VOL. 129 | NO. 122 | Tuesday, June 24, 2014
Ni Hao, Y'all: US Hinterlands Woo Chinese Firms
PAUL WISEMAN | AP Economics Writer
PINE HILL, Ala. (AP) – Burdened with Alabama's highest unemployment rate, long abandoned by textile mills and furniture plants, Wilcox County desperately needs jobs.
They're coming, and from a most unlikely place: Henan Province, China, 7,600 miles away.
Henan's Golden Dragon Precise Copper Tube Group opened a plant here last month. It will employ more than 300 in a county known less for job opportunities than for lakes filled with bass, pine forests rich with wild turkey and boar and muddy roads best negotiated in four-wheel-drive trucks.
"Jobs that pay $15 an hour are few and far between," says Dottie Gaston, an official in nearby Thomasville.
What's happening in Pine Hill is starting to happen across America.
After decades of siphoning jobs from the United States, China is creating some. Chinese companies invested a record $14 billion in the United States last year, according to the Rhodium Group research firm. Collectively, they employ more than 70,000 Americans, up from virtually none a decade ago.
Powerful forces – narrowing wage gaps, tumbling U.S. energy prices, the vagaries of currency markets – are pulling Chinese companies across the Pacific. Mayors and economic development officials have lined up to welcome Chinese investors. Southern states, touting low labor and land costs, have been especially aggressive.
In the case of the Pine Hill plant, tax breaks, some Southern hospitality and a tray of homemade banana pudding helped, too.
"Get off the plane and the mayor is waiting for you," says Hong Kong billionaire Ronnie Chan.
In March, Dothan, Alabama, held a two-day U.S.-China manufacturing symposium, drawing dozens of potential Chinese investors. On sale were T-shirts reading: "Ni hao, y'all" – combining the Chinese version of "hello" with a colloquial Southernism.
Chinese executives wandered around during a street festival, experiencing Americana by snapping photos of vintage '60s muscle cars. A Chinese company, in a deal negotiated before the symposium, announced it would bring a 3D printing operation to Dothan.
Among other Chinese projects in the United States that are creating jobs:
– In Moraine, Ohio, Chinese glassmaker Fuyao Glass Industry Group Co. is taking over a plant that General Motors abandoned in 2008 and creating at least 800 jobs. The site puts Fuyao within four hours' drive of auto plants in Ohio, Kentucky and Indiana.
– In Lancaster County, South Carolina, Chinese textile manufacturer Keer Group is investing $218 million in a plant to make industrial yarn and will employ 500. South Carolina nudged the deal along with a $4 million grant.
– In Gregory, Texas, Tianjin Pipe is investing over $1 billion in a factory that makes pipes for oil and gas drillers. The company expects to begin production late this year or early in 2015. It will have 50 to 70 employees by the end of this year and 400 to 500 by the end of 2017.
The United States and China have long maintained a lop-sided relationship: China makes things. America buys them. The U.S. trade deficit in goods with China last year hit a record $318 billion. And for three decades, numerous U.S. manufacturers have moved operations to China.
The flow is at least starting to move the other way. One reason is that in the past decade, the cost of labor, adjusted for productivity gains, has surged 187 percent at Chinese factories, compared with just 27 percent in the United States, according to Boston Consulting Group.
In addition, Chinese electricity costs rose 66 percent, more than twice the United States' increase. The start of large-scale U.S. shale gas production has helped contain U.S. electricity costs.
And the value of China's currency has risen more than 30 percent against the U.S. dollar over the past decade. The higher yuan has raised the cost of Chinese goods sold abroad and, conversely, made U.S. goods more affordable in China.
Those rising costs have cut China's competitive edge. In 2004, manufacturing cost 14 percent less in China than in the United States; that advantage has narrowed to 5 percent. If the trend toward higher wages, energy costs and a higher currency continues, Boston Consulting predicts, U.S. manufacturing will be less expensive than China's by 2018.
Cost isn't the only allure. As Chinese companies build more sophisticated products, they want to work more directly with U.S. customers.
"Being close to the marketplace is good for everybody," says Loretta Lee, a Hong Kong entrepreneur who just opened a shoe factory in Tennessee.
Sometimes, political pressure nudges Chinese firms into investing in America. Tianjin Pipe, for instance, began building its Texas plant after the U.S. imposed sanctions against Chinese-made pipes in 2010, notes Thilo Hanemann, Rhodium's research director.
Local officials here in southwestern Alabama went out of their way to lure Golden Dragon, which wanted to build a plant to make copper tubing for air conditioners.
At first, the company considered Thomasville, just across the border in Clarke County. But Thomasville didn't have any suitable sites after Golden Dragon decided it needed three times as much space as originally sought.
"I was almost in a panic," recalls Thomasville Mayor Sheldon Day.
But Day spotted an industrial park in Wilcox County with plenty of space. Day says he didn't mind the project going to a neighboring county. The plant would employ Thomasville residents, too.
And there was another benefit: Wilcox County – stuck with 15.5 percent unemployment, Alabama's highest – qualified for extra aid. It landed $8 million in state and federal grants to help build an annex road and sewage lines for the project.
Wilcox County also gave the company 100 acres of a 274-acre industrial park it bought for $1.2 million and a break on local property taxes. And Alabama offered to reimburse the company up to $20 million of its costs for building the $100 million factory. It will get the full amount if it ends up hiring 500 people, says George Alford of the Wilcox County Industrial Development Authority.
Local officials assembled all the public agencies and utilities Golden Dragon will have to deal with – from Alabama Power to the Port of Mobile – in one room on one day so company executives could have their questions answered at once.
The message, Day said, was: "If you come here, we'll hold your hand."
A banquet was organized with both traditional Southern fare, such as pinkeye purple hull peas, and Chinese dishes from Thomasville's New China Buffet restaurant.
When the visiting Chinese were seen devouring homemade banana pudding, "we took them the whole tray," Day says.
To prepare for future banquets, Thomasville is buying Chinese-style dining tables with built-in turntables.
Still, culture and language can remain a barrier. Local officials hastily replaced a black-and-white banner welcoming Golden Dragon after learning that the colors signified a funeral to the Chinese.
"Nobody wants a faux pas," says John Clyde Riggs, executive director of a regional planning commission.
Golden Dragon and the future Dothan 3D join two other Chinese firms in Alabama: Continental Motors in Mobile makes piston engines for aircraft. And Shandong Swan USA in Montgomery makes saws for cotton gins.
Alabama and other Southern states have followed the example of South Carolina, which nabbed the first Chinese plant in America 14 years ago when appliance giant Haier built a refrigerator plant in Camden.
John Ling, who runs South Carolina's Shanghai office, has an empty factory he's pitching to Chinese firms. It's been shuttered for four years – since the former owners closed it and moved the jobs to China.
"We will see more and more Chinese projects coming," Ling says. "It's at the very beginning."
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