Liu spent about $500,000 for seven acres in Spartanburg — less than one-fourth what it would cost to buy the same amount of land in Dongguan, a city in southeast China where he runs three plants. U.S. electricity rates are about 75% lower, and in South Carolina, Liu doesn’t have to put up with frequent blackouts.
About the only major thing that’s more expensive in Spartanburg is labor. Liu is looking to offer $12 to $13 an hour there, versus about $2 an hour in Dongguan, not including room and board. But Liu expects to offset some of the higher labor costs with a payroll tax credit of $1,500 per employee from South Carolina.
“I was surprised,” said the 63-year-old president of Shanxi Yuncheng Plate-Making Group. “The gap’s not as large as I thought.” Liu is part of a growing wave of Chinese entrepreneurs expanding into the U.S. From Spartanburg to Los Angeles they are building factories, buying companies and investing in business and real estate.
True this is still a relatively small macro economic factor. However, it is growing. The primary push so far is economic – not a move to lean manufacturing (as far, as I can tell) to put manufacturing close to the customer. What is the biggest factor? The USA is spending more than $400 billion every year more than it produces. The only way to consume more than you produce is to borrow (and take an obligation to pay back those that lend you money) or sell the stuff you own to those that are producing more than they are consuming. China is producing more than $200 billion more than it consumes every year.
For decades foreigners have taken debt from Americans that promise to pay back later (to pay for what they consumed). Now many are deciding that these debts are not attractive investments and are looking to own productive assets in the USA (companies, factories…). Which is smart on there part in my opinion.
Related: The Budget Deficit, the Current Account Deficit and the Saving Deficit – Moving Jobs to Silicon Valley from India – $2,540,000,000,000 in USA Consumer Debt – How to Keep the USA Manufacturing – Top 10 Manufacturing Countries 2006
Warren Buffett’s 2004 Annual Report:
From the original article:
By comparison, U.S. investment in China was $2.6 billion last year, down from $3 billion in 2006, said China’s Ministry of Commerce. But many Chinese entrepreneurs prefer to keep a low profile, and experts say those figures don’t include a lot of investment activity happening under the official radar.
This is showing how low investment in companies in the USA by Chinese has been. Hundreds of billions of dollars has been invested in USA debt each year (largely US government debt). Another thing I like about the original article is the positive view the investor has of manufacturing in the USA. From our previous post, New Look American Manufacturing: