According to a report released last week by the Rhodium Group and the National Committee on US-China Relations, Chinese direct investment in America is at an all-time high. Chinese companies now directly employ over 140,000 workers in the U.S. and, as of 2016, China had invested $46 billion in the United States—triple the amount in 2015. Chinese companies now have investments or assets in 425 out of 435 U.S. congressional districts.
China’s expansion into the United States is part of a larger global trend. The Chinese public and private sectors invested a combined $175 billion overseas in 2016, an increase of more than 50 percent from the previous year.
What does this surge in foreign investment reveal about China? And how does it change the way global brands need to think about their strategies? Here are three possible answers.
1. Test Your Assumptions
Since the 2016 U.S. presidential campaign, much of the rhetoric surrounding U.S.-China trade relations has been predicated on a familiar story: An influx of cheap foreign goods from China and elsewhere in the developing world are replacing what U.S. workers—increasingly unemployed because of globalization—used to manufacture and grow at home. China’s gain, this story would have us believe, is the U.S.’s loss.
This may be an effective bit of political rhetoric, but in the second decade of the 21st century, it’s a wobbly premise.
Take agriculture and food, the sector responsible for the largest percentage of M&A deals between the U.S. and China, about $7.6 billion last year. Pork, which is a staple for China’s 1.37 billion people, is something the country has to import, and the lion’s share of it from comes the United States.
Far from replacing U.S. jobs, Chinese growth has been vital to the livelihood of the more than half a million workers employed by the U.S. pork industry. China, the world’s largest pork importer, now depends on the U.S., the world’s largest pork exporter.
Dig into the data about the flow of goods and labor between the U.S. and China, the world’s two largest markets, and you’ll find a wealth of other surprises that run counter to our prevailing assumptions about globalization.
China’s foreign investments are surging in energy, tech, heavy industry, and consumer goods, so expect to see surprising changes in the global shape of those industries in the coming years.
2. Rethink Internal Communications
President Donald Trump’s campaign speeches about China, and the variations in his stances on a number of crucial issues, trade included, have made some Chinese companies uncertain about how to pursue their objectives in the U.S.
If changing policies prevent them from buying or investing in existing operations, which has been their prevailing strategy so far, Chinese companies may opt to build more businesses in the U.S. from the ground up. This could generate more U.S. jobs, but it would also create a new challenge: how to communicate and collaborate effectively with American workers.
No matter what direction future policy takes, one thing is certain: There will be an increasing need for people who are able to take the global strategy of Chinese companies and turn it into a series of tactical objectives and a set of messages that U.S. workers will connect with, help shape, and execute. Making sure that Chinese business practices adapt to the demands of working with unionized U.S. labor is one area where this will be crucial. And making sure that communications aren’t confused by cultural misunderstandings will be more challenging as Chinese investment moves beyond more internationally facing coastal areas such as Los Angeles and New York and into the U.S. Midwest and Southeast.
3. Think Globally
The upsurge in China’s global investment is part of the country’s long-term strategy to secure vital resources—not just raw materials and food, but also innovative ideas and technologies. That’s one of the reasons that more Chinese firms are investing in U.S.-based tech startups. China, as much as any country, needs a steady supply of innovation, and it’s willing to pay for it. For U.S. startups and entrepreneurs, it means that China is likely to be an increasingly important source of capital. Another reason for China’s increased investment in startups is that its overall wealth is increasing, so it has more money to invest, period.
That means that no company, however small, can afford to turn a blind eye to international affairs, especially the relationship between the U.S. and China.
Flash points like April 6, 2017, when President Donald Trump hosted Chinese president Xi Jinping at Mar-a-Lago and launched a retaliatory missile strike against Syria in the same 24-hour period, send mixed messages about the future of U.S.-China trade relations. On the one hand, President Trump reversed his public stance that China was a currency manipulator in the hours following his meeting with Jinping. But on the other hand, his decision to bomb Syria while the Chinese President was a guest in his home was widely seen as a veiled threat of future action against North Korea, a close Chinese ally. President Trump may have wanted to prove that, unless the Chinese rein in the excesses of Kim Jong Un, the U.S. was willing to use force to do so.
As Chinese investment becomes more inextricably linked with the U.S. private sector, the ability to interpret the mix of motives and signals that surrounds any interaction between the U.S. and China, the world’s two largest markets, is rapidly becoming essential business intelligence.