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Deep-Pocket Tiger Is Headed This Way
GRAND RAPIDS — A tiger is coming in the form of Chinese foreign direct investment in the United States, and it has already set foot on American soil.
Clark Hill Attorney D. Kerry Crenshaw, who handles matters involving securities, finance, mergers, acquisitions and international transactions, said Chinese foreign investment in this country is poised to explode. Chinese investors are holding substantial foreign currency reserves; they’re flush with cash, and the current U.S. trade account balance with China is growing all the time, he pointed out.
“What are they going to do with those dollars? They have to buy something, and they’re going to buy it over here,” Crenshaw said. “They’re starting timidly at first, but we think that there will eventually be a deluge of Chinese investments and that they’ll want to own everything over here — just like for a period of time the Japanese bought up Pebble Beach and Rockefeller Center and all that stuff.”
Crenshaw said he thinks that initially Chinese investors will be looking to buy manufacturing companies because it’s a sector they understand, but as investors become emboldened, they’ll be looking to invest in much more sophisticated technology.
“The level of international work even at a small firm like ours shows you the world is getting flatter and flatter, and that Michigan is getting into the 21st century big time, doing deals around the world,” Crenshaw said.
The Michigan Economic Development Corp. has sponsored six investment missions to China over the last three years, most recently in October. Harry Whalen, MEDC’s manager of international business/new markets, noted that in April the MEDC will host a “reverse investment mission” here with 11 Chinese companies. The sole purpose of the reverse mission is to convince those visiting companies that they should concentrate their investment efforts in Michigan, he said.
Chinese investors are flush with discretionary dollars, and the Chinese government is encouraging — and in some cases helping to back — their investment in the United States, Whalen said. A couple of years ago the Chinese government went on record to encourage their companies to invest in North America and has helped the MEDC identify specific Chinese companies to meet with on its investment missions, he noted.
“Just hold on,” Whalen said. “The tiger is coming.”
Whalen said that in Michigan the first wave of Chinese investment will be in manufacturing, particularly in the automotive sector, because of Michigan’s core strength in that sector. “We’re seeking investment from anywhere in the world to come to Michigan,” he said.
Whalen said the MEDC knows of 42 Chinese companies that have established sales, technical support or manufacturing operations in Michigan, although the MEDC doesn’t claim that to be an accurate number. For instance, the organization just recently learned from a private source that two new Chinese companies established sales and technical support offices in the greater Detroit area: Sumitech Engineering located a 16-person engineering office in Canton, and Wanxiang initiated a joint venture with Neapco, also in the Canton area.
That’s why three years ago the focus of the MEDC’s Shanghai office shifted from trade development — helping Michigan companies sell their goods and services in China — to foreign direct investment in Michigan, Whalen explained. Today, only 10 percent of the Shanghai office’s efforts involve trade development; the balance of its work is in promoting Michigan as the place for Chinese companies to invest, he said.
Ray De Winkle, vice president of Right Place Inc., has accompanied Whalen’s group on all six of MEDC’s investment missions to China. He said the Right Place has to first identify potential Chinese investors, build relationships with them, then show what Michigan has to meet their needs. The organization also has to ascertain that the foreign company is both serious and capable of pulling off its business plan.
The Right Place has promoted Michigan’s strength in the automotive industry, as well as in life sciences. De Winkle said that on the automotive side, Chinese foreign investors are looking at sales, distribution and engineering centers, and at potentially acquiring firms that are struggling so they can create a stronghold here. On the life sciences side, The Right Place is working with a couple of Chinese firms.