Foreign direct investment

This post focuses on a topic that was brought up
in my broader-ranging post on “Investment and finance”,
namely, the peculiar asymmetry of investment flows
between the United States and other countries, e.g., China.
During the post-1960 period,
for reasons which have never, to my knowledge, been fully examined,
U.S. financial and corporate leadership made “off-shoring” almost a holy grail,
making billions of dollars of investment in Latin America and, especially, Asia.
They not only gave away their proprietary knowledge to these other nations,
in most cases they even trained the foreign workforce
in how to take jobs from Americans.
When American politicians and leaders now, in the 2010s,
decry “economic inequality”,
they should look at, among other things, the decisions made
with the acquiescence and approval of the chattering classes
and the political, financial and economic decisionmakers

that placed shareholder values over stakeholder values.
Did you ever see a New York Times columnist (e.g. Friedman and Krugman)
decry that shift?
On the other hand, some pundits have decried it.
Those economic patriots known to me include, especially,
Clyde Prestowitz, Eamonn Fingleton, Pat Choate, and Patrick Buchanan.

Now we are getting a reverse flow, where other countries, e.g., China,
evidently having profited so much from previous trade and currency flows,
now have so much excess currency
that they are making investments in the U.S.

In any case, here are some articles which discuss these issues:


In Blue-Collar Toledo, Ohio, a Windfall of Chinese Investments
New York TimesNew York Times, 2013-12-27

TOLEDO, Ohio —

The realization was as surprising as it was momentous.
Toledo, long known as Glass City, needed glass,
and it could no longer be manufactured here quickly enough.

So Toledo turned to China to make the 360 panels, 1,300 pounds each,
needed for an extension to the Toledo Museum of Art.
Some here resented the move after China supplanted the United States
as the world’s top glass producer.
But in the process, city leaders began an improbable and remarkable relationship.

Over the past seven years, the ties between Toledo and China have grown numerous.
Chinese companies have paid more than $10 million in cash
for two local hotels, a restaurant complex and a 69-acre waterfront property.
Mayor Michael P. Bell has taken four trips to China in four years in search of investors.
His business cards are double-sided, in English and Chinese.

Huaqiao University, one of the largest higher-education institutions in China,
recently signed an agreement to open a branch in Toledo.
There have also been preliminary talks between local officials and a Chinese company
about an arrangement in which industrial tools would be produced in China,
shipped for assembly in Toledo and labeled “made in the U.S.A.,”
which would allow them to be sold at a premium.

Toledo has also reached a deal for rarely seen Chinese antiques
to be shown at the museum next year,
and there are plans for the city to host a Chinese technology trade fair
at its convention center.
In all, more than 100 Toledo business people have traveled to China in recent years,
and hundreds of Chinese investors have been welcomed in return,
treated to special performances by members of the Toledo Symphony Orchestra.

“For little old Podunk, Ohio,
it’s been pretty phenomenal what we’ve been able to do,”
said Dean Monske, president and chief executive of the Regional Growth Partnership,
a local economic development group.

Toledo is hardly the only American city to make common cause with China.

Chinese companies made $12.2 billion in direct investments in the United States
during the first nine months of 2013.
That is up from $7.1 billion in all of 2012, which was itself a record at the time,
according to the Rhodium Group, a New York-based consulting company.
Chinese investors have been buying commercial and residential real estate in Detroit,
inexpensively because of the city’s financial troubles,
and have agreed to finance a $1.5 billion waterfront development in Oakland, Calif.
Earlier this year, on a trade trip to China, Gov. Jerry Brown of California
discussed Chinese investment in the state’s troubled $91 billion bullet train project.

Oklahoma, South Dakota and Tennessee have also increased their push for Chinese investment.

But Toledo, a largely blue-collar city of about 280,000,
appears to be punching well above its weight at a time when
mayors from Philadelphia to San Francisco are returning from China empty-handed.

“They looked on a map, figured out where we were sitting and saw the benefit,”
said Mayor Bell, a gregarious former University of Toledo defensive lineman,
referring to Toledo’s location near a number of large cities in the United States and Canada.
“They could see that this town needed to be helped a little bit
and that it could be on the upswing —
that there was potential, that they could do something,
that it could be incredible and it would not probably take a whole lot to do.”


[I certainly do not know the reasons why
the Chinese decisionmakers chose Toledo for their investment,
but I very seriously doubt that it was because
“this town needed to be helped a little bit”.
But if it were,
how sad it is that American cities need to rely on Chinese goodwill for their prosperity.
One may also wonder why the Chinese see good investments in Toledo
but Wall Street does not.]