Chinese companies are still interested in the US, but face bigger hurdles

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When Pin Ni arrived in Washington, he told his cab driver how cold it was. The driver told him it wasn’t the temperature, but the wind that made him feel so cold.

Ni, president of Wanxiang America and vice president of the US China General Chamber of Commerce (CGCC), drew a parallel between the stormy weather in the US capital and worsening Washington-Beijing relations.

“This is interesting for our business. The temperature is still there, the business logic is still there, and the business opportunity is still there,” Ni said. The chill, he argued, came from political rhetoric. “The best way to face the wind is to try not to face it. .. If you focus on what you are supposed to be doing, then you should survive just fine.

Ni delivered his views as a keynote speaker at the CGCC reception at the recent SelectUSA event in Washington. His cautious optimism is shared by many Chinese companies and their American counterparts who are still optimistic about expanding into the US market.

Attendance at the SelectUSA 2023 conference, an event bringing together US state officials and foreign investors, set a record of more than 4,400 people. China had the third largest delegation, with 80 members, behind India and Taiwan.

More Chinese companies would have participated if obtaining a US visa had been easier, according to people familiar with the matter.

Ni’s positive outlook was reflected in the results of the CGCC’s annual survey of Chinese companies in the US, released to coincide with the event. More than half of respondents said they met or exceeded their goals last year, while more than 80% said they were satisfied or neutral with all aspects of the US business environment. About 67% of Chinese companies said they have expanded their business and investments in the country. All companies in the consumer discretionary sector reported expanding their operations in the United States and increasing investments.

Many Chinese companies that attended this year’s trade event are looking for manufacturing facilities in the United States, often to service an existing customer base in the country. All is not serene, however, with US geopolitics and local issues clouding the horizon.

According to the CGCC survey, about 81% of Chinese companies cited bilateral relations as the top challenge in the near future, followed by inflation and uncertainty in the US economy.

Benjamin Yin, executive director of construction hardware maker Trigo Enterprises, is one of those faced with the dilemma of wanting to expand into the United States but not knowing where.

Yin told Nikkei Asia that her company ships 80% of its products to customers in the United States, but has plants only in China and Vietnam. Sales to US customers have increased over the past three years, he said, but rising shipping costs and other logistics issues have left it unprofitable. For example, in 2020 his company spent $300,000 to book a plane to ship $300,000 worth of cargo.

This article is taken from Nikkei Asia, a global publication with a uniquely Asian perspective on politics, economics, business and international affairs. Our correspondents and external commentators from around the world share their insights on Asia, while our Asia300 section provides in-depth coverage of 300 of the largest and fastest-growing publicly traded companies from 11 economies outside Japan.

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“We are looking to establish a factory here, transfer some production to mitigate our risks, be closer to our customers, and hopefully win more customers,” Yin said. “In the long run, maybe instead of being a [original equipment] manufacturer, we can sell our products under our brand name”.

Yin said he is looking into several possible positions, but feels torn between Republican-controlled “red” states and Democrat-led “blue” states.

“Red states are more business friendly, they cut taxes, but the challenge is, if you look at the polls, 60% of people in red states see China as an enemy, we don’t want to go to a state to establish a factory and people think that we [are] the enemy or the spy,” Yin said. “The blue states are much friendlier to the Chinese, but [have] higher taxes, more unions, higher overall costs, and perhaps more security concerns.

“Maybe we need to find these purple states,” Yin added.

Some red states are moving to close their doors to Chinese investment: Florida, South Carolina and Oklahoma are among those that have recently banned or restricted Chinese citizens from buying property.

Others, however, are more welcoming. Idaho Republican Senate Majority Leader Kelly Anthon said the state still has an office in China to help boost Idaho’s exports and attract foreign direct investment.

“At the state level, we’re just trying to make sure we’re doing the right thing for Idaho,” Anthon said. “Some of that geopolitical stuff that’s out there [are] probably above our salary grade.

In between there are states like Oklahoma. Governor Kevin Stitt told Nikkei Asia that the state would follow the federal government’s lead in treating Chinese companies with caution.

“There is already a law that prohibits foreigners from buying agricultural land [in Oklahoma], it’s something we are concerned about and are monitoring,” said Stitt. “Obviously we will not stop them [Chinese] investment from entering, but we will not go out and pursue [them].”

A version of this article was first published by Nikkei Asia on May 24, 2023. ©2023 Nikkei Inc. All rights reserved.

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