Making sure all roads from China lead to California economy

150 150 Cheryl Getuiza

Guangzhou, the most populous and biggest import/export city in China. (Photo credit: Azwari Nugraha via Flickr)

California’s golden shimmer appears to be attractive to investors in China. Those investments have already created new businesses, jobs and tax revenues for the state. California is poised to lead the nation in attracting more Chinese investment in the coming years, however state leaders, the business community and the private sector must all work together.

“With its long history with China, the most sizeable Chinese American population in the country and more inward investment deal from China than any other state, California is in a position to lead the nation,” said Thilo Hanemann, research director for the Rhodium Group.

The economic research and investment group partnered up with the Asia Society on a new report called Chinese Direct Investment in California.

The Golden State has attracted 156 deals from 2000 to 2011. That’s one quarter of all Chinese investments in the United States during that time frame.

How did California do it? We can give thanks to our dynamic private sector, doing the bulk of the work to make our state more attractive. Also, overseas investors are drawn to the state’s high-tech and service sectors.

“Of the 1.3 billion in Chinese investment in the state, Southern California leads the way with 69 deals totaling $618 million since 2000,” said Hanemann. “The San Francisco Bay Area and Silicon Valley/South Bay regions are the second and third most attractive areas.”

The competition to win over Chinese investors is a constant battle which is why California must ramp up its efforts.

Hanemann says there are several ways California can remain competitive:

  • Understand California’s value to China – California holds several strengths including: having the largest state market in the country; being a national leader in many of the high-tech industries; it has created a multicultural pool of workers; and it still has international reputation for its quality of life. Understanding these strengths is vital to developing a relationship with Chinese investors.
  • Target the right Chinese firms – China has almost five million businesses. Investors are targeting certain sectors. State officials should capitalize on past successes to make the case. State leaders must open the lines of communication to these investment giants.
  • Set up the state’s investment promotion efforts – Competition from other states is growing. California needs institutional change in its investment promotion efforts. Its recommended the state create an agency with a mandate to lead and coordinate efforts to promote Chinese investment. The new GO-Biz office is encouraging development, but more must be done to support innovative local initiatives such as ChinaSF.

“California’s private sector has been a strong leader in bringing Chinese investment to the state,” said Jack Wadsworth, Co-Chairman of Asian Society Northern California. “We need state government to make the same commitment.”

The Golden State has great potential—attracting between $10 billion and $60 billion by 2020—of course, doing wonders for our economy.

“No single politician, government agency, or chamber of commerce can deliver success; attractiveness is truly a function of coordination across all of these groups and many more,” said Hanemman.

That’s just the sort of thinking that has driven the California Economic Summit, through its SMART Innovation Action Team, to work towards the creation of a comprehensive Economic Competitiveness Plan for the whole state. Keep tabs on our progress on this issue and the others on the Progress Tracker site.


Cheryl Getuiza

All stories by: Cheryl Getuiza