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China Business Weekly

Is Detroit becoming a Chinese city?

Chinese homebuyers and businesses have been flooding into Detroit, which filed for bankruptcy last July. Forbes magazine humorously suggested that Chinese shoppers can't resist a bargain.

"Where else can you buy a two-story home in the US for $39?" However Detroit is not just any American city - it is the center of the US car industry and so the Chinese interest in Detroit also has a strategic purpose. Indeed it is a classic case of turning crisis into opportunity, not only for China, but for the people of Detroit.

Detroit is the most populous city in the state of Michigan and the biggest cheerleader for Chinese investment is state governor Rick Snyder, who has asked for 50,000 special federal immigration visas to encourage more immigration from China and elsewhere.

Snyder has a long-time connection with China and last September he wooed investors at Beijing's China International Auto Parts Expo. He told them Michigan was the best place for Chinese companies to expand in North America, with 70 percent of global automotive research and development, a strong manufacturing base and a business-friendly environment.

More than 100 Chinese companies have already invested in Michigan, with Chinese foreign direct investment in the wolverine state reaching the $1 billion mark in 2012. Investments have included car-makers and auto-parts, and Chinese investors have been soaking up the talent of American automakers and their suppliers.

While the auto industry accounts for nearly 95 percent of Chinese investment in Michigan, according to Snyder, it is not the only target for Chinese investors. Property investors have also been scooping up residential properties - sometimes hundreds at a time.

The activity in Detroit follows a well-established pattern of Chinese overseas investment and is the latest indication that China is intent on becoming a world leader in the auto industry. Over recent years there have been many major investments across the globe, including the purchase of leading brands such as Peugeot and Volvo.

Thailand is also a focus of the Chinese. Early this month I had the pleasure of witnessing a new milestone in the car industry in Thailand with the roll-out of out the new MG6 1.8 litre saloon. This is being manufactured in Rayong as a joint venture between CP Group and Shanghai Automotive Industry Corporation (SAIC). SAIC is the largest car maker in China, with annual production and sales of over five million vehicles in 2013.

A key factor in the revival of the American auto industry is automation. Certainly China understands its importance, given its own rapidly-rising wage costs. In 2012 China became the world's biggest and fastest-growing market for industrial robots, and robot sales to mainland China now account for 20 percent of the global market.

China clearly seems to have all the factors in place for success in Detroit. Given Thailand's key role in the global auto industry supply chain, we will certainly be watching developments with interest.

For more columns in this series please see www.bangkokbank.com


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