China Ramps Up U.S. Investments, From Straws To Semiconductors | KERA News

China Ramps Up U.S. Investments, From Straws To Semiconductors

May 17, 2016
Originally published on May 18, 2016 1:28 pm

Chinese companies are on a major shopping spree in the U.S. They're set to break a record for investment deals this year, snapping up everything from entertainment companies to methanol plants.

Most of these investments are takeovers, though Chinese companies are also expanding their existing operations to the U.S.

They include Fuling Plastic, one of China's largest manufacturers of plastic cutlery, cups and straws. Its biggest customers are fast food chains in the U.S.

Fuling Plastic has been supplying American customers for about eight years, manufacturing in China and shipping its products to the U.S. A year ago, Fuling opened up operations in Allentown, Pa., transforming an empty 80,000-foot warehouse into a factory for its plastic straws.

Now, at any given time of the day or night, machines at the plant are churning away, producing and wrapping drinking straws. Gilbert Lee, who runs the Allentown operation, says that's a lot of straws over the course of one year.

"It would be a few hundred million," he says. "We have already made enough straws to go around the world one and a half times."

Lee, a U.S. citizen born in Hong Kong, says it was a strategic business decision to open up an American factory. He says it will save shipping time and millions of dollars in freight costs.

"First of all, a lot of our customers really like the fact that our products are made in the U.S.," he says. "And then we'll be able to cut about a month of delivery time because it had to ship by ocean freight" when the straws were made in China.

Seeking More Chinese Business

Fuling Plastic currently employs 43 people, including a few workers from China. A new factory is important in a place like Allentown. For decades it was an area dominated by heavy manufacturing. But a generation ago, large corporations moved elsewhere and jobs dried up.

Don Cunningham, president of the Lehigh Valley Economic Development Corp., says his group lobbied hard to get Fuling Plastic into the area in the hopes that other Chinese companies would follow.

"My belief was that once one comes and breaks the ice, so to speak, there's a [comfort level] that others will tend to look at the same area," he says. "If someone's already done the due diligence and it seems to work, then you have a better chance of a pipeline behind it."

Fuling Plastic may be the first Chinese company in the area, but it represents a fast-moving trend playing out more broadly.

Some acquisitions have been very large, like the nearly $2 billion purchase of the Waldorf Astoria hotel by a Chinese insurance company.

This year, direct Chinese investment in the U.S. is projected to hit a record $30 billion. That's double last year's record.

"We're now looking at 90,000 Americans that are directly employed by Chinese organizations in the U.S.," says Steve Orlins, president of the National Committee on U.S.-China Relations, which co-authored a report studying the surge of direct Chinese investments over the past few years. He says Chinese companies have been scooping up all types of businesses.

"There is travel and leisure; we're seeing lots of investment in hotels," he says. "We've seen billions of dollars in investment in entertainment, automotive parts, semiconductors."

Still Relatively Small, But Growing Fast

Nicholas Lardy, with the Peterson Institute for International Economics, says Chinese investment is getting a lot of attention because it's increasing so rapidly. But it accounts for less than 5 percent of the investment coming into the U.S.

"Our traditional trading partners like the U.K., Canada and so forth are the really big investors," he says.

Still, Lardy says Chinese investment will continue to grow. He says in the past, it was mostly state-run Chinese companies that invested abroad. Now, thanks to economic changes by Beijing, it's mostly private companies on a buying spree.

"Some of them are expanding because of opportunities. Some are expanding because of low prices. But the underlying factor I think is liberalization," he says. "I think private companies have better access now to borrow money to make the acquisitions."

Back at the Fuling Plastic factory, Gilbert Lee says the future of the company is looking very positive. It became a public company listed on the Nasdaq last year, which will help give it an image as being reputable and transparent.

"We have a lot of very loyal customers already. But new customers, seeing that we have established our manufacturing base in the U.S., now they want to do business with us," he says, adding that the company is due to expand over the next year, doubling its work force.

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News of a big shopping spree now. Chinese companies are set to break records for investment deals in the U.S. They've been snapping up everything from entertainment companies to methanol plants. Along the way, they've created tens of thousands of jobs for Americans. NPR's Jackie Northam reports.

JACKIE NORTHAM, BYLINE: Twenty four hours a day every day, plastic drinking straws shoot from this hopper into individual wrappers. That's a lot of straws.

GILBERT LEE: It would be a few hundred million. We have already made enough straws to go around the world one-and-a-half times.

NORTHAM: That's Gilbert Lee. He runs Fuling Plastic here in Allentown, Pa. It's one of China's largest manufacturers of plastic cutlery, cups and, yes, straws. Its biggest customers are fast food chains in the U.S.

LEE: Those two machines make Burger King straws. This is Wendy's. Wendy's straws are - they have one red stripe.

NORTHAM: Fuling Plastic has been supplying American customers for about eight years, manufacturing the products in China and shipping them to the U.S. Then a year ago, Fuling opened an operation in Allentown, transforming an empty, 80,000-square-foot warehouse into a factory for its plastic straws. Lee, a U.S. citizen born in Hong Kong, says it was a strategic business decision to save shipping time and money.

LEE: First of all, a lot of our customers, they really like the fact that our products are made in the U.S. And then we will be able to cut over a month of delivery time because it has to ship by ocean freight.

NORTHAM: Fuling Plastic employs 43 people. All but a few are locals. A new factory is important in a place like Allentown. For decades, it was an area dominated by heavy manufacturing. In the '90s, large corporations moved elsewhere and jobs dried up. Don Cunningham, the president of the Lehigh Valley Economic Development Corporation, says his group lobbied hard to get Fuling Plastic into the area in the hopes that other Chinese companies will follow.

DON CUNNINGHAM: My belief was that once one comes and brings the ice, so to speak, there's a comfortability (ph) that others will tend to look at the same area.

NORTHAM: Fuling Plastic may be the first Chinese company in Pennsylvania, but it represents a fast-moving trend playing out across the U.S. Some acquisitions have been very large, like the nearly $2 billion purchase of the Waldorf Astoria Hotel by a Chinese insurance company. This year, direct Chinese investment in the U.S. is projected to hit a record $30 billion. That's double last year's record.

STEVE ORLINS: We're now looking at 90,000 Americans that are directly employed by Chinese organizations in the United States.

NORTHAM: That's Steve Orlins, president of the National Committee on U.S.-China Relations, which co-authored a report studying the surge of direct Chinese investments. He says Chinese companies have been scooping up all types of businesses over the past few years.

ORLINS: We've seen billions of dollars invested in entertainment, automotive parts, semiconductors.

NORTHAM: And the list goes on. Nicholas Lardy with the Peterson Institute for International Economics says Chinese investment is dwarfed by that of other countries like Japan and the U.K., but it will continue to grow. Lardy says in the past, it was mostly state-run companies that invested outside of China. Now, thanks to economic reforms by Beijing, it's mostly private companies on a buying spree.

NICHOLAS LARDY: Some of them are expanding because of opportunity. Some of them are expanding because of low prices. But the underlying factor, I think, is liberalization, that private companies have better access now to borrow money to make the acquisitions.

NORTHAM: Back at the Fuling Plastic factory, Gilbert Lee says the company is gaining new customers now that it's established a U.S. base.

LEE: Now they want to do business with us. So the future is looking very positive.

NORTHAM: Lee says the company is due to expand over the next year, doubling its workforce. Jackie Northam, NPR News. Transcript provided by NPR, Copyright NPR.