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Below the Surface: China Investment In the US

US manufacturing jobs went offshore or were replaced by automation over the past 20 years. More will go the same way. Computerization and lower labor rates have a lot to do with it. But what is now a bad trade relationship with China added to that effect and is mostly overlooked.

About 1 in 5 manufacturing jobs in this country are created by foreign companies. Those organizations place factories in US communities. This way they’re closer to the US market. Those same factories also account for 1 in 4 products exported from the US. They’re highly sensitive to trade policy.

The trade war with China isn’t abating. Yes, there is trade. Yes, it’s in certain sectors like agriculture. Soybeans are a good example. The most efficient of animal fodder is in demand in China with its massive requirement for animal protein. But China is risk-averse to negative trade policy and especially the mercurial decisions that came with the Trump administration.

Chinese Eave

Foreign Direct Investment (FDI) from China dropped precipitously from $46 billion 2016 to $5 billion in 2018 and now it’s virtually stopped. A number of Chinese factory purchases in the US are on hold because of the uncertainty. Many of those are in challenged industries or economically-stressed cities in the Southeast US and in mature sectors like auto-making and paper.

A key indicator will be whether the “America First” policies will continue into the future.

Especially watch policy decisions about US companies investing in these ventures. The Trump Administration is considering a ban.


Photos by Annie Spratt and Alejandro Luengo on Unsplash
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