recent report by the World Trade Center LA assessed the positive effects of foreign owned enterprises (FOE) in the state. The report, created in collaboration with the governor’s office of economic development, lists over 19,000 FOEs that employ 731,000 CA residents, including the major regions of the Bay Area, Southern CA, and Greater CA. With Asian countries comprising three of the top ten source nations for FOEs, the mutual benefits are clear.
Japan, the top foreign employer across the entire state with 3380 firms, continues to keep its reputation as the largest source of new investments for the state. Even in the context of the pandemic, new investments are being made into burgeoning sectors like the SDG (Sustainable Development Goals) sector. One example of this is the Japanese firm Mitsui and Co. which invested $25 million into the California startup FirstElement Fuel, the state’s biggest developer of hydrogen stations. US companies have also recently returned the favor to support Japanese venture capital firms. In June, the popular Silicon Valley investment firm Sequoia Capital entered the Japanese market seeking to cultivate high-end tech startups in a largely analog culture.
Combined, Chinese and Taiwanese FOEs accounted for approximately 37,000 jobs in the state, from 1094 firms. Taiwan, the tenth largest source of FOEs in California, is notably the seventh largest importer of Californian goods and services globally. BYD, a Chinese vehicle manufacturing company, recently shifted to producing masks and hand sanitizers. Following this move, CA governor Newsom signed a $1 billion deal to have the much needed supplies delivered to combat the COVID-19 pandemic.
COVID-19 has dealt significant damage across the globe not only physically, but in economic terms, as governments enact sweeping policy measures to combat some of these economic effects. As purchasing power per capita and overall activity have dropped significantly, the role of FDI in supporting economies has become more significant.
Despite the slowdown of FDI, the report still projects confidence in the long term, as “international companies consider adding operations here to supply the US, and California specifically” due to the fact that during times of crisis, safe markets can be the only viable place to invest capital, California being among the safest in the United States.
Tenzin Chomphel is a participant in the East-West Center Washington’s Young Professionals Program. He is also a graduate student studying international economics at UC San Diego’s School of Global Policy and Strategy, specializing in the China-Pacific region.