China’s Influence Still STRONG in Michigan

For Michigan, China is a significant source of imports and exports, and is expected to grow in the coming year, according to the Michigan Economic Development Corporation. It reports that China is the state’s third largest export market, behind Canada and Mexico, with exports in 2014 of nearly $3.5 billion.

The single largest trade category is transportation equipment, with about $1.5 billion in sales, followed by chemicals ($368 million), industrial machinery ($347 million), computers and electronics ($237 million) and electrical equipment
($148 million).

In the automotive category, both Ford and General Motors have reported continued strong sales in China, cars built in the U.S. or by offshore operations. Ford expects sales to top one million vehicles in 2015 and General Motors sales will top
Three million.
Among GM’s strongest brands is Buick, which sold more than one million vehicles in 2014. And among the popular models is the Enclave, built at the Lansing Delta Assembly Plant.

GM announced in 2014 that it would begin exporting the latest edition of its award-winning Enclave luxury crossover to China. Earlier generations of the Enclave exported to China from 2008 to 2013 sold 25,000 units, the automaker said.

While vehicle sales during the last half of 2015 declined, reflecting a slowing economy, a change in tax policy which cut the auto sales tax by half, boosted sales in November. The trend reflects short-term challenges for businesses.

“There is a certain level of uncertainty,” said Tunga Kiyak, managing director of the Academy of International Business at Michigan State University. “Emerging markets are always more risky than developed markets. The challenge for companies who export to China is that their products are more expensive.”

For most businesses in mid-Michigan, economic relations with China unfold on a smaller scale and in many respects are still in the commercial relationship building stage with education, tourism and components for auto parts responsible for much of the commerce.

“I would say that there still seems to be a steady stream of interest. I haven’t had any calls from people I work with saying that they are putting everything on hold,” said Brent Case, vice president of Business Attraction for the Lansing Economic Area Partnership.

Experts suggest that even as the Chinese economy under performs by its recent standards, projected growth of 6.5 percent is nonetheless extraordinary. According to Brian Connors, China Business Development manager at MEDC, “In 2015, China’s growth was equivalent to the size of the Indonesian economy.”

“Regardless of their growth rate, China is still a huge market where there are going to be lots of opportunities. It is going to be a major player for decades,” said Kiyak.

For businesses exporting products to China, the appreciation of the U.S. dollar versus the yuan, is likely to hurt sales by increasing costs. But importers should see improved values.

“With the Chinese economy devaluing, things manufactured there may be cheaper. U.S. companies could find themselves in a little bit more advantageous spot, more competitive,” Kiyak said.

Among the factors driving the Lansing area’s Chinese trade strategy is MSU, the thousands of students who study there and the relationships they establish with the region.

“We do our best to leverage [our] MSU connection,” Case said. “Students there have parents that are very well connected, often entrepreneurs. How do we make the most of that?”

“With what Chris Holman is doing with the airport and the cultural center. I think it still makes sense. Building a cultural center helps not just with students, it shows the Chinese that we take them seriously, that we respect them,” he said.

Holman, who has decades of business experience in China, is Lansing’s leading proponent of trade relations. His Michigan Business Network sponsors regular forums and events bringing together business leaders to explore opportunities and deepen cultural understandings.

Holman has highlighted the potential for tourism, education and agriculture between Lansing and Xiamen, a seaside city of two million people in the southern part of China, just west of Taiwan. Lansing Mayor Virg Bernero and U.S. Sen. Debbie Stabenow, D-Mich., support his efforts.

Lansing officials hope that two initiatives underway will support the long-term strategy of enhanced China trade.

Capital Region International Airport is seeking a direct passenger flight to Xiamen, citing its central location in the state and the 49,000 people who travel from Michigan to major Chinese cities.

Holman, who is chairman of the Capital Region Airport Authority, said that officials have identified two cities in China that are interested in flights to Lansing. The challenge, he said, is finding a charter company to fly the route amid an aviation industry shortage of aircraft and pilots.

“Lansing is unique. We want to be the China doorway for Michigan,” Holman said, citing state government, the auto industry, proximity to Detroit and the airport free-trade zone as reasons for optimism.

Also in the development stage is a Chinese cultural center. Proponents have identified two possible sites, said Holman, for a facility to be paid for by Chinese interests. To be known as The China Center, it will facilitate cultural and trade relations and medical and educational exchanges.

“It will still be a couple of years.” But Holman, like others, discounts any long-term consequences of China’s current economic issues.

He and others say the benefits of improved cultural understanding and solid relationships is an appropriate strategy, no matter how the Chinese economy wobbles.

While acknowledging that tracking Chinese investment is at times difficult, the fundamentals are undeniable, said Kiyak. “China still has lots of money to invest in different places. That will continue in the United States because it is simply more stable than other places in the world. Getting that Chinese investment should be the goal.

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