China becomes 3rd largest export market in 2007 - buys $65 billion in US goods

(Michigan) Firms cash in on China
By Chris Gautz
Originally published in MLive.com - Michigan Business, International and Local Small Business News on Economics & Finance

Much has been said about the United States' trading relationship with China - and much of it negative - but a new report shows American companies are finding China has a wealth of opportunities.

The United States-China Business Council Inc. recently released a study showing a 300 percent increase in exports to China from across the country from 2000 to 2007.

Locally, the numbers are even more dramatic.

In Michigan's 7th Congressional District, which includes all or portions of Jackson, Branch, Calhoun, Eaton, Hillsdale, Lenawee and Washtenaw counties, exports to China are estimated to have increased by 516 percent during the same time period. Most of that comes from the exporting of transportation equipment and electronics.

Exports from the district to China amounted to $97 million in 2007.

David Dent, president of Melling Engine Parts, was surprised by the numbers, even though his company adds to them.

"It's kind of the reverse of everything you hear," he said.

Erin Ennis, vice president of the United States-China Business Council, said her group's report helps tell the other side of the story.

"While there are some very significant concerns the U.S. has with China, at the same time there are some (U.S.) companies that are benefiting from the trading relationships," she said.

One of those concerns, said U.S. Rep. Tim Walberg, R-Tipton, is the trade imbalance with China. While last year's U.S. exports to China topped $65 billion, Chinese imports amounted to about $321 billion, he said.

"That is certainly something we need to address," Walberg said. "China also has to respect our intellectual property rights."

But the growth of Chinese funds coming into the region is worth noting, he said.
"That's real money that's helping our businesses," Walberg said.

The United States-China Business Council is a private, nonprofit group of more than 250 American corporations that do business with China. The council provides guidance and market research to members.

According to the study's results, of the 435 congressional districts in the country, only 29 did not record triple-digit export growth to China between 2000 and 2007.
"Given the state of the U.S economy, a lot of companies are finding where the growth is, in terms of sales, is international markets," Ennis said.

Michigan ranked 13th in the country in 2007 in exports to China, which amounted to about $1.3 billion. But that figure was dwarfed by the state's $25.6 billion in exports to Canada. (Wisconsin's 2007 China exports totaled $1.2 billion. Canada was top at $5.9 billion with Mexico 2nd at $1.9 billion.)

After overtaking Germany and Japan, China is America's third-largest export market, behind Canada and Mexico - rankings that mirror Michigan's (and Wisconsin's.)

"China's growth is driving that growth," said Kellie Holloway, project manager for the China Business Information Center of the U.S. Commercial Service.

As China's already expansive middle class continues to grow, demand for American products rise.

Holloway said most experts don't see China's economy slowing down anytime soon. "It does continue to present opportunities for U.S. companies," she said.

Mike Wall, auto analyst at CSM Worldwide, a global automotive market analysis group, said the numbers aren't surprising.

"It's still a boom market," he said. "There is a lot of growth still to be had."

While there is a question of sustainability, as Chinese companies will undoubtedly strive to supply their local companies, it does give U.S. suppliers a chance to get in on the ground floor Wall said.

"The U.S. excels in its innovation," Holloway said. "We're never going to be the low-cost producer."

Holloway said U.S. firms are aided by the fact that Chinese companies know that quality standards in China aren't as high as in the United States.

"The perception of U.S quality isn't going away," she said.

Holloway said one way local economic development groups can aid businesses is to help create the bridge to the Chinese market.

That's already happening in Jackson (Michigan.)

In early April, a handful of Jackson manufacturers met with several Chinese business representatives touring the state looking for potential partners in the automotive business.

"There's been a lot of conversations back and forth between the companies since then," said Bill Rayl, executive director of the Jackson Area Manufacturers Association. "Corporate friendships are being built there."

Rayl said this can be a new revenue stream for local companies looking to sell their products.

Frank Ferro, special liaison with Michigan China office, said he often gets calls from Michigan companies inquiring about China and calls from Chinese companies looking for partners in the state.

"There's a tremendous interest in China for Michigan companies," he said.

At Melling's Blackman Township plant, workers once a month load a shipment of oil pumps bound for a General Motors Corp. plant in Shanghai. The pumps will be used in the HV V6 engine, which is used in several GM vehicle models.

Melling's exports to China are relatively small, Dent said, because most of the growth in China's automobile market is for smaller engines.

To expand what it offers into the Chinese market, Dent said GM wants his company to set up operations there. But Dent said he prefers to keep the work in Jackson.

"Certainly that's what they want," Dent said. "A weak dollar does help our position." Dent said he would recommend other Jackson suppliers look at the Chinese market, but only if they have a niche or a technical specialty.

"I think there's opportunity for companies that make a relatively sophisticated product," he said. "The simplest things are going to be built over there."