Chinese Businesses Moving To The US​ To Cut Costs!

At a time when Donald Trump won the American Presidential elections after invoking, among other things, fears of the United States of America losing out on investment and business opportunities to China, there seems to be a reverse flow with Chinese businesses preferring to set up shop in the US.

One such Chinese business tycoon is Cao Dewang Chairman of Fuyao Glass Industry Group. Founded in Fuzhou China in 1987, Fuyao Group is a Sino-foreign joint venture manufacturing automotive safety and industrial technology glass. It has production lines in nearly a dozen Chinese cities including Beijing and Shanghai and also has a factory in Russia.

The company has invested more than $ 1 billion in the United States, setting up a factory in Moraine, a suburb of Dayton, Ohio in October 2016. In an interview to China Business Network, Cao justified the decision saying that it was cheaper to set up a manufacturing facility in the US than export glass panes from China after paying higher taxes and other expenses.

He claimed that the tax burden for manufacturers in China is 35% higher than in the U.S. Cheap land, reasonable energy prices and other incentives available in Ohio meant that, despite higher manufacturing costs, he can still make more money.

The factory has been set up at the premises that once housed the General Motors assembly that had been lying empty since late 2008. The plant now employs a workforce of almost 2,000 and when it becomes fully operational, it will provide jobs to almost 3,000 workers.

Cao says wages and transportation costs have been on the rise in China with wages almost tripling over the past four years. In the US, transportation costs the equivalent of less than one yuan ($) per km, while road tolls in China are higher. Some of the medium and small-sized Chinese enterprises have started moving to South East Asian countries like Vietnam and Cambodia in view of cheaper wages and materials availability.

Fuyao is not the first Chinese business making the move across the Pacific in recent years. According to the Wall Street Journal, Chinese companies invested over $20 billion in the U.S. last year —from a practically non-existent total investment back in 2006.

However, with the latest data indicating that China’s manufacturing sector would remain in a strong position for some years, the country would remain the world’s second largest economy.

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Meanwhile, a new report by Rhodium Group and the National Committee on U.S.-China Relations provides a detailed picture of two-way direct investment flows between the United States and China, past and present.

With funding by big U.S. businesses and trade groups, Rhodium counted $228 billion in 6,677 U.S. investments into China since 1990, plus 1,200 Chinese investments into the U.S. worth $64 billion. The figures are significantly higher than official numbers produced in each country, The Wall Street Journal (WSJ) says.(Image Source:pixbay)