China has emerged as the leading foreign direct investor in the US, with low-cost energy cited as the major driver of such flows. The fDi Report 2015: Global Greenfield Investment Trends, reveals that the US was the top destination for greenfield FDI from China in 2014, attracting an estimated $9bn in capital investment. The annual report was published by fDi Intelligence, the Financial Times division, which also includes fDi Magazine.
Didi Caldwell, principal of Global Location Strategies in Greenville, South Carolina, reports that her firm is working with numerous Chinese clients. “They see the US as stable, besides being a very large market,” she said. “I think they are concerned about what’s going to happen with their economy over the long term.” Crucially, the price of natural gas in China is three times more expensive than that in the US.
Louisiana and the US Gulf coast are known for having ample supplies of low priced natural gas – the feedstock for methanol production. The region has seen a boom in petrochemical industries, largely due to the US's shale gas revolution. Last year, Yuhuang Chemical decided on Louisiana to build a massive $1.85bn methanol complex in what was the state’s first major direct investment by a mainland Chinese company. It will be located on 4.45 square kilometres that are crossed by the Union Pacific Railroad and have access to the Mississippi River. Construction will begin in 2016. “Cost of energy and availability of cheap natural gas were the key site selection drivers [in the decision],” Ms Caldwell said.
Yuhuang plans to transport 20% to 30% of the methanol by barge and rail to North America, and ship the remaining 70% to 80% by ocean-going vessels for export, with 20% to 30% of that being used by the parent company in China.
Another factor impacting Yuhuang’s decision was China’s 'going abroad' policy of 2001/02, which has resulted in a dramatic increase in outward direct investment.
China is not the only country taking advantage of North America’s cheap energy rates. Ms Caldwell reports that German, English and French firms, among others, are interested in the US, since their energy prices at home are very high. Among the projects her firm has been involved are the building of a $14m dry polymer manufacturing operation in Mississippi by Finland-based Kemira, and the $150m development of an aluminum production facility in Bowling Green, Kentucky, by French-Japanese joint venture Constellium/UAJC.