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This Chinese Company Moved Production to South Carolina to Save Money

wsj-china-carolina

Part of Beijing’s strategy was to encourage Chinese companies to invest overseas as a way to build their global presence to find markets for excess supply. The strategy also could boost Chinese exports. That’s because foreign firms generally look to home companies for supplies.

Bob Davis reports: South Carolina officials have fished successfully in foreign waters for investment over the past decade. Now they’re even reeling in catches from China, a nation blamed throughout the state for battering South Carolina’s economy over the past two decades.

“No one could have imagined five years ago that China would look at the cost structure in South Carolina and say it’s more profitable to locate in South Carolina than in China,” says Auggie Tantillo, a South Carolina native who heads the National Council of Textile Organizations.

 [This has been cross-posted from WSJ’s Real Time Economics blog]

For years, South Carolina’s business leaders were at loggerheads with China. Roger Milliken, the former chief executive of textile giant Milliken & Co., bankrolled unsuccessful efforts to block China’s entry into the World Trade Organization because he believed Chinese competition would undermine U.S. firms. Former Sen. Jim DeMint, who won office as a free trader, says that many people in his home state believed they were losing their jobs because of low-cost Chinese competition.

But now Chinese investment in the state, although now at modest levels, is starting to build. Chinese investors are buying golf courses near Myrtle Beach, and setting up yarn, plastic and chemical companies elsewhere. In one of the biggest investments, Chinese-owned Volvo Car Corp. last year said it would invest $500 million to build a new vehicle plant near Charleston.

So far, Chinese firms have invested about $300 million in South Carolina and employ about 1,000, according to Rhodium Group, a New York research group. That’s a small fraction of the approximately 130,000 South Carolina workers who now work for foreign-owned firms in the state, mainly from Germany, France and elsewhere in Europe. South Carolina’s success in snagging foreign investment is the subject of a Wall Street Journal front-page story.

[Read the full text here, at China Real Time Report – WSJ]

The state has focused on Chinese investment since at least 2001, said John Ling, who until recently headed the state’s Chinese investment efforts. “The breaking point,” Mr. Ling said, was in 2009 when China spent heavily to stimulate its economy and pull itself out of the global recession. Part of Beijing’s strategy was to encourage Chinese companies to invest overseas as a way to build their global presence to find markets for excess supply. The strategy also could boost Chinese exports. That’s because foreign firms generally look to home companies for supplies.

Few in Beijing knew much about South Carolina, Mr. Ling said, and what they heard often didn’t help. “It was always something not good—racial problems, lack of education” and no local Chinese community, Mr. Ling said.

Still, the state had a number of pluses: laid-off manufacturing workers looking for jobs, low wages, the modern Port of Charleston, good roads and a state government willing to give tax breaks and other benefits to foreign firms. “As soon as we sign a company, we custom-build a training program for them,” said the state’s commerce secretary…(read more)

Source: China Real Time Report – WSJ

–Bob Davis. Follow him on Twitter @bobdavis187.

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