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» China-Business-Articles » Reading: "China-Michigan's next best friend?"
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| China-Michigan's next best friend? |
By:
Rick Haglund |
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China could be Michigan's next best friend
Sunday, December 03, 2006
By Rick Haglund
Detroit Bureau
DETROIT -- If you want to add a little spice to your next holiday party, try using China as an ice-breaker.
Not since Japanese automakers began stealing market share from the domestic Big Three automakers in the 1970s have passions run so deep about whether another country is pilfering high-paying manufacturing jobs and threatening Michigan's economic future.
The stakes are even higher this time because China has 1.3 billion people who want someday to live at least as well as the average Michigan wage earner does now.
"I've been practicing international law for 44 years and I have never seen another nation that has the potential to be our equal," said Peter Theut, an attorney who works in the Ann Arbor office of Detroit-based law firm Butzel Long.
China does, Theut said. He has traveled there 52 times over the past eight years, helping client companies to either set up operations in China or export their products and services there.
His trips have convinced Theut that China is as much an opportunity for Michigan -- to prosper by engaging in trade relationships with the Chinese -- as it is a threat to the livelihoods of Michigan workers.
That view is far from universal, though. Union leaders and political figures, many of them Democratic, see China as a fire-breathing, economic dragon that is leading a "race to the bottom" in wages and benefits paid to manufacturing workers.
Some observers have attributed Gov. Jennifer Granholm's re-election last month, in part, to repeated China-bashing. Granholm continually criticized opponent Dick DeVos for building a factory in China while cutting jobs in Michigan when DeVos ran the Amway Co., a consumer products company based in Ada, near Grand Rapids.
DeVos countered, to no avail, that no Michigan jobs were shipped to China, although his company laid off several hundred workers. Expanding to China and other Asian countries strengthened the company, he said.
But after demonizing Amway for investing in China and cutting jobs here, can Granholm convince that country to invest in Michigan at a time when Theut and others say the Chinese want to set up business operations in the United States, as well as export goods here?
"I think the Chinese will take note of it, but they also know it's politics," said Tom Watkins, the former Michigan superintendent of schools. Watkins is now a consultant specializing in working with Chinese businesses and schools.
Granholm's administration has been doing a bit of stealth economic development work in China. While Granholm was hunting for jobs and investment during a high-profile trip to Japan last spring, Michigan Economic Development Corp. President James Epolito was in China, establishing relationships with Chinese companies and government officials.
Epolito is meeting with local economic developers Tuesday to discuss how to approach the Chinese market, said Mike Shore, MEDC spokesman.
And a proposal by Northwest Airlines to operate daily, nonstop flights between Detroit and Shanghai could shorten travel time for some of the 170,000 Michigan business people and community leaders who submitted letters to the U.S. Department of Transportation supporting Northwest's bid. Northwest is competing with plans from American Airlines, Continental Airlines and United Airlines, which have proposed nonstop flights from other U.S. cities. A decision is expected by the end of the year.
While the United States has a staggering $116 billion trade deficit with China, exports of goods and services from Michigan to China have more than tripled over that past six years.
Michigan companies have exported $721.8 million worth of goods and services to China so far this year. That's up from just $211.6 million in all of 2000, according the U.S. Commerce Department. Most of Michigan's exports were transportation equipment, machinery, chemicals and scrap metal.
Dozens of Michigan companies, primarily automakers and their suppliers, are doing a handsome bit of business in China. General Motors Corp., struggling to survive in its home market, is the largest seller of cars and truck in China, controlling about 15 percent of the market.
Theut sees an opportunity for Michigan companies to do far more business in China and for Michigan to attract more Chinese investment here.
Still a communist nation, China's economy is largely controlled by a centralized government that issues five-year economic plans. The current plan, Theut says, calls for Chinese companies to establish operations in countries to which they export products.
He envisions Chinese companies setting up distribution centers, sales offices, engineering facilities, and research and development centers in the United States, much like the Japanese automakers did decades ago before building manufacturing plants here.
But because China has formed ties with the West so recently, company managers have little experience in American business practices. Rather than start their own businesses here from scratch, Theut said the Chinese will be looking to establish joint ventures with Michigan companies and learn from them.
"It could bring fresh capital into a state that badly needs it," he said.
But others say China wants to dominate the world economically, not play nice with it.
Democratic lawmakers such as Michigan Sen. Debbie Stabenow, labor leaders and some economists say China isn't abiding by accepted trade rules. They say the country is stealing intellectual property from foreign-owned companies, violating human rights and intentionally devaluing its currency, the yuan, to make its goods cheaper than those of its competitors.
"Less than half of China's price advantage is created by inexpensive labor," said Peter Morici, former chief economist at the U.S. International Trade Commission. "The rest, quite plainly, comes from chiseling and cheating on the rules."
During her re-election campaign, Stabenow proposed that the United States appoint a "trade cop" who would cite China and other countries that violate international trade rules.
But few expect China's behavior to change anytime soon, especially since China is a major buyer of U.S. Treasury securities, helping to keep bank interest rates low for American consumers.
Some say the best defense is to go on the offensive and try to capitalize on trade opportunities with China.
Watkins said Michigan's schools should teach more Chinese language and culture classes and that the state should aim to become the most hospitable state in the country to China.
The result could be more opportunities for Michigan businesses to sell goods to China, he said. And Chinese auto parts makers might help preserve manufacturing jobs here by purchasing Delphi Corp. plants that are slated for closure or sale.
"There's an economic bridge between China and the United States," Watkins said. "We need to build as many off ramps to Michigan as possible."
Contact Rick Haglund at (248) 540-7311 or e-mail him at rhaglund@boothnewspapers.com
©2006 Booth Newspapers
© 2006 Michigan Live. All Rights Reserved. |
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