Idaho companies like J.R. Simplot and Micron Technology have benefited from the emergence of China as a global economic giant.
Idaho’s exports to China have risen from $700 million in 1987 — when $500 million of that was farm products — to more than $5 billion today across all sectors. But the opportunities are going to grow dramatically for Idaho businesses as the nation of 1.4 billion people matures.
“China is moving from being the world factory to being the world market,” said Manuel Menendez, a businessman who has been making deals in China for 30 years.
This shift, along with huge wealth accumulated by individual Chinese, will help nearly every segment of Idaho’s economy, from agriculture to aircraft parts, and manufacturing to health care.
“China’s hungry, and they need more and more of our products,” Menendez said.
He was the main speaker at a daylong China Business Summit Thursday at the Boise Centre on The Grove. It was sponsored by the state and several Idaho businesses. Business executives from around Idaho came to hear how to integrate China trade into their ventures.
Sessions looked at logistics, protecting intellectual property and financing.
Gov. Butch Otter opened the session, sharing advice gained from visits to 83 countries in 18 trade missions since 1987. Both he and Menendez spoke of the importance of having partners in China who know the country, and the cultural and political landscapes.
Otter visited China several times when he was an executive with Simplot. Idaho has had four trade missions to China since 1981. Otter joined Gov. Dirk Kemp-thorne in 2005, and led missions in 2010 and 2012.
“You’ve got to have someone there who is ready to speak up for you,” Otter said.
The summit promoted Otter’s 30-year strategy of “selling groceries” and other products to increase economic development. Business people like David and Susan Price of Burley are following in the footsteps of companies like Simplot in reaching into the China market.
The Prices are partners in Double L Global, a company that makes potato planters, harvesters and handling equipment at a new manufacturing plant in Burley. It employs 94 workers with good wages and full benefits. Double L already sells equipment in China to suppliers like Simplot and other potato processors in China.
Another company the Prices are involved with is Pickett Equipment, which sells sugar beet harvesters. The strong market in China for french fries — driven by the growth of fast food restaurants — is prompting the Prices to consider whether to open a plant there similar to the one in Burley.
Their equipment provides better quality potatoes than does hand picking. But that’s not the only consideration. China’s wages are rising and it’s harder for ag companies there to find good workers, making mechanization a more attractive choice, David Price said.
MONEY IN THE BANK
Wages are rising because the number of workers between 16 and 60 is dropping under China’s one-child policy.
And people save their money. This is a society that already has saved $3 trillion by the 280 million people in the middle class, Menendez said.
“They have more money in the bank than any other country in history,” said Menendez, who has known every China leader since Deng Xiaoping in the 1980s.
China’s policies have encouraged saving, Menendez said, but the Communist Party is now seeking to create incentives for spending. This growing wealth and consumer demand will help manufacturing in Idaho and create a huge new market for any products Idaho wants to sell.
“We hope every one of them wants a sack of french fries every day,” Price said.
CHINA INVESTMENT: ANOTHER STORY
A new book, “China Goes Global: The Partial Power” by David Shambaugh, recognizes Otter’s 30-year relationship with China and Idaho’s “investment-friendly state government.” But Shambaugh also talks about the suspicion generated by proposed Chinese investment in Idaho and other places.
In 2010, a Chinese company’s proposal to develop an area near the Boise Airport created a maelstrom of panic from some Idahoans, resulting in a resolution from the state Republican party questioning the investments. The interest dried up.
The U.S. Department of Commerce and Otter have tried to calm those fears. “Such reassurances have not convinced China’s government or companies that the American door is truly open,” Shambaugh wrote.
Price said the controversy has had no impact on his decisions and investments.
“I wasn’t aware of it,” he said.
With the excess wealth and an easing of restrictions on spending and taking money out of the country, Menendez predicts a wave of Chinese investments in the United States, something both he and Shambaugh say should not be feared. China has shown no interest in expanding its military power beyond its immediate region.
And, Shambaugh argues, despite its economic might, China is a global actor, not a global power.
“China remains a lonely power, lacking close friends and possessing no allies,” Shambaugh argues.
The key to success in business in China as elsewhere is trust gained only by strong personal relationships, Menendez said. Price’s partner has made 40 trips to China to build their relationships.
“If we have a talent,” Price said, “it’s being a partner with people.”
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