Three Less Understood Aspects of Chinese Investment in America

The attitude in the United States is shifting decisively toward increased scrutiny of—and new restrictions on—Chinese investments in America. This will likely lead to new legislation and policies, which have been fueled by headline deals in platinum sectors, such as high technology and entertainment, where legitimate concern is intensifying over national security and intellectual property transfers.

But scrutiny takes many forms. Our new interactive product “Know the Numbers” enables us to scrutinize micro-level implications of Chinese investment in America. So it’s worth peeling the onion a few layers deeper by noting three less understood aspects of how Chinese investment has affected local communities, jobs, and American daily life. Here are some notable, but less noticed, trends that can be teased out from our database but have elided national headlines.

1.  Chinese investments are diverse geographically and in their local impact.

As Figures 1 and 2 make clear, the geographical distribution of Chinese investment in the United States is extraordinarily diverse—spread across 49 states and 589 counties through 2,376 Chinese-owned entities. With this kind of diversity, it is nearly impossible to capture local community impact based mainly on national-level narratives. Consider the June 2016 deal through which China’s Haier acquired GE Appliance for $5.6 billion. At the time, some media had readily put the GE refrigerators brand on par with Coca-Cola, viewing it as yet another Chinese acquisition of an iconic American brand.

Figure 1. Majority of US Counties with Chinese Investment Fall Outside the Spotlight

Figure 2: Number of Counties with Chinese Investment in Each State

But a deeper story involves what happened to the American workers and factories after the deed changed hands. Take Lafayette, Georgia for example, a small town that sits 300 miles south of GE Appliance’s headquarters in Louisville, Kentucky. It has a population of 7,107 and a poverty rate of 23.3%. Unbeknownst to most, one of the town’s biggest employers, if not the largest, is Roper Corporation, a home appliance manufacturer and subsidiary of GE Appliance. So when Haier acquired GE Appliance, Roper effectively became a subsidiary of the Chinese parent company, with its roughly 1,250 workers also becoming Haier employees. Rather than being liquidated or closing shop, Roper, now more than a year under Chinese ownership, seems set for continued growth, is hiring, and lists employee benefits on its corporate website.

2. One-dimensional stories miss the trees for the forest.

Just as Chinese investments are more diverse geographically than is usually appreciated, their knock-on effects are more diverse than is commonly understood. Take, for example, Wanda Group’s high-profile 2012 acquisition of AMC Entertainment for $2.6 billion. Because AMC is a theater chain, a number of headline stories raised concerns about such an acquisition’s implications for Hollywood and whether it would lead to Chinese propaganda and control of US media.

But “Know the Numbers” shows the reach of AMC Entertainment in terms of other metrics, such as employment. The company’s headquarters is located in Leawood, Kansas, and the theater chain has over 300 theaters across more than 40 states, sustaining more than 12,000 jobs. One of these is the AMC Classic Farmington 4, the only movie theater in Farmington City, Missouri, a town of 17,000 residents.

Beyond jobs, AMC has also experienced tangible improvements, namely the upgrading of its facilities to appeal to American movie goers and to justify ticket price hikes. Anyone who has visited an AMC theater in the last few years will immediately notice that the old and uncomfortable seats have been replaced with what AMC calls “plush power recliners.” In AMC theaters in major US cities, full theater dine-in service is now being offered. These upgrades have progressed gradually and unfortunately has yet to hit the AMC Classic Farmington in Missouri. But such improvements seem to have shown results: in the first year post-renovation, these theater locations have shown 40% to 60% increase in attendance, according to AMC’s filings with the Securities and Exchange Commission.

Increased profitability has also brought to the table more strategic opportunities for expansion. In the years following the Chinese acquisition, AMC bought up several theater chains, including US’ Carmike Cinemas and Sweden’s Nordic Cinema Group. “I don’t think in my wildest dreams I thought we would go from being the second-largest market-share player in the US to the largest in the US, the largest in Europe, and in the world in 14 months,” AMC’s CEO Adam Aron once commented.

3. Americans experience Chinese investments everyday but hardly realize it.

Chinese investment can often be an abstract subject, fodder for the newspaper stories that Americans read on, for instance, a flight from Boston to Denver. But as the passengers digest these stories in economy or business class, they may also be digesting, literally, such Chinese investments on the tray table in front of them.

That’s because Chinese firm HNA Group owns one of the major providers of airplane food. In 2016, HNA acquired Swiss onboard service provider gategroup, which at the time, ran some 40 operations across major American airport hubs such as JFK, O’Hare, and Dulles. The deal of course grabbed headlines, but its implications are actually rather mundane yet nonetheless important for ordinary Americans. The Chinese-owned entity is literally responsible for the coffee and bistro boxes the flight attendant hands out to Americans on hundreds of domestic flights daily.

Even prior to boarding, most passengers have already encountered and have been affected by another HNA-owned entity, Swissport USA. It is a ground service provider that handles numerous pre-boarding services, including fueling and cleaning the plane, so that the flight can take off without a hitch.

Few Americans are likely to notice or care about the ownership of service providers that for the most part perform their jobs well. But that is also precisely how it’s supposed to be: Americans shouldn’t notice any change or difference. This leads to a crucial point that is often lost in the debate and arguments about foreign direct investment, Chinese or otherwise: ownership can change hands, often more than once, but in most cases, a successful transaction and its aftermath should guarantee minimal disturbance and inconvenience to American customers. That’s because the target company needs to continue operating to the standard and quality it has always done, irrespective of ownership.

As concern grows on Capitol Hill over certain types of Chinese investment, the reality is quite different in state capitals across the United States. The impact of any single Chinese investment can range far beyond the location at which a deal is signed, or, for that matter, the city and state where its headquarters is located. In an economy as large and dynamic as America’s, characterized by great inter-connectedness across place, sector, and segment, Chinese investments are having a wider impact than is commonly understood or acknowledged.

Perhaps a better way to get a sense of the reality of Chinese investment is through a granular look across cities and towns, the implications of one sector for a related one, and local level employment patterns associated with Chinese-owned entities. Our close-up view of every single entity that currently exists in the United States aims to begin capturing these less understood aspects of Chinese investment in America.