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.
But critics of U.S.-China trade policies say that the investment boom in China by U.S. businesses is still coming at a cost to American jobs and factories.
"For every dollar of investment in China, that's a dollar of investment that will not be made in an American community," said Scott Paul, executive director of the Alliance for American Manufacturing, a trade group made up of select manufacturers as well as the Steelworkers union.
Most of the concern about China's economic growth hurting U.S. jobs is focused on inexpensive exports made by low-wage Chinese workers. But critics say the real drag on jobs is Chinese competition for American business investment dollars. And it's a trend that is only picking up speed.
The American Chamber of Commerce, the Beijing-based group that represents U.S. business interests there, said 79% of members surveyed in 2010 planned to increase their investment in China, with just over half projecting double-digit increases.
Trade groups critical of China-U.S. trade policy say that a mature consumer market like the United States is struggling to compete for investment dollars when businesses weigh sluggish U.S. growth with China's rapidly growing middle class.
Plus, Chinese trade policies are causing U.S. companies to lean toward production in China rather than trying to export goods from U.S. factories, said Alan Tonelson, a senior fellow with U.S. Business and Industry Council.
"The Chinese work overtime to lure this investment with lavish subsidies or coercion," Tonelson said.
He's also worried that some of the companies investing in China with the expectation to sell to Chinese consumers will find that's easier said than done, leading them to export at least some of the product back to the U.S. market.
But not everyone agrees that the Chinese investment is coming at the expense of investment in U.S. facilities.
"I'm a little uncomfortable with the idea that there is only a fixed amount of capital to invest," Lardy said. He said if a company sees the potential for growth both in China and the U.S. market, it will find the money to invest in both.
And Lardy argues the growing Chinese sales from investment there are good for U.S. companies, and to a limited extent, for U.S. jobs, especially since even some goods made in China by U.S. companies include content from U.S. suppliers.
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