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Trade war

US cities and states woo Chinese investment despite trade war

Conflict is 'elephant in the room' for companies and officials seeking deals

White House economic adviser Larry Kudlow speaks at the SelectUSA Investment Summit in Washington on June 11.   © Reuters

WASHINGTON/LOS ANGELES -- City and state governments in the U.S. remain eager for Chinese investment even as strident rhetoric from Washington and trade war uncertainty kept many delegates from China away from recent trade events.

Just 77 Chinese delegates attended this year's SelectUSA Investment Summit, an economic development conference held by the U.S. Department of Commerce, compared to 101 last year and 155 in 2017. The event was held in Washington over three days in early June.

A similar trend was observed at SelectLA, a spin-off conference hosted by the government of Los Angeles.

"There are much fewer attendees from China this year than last," said Yi Zhang, Chinese business services leader at management consultancy Plante Moran, who was attending the event in Los Angeles for the third year.

"The trade war is like the elephant in the room. Everyone is thinking about it but not talking about it," said a Hong Kong delegate at the California event.

In 2017, SelectUSA welcomed its largest delegation from China ever, a point that U.S. Secretary of Commerce Wilbur Ross announced proudly in his opening remarks for the conference.

This year, Ross's opening remarks were far less friendly, though he avoided calling out China by name. As the much reduced Chinese delegation sat in the audience, many listening via simultaneous translation, the commerce secretary talked about how the government is "defending American producers from foreign nations that dump government-subsidized products into the U.S. and global markets, or that have refused to play by the global rules of trade."

The impact of the ongoing trade war can be seen in investment figures, too. Chinese direct investment into the U.S. plunged to just $5 billion last year, an 80% drop from 2017 and its lowest level since 2011, according to consultancy Rhodium Group.

Yet even as Washington hardens its tone, many cities and states are still eager to attract Chinese capital.

At SelectUSA, many cities and localities from across the country had Mandarin speakers standing by their booths to assist with any inquiries from Chinese delegates.

Jennifer Zou, vice president of global initiatives at the Bay Area Council of San Francisco -- America's biggest tech hub -- said that California has a much more welcoming attitude toward Chinese investment than the federal government. "Chinese interest in investing in the Bay Area remains strong and we welcome it," Zou said.

At its exhibition booth, North Carolina -- home to the U.S. headquarters of Chinese PC maker Lenovo -- advertised its aviation, biotech, IT and fintech industries to Chinese investors.

"When you talk to companies in China, you really can sense the demand is still there," Danny Ding, director at the China office of the State of North Carolina. "Many of these Chinese companies have reached a stage where they want to seek overseas expansion."

But Ding also said the Chinese business community's confidence in the U.S. market has taken a serious hit, especially with recent developments involving Huawei Technologies. The U.S. Department of Commerce last month added the Chinese tech giant to its so-called Entity List, effectively banning exports of American technology to Huawei.

"Companies want to wait it out," he said. "When you commit to an investment project in another country, the last thing you want is uncertainty."

Participants at the Los Angeles event were keen to roll out a warm welcome for Chinese investors.

Several speakers at SelectLA referred to the ongoing U.S.-China trade war as an "unfortunate situation." But officials, including Los Angeles Mayor Eric Garcetti, and Lenny Mendonca, chief economic adviser to the California governor, assured the attendees that both the city and the state will remain open to foreign investment and continue to advocate for free trade.

Only one of the 20 exhibitions at SelectLA was from China, and several participants pointed to the trade war as the major reason for the diminished Chinese presence.

But there was also optimism, at least about the longer term.

"I found for companies in both countries, the eagerness to do business with each other is still strong," said a commerce representative from a city in southern China. "And their eagerness to do business with each other might change the current political situation."

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