Chinese Business Coveted by Michigan

In a move that has a certain if-you-can't-beat-'em-join-'em quality, government officials from Michigan have gone to an odd place looking for investment and new jobs -- China. With U.S. companies rushing to build plants and research centers in China, where workers earn far less than in the United States, Michigan officials wondered whether they could persuade fast-growing Chinese companies to open offices in the state. Their pitch: Detroit is still the automotive capital of the world, and Asian companies need research and development or sales offices in Michigan.

From Detroit Free Press

DETROIT — In a move that has a certain if-you-can’t-beat-’em-join-’em quality, government officials from Michigan have gone to an odd place looking for investment and new jobs — China.

With U.S. companies rushing to build plants and research centers in China, where workers earn far less than in the United States, Michigan officials wondered whether they could persuade fast-growing Chinese companies to open offices in the state. Their pitch: Detroit is still the automotive capital of the world, and Asian companies need research and development or sales offices in Michigan.

Seven officials from the state’s top economic development agency and local development groups from Detroit, Oakland County and Grand Rapids spent three weeks from mid-October to early November in Asia, including a week testing that idea on Chinese automakers, parts makers and other business interests.

“This was a first for us or one of our first attempts to pursue business in China. We want to lay the groundwork for the Chinese or Koreans or others to invest back in Michigan,” said Sanford Ring, chief operating officer of the Michigan Economic Development Corp.

The state has had an office in China since 1998, but its job was to help Michigan firms export products to China. This trade mission was different because it was trying to recruit Chinese investment to Michigan.

Ring admitted it may seem awkward to some that Michigan is pursuing business in China, but he said the state must look for new places to find different companies to invest and create jobs. Michigan is the only state in the nation to suffer a net loss of jobs this year, about 32,000 through October.

“I know there are people who have lost jobs to China or due to outsourcing, and I am empathetic to them. But this is us trying to recoup some of the jobs we’ve lost,” Ring said. “China’s industrial base is booming, and there’s no reason Michigan shouldn’t pursue that. If the Chinese are going to invest somewhere, they should want to invest in the auto capital of the world, even if the meaning of that has changed.”

There are six major Chinese automakers and hundreds of smaller car companies and parts suppliers fighting for a piece of China’s burgeoning auto industry — and looking beyond their borders for other opportunities. Recently, the largest Chinese automaker, Shanghai Automotive Industry Corp., set up a small operation in Troy.

China business experts who attended the state’s presentations said there was surprising interest among Chinese auto suppliers about doing business in Michigan.

“The Chinese are very interested. I got a lot of feedback about Michigan,” said Busty Okundaye, a China-based management consultant and former engineer for General Motors Corp. who spoke at one of the state’s events.

“A number of auto suppliers in the chemical or electrical or plastics fields have some basic skills and business in China, but they want to expand their market or come to the United State to pick up new technologies,” he said.

While more publicity was given to Gov. Jennifer Granholm’s visit to Germany last week, Ring, local officials and business officials from Comerica Bank and others spent portions of October and November in Asia trying to lure business to Michigan. The trade mission was put on by the Michigan Global Partnership, a business group that tries to recruit new business to the state.

Michigan has lost 175,000 manufacturing jobs since 1999, and its 6.6-percent unemployment rate is well above the national level.

Many of the job losses are due to productivity gains at automakers like General Motors Corp. and to falling demand for their products. However, China has been blamed by many toolmakers and other manufacturers who say Chinese competitors use low-cost labor and currency manipulation to under-bid them on new work, forcing the local manufacturers to cut their workforce or go out of business.

Local international-trade experts said Michigan should engage China, rather than ignore it or complain about it.

It’s fair, the experts said, to see China as a threat to Michigan and the Midwest standard of living, but the state and country can blunt the threat by convincing the Chinese that there is something to be gained by doing business here.

“The only country that can stem the Asian tide is the United States. The Chinese actually look to the United States as a model for business because we are so successful,” said Peter Theut, an international-trade lawyer at Butzel Long, who runs the Detroit law firm’s offices in Shanghai and Beijing.

The Shanghai office participated in a Michigan presentation to Chinese companies.

“We are seeing some Chinese companies looking at Michigan as a place to build some sales offices or engineering centers or in light manufacturing,” said Theut. “The Chinese recognize the importance of Detroit to the auto industry, and they figure the best way to learn is to come here.”

Theut said Chinese auto suppliers might be most interested in either buying a Michigan company or doing joint ventures with small, family-owned suppliers in the area.

Ironically, said Theut and Okundaye, while Michigan firms are nervous about what China means to them, many Chinese are intimidated by doing business in Michigan or the United States.

“Yes, they are kind of scared. Like U.S. firms, they have a fear of the unknown,” said Okundaye.

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