies, but Chinese companies are investing more than ever in the U.S.and supporting thousands of American jobs.
With two separate billion-dollar deals in shale oil and gas, a struggling chainof movie theaters and other major ventures in the works, investment from Chinais set to hit record levels in 2012. Its cash-rich companies have expandedtheir presence here in the past three years, keen to get closer to thelucrative American market and tap U.S. know-how.
The jobs created far from offset what American politicians and some economistssee as the millions of jobs lost because of China's currency policies and theftof intellectual property. Also, Chinese investment, especially intelecommunications and other sensitive businesses, isn't always welcome.
But the growth in investment underscores how the relationship between the U.S.and China is more complicated than depicted on the campaign trail. CheapChinese products have benefited American consumers, and China's massivepurchases of Treasury securities have helped finance the U.S. budget deficit.And while Chinese investment in the U.S. is barely off the starting blocksgiven the size of its economy, some believe it could become a major source forAmerican jobs.
"There's a huge amount of ignorance in the U.S. market place of how totake advantage of potential Chinese investment," said Larry Morrissey,independent mayor of Rockford, Illinois, a city of 150,000 which hosts threemajor Chinese companies. While money is tight in the U.S., he said, Chinesefirms want to invest and have the funds to do it.
But in the presidential campaign, China seems to attract only negativeattention.
"They steal our intellectual property rights. They block access to theirmarkets. They manipulate their currency," Republican vice presidentialcandidate Paul Ryan told supporters in Ohio last week. He accused PresidentBarack Obama of allowing China to treat him like a "doormat" andvowed Mitt Romney would crack down on China cheating.
Obama, who has sought deeper ties with China, says his administration hasnevertheless stepped up trade complaints, and announced one in response toChinese tariffs on U.S. auto exports during a campaign trip to Ohio in July.
But the administration, as well as the Republican-supporting U.S. Chamber ofCommerce, are actively seeking Chinese investment. They want to capitalize onthe ambitions of state-owned and private Chinese companies to expand from thedeveloping world to developed countries.
The private Rhodium Group, which closely tracks Chinese foreign directinvestment, or FDI, puts the total attracted to the U.S. since 2000 at $20.9billion. It predicts that Chinese companies could invest between $1 trillionand $2 trillion internationally by 2020 and a significant chunk could come tothe U.S.
"Chinese firms are arriving at the inflexion point at which it makes sensefor them to be developing more of a commercial presence in the United Statesand Europe," said Daniel Rosen, partner at the New York-based group.
While China is still far from emulating the outward expansion of Japanese companiesinto the United States the 1980s, this could be a formative example. Fears thenthat the U.S. economy might be dominated by Japan proved unfounded. Today,Japanese-affiliated companies employ about 700,000 Americans.
As a strategic and emerging military rival of the U.S., however, China bringswith it more baggage. China still restricts foreign investment in much of itsown economy. Many of its biggest companies looking to invest abroad arestate-controlled.
Cybersecurity is also a major concern because of repeated reports ofcyber-attacks on Western companies and government departments originating fromChina. That has dented the prospects for its telecommunications and technologygiants.
Attempts by Huawei, a private Chinese company founded by a former army officer,to acquire 3Com in 2008 and failing U.S. computer company, 3Leaf Systems, in2011 were floored by security concerns.
U.S. lawmakers have often weighed into the debate. The House IntelligenceCommittee is investigating Huawei, one of the world's biggest suppliers oftelecoms gear, and its rival, ZTE, examining their ties to the Chinesegovernment. It is also probing reports that ZTE is supplying surveillanceequipment to Iran.
Lixin Cheng, CEO of the American arm of ZTE, says the company has cooperated inthe probe but denies that ZTE is influenced by the Chinese government. (Thecompany is state-owned but has a portion of its shares publicly traded). Hedescribes the allegations as "noise coming from guys who don't wantcompetition here so they can protect their market share."
But Cheng says handset sales have been rising and he remains bullish on thecompany's prospects in supplying American mobile network carriers, whichaccount for about 90 percent of handset sales in the U.S.
Pin Ni, president of the American arm of the private Wanxiang Group, an autoparts and renewable energy manufacturer that has close to 6,000 employees inthe U.S., said negative views of China and political tensions between the twogovernments deter some companies. Yet in reality, he said, that's littleimpediment to doing business.
Ni set up Wanxiang America from a home office in Mt. Prospect, Illinois, in1994, essentially as a sales outlet for the parent company. It now has 27 manufacturingfacilities across 14 states, annual revenues of more than $2 billion, andsupplies most of the major American auto manufacturers. He said that only about10 percent of the parts it supplies in America are now sourced from China.
"Our labor costs are higher (in the U.S) but our overall costs are lowerbecause it's more efficient here," he said.
Mayor Morrissey said Wanxiang had acquired a struggling auto parts manufacturerin Rockford. Attracted by the Chinese company's long-term commitment to theU.S., Rockford chose Wanxiang to develop a $12.5 million solar panelmanufacturing plant employing 60 people, and a large solar power farm, as partof the city's strategy to attract more green business.
Two other major Chinese firms have investments in Rockford, including DalianMachine Tool Group which acquired Ingersoll Production Systems and employs 100people. Rockford is also in talks with Wanxiang about plans to modernize thecity center.
"A lot of American cities are completely on the sidelines," saidMorrissey, who has made several trade missions to China. "I don't see manycities, especially cities of our size, doing what we are doing, of beingproactive and looking to exploit the opportunities there are for Chineseinvestment."
Joy Huang, president of Connect East, which advises mostly Chinese state-ownedenterprises on working in the U.S., said companies want to establish their ownbrand presence here — something few Chinese firms have achieved, other thanappliance-maker Haier and computer-maker Lenovo. She said the main challenge islearning to comply with the myriad regulations and customizing products forpicky American consumers.
Chinese companies are targeting a wide range of industries, also includingaerospace, banking, metals processing and plastics. In a sign of thosediversifying interests, conglomerate Dalian Wanda Group announced in May it isacquiring cinema chain AMC Entertainment Holdings for $2.6 billion, the biggestChinese takeover of an American company to date.
Both the Rhodium Group and the Heritage Foundation, a Washington-basedconservative think tank that maintains a database of major Chinese FDI acrossthe world, predict a record year in 2012.
But Derek Scissors, an expert on China's economy at Heritage, remains skepticalthat augurs a spiraling takeoff in Chinese investment into the U.S. He saidChinese FDI in the past eight years has tended to spike from one region toanother: first in Australia, then sub-Saharan Africa, and most recently inLatin America.
With the global energy firms now turning their attentions to shale oil and gasin North America, "we're next on the hit parade," Scissors said.