GREENVILLE, S.C.—South Carolina officials have fished successfully in foreign waters for investment over the past decade. Now they’re even reeling in catches from China, a nation blamed throughout the state for battering South Carolina’s economy over the past two decades.

“No one could have imagined five years ago that China would look at the cost structure in South Carolina and say it’s more profitable to locate in South Carolina than in China,” says Auggie Tantillo, a South Carolina native who heads the National Council of Textile Organizations.

For years, South Carolina’s business leaders were at loggerheads with China. Roger Milliken, the former chief executive of textile giant Milliken & Co., bankrolled unsuccessful efforts to block China’s entry into the World Trade Organization because he believed Chinese competition would undermine U.S. firms. Former Sen. Jim DeMint, who won office as a free trader, says that many people in his home state believed they were losing their jobs because of low-cost Chinese competition.

But now Chinese investment in the state, although now at modest levels, is starting to build. Chinese investors are buying golf courses near Myrtle Beach, and setting up yarn, plastic and chemical companies elsewhere. In one of the biggest investments, Chinese-owned Volvo Car Corp. last year said it would invest $500 million to build a new vehicle plant near Charleston.

So far, Chinese firms have invested about $300 million in South Carolina and employ about 1,000, according to Rhodium Group, a New York research group. That’s a small fraction of the approximately 130,000 South Carolina workers who now work for foreign-owned firms in the state, mainly from Germany, France and elsewhere in Europe. South Carolina’s success in snagging foreign investment is the subject of a Wall Street Journal front-page story.