This month, a Delaware bankruptcy judge approved Wanxiang America’s $256.6 million bid for battery manufacturer A123. Several Republican senators demanded an investigation. The Strategic Materials Advisory Council, a coalition of former U.S. military leaders and industry specialists, urged the U.S. government to block the sale on the grounds that the United States would now be dependent on China for advanced battery technology.
This despite the fact that A123’s defense-related battery project was hived off and purchased by a U.S. firm. The deal had become even more of a political football because in 2009 A123 had been awarded a $249 million Energy Department grant, though Wanxiang will forgo the remaining $120 million. Meanwhile, the U.S. company that lost to Wanxiang in the bidding is now lobbying Congress, using the fear of Chinese competition as a way to persuade the government to stop the sale so it can buy A123 at a lower price.
But instead of a case study about the treacherous designs of Party Central, Wanxiang’s story is, rather, a tale of the complex development of Chinese-style capitalism. It underscores that as U.S. ties with China deepen, which they inevitably will, Americans are going to need to learn how to distinguish sketchy Chinese firms from good ones if this relationship is going to work. Blanket buzzwords like “Chinese company” don’t help.
Take the story of Wanxiang America’s boss. In 1989, Ni Pin was in college in Zhejiang province in China and marched, like millions of Chinese students, for a freer country. The next year, as part of a government crackdown on dissent, he was “set down” to work “among the broad masses” and purge his thoughts of any pro-Western sensibilities. The Communist Party assigned Ni to a privately owned auto-parts company called Wanxiang, run by a boisterous chief executive named Lu Guanqiu.
Within two years, Ni had moved to Kentucky to earn a PhD in economics (obviously, the brainwashing hadn’t worked). Within a few more years, Ni would drop his studies, marry the boss’s daughter and start Wanxiang’s business in the United States. From his base in Elgin, Ill., Ni has powered Wanxiang’s U.S. subsidiary to $2 billion in annual revenue.
Wanxiang has succeeded here because it marries U.S. strengths in high-tech manufacturing and design to the speed and appetites of China’s market. Wanxiang’s success in bidding for A123 wasn’t surprising; the company has a pattern of smart purchases of distressed U.S. manufacturing assets. It has another pattern, too: keeping the jobs in the United States. Ni’s office is lined with thank-you letters from state governors because he has saved American jobs. Wanxiang America employs some 5,000 Americans, more than any other Chinese company.
While Wanxiang was one of the first Chinese companies to do this, the field is crowded now. In 2000, Chinese firms employed fewer than 2,000 Americans. Today that figure is 27,000. The Rhodium Group, a consultancy that studies this issue, estimates that if current Chinese investment trends continue, between 200,000 and 400,000 Americans will be working for Chinese companies by 2020. Rhodium also found in an October report that there was no evidence that Chinese companies were stripping U.S. assets and taking the jobs home. Chinese money is behind where Americans watch movies (AMC Theaters is owned by a Chinese company) and where they live (a Chinese bank wants to fund San Francisco’s biggest real estate project since the 1906 earthquake).
Of course, some of the American paranoia is justified. Chinese companies have been involved in worrisome activities, and the FBI has identified corporate espionage from China as a serious threat to U.S. competitiveness. IPO listings of Chinese firms on Wall Street are basically on lockdown following a series of accounting scandals involving Chinese businesses.
Some Chinese companies have struggled to sell products up to a standard that Americans expect. And the U.S. government has raised security concerns about some Chinese firms — such as the telecommunications companies Huawei and ZTE — that have vied, so far unsuccessfully, to land big contracts with telephone companies that provide federal services.
But when all is said and done, to me, living in China and witnessing the energy emanating from what Peter Fuhrman of China First Capital calls “the Big Bang of Chinese entrepreneurship,” the words “Chinese company” mean “opportunity” — for the U.S. economy and its workers.