Chinese Manufacturer Moves To The U.S. To Cut Costs

In a reversal of conventional business wisdom, a Chinese auto-glass manufacturer has moved some of its operations to the U.S. because it’s more cost-effective to do business here.

The Fuyao Glass company bought a former GM plant in suburban Dayton, Ohio, and the factory expects to create jobs for 3,000 workers there when it is fully operational. Fuyao Glass America employs about 2,000 people already since its grand opening in October.

Founded in 1987, Fuyao is said to be the largest glass fabrication company in the world, according to WDTN. It has 18,000-plus employees around the world, with factories in Australia, Brazil, Germany, Japan, Russia, South Korea, as well as China and now the U.S., where the Moraine, Ohio, facility will serve as its North American hub. Fuyao makes auto glass for the “Jeep Grand Cherokee, Buick Regal and Verano, Hyundai Elantra and Sonata, Kia Optima, many other vehicles,” the Dayton Daily News chronicled.

By most benchmarks, China is considered a business-friendly, economic powerhouse.

Billionaire Cao Dewang is, however, investing $1 billion in the U.S. to set up Fuyao factories across the country, the South China Morning Post reported today.

“In The Beijing News on Monday, Fuyao Glass chairman Cao, 70, was quoted as saying the US was a cheaper and better place to make glass because taxes were much lower than in China. His comments come as some companies are reconsidering their ­presence in China, and as U.S. president-elect Donald Trump is trying to lure firms back to the U.S. under his ‘Make America Great Again’ slogan. He said manufacturing businesses in the mainland paid about 35 percent more in taxes than their counterparts in the U.S., and value-added tax had become the biggest burden for companies.”

President-elect Trump has vowed to push legislation in Congress that would reduce corporate tax rates substantially and thereby provide more incentives to bring outsourced jobs, primarily in the manufacturing sector, back to America, and also to repatriate U.S. corporate cash parked in offshore accounts. During the presidential campaign, Trump blasted U.S. negotiators for being consistently outwitted by their counterparts in China, Mexico, and other countries.

https://www.youtube.com/watch?v=K_YK03KgmFA

“[Cao] added that a combination of cheap land, reasonable energy prices and other incentives means that, despite higher manufacturing costs, he can still make more money by making glass in the U.S. than by exporting Chinese-made panes to the U.S. market,” MSN Money detailed. “Wage and transportation costs are getting higher in China, Cao says. Compared with four years ago, labor wages [in China] today have tripled, he told China Business Network.”

In perhaps something along the lines of the old saying, “what goes around comes around,” the executive also claimed that some manufacturers have left China for Vietnam or Cambodia in search of lower labor and material costs.

The glass company’s decision is apparently not a one-off event. Fortune reports, for example, that clothing maker Tianyuan Garment of China intends to build a new factory in Little Rock, Arkansas, where it will produce goods for Adidas, Armani, and Reebok.

“Slated to open in 2017, the $20 million factory is expected to bring 400 jobs to Arkansas over the next four years.”

Separately, as of February, Chinese firms invested about $300 million in South Carolina for manufacturing and other businesses, the Wall Street Journal noted. In 2015, China invested approximately $20 billion in U.S. operations overall, the WSJ added.

“Even though wages for a factory employee in the U.S. were about eight times higher than for those in China, the U.S. remained an attractive place to invest,” Fuyao Glass chairman Cao Dewang told the Chinese media.

Do you think it is a positive sign for the U.S. economy that Chinese manufacturers are creating jobs in America?

[Featured Image by John Minchillo/AP Images]