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Can China bring jobs back to America? Yes and maybe

The difference between hi-tech and traditional finance came into focus as Alibaba chief Jack Ma and US Commerce Secretary Wilbur Ross headlined overlapping conferences in the US.
Alibaba HQ in Beijing | Shutterstock

The difference between hi-tech and traditional finance came into focus as Alibaba chief Jack Ma and US Commerce Secretary Wilbur Ross headlined overlapping conferences in the US.

Both events aimed to leverage the US-China economic and trade relationship to support American jobs, but the optics couldn’t have been more different. Alibaba’s “Gateway ’17” in Detroit, opened before a crowd of 3,000, which was treated to a performance of drummers festooned in high-tech lighting, moving through the air with the help of invisible wire.

In Washington, an equally large audience was welcomed with a traditional military colour guard drumming out the US national anthem at the government’s SelectUSA investment conference.

The objectives of both events resonate in the United States, where allegations that politicians sold out American workers by offshoring production to China dominated political discourse in the run-up to the country’s 2016 presidential election. Many analysts cited then-candidate Donald Trump’s harsh anti-Beijing rhetoric as a reason for his victory.

Swamped by investigations into White House connections with Russia and unable to deliver on policy promises such as health care reform, Trump needs evidence that relations with China will start fuelling US job growth. He dropped his harsh tone against Beijing and hosted Chinese President Xi Jinping at his Mar-a-Lago resort in Florida just two months into his term.

The stakes are also high for Ma, who pledged to help support one million small businesses in the US when he met Trump in New York two weeks before the president took office.

“We think American small businesses have great brands,” Ma said in Detroit, before taking the stage for an armchair discussion with talk show host Charlie Rose. “This show is to teach people about e-commerce in China, teaching people about selling things to China and Asia, so this is the beginning.”

Ma said the choice of Detroit for the event “made sense”, because the decline of the city’s once-dominant auto industry had created a vibrant ecosystem of small enterprises. He said he wanted to boost the number of active users on Alibaba to 2 billion, from just over 500 million now, which would require the company to expand its network of merchants beyond China.

Ma added that consumers in China were keen for products from small businesses in Detroit and the midwest US region, fresh produce and other food products in particular.

One attendee, Jeff Olson, 53, said he planned to leave his job at a custom office furniture dealer to start his own trading firm.

“These guys are coming to America to teach us how to sell to China, so I brainstormed with my friends to figure out what we can make and I’m going to learn how to sell them to China,” Olson said. “The main thing I took out of this today is that I can do this. I don’t know how I’m going to do it yet, but that’s what the people are here for, to teach me and provide the services.”

Some analysts noted that while Alibaba’s proposition represents opportunities for small US companies, there are hurdles that need to be cleared.

“There are all kinds of cross-border friction points that they are working to remove, but it is still now fluid,” said Rob Sanderson, an analyst at investment firm MKM Partners in Connecticut, who has a “buy” recommendation on Alibaba’s stock.

One US Alibaba customer, Ric Kostic, who has sourced packaging materials for his skin care products through the portal since 2004, said he found the transfer of his goods “a little tricky” because of shipping procedures required by Alibaba’s logistics network in China that he had not expected.

Meanwhile, at SelectUSA in Washington, complaints from some Chinese companies highlighted issues hampering the kind of job creation that the conference was trying to promote.

Gilbert Lee, the chief financial officer of Nasdaq-listed Fuling Global and a SelectUSA panellist, complained about the difficulty in securing visas for the technicians he needed to train workers at his facility in Allentown, Pennsylvania, which makes environmentally friendly drinking straws.

Lee, who employs 60 workers at the plastic injection moulding and extrusion plant, said he had put an expansion plan on hold while he figured out whether he would be able to expand without a team of workers from Fuling plants in Zhejiang Province to train his local staff.

“They have been working in the company for 15 to 20 years, so they have all the experience on how to fine-tune the machines,” Lee said. “They are skilled workers, but not with advanced degrees that [US immigration authorities] want to see to approve their visa applications.”

Jason Lam, general manager at Huizhou Jiesong Electronic Technology, expressed the same concern.

“There’s a scarcity of skilled labour in the US, particularly skilled technical labour, and I think the authorities need to loosen the requirements on bringing this class of labour into the country,” Lam said, adding that he would not invest in the US until he knew how to source the labour he needed.

Still, the level of participation by Chinese companies in SelectUSA suggested their interest in US direct investment is strong.

Chinese investment in the US exceeded that of the US in China for the first time in 2015, reaching US$15.3 billion while the figure the other way was US$13.8 billion, according to the China Investment Monitor, a database compiled by New York-based Rhodium Group.

The number of Americans employed by China-affiliated companies rose to more than 140,000 in 2016, when Chinese investment in the US surged threefold to US$46 billion, according to Rhodium data.

And as for Alibaba’s efforts to bring more US enterprises onto its platforms, China’s rapidly changing consumption habits would create strong demand for this, said MKM’s Sanderson.

“The Chinese economy is moving up the hierarchy away from manufacturing and towards a consumption economy. It’s a long-term trend but if it continues going in this direction, China is going to need a lot of help to support the consumption class.”

Alibaba owns the South China Morning Post.

Read the original story on the South China Morning Post