China starting to export jobs to U.S.
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 in Pine Hill, Ala., last month. It will employ more than 300. “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, including Michigan.
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.
Michigan, too, has been active in attracting Chinese companies. More than 100 of them have invested more than $1 billion since 2000, according to Rhodium, and Gov. Rick Snyder has been active in trying to recruit more Chinese businesses to the state. Michigan ranks among the top 10 U.S. states in Chinese investments.
Most of the companies with locations here are automotive-related; many are suppliers that want to be in close proximity to their Detroit automaker partners.
Chinese-owned Nexteer Automotive, which makes steering systems and related components, has locations in Troy and Saginaw, the latter of which serves as its headquarters. SAIC Motor Corp. — one of the Big Four Chinese automakers — has a location in Birmingham.
“Years ago, GM and Ford came to China,” said Michael Lie, chairman of the Beijing Dixing Taihe Investment Group, at a forum earlier this month. “Now, China’s coming here.”
Snyder has made multiple trips to China in hopes to sell companies on the idea of what he calls Michigan’s friendly business climate.
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.
■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 lopsided 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, China entrepreneur.
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.