In the last five years, America’s mayors have stepped into a leading role in US-China economic relations. While the pendulum of national politics with China swings wildly from hate to love and back to hate again, America’s mayors have been the foot soldiers in the trenches, pitching their cities as investment destinations. Much of the attention on Chinese foreign direct investment (FDI) focuses on acquisitions, particularly of big-name American brands and sensitive technologies, from the Waldorf Astoria hotel and AMC theaters to computer chips. But when it comes to local employment and economic development, greenfield investment—when investors build a local presence in the form of new headquarters, factories or real estate developments—has a much bigger impact on local communities.
So how can an American mayor attract greenfield investment? My own perspective on investment outreach reflects personal experience organizing and receiving investment promotion delegations, in addition to reporting as a journalist on the promises and pitfalls of Chinese FDI on American soil. Investment promotion can be more art than science, with a large role for good timing and sheer luck. But if American mayors put some of what I believe are the most important lessons into practice, they have a chance to tilt those odds in favor of the cities and citizens they serve.
The first step a mayor can take in establishing a China strategy is finding a facilitation partner organization to get investment promotion activities off the ground. These organizations often fall into one of two camps: publicly funded investment promotion groups or sponsor-funded groups often billed as public-private partnerships, such as the California-China Office of Trade and Investment. Both sides of this spectrum have strengths and pitfalls that stem from their source of funding.
Publicly funded groups, especially those associated with federal or state governments, have the mandate to operate in the best interests of the American public. But that duty to the general public can also be a liability: these groups are often hamstrung by requirements to not play favorites among companies or municipalities. While they serve as valuable information providers and organizers of roadshows, they’re less likely to play a hands-on role in arranging action-oriented meetings. Conversely, groups that live and die by sponsorships are free to provide that hands-on help but can be more beholden to the interests of their sponsors’ than the delegation itself.
The key question any mayor should ask when evaluating these investment promotion partners is, “Is this group more interested in producing photo ops or generating real investment leads?”
Finding the right partner organization might be a necessary first step, but it is far from sufficient. While these groups can get this process moving, typically it’s private sector companies that will drive it forward. They are the key to generating lists of actionable projects and serving as trusted partners on the ground for Chinese companies. Representatives from these companies may travel with mayors to China or simply provide project materials, but they must be engaged well in advance of any delegation trips.
Meeting Mechanics: Minimize Pomp
Investment promotion events on both sides of the Pacific are often more ceremony than substance. If mayors hope to generate real results, they should minimize the pomp and maximize the time spent in conversation about specific projects.
In the early stages of outreach, it can be necessary to hold high-visibility public events—essentially, opportunities to raise “brand awareness” for less well-known American cities and to build general-purpose relationships with Chinese officials. But once meaningful contacts have been made, these events should be kept to a minimum. One American mayor I spoke with laid out three tips for maximizing time spent in China:
- Don’t hold a public event.
- Do the photo right away.
- Present a short time window in which you’re available.
The first tip spares everyone hours of pointless speeches. The second tip gives Chinese officials face—a photograph with foreign dignitaries helps with both internal politics and external public relations efforts—while quickly clearing the slate for productive conversations. The third guideline forces everyone to get right to the point. These guidelines shouldn’t be enforced to the point of being rude. Instead, they can be used to establish a low baseline for the level of ceremony, one that can be loosened to accommodate instances when the Chinese side requires more.
American mayors should come into these meetings armed with bilingual “deal books” that lay out specific projects or parcels of land available for development. Along with details on the type and size of investment sought, these should include direct contact information for decision-makers on the projects.
Hand Holding, Not Handouts
American local officials looking to attract investment often dangle a single carrot—money, usually in the form of tax breaks or subsidies for construction. This practice is dubious when wooing American corporations to set up shop in a particular city, and in my experience, it makes even less sense with China-based companies.
Chinese businesses looking to invest in the United States are rarely short on cash—their international ambitions are often the spoils of conquering their home market. These greenfield investors want to learn from the best practices abroad, diversify their business, and build an international brand, not make a quick buck off subsidies or tax breaks. There are cases when financial incentives proved helpful or even decisive—especially when paired with labor force training or other intangible assets—but I believe these to be the exception.
Besides being a weak motivator, financial incentives can also be politically risky. A government handout to a corporation—especially to a foreign corporation—is like blood on the shark snout of American civil society. Journalists hungry for a scoop and activists looking for a cause all see red when politicians open public coffers to private firms, especially Chinese companies.
Chinese investors arriving in America don’t need handouts; they need handholding. These firms may be strutting confidently onto the world stage, but they’re usually bewildered by America’s dense thicket of legal, labor and environmental regulations, many of which vary between states and even cities. Mayors looking to give their city an edge should offer to guide Chinese companies through these processes by bringing together local stakeholders.
The mayor of Lancaster, California—the man who wooed BYD into building an electric bus factory that now employs close to 600 people—does this with a one-stop-shop permitting process. Any time a potential project gets serious, he calls together the heads of various city agencies—from sanitation to air quality—for a work lunch with investors. At that lunch, potential issues are hashed out in real time. That type of handholding bolsters the confidence of Chinese companies as they prepare to set down roots in a foreign land.
It’s worth remembering that meetings rarely result in on-the-spot agreements, but they do plant seeds that may bear fruit down the road. Once meetings are held, the most important thing mayors can do is establish clear channels of communication for serious follow-up on each project. These channels can be mediated through facilitating organizations—or, even better, the city’s designated point person—and they ideally should remain active even if there is a change in leadership at city hall.
Finally, if there is a leadership change that requires a new point of contact, this should be used as an opportunity to reconnect with potential investors and hopefully rekindle interest in projects. Only through persistent follow-up can a project pipeline be built and sustained.