Chinese Enterprises Enjoy Increasing Investment Opportunities in the US Manufacturing Sector

Chinese Enterprises Enjoy Increasing Investment Opportunities in the US Manufacturing Sector

A Special Interview with CODA’s General Secretary HE Zhenwei

On 10 November 2016, Secretary General of the Chinese Overseas Development Association (CODA), HE Zhenwei, had an interview with the Electric Economic Observer (EEO), an online business information platform, on the subject of Chinese outbound investment towards US under the new situation. Mr. HE told EEO that opportunities in the US manufacturing sector have considerably increased compared to previous years.

The details of the interview are as follows:

EEO:     Please share with us your insights on Chinese outbound investment outlook in the US.

  • HE:     Chinese enterprises are enjoying more opportunities to invest in the U.S. . Trump’s ambition to restore the US economy will require more cash to be pumped into the economy. While funds may be sourced from both domestic and international capital markets, the US government would need to take steps towards attracting more foreign capital. This would offer tremendous opportunities for Chinese enterprises wishing to invest abroad. Cathy Feig, the Commercial Officer of US Embassy in Beijing, came to see me yesterday. She congratulated CODA on its performance in hosting this year’s China Overseas Investment Fair, and voiced her support to encourage Chinese enterprises to invest in the US.

EEO:     In your opinion, will the US set higher thresholds on Chinese capital that intends to enter into the US market?

  • HE:     As a general rule, developed countries set higher thresholds on capitals from less developed countries. Although the US conducts investment screening and reviews on Chinese capital, such review procedures only apply to a few cases. If the US follows its plan to reinvigorate its economy, it will need to boost investments. The US is a highly developed country and has well established legal systems and policies, which would not change simply because of a party change. 
  • As for Chinese capital, the US government is more concerned about defending its own interests. Chinese investors may find it difficult to invest in industries that would arouse national security concerns; for example, Huawei has been prohibited from entering the US telecommunication market. It won’t be any different now, however Chinese investors can do more lobbying and have a better strategy.  In many situations money is not the only solution. For instance, we can have more exposure for our businesses; particularly focus on lobbying some members of parliament to support us.

EEO:         Trump has committed to bringing back lost manufacturing jobs from China, and proposed to cut American corporate income tax from 35% to 15%. He also proposed to levy a one-off tax of 10% on overseas gains of American enterprises, and use such tax to bail out those less developed states. How will such commitments, if fulfilled, impact the Chinese manufacturing sector and US enterprises?

  • HE:     The US government’s objective is to create more jobs and reinvigorate its manufacturing sector. This is consistent with the “international production capacity cooperation” scheme the Chinese government is strongly promoting. The US’s plan of cutting corporate taxes down to 15% is not only good news for its domestic manufacturing sector. It is an incentive for Chinese enterprises to promote production cooperation with their American counterparts, especially since the Chinese government has been calling enterprises to transfer manufacturing facilities overseas. I see no reason why this should not proceed. 
  • As to its impact on American enterprises, in my opinion, sometimes politicians present arguments during election campaigns without really meaning them. I do not think Trump would bring back all the manufacturing jobs from China to the US, particularly given the globalization trend nowadays. What he committed to doing simply represents his attitude during the elections, where his key point was to boost the economy to make America great again.  

EEO:     What industries or areas would most welcome Chinese capital?

  • HE:     First would be the manufacturing sector. Chinese investors are facing numerous opportunities from this sector. For example, China’s manufacturing brands Haier and Wanxiang have already gained a great presence in the US market. This means that there are opportunities for both Chinese and American enterprises. 
  • The second is the agriculture industry. The US is seeking foreign capital in agricultural areas a large number of their farm villages and wineries have already been acquired by Chinese investors. The acquired companies have the opportunity to sell their products in the Chinese market. This will bring tremendous opportunities for Chinese investors.
  • Another area of interest is the high-tech sector. The US has cutting-edge technologies, particularly in green energy and new energy cars sector. Currently, many cutting-edge technologies in the US are facing difficulties due to capital constraints. Chinese enterprises are however, cash rich and looking for opportunities to invest in the sector. Cooperation between American tech companies and Chinese investors would be beneficial for both parties as Chinese enterprises are looking to acquire more advanced technology and US companies require funds to further develop their technology.  
  • Lastly, the US needs to tackle their aging electricity infrastructure, and refurbish the outdated airport facilities and poor tourism infrastructure. This will present opportunities for Chinese enterprises to invest in American infrastructure projects. However Chinese investors would have to get approval to get involved. 

EEO:     Will the Federal Reserve slow down on plans to raise interest rates? Please share with us your insights in the financial market turmoil yesterday? Will the turbulence continue?

  • HE:     The US Dollar still reigns in the global financial market. In my opinion, the chance of an interest rate increase is still high. The whole stock market dipped yesterday morning, but bounced back in the afternoon. Stock market investors have their own opinions. I think that the stock market will soon return to normal.
  • Everything will return to normal. Politicians and Presidents are distinctive identities. When a politician runs for the presidency, he/she makes proposals and commitments with the aim to win the election, however, such proposals and commitments may not influence the whole American economy. In conclusion, there might be some changes, however, the US will not experience any radical changes.