Job creation seen as key to China's investment in U.S.

By John Pomfret
Washington Post Staff Writer
Wednesday, January 19, 2011; 12:00 AM

ELGIN, ILL. - Ni Pin believes in the United States. He's lived here for almost 20 years. His three children were born here. And, unlike many Americans, he thinks that even in the middle of the Rust Belt, there's hope for manufacturing in this country.

Ni runs the U.S. operations of a Chinese company called Wanxiang International, an auto parts giant with worldwide revenue of $8 billion. Over the past decade, Wanxiang America has purchased or invested in more than 20 U.S. firms and now employs more Americans - 5,000 at last count - than any other Chinese company.

It's for that reason - jobs, jobs, jobs - that Chinese President Hu Jintao will highlight Wanxiang's U.S. operations on Friday during an event in Chicago. Hu is hoping to show Americans that in addition to providing them with cheap goods, Chinese companies can also give them good jobs.

That issue is a critical one in an economic relationship that many Americans feel is unfairly tilted toward Beijing. In speeches last week, Treasury Secretary Timothy F. Geithner and Commerce Secretary Gary Locke both complained that China was not open enough to U.S. products, had not done enough to let the value of its currency appreciate against the dollar and was not respectful of U.S. intellectual property rights.

If the United States and China are going to begin to rebalance their economies, China needs to bring more jobs to the United States.

For years, there wasn't much progress. As of 2008, Chinese companies had invested less than a total of $5 billion in the United States, even as U.S. firms had made $50 billion in capital investments in China and employed tens of thousands of Chinese workers.

But since 2009, Chinese investment in the United States has exploded - jumping about 150 percent to almost $12 billion in total, according to new figures from Rhodium Group, a New York-based consultancy. Today, Chinese firms employ at least 10,000 Americans.

"While most people are asking, 'What's holding Chinese investment back?' that question is obsolete," said Daniel Rosen, a principal at Rhodium. "Chinese investment is taking off."

Among leading Chinese entrepreneurs, the United States was second only to Hong Kong in a survey of potential destinations for investments, said Clarence Kwan, the head of the China Services Group for Deloitte Touche Tohmatsu. "There is a real enthusiasm about the United States," he said.

That enthusiasm could be a boon for China's image in the United States. While China's economic growth has benefited U.S. companies and shareholders, most Americans still view the country warily. In a new poll conducted by The Washington Post and ABC News, 61 percent of 1,053 people surveyed said they viewed China's economy as more of a threat to U.S. jobs than an opportunity for new markets and investment.

Until China figures out a way to link itself to "the idea of job creation . . . you are always going to have a negative perception of China in the United States," said Drew Thompson, director of the Nixon Center's China Studies Program in Washington.

Thirty years ago, another Asian dynamo faced the same problem. Like China, Japan had an enormous trade surplus with the United States and was being attacked over unfair trading practices.

Then Japanese firms began pouring money into the U.S. economy. In 1980, Japan had $8.7 billion invested here. A decade later, the investment was up to $83.1 billion. While there was scare-mongering about a Japanese takeover of the U.S. economy, more than 50 congressional districts have benefited from Japanese funds and Americans grew accustomed to working for Japanese bosses.

But unlike Japan, which came to the United States with well-established brands such as Toyota, Honda and Sony, China has only a handful of companies that Americans might recognize. So while Japanese firms invested here to produce already-popular goods for the U.S. market, Chinese companies are seeking something else - American technology, management and ideas.

That has opened China to allegations of corporate piracy.

One of last year's biggest Chinese investments - a $1.08 billion injection from a Chinese oil company, CNOOC, into a Texas venture - raised concerns that the firm was making the deal to obtain U.S. shale oil technology, which it would then use to compete with American firms overseas.

"You Americans always think I'm here just to steal your technology," said Zheng Yongzhi, the deputy general manager of an air compressor manufacturer who was in the United States recently looking for investment opportunities.

Chinese firms have also seen significant investments blocked on national security grounds. CNOOC's investment last year into the shale oil fields marked the first time it had returned to the United States since its attempt to buy a U.S. oil firm, UNOCAL, was blocked in 2005. At the time, some lawmakers objected to the prospect of a Chinese firm owning U.S. oil assets.

Other Chinese firms, such as the telecommunications giant Huawei, have seen their investment plans stymied as well.

In 2008, Huawei's attempt to buy 3Com, another telecom firm, was rebuffed by the Committee on Foreign Investment of the United States, a unit of the Treasury Department.

And while Huawei has invested millions in the United States over the past few years and employs hundreds of Americans, it is still having difficulty selling its technology to U.S. telecommunications firms. In 2009, the U.S. government stopped AT&T from buying equipment for a new phone system because of concerns that Huawei might help the Chinese government tap into U.S. government lines. Last year, Huawei lost out on a contract to Sprint.

For their part, Chinese investors complain that they can't even get to America. In interviews, all five members of a Chinese delegation in the United States recently to look for investment opportunities had stories of having their visas rejected by the State Department.

"You don't want to close your doors and believe you can do everything yourselves," said Ma Xin, chairman of the Sinocome Group. "That's a ticket to becoming a Third World country."

Ni, the 46-year-old president of Wanxiang America, has had a much more positive experience, one that illustrates the bright side of Chinese business in the United States.

In 1989, after the crackdown on the student-led protests at Tiananmen Square, Ni graduated with a master's degree in business from a university in Zhejiang province.

Like all students who had participated in the demonstrations, Ni was dispatched for a year to work at the "grass roots" - part of a Chinese government program to purge the pro-Western thoughts from the minds of its youth. Ni was sent to work at Wanxiang.

Ni married the daughter of Wanxiang's chief executive, Lu Guanqiu, who along with other Chinese and American executives will meet with President Obama and Hu in the White House on Wednesday. Within three years, Ni found himself at the University of Kentucky pursuing a doctorate in economics. But Wanxiang needed help once it began selling its auto parts in the U.S. market. So Ni resumed working for his father-in-law.

Now, Wanxiang America has $1.3 billion in revenue. It has saved more than a dozen companies from bankruptcy. It has set up an investment fund to look for more opportunities in the United States. And while U.S. solar companies are pulling up stakes and moving production to China, Wanxiang helped set up a solar panel manufacturing plant in Rockford, near Elgin. Illinois proclaimed Aug. 12, 2002, Wanxiang Day because it kept manufacturing jobs there.

"I never say we're the solution," Ni said. "I say we're part of the solution."

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