Chinese firms in US seek to optimize localization

While globalization has made the world flatter, localization is the key to capitalizing on it, said executives of Chinese companies in the US and facilitators in bilateral economic exchanges.

Scores of Chinese executives gathered in Houston on Wednesday to discuss localization strategies at a seminar organized by the China General Chamber of Commerce (CGCC).

"According to our statistics, as of March this year, our Chinese-member companies have accumulatively invested over $170 billion in the states, directly employ over 200,000 employees and indirectly support more than 1 million US jobs," said Hu Wei, chairman of CGCC and president and CEO of Bank of China USA. "That's a huge contribution from our investors to the US community."

Hu said that as Chinese companies understand how to better tap into the local market, optimization of localization strategies is an important area when it comes to competing globally, including localizing products, services, content and more.

Guan Linhua, CEO of Surge Energy, talked about how the company survived the pandemic and oil-price fluctuations since it was established in 2015 by localizing its business.

"When oil prices dropped to below $40 a barrel, more than 200 companies filed for bankruptcy. We survived the downturn and even took advantage of the situation and made two acquisitions in 2021," he said.

Surge Energy is a wholly privately owned Chinese company based in Houston. Guan credited part of the company's success to localization of projects, one being water conservation in very dry West Texas.

"We have been a pioneer in water recycling for fracking operations since 2017. So far, we have conserved 3.6 billion gallons of fresh water in the dry area of West Texas. That's enough to give every American in this country 10 gallons of fresh water," Guan said.

The water conservation eliminated more than 200 million water trucks from the road, reduced CO2 emission and made the roads in West Texas safer, Guan pointed out.

The company also built its first electric substation in January 2020 to generate enough power to remove 45 diesel fire generators. A second one will be commissioned soon. That, along with water conservation projects, has contributed to a considerable reduction of CO2 emissions.

By this year, Surge has sold $7 billion in oil and gas and contributed $2 billion in taxes as a Chinese operation in Houston. "We contributed to the economy of Texas and created jobs," Guan said.

Fuyao Glass America is another success story achieved through localization of the supply chain and employees, according to its Vice-President Amy Lei.

As the world's largest auto glass supplier, Fuyao got close to its customers in the US when it opened its Ohio factory, including Ford, BMW, Tesla and others.

To make auto glass, "Fuyao needed a lot of raw glass. For the Ohio factory alone, we need 10 million pieces of raw glass each year," Lei said.

Unable to find a supplier of high-quality raw glass in such a large quantity, Fuyao decided to invest in raw material and opened a factory in Illinois.

"We localized and vertically integrated our supply chain. This gives customers a lot of certainty to know we have reliable supply chain within our own system, and we can always deliver products on time," Lei said.

As a result, the COVID-19 pandemic has had minimal impact on Fuyao's supply chain.

Fuyao's workforce is also very localized, said Lei. "For our operations here, we run the American way. We have about 3,000 workers across four states, and more than 90 percent of our workers are hired locally. It's important for our employees from China, US and other countries to embrace diversity and work as one Fuyao team," Lei said.

Shau Zhang, partner and Americas leader of China overseas investment at Ernst and Young, said that localization of Chinese companies in the US needs to go one step further.

"While Fuyao is doing well, I challenge, how many of your C-suites (are) localized?" Zhang asked, adding that the C-suite is 90 percent, or even more than 95 percent localized for many South Korean and Japanese companies in the US.

According to the newly enacted Inflation Reduction Act, effective 2024, electric vehicles with components manufactured in China won' be eligible for government incentives. Effective in 2025, products with raw materials from China won't qualify for any incentives.

"You have no choice but to localize everything," Zhang said.