From a study conducted by the Rhodium Group:

The authors of the report, Daniel H. Rosen and Thilo Hanemann of The Rhodium Group, estimate that Chinese firms in the United States have already created more than 10,000 American jobs. But despite an overall effective U.S. screening policy for inward investment, political interference threatens to divert legitimate and potentially beneficial investment deals.

Surging Chinese investment has triggered populist anxieties in the United States, just as Americans once feared economic domination by Japan.  “Japanese investment in the United States during the 1980s was as controversial as China’s,” the authors say, “but in the following years, U.S. affiliates of Japanese companies invested hundreds of billions of dollars in the United States, and today employ nearly 700,000 Americans.”

Hyundai directly employs 4,000 people in the US, and indirectly employes 45,000 people when you add the dealership employees.   Nissan employs 8,000 people in Tennessee alone.  Nissan uses primarily US made parts in its cars and has three manufacturing facilities in the US.  The company’s main design center is in the US as well.    Faced with stiff import duties, China recently built a $1 billion Texas steel pipe manufacturing plant that employes 650 people.   Foreign direct investment accounts for 5% of all private jobs in the US.

Meanwhile domestic multi-national companies have been trimming domestic jobs.  From a recent Wall Street Journal article by David Wessels:

“U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization’s effect on the U.S. economy.

The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That’s a big switch from the 1990s, when they added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad.”

Beezer here.  Who knows all the dynamics involved here?  My take is that US multi-national corporations (MNCs) are picking the relatively low hanging fruit offered by the developing Far East countries, primarily China and India.   In the US, the MNC existing capacity is more than sufficient to supply domestic demand, particularly the lower demand caused by the financial meltdown three years ago.  Because of this existing capacity, the US recovery underway is slow when it comes to hiring.  Profits are skyrocketing but they don’t seem to be spurring much in the way of US jobs.  At least not yet.

There’s a consensus building that the rising price of petroleum will inevitably slow consumer spending in developed countries, but that the rapid growth of Far East developing countries (primarily China and India) will continue to power over all economic growth.

First some detail regarding the price of oil and it’s impact on US consumer driven spending.  From the econobrowser blog site.

Consumption spending slowing down

Guess what: rising energy prices are taking a toll on consumers.

On Monday the Bureau of Economic Analysis released details on personal consumption expenditures for February, allowing us to update our graph of how big a share energy is in American budgets. A 6% expenditure share marked the point at which we started to see significant consumption responses a few years ago. The share in February is essentially there (5.98%, to be exact), the highest it’s been since October 2008. For poorer households, energy’s budget bite is a significantly larger percentage.

Energy expenditures as a percentage of consumer spending. Calculated as 100 times nominal monthly consumption expenditures on energy goods and services divided by total personal consumption expenditures. Data source: BEA Table 2.3.5U. Blue line is drawn at 6.0%.

Not surprisingly, overall spending on other items is slowing down. Real personal consumption expenditures grew at a 3% annual rate in February after falling slightly in January. Bill McBride (and you know I don’t like to argue with him) thinks this means real consumption spending for 2011:Q1 may only grow at a 1.4% annual rate. That’s less than half the rate that many analysts had been anticipating prior to Monday’s data.

Beezer here.   After this piece there comes this from a commentator.

“Again, weak demand in developed countries, e.g., the US, since 2005 is not a new story. But the real story is increasing demand in developing countries. Oil consumption in the US and four developing countries for 1998 to 2009 (100 = 1998 consumption, EIA):

At Chindia’s 2005 to 2009 rate of increase in net oil imports, as a percentage of global net oil exports, Chindia would be consuming 100% of global net oil exports in 2025. As they say, somethings gotta give, and that something will largely be consumption in the US, as we will probably continue to be gradually priced out of the global net oil export market.”

Beezer again.  The shift from west to east of economic growth appears pretty obvious.  But the implications of this shift towards where 40% of all humans live seems not to have been recognized by the US public.  In his energy policy speech Wednesday Obama spent some time addressing the medium to long term implications of not having a real non-fossil fuel energy system.  But he skirted what may be the real challenge:  There is not likely to be enough energy to go around with our current systems.  Claims that all we need to do is develop shale oil, which is relatively abundant in the US, are blinding the US public to the real problem of resource demand outstripping supply.    Nevermind that the stripping of shale rock through the process of fracking will inevitably produce yet another environmental disaster.  A similar set of issues arise when you consider shale gas, including the same problem of water pollution and use in fracking. 

Something else needs to be done, and done quickly.  Ignoring the necessity of building a sustainable or renewable ‘plan b’ is a fatal mistake.  The US economy is now trapped between periods of external shocks and recession and periods of slow growth that are not sustainable.  Leadership talks in terms of decades as if we actually have 40 or 50 years to transform our systems.  We don’t.  Not even close.

Beezernotes began as an effort to understand what may be the world’s most important challenge:  Resource utilization necessary to meet the demands of a growing global population.  A North Atlantic great recession that developed almost three years ago pushed most of Beezernotes into domestic political and financial considerations and generally away from the original intent.

But the original intent remains the most important challenge.  From Lester Brown’s book ‘Plan B 3.0, Mobilizing To Save Civilization.’

“By 2030 China would need 98 billion barrels a day.  The world is currently producing 85 million barrels a  day and may never produce much more than that.  There go the world’s oil reserves.

What China is teaching us is that the western economic model–the fossil fuel based, automobile centered, throwaway economy–is not going to work for China.  If it does not work for China, it will not work for India, which by 2030 may have an even larger population than China.  Nor will it work for the other 3 billion people in developing countries who are also dreaming the ‘American dream.’  And in an increasingly integrated global economy where we all depend upon the same grain, oil, and steel, the western economic model will no longer work for the industrial countries either.

The overriding  challenge for our generation is to build a new economy–one that is powered largely by renewable sources of energy, that has a much more diversified transport system, and that reuses and recycle everything.  We have the technology to build this new economy, an economy that will allow us to sustain economic progress.  Can we build it fast enough to avoid a breakdown of social systems?”

2030 is not that far off.  Obviously the world’s not going to end up where China uses all the world’s available petroleum.  Many dramatic changes, consensual or forced, will  occur long before 2030.

It appears that we are not going to be able to ‘muddle’ through into 2030.  Common sense dictates that leadership around the world, in both the private and public sectors, needs to work cooperatively in order to successfully make the adjustments needed to better utilize existing  resources.

It is clear that markets will be central to making these adjustments.  Command, top down economies absent relatively ‘free’ markets are unlikely to make all the correct choices going forward.   But markets will come under intense stress by political leadership faced with populations seeking a better life and more access to the world’s resources.

Securing competitive, functional markets will no doubt be a key challenge to overcome as nations increasingly compete for access to basic resources.   Without a global consensus that preserving competitive markets is a concern primary to short term, domestic ambitions, the needed reforms adequate to meet the challenge or resource won’t happen.  

Competitive markets are not ‘free.’  As we’ve said several times, these real world markets most closely resemble mixed martial arts combat than any theoretical model of ‘free’ markets.  But as rough and tumble as these markets are, they are vastly superior to wars.  The markets will dispense resources and discover the prices at which resources are dispensed much more efficiently than any other method.

Markets do not exist in a vacuum, of course.  They are subject to rules, it is hoped rules that are fair and enforced.  Their obvious advantages don’t diminish if nations utilize them to reach goals.   If nations agree to a common goal, say one of achieving sustainable energy, then competitive markets will be vital to achieving the goal.  Without them the probability of success dramatically decreases.

Right now global markets exist for almost everything.  Communication technology advances have been critical to these markets.  But this critical infrastructure, and the markets it makes possible, can be undermined by a lack of global political unity.   If there’s a threat to these markets, it is not the markets themselves, but national politics that disrupt even the most basic rules markets need in order to exist.

Right now state capitalism, or mercantilism if you prefer, undermine basic rules.  China, in particular, uses export subsidies and currency manipulation in order to drive an export led economy.  There are many other countries, not the least of which are Germany and Japan, who also enact policies aimed at running export surpluses. 

Maintaining these manipulations threatens the international markets so critical to adjusting to a world of resource contraints.  The stresses created will impede the changes needed to create  a different, economically stable world.  There will be winners and losers.  But the relative share of global resources and production will be more evenly, and thus fairly, distributed by competitive markets.

Which cannot happen if nations decide to go ‘rogue.’   If that happens, reality is going to be very, very harsh for all concerned.  And that’s a door you don’t want to open.

While conservatives assert that government can’t create jobs or wealth, countries around the world are proving without doubt this is false.  Continuing to believe in this myth guarantees that the federal government won’t be able to use its power on behalf of the country’s future prosperity.  

From the book “The End Of The Free Market,” written by Ian Bremmer of the Eurasia Group:

“Between 2004 and the start of 2008, 117 state-owned and public companies from Brazil, Russia, India, and China (the so-called BRIC countries) appeared for the first time on the Forbes Global 2000 list of the world’s largest companies, measured by sales, profits, assets, and market value.  A total of 239 US, Japanese, British, and German companies fell off the list.  The percentage market value of this latter group of companies dropped from 70 percent to 50 percent over those four years; the value of the BRIC-based companies rose from 4 percent to 16 percent………

Bloomburg news reported in early 2009 that three of the world’s four largest banks by market capitalization were state-owned Chinese firms–Industrial and Commercial Bank of China (ICBC), China Construction, and Bank of China.  The 2009 Forbes Global 2000 listed ICBC, China Mobile, and Petro China among the world’s largest companies by market value.”

Beezer here.  The growth of these state owned and directed hybrid capitalist companies is no accident.  Governments around the world are increasingly aware that the world’s growth is going to put intense pressure on gaining the raw materials necessary for modern economies.  Bremmer puts it this way:

“…There is no way global consumption will remain at today’s levels for the next forty years…For simplicity, let’s focus only on automibiles.  In 2009, about a thousand brand-new cars hit the streets of Beijing every twenty-four hours, and only about 4 percent of Chinese consumers already own automobiles.  In other words, China offers a vast–and still largely untapped–market for cars….

“Who will profit from all that new consumption?  The phrase ‘big oil’ conjures up images of Western multinationals like ExxonMobile, Royal Dutch Shell, and British Petroleum.  But three quarters of global crude-oil reserves are now owned by national oil companies like Saudi Aramco, Gazprom (Russia), CNPC (China), NIOC (Iran), PDSVA (Venezuela), Petrobas (Brazil), Abu Dhabi National Oil Company, Kuwait Petroleum Corporation, and Petronas (Malaysia).  These state owned giants are the world’s largest energy companies measured by reserves.  The biggest multinationals collectively produce just 10 percent of the world’s oil and gas and hold about 3 percent of its reserves.  The largest of them, ExxonMobile, ranks just fifteenth in the world.”

Beezer again.  With 1.4 billion people already, China is expected to add another 300 million over the next 15 years.  Almost another United States, which has a population today of slightly more than 300 million.  China uses it’s government power to gain assets overseas–to lock up the raw material needed to grow.

Again from Bremmer.  “From Algeria to Angola, in Nigeria, Niger, and Ghana, state-owned Chinese companies are competing with Western multinationals for energy supply contracts.  China’s trade with Africa topped $100 billion in 2009, a figure ten times higher than in 2001.  This trend is not limited to China, nor is Africa the only playing field.”

Bremmer points out national oil companies, as well as other nationalized or controlled companies (called national champions), have several advantages over totally private companies.  They can work cooperatively with other nationalized oil companies where private companies are prohibited.  They can invest in large scale projects with repressive regimes that multi-nationals can’t approach.  And they can pay above market prices to lock up critical assets, such as oil or minerals.  These state owned companies, in other words, are looking long term on behalf of their citizens, not just on short term profits which dictates private corporation thinking.

And national champions that are legally private (although the government may be a major shareholder, and the government gives them guaranteed dominance in their country) are on the constant lookout for attractive foreign assets. 

“Vale, privatized in 1997, used government support to acquire Brazil’s second-largest iron-ore producer (MRB) and, in 2007, the Canadian company Inco for nearly $17 billion.  Vale has now become the world’s second largest mining company.  India’s Tata Group has become the country’s largest corporation, partly through acquisition of iconic Western brands like Britain’s Tetley Tea, Jaguar, Land Rover and Corus (formerly British Steel).  Tata now operates across multiple industrial sectors in more than eighty countries.”

Beezer again.  There was a time when America understood the reality of competition.  It’s never fair or free.  There are always corporate and government agents, often working in cooperation, intent on gaining advantage over competitors.  That’s always been the case.

Bremmer’s list of the assets now being hoovered up by state owned capitalist companies around the world, or their national champion brethren (often funded by Sovereign Wealth Funds controlled by governments) is long and threatening. 

If we don’t wise up and start wielding all our various powers, including the dynamism of our private corporations, then we will continue to lose our wealth and as a consequence, our prosperity.