Where Is China Investing In The U.S.?
In spite of the recent debt downgrade, financial woes and flailing economy, investors from China see the United States as a stable - and desired - place to put their money.
According to a recent report in the New York Times, investors from China are "snapping up luxury apartments" and are planning to spend hundreds of millions of dollars on commercial and residential projects like Atlantic Yards in Brooklyn. Chinese companies also have signed major leases at the Empire State Building and at 1 World Trade Center, the report said.
Besides the huge surge in real estate purchases, where else are the Chinese investing in the U.S.?
TUTORIAL: Bond Basics
While the rest of the world was wringing its hands over global debt woes this summer, China dipped deep into its pockets and purchased $5.7 billion in U.S. Treasury bonds in June, increasing its holdings to $1,170 billion. That followed purchases of $7.3 billion in May and $7.6 billion in April, according to data from the U.S. Department of the Treasury. (For related reading, see The Advantages Of Bonds.)
Economic researchers at the Center for China in the World Economy at Tsinghua University said the purchase was an act of "choosing the best of a bad bunch," implying that China's options for investing such a large amount of money were limited, but still worth it. Analysts are predicting that China will continue to be a major player in the global debt markets, an investment that helps keep U.S. interest rates low and finances America's enormous debt.
Chinese business owners are expanding their operations by opening plants and factories in the U.S. for a number of reasons. Purchase prices are cheaper - in some cases by more than half of what land and/or buildings would cost in China. Operation costs, such as electricity and other utilities, are also less expensive, making a move to America quite desirable for many private businessmen. One major difference is labor costs. The Federal minimum hourly wage in the United States is $7.25. Wages in China are regulated by local governments and are often quite low. In Beijing, the average monthly income is $177. (For related reading, see Investing In China.)
Chinese businessmen, however, are often willing to pay American workers more because they see eventual success in the larger picture of investment in the U.S.
American companies have reached out to global partners in industry for decades. One industry of substantial interest for the Chinese is green technology. Automobile companies are preparing for the wave of the near future in electric cars, as well as the recent push for increased energy-efficient manufacturing, including solar panels and lithium batteries. With the fierce debate raging over the future of China's "garbage technology" for hybrid and electric cars, Chinese investors are looking to put their money in a more stable green tech market beyond its borders.
Texas led the rest of the states in dollar terms, and oil is the name of the game in the Lone Star State. After a thwarted effort several years ago to buy into a California-based energy company, state-owned Chinese energy giant, CNOOC bought a multibillion-dollar stake in Chesapeake Energy Assets last year. Chesapeake Energy Assets holds 600,000 acres of South Texas oil and gas fields. The move is expected to create 20,000 American jobs by 2012.
As the Chinese continue to expand their real estate holdings, construction companies are winning contracts for major projects in and around those sites. In 2010 alone, Chinese construction companies signed $1.04 billion worth of contracts with various U.S. business partners and completed $836 million worth of projects in multiple states.
One company, for example, has won contracts on major public works projects in the greater New York City area. China Construction America has won bids for projects including the Tappan Zee and Alexander Hamilton Bridges, the No. 7 subway line extension and the $91 million Metro-North Railroad station at Yankee Stadium.
The Bottom Line
China has been investing in countries around the world for years. Now it's got its sights set on the U.S., where some analysts say its investments could reach $2,000 billion by 2020. There remains an anti-China sentiment among Americans, who fear loss of jobs as well as a threat to our country's security. (To learn more about the risks of foreign investing, see Why Country Funds Are So Risky.)