From the Idaho Statesman in December 2010:
"A Chinese national company is interested in developing a 10,000- to 30,000-acre technology zone for industry, retail centers and homes south of the Boise Airport. Officials of the China National Machinery Industry Corp. have broached the idea — based on a concept popular in China today — to city and state leaders. They are also interested in helping build and finance a fertilizer plant near American Falls, an idea company officials returned to Idaho this month to pursue.
This ambitious, long-term proposal would start with a manufacturing and warehouse zone tied to the airport, and could signify a shift in the economic relationship between the two superpowers — a relationship once defined by U.S. companies like the J.R. Simplot Co., Hewlett-Packard and Morrison-Knudsen that would head to China to build and develop.
“I think China’s coming over here shows they are willing to collaborate on the reinvigoration of the American industrial base,” said Jeff Don, CEO of Eagle-based C3, which is acting as an Idaho representative for the Chinese company, called Sinomach for short. Sinomach is just one of an increasing number of companies and investors showing interest in Idaho.
Hoku Materials Inc., a subsidiary of a Chinese energy firm, already has 500 people building its $400 million plant to make polysilicon for solar panels in Pocatello. It expects to begin production in 2011, employing 250 people, said Scott Paul, Hoku’s president and CEO."
MP: This story illustrates several important economic points:
1. It helps expose the type of trade lunacy/nitwitery advocated by mercantilist protectionists like Ian Fletcher,
who claims here that "Our trade deficit helps Guangdong, Seoul, Yokohama, even Munich – but not Gary, Indiana, Fontana, California, and the other badlands of America’s industrial decline." Try telling that to the citizens and workers in Idaho, who are benefiting from jobs and investment as a direct result of our trade deficit with China.
2. It helps illustrate a point made by Don Boudreaux, who reminds us that another name for the “U.S. trade deficit” is “U.S. capital-account surplus” – that is, inflows of investment funds to the U.S. that supply financing for the creation or expansion of U.S. companies, and help create or support jobs in America. The $273 billion "trade deficit" with China in 2010 was exactly offset by a $273 billion capital inflow, and $400 million of that capital financed the construction of a solar panel factory in Pocatello, Idaho, employing 500 workers for the construction and another 250 workers this year when production starts.
3. Why are China and investors from other countries showing such interest in Idaho as a location for manufacturing production, and not nearby California or neighboring Washington? Maybe it's because business-friendly Idaho ranks among the most free states in the country (#3) according to a new study by the
Mercatus Center, while California (#48) and Washington (#40) rank among America's least free states. When companies, either foreign or domestic, shop around the U.S. for business locations or re-locations, the state's business climate will certainly rank as one the most important factors in the decision-making process. In the future, we can expect much more investment, production and job creation in the freest states like Idaho, and ongoing contractions and out-migrations from the least free states like New York, New Jersey, California and Massachusetts.
29 Comments:
this may have more to do with incredibly attractive financing being provided by china.
they are swimming in us federal bonds and looking to put that money to work in productive assets. they are offering attractive capital to chinese companies for that purpose.
ironically, the declining credit worthiness of the us federal government and the endless dollar debasement may be driving foreign investment.
that's one for the book of the perverse.
This is just off the I15, which connects Mexico in the south with Fort McMurray (oilsands) in the north. 50 million people live within a 3 hour drive of this highway. From Idaho, there are infinite directions that goods can flow with very few barriers. And why not avoid trade tarrifs by setting up shop right here in the USA.
That, my friends, is why we have invested trillions of dollars in the transportation system in America!
I hope the Chinese can teach the local planning authority a little "central planning" theory.
California is on the road to ruin, no doubt about it. New requirements for 'green' energy will raise personal and business utility by 20%. Further, the High Speed Rail system envisioned will need at least a $5B per year subsidy. (In current terms the $5B is about 5% of our state revenues.)
The dire straits that California is in is easily seen by our state having the third highest unemployment rate in the country so everyone has to know we are in trouble. But California politicans (and voting citizens) regale in being smart and forward thinking. This is a massive insanity.
When companies from totalitarian communist dictatorships prefer investment in Idaho, you really know the writing is on the wall for the People's Republic of California!
This is pretty much the classic consequence of mercantilism: if you manipulate your currency to amass foreign currency, you eventually have to spend that foreign currency or it's effectively worthless. But there are all kinds of ways for that to play out that are not in our interest.
Well, we're forcing our U.S. Corporations to "lock up" their money overseas, so China throws us a crumb.
They own our debt, and now they're going to own our Country. And, that's a "Good" Thing?
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They own our debt, and now they're going to own our Country. And, that's a "Good" Thing?
I hope you'll come back and explain why it matters who owns our debt. The real problem is that our government issues debt at all. With a balanced federal budget, the Chinese would have to spend their trade-dollars on American goods or invest them in American businesses.
Either would benefit us.
As an aside, the Japanese owns far more of our debt than does China. Gee, I wonder why we don't worry about the Japanese anymore? Maybe you can help us out on that one, too.
And, they question is, "How is China different from Japan?"
Really?
After the communists are overthrown, the Chinese elites, who tend to be wealthier and more educated, may find American ChiComTowns reassuring.
They own our debt, and now they're going to own our Country. And, that's a "Good" Thing?
Yes it is. To a worker in Idaho or a consumer in New Orleans it does not matter who owns the plant.
VangelV invokes an inner comradeship:
"Yes it is. To a worker in Idaho or a consumer in New Orleans it does not matter who owns the plant.
Yes, absolutely the Chinese should stay the h*ll away from CA, NJ, NY and MA.
And yes, they ought to invest their money in the U.S. economy directly, not just in the purchase of treasury debt.
Craig @ 6:31
"The real problem is that our government issues debt at all"
~~~~~~~~~~~~~~~~~~~~~
Yes. Most China-bashers don't understand that.
How long before the ChiCom business start putting pressure on the Idahoan politicians to keep quiet about their human rights violations?
"And, they question is, "How is China different from Japan?"
Really?"
No, the question is: Why don't we worry any more about Japan owning our debt, even though it's a greater amount than China owns?
I too am waiting to hear your answer.
"They own our debt, and now they're going to own our Country. And, that's a "Good" Thing?"
is there anything that makes you guys happy?
the us investing and building factories in china is bad.
but so is china investing and building factories here.
how can they both be bad?
if our doing X is bad for us, then how can china doing X also be bad for us?
you are on both sides of this argument, with is not logically supportable.
i think you are just xenophobic and do not understand how trade works.
"I hope you'll come back and explain why it matters who owns our debt. The real problem is that our government issues debt at all. "
amen. blaming china for our terrible fiscal policy is just foolish. that is a US driven problem. blaming china is like taking out a huge mortgage and then blaming the bank because you are in debt.
How long before the ChiCom business start putting pressure on the Idahoan politicians to keep quiet about their human rights violations?
Chinese companies will operate in Idaho in exactly the same manner as American companies.
you are on both sides of this argument, with is not logically supportable.
Theirs is not a position based on logic or reality. It is one of emotion and ignorance of economic reality.
Inverse Relationship?
Having Idaho ranked #3 and California ranked #48 means that there is an inverse relationship with actual business formation. Thus states should avoid policies that would get them a rank of 3 and implement policies that would get a rank of 48. California (48) has more manufacturing than Washington (40) and both have more manufacturing than Idaho (3).
Is this negative correlation unique to this case or is it true in other states? That is, is this a significant ranking system useful in determining where manufacturing should be located or is it lobbyist propaganda designed to promote concessions in the states where people really want to locate their manufacturing and in fact do. The exodus of manufacturing from California to other states is more wishful thinking than reality. Note that as bad as California’s economy is business friendly Nevada is worse. If California was actually losing as many businesses to adjacent states as indicated here then those states should be booming. None are.
"Having Idaho ranked #3 and California ranked #48 means that there is an inverse relationship with actual business formation. "
No, this indicates that states that historically were good for business formation have become bad for business formation in direct proportion to the ability of the political class to attach sucking mouths to the teats of the engines of prosperity, eventually driving them to collapse or to friendlier places.
The Chinese in Idaho are avoiding that step for the time being. I'm sure as Idaho becomes the most prosperous state in the union, the grabby hands will find a way to change that status.
China is trying to get some value from the failing dollar before it is gone.
China is trying to get some value from the failing dollar before it is gone.
This is likely true. I noticed that the PDAC had a large numbers of Chinese 'capital investment' companies represented that had no listings anywhere as well as a number of government owned companies looking to find reserves that could be developed. Quite a few of the juniors found it very interesting that they were getting so much attention even though they were years from having projects ready to go.
Has anyone considered the possibility that the Chinese's main objective is not to build a factory, but to acquire American real estate? The Chinese love real estate. They think years down the road. This development is very likely not their main objective. It is just a token offering designed to make their real estate purchase more palatable to the U S government and population. If they can make a profit in the main time, so much the better. But that's not why they're there.
"Has anyone considered the possibility that the Chinese's main objective is not to build a factory, but to acquire American real estate?"
And we should be concerned about this...why?
Actually, while we can make assumptions, there is nothing in the article that mentions buying anything. We see the words invest, build, develop, and finance, but no mention of buying. Perhaps our baseless fears are without merit in any case.
Joseph, you're worried that the Chinese want to make money off real estate in Idaho?!! If they want to buy a bridge in North Dakota too, I'd be glad to oblige. ;) If they're really after real estate, whether Idaho or New York, they are even dumber than they seem. Though there might be a temporary spike with the coming tech boom, real estate values are about to fall for decades, especially in the way overpriced, large metropolitan areas.
I had to comment on this post though, after seeing Mark finally call a spade a spade and call out Ian Fletcher's "lunacy/nitwitery." :D
I think too many Americans are unfairly afraid of China. It seems people always fear the unknown. These are not evil people nor does their government have evil intentions.
.
Think of China as just a business controlled by long term planners but run by aggressive profit driven day-to-day managers. If you think about it that system makes sense as we have seen in America, our elected officials just keep kicking the can down the road and no one is doing long term planning or dealing with our long term problems. Some call this managing by crisis. Thank God, Americans operate well in crisis mode.
.
The Chinese central planners tried to control population with their one child policy, which didn't work, so they have submitted to the people's desire for large families. Their leaders have crunched the numbers and know that they have to grow their job and capital creation at a tremendous rate to keep up with the needs of their large and growing population. The Chinese central planners have to take what may seem drastic measures to us but remember how serious their overpopulation is to them. Put yourself in their shoes and their actions become clearer.
.
As to them opening business operations here I see it as a potential win-win. They have capital and need to grow their money and we need jobs. I doubt many will agree with me at this point, but I think the Chinese see where America is going. I think as the years pass Americans will want to address all the job loss here and more people will support a VAT tax on that portion of goods and service produced overseas. China is just hedging their bets and not putting all their eggs in the "China produced" basket.
.
In other words, I see this as the natural order of a world economy. Invest and produce without borders. Everyone exploits their advantages to give the buyers the best value for their money. America now needs some long term thinking leaders to look ahead and position America to succeed in the coming one world business environment. Unfortunately our government is designed to discourage those that make the tough decisions today to reap us tremendous long term rewards.
.
But mostly the the America media kills that kind of thinking with their live now, tomorrow may never come mentality. Watch what the media does to anyone that presents a plan that requires any sacrifices today to insure our future generations the American dream. Ignore the severity of the problem and/or kick it down the road. Pick one is their mantra.
.
A Nation of Sheep Breeds a Government of Wolves!
I think too many Americans are unfairly afraid of China. It seems people always fear the unknown. These are not evil people nor does their government have evil intentions.
.
Think of China as just a business controlled by long term planners but run by aggressive profit driven day-to-day managers. If you think about it that system makes sense as we have seen in America, our elected officials just keep kicking the can down the road and no one is doing long term planning or dealing with our long term problems. Some call this managing by crisis. Thank God, Americans operate well in crisis mode.
.
The Chinese central planners tried to control population with their one child policy, which didn't work, so they have submitted to the people's desire for large families. Their leaders have crunched the numbers and know that they have to grow their job and capital creation at a tremendous rate to keep up with the needs of their large and growing population. The Chinese central planners have to take what may seem drastic measures to us but remember how serious their overpopulation is to them. Put yourself in their shoes and their actions become clearer.
.
As to them opening business operations here I see it as a potential win-win. They have capital and need to grow their money and we need jobs. I doubt many will agree with me at this point, but I think the Chinese see where America is going. I think as the years pass Americans will want to address all the job loss here and more people will support a VAT tax on that portion of goods and service produced overseas. China is just hedging their bets and not putting all their eggs in the "China produced" basket.
.
In other words, I see this as the natural order of a world economy. Invest and produce without borders. Everyone exploits their advantages to give the buyers the best value for their money. America now needs some long term thinking leaders to look ahead and position America to succeed in the coming one world business environment. Unfortunately our government is designed to discourage those that make the tough decisions today to reap us tremendous long term rewards.
.
But mostly the the America media kills that kind of thinking with their live now, tomorrow may never come mentality. Watch what the media does to anyone that presents a plan that requires any sacrifices today to insure our future generations the American dream. Ignore the severity of the problem and/or kick it down the road. Pick one is their mantra.
.
A Nation of Sheep Breeds a Government of Wolves!
Think of China as just a business controlled by long term planners but run by aggressive profit driven day-to-day managers.
It is a lot more complicated than that. I worked for an outfit in China that was under orders to build MD-90 wings for the AVIC run Trunkliner program. Even though the political bosses in Beijing were supposedly in charge the action was actually controlled locally and nothing got done until the local managers were satisfied. If the party bureaucrats could not control the people who actually worked for them how are they going to control the aggressive profit driven private companies?
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