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China is state’s fastest growing export market
By Molly Parker
Staff Writer
Thomas Friedman may have coined the phrase “The World is Flat” with his best-selling book released in 2005, but the S.C. Department of Commerce is attempting to logistically help flatten it for entrepreneurs who might find the international market a daunting place to do business.
The department next month is escorting about 15 state businessmen to China, the state’s fourth-largest export country. The mission will include visits to the Chinese cities of Chongqing, Tianjin, Shanghai and Beijing.
“Lots of people talk about imports, but this is an opportunity to grow our exports,” said Clarke Thompson, director of the department’s international division. “(China) is such a huge developing market that there’s such a great opportunity for us to sell product to them. Five years ago, they were not even in our top 10 destinations for exports, and now they have moved up to fourth.”
Last year, the state exported more than $13.6 billion in goods to 197 countries with the top export industries being vehicles, machinery, plastics, rubber, organic chemicals, paper and paperboard, optics and medical equipment, wood pulp, and cotton yarn and fabrics, state records show.
Hoping to continue expanding export figures, the department earlier this year laid out plans to host trade missions to five countries: Canada, Guatemala, El Salvador, Australia and China.
The trip to China, which will take place between Nov. 1 and Nov. 11, is the last of the year’s state-sponsored trade mission trips.
This one is vitally important, Thompson said, because the Chinese market was the state’s most impressive growth market last year.
Exports to China last year grew 12.5% to more than $869 million and moved from fifth to fourth place, surpassing the United Kingdom in ranking order of exports.
Gov. Mark Sanford has made three trips to China since he was elected in 2002.
“There are over 1 billion consumers in China. When you look at the global marketplace, there are really opportunities to export South Carolina goods to that part of the world,” Sanford spokesman Joel Sawyer said.
The trip is not funded by the state; everyone attending must pay his or her own way, he said. It cost $750 a person to participate in the mission, plus the cost of airfare, lodging and incidentals.
Unique relationship
South Carolina is not the only state to embark on missions of this type. Most do, in fact. But Thompson said the Palmetto State has a unique relationship with China. It is the only state, he said, with an official state employee running a branch office in China.
Around 1999, Thompson said, the state hired John Ling from the industrial building industry to work as the state’s Asian trade manager. He worked in Columbia at first, and then moved to direct the department’s Shanghai office and strengthen relations between China and South Carolina.
“He was able to take those connections in not only helping us from a government standpoint make connections to Chinese leaders, but also to connect South Carolina companies with buyers in China,” Thompson said.
Ling was also instrumental in helping lure Haier Group, the only Chinese business to move into the United States; Haier America, a refrigerator plant, opened in Camden in 2000.
In March of this year, the company announced plans to invest an additional $6 million in equipment and hire 128 more workers to develop a new product, a 25-cubic-foot, three-drawer refrigerator/freezer with a flexible storage drawer.
When Chinese Vice Premier Wu Yi visited Camden last year, Haier promised to eventually grow the company’s South Carolina investment to $100 million and grow to a staff of 1,000.
Refuting naysayers
With the department preparing to embark on another Chinese trade mission, Thompson said he knows there are “naysayers out there.”
For years, China has made headlines for its growing population and economic base, and has become a hot spot for international business. But bad news befell the country this past summer with reports of dangerous toys and tainted seafood it had exported to countries including the United States.
Critics have also questioned America’s trade deficit and labor groups have expressed concerns about the ease with which jobs can be outsourced or products can be imported to and from nations where labor is cheap.
U.S. Department of Commerce Secretary Carlos Gutierrez, speaking earlier this month in Columbia during a guest visit to the Moore School of Business at the University of South Carolina, said individual states and the country as a whole should focus on exporting more, as opposed to passing “protectionist legislation” to limit imports.
Drawing on a page from history, Gutierrez noted the ill effects of the Smoot-Hawley Tariff Act of the 1930s that was originally designed to protect domestic farmers but that ended up creating historically high tariffs on myriad industrial products.
It would be a “trap” to focus only on creating a trade balance at the expense of gross domestic production, unemployment rates and inflation, he said. He noted Germany as an example of a country with a trade surplus and yet high unemployment rates.
Thompson said South Carolina is best positioned to concentrate on areas where it can have an impact on trade statistics.
“I think when you look at things, there are some things you can control and some things you can’t,” he said. “One of the things we can do to fill that void is to take advantage of that niche area where we can control. That is increasing exports, to help sell as much as we can to aid the companies here that are healthy, wealthy and employing more people.”
Businesses of all sizes have been successful in recent years in securing government contracts, Thompson said, but it’s not easy chartering international business culture.
Working with China
That’s something Robert Newman, president of Columbia-based Harsco Track Technologies, knows well. His company, a division of Pennsylvania-headquartered Harsco Corp., recently secured a $350 million contract with the Chinese Ministry of Railways to build 44 diesel-powered rail grinding machines that will be used for maintenance of much of the nation’s railway system.
Though he has never participated in the state-sponsored trade missions, Newman, whose company weathered many upsets before establishing itself in the Chinese market, recommended the trade missions as a way to get grounded in foreign markets.
“We have found that the Chinese are very skilled negotiators,” Newman said. “We’ve learned over a period of time about how to be successful in these types of negotiations. It takes a lot of patience, a lot of time and a lot of perseverance. You have to have that to be successful.”
The contract his division secured with the Chinese government required more than 100 meetings, he said. But in the end, it’s worth investing in and learning the foreign market.
“When you say China and manufacturing to the average person on the street they only think of one thing, and that’s manufacturing in China and selling to the United States. But this represents a direct investment by the Chinese to create significant jobs in South Carolina,” Newman said.
Molly Parker is a staff writer for the Business Journal. E-mail her directly at mparker@setcommedia.com.
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