From Austin oil to Seattle aviation, China’s ties with US run regional and deep

US President Donald Trump says Beijing has too tight a grip on the American economy, but city and state leaders across the nation want an even closer relationship

PUBLISHED : Friday, 31 March, 2017, 12:02am
UPDATED : Friday, 31 March, 2017, 12:02am

If US President Donald Trump gets confrontational with Chinese President Xi Jinping over trade at their Mar-a-Lago summit in Florida in April, the Chinese leader will have potential allies in some surprising places – namely, Austin, Sacramento and Olympia.

The economic ties that bind China to the United States are primarily regional and run deep. Now, with a wild card in the White House, the Chinese want even more leverage should bilateral trade relations get hammered. China’s Ministry of Commerce says it’s working to expand various investment agreements with California, Texas, Iowa and other states, deals it estimates were worth US$2.5 billion to American and Chinese businesses last year alone.

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Sun Jiwen, a spokesman for the ministry, used an old Chinese saying to describe the trade situation: “A good relationship between two nations is based on close connection between their peoples,” Sun said. “Province-state and intercity economic partnerships provide an important foundation for China-US economic ties.”

While the outreach is a continuation of regional ties promoted for several years by Xi, it’s taken on added urgency as Trump’s economic team weighs whether to follow through on campaign-trail promises of tariffs of as much as 45 per cent on Chinese goods.

Part of the thinking is that making more American friends outside Washington could slow the push for protectionist measures, according to a person involved in the ministry’s campaign, who asked not to be identified discussing its internal deliberations.

If such cooperation flourishes, “it will not be easy for anyone to shake,” says He Weiwen, a former ministry official who’s now deputy director of the Beijing-based Centre for China and Globalisation.

Attention has focused on the massive trade deficit in trade of goods with China – US$347 billion last year, almost half of the US total. But China, with its 1.37 billion people, is also among the top three export markets for 33 states. 

Texas oil and gas producers, Michigan carmakers and Georgia paper mills would all suffer if China were to impose import restrictions in response to American tariffs. China has also ramped up its investments in the US, by one estimate, they tripled last year to US$45.6 billion – which helps create the jobs Trump has promised.

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US-China trade ties aren’t solely between Beijing and the White House. They’re forged in places like Moraine, Ohio, where American workers are employed by Fuyao Glass, a Chinese-owned company that bought part of a shuttered General Motors plant in 2014. Many of China’s cross-border investments are welcomed locally and aren’t the kind of deals that draw scrutiny from the US government, which reviews foreign purchases for national security concerns.

In Lancaster, California, a desert town north of Los Angeles hit hard by the financial crisis, the Republican mayor, R. Rex Parris, in 2008 began courting the Chinese electric vehicle maker BYD Company, which is part-owned by Warren Buffett’s Berkshire Hathaway.

“Saved our city,” he says of BYD’s electric bus plant in Lancaster. BYD now employs almost 500 people there and anticipates tripling that within three years. “I’m telling people, ‘you’re going to have to not want a job to not have one,’” says Parris, who expects the local unemployment rate to drop to 2 per cent.

The Ministry of Commerce began formalising the provincial-state ties in 2012, when Xi visited the US and talked with governors including Iowa’s Terry Branstad, an old friend from a 1980s cultural exchange, about boosting trade opportunities. 

California, Texas, Iowa, Michigan, New York, the state of Washington and the city of Chicago have since signed agreements with the ministry, calling for regular trade visits, business matchmaking and other exchanges. The deals cover 25 Chinese provinces and cities, which sent 22 delegations to the US last year while the US organised 14 trips to China, according to the ministry.

Officials and executives from Shanghai made two visits last year to Chicago, which helped convince the popcorn maker Garrett Popcorn to choose the city for its first store in mainland China, according to a statement from Shanghai’s commerce commission. 

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In the manufacturing hub of Guangdong, officials plan a slate of cooperative activities this year, among them setting up a regional trade office in Los Angeles, hosting a biotech delegation from Massachusetts and sending representatives to an “Invest in America” summit sponsored by the US Chamber of Commerce, the Guangdong Commerce Department said in a written statement.

Bob Honts, the owner of Texas Lone Star Enterprises in Austin, Texas, accompanied Texas Governor Rick Perry on a trade mission to China in 2014. Honts, whose company raises investment money under the EB-5 visa programme, says Chinese immigrants have put US$200 million into real estate, oil exploration and other ventures in the state.

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“To ignore the Chinese is like you’ve got this race car and you’re using three cylinders out of eight,” says Honts, a Republican. “You can’t do that. We need to work with China.”

Trump hasn’t resolved tension in his administration between hardline advisers like Stephen Bannon, who has called for “economic nationalism”, and such moderate voices as Branstad, who’s now slated to become Trump’s ambassador to China.

Few companies have more to lose from a trade war than Boeing, which makes most of its commercial jetliners in Washington state and has collected US$60.2 billion from deliveries to China since 2000, according to data compiled by Bloomberg Intelligence. That far outweighs the US$800 million to US$1 billion that Boeing spends a year on aircraft parts made in China, joint ventures and other operations. 

At Boeing Field in Seattle, many of the 737s lined up for testing are Chinese domestic carriers. But if would-be Chinese buyers get caught in the middle of a trade war, “they will simply buy Airbus”, says Gary Locke, a former governor of the state who was also ambassador to China under former president Barack Obama.

The state’s director of commerce, Brian Bonlender, is in China this week in preparation for a visit from provincial officials that had been planned for June but now has been pushed back to September and a planned trade mission led by Washington Governor Jay Inslee in August.

Bonlender says his counterparts at the ministry in China have been more “engaged” and “helpful” since Trump’s election – and seem especially focused on finding Chinese businesses with advanced ideas for investment projects and bringing them to the state’s attention. “We’re very encouraged” by the increased outreach, Bonlender says, adding that it’s likely due in part to the “changing tenor of international engagement” under Trump.