Business as usual amid Sino-US strife

Even though the U.S. has shown no respite in attempting to cut off China’s access to vital technology such as chips, some Chinese electric car battery makers are pouring investment into U.S. Rust Belt states like Illinois.

Chinese battery maker Gotion High-Tech Co. has selected Illinois for a US$2 billion gigafactory, slated to start production next year. Gotion’s new facility in Kankakee County will create 2,600 jobs, stimulate economic development, and is the “most significant new manufacturing investment in Illinois in decades,” Governor J. B. Pritzker said Friday. The plant received state incentives valued at US$536 million.

Gotion’s investment is in addition to a US$2.4 billion plant it intends to construct in Big Rapids, Michigan.

In a similar vein, Eve Energy, another electric vehicle battery producer based in Huizhou, Guangdong, announced Thursday that it has signed a deal with a group of foreign partners including Daimler Truck to build a factory in the U.S. Eve will invest US$150 million for a 10% stake in a joint venture with Daimler Truck, Electrified Power and Paccar, which will own and operate a 21 gigawatt-hours (GWh) battery plant.

These reflect the deepening presence of Chinese manufacturers in the U.S. market, irrespective of political discord.

Chinese and foreign battery makers are competing to enter the U.S. market, which has a growing demand for power batteries, propelled by a shift towards electric cars. Building factories on U.S. soil has become the only choice after the Inflation Reduction Act enacted by the Biden administration last year offers significant incentives for the development of wind, solar, battery storage, and electric vehicle technology. The act requires the use of domestically manufactured components in these renewable energy projects for tax credits to be granted.

According to the guidance on the new clean vehicle provisions of the act, to be eligible for a US$3,750 credit, at least 40% of the value of the critical minerals contained in the battery must be extracted or processed in the U.S. or a country with which the U.S. has a free trade agreement, or be recycled in North America. The requirement of such percentage will increase to 100% in 2029.

Facing bitter competition at home, Chinese battery producers have to make foray into overseas markets if they are to sustain rapid growth. Their investment projects in the U.S., amid the rising hostile rhetoric between the two countries, are purely commercial decisions.

On the other hand, despite a handful of Americans now labeling China as “uninvestable,” U.S. businesses will stay put in China and even increase investment here as the Chinese market continues to generate profits for them.

Starbucks Coffee Co., for instance, last year announced a plan to invest about US$130 million in China to open a state-of-the-art roasting facility as part of its new Coffee Innovation Park. Last month, Starbucks signed a deal to establish an Innovation and Tech Center (SITC) in Futian, Shenzhen, with an initial investment of 1.5 billion yuan (US$204 million) in the first three years. It is also opening more stores in the country. By 2025, Starbucks will have expanded to have 9,000 stores in China, from the current 6,500 stores in 250 cities.

The Moutai-infused latte frenzy last week shows the potential of the country’s consumer market, and the fact that creativity can stimulate spending even as consumers are showing signs of stress.

While political discord and economic headwinds affect the investment between China and the U.S. in the short term, areas with foreseeable profitability will continue to encourage growth.

As the 2024 election approaches, U.S. politicians will drum up China bashing. On Aug. 18, Nikki Haley, a Republican presidential hopeful, said in a post on X (formerly Twitter), “Listen up China, your days of buying American farmland and stealing our seeds are numbered. Not under my watch.”

A review by NBC News of thousands of documents filed with the U.S. Department of Agriculture, however, shows very few purchases by Chinese buyers in the past 18 months: fewer than 1,400 acres (567 hectares) in a country with 1.3 billion acres of agricultural land. In fact, the total amount of U.S. agricultural land owned by Chinese interests is less than 0.0003%.

We will have to live with lies and spats but cross-border investment will continue to thrive where money is beckoning.

(The author is a deputy editor-in-chief of Shenzhen Daily.)