I am honored to once again be published in a great periodical, China US Focus. This week, I discuss a growing trend that deserves all of our attention: the rise of Chinese private outbound investment. You can read the article on China US Focus here, or read on below:
The Age of Chinese Outbound Private Investment
While the mainstream media debates the future of the Chinese economy, the opportunist understands that China’s rapid economic growth path is only just now starting to bear fruit. We are at the beginning of a new chapter in the Chinese economy: the age of outbound private investment.
It is no secret that during China’s historic economic rise, the country has made significant investments abroad. But up until just a few years ago, a vast majority of this investment was state-led. According to the Rhodium Group, from 2000 – 2011, 70% of China’s outbound investment was carried out by state-owned enterprises. The economic climate has changed drastically in a short amount of time. In 2012, private firms represented 80% of China’s outbound transactions, and just this year, private companies accounted for 16 out of 17 Chinese outbound M&A deals.
Private firms are increasingly looking into more mature markets like the United States to grow their companies. Top industries of choice for Chinese firms include engineering and contracting, energy and mining, household appliances, automotive, and financial services. These types of investments save and even create jobs in the United States, further integrating our two economies and building a great pie.
Recently, there have been a few high profile purchases by large Chinese companies. Last year, Chinese real estate and entertainment conglomerate, Dalian Wanda Group, purchased AMC Theatres for over $2 billion, and is gearing up to use it as a platform for further expansion into the U.S. market. Even more recently, China’s biggest pork producer, Shuanghui International, bought out Virginia-based pork producer Smithfield foods for $4.7 billion.
It’s Not Just About the Companies, It is About the People
These large-scale private purchases are merely harbingers of a greater trend of private investment and people flow between the United States and China. It truly is the dawning of a new age.
Chinese individuals are more and more looking for ways to get their assets out of China. They are spurred not only by uncertainties about the future of the Chinese market, but also certain present realities. A great majority of China’s private wealth has been built on real estate. But now, in an effort to push down inflation and prevent a housing bubble, the Chinese government has been imposed strict regulations on real estate speculation. In Beijing, for example, the purchase of a pre-owned home is now subject to a 20% tax. On top of that, even owning a second home in Beijing has been banned for new buyers.
There seem to be more changes on the horizon that are causing Chinese investors to look outward. The Chinese weibosphere (equivalent of U.S “twittersphere”) went crazy early in October when a State Council member announced that as part of the upcoming plenary session, the government is considered installing an inheritance tax.
In light of all of all this, entrepreneurial Chinese are wasting no time figuring out ways to get around this by getting out. Emigration to the West has become a preferred option. Tens of thousands of Chinese high net worth individuals are emigrating every year. They see an American green card or other residency permits in Western countries as a safety precaution; a vehicle to make it easier to move money, and their families, out.
Still, China does not make it easy on individuals to get their money out of China. According to Chinese law, an individual is only allowed to transfer up to 50,000 USD worth of Chinese yuan out of the country annually. That means that these investors need to be creative and use their network to move their assets into foreign markets.
This bodes well for foreign financial firms and money managers that stand to grow a multitude of Chinese clients in this space. Currently, there is $4 trillion of private wealth sitting around in China. Astonishingly, only 7% of that is under management. That means over $3.7 trillion of Chinese wealth is unmanaged. Why is this the case? The concept of having third party management of wealth has only begun to emerge in China. In the Chinese economy, the guanxiculture that places so much emphasis on who you know that it makes people very unwilling to trust others, even professional financial managers, with their money. But now, the learning curve that comes with investing in foreign markets is now forcing Chinese to look to professionals to help them.
New Investors, New Markets
In fact, if Americans can understand how new and untapped this opportunity is, an earnest effort to seek out and welcome private investment from China can help to resurge our economy and rebuild communities that need a kickstart. Americans and Chinese people are actual two sides of the same coin; largely what we know about each other is what we read in the newspaper. For that reason, it is no surprise that historically, individual investment in the United States from China has been concentrated in large, high-exposure markets like New York or Los Angeles. The tide could be turning, however, as more and more investors understand that those markets are becoming saturated. They are starting to look for answers elsewhere.
Take Detroit for example. Although the Detroit market on the surface seems decrepit and failed, the Detroit real estate market has struck a cord amongst Chinese homebuyers. According to the United States National Association of Realtors, the Detroit market was one of the top 5 most inquired about markets amongst Chinese real estate buyers. This seemingly is an anomaly when considering the other markets that have historically caught the eye of Chinese such as New York and Los Angeles.
In Milwaukee, we have been able to attract hundreds of millions of dollars through the EB5 program from Chinese investors. These people are becoming more sophisticated, understanding that the best, safest, and even potentially biggest boon markets in the United States are outside of the major metropolises that they have heard of.
The time is now to start building relationships of trust directly with Chinese investors. The wave of outbound Chinese investment is only just beginning; the playing field is leveled. The question is, are you ready to ride the wave?
Last weekend, American football came to Beijing! An organization called AFL China, which involves none other than famous footballer and ESPN Sunday NFL Countdown Legend Ron “Jaws” Jaworski, hoped to make the Arena Football League a popularly played professional sport here in China. On Sunday, November 10th, they hosted the first ever Arena Football League All Star Game at Capital Indoor Stadium in Beijing.
And who does football better than the Big Ten? When the Big Ten Clubs got wind of this a few weeks ago, we were armed and ready to do what we do best: TAILGATE! It is really amazing what happens when a few people have an idea and just decide to run with it. Within 2 weeks, a group that included myself (President, MSU Beijing Alumni Club), Marco Reyes (President, U Illinois Beijing Alumni Club), Sylvia Liu (Purdue Beijing), and Tom Degregoris (Notre Dame Beijing) got together with the AFL China team to sell almost 250 tickets to the game through the Big Ten Network. Then in the morning before the game, we hosted the first ever American Football Tailgate in Beijing. Over 100 people representing 20 universities came out for beer, sausages, and all the fixins of an America-style football tailgate. We believe it is the start of a great new tradition!!
See below for pics from the event, and join our Facebook page here: https://www.facebook.com/groups/bigtenchina/
I’m flattered by a recent article posted in Dome Magazine by Tom Watkins highlighting my China journey. The article is called China Dan, and you can read the article on Dome here or read the whole text below.
Truthfully, my global journey has been an amazing experience, but its a road that I do believe will lead me back to the Mitten state someday!
by Tom Watkins
There is much angst about the brain drain in Michigan. You’ve heard it: Our young college grads securing education, knowledge, skills and talent only to flee the state after graduation.
Yet it is a big world out there, and Michigan has two beautiful peninsulas — we are not an island.
Perhaps Michigan will benefit from the worldly experiences our youth gain elsewhere, if the magnetic pull of Pure Michigan can draw them back someday.
I met one such young man, Dan Redford, in his senior year at Michigan State University. He flew the coop and now makes his home in Beijing, China. Dan is fluent in Chinese and bleeds “Green” as a proud MSU grad.
Redford earned a bachelor’s degree with a double major in Chinese and international relations from James Madison College at MSU.
Redford, now 25, originally wanted to get a political science degree and attend law school. That all changed after his first trip to China in 2008.
Why China? He first fell in love with the language, and after his Middle Kingdom trip in 2008, taking in the sights, sounds, culture, language and people, he was hooked. The added excitement of the 2008 Olympics pulled him into the China orbit.
Redford grew up in Frankenmuth, a town of 4,000 people – in stark contrast to Beijing’s nearly 20 million people. As he says, “There are nearly as many people in my Chinese apartment building as there are in the entire city of Frankenmuth”.
Living in the Chinese capital, Redford feels like he is at the center of the most dynamic, unfolding story of the modern world. He clearly is, as China is the fastest growing large world economy, bursting with possibilities. Going forward, all major world geopolitical issues will intersect at Beijing and Washington, D.C.
Redford is director of China operations for First Pathway Partners of Milwaukee, promoting this Midwest state in China. Yet, he is a Michigan cheerleader, as well as one for Wisconsin, and a one-man marketing crew promoting the Mitten State with his unbound enthusiasm.
Does he miss Michigan? Of course. He would like nothing better than to mesh his love for Michigan and love for all things China. His life ambition is to “make a lasting impression on everyone I meet, and meet as many people as possible before I’m done.”
Redford credits his time at MSU with helping to open his eyes to the world. His first trip to China was through a study abroad program. MSU taught him to “think globally”.
Redford appreciates Governor Rick Snyder’s efforts to make Michigan a friendly place for immigrants and to build bridges.
“Governor Snyder is taking risks to propel Michigan forward past denial and to thrive on the global stage,” he says.
When asked what advice he would offer high school kids, he responds, “Find something to be passionate about and let God be your compass. Let your passions drive you forward.”
Sound advice from a young man who has circled the globe.
Yes, Michigan has lost Redford for now.
At some point in the future, he will return to Michigan and our state will get its ROI — return on investment — from his global experience and perspective.
A few months ago, I posted about my TV debut on a Chinese television show called “助跑80后“ （The Road after 1980）。The episode was filmed in July, but was finally aired on Chinese Education TV, an affiliate of Chinese Central Television (CCTV) on October 24th.
You can watch the full show here: http://www.letv.com/ptv/vplay/2152816.html
Skip to about 40:20 to see me spitting some Chinese
During the show, we interviewed the special guest, Fang Fang, Vice President of JP Morgan Chase Asia. It was a great experience, and I learned alot about how many Chinese young people approach the job hunting process in China. Chinese young people, just like Americans, often struggle to find a suitable job that pays a decent wage after college. We face the same pressures, and would do well to learn from each other.
And once again, this was all made possible due to the MSU Network. The host of the show was introduced to me by her husband, Ray Wu, a good friend and graduate of MSU. Go Green!
I am proud to have been featured in this week’s edition of US – China Focus. This website is a great emerging tool for students of the ongoing, complex relationship between our two countries. I wrote a piece about upcoming privatization reforms in China, and how the next wave of Chinese development needs to “dare people to dream.” You can read the article on US – China Focus, or read the text below:
China’s Upcoming Privatization Reforms: Daring People to Dream in China
For over thirty years, China’s economy has been a disruptive and powerful force in the global economy. Now, China’s newly minted leadership has the challenge of managing this powerful economy as it shows signs of tiring. Problems of high inflation, rising property values, and a high level of bad government debt all threaten to throw China’s economy off track. Further privatization has been accepted as a way to combat these challenges, particularly in opening up government project contracts previously offered exclusively held by state-owned enterprises to the private sector. To really ensure effective privatization, China must develop a culture of innovation that gives Chinese people more ownership over the direction of this giant economy.
China’s education system is a significant barrier to innovation. Unlike in the United States, where education involves a healthy mix of in-class testing and extra-curricular activity, China’s education system is almost 100% based on test scores. From primary school all the way through to high school graduation, Chinese students are preparing for the gaokao, a written test that each student takes after completing high school that will determine their collegiate path. It is a high-pressure system that forces students to focus on test scores and numbers, and does not foster creative thought.
Even more constraining is the strong divide between social classes. This is not the first time in China’s history that the leadership has made sweeping statements about reforms in China’s economy. The question is, will people believe that they will become a reality? China is divided into three basic classes – laobaixing (common people), fuerdai (the rich), and tanerdai (government officials and colleagues). These differences are so pronounced that it is hard for Chinese people to imagine any reforms that would change their relative position within this system.
These two aspects of Chinese society deter innovation, evidenced by a marked increase in dissatisfaction by average Chinese citizens in this economy, and an exodus of China’s rich, would-be innovative class.
Since moving to Beijing in 2011, I’ve witnessed the attitudes of average Chinese people go through a steady change. For common people, pride and excitement in China’s economic growth are gradually being replaced with disappointment and resentment. Last week, I had a cab driver ask me if the U.S. would consider liberating China instead of Syria. Why?
“This country is completely unfair. This country gets richer and richer, but I work harder and harder, and make less money.”
This change in attitude is growing along with divide between rich and poor. The government understands the severity of the problem. In January they released the official Gini Coefficient, which measures income disparity within an economy, for the first time since 2005. The Chinese claim that the number sits at .474, though a majority of independent assessments from scholars put the number over .6. Both numbers are over 0.4, which is considered a standard breaking point at which society as a whole starts to turn from generally satisfied to generally unsatisfied.
These statistics play out in China’s cities where working class citizens and migrants work and live in close proximity to the wealthy and powerful. Last year it was announced that over 51% of China’s population lives in urban areas, and China expects to enact plans to make that number increase to 70% by 2025. Unfortunately, with limited education and poor platforms for social mobility, the cities are being filled more and more with people that are not in a position to offer innovative value to a society that needs it.
At the same time that migrants and low-educated people are growing their presence in China’s economic hubs, certain habits of the educated and wealthy indicate a need to create incentives for innovation.
One of these habits is emigration. In a 2011 survey of Chinese citizens with net worth of over 10 million RMB ($1.53 million), it was discovered that over 60% said that they were considering emigrating from China. The survey, developed collectively by Bain and Company and China Merchants Bank, shows that the wealthy in China are either not sure about the trajectory of China’s future, or that they are just generally dissatisfied. One thing is clear is that they are not willing to stick around to spend time investing and innovating in the Chinese economy.
In China’s new era of privatization, the leadership should frame the reforms around giving average Chinese people incentives and resources to “dare to dream.” They will find ample opportunities as they start to open contracts previously held exclusively by state-owned enterprises to private companies. These large contracts should be given not just to those with government relationships, but those that demonstrate that they can give the best performances. Over time, this will provide evidence to Chinese people that society is indeed changing, and that taking a more entrepreneurial path could be an acceptable track to achieving a better life in China. Eventually, this will give the government teeth to actually reform the gaokao-based curriculum and encourage a balanced education system that gives Chinese people the incentives to think outside of the box. This is how to create a healthy economy that depends on and fosters innovation within its people.
Dan Redford is the Director of China Operations for FirstPathway Partners, and industry leading EB5 immigration fund manager. He also serves as the President of the Michigan State University Beijing Alumni Club. You can follow him and his perspectives from China at http://www.danredford.com.
As it is every day, it is GREAT to be a SPARTAN.
I am so proud of my friend, colleague, and professor, Dr. Geri Zeldes of Michigan State University for producing and directing a great documentary about the experience of Chinese students at MSU, Imported from China. The documentary featured the journey of a few Chinese students at MSU, along with American students that reflect on their interactions with the influx of Chinese in our community. It premiered at MSU on September 17th, and will soon be distributed widely. I believe it will be a great tool for any university or school that is experiencing an influx of Chinese students and is looking to serve them better.
I am honored to have been interviewed and included in the documentary, along with some of my other respected and dear friends, including Jing Cui, Tom Watkins, Peter Briggs, and Joy Fu.
MSU is currently home to over 3,600 Chinese students. This puts our university at the heart and center of one of the world’s most dynamic and unfolding stories – the one between China and the U.S. As the documentary says, “Like it or Not, we are linked together.” At MSU, we are creating leaders of a generation that I believe will guide us through a prosperous and fulfilling modern U.S. – China relationship.
If you are interested in screening this video at your school or for your alumni club, please contact me and I can put you in touch with Geri.
Next week, Governor Rick Snyder will be traveling to China on his 3rd trade mission in as many years. Here are 5 things I hope he does during his trip (heck, I’d take 2!):
1. Bring home the bacon
Obviously, we need to see some real business deals signed that bring home jobs. There are at least 30 delegates going on the trip with Snyder, and I hope that at least one of them, such as Lori Huisman of Classic Design Concepts, can benefit from associating with the governor on this junket with a real business deal.
2. Declare that “密西根”is the standard Chinese name for the state of Michigan
It sounds crazy, but the state of Michigan does not even have a standard name in Chinese. There are at least 3 popular versions throughout China, but the state itself has never made it a point to standardize. The name 密西根 (pronounced mi-shee-gen) is the best choice and is already being implemented at the Michigan China Center in Shanghai, Michigan’s official office in China.
This will greatly help George Zimmerman, Director of Travel Michigan, and those of us Michiganders in China helping to promote our state!
3. Announce that he will personally sign visa invitation letters for serious real estate buyers
Quartz.com, and many other news outlets, commented about how Chinese have been going crazy over cheap buys in the Detroit Real Estate market. According to Fox News, though, many were unable to make purchases because they were denied visas to the United States. Ouch!
If the Governor signs an invitation letter, that goes a long way for a foreigner to get an approved visa. We could greatly avoid the missed opportunities created when serious buyers are denied entry. (Note: I understand that we don’t want the corrupt or the criminal entering either…proper due diligence on invitees would have to be a prerequisite.)
4. Pen a Sister City Memorandum of Understanding between Detroit and Chongqing
With almost 30 million people, Chongqing is China’s largest city. Lucky for Detroit, it is already sister cities with this giant! Snyder should re-ignite the sister city relationship by signing an MOU with their new party chief to work towards sustained collaboration. (Ironically, the Party Chief of Chongqing was sacked last year in a corruption scandal and recently went on trial…I guess you could say there are some similarities between the two cities?).
5. Commission a “Detroit Dialogues” Series in Beijing
There are thousands of Michiganders and Chinese with Michigan ties that are ready to serve on the front lines to change the narrative about Michigan in China. We have access to corporate CEOs and government officials that we’ve worked with during our time here – - commission us to start a “Detroit Dialogues” series to get people talking about the realities of Detroit and Michigan. Consider this my application to volunteer!
Good luck to Governor Snyder and this year’s trade mission! 中国欢迎您！Welcome to China!
It is always a privilege to be published in some great publications back in Michigan. This week, the Holland Sentinel published my article about my reflections on my trip back to Michigan last week.
I have always believed that this crazy journey to China would lead me back to Michigan someday…and do not believe that I’m alone.
You can read the full text of the article in the Holland Sentinel by clicking here, or read below:
A Global Journey Back to Pure Michigan
Last week, my family and I gathered in beautiful South Haven to celebrate the 60th wedding anniversary of my grandparents, Neil and Phyllis Redford. It truly was a once in a lifetime occasion. As families get older, and kids grow up and move away, these special moments become more profound and important.
Soon after graduating from Michigan State University, I moved to Beijing, China. I often proudly remark to my colleagues here that I am from the most beautiful state in America. During my time in South Haven, I was reminded by just how true that really is. The life of a 25 year old doing international business in one of the world’s most dynamic cities is certainly exciting, but there is no comparison to the comfort and joy I felt walking the streets of South Haven and swimming in the pure waters of Lake Michigan. After living two years in disgusting, polluted Beijing, it was overwhelmingly refreshing to daily breath in the fresh air.
Even more inspiring than the climate were the people. The beaches were lined with parents and kids taking in the sunshine, making sand castles and doing all the “good stuff” that young families do. In town, the streets were filled with dad’s carrying their daughters on their backs, and little boys trying to eat ice cream cones bigger than their heads.
These are the moments and the memories I carry with me back to China. Pure Michigan is a dream that I am working towards; a dream to live out my life raising a family in a beautiful place with fantastic people, just like my grandparents.
Since leaving Michigan, I’ve come to understand that this dream is indeed a monumental challenge, not just for me, but also for the state of Michigan. There is a lot of darkness behind all of the sunshine I’ve just described. With many high profile problems, such as the recent Detroit bankruptcy, we know that despite all of the beauty, many people across our state are hurting.
In the midst of all of this, young people like me are leaving the state in droves. In March, one of the hot discussion topics of Governor Snyder’s Economic Summit was how to reverse the brain drain of many Michigan college grads that ship out to places like Chicago and New York every year.
Amy Cell, who serves as Vice President of the Michigan Economic Development Corporation for Talent Enhancement, has been doing a great job building programs to aid young people to build their careers within the state of Michigan. These efforts will ultimately be successful, and may be even more effective than the numbers suggest. Michigan is an attractive place for many young people – just maybe not right now. We live in a globally interconnected economy. Many of us are just on a journey to figure out what is out there. During this journey, we are building global networks and accessing global resources that eventually we will bring right back to where we were headed all along – Pure Michigan. All we need is a few years to spread our wings.
I could not have asked for a more vivid example of how this works than one evening I had at a restaurant in Sawgutuck. As three generations of my family gathered for dinner with grandma and grandpa, I noticed that sitting behind us was a table with some Chinese guests. I went over to talk with them, and it turned out that they were from Guangzhou and were meeting with their Holland-based partner, AlSentis, to discuss a business deal. We exchanged cards and I plan on meeting them the next time I go to Guangzhou.
I believe that Michigan’s best days are still ahead. With beautiful, friendly cities like South Haven and Sawgutuck, it will continue to be a place that offers a quality life that young Michiganders gravitate to and will eventually return to after our exploring. This is the formula for a purer, more global Michigan.
Most of you reading this post have no doubt seen your Facebook newsfeed filled with posts and reposts on Ashton Kutcher’s motivating Teen Choice Awards speech.
This is definitely a great message no matter what age you are or where you are at in life.
I also think that along with the motivation that comes with the content of what Kutcher says in his speech, there is something else that is revealed as part of his talk. Do you notice how the crowd reacts when Kutcher brings up the word “sexy?” It roars. I am guessing that a majority of the audience at the Teen Choice awards are teenagers, and judging by the sound of the crowds roars alot of those cheering loudest were young, impressionable girls.
Our society does have a problem. We elevate sex in our pop culture and media, which sifts through onto the web and into the minds of our kids. They gravitate to it, and things don’t change when they get older, in fact it usually gets worse. We know its wrong because when someone like Ashton Kutcher (or I guess, Chris) says something like this, we all realize he is right; thus, we can conclude that the way things are going on the mainstream level, the messages we are leaving our kids on how to live their lives, are on the whole not correct.
Thanks Ashton for making this speech, and I hope we can all take to heart what he said. I hope that our society can reverse the trend of “sex sells” in favor of a “its sexy to be smart” mentality. The first line of defense is of course what happens in homes across America, but things need to change in terms of what our leaders in government, business, and entertainment decide to do about this problem. The problem should be acknowledged and acted upon.
And I suppose for us as individuals, including myself, one must ask – what am I doing in my own life that is contributing to what is happening in our society? How can I be better?