We’ve all heard about how China is disrupting the U.S. automotive market. They have certainly built a reputation as the world’s low-cost manufacturing base. I often get asked the question, “where do you see the future heading for U.S. companies investing and manufacturing in China”?
Here’s my take on the future for U.S. companies
In 2015, 68% of the 450 U.S. companies surveyed by the American Chamber of Commerce said that they were profitable in China. And I’m certain if you did that survey again, today in 2017, that number would rise. I believe that we will continue to see companies investing in Chinese operations to build goods not only for export, but to supply the increasing demand for those goods to the burgeoning middle class throughout China.
Last year in 2016, almost 40% of the population in China was defined as being in the low income bracket – having a personal disposable income of less than $2,100. That population is expected to drop to 11% by 2030. And on the opposite end of the spectrum, high-income individuals – those with a disposable income above $32,000 represent 2.6% of the population now and will rise up to almost 15% of the population by 2030. This is the fastest growth rate of all income categories.
In the past, China’s economic growth depended on using the deep pockets of the state to finance investment. In the future, however, meeting the needs of a booming and more demanding middle-class group of consumers will be fundamental to economic sustainability. The majority of China’s total consumption has historically centered on essential items such as food, beverages and clothing. Looking to the future, as average disposable income levels rise, higher spending is expected on cars, luxury goods, financial services and health.
Economists in China are predicting only mild growth for necessary items because market demand is mostly met. There is a strong potential for growth in spending on transport and communications. Basically, as consumers become richer, they will be more demanding for higher quality of goods and services. This is a business owners dream. A growing population not only in size, but in wealth. There are so many opportunities to take advantage of in a setting like this.
- Pictured Below: Milan Stevanovich, VP Global Strategy, Detroit Chinese Business Association with me at the Automotive Press Association’s Luncheon
U.S. / China relations are strong in Michigan
Chinese investors see the potential here in Michigan and they are eager to participate in the revitalization and rebranding of Southeast Michigan. Below is a small list of what’s already in progress:
- Nexteer, a Chinese-owned auto supplier, recently opened their Global Headquarters in Auburn Hills, Michigan, and have created over 150 new jobs.
- STEC USA, which is an American Subsidiary of Shanghai Automotive Industry Corporation, opened its doors in metro Detroit. They are expected to create over 175 new jobs and more than $15 million in new, private investment.
- Just recently, China-based Fuyao Group, the world’s largest automotive glass manufacturer, chose Plymouth, Michigan for its new automotive plant, creating an estimated 950 jobs over the next three years.
Of course, Lucerne International, just relocated to Auburn Hills, Michigan, where we are increasing our staff and production each and every day.
All of these large scale Chinese investments are happening here in Michigan – and that’s just in the auto industry! The China – Michigan connection is stronger than ever and is continuing to pick up speed at an astounding pace.
The University of Michigan is making a big impact, too
The University of Michigan is set to receive $27 million from a Chinese investment firm to aid in the institution’s driverless vehicle and robotics research. The funding will establish a joint research center at the university and assist the construction of a robotics laboratory and garage. It’ll also provide engineering service and consulting fees for university researchers to advise the firm in Shenzhen on design of an autonomous vehicle test facility there.
This is amazing. It’s going to help advance mobility across the world.
In November, 2016, Shanghai Jiaotong University and the University of Michigan announced the Joint Institute-Ross Executive Development Program this partnership will benefit both universities by broadening international engagement for students and faculty and providing a unique cross-disciplinary educational experience.
A memorandum of understanding between U-M, the Southern University of Science and Technology (SUS Tech) and the Beijing Institute of Collaborative Innovation was signed last November. It’s intended to establish a Global Collaboratory of Water Technology to conduct research in technologies related to clean water science and to cultivate talent and entrepreneurship.
U of M alone has a long history – over 170 years – of collaboration with China.
Michigan is among the most committed U.S. states to building and maintaining a strong relationship with China. We even have a Michigan Chinese Innovation Center located in downtown Detroit. This office was set up last May with a $5 million grant from the Michigan Strategic Fund Board and is part of the MEDC. Its goal during the next five years: encourage Chinese companies to invest in the state, thereby creating new job opportunities.
- Pictured Below: Speaking to students with The University of Michigan Association for Chinese Economic Development, December 9, 2016