Chinese investors must tread carefully in Ohio

When I was growing up in Detroit decades ago, it was still a lovely and productive city, affectionately known as the Motor City, or, to the many African-Americans who escaped the racism and economic stagnation of the bigoted American South, a beacon of economic and political hope called Motown. Nobody thought then that a few decades later, it would be known as the murder capital of the United States and a part of the industrial rustbelt.

For fun, we'd drive to Toledo, Ohio, because at that time there, you could legally drink watered-down 3.2 percent beer at 18 years old, when at home we had to wait until we were 21 for the real stuff. Like Detroit, Toledo too was one of the engines that drove the American economy and was very much part of the supply chain of the American automobile juggernaut. But Toledo too succumbed to economic pressures and itself became part of the rustbelt. Like some sections of Detroit, there are some parts of Toledo that are so crime-ridden that nobody goes there except out of sheer necessity. As in Detroit, people fled the city in large numbers out of fear and/or lack of opportunity.

It's no secret that Americans are in debt to China to the astounding amount of $1.15 trillion in US Treasury bills alone, and it's no secret either that Chinese investors are buying up individual properties at rock-bottom prices in many parts of America. They range from dollar houses in Detroit to multimillion-dollar estates in Beverly Hills or the North Shore of Long Island. But it is news when Chinese businesspeople appear to be buying up significant parts of an entire city. And that city is Toledo. It remains to be seen, however, if China will be perceived as savior of the city or an unsavory exploiter.

The Chinese are not going to Toledo for the beer but because this down-on-its-luck city offers not only bargain-basement deals but a unique geography as well. As one of the Chinese investors points out, Toledo is a "five star logistical region" with easy access to Chicago, Cleveland, Columbus, Dayton and Detroit.

The Chinese investors can indeed be saviors if they are sensitive to local conditions and local people. They needn't repeat the arrogant behavior of the Japanese in the 1980s in the US before their bubble spectacularly burst.

The following months represent a very sensitive period in the US, just as it does in China. Nowhere in America will the spotlight focus more intensely than on Ohio because this is one of the few states in which this too-close-to-call presidential contest will likely be won or lost. During the election, we can expect a steady diet of anti-China rhetoric. China is an easy target, and China-bashing will be frequent until Nov 7, the day after the election. Every misstep that the Chinese investors make could easily end up as part of a Barack Obama or Mitt Romney campaign speech.

Americans, who may have been more friendly to China in years past, are trending quite negative recently. A Pew survey found that just 40 percent of Americans view China favorably, down from 51 percent last year. A recent Gallup-China Daily USA poll showed just 42 percent of Americans with a favorable view of China, with 44 percent unfavorable. Even the most positive recent survey of Americans from the Committee of 100 shows a bare majority of 55 percent (with a 3 percent margin of error) with a favorable view of China. Both presidential candidates avidly read polls, and adjust their campaign rhetoric accordingly, so these results are bound to influence their behavior, which of course will not be to China's benefit.

Perhaps the first rule the Chinese investors have to learn when buying up property in Toledo or elsewhere is that things will not work the same in foreign markets as in China. Anyone who assumes otherwise is on a crash course to failure. This was one of the key takeaways from a conversation with Sam Zell, the legendary Chicago investor, last week in Beijing.

Once local rules are learned, they must be followed. Some Chinese have already generated lawsuits and ill will in Toledo by breaching a contract with local tenants in a Chinese-owned restaurant complex, and failing to obey a local court order.

Even worse, rather than becoming active members of the business community and local civil society, most individual Chinese businesspeople in Toledo hide behind their corporate veils. This breeds suspicion and worse, especially in bad economic times. The ill feelings are not much different from those of many similar Chinese investments all over Africa.

The Chinese businesspeople have to be careful that people in the communities in which they invest do not perceive them as invaders or as seeming to be better than the locals. I remember in the 1980s when the Japanese bought up Columbia Pictures, Rockefeller Center and other iconic properties, and people got angrier with each purchase. And while the bubble had already burst, this feeling gave rise to anti-Japanese diatribes such as Michael Crichton's novel and film Rising Sun. For Toledo then, the behavior of Chinese businesspeople will be a bellwether of what is to come in Sino-American relations, just as the state of Ohio will be a bellwether that will predict who will be the next president of the United States.

The author is a senior adviser to Tsinghua University and former director and vice-president of ABC Television in New York.

About the author and the broadcaster:

Harvey Dzodin is a senior adviser to Tsinghua University and former director and vice-president of ABC Television in New York.