Chinese companies opening plants in U.S.

PINE HILL, Ala. – Burdened with Alabama’s highest unemployment rate, long abandoned by textile mills and furniture plants, Wilcox County desperately needs jobs.

They’re coming, and from a most unlikely place: Henan Province, China, 7,600 miles away.

Henan’s Golden Dragon Precise Copper Tube Group opened a plant here last month. It will employ more than 300 in a county known less for job opportunities than for lakes filled with bass, pine forests rich with wild turkey and boar and muddy roads best negotiated in four-wheel-drive trucks.

“Jobs that pay $15 an hour are few and far between,” says Dottie Gaston, an official in nearby Thomasville.

What’s happening in Pine Hill is starting to happen across America.

After decades of siphoning jobs from the United States, China is creating some. Chinese companies invested a record $14 billion in the United States last year, according to the Rhodium Group research firm. Collectively, they employ more than 70,000 Americans, up from virtually none a decade ago.

Powerful forces – narrowing wage gaps, tumbling U.S. energy prices, the vagaries of currency markets – are pulling Chinese companies across the Pacific. Mayors and economic development officials have lined up to welcome Chinese investors. Southern states, touting low labor and land costs, have been especially aggressive.

In the case of the Pine Hill plant, tax breaks, some Southern hospitality and a tray of homemade banana pudding helped, too.

“Get off the plane and the mayor is waiting for you,” says Hong Kong billionaire Ronnie Chan.

In March, Dothan, Alabama, held a two-day U.S.-China manufacturing symposium, drawing dozens of potential Chinese investors. On sale were T-shirts reading: “Ni hao, y’all” — combining the Chinese version of “hello” with a colloquial Southernism.

Chinese executives wandered around during a street festival, experiencing Americana by snapping photos of vintage ’60s muscle cars. A Chinese company, in a deal negotiated before the symposium, announced it would bring a 3D printing operation to Dothan.

The United States and China have long maintained a lop-sided relationship: China makes things. America buys them. The U.S. trade deficit in goods with China last year hit a record $318 billion. And for three decades, numerous U.S. manufacturers have moved operations to China.

The flow is at least starting to move the other way. One reason is that in the past decade, the cost of labor, adjusted for productivity gains, has surged 187 percent at Chinese factories, compared with just 27 percent in the United States, according to Boston Consulting Group.

In addition, Chinese electricity costs rose 66 percent, more than twice the United States’ increase. The start of large-scale U.S. shale gas production has helped contain U.S. electricity costs.

And the value of China’s currency has risen more than 30 percent against the U.S. dollar over the past decade. The higher yuan has raised the cost of Chinese goods sold abroad and, conversely, made U.S. goods more affordable in China.

Those rising costs have cut China’s competitive edge. In 2004, manufacturing cost 14 percent less in China than in the United States; that advantage has narrowed to 5 percent. If the trend toward higher wages, energy costs and a higher currency continues, Boston Consulting predicts, U.S. manufacturing will be less expensive than China’s by 2018.

Cost isn’t the only allure. As Chinese companies build more sophisticated products, they want to work more directly with U.S. customers.

“Being close to the marketplace is good for everybody,” says Loretta Lee, a Hong Kong entrepreneur who just opened a shoe factory in Tennessee.

Sometimes, political pressure nudges Chinese firms into investing in America. Tianjin Pipe, for instance, began building its Texas plant after the U.S. imposed sanctions against Chinese-made pipes in 2010, notes Thilo Hanemann, Rhodium’s research director.

Golden Dragon and the future Dothan 3D join two other Chinese firms in Alabama: Continental Motors in Mobile makes piston engines for aircraft. And Shandong Swan USA in Montgomery makes saws for cotton gins.