Will China “Save” Detroit?

By:  William F. Jasper
10/21/2013
       
Will China “Save” Detroit?

Detroit’s politicians are practically prostrating themselves before Chinese “investors” so that the Chinese will buy and keep open companies, but it’s a strategy doomed to fail.

Michigan Governor Rick Snyder has a BIG sales job to pull off. No, make that SEVERAL big sales jobs. He’s got to convince the state’s residents, taxpayers, businesses, and investors that Detroit — Michigan’s biggest city (now in the midst of the largest municipal bankruptcy proceedings in U.S. history) — and Michigan itself are on the rebound, after decades of economic decline and a business and population exodus that gives the distinct impression of a sinking ship. He’s also got to convince foreign investors to risk a lot of capital betting that the “Rust Belt” will shine again, that “Motor City” will revive, and that the corruption, cronyism, and spendthrift politics at the heart of the Wolverine State’s financial woes have been banished. And, he’s got to convince Michigan voters, taxpayers, and businesses that their best hopes for a lifeline lie with the cash-rich coffers of the People’s Republic of China.

Chinese Inroads

On that last item, it appears that the governor is pushing on an open door; drowning people do not look askance at lifelines, even when thrown to them by slavers or cutthroat pirates. In September, Governor Snyder, a Republican, led a large contingent of Michigan business people, government bureaucrats, and politicians on a weeklong tour of key Chinese business centers, visiting Beijing, Shanghai, and Chongqing. This was his third trade mission to China since taking office in 2011. In Beijing this year, Snyder delivered the keynote address to the China International Auto Parts Expo 2013 (CIAPE 2013), making a pitch for more Chinese companies to follow in the giant footsteps of China’s Pacific Century Motors, AVIC Automobile Industry Holding Co., and Wanxiang Group, or the more modest footsteps of the 100 or so Chinese companies that have also taken stakes in Michigan’s troubled economy.

In 2010, General Motors sold Nexteer, a global manufacturer of steering and driveline products, to Pacific Century Motors (PCM), a joint venture of Beijing E-Town International Investment & Development Co. Ltd. (E-Town), the sovereign wealth fund of Beijing’s municipal government, and China’s state-owned Tempo Group. Nexteer is a venerable Michigan company that goes back over a century in the automotive business, with facilities in Saginaw and Buena Vista that provide thousands of blue-collar and white-collar jobs. In 2011, E-Town/Tempo sold 51 percent of PCM to AVIC Automobile Industry Holding Co., a subsidiary of Aviation Industry Corporation of China (AVIC), the state-owned enterprise that produces China’s advanced fighter jets, helicopters, and other airborne weapons. The price tag for the sale, reportedly, was more than $400 million, the largest ever Sino-U.S. deal in the auto parts industry.

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