Sometimes one phone call can make a person think. Really think.
That’s what happened when Cathy Zhang, host of “Engage America,” a Chinese radio show, called and asked if I would agree to an interview about my new report, “Why Companies Leave California.” She wanted to know whether its findings might be useful to China’s business interests.
I replied: “Yes, they sure are.”
Frankly, I also figured I’d have an audience of millions of people. The program is part of the Sound of Hope Radio, the most listened-to network among Chinese expatriates throughout the United States and around the world. The network operates independently of the Chinese government, whose policies it has criticized, but can be heard via shortwave in China.
Part of my new out-of-California report addresses disinvestment events when companies relocate California facilities to China and Chinese-owned companies avoid California when locating new facilities in this country. It also examines California-related events in other nations.
I should point out that years ago I had studied the life of Confucius (551 – 479 BC), China’s most famous philosopher. I learned, thanks to the Encyclopaedia Britannica, that at one point, when he realized that his superiors were uninterested in his policies, Confucius left the country to find another state to which he could render his service.
I think that if Confucius lived in California today, he might do the same. California’s government is so unstable, and its policies among the most incomprehensible in the nation, that many companies and individuals are motivated to relocate to friendlier places.
Moreover, Confucius experienced life under an unstable government and perceived that the political institutions of his day had completely broken down. . (Many Californians can identify with that observation.) The Stanford Encyclopedia of Philosophy noted that Confucius “believed that a ruler should learn self-discipline, should govern his subjects by his own example, and should treat them with love and concern.”
Well, maybe “love” is too much, but how about some concern? I don’t know of a single California business owner or executive who can say with a straight face that politicians are concerned about their enterprise.
The Facts About Leaving California
The out-of-California report outlines the who, what, when, where and why more than 13,000 companies over a nine-year period moved facilities to other states and nations. The study discusses the leading countries, states and metropolitan areas that were selected to be the new homes for migrating Californians.
It also summarizes how California’s insensitivity to businesses motivates departures. Reasons include punitive laws and regulations, high taxes and an absurd legal environment that is excessively unfair to companies – even those who work conscientiously to respect all laws.
Conceiving a Better Future
“Aiming high brings good fortune,” said Confucius.
Indeed, some California companies improved their fortunes by migrating offshore. In the 2008-2016 period, the nations gaining the most from California events were Mexico in the number one spot, followed by India, and in third place was China. Here are a few examples of work that went to China:
- Mellanox Technologies Silicon Photonics, Inc. (formerly Kolura, Inc.) moved silicon photonics work out of Monterey Park, in Los Angeles County.
- Fluke Corp. shifted manufacturing of laser tools from San Rafael, in Marin County.
- Lumileds LLC, subsidiary of Royal Philips, moved LED lighting manufacturing out of San Jose, in Santa Clara County.
A number of years ago, China Zhongwang Holdings Ltd. cancelled plans to build a $1.5 billion aluminum manufacturing facility even though Southern California Edison offered “substantial savings” for the project. A consultant noted that electricity costs were 50 percent higher than the second-most expensive state west of the Mississippi River.
A category receiving recent attention is reshoring – bringing back to the United States jobs that had previously been offshored.
According to the Reshoring Institute, California has a difficult time competing against other states when it comes to labor laws, property costs, wage rates, taxes and energy costs. California’s hostility to business is so well known that in many cases the state is completely bypassed during location searches. California’s reshoring ranking, at number 20, is far below the leading states of South Carolina, Tennessee and Michigan – all of which are smaller in size and population.
An example of a California company moving work back from China – but putting it in another state – is Elemental LED, a manufacturer of LED lighting. They moved their manufacturing from China, along with their headquarters from Emeryville, in Alameda County, to Reno, Nevada, where they consolidated everything.
California politicians ought to give thought to other advice from Confucius, namely, “When you are in public life, any lapse in conduct can bring disfavor.”
The laws and regulations that emerge from California’s political system show indecent conduct, which is why more companies and people will flee. If Confucius were still alive, he, too, might be packing his bags for a more wholesome environment – one where businesses and citizens are given the respect they deserve.
(Side note: Why I studied the life of Confucius. Some time ago I participated in the creation of a website that sells greeting cards and apparel that revolve around a cartoon character with a similar name – Computious. That website is here: Computious – The Everyday Sage of the Digital Age!)
Link for a summary of “Why Companies Leave California.”
Joseph Vranich is a site selection consultant providing location advisory services to corporations and small businesses. His motto is “Helping Businesses Grow in Great Locations.” In recent years, he has discussed California’s difficult business environment with more than 100 economic development agencies located in North America and Europe. The name of his company is Spectrum Location Solutions LLC, but he also has been known as the Business Relocation Coach. If you found this posting useful, please forward it to a friend and subscribe to Joe’s blog here (see the top right-hand side of page; your email will not used for any marketing purposes whatsoever).