Luring Chinese Dollars
Is Hawaii Getting Any?
While their representatives in Washington bash China, American cities are going all out to lure Chinese investors. There is a strong disconnect between what happens on the local level and the things that go on in the hallowed halls of the U.S. Congress. The Wall Street Journal ran an article a couple weeks ago entitled “U.S. Cities Seek To Woo Chinese Investment.” (See Contrary Winds for yet another example of a U.S. senator bashing a Chinese investment.)
The point of the article is that U.S. cities and regions are in hot pursuit of China’s dollars, competing hammer-and-tong with each other and with foreign destinations attempting to do the same thing. The Journal mentions some of the successes: a new soy sauce plant in Georgia, telecom investments in Texas (they didn’t mention the wind farm), a theater in Missouri, a solar panel assembly plant in Illinois, and a shopping mall in Wisconsin. Direct investment from China was up to $1.24 billion in 2008 (the latest data available), but that was only .05% of total foreign direct investment in the United States that year – hardly worth mentioning. And it is only a bit more than 2% of China’s outbound investment. So why are our cities salivating over China’s dollar reserves? Same reason Willie Sutton robbed banks.
But it has been tough, and will be tough, to get the Chinese to plunk down those dollars in the United States. Not only are they more at ease with investing in Asian cultures, Beijing likes to put investment into developing countries and regions where they can gain influence that would not be possible here. Plus, and this is where our Washington politicos get the blame, we have created an atmosphere of uncertainty about how Chinese investments will be received. That started, perhaps, with the 2005 rejection of CNOOC’s attempts to invest in the U.S. oil industry. It makes some sense (unless you are a boy in the 3rd grade) that if you want to attract someone, you don’t loudly talk stink about them. But that is what so many politicians do these days.
The U.S. Department of Commerce has an “Invest in USA” program that may be helpful, but is hamstrung in many ways. Despite wanting to see inbound investment grow, the Federal Government cannot be seen as picking winners. That means that Commerce has to lean over backwards not to play favorites, so if two cities or states are going after an investor, Commerce can only provide the same information to both of them and cannot use its commercial officers in U.S. embassies to lobby overseas for one and not the other.
I’m usually quicker off the mark when I see an interesting article, but I wanted to research how Hawaii is doing in the race for Chinese investors. I was expecting to find some good success stories, especially because our governor brought in Ted Liu to be her director of the Dept. of Business, Economic Development & Tourism (DBEDT) expressly for his expertise of working with Chinese investors. Ted did this for years with an investment firm in Hong Kong, and led Hawaii into an office in Beijing and ventures in Shanghai to attract investors. (To be fair, investment was not their only purpose.) So I asked DBEDT what success they had in the past couple years. They didn’t know! I have to assume that means none, nada, a goose egg.
I then turned to contacts in the real estate business. Admittedly a very small sample, one residential realtor said she had heard that Chinese have bought some houses recently, though another realtor said she had heard nothing. A commercial realtor didn’t want to talk about it, which I assume means that she has an active Chinese client that doesn’t want to go public yet. My conclusion: if Hawaii is picking off any of the outbound investment from China, it’s pretty low key.
