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Weak Dollar Fuels China's Buying Spree Of U.S. Firms
While the money coming from China is still limited -- $9.6 billion in 2007, up from $66 million the previous year, according to Thomson Financial -- it is reminiscent of the Japanese and German buying sprees of U.S. firms in the 1970s and '80s.
One place where the trend is playing out is South Carolina, where nearly 21 percent of the manufacturing labor force works for foreign companies, the biggest proportion in any state except Hawaii.
It's also a place with high unemployment -- 6.6 percent statewide and 10 to 15 percent in some counties, according to December 2007 figures. South Carolina has also led the fight against outsourcing of jobs overseas. But in recent years the opposite has occurred: Chinese companies have invested in South Carolina -- albeit on limited terms.
Haier, a Chinese appliance maker, has a refrigerator factory in the state. There's also a Chinese-owned chemical factory, printing company and general construction company, among others, that in total employ thousands of South Carolinians, according to John X. Ling, the state's representative in China.
The low cost of land, cheaper than in China's major cities, and electricity -- which tends to be about a third or a fourth the cost in China -- are attractions. So is the idea of being closer to American consumers, their primary customers.
Zhou, 54, who purchased the auto refurbishing company in Spartanburg, said another factor has to do with politics.
"We look at the example of the Japanese company Honda. . . . The U.S. was against the dumping of Japanese cars at low prices, but Honda was not affected because it had operations in the United States," he said.
Zhou is the founder and chairman of Guanshen Auto Parts Manufacturing in Wenzhou, a city about 260 miles southwest of Shanghai that has an almost mythical reputation for capitalist wealth. When U.S. business delegations come to China seeking investments, Wenzhou is a popular stop.
Guanshen Auto is a leading supplier of constant-velocity axles, which transfer power from a vehicle's transmission to its wheels. Lovely's company, Powerline, refurbished old CV axles and sold them.
Zhou made his initial purchase of a stake in Powerline in 2005, a few months after the Chinese government did away with its currency's long-held peg to the dollar and its value began to rise. As the dollar continued to weaken in 2007, Zhou bought more of the company, renaming it GSP North America after the Chinese initials of the parent company. After having paid a total $1.3 million, Zhou now owns 85 percent of the South Carolina factory.
He said that the factory employees were apprehensive about working for a Chinese company. "People objected. When we went to visit the factory, American workers said, 'We work for Chinese now. We don't have face,' " Zhou recalled.
Lovely, who remains chief operating officer of the company and still owns 15 percent, himself was apprehensive. "People said, 'You're very gutsy to do that.' . . . It was hard for other people to understand. People think there's no law over there" in China, he said.
Dick Adams, 57, whom Zhou hired to be in charge of sales and marketing at GSP North America, said the company is proving to employees, the community and the state of South Carolina that they are "good Chinese."
When Zhou took over, he initially operated the factory Chinese-style, 24 hours a day -- with a day shift and a graveyard shift. But the workers complained about working in the middle of the night, so now the factory just keeps regular daytime hours.
"You have Chinese that come in here and just want to take, take, take and not give anything. They'll come in here just to get an order and run away. GSP hasn't done that. They have come and invested millions of dollars in buildings and people and distribution," Adams said.
Researcher Wu Meng and staff writer Michael Fletcher in Washington contributed to this report.