Yes, you read the headline right: “Jobs for Americans and pink slips for the Chinese”, says the quote in the current issue of Businessweek. It turns out companies from China are setting up shop in the US to avoid trade barriers, to capitalize on the US government’s alternative energy push, and to pick up on some of our new technologies.
For 20 years, US manufacturers have decamped to China in search of cheaper labor and parts. Now things may be turning the other way. 
China’s Suntech just opened a solar panel plant near Phoenix to bring the company closer to its American customers (which means big savings on shipping costs) and into compliance with “Buy American” government contracts. Tiajin Pipe is opening a $1 billion steel pipe mill near Corpus Christi, Texas, to circumvent 63% US tariffs. Tiajin will employ 500-600 people. Beijing’s Pacific Century Motors just bought Michigan-based Nexteer Automotive, a car part manufacturer, and employs 3,600 workers in Saginaw.
Letting in Chinese companies isn’t as controversial now that the US is bleeding manufacturing jobs. With unemployment hovering near 10%, US officials have put aside concerns about unfair Chinese competition. “Chinese companies, thanks to government-backed loans, monopolies, and preferential treatment, are awash in cash and should be a source for investment in the US economy–investment that would help maintain and create jobs in the US”, wrote the US ambassador to China in a diplomatic cable on Jan.28,2010, which was recently disclosed by WikiLeaks.
How does this relate to pink slips in China? Suntech is using more advanced equipment in Arizona than in its home plant in Wuxi. Here, 30 Americans are producing the same number of solar panels as 100 Chinese. “If it works well, we can integrate the same manufacturing technology in China”, says the plant manager. “This would help Suntech China make a manpower reduction”. Perhaps this is the 1st turnabout in US-Chinese relations.
Discussion questions:
1. What are the benefits and dangers to the US of Chinese plants opening here?
2. What happened when a China oil company tried to buy Unocal for $18 billion in 2005? Why the change?
People often view trade and investment as a zero sum game: one nation wins when the other loses. The reality is often much more complex.
SunTech investments in the US comes from several reasons: 1. closeness to the US consumer, 2. ability to develop and retain intellectual property, 3. and learning from the new market.
The potential for alternative energy is high in developed markets and developing markets alike. If SunTech’s bet is correct and the market potential materializes, SunTech will likely hire more people both in the US and in China.
Ilan Alon, Ph.D.
http://www.chinarules.org
This is an excellent follow up to a post Barry made on December 9th regarding Jeffrey Immelt’s remarks about a change in strategy at G.E. Early in the semester, our students often ask why they must take an operations class, especially since all they have heard in the last 20 years is about the death of American Manufacturing. This is another piece to use to help them understand the importance of this course for continued growth of the U.S. economy.