FDI vital to S. California: report

Despite intensified political debates over trade and globalization, international trade and inbound foreign direct investment remain critical to the economy of Southern California, a report says.

The report, Foreign Direct Investment in Southern California 2017, was released Thursday at the ongoing Select LA Investment Summit by World Trade Center Los Angeles.

Based on a survey conducted on foreign-owned firms in the region between January and May 2017, the report aims to better understand the contribution of the more than 9,000 businesses to the regional economy, their motivations for locating in the region, and which factors encourage them to continue their presence there.

Currently, there are an estimated 9,964 foreign-owned firms in Southern California, representing 1.2 percent of all firms in the region. These firms have 439,101 employees, or 4.3 percent of the region’s workers, and pay $27.4 billion in wages, according to the report.

Retail and wholesale trade continue to be the largest sectors for the number of foreignowned firms, with manufacturing the largest sector in terms of employment.

Japanese firms remain the largest contributor to the region, with 2,465 firms paying 87,247 workers a total of $5.5 billion.

China ranks ninth, with 323 firms paying 11,221 workers a total of $726 million. For Chinese firms, the largest sector is wholesale trade followed by manufacturing and information, says the report.

In recent years, Chinese investment has flooded into the real estate market in Southern California, and as a result, major revitalization has been seen throughout the region, said Mike Leipart, managing partner of The Agency, a Beverly Hills-based luxury real estate brokerage.

“Additionally, we’re at a time when Chinese investment has spilled over from the traditional Southern California destinations of Los Angeles and Orange counties to the Inland Empire, where land and property is cheaper and investments, even in wineries, go for a fraction of the cost of their counterparts to the north,” he said.

The survey finds that as Chinese investment increased, the number of Chinese firms decreased by 17 and the number of employees increased by 4,771 during 2015 – 2016.

Such growth is also reflected over longer time periods for most source nations, which demonstrates the strong and growing contribution of foreign-owned firms to the region, the report says.

The survey, conducted through phone calls and emails by Dominguez Hills Economics Institute, reached 9,105 firms, and 143 responses were collected.

The majority of respondents were positive about their business experiences in Southern California. But respondents also reported concern over trade and investment restrictions, delays for business visas for overseas workers, taxes, labor costs and housing affordability.

The report says Southern California appeals to foreignowned firms for “a myriad of benefits”, including proximity to transportation hubs, closer to home, and diverse and highly skilled workforce living in the region.

“Some trends we’ve seen are Chinese buyers heavily seeking out Southern California’s worldclass universities such as USC and UCLA, making Southern California a major hub for Chinese families,” said Leipart.

The Chinese culture emphasizes education, and having quick access to the world’s leading universities is a highly desirable feature of the California real estate marketplace, he explained.

“On top of this, few areas of the US can compare with California in terms of lifestyle comfort, since SoCal is known for its warm weather, beautiful sights and diverse cultural groups,” he said.