Michi­gan: high-revving en­gine of China trade

China Daily (Canada) - - DEPTH -

The state of Michi­gan served as the back­drop of the US pres­i­den­tial cam­paign this week, as Repub­li­can can­di­date Don­ald Trump de­liv­ered an eco­nomic speech in Detroit on Mon­day. Demo­cratic can­di­date Hil­lary Clin­ton was due in the state on Thurs­day to de­tail her jobs plan.

Rust Belt Michi­gan is a state that both can­di­dates are look­ing to cap­ture in No­vem­ber’s elec­tion, along with the key bat­tle­grounds of Ohio and Penn­syl­va­nia.

As for “rust’’, Michi­gan ap­pears to have shaken any off, par­tic­u­larly when it comes to its business with China. The state, home of the US auto in­dus­try, is pretty much in the driver’s seat.

In terms of Chi­nese di­rect in­vest­ment, Michi­gan has 79 deals open with China, fourth in the United States be­hind Cal­i­for­nia, Texas and New York, states with much larger pop­u­la­tions. Of those deals through the first quar­ter of 2016, 75 per­cent of them (close to $3 bil­lion) were in the au­to­mo­tive in­dus­try, ac­cord­ing to Rhodium Group.

The state’s ex­ports to China have in­creased from $284 mil­lion in 2002 to $3.2 bil­lion in 2015, ac­cord­ing to the US Depart­ment of Com­merce.

‘Pro-Michi­gan’

“We are staunchly pro-Michi­gan,” joked Brian Con­nors, ex­ec­u­tive di­rec­tor of the new Michi­gan-China In­no­va­tion Cen­ter, when asked about any bear­ing the pres­i­den­tial cam­paign could have on the state’s econ­omy.

On July 11, the new in­no­va­tion cen­ter opened in down­town Detroit.

“We re­al­ized that we have a unique sit­u­a­tion in Michi­gan, where we have tremen­dous eco­nomic as­sets and also a rapidly grow­ing Chi­nese com­mu­nity in the state,” he told China Daily in an in­ter­view.

“The sup­port and ex­cite­ment among the business com­mu­nity for ex­pand­ing our business ties with China has been enor­mous. The state of Michi­gan gov­ern­ment has re­al­ized we need a more in­no­va­tive so­lu­tion to how we build our re­la­tion­ship with China,” said Con­nors, who spent sev­eral years study­ing and work­ing in China and speaks Chi­nese.

“We have formed a ded­i­cated re­source, a team of bilin­gual pro­fes­sion­als to work full time on build­ing business ties be­tween Michi­gan and China.”

In March, the Michi­gan Eco­nomic Development Corp al­lo­cated $5 mil­lion for the cre­ation of the cen­ter.

“We have a lot to lose by not work­ing very closely with one an­other. That’s the view of our cen­ter and cer­tainly that’s the view of our cur­rent lead­er­ship in the state of Michi­gan,” Con­nors said.

To many peo­ple, Michi­gan, and Detroit, the Mo­tor City, are syn­ony­mous with cars, and China has be­come an in­creas­ingly im­por­tant player in the au­to­mo­tive in­dus­try.

“With the ex­cep­tion of FCA (Fiat Chrysler Au­to­mo­biles), which is tech­ni­cally an Ital­ian com­pany … China will be the fastest-grow­ing source of au­to­mo­tive FDI in Michi­gan,” Con­nors said.

“Michi­gan com­pa­nies are do­ing well in China’s au­to­mo­tive in­dus­try. … The Big Three are all pro­duc­ing there with their joint ven­ture part­ners. The tier 1 sup­pli­ers have also cre­ated tens of thou­sands of jobs in var­i­ous cities in China sup­ply­ing China’s au­to­mo­tive in­dus­try, which … is the big­gest in the world and still grow­ing very quickly.

Im­por­tant part­ner

“We see China as an im­por­tant part­ner as Michi­gan leads the way in trans­form­ing the au­to­mo­tive in­dus­try in North Amer­ica,” he said.

Michi­gan’s au­to­mo­tive parts man­u­fac­tur­ing sec­tor was the site of two ma­jor ac­qui­si­tions last year. In Fe­bru­ary 2015, China Ever­bright Ltd bought Burke E. Porter Ma­chin­ery Co, a maker of au­to­mo­tive test­ing equip­ment and pre­ci­sion ma­chined prod­ucts, for $90 mil­lion.

Aviation In­dus­try Cor­po­ra­tion of China bought Hen­niges Au­to­mo­tive, a sup­plier of seal­ing and anti-vi­bra­tion sys­tems, for an undis­closed sum in Septem­ber.

CW Bear­ing USA, based in Novi, Michi­gan, ex­pects to start man­u­fac­tur­ing a unique auto part late this year at its new fac­tory near Detroit, which will help boost the Chi­nese bear­ing man­u­fac­turer’s US mar­ket share.

A sub­sidiary of Cix­ing Group Co, based in Ningbo, the com­pany’s re­search-and-development team in the US de­signed an in­te­grated ball nut for au­to­mo­biles’ elec­tronic power steer­ing sys­tems eight years ago.

The new bear­ing com­po­nent helps re­duce ex­haust emis­sions as well as gaso­line con­sump­tion be­cause it cre­ates “zero fric­tion” by in­te­grat­ing two bear­ings to the ends of a ball nut in­stead of at­tach­ing the two bear­ings to it.

With an es­ti­mated in­vest­ment of $26 mil­lion, the com­pany is build­ing a 50,000-square­foot plant in Northville, a Detroit sub­urb. The com­pany also has built new head­quar­ters in Novi for de­sign, sales and ad­vanced man­u­fac­tur­ing.

The new fac­tory is ex­pected to gen­er­ate an­nual rev­enue of $20 mil­lion and cre­ate 125 lo­cal jobs, in­clud­ing assem­bly line work­ers, en­gi­neers, man­age­ment and sales staff, ac­cord­ing to Hu Lirong, pres­i­dent and CEO of CW Bear­ing USA.

The ball nuts man­u­fac­tured at the new fa­cil­ity will be sup­plied to Gen­eral Mo­tors, which has a con­tract with CW Bear­ing USA through 2026.

In July 2015, Chi­nese auto-sup­plier YFS Au­to­mo­tive Sys­tems, which de­signs, tests, and man­u­fac­tures au­to­mo­tive fuel sys­tem com­po­nents, in­vested $26.9 mil­lion in a new Detroit fa­cil­ity.

The com­pany plans to ac­quire roughly 12 hectares of va­cant in­dus­trial prop­erty in the city, where it will build a 14,000-square-me­ter fa­cil­ity and add 160 new jobs to the city’s man­u­fac­tur­ing base.

But cars are not all Michi­gan and China have in com­mon.

More than cars

“Auto is an ex­tremely im­por­tant part of the re­la­tion­ship be­tween Michi­gan and China, but it is by no means the only part of the re­la­tion­ship,” Con­nors said.

“We have ter­rific com­pa­nies such as Dow Chem­i­cal, Amway, Whirlpool, Stryker, Kel­logg’s that are not au­to­mo­tive (that) have (cre­ated) hun­dreds of thou­sands of jobs in China.

“We have Uni­ver­sity of Michi­gan and Michi­gan State Uni­ver­sity, the num­ber of alumni there (in China), it num­bers over 100,000,” he said. “We have 10,000 stu­dents on cam­pus right now in Michi­gan from China.

“Those stu­dents are an ex­tremely im­por­tant part of the bridge be­tween Michi­gan and China and an in­dis­pens­able part of that re­la­tion­ship’s fu­ture,” he said.

This No­vem­ber, se­nior Michi­gan of­fi­cials will head to China on a week­long trade mis­sion, mak­ing stops in Bei­jing, Shang­hai, Hangzhou and Shen­zhen.

Also in No­vem­ber, Jamie Clover Adams, Michi­gan Depart­ment of Agri­cul­ture and Ru­ral Development di­rec­tor, will lead a trade mis­sion to China to fo­cus on con­nect­ing the state’s food and agri­cul­ture com­pa­nies with Chi­nese buy­ers.

The del­e­ga­tion will stop in Shang­hai and Shen­zhen, and the trip will in­clude one-on-one meet­ings, re­tail tours and brief­ings with US Depart­ment of Agri­cul­ture of­fi­cials.

“As the third-largest ex­port mar­ket for Michi­gan food and agri­cul­ture prod­ucts, China’s grow­ing mid­dle class pro­vides a great op­por­tu­nity for Michi­gan com­pa­nies,” Clover Adams said.

In 2015, US food and agri­cul­ture ex­ports to­taled more than $20.2 bil­lion, ac­cord­ing to the USDA, with a record $71 mil­lion com­ing from Michi­gan. US agri­cul­ture ex­ports to China have grown more than 200 per­cent over the last decade.

Tourism is one of Michi­gan’s Big Three in­dus­tries, last year gen­er­at­ing $22.8 bil­lion in eco­nomic ac­tiv­ity and sup­port­ing more than 214,000 jobs.

Michi­gan Gov­er­nor Rick Sny­der, who has been to China five times, boosted the state’s at­trac­tions on a visit a year ago.

“The Great Wall is sim­ply fas­ci­nat­ing, go­ing back 2,300 years and stretch­ing for some 13,000 miles,” Sny­der said dur­ing an Au­gust 2015 visit to China’s iconic land­mark. “And Michi­gan also of­fers amaz­ing op­por­tu­ni­ties for tourists like Pic­tured Rocks and Sleep­ing Bear Dunes, which was re­cently voted the most beau­ti­ful place in Amer­ica.”

Sny­der, a Repub­li­can, re­galed jour­nal­ists with sto­ries of Michi­gan’s Great Lakes and beaches, Mack­inac Is­land and ac­tiv­i­ties in Detroit and Grand Rapids.

“Michi­gan is a per­fect com­bi­na­tion with Chicago,” Derek Yang, Travel Michi­gan’s mar­ket­ing and trade rep­re­sen­ta­tive in Shang­hai, told the South Bend Tri­bune of In­di­ana.

“Af­ter they’re done in Chicago, they come to see these beau­ti­ful small towns. Most Chi­nese tourists come from big cities, so sky­scrapers are nice, but it’s not very spe­cial,” he said. But these charm­ing small towns, we don’t re­ally have those.”

Sis­ter-state agree­ment

Michi­gan also has re­cip­ro­cated with Chi­nese del­e­ga­tions.

“Tonight is a night for ac­tion,” Sny­der said on May 10 at a cer­e­mony mark­ing the sis­ter state-prov­ince agree­ment be­tween Michi­gan and Guang­dong prov­ince.

Sny­der; Hu Chun­hua, Party sec­re­tary of the Guang­dong pro­vin­cial com­mit­tee; Cui Tiankai, China’s am­bas­sador to the US; and Shen­zhen Mayor Xu Qin were in Detroit to sign the agree­ment.

The pact for­mal­ized co­op­er­a­tion on trade and in­vest­ment, sci­ence and tech­nol­ogy, ed­u­ca­tion, tourism and cul­ture.

Hu said Guang­dong was up­grad­ing man­u­fac­tur­ing sec­tor.

“Michi­gan is known for its in­no­va­tion in man­u­fac­tur­ing, and this is one area that we can co­op­er­ate and have progress on,” he said.

“It can be a path to progress for both re­gions. Detroit and Michi­gan are in the process of an eco­nomic re­vi­tal­iza­tion, while Guang­dong epit­o­mizes the new emerg­ing econ­omy of China, and both can learn from each other,” said Jerry Xu, pres­i­dent of the Detroit Chi­nese Business As­so­ci­a­tion.

“It’s hard to imag­ine a fu­ture in which China is not a cru­cial part­ner in terms of trade and in­vest­ment on a sub­na­tional level and in terms of solv­ing the world’s prob­lems on an in­ter­na­tional level. We’ll re­main com­mit­ted to that no mat­ter which way the winds blow in No­vem­ber,” he said. its

Lia Zhu in San Fran­cisco and Paul Welitzkin in New York con­trib­uted to this story.

Con­tact the writer at williamhen­nelly@ chi­nadai­lyusa.com

PRO­VIDED TO CHINA DAILY

Michi­gan Gov­er­nor Rick Sny­der vis­its the Great Wall of China in Au­gust 2015. The gov­er­nor has been to China five times and has pri­or­i­tized bi­lat­eral trade with the coun­try through­out his ad­min­is­tra­tion.

PRO­VIDED TO CHINA DAILY

Shen­zhen Mayor Xu Qin and Michi­gan Gov­er­nor Rick Sny­der shake hands as Am­bas­sador Cui Tiankai (third from left), Hu Chun­hua (fourth from left), Guang­dong pro­vin­cial com­mit­tee Party sec­re­tary, and oth­ers look on dur­ing MOU sign­ing in Detroit in May. Brian Con­nors, ex­ec­u­tive di­rec­tor, Michi­ganChina In­no­va­tion Cen­ter

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