Why progress is made in China

President Barack Obama walks with Chinese Premier Wen Jiabao to their bilateral meeting at the U.N. Climate Change Conference in Copenhagen, Denmark, Dec. 18, 2009. (Official White House Photo by Pete Souza)

The latest edition of the Harper’s Index will tell you the percentage of  all U.S. stimulus funds for renewable energy that have gone to foreign companies since last September: 79.

But it won’t tell you why.

That you must wonder. But before you conclude President Obama is a Marxist implant sent by Hu Jintao to subjugate the United States to China, consider the case of Yet-Ming Chiang, which suggests “American ingenuity” is becoming an oxymoron, thanks at least in part to American financing.

Yet-Miang Chiang is a professor at the Massachusetts Institute of Technology, and the inventor of a compact battery that helps his Toyota Prius achieve 100 miles to the gallon.  Chiang’s company, A123 Systems, has received $249.09 million in Stimulus funds from the Department of Energy, more in tax breaks from Michigan, to develop and manufacture its battery in the U.S.

But A123 Systems has had a harder time attracting private capital. And although it is now using Stimulus funds to open U.S. plants, it began manufacturing with private capital in China.

“Without question, we would rather have done it all in the U.S.,” Chiang told Don Lee of the Los Angeles Times. “I’m an American citizen. We’re an American company. It’s an American-born technology.”

Despite the promise of Chiang’s batteries, many on Wall Street and in Silicon Valley were incredulous when he and other leaders at A123 asked for capital to build factories in America — Asia, yes, but Michigan, why would you want to?

Even more daunting, nearly all of the world’s battery manufacturing industry is in Asia, where plants can be built faster and supplies and equipment are much easier to get than in the United States. These days, it’s hard to find Americans who even know how to build a battery factory.

Despite the obstacles, A123 and a few other advanced battery producers are building plants in Michigan and other states, thanks to massive government support that has offset Wall Street’s skepticism and should help domestic producers narrow cost disadvantages with Asian rivals.

via – latimes.com.

If we can generalize from Chiang’s experience, the U.S. government is stimulating domestic growth in renewable energy manufacturing, but against, rather than with, the current of private industry.

When asked why manufacturing settles overseas, manufacturers often blame high taxes, but they can’t do so in this case. In addition to its $249 million grant, A123 is receiving tax incentives from the state of Michigan.

Many of the jobs that will result from the Stimulus are yet to come, when manufacturing begins. A123 has created nine jobs so far, according to its latest progress report, and has spent only $6 million of its Stimulus grant.

A123 Systems will be required to match the $249 million Stimulus grant with its own funds as the grant is expended. It is building manufacturing plants in Livonia and Romulus Michigan, outside of Detroit. The Livonia plant is expected to open this month.

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