November 18, 2024

A Wave of Chinese Money Gives a Lift to Companies Struggling in Tough Times

The report, commissioned by the Asia Society and the Woodrow Wilson International Center for Scholars, outlines the change in China’s priorities from attracting foreign investment to becoming a global purveyor of capital. While China has been investing to develop natural resources in Australia, Africa and elsewhere for years, the coming wave is different. It reflects China’s intention to expand its already enormous but still growing domestic market. To do so, Chinese companies that have mastered manufacturing must develop their distribution, marketing and innovation skills, all areas where American businesses could help.

While there is some concern that political tensions could get in the way, the investment money is a huge opportunity for American businesses. The following four small businesses, already the beneficiaries of such investments, illustrate the aims of Chinese investors and the benefits that American companies can take from them — including rescue from a very tough economy.

Solar Power Inc., of Roseville, Calif., received a $33 million investment in March from LDK Solar, a large Chinese manufacturer of solar cells. The American company, now seven years old and with 60 employees, installs solar arrays on commercial buildings, including on the roofs of Staples Center and the 20th Century Fox movie studios in Los Angeles. Solar Power initially focused on the United States residential market but that market collapsed in the recession. In 2010 the company’s sales declined to about $24 million and its losses increased.

So Stephen C. Kircher, Solar Power’s founder and chief executive, turned to commercial projects and attracted LDK Solar’s investment in exchange for 70 percent ownership of Solar Power. Mr. Kircher had met LDK executives in China through two California financial institutions, Roth Capital Partners in Newport Beach and East West Bank in Pasadena.

“LDK Solar’s investment will allow us to compete for many projects across the United States, not just one job at a time,” Mr. Kircher said. Indeed, Solar Power recently won a three-year job to provide engineering on solar energy projects in New York and New Jersey.

Why did LDK, which has $3.6 billion in annual sales of solar energy components, buy into Solar Power? “Their aim is to employ Chinese people,” Mr. Kircher said. “They will integrate their manufacturing with marketing and distribution on our solar panel projects and then have the know-how to help them in the emerging domestic economy in China.”

MVP RV of Riverside, Calif., a maker of recreational vehicles, was able to reopen its doors this year thanks to a big order and significant investment from Winston Battery of Shenzhen, China. Brad B. Williams, Roger J. Humeston, and Pablo Carmona had purchased MVP, a motor home and travel trailer operation, in July 2008 from their employer, Thor Industries. At that time, MVP had 440 employees and close to $100 million in sales, Mr. Williams said.

Two months later, the recession began and demand for recreational vehicles collapsed. Gradually, employees were laid off, and the company closed its factory “to preserve capital,” Mr. Williams said.

“We went through more than 40 presentations trying to raise capital, with no luck,” Mr. Williams said. “But then we got a call from somebody asking us to visit Winston Battery in Shenzhen.” There the partners met Winston Chung, an entrepreneur whose company makes lithium ion batteries. “We hit it off immediately,” Mr. Williams said.

Mr. Chung gave MVP an order for a few motor homes that got the company working again. Then early this year, Winston Battery gave MVP a $5 billion order for 10,000 motor homes — which can cost from $100,000 apiece to more than $1 million — and 20,000 smaller vehicles over the next three years.

The Chinese company also began an investment “that will ultimately amount to $310 million, making Mr. Chung the majority owner of our company,” Mr. Williams said. As a result, he added, the original partners will have “a smaller piece of a bigger pie.”

The company is now back up to 250 employees and plans to take on about 1,000 more in the next few years. “We are building prototypes for the China market now,” Mr. Williams said. The recreational vehicles on order will be diesel-powered, he said, “but we will work with Winston Battery to develop electric-powered vehicles in the next few years.”

Synthesis Energy Systems, of Houston, recently got an $84 million investment from Zhongjixuan Investment Management, of Beijing, which will assist Synthesis in developing new ventures in China. Synthesis Energy was introduced to Zhongjixuan Investment, also known as ZJX, through a Chinese business associate who helped arrange a gas-from-coal energy project in China in 2006.

Article source: http://feeds.nytimes.com/click.phdo?i=4833be9bd73930facfb648b935ae4a73