States Are Distributing Tax Dollars To Chinese Companies

A lawsuit to stop Chinese lithium ion battery maker Gotion from building a plant in Manteno, Illinois, awaits a decision next month, as Americans push back against government officials wooing Chinese companies. America’s governors and state governments are playing a reckless game with our tax dollars: competing to host U.S. locations of China-owned companies. In retrospect, allowing China-owned companies to establish operations in the U.S. is only the latest commercial iteration of Making America China.

First, George H.W. Bush laid the diplomatic groundwork for outsourcing to China, letting the lights go out in our Pax Americana-era factories. Then around the 2010s, China started buying our mega brands such as Smithfield Foods and Starwood Hotels. More recently, Chinese companies have graciously offered to dust off our shuttered factories for their own profit, “as our way of cherishing and conserving resources,” said Gotion Chairman Li Zhen in 2023 of its bargain-basement factory acquisition in Manteno.

Rather than being insulted, state and local officials find this offer so appealing that they throw tax-funded incentives at the Chinese companies in competition with each other. Thus completes the generational cycle of American businesses, to no businesses, to Chinese businesses occupying the industrial properties of what has become the Rust Belt.

They Were Warned

The current mood, in which the various states perceive themselves to be in a hot bidding war for each Chinese company that speculates about U.S. expansion, can be traced back to a meeting in May 2019. It was an Exclusive Deal Making Opportunity (the actual meeting name) within the fifth China-U.S. Governors Forum. The forum’s conferences are sponsored by the Chinese People’s Association for Friendship with Foreign Countries (CPAFFC), part of the Chinese Communist Party’s (CCP) United Front Work Department. The 2019 meeting in Kentucky was attended by 400 U.S. and Chinese government leaders and investors.

The China-sponsored deal-making workshop was advertised as a “prestigious and highly curated event where investors from both countries can meet one-on-one and discuss possible investment projects.” An exciting offer, perhaps, for leaders of economically depressed areas who are unaware of or indifferent to the CCP’s record of forced labor, intellectual property theft, and product dumping. Irrefutable signs of a bad business partner.

Little is known about what deals were made or which governors attended besides the host Gov. Matt Bevin, R-Ky., Gov. Bill Lee, R-Tenn., and representatives from Colorado, Michigan, and Washington state. But with a crowd of 400 — much like Chinese leader Xi Jinping’s dinner with the CEOs last November — the imagination fills in the blanks.

If the danger of this environment was not apparent, the federal government promptly made it clear.

The U.S. Department of State withdrew support for the China-U.S. Governors Forum in 2020. In February 2020, then-Secretary of State Mike Pompeo delivered a no-minced-words address to the National Governors Association about the “China Competition.” “Know that [the CCP] is working you, know that it’s working the team around you,” he noted. In October 2020, a Department of Homeland Security report noted that that CCP may take advantage of a state or municipality’s economic challenges to create a dependency.

In July 2022, the National Counterintelligence and Security Center issued a communication detailing this progression, and advising state and local leaders to background check new connections, stay vigilant to bribery, and prioritize national security over economic development.

Leaping without Looking

In response, state governments have pursued a China-forward economic agenda, ignoring all warnings and common sense to the contrary.

Before the U.S. Air Force declared Chinese corn processor Fufeng a national security threat in early 2023, Fufeng initially “selected” Grand Forks, North Dakota, from among 25 candidate submissions for its first U.S. location. Consider the stunning statistic that more than two dozen local governments across the U.S. gave their best-and-final offers in search of a foreign bridegroom.

Consider also that Doug Burgum had been North Dakota’s governor the entire time, from the CCP’s deal-making meeting through former Secretary Pompeo’s address, and the numerous other warnings since. Did Burgum help advance this deal behind the scenes? Had he paid attention to the warnings?

Grand Forks had offered a winning incentive package of $91 million for the ill-fated deal, to provide Fufeng-specific infrastructure needed to feed its energy-intensive beast of a factory. The $91 million was to be generated from mostly county and state grants, a portion covered by a pay-back loan to Fufeng, and most notably: $7 million appropriated from the American Rescue Plan Act (ARPA), a federal Covid relief fund for small businesses.

This generous dowry pales in comparison to the incentive packages offered by other states in pursuit of China deals, which are going almost as poorly.

In October 2022, Gov. Gretchen Whitmer, D-Mich., conjured up a total of $715  million for the Chinese lithium ion battery maker Gotion. The package included $175 million cash money, plus $540 million in tax abatements through a “Renaissance Zone” designation. Green Charter Township residents recalled their entire township board for approving this plan, and voted in anti-Gotion representatives. Gotion is now suing the township (population 3,218) for breach of contract.

Gotion wanted to develop a second U.S. site concurrently. It found a warm welcome from Gov. J.B. Pritzker, D-Ill., who offered up the small town of Manteno (population 9,210) along with a proverbial briefcase stuffed with $536 million. This deal included $125 million cash and the rest in tax abatements for the privilege of letting Gotion “cherish” Illinois’ resources. Unable to fire their board, the residents of Manteno formed a protest organization and are suing Gotion. “Why would anybody think that’s a good idea to have that in our backyard?” asked Amanda Piker, founder of “No Gotion in Illinois.”

Smaller China deals haven’t fared well either: Gov. Eric Holcomb, R-Ind., arranged an $11 million incentive package for auto parts maker BeijingWest Industries (BWI) to open an $80 million factory in 2019; a deal he had been working on since 2017. The factory was intended to create a modest 195 jobs; but it closed promptly during Covid, and had trouble staying fully operational thereafter due to alleged “workforce” issues. BWI will be closing this year. Holcomb may as well have given $50,000 checks to 195 unemployed Hoosiers.

Americans instinctively don’t want these companies here. What will it take for state and local officials to honor the will of the people?

The Long Arm of the CCP Likes the Long Tail of the US

The CCP pursued relationships with U.S. state governors to get around the Trump administration’s trade posture. Cui Tiankai (former Chinese ambassador to the U.S.) stated outright at the 2019 China-U.S. Governors Forum that “it is more important than ever that sub-national representatives from China and the United States gather to explore how to advance cooperation.” Why struggle with one door that opens and closes, when there are 50 other doors to check out?

The same year, the CCP deployed a brilliant piece of psychological warfare in publishing a rating of the 50 governors’ attitudes toward China. Despite the questionable methods and source of this survey, it surely branded the CCP-friendly collaborators as such; convinced the less-friendly “ambiguous” states to catch up with the “friendly” states; and put the “tough” states on notice.

“All that we see here [in Illinois] are of enormous value to us,” said Gotion Chairman Zhen. Indeed. We have allowed our land to become the desirable empty vessel, and offered it to the highest bidder. While we wait for a future time when governors are told, not just asked, to change course, we can counter the empty vessel economics with internal integrity. Now is the time for Americans to start businesses. Expand businesses. Remove the argument that there’s no one else around who wants to reindustrialize America.

Vanessa Battaglia is a defense engineer with experience designing software, hardware, and airborne systems for the Army, Navy, Air Force, Space Force, Special Operations Command, and the Federal Aviation Administration.