The cost advantage
John Ling, president of the Council of American States in China, makes a living finding prospective investment locations in the U.S. for Chinese companies.
“In every project I help to land in the U.S., if I cannot present evidence that they can lower their costs, my chance of doing [the deal] in the U.S. is almost zero,” he told CNBC. “Cost is driving this.”
American workers earn a lot of money compared to their counterparts in China, but the U.S. can still come out on top when costs are taken as a whole.
For Hangzhou-based textile manufacturer Keer Group, American workers were paid on average twice as much as workers in China, according to the firm’s president, Zhu Shanqing. In aggregate, however, producing in the America is significantly less compared to China.
“In the U.S., land, electricity and cotton are all much cheaper,” Zhu said. “My production cost per ton of textiles is 25 percent lower [there].”
In addition, he said, wages for him in China have been increasing 30 percent each year for much of the past decade. He has pledged $220 million to build and expand a facility in South Carolina and plans to eventually move the entire business to the U.S. where he plans to employ more than 500 people by the end of the year.
Add in the possibility of a lower corporate tax to as little as 15 percent, as proposed by Trump, and the U.S. becomes a no-brainer for many manufacturers Zhu said.
“If Trump cuts the corporate tax even by 5 percent, companies that left America a few years ago, will be back,” he said.
The stable business environment
Compared to many other countries, especially in the emerging world, China has been a stalwart of stability for manufacturers for decades. However, the U.S. does have some selling points that Chinese companies don’t really like to talk about on record: better air, safer food, straightforward access to funding and a government that doesn’t intervene.
U.S. state politicians will pitch to a foreign company to bring in the jobs, but once they’ve invested, it’s said the American officials leave them alone. Once a company is in the U.S., Chinese or not, it is treated like any other company.
The proximity to the U.S. consumer
Chinese consumers are the spenders of the future, but Americans are the buyers of today. As Chinese companies grow in stature and expand their footprint overseas, many of them see the U.S. market as the holy grail.
Guangzhou-based GAC Motor, which is eyeing the U.S. market, says partnering with a stateside automaker or even building its own American plant one day is in the cards.
“If we can succeed in the U.S. market, we can succeed anywhere in the world,” President Yu Jun told CNBC, adding that having facilities in the U.S. makes a manufacturer more nimble to respond to a customer’s needs.
“No matter if it’s a good economy or a bad economy, the U.S. is still the number one market for any company in the world,” Ling explained. “So certainly, naturally you want to be closer to where your customers are.”