The Chinese are coming, and not just e-commerce giant Alibaba.
China accounts for 85% of investors applying for the US's EB5 visa. US real estate attracted $3.1bn from China last year, up from $250m in 2012. There are 250,000 Chinese students studying at US universities. Chinese visitors are the biggest per trip spenders coming to the US, and total visitor spending has doubled in the past three years.
Chinese direct investment in the US has grown to $40bn since 2000. The first half of 2014 saw $3bn for 36 acquisitions and $600m for 30 greenfield projects. That is an average of three deals per week. China’s official 'go global' policy has taken hold.
This is not the reshoring of assembly and light manufacturing. China’s labour and energy costs have gone up but, considering all factor costs, productivity rates and China’s internal markets, China remains a strong choice. And, there are many less expensive places to 'reshore' to than the US, even considering the US’s boom in natural gas.
That said, FDI from China to the US now exceeds FDI from the US to China. Here are some clues for states and cities seeking Chinese investment.
Tariff jumping: companies come to the US to escape punitive tariffs. This has been prominent in metals industries, ranging from steel pipe to copper wire and aluminium fabrication.
Proximity: profitability benefits by being close to customers (for example, high freight costs, high-end consumer responsiveness, working capital tied up in transit).
Intellectual property: just as Global 1000 teams invest in start-ups or acquire young companies to supplement internal research and development, Chinese companies are buying into industries driven by innovation.
Biotechnology and pharmaceuticals, aerospace, electronics and ICT account for half of this year’s investments. Expect a continuing rise in Chinese greenfield projects near target talent pools as well as opportunistic acquisitions.
Daniel Malachuk works with business and government leaders on global direct investment strategies. He has advised many of the world's leading companies and served in the public sector as director of White House operations. Email: firstname.lastname@example.org