The FDI angle

• The plans by China's Gotion to build a $2.4bn EV battery plant in Michigan is sparking local and political opposition.
• Concerns focus on ties to China's Communist Party and taxpayer-funded incentives for foreign firms.

Why it matters: Rising opposition to Chinese FDI highlights growing scrutiny over foreign investment in key industries, with national security and geopolitical concerns potentially reshaping future US investment policies.

In October 2022, Michigan governor Gretchen Whitmer enthusiastically welcomed battery maker Gotion’s plan to build a $2.4bn electric vehicle (EV) battery plant in the small town of Green Charter Township.

It wasn’t long before opposition to the plans surfaced, though. 

Despite the promise of 2350 new jobs, many local politicians and residents have protested the project. Gotion is a US subsidiary of China’s Gotion High-tech — on top of concerns over ties to the Chinese Communist Party (CCP), some object to handing taxpayer-funded state and federal incentives to a company owned by a foreign parent. Along with Gotion’s proposed battery plant in Michigan, the company has another planned $2bn battery plant in Illinois. The incentives for the Illinois facility total $536m, while the Michigan facility’s add up to $715m.

Across the country, opposition to such projects has shed a harsh light on foreign direct investment (FDI) from countries viewed as US adversaries — namely China, Iran, North Korea and Russia. But China is in the crosshairs, despite representing less than 1% of inbound FDI in 2023.

“Our nation’s complicated relationship with China is of bipartisan interest in Washington and shows no sign of diminishing after this year’s election,” says Jonathan Samford, executive vice-president of the Global Business Alliance, a trade group that represents international companies with a significant US presence. 

“There is no doubt that China is viewed with scepticism.”

Apprehension about investments

Kei Komuro, an associate in the global trade and national security practice at law firm Lowenstein Sandler, says Chinese investment in the US has stoked “significant apprehension” about Chinese business ties to the CCP. This centres on possible risks related to technology transfers “that could undermine US national security”, Mr Komuro explains. “The pushback against FDI, particularly from China, has intensified compared to previous years.”

A recent US survey appears to back up Mr Komuro’s assertion. A March 2024 Advocus poll of 800 voters nationwide found that 41% held negative views of FDI in their state; 29% expressed positive views and 30% were unsure. Overall, Republican voters tended to be more negative about FDI than Democrat voters, with critics citing potential foreign influence as a key concern. 

“Substantive national security concerns are mixing with geopolitical rhetoric in this election year,” Mr Komuro notes.

Could more anti-FDI moves be on the horizon?

That scenario has played out in Green Charter Township. In November 2023, local voters recalled the township board, which had backed the Gotion project, and installed opposition-friendly members.

But, in August 2024, a federal judge dealt a setback to Gotion’s foes, ordering the newly configured township board to stick to the previously approved agreement with Gotion. 

Despite this, campaigns to block deals such as the Gotion plant in Michigan could gain traction, particularly if they align with national security concerns, Mr Komoru says.

The US Treasury Department has already proposed expanding the Committee on Foreign Investment in the United States’s jurisdiction over foreign real estate transactions. Furthermore, several federal lawmakers are pursuing legislative crackdowns on FDI in US real estate, especially land located near military installations.

Meanwhile, Gotion’s nearly $4.4bn collective investment in Michigan and Illinois has spawned the No Official Giveaways Of Taxpayers’ Income to Oppressive Nations Act — or ‘No Gotion Act’ for short. This would prohibit CCP-affiliated companies from receiving green energy tax credits under the federal Inflation Reduction Act. Iran, North Korea and Russia also would be prohibited under the act.

A co-sponsor of the No Gotion Act, Darin LaHood, a Republican Representative from Illinois, says in a statement that foreign adversaries who have launched “malign efforts” to undermine domestic supply chains and national security should not be rewarded with tax credits for the production of green energy.

“The future of FDI in the US, especially from China, is likely to be marked by increased regulatory scrutiny and evolving geopolitical dynamics,” Komuro says. “As national security concerns become more pronounced, we can expect a more stringent regulatory environment governing FDI.”

As a result of this movement, some Chinese investors are scrutinising geopolitical tensions and regulatory barriers before committing to new ventures in the US, “reflecting a shift toward a more cautious and strategic investment posture”, he says.

Tremendous excitement remains

Despite high-profile backlash such as this, Hrishikesh Hari, a partner at Dechert who specialises in FDI, says there’s “tremendous excitement” around FDI in the US, and its future looks promising.

“However,” he adds, “this enthusiasm is not uniform with respect to all investments from all investors.”

By all accounts, that statement applies to China more than any other foreign investor in the US.

Investment figures support the “tremendous excitement” mentioned by Mr Hari. FDI in the US totalled $76bn in the first quarter of 2024, up 31% from the fourth quarter of 2023, according to the Global Business Alliance.

John Boyd Jr., principal of the corporate site selection firm The Boyd Co, agrees with Mr Hari’s overall assessment. He believes the current pushback, most notably against Chinese investments, “is much overstated”.

“We are seeing states aggressively promote themselves in Europe and Asia with new offices, staff and marketing initiatives. Most companies in Europe, Asia and Latin America continue to view the US as the safest nation for capital investments,” Mr Boyd says. “Looking ahead, the US’s industry-leading research and talent assets in quantum computing and artificial intelligence will be additional draws for FDI.”

A representative of Gotion could not be reached for comment.

John Egan is a freelance journalist based in Austin, Texas.

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.

This article first appeared in the October/November 2024 print edition of fDi Intelligence