Only time will tell if it is a brilliant and classical business strategy to “buy low and sell high.” Recently, the Wanxiang Group, China’s largest auto parts company, won a bankruptcy auction for the assets of Fisker Automotive, the California based, defunct manufacturer of plug-in hybrid sports cars which was partially subsidized by U.S. taxpayers. Wanxiang is building a presence in the U.S. and last year the U.S. government cleared it to acquire the bankrupt assets of A123 Systems Inc, which made Fisker batteries. As we would say in America, Wanxiang got the gold mine and the American taxpayer got the shaft, and it is becoming a growing player in my hometown of Detroit, Michigan.
Tom Watkins
What Reuters news service points out, and what the American taxpayer knows, is that “Both Fisker and A123 were funded in part with loans from the U.S. government that were meant to foster clean-fuel technologies. Wanxiang outbid Johnson Controls Inc for A123, and the Chinese company also overcame an active lobbying effort to block it from obtaining technology developed with U.S. taxpayer money.” For Americans paying attention, the sale captures the angst many feel: “Why would America allow a company from China to purchase a company American taxpayers have supported? It is time we wake up and stop the free transfer of American engineering and technology to China.” It appears as if America invests and Chinese businesses cash in.
China’s Rise Or America’s Demise?
While some are debating the sale to China, my home state, Michigan is capitalizing on Chinese investment. Consider the following, impressive export data shared by Michigan’s Economic Development Corporation:
- China is Michigan’s 3rd largest export market, after Canada and Mexico.
- Michigan exported over $4.1 billion of goods and services to China in 2013.
- Michigan ranks #8 among states exporting to China and has witnessed over $1 billion in cumulative Chinese investment since 2000.
- More than 100 Chinese companies of scale have located in our beautiful state–almost all automotive although some recent significant investments in real estate and IT have been made.
Michigan’s Governor, Rick Snyder, has accelerated job creation and investment in his state by:
- Increasing confidence among Chinese investors in Michigan’s investment environment,;
- Building relationships and expressing Michigan’s welcoming stance to international investment; and,
- Holding private meetings directly with Chinese and other international companies to convince them to locate in Michigan.
Building Guanxi
Personal meetings with Governor Snyder resulted in recent new investments and re-investments by Wanxiang/A123 and the following Chinese companies:
- Fuyao Automotive
- SAIC
- Yanfeng Auto Trim
- Chongqing Jiaxuan Automobile sealings Co.,Ltd.
- AVIC/Nexteer automotive
- Chang’an
- Wanfeng/Meridian
- Chonqing Machinery/Enstrom Helicopters
The Detroit Chinese Business Association is working with the State of Michigan to maximize ways to assure China’s rise does not come at the state’s demise. The DCBA recently hosted a delegation of the China Association of Automobile Manufacturers (CAAM) in America, seeking local partners to expand their business in Michigan and America. The high-powered group was led by Mr. Yang Dong, the vice chairman and general secretary of CAAM. Mr. Yang came to America with 40 Chinese business and government leaders. While in Detroit Mr. Yang pointed out, “The Chinese auto industry produced and sold over 22 million automobiles in 2013. At this moment, we come to Detroit to establish and expand investment and partnership with local companies.” He continued, “Through engaging with the U.S. auto industry, we can improve our R&D capabilities and integrate local auto suppliers with the Chinese market. This is a win-win situation for both sides, as we will bring investment and jobs to the Detroit area. We greatly look forward to the opportunities that lie ahead for all of us.”
China Opens To The World
Thirty-five years ago, the U.S. and China began the process of normalizing relations, and China opened its doors to the world. By improving the economic and trade environment, both China and the United States have benefited. China is quietly expanding its presence in the Detroit-based and American market. Enticed by the bargain price of real estate and the high level of advanced engineering talent, (including over 15,000 Mandarin speaking engineers in the Detroit area alone) Chinese auto companies and suppliers are opening plants and offices in and around Motown, where they hope to one day compete with the likes of Volkswagen, Honda, Toyota, and Hyundai by selling cars to American buyers. The People’s Republic of China plays a pivotal role in the global supply chain now and it is likely only to grow.
Not All Investments Pan Out
In 2009, U.S. Energy Secretary Steven Chu announced a $528.7 million taxpayer subsidized loan to Fisker Automotive for the development of two lines of plug-in hybrids touted as positioning America to win the clean energy revolution. The political claim, at the time, was that this taxpayer subsidized “investment” would result in thousands of American jobs. Secretary Chu said, “This investment will create five thousand new American jobs and is another critical step in making sure we are positioned to compete for the clean energy jobs of the future … Plug-in hybrid electric vehicles could revolutionize personal transportation and cut our dependence on foreign oil, not to mention give us cleaner air and less carbon pollution.”
Today, it looks like China is winning the green revolution. Yet, America is benefitting as well. Chinese investment is creating jobs and wealth in America as well as the state that put the world on wheels. At the same time, our domestic car companies continue to make inroads in China as well.
In May, Ford’s China sales grew by 32 percent. The US-China 2022 report produced by ChinaUSFocus.com demonstrates that “continued bilateral cooperation is the most beneficial way forward for both countries, and projects what can be achieved from a continued economic relationship by 2022.”
The China wave will continue to lap at our shores. We can do nothing and be swamped or learn to surf and ride the wave. Surfs up, America!
Tom Watkins has had a lifelong interest in China sparked by a great fourth grade teacher. He has worked for over three decades to build economic, educational and cultural ties between the US and China. He is advisor to the University of Michigan Confucius Institute, Michigan’s Economic Development Corporation and Detroit Chinese Business Association. He can be reached at tdwatkins88@gmail.com or on Twitter @tdwatkins88.
