Page 2 of 2 When China comes to
Iowa By Benjamin A Shobert
and the Midwest, with an emphasis
on identifying opportunities for Chinese
investment in the US.
Thus far, only about
5% of Chinese investment overseas is within the
US, but as Rodgers points out, with between 45,000
and 50,000 people employed in the state of
Illinois by Japanese companies, the potential
benefits to Midwestern economies who build
relationships with China and seek to attract its
investment is
too
significant to overlook.
Within the
Midwest, what Rodgers sees occurring so far in an
admittedly early relationship is municipal-level
staff - including mayors - traveling to China in
an attempt to gather information and build
relationships that could translate into future
investment in their areas by Chinese
entrepreneurs. Such cities as Columbus, Indiana
(population 39,380), that already have a strong
track record of attracting Japanese investment are
laying the foundation of what they hope will be a
similarly successful entry to Chinese FDI with
trips to China by economic-development teams.
Such an investment is not without risk, as
increasingly limited budgets have forced many
Midwestern state governments to trim both offices
and trips abroad and emphasize short-term
strategies that promise shorter payback times and
less political risk.
Rodgers is quick
to point out that some of what
Midwestern administrations need to improve their ability
to attract Chinese FDI is outside the
states' control. In particular, the post-September
11, 2001, problem of securing visas for Chinese
to enter the US remains an obstacle. As Rodgers
says, for many Chinese businesses, it "doesn't
make sense to pick the rocky road"; consequently, they
look for markets with lower barriers to entry.
Rodgers acknowledges that the experience
of working with China is more entrepreneurial than
that of partnering with Japan, where government
and business moved fluidly toward their goal of
investing in assets and businesses within the US.
Larry Ingraham, president of Ingraham and
Associates of Carmel, Indiana, has been involved
with Japanese FDI in the US for almost 30 years in
both government and business advisory roles, and
sees the less organized and more entrepreneurial
approach of Chinese business as an important
distinction between the successful Japanese
experience and current Chinese efforts to engage
in FDI to the Midwest.
"The connection
between government, business and banking in Japan
was very organized," Ingraham said. "When a
Japanese company came to the US, it was not coming
alone as many Chinese entrepreneurs do."
This may seem counterintuitive to those
who see China as the example of complicit actions
among business, banking and government, but the
proper distinction is between an organized and
uniting purpose in Japan, versus collusion and
corruption in China. The Japanese experience in
the US Midwest was based on concentrated efforts
and directed energy built on a realization that
Japan had to export to survive, and was facing
political pressures in the US that were best
managed by manufacturing certain goods in their
destination markets.
Ingraham is quick to
point out the similarities between the situation
in the Midwest then and now: "States needed new
jobs that were not available from US sources, the
states needed to increase their tax base, and
states wanted to bring new technology to their
state and not lose it to surrounding states."
What also seems missing in the search for
Chinese FDI in the US Midwest is a specific sector
where the Chinese can exploit an inherent
competitive advantage other than their domestic
cost for labor. When the Japanese engaged US
business during the 1970s, it became obvious that
Japanese auto manufacturers had a pronounced set
of advantages over their US competitors, and that
low-cost labor was not their primary upper hand.
Japanese business had emphasized
manufacturing principles of quality and efficiency
that, when coupled with fuel-efficient product
designs in line with what consumers wanted,
allowed Japanese auto makers to outmaneuver their
entrenched US equivalents.
Thus far, no
Chinese success story, automotive sector or not,
seems able to emphasize product innovation or
insight into manufacturing methodologies as an
inherent strength of the business. Consequently,
the Chinese threat and opportunity seem on one
hand diffuse and on the other very specific - they
are everywhere and yet nowhere. In all likelihood,
before China will need to create FDI opportunities
in the US, it will need to find a more balanced
model for business that does not emphasize only a
low-cost labor rate as the key to economic growth.
The "war on terror" and the US fascination
with the paradox of its values embodied in the
battle over immigration have thus far prevented a
clear picture forming of how to view the US
relationship with China. Because of the
inconsistent nature of how Americans perceive
China - on one hand a fledgling country still
developing and gradually changing toward a hopeful
future encounter with democracy, and on the other
a country sucking up entry- and mid-level jobs
much needed in the US - it has thus far not become
mandatory that Chinese companies expand US
operations to maintain their political viability
in a key export market.
As the Chinese
economy matures, as manufacturing employment
opportunities dry up and wither away in the US
Midwest, and as economic fault lines widen (as
evidenced by the recent slump in new and existing
home sales felt acutely in the Midwest), China may
come to realize that it must change its outbound
FDI policies if it is to be fully integrated into
the world's economy.
If and when this
happens, people like Rodgers and Ingraham will
have prepared the way over years of
relationship-building and education, and will
undoubtedly reap the rewards along with the states
that were willing to run the risk of bringing
China in. Whether these success stories will be
isolated entrepreneurial ventures or broad
industry-shaping FDI packages may ultimately say
more about China's actual versus perceived
capabilities than many now realize.
Benjamin
A Shobert is the managing director of Teleos
Inc (www.teleos-inc.com), a consulting firm
dedicated to helping Asian businesses bring
innovative technologies into the North American
market.
(Copyright 2007 Asia Times
Online Ltd. All rights reserved. Please contact us
about sales, syndication and republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
