California Gov. Brown seeks Chinese investment for projects

The Sacramento BeeMarch 2, 2012 

California Gov. Jerry Brown talks a lot these days about China, ever since his visit last month with the nation's president-in-waiting, Xi Jinping.

During Xi's visit, Brown said California will open trade offices in Shanghai and Beijing. Last weekend, the Democratic governor, who rarely travels, said he will lead a delegation there, likely this year.

"This is all about getting business deals," Brown said.

Adopting an emerging strategy for executives in other states, Brown is seeking Chinese capital for major projects in California, perhaps including public infrastructure.

California has not had an official presence in China since 2003, when the state disbanded its 12 foreign trade offices amid controversy.

Their return has been a long time coming. It was more than three decades ago, when Brown was governor before, that he met Xi's father, the communist revolutionary Xi Zhongxun. In 1976, Brown called for "an increased normalization" of America's relationship with China.

Other states already are courting the world's second-largest economy.

"You know, go where the money is," Mitch Daniels, the Republican governor of Indiana, said at a meeting last weekend of the National Governors Association. "I'd be surprised if most states didn't believe this was part of their opportunity, and therefore part of a governor's responsibility."

California exported $14.1 billion in goods and services to China last year, according to the state, and though China accounts for just a tiny fraction of all foreign direct investment in the United States, it is a growing force.

"It's a source of investment," Brown said. "Instead of buying T-bills, they can buy into some of our projects."

Brown has spoken only generally about what those projects might include. He said he is seeking investment in "agriculture, technology, infrastructure and any other area that makes sense for both California and Chinese investors."

Asked if he is seeking investment in California's nearly $100 billion high-speed rail project, Brown said he "wouldn't exclude it," but "that's way premature, way premature."

Jim Wunderman, president of the Bay Area Council, one of several business groups working with the Brown administration on the China initiative, said California could use Chinese capital to finance the construction of toll roads or university housing, or for joint research and development projects.

"As long as we're transparent and everybody goes in with their eyes open, it's in our interest to build relations with China, because these two nations are clearly the world's leaders now," said Wunderman, whose group opened its own trade office in China in 2010. "The more we're engaged, particularly economically, the more we're going to be able to accomplish things together."

In mid-February, when Brown announced the opening of trade offices in China, state Sen. Tom Harman, R-Huntington Beach, urged Brown in a prepared statement to discuss with Chinese officials concerns about the country's trading practices and human rights.

Brown, a former seminarian, said he followed events in China when "one of the priests at Los Gatos was imprisoned by the Chinese." Of the country's human rights record, he said, "Those are also issues," but he suggested they are not his.

"For California, we're dealing with state issues and jobs," Brown said. "There's trillions of dollars over the next 10 years the Chinese have to invest. They're doing it in South America, they're doing it in Africa, and they're not doing it in California at the level they could."

Brown said the foreign trade offices opening in China will be privately financed. Outposts the state closed nine years ago were taxpayer-funded, and the Legislative Analyst's Office, among other observers, questioned their effectiveness and cost.

Brown acknowledged "a lot of truth" to past criticism.

"You send somebody, a civil servant over there, and it may not be that effective," Brown said, "so we want to work with the chambers of commerce and business."

Jock O'Connell, international trade adviser for the economics consulting firm Beacon Economics, said Brown is "quite right" that "the Chinese are sitting on piles of cash, and they want to find ways of investing it profitably."

O'Connell is optimistic about the prospects of a Brown-led trade mission. Chinese business leaders, he said, "put a great deal of stock in having a commitment from people at the highest level of authority."

But O'Connell is wary of opening a trade office, even one financed by private interests. Without a financial stake in the office, he said, the state may lose control over business people allowed to "pass themselves off as the official representatives of the state of California."

Mike Rossi, the Brown adviser coordinating the establishment of California's offices in China, said the state will only sign an operating agreement in which it maintains operational control.

In Washington, D.C., last weekend for the meeting of governors, Brown lunched with Chinese Ambassador Zhang Yesui and was briefed on China at the State Department.

"It is kind of remarkable that all these government officials keep talking about business deals," he said. "Everybody's talking about business. The communists are talking about business. The capitalists are talking about business; the government officials are talking about business.

"Then there's all these guys doing business," Brown said, and "making money."

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