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An outsourcing reversal: Chinese firms in US

Places from Richmond, Va., to Barstow, Calif., are already wooing foreign direct investments.

By Ron SchererStaff writer of The Christian Science Monitor / January 28, 2005



NEW YORK

In March, a delegation from Richmond, Va., will visit three cities in China to hold a seminar on how to profit in America.

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In Lockhart, Texas, a delegation of Chinese executives last week ate barbecue as town officials showed them potential factory sites.

In Massachusetts, officials are talking to the Chinese about investing in the fishing industry, which can supply Asian consumers with herring and mackerel.

Across the country, mayors are brushing up their chopstick skills in an effort to win Chinese investment. Individual counties and cities are setting up trade offices in Beijing and other Chinese cities. Some places are enlisting their Chinese-American citizens to translate and show visitors that their city cares about Asian culture.

Wooing the Chinese is important because in November, the United States had a trade imbalance of $158 billion with China, double what it was three years ago and growing by $3 billion to $4 billion every month. It dwarfs the second largest trade deficit - with Japan - by more than $80 billion. To date the Chinese have used some of that money to invest in US Treasury bills. However, economists believe it's important that China diversify and lengthen its investments.

"It produces a better, more balanced and stable relationship," says Mark Zandi of Economy.com. "It is a healthy sign."

There is no question the Chinese are coming, even though news reports have said that the Bush administration may raise national-security objections to the $1.2 billion acquisition of IBM's PC business by Lenovo, a Chinese computer company. Observers expect further investments in US companies involved in oil and gas production and appliances.

"This is the first inning of a very long game," says Don Straszheim, an economist who follows China trends in Santa Monica, Calif.

Chinese officials don't dispute that the future is likely to include some significant investments in the US. "The Chinese have adopted a policy to go global," says Zhanling Yuan, an economic and commercial consul in New York.

To date, most of the money has gone the other way - from the US to China - as companies moved their manufacturing operations. According to the State Department, China received $53 billion in foreign direct investment in 2003 for a cumulative total of $501 billion. By way of contrast, the Xinhua News Agency estimates Chinese direct investments in other countries totaled $1.8 billion for the first 11 months of 2004, and most of that was in Latin America.

That is expected to change, however. Liang Shuhe, vice director general at China's Department of Foreign Trade, says acquisitions may be a "shortcut" for Chinese companies to develop a brand. That will be the case with Lenovo, which will be selling IBM's "ThinkPads" (which are already made in China).

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