COLUMBIA — With two Chinese manufacturers building plants in the Midlands, it’s an opportunity for the state to attract more business as the country continues to invest its huge capital overseas, according to a University of South Carolina economist.
Chinese investors are looking carefully around the United States for opportunities, and that includes South Carolina, said Doug Woodward, an economist at the Darla Moore School of Business at USC.
China is holding a tremendous amount of capital thanks to its massive growth, fueled largely by export success, Woodward said. Like European businesses did in past decades, Chinese companies are looking at the advantages of doing more business overseas, including manufacturing.
“It’s the beginning of a wave of Chinese investment, because that is where the money is,” Woodward said.
Two China-headquartered companies announced plans in the past two years to build fiberglass manufacturing operations to Richland County. China Jushi announced a $300 million investment in May 2016, with its fiberglass operation projected to create about 400 jobs. Construction of its plant is under way in an industrial park off Shop Road.
China Hengshi Foundation Co., another fiberglass manufacturer, announced in May 2017 that it would invest $11.1 million in capital to build a facility on Atlas Road making fiberglass fabrics, which is expected to create 48 jobs.
Neither is the first Chinese-owned company to invest in the Midlands. Haier has been making refrigerators and other appliances in Kershaw County since 1999. The company has acquired the GE Appliances banner and will using that name going forward.
Acquiring General Electric’s appliance business gives the company something that Chinese companies lack in the United States, Woodward said: a recognizable brand.
European and Japanese manufacturers have an advantage with brands such as BMW or Toyota being well-known in the U.S. market. But China is looking to make up ground by investing in business such as Swedish automaker Volvo, which is owned by Zhejiang Geely Holding Group and is investing $1 billion million to open its first U.S. plant in Berkeley County.
China Jushi and China Jushi don’t have companies in South Carolina that they are supplying with their fiberglass products, according to Jeff Ruble, director of the Richland County Economic Development Office. South Carolina is a good location for fiberglass work because of the sand that is available for industrial processes and the right kind of clay, which can be brought in from Georgia, Ruble said.
One important factor according to Ruble that helped the county land two plants in succession was a common executive: Zhang Yuqiang is chairman of both companies. Often in economic development, selling one key executive on a location can lead to sealing a deal, Ruble said.
The two companies differ in that Jushi has more direct government investment while Hengshi is more of a private concern, Ruble said.
Many Chinese firms have government backing, but they still show independent decision-making as “hybrid” companies seeking profit in the marketplace, said Sali Li, an associate professor at the Moore School who has researched the actions of multinational companies.
“They behave more like a private company,” Li said.
Chinese companies are a bit more likely to invest where other Chinese firms have set up roots and can offer them information and support, Li said. Having other companies to connect with helps them have confidence in their due diligence before investing, he said. That could prompt other Chinese firms to follow the two fiberglass companies to consider the Midlands if they find success here.
The S.C. Commerce Department has made a priority of developing better contacts in China for years, including operating an office in Shanghai, Woodward said. Getting deals made in China requires knowledge of the region and well-established contacts there, Woodward said, and Commerce has a strong plan and staff in place to get that done.
What does South Carolina have to offer Chinese investors? Li offers one answer: Despite China’s socialist structure, they like that South Carolina is a right-to-work state with low labor participation.
Part of that is because Chinese companies always are concerned about maintaining low costs, but it also relates to their long hours of operation. Chinese firms often follow the model of a workday that stretches from 9 a.m. to 6 p.m., six days per week, Li said. Unions are more stringent about time off and overtime than Chinese management is used to, he said.
Chinese companies are looking to expand thanks to what Woodward calls the country’s “astounding rate of growth,” which means finding ways to build things closer to the markets they are serving.
“The next logical step is foreign direct investment,” Woodward said.
That investment could be accelerated by a weakening dollar, which makes it more affordable for Chinese companies to buy overseas. China has in recent weeks allowed its currency, the yuan, to gain value as the dollar has lost some value overseas, according to The Wall Street Journal.
Chinese executives who look at South Carolina like the business climate and infrastructure here, once they learn more about a region they might not be familiar with initially, Woodward said. “What they see they like,” he said.
While other manufacturers might be watching to see how the two Richland County fare, investment-minded Chinese are looking for opportunities across all categories of business, including real estate, he said. They are eager and inquisitive to learn more about opportunities and the rules for doing business in South Carolina, Woodward said.
“There’s nothing they’re not interested in,” he said.