China Law Blog

We are always posting on how Chinese outbound investment is growing and will continue to grow.  This is, after all, part 12. 

For the last year or so, the Chinese government has been increasingly talking about ramping up outbound foreign investment and Chinese companies have increasingly been doing just that.  The government recognizes few Chinese companies have the skills required to be true global players and that acquiring foreign assets and operating overseas will hasten the learning curve, just as it did for Japanese companies in the 80's and Korean companies in the 90's. It also makes for good world politics. 

The strenghtening Yuan will only accelerate this trend as it reduces the Yuan price of Chinese overseas purchases and investments. 

My Seattle based investment banker friend who is always calling me with ideas for China purchases called me again this week to say he thought Eddie Bauer (which is on the block) would be perfect for a Chinese company.  I think he is right. 

John Ray, another investment professional, agrees the Chinese are coming and he is also of the view that Americans should be out there marketing for it.  Mr. Ray heads up an Atlanta based corporate advisory company, Heritage Capital Advisors, "focused on those sectors we know, while shunning what we haven't a clue about."  Mr. Ray wrote an opinion piece for the Atlanta Busines Chronicle calling on his home state of Georgia to increase its marketing to bring Chinese companies in.  Mr. Ray's editorial is entitled "It's Time to Ask for the Business---in Chinese," and it can also be found on his company's Heritage Tidbits Blog. 

Mr. Ray equates China outbound investment today to that of Japan in 1979 and he calls for the state of Georgia to aggressively court Chinese inbound investment just as the more aggressive states courted Japanese investment back then: 

In 1979, President Jimmy Carter told a meeting of the nation's governors to go to Japan and persuade the Japanese "to make in the U.S. what they already sell in the U.S." In other words, "Go ask for the business."

Lamar Alexander, then the newly elected governor of Tennessee, went to Japan, selling the advantages of locating manufacturing facilities in Tennessee. By doing so he followed the example of Georgia Gov. George Busbee, who had helped formed the Japan-Southeast U.S. Association a few years earlier.

Nissan became convinced of those rewards, one of which was to bypass the rising protectionist backlash against Japanese imports. In February 1981, the company broke ground in Tennessee on a $300 million truck plant originally slated to employ 1,300. This plant was just the first trickle in a Japanese investment tidal wave. In Tennessee alone, approximately 160 Japanese-owned facilities now employ roughly 42,000 people, representing an investment of more than $10 billion.

Today's hottest global growth story, of course, is China. Seemingly the only thing growing faster than China's economy is the ambition of its entrepreneurs. I have yet to visit China without encountering multiple entrepreneurs seeking to expand to the United States. Many of these businessmen already understand that becoming a major employer of U.S. workers in U.S.-based facilities is an effective way to crack the world's most important market.

With protectionist sentiment in the United States now focused on China, Chinese entrepreneurs and economic development officials are scouring this country; ambitious and knowledgeable Chinese businessmen are visiting Southeastern states while being courted by officials from those states on their own trips to China.

What Mr. Ray says about Georgia can be said of nearly the entire United States and countless other countries as well.  China is engaged in massive outbound investment efforts right now and though it will take more than just asking for that business, those who ask are more likely to receive. 

For those interested in reading more on Chinese outbound investments click here and here.