By Chris Isidore
NEW YORK (CNNMoney) — While U.S. businesses are still reluctant to invest in new plants and jobs in the United States, many are pouring money into China. But not for the reasons you’d think.
Rather than “outsourcing” their operations to China’s low-cost environment to produce cheap goods for U.S. consumers, multinational corporations are pouring billions into China to meet demand from the rapidly growing Chinese middle class.
Total investments in China by U.S. multinationals were worth $49 billion as of 2009 — up 66% from two years earlier, according to U.S. Commerce Department figures. And 2010 is shaping up to be another banner year for the Chinese — U.S. companies poured an additional $6 billion into China in the first three quarters alone.
“American investment in China is still growing,” said Nicholas Lardy, a China expert at the Peterson Institute for International Economics. “It’s one of their most profitable markets, if not their most profitable market. No one is pulling back.”
In 2010 General Motors (GM) sold more cars in China than in the United States for the first time, but did not export any cars from China back to its home market. GM, which closed 13 U.S. plants since its bankruptcy filing in 2009, has opened 15 plants in China in the last 10 years.
Yum Brands (YUM, Fortune 500), owner of fast-food chains like KFC and Pizza Hut, reported $1.2 billion in Chinese sales in its most recent quarter, surpassing its declining U.S. sales for the first time. It added 245 restaurants in China in the first nine months of last year while selling off U.S. locations.
And as Chinese President Hu Jintao meets with President Obama during a state visit, top businesses leaders are lining up for a chance to get into China’s good graces.