Who would have thought? Chinese companies are starting up cotton mills in America. Chinese investment in America makes sense to these businesses because for every dollar required to manufacture in the USA it costs 96 cents to manufacture in China. The New York Times reports on how Chinese textile mills are setting up shop in the USA.
Once the epitome of cheap mass manufacturing, textile producers from formerly low-cost nations are starting to set up shop in America. It is part of a blurring of once seemingly clear-cut boundaries between high- and low-cost manufacturing nations that few would have predicted a decade ago.
Textile production in China is becoming increasingly unprofitable after years of rising wages, higher energy bills and mounting logistical costs, as well as new government quotas on the import of cotton.
At the same time, manufacturing costs in the United States are becoming more competitive. In Lancaster County, where Indian Land is located, Keer has found residents desperate for work, even at depressed wages, as well as access to cheap and abundant land and energy and heavily subsidized cotton.
The end result of higher wages and other manufacturing costs in China is Chinese investment in America. How can US investors take advantage of this trend?
Skilled Labor and Chinese Direct Investment
We have written about direct foreign investment by US investors. The same principles apply whether one is moving money into or out of the USA to invest.
Foreign direct investment is done by folks with lots of money and the intention to stay a course and make a profit. If you are looking for offshore investment ideas, take a look at where foreign direct investment goes year after year after year. There have been changes afoot regarding where foreign direct investment is going. A very useful reference in this regard is the just published United Nations study, World Investment Report 2013.
The interesting thing today for investors is the amount of money flowing out of China now that the miraculous growth period is over. The Center of American Progress writes about Chinese direct investment in the clean energy business in the USA.
When China first joined the global economy in the 1980s, it did so as a low-cost export manufacturer. Consumers in the United States benefitted from access to low-cost goods from China, but some U.S. workers suffered from the loss of manufacturing jobs as factories relocated to China to take advantage of cheap labor costs. Now, Chinese labor costs are rising; export manufacturing is not as profitable as it once was; and Chinese firms are beginning to come to the United States, not for cheap labor-average U.S. wages are still much higher than those in China-but for access to other comparative advantages such as the highly skilled U.S. labor force and a growing U.S. consumer base for clean energy products. Chinese companies are now making direct investments in the U.S. energy economy that support American workers, build new clean energy infrastructure, and, in the case of clean energy projects, lower climate pollution. Many governors and city mayors across the United States view these projects as a boon for economic growth.
The article lists Chinese companies making forays into renewable energy in the USA. US investors will do well to follow Chinese investment in America to see what supplies, financing and technical support they need.