The Latest in Economic Development – 2.16.12

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This week’s blog entry explores the complicated issue of FDI from China, highlights a few recommendations for economic development in the face of a stagnant economy, and uncovers recently released job creation figures from the “app economy.” Comment below or send to

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Should the United States actively seek investment from China? China is flush with excess cash reserves from running perpetual trade surpluses and they have been very active the last few years investing in assets all over the world. Currently, the United States represents a very small portion of Chinese FDI, but these figures are increasing. James Lindsay, in a Council on Foreign Relations blog post, explains that Chinese investment can potentially stimulate growth and create jobs, but allowing Chinese access to American technology continually sparks security concerns. In a separate article in the Wall Street Journal, Joseph White and Norihiko Shirouzu tell the story of a factory in Saginaw, Michigan that was saved from closing by “Chinese industrialists.” A cautiously optimistic dynamic seems to be at play within the Saginaw community, as they still don’t completely trust that the jobs will remain in Michigan. The Chinese investors say they are committed to the US market and for now, the Michiganders are just happy to be working. As more Chinese investors infiltrate our communities seeking out profitable assets, this issue will no doubt rise to the forefront.

Although the US receives a small sliver of FDI from China, we continue to receive more FDI inflows than any other country.  Mark Crawford states that “according to the Council of Economic Advisors… nearly half of all goods and services provided by foreign-based companies came from the US manufacturing sector. These companies employ about 5.7 million US workers, including more than two million employees in manufacturing industries.” Helping this trend are economic development professionals who aggressively seek out investment from abroad by building effective relationships and setting up trade missions. The competition to provide incentives to foreign companies is fierce – 300 counties competed for German company Schulz GMBH before they selected Tunica, Mississippi. FDI figures will continue to be strong, particularly in industries related to alternative energy, biomedical, and advanced manufacturing. (Area Development)

In an economic climate forecasted to be relatively stagnant for the next few years, what should cities and states focus on with regard to economic development? According to Daniel Levine, chasing projects with incentives and interstate poaching of industry has become too expensive to be effective. “Regional-centric” partnerships involving private industry and universities and community colleges prove to be much more valuable. Levine also recommends a focus on distressed workers, most of whom are not qualified for the high paying, high-tech jobs that are often targeted with incentives. (Area Development)

Even if you don’t have a smartphone (like me), you’ve probably been exposed to the “app economy.” Looking around, it’s quite easy to see the growing dependence on apps to get around, find something to eat, or check what time the next train leaves. This is the “app economy” at work. Has the “app economy” been an effective job creator? Apparently, in the last five years, the mobile applications market created an estimated 466,000 jobs according to TechNet via the LA Times. While many job seekers don’t have the computer science and engineering skills to qualify for “app economy” jobs, it is still a bright spot in an otherwise gloomy economy. (Dayton Daily News) via (Economic News from Ohio’s Regions)

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