Why Chinese investors choose US

16:55, May 20, 2010      

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Recent news on China's large enterprises shows that many are flocking to the United States to start plants. In April, BYD Auto set up its North American headquarters in Los Angeles. In mid-May, the cooperative deal signed between Anshan Iron and Steel Group and the United States Steel Corporation launched an era of China's steel enterprises' investment in the United States.

In November 2009, Suntec Power Holding, China's leader in the design and manufacture of solar products, decided to build a solar panel assembly plant in Arizona. In the same month, China's First Energy Corporation and the U.S. Renewable Energy Group inked a deal to open a factory and provide wind turbines for the recycling projects in both North America and South America.

We see four features in these investments over a short period of time. First, China's enterprises accelerated the pace of overseas investment and benefited their partners while many transnational companies shrunk their investment scale due to the worldwide financial crisis. Second, all the aforementioned Chinese businesses chose the United States as their investment destination. Third, investment occurred not only in traditional manufacturing industries, but also in alternative-energy industries. Fourth, they are all large leading enterprises in China.

Generally, enterprises in developing countries should invest in other developing countries. It seems to breach the conventional investment theory that several Chinese enterprises chose the United States. They lack the obvious advantages in technology and brands compared to U.S. counterparts, and the production and management costs are higher than that in developing countries.

Despite this, the trend that Chinese companies invest in the United States is climbing. There are three reasons explaining this. First, the lack of relative industries in the United States provides chances for China's manufacturing industry. Second, direct investment helps to know the developed countries' technology and management experiences. Third, it can avoid trade barriers and open the U.S. market or a third market. The United States, of course, also benefits from China's investment.

As for alternative energy enterprises, their investment in the U.S. has more far-reaching strategic significance. Historically, the developed countries, relying on their technical superiority, upgraded their industries and transferred the marginal industries to the developing countries, which makes them in the high-level of industry value chain forever. The worldwide financial crisis has brought an opportunity to the adjustment of global industry, in particular, the alternative-energy industry, which is likely to become the source of the new industry chain.

In a short, only when the developed countries give up investment protectionism, lower the threshold of some industries and provide open, fair and transparent investment environments, will both sides realize mutual benefit and a truly win-win situation.

By People's Daily Online


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