Chinese companies collectively employ more than 70,000 Americans, up from almost none a decade ago.'Ni hao, y'all' »
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.
Ni hao, y'all: US hinterlands woo Chinese firms
By PAUL WISEMAN5 hours ago
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PINE HILL, Ala. (AP) — 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.
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In this May 28, 2014 photo provided by the Alabama Governor's office, Gov. Robert Bentley, flank …
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.
Among other Chinese projects in the United States that are creating jobs:
— In Moraine, Ohio, Chinese glassmaker Fuyao Glass Industry Group Co. is taking over a plant that General Motors abandoned in 2008 and creating at least 800 jobs. The site puts Fuyao within four hours' drive of auto plants in Ohio, Kentucky and Indiana.
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In this May 28, 2014 photo provided by the Alabama Governor's office, Gov. Robert Bentley, right …
— In Lancaster County, South Carolina, Chinese textile manufacturer Keer Group is investing $218 million in a plant to make industrial yarn and will employ 500. South Carolina nudged the deal along with a $4 million grant.
— In Gregory, Texas, Tianjin Pipe is investing over $1 billion in a factory that makes pipes for oil and gas drillers. The company expects to begin production late this year or early in 2015. It will have 50 to 70 employees by the end of this year and 400 to 500 by the end of 2017.
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.
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In this May 28, 2014 photo provided by the Alabama Governor's office, Gov. Robert Bentley, follo …
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.
Local officials here in southwestern Alabama went out of their way to lure Golden Dragon, which wanted to build a plant to make copper tubing for air conditioners.
At first, the company considered Thomasville, just across the border in Clarke County. But Thomasville didn't have any suitable sites after Golden Dragon decided it needed three times as much space as originally sought.
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Graphic shows China’s historic foreign direct investment in the U.S.; 1c x 2 1/2 inches; 46.5 mm x …
"I was almost in a panic," recalls Thomasville Mayor Sheldon Day.
But Day spotted an industrial park in Wilcox County with plenty of space. Day says he didn't mind the project going to a neighboring county. The plant would employ Thomasville residents, too.
And there was another benefit: Wilcox County — stuck with 15.5 percent unemployment, Alabama's highest — qualified for extra aid. It landed $8 million in state and federal grants to help build an annex road and sewage lines for the project.
Wilcox County also gave the company 100 acres of a 274-acre industrial park it bought for $1.2 million and a break on local property taxes. And Alabama offered to reimburse the company up to $20 million of its costs for building the $100 million factory. It will get the full amount if it ends up hiring 500 people, says George Alford of the Wilcox County Industrial Development Authority.
Local officials assembled all the public agencies and utilities Golden Dragon will have to deal with — from Alabama Power to the Port of Mobile — in one room on one day so company executives could have their questions answered at once.
The message, Day said, was: "If you come here, we'll hold your hand."
A banquet was organized with both traditional Southern fare, such as pinkeye purple hull peas, and Chinese dishes from Thomasville's New China Buffet restaurant.
When the visiting Chinese were seen devouring homemade banana pudding, "we took them the whole tray," Day says.
To prepare for future banquets, Thomasville is buying Chinese-style dining tables with built-in turntables.
Still, culture and language can remain a barrier. Local officials hastily replaced a black-and-white banner welcoming Golden Dragon after learning that the colors signified a funeral to the Chinese.
"Nobody wants a faux pas," says John Clyde Riggs, executive director of a regional planning commission.
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.
Alabama and other Southern states have followed the example of South Carolina, which nabbed the first Chinese plant in America 14 years ago when appliance giant Haier built a refrigerator plant in Camden.
John Ling, who runs South Carolina's Shanghai office, has an empty factory he's pitching to Chinese firms. It's been shuttered for four years — since the former owners closed it and moved the jobs to China.
"We will see more and more Chinese projects coming," Ling says. "It's at the very beginning."
A U.S. Air Force F-35A Lightning II makes a flyby after an unveiling celebration takes place at Luke Air Force Base for the delivery of the first F-35A fighter jet, Friday, March 14, 2014, in Glendale, Ariz. It is the first delivery of an anticipated total of 144 F-35A planes destined for Luke AFB. (AP Photo/Ross D. Franklin)
There’s an old saying in the military that we’re always training for the last war, so fixated on the lessons of our most recent conflict that we’re blind to the emerging threat.
For years, that last war was the Cold War, and the emerging threat was the insurgents of Iraq and Afghanistan. Slowly, painfully, eventually, the military reoriented itself. The result? After more than two decades of post Cold War re-alignment, the military is less prepared than it has been in generations for a confrontation with Russia.
No one in Washington is calling for the U.S. to go to war over Crimea and there are plenty of reasons why, at this point, military intervention could be a dangerous and foolhardy course. But if circumstances change and political leaders start looking to the military or the bargaining power that comes from a credible threat of force, they will find their options severely limited.
Over the course of the wars in Afghanistan and Iraq soldiers and marines have trained for maneuvering and fighting in small units over the landscape of the Middle East. Counter-insurgency (“COIN”) doctrine, which stresses engagement with local civilian populations and tactics for fighting loosely organized forces employing light weapons, has become the military’s new bible. It’s about as far away as you can get from the principles used in the Cold War.
According to retired General David Deptula, who served as the Air Force’s top intelligence officer, “we’ve been focused on the far left end of the spectrum of operations,” by which he means the protracted, low-intensity conflicts in Iraq and Afghanistan. But, he says, “if we want to maintain superpower status we need to be prepared to succeed across the full range of operations, not just the left end of it.”
Even the few strategists that weren’t pre-occupied by Iraq and Afghanistan were planning for the much-touted Asia pivot, envisioning a future, one they’d argue is still looming, defined by Chinese hegemony. Russia, meanwhile, was considered by many to be an historical relic; still big enough to wield real power but no longer capable of threatening U.S. vital interests and a second or third order afterthought when evaluating threats the military needed to plan for.
“For years there have been only a handful of people consistently talking about Russia and China building highly advanced systems for use against our ‘Cold-War era’ aircraft, missiles and ships,” Deptula says.
He’s talking about himself and some of his closest confidants at the Air Force, who pushed for continued production of high-end weaponry like the F-22 stealth fighter—right when the Iraq insurgency was at its peak. It made Deptula and his gang seem like Mach 2 dinosaurs, pining for a conflict with an imaginary enemy while the real bad guys were blowing up Marines in Fallujah. Understandably, Robert Gates, the Defense Secretary of the time, wanted the military to focus on the wars America was actually fighting at the moment. And so eventually, many of Deptula’s colleagues—including Gen. Michael “Buzz” Moseley, the Air Force’s top officer—were shown the door when they opposed Gates once too often. According to Deptula, “those people were ignored by [former Defense Secretary] Gates, and some were fired because they had the courage to speak truth to power.”
As the White House and Pentagon planners consider what to do if Russia invades Eastern Ukraine or deploys its forces elsewhere in the region, the limited choices available reveal just how profoundly the military has changed since the Cold War.
For half a century, Cold War military strategy focused on containing Russia and winning in clashes between large conventional forces. On the ground, that strategy called for mass formations organized around tanks and heavy weaponry. In the skies it relied on dominance in Top Gun style style air-to-air fighting prowess, radar evading stealth technology, and powerful bombers that could drop massive munitions to destroy enemy armor and fortified installations.
Since the end of the Cold War, that strategy has been completely overhauled. Training and doctrine have focused on small unit tactics while new weapons and vehicles have been designed with squads in mind rather than divisions. Super-sophisticated dogfighters, like the $187 million-a-pop F-22, suddenly seemed too fancy to actually use. Who would fit the bill if one actually went down? Instead, drones costing less than a tenth the price littered the skies over Afghanistan and Iraq.
But those drones are useless against any military with a half-decent system for shooting down enemy aircraft. And Russian has one of the best air defenses on the planet. Suddenly, it’s those iconic Predator drones that seem obsolete.
“Hopefully the situation with Russia and Ukraine will be a bucket of cold water on those who believe all we need to be able to do is counter-insurgency operations,” Deptula told The Daily Beast.
And now, there are signs that the U.S. Air Force’s long-held technological advantage may be eroding.
The new generation of Russian fighter plane, the T-50, isn’t yet fully operational but it “will be produced much sooner that Gates and his crowd predicted,” Deptula says. He adds that “once the T-50s are produced in sufficient numbers there won’t be anything in the NATO fleet that can deal with them except the F-22s and F-35s.”
David Axe, the long-time military tech writer notes that the T-50, which can fire long-range missiles while flying both high and fast, may be able to “exploit critical vulnerabilities in U.S. and allied forces and level the air power playing field for the first time in a generation.”
An independent Australian think tank, Air Power Australia, drew a more severe conclusion. “If the United States does not fundamentally change its planning for the future of tactical air power, the advantage held for decades will be soon lost and American air power will become an artifact of history.”
While Russian aircraft rely on speed and long flight times, the U.S. fleet is largely built for stealth so it can evade detection and anti-air weapons to engage targets at closer ranges. But the stealth capability, is now being challenged by advances in Russia’s radar detection platforms and anti-aircraft weapons.
“Today,” Deptula said, “the Russians have an extant significant advantage in their surface to air capabilities.” And that with the exception of the U.S.’s small number of highly advanced 5th generation aircraft, “the Russians can conduct area denial of any airspace within range of their defenses if they want to deny access to aircraft.”
Since 2001, the Pentagon has had good reasons for prioritizing spending for troops on the ground in Iraq and Afghanistan over speculative needs for future wars, but a consequence has been that we now have what Deptula calls “a geriatric Air Force and Navy fleet.”
No one, not even Deptula, is suggesting that there’s about to be some all-out showdown between Moscow’s military and Washington. But it’s not at all unlikely, given the new and chilly climate, that American forces and allies could wind up in skirmishes with proxies equipped and trained by Russia. The U.S. used to be able to count on an overwhelming technological advantage. Tomorrow, maybe not.
Foreshadows of this are already being cast. Already, Russia is outfitting the Assad regime in Syria while America runs guns to the rebels there. It’s the Russian side that’s winning.
The change isn’t just about equipment or tactics, though, American forces trained in counter-insurgency who are stationed in Europe could still be deployed to hold the line against Russian advances. But there are drastically fewer forces left in Europe available to be called upon in such an event.
An analysis of Defense cuts published by the conservative American Enterprise Institute in 2013 reported that “the Army alone has closed 100 installations in Europe since 2003 and plans on returning an additional 47 installations to host nations by 2015.” The same report notes, “the Navy has also been consolidating and decreasing its European bases” and “since 1990, the Air Force has reduced aircraft and forces stationed in Europe by 75 percent.” Addressing the future of America’s military footprint in Europe, the paper concludes that the Pentagon is “planning to continue reducing the US presence in Europe by approximately 15 percent over the coming decade.”
The military can’t be equally prepared for every threat and if its focus has been on counter-insurgency, that’s because those are the wars we’ve been fighting for the past twelve years.
Generations of veterans who fought in Iraq and Afghanistan have been raised and bled on COIN doctrine but, as combat demands, they have also learned how to be agile. Individual leaders on the battlefield are able to adapt quickly; it’s the military bureaucracy that’s like a tank: a slow, immensely powerful machine that’s only capable of plotting one course at a time. Quick turns are not an option.
Without many viable military options to counter Russian aggression what’s left for U.S. leaders seeking to punish Russia and assure our NATO allies that we’ll protect them? Cunning diplomacy, maybe.
Crimea is Russian now; that’s not changing any time soon. Condemning the invasion and the fixed terms of the referendum have no more bearing on the current situation than the reasons Russia gave for annexing Crimea—some of them legitimate—ultimately had to do with the duplicity and force they used to take it.
The real question, and the subtext in much of the current talk about Crimea, is whether Russia will stop there or proceed to further conquests.
Despite it’s show of force in Crimea, Moscow has a lot to lose if the conflict broadens and draws in the U.S. and NATO. Russia has gas to sell to Europe, oligarchs counting on feeling comfortable in their London townhouses, a new middle class looking for normalcy that’s already taken to the streets in protest, and the memory of Chechnya, a brutal war that took thousands of lives, fresh in the national memory.
If U.S. officials can present a deal that satisfies American aims while appealing to Russia’s self-interest, they may be able to prevent a larger conflict. But a new age of competition with Russia? That may be even harder to head off.
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