Globalization Can Be a Two Way Street
If not entirely a one-way street, then globalization and the trading relationship between the United States and China has been no more than a road with three lanes.
On two of those lanes, a vast amount of goods have flowed from China in giant container ships to ports in the United States. On the third, money and goods have flowed from the United States to ports—and banks—in China. Largely as a result of its trading and investment activity with the United States, China has amassed over $1.3 trillion of foreign currency reserves.
Although the financial impact of China’s emergence as an economic superpower is not as apparent to everyone, what is clear to all is that U.S. manufacturers have been severely impacted by China’s rise. Whether one believes that the shift of manufacturing jobs to low-cost countries like China is good or bad, the fact is that a shift has occurred. But, recent events suggest that a fourth lane in the relationship between the two countries is now being built.
On the capital front, China recently invested $3.0 billion into Blackstone, the large private equity firm, and most observers believe that this is only the beginning of more equity-type investments in developed countries like the United States. It now appears that Chinese companies, in their quest to become global players, are also making strategic investments in the United States, bringing both capital and jobs.
In September, Sany Heavy Industry Co. signed a memorandum of understanding with the state of Georgia to build a manufacturing facility with an investment of $60 million.
The company announced that it plans to acquire over one million square meters of land in Georgia’s Peachtree City to build the plant.
The factory would make Sany the first Chinese construction equipment maker to own a plant in North America, home to industry giants like Caterpillar Inc. “The project in the U.S. will further boost our competence in the global market, especially in the U.S., which is the world’s largest construction machinery market,” said He Zhenlin, vice-president of Sany Group.
For those who believe that all manufacturing jobs in the United States are destined to move elsewhere, Sany’s announcement indicates that is not necessarily the case. Just like Toyota and the other Japanese car makers have found, Sany has decided that it is smart to put plants in a large market like the United States as a way to increase market penetration. While there are certainly cost advantages in China, there are also advantages to being close to the end consumer.
This does not mean that U.S. companies will be immune from competition from their Chinese counterparts—-in fact, Chinese companies may become more of a threat due to moves like Sany’s. (Toyota is gaining market share at the expense of U.S. carmakers as a result of its growing manufacturing presence in North America.) But it does mean that whether U.S or Chinese companies emerge as the winners, the U.S. economy has a fair shot of winning as well. Ask the State of Georgia. I am sure that they are feeling like winners today.
