Asia Business Podcast The Evolution of Chinese Investment in the United States
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Full show Transcript below Summary and Timestamps
Introduction:
In a recent podcast episode featuring John Ling, an expert in Chinese manufacturing investment in the US, valuable insights were shared regarding the challenges and opportunities faced by Chinese entrepreneurs venturing into the American market. With years of experience and a deep understanding of the dynamics between China and the US, Ling provided a comprehensive overview of the mindset of Chinese investors, the factors influencing their decisions, and the strategies for success in this competitive landscape.
Understanding Chinese Manufacturing Investment:
Ling emphasized that Chinese companies venturing into the US market are often among the best in their industry, driven by competitiveness honed in the challenging business environment of China. Despite facing initial setbacks such as trade wars and market disruptions, these companies demonstrate resilience and long-term vision, making them well-positioned for success.
Challenges and Strategies:
One of the key challenges highlighted by Ling is the cultural and operational differences between China and the US. Chinese entrepreneurs must navigate unfamiliar territory, including regulatory frameworks, labor markets, and business practices. However, by building strong relationships with local communities and government entities, as well as seeking partnerships with experienced US companies, they can overcome these challenges and thrive in the American market.
The Importance of Communication:
Effective communication emerges as a crucial factor in the success of Chinese manufacturing investment projects. Ling emphasized the need for clear communication channels between stakeholders, including investors, local governments, and community members. By fostering open dialogue and addressing concerns proactively, Chinese entrepreneurs can build trust and collaboration, essential for long-term success.
Building Name Recognition:
Another important aspect discussed by Ling is the significance of name recognition in attracting Chinese investment. States and communities that proactively position themselves as attractive destinations for manufacturing projects can capitalize on this trend. By offering incentives, streamlining regulatory processes, and fostering a welcoming environment, they can attract investment and boost economic growth.
Conclusion:
In conclusion, John Ling's insights shed light on the complex dynamics of Chinese manufacturing investment in the US. By understanding the mindset of Chinese entrepreneurs, recognizing the challenges they face, and implementing effective strategies for collaboration, states and communities can leverage this opportunity for mutual benefit. With the right approach, Chinese investment can drive economic growth, create jobs, and foster cross-cultural understanding.
Timestamps
0:00 - Introduction to the Episode and Guest
1:29 - John Ling's Journey and Chinese Investment in the U.S.
6:20 - The Evolution of Chinese Companies in the U.S. Market
14:30 - Understanding the Operational Success of Chinese Companies in the U.S.
21:30 - The Role of Local Teams and Cultural Differences
30:45 - The Importance of Local Partnerships and Government Engagement
39:50 - Concluding Thoughts and How to Connect with John Ling
Transcript
Art Dicker: Welcome everybody to another episode of the Asia Business Podcast. I'm your host, Art Dicker. Today we have the absolute pleasure of being joined by John Ling. John is Managing Director at LinVest LLC. LinVest is a boutique investment advisory firm doing strategy, site selection, lending services, and incentive negotiations for inbound foreign investors into the United States, particularly specializing in the greater China market.
Art Dicker: Welcome, John.
John Ling: Thank you, Art. Good morning. How is the sunny San Diego? It's always beautiful every time I went there.
Art Dicker: There are a few clouds in the sky today, but yes, normally it's picture-perfect here. And how are things in South Carolina?
John Ling: It's nice, a beautiful Carolina blue, as people say here, and it's warm and nice.
John Ling: And so enjoy catching up. Yeah.
Art Dicker: Perfect weather for a podcast. Yes. Yes. Yeah. So you have so much experience. We met at the SelectUSA conference, which is just a great event that helps foreign investors come, and lots of folks that work with foreign investors coming into the United States. And I know that's what your business is all about.
Art Dicker: And with the particular focus on greater China, like we said, so I think there's going to be plenty of things to talk about. You and I have talked earlier about the, there's quite a few Chinese companies coming to the United States these days for various reasons. So we're going to get into that in a lot of detail.
Art Dicker: My first question for you is if you can walk the audience through a bit, how we've gone over the years in different phases maybe of Chinese investment in the United States. Let's put, let's say maybe the last 20 years or so, what's a kind of a rough timeline of the types of investors and the types of investments that Chinese investors have been making over the last 20 years or so into the United States?
John Ling: Sure, Art, I don't know about you, but I'm not someone who really ever tried to plan ahead and I never thought about a so-called career path. So I came to this country in '91, and my first job was to market pre-engineered metal buildings to China. Every one of our clients at that time was a manufacturing project.
John Ling: So my first encounter with inbound Chinese investment project was a company by the name Fuyao glass. Oh yeah. They are the largest auto windshield maker in the world. I met them in '95; actually, their first project in the U.S. was in Greenville, South Carolina, where I currently live, and my wife's first job in the U.S. happened to work for the company, and the company was only less than $100 million a year in revenue. But yet the owner had quite some ambition to go abroad. He invested, I don't remember the exact dollar amount, but he was building a 130,000 square foot building, mostly for distribution and warehousing.
John Ling: And also thought about going into a joint venture with Saint-Gobain, which is at that time, probably the largest auto windshield maker in the world, a French company. It never worked out. So they failed in that first effort. And, but having said that there, the gentleman or the company was featured in a documentary.
Art Dicker: Oh, yeah, I know. Yeah. And I think the name of the movie is that American Factory, if I remember right. And they even won some kind of Oscar documentary film award. And now they employ about, I would say 3,000 or so employees in the U.S. in multiple States. Right. Including Ohio, Illinois, and South Carolina, maybe one or two more.
John Ling: And my real first greenfield manufacturing project was Haier, the home appliances maker who later bought GE home appliances for $5.3 billion, and they were one of my clients in China. So they thought about coming to the U.S. in the late '90s to build a refrigerator factory. And of course understandably at that time people in China or in this country were wondering how in the world a Chinese company did do they just lose their mind coming by coming to the U.S. to build a factory? It should be another way around and remember in the mid or late '90s, you might as well say it's several generations ago in China. When you talk about, actually, there were hardly any so-called wholly-owned multinational company in China, but most say it's so-called joint venture.
John Ling: And so they were, as far as I can remember, I think they are the first greenfield Chinese investment coming to this country, and I joined South Carolina Department of Commerce in January 2000. At the beginning of this century, and I worked at the head office for 5 years, and then they saw the opportunity in the Chinese market.
John Ling: The governor and his commerce sector at that time, it was actually their idea upon seeing what's happening in China, and what kind of companies or opportunity I have introduced them to. So, they basically decided to set up a state office in China, and the state sent me to Shanghai in '05 to open the state office.
John Ling: The first five, six years, there were some activities, but nothing shaking or big. I think, to me, I think the turning point was in around 2012. I think that's as we may remember, that was after the financial crisis here, and the economy globally was not in great shape. The Chinese government at that time seemed to have handled it better during that period.
John Ling: So the economy seems to have sustained that hit. And also as Chinese business people travel to the world, they saw some opportunities and they saw, they also noticed the cost of manufacturing between the West, or in this case, the U.S. and China has been have been narrowed. So, they, so there are several companies that started the move.
John Ling: So, I think that's why I think 2012 is a turning point as we start seeing. Projects ranging from tens of millions or hundreds of millions. Coming to this way, and I work with quite a few of them, uh, in the following years, COVID shut down a lot of things. So for about two, three years, nothing much happening, but the past two years, contrary to most people's thinking, when we see what's happening around the globe, and especially in terms of the geopolitics.
John Ling: Or really the relationship between China and the U.S. most people may have thought this can. This could have almost stopped the inbound. Projects from China or great China region, but. What I have been seeing is that again, I have never seen such a strong pipeline. Never seen this many projects, so we are actively engaging with many different projects by taking them to visit different parts of the U.S. to help them to find the most suitable location for their project.
Art Dicker: That's a great introduction. That's, you've lived the timeline that I was trying to get the audience to understand. So that's, so you're the perfect person to talk about it, and amazing. And you mentioned Haier that you worked with there.
Art Dicker: It's not surprising that they're one of the first to come to the U.S. I know their CEO and founder was famous for taking a sledgehammer to break the refrigerators in the factory in the early days when it was moving over from a state plan company to a private company. Set the tone. And so it's not surprising that that founder would have the energy and creative thinking to come to the U.S. so early.
Art Dicker: And that's a wonderful success story. You mentioned they bought the GE appliance brand, and they were able to maintain the quality because it's a wonderful brand that they make good things. And then you also mentioned one thing I wanted to emphasize for the audience. You mentioned around 2012, there was a switch where Chinese companies realized that the cost differential was not so big anymore between the U.S. and China.
Art Dicker: And I guess that's largely because not so much anything that changed in the U.S., but China was becoming more expensive in labor costs and things like that. That's correct.
John Ling: Again, me and my family lived in Shanghai at that time. And as I talked to many business people, they, no matter, they either came here for business or for leisure. And as I go, say, go to a department store, a restaurant, and very often they find. That it's really reasonable, a lot of things they are purchasing. And as they talk to their counterparts here or customers here and ask different questions, they find out actually for most parts, yes, there are still a gap between the wages in China and the U.S., but at the professional level, especially at the management level, there's Actually, the gap is even narrower.
John Ling: So, when you consider, of course, when you are planning a project, you just don't look at the wages. You look at the overall picture. I guess my selling points at that time is that. When you think about how expensive. Then price is in China in Asia. And how hard for you to secure even a parcel of land, the utility costs, especially the electricities and the shipping costs, the freight costs, especially these days, duty.
John Ling: Yeah, of course. At that time, nobody knew what happened in the following years or decade. I, again, I'm not taking pleasure in saying this, but every project I have WordPress. At the moment, up to today, every one of them is very glad that they made the move because say a few projects even told me that had they not made the move, their whole company might have gone by.
John Ling: Now I am talking about, for example, one is a company that invested 200 million dollars in South Carolina, making the most basic goods, which is cotton yarn. And the owner told me had they not come the company, at least there is yarn spinning business in China. You know, is that actually, so he's very happy to have made that move.
John Ling: I also have another client. They make the. What do you call that? Drill? It's an industrial drill. And some hand tools they bought us. They bought a company here in 2009 for about right under 30,000,000 dollars and. That was again, they were trying to, they saw some opportunity in this country after or during the financial crisis.
John Ling: They went ahead and made a, to them, that's a huge purchase because it's not a big company. They actually just sold the business last year. I'm quite sure they made 10 times more, actually much more than that. And however, their, their business in China actually had not been growing as fast