Development

As China rises, North Carolina, Charlotte leaders look to the east

North Carolina business and political leaders meet with their Chinese counterparts in Changsha, China. N.C. Commerce Secretary John Skvarla is seated in the middle, and Richard Yang, president of the Carolinas Chinese Chamber of Commerce, is seated in the first row, second from the right.
North Carolina business and political leaders meet with their Chinese counterparts in Changsha, China. N.C. Commerce Secretary John Skvarla is seated in the middle, and Richard Yang, president of the Carolinas Chinese Chamber of Commerce, is seated in the first row, second from the right.

What struck them most was the number of cranes: North Carolina leaders who returned two weeks ago from a trade mission to China sounded in awe as they described construction crews raising whole cities from scratch across the vast country.

Even though China’s economy isn’t growing as fast as a few years ago, its annual growth rate is still about triple that of the United States. Seeking a safe place to invest, more Chinese businesspeople and firms have started looking to the U.S. – and local leaders say they don’t want to be left out.

“Anyone that’s not on board the China train will be relegated to a communal backwater,” said Chase Saunders, a retired judge and Charlotte lawyer who went on the trip.

The impact of Chinese firms is already being felt around the Charlotte region. Keer, a textile company, this year opened a new, $218 million mill in Lancaster County, about 6 miles south of Ballantyne, that will employ 500. And China Orient Summit Capital is financing a $122 million office tower under construction at 615 South College Street.

The trade delegation was the second this year by North Carolina officials, following a trip that included state Agriculture Commissioner Steve Troxler and Commerce Secretary John Skvarla this spring. One of that trip’s main goals was establishing ties to export more agricultural goods from North Carolina to China, including tobacco and pork. Smithfield, a leading U.S. pork producer with operations in eastern North Carolina, was bought by Shangui International Holdings in 2013.

The Carolinas Chinese Chamber of Commerce footed the bill for public officials on the trip, President Richard Yang said, but he declined to say how much the trip cost.

Such trips are sometimes criticized as junkets to wine and dine politicians with few concrete results. Charlotte City Council member Patsy Kinsey said the packed schedule, which involved overnight travel and days packed with meetings, factory tours and site visits, ensured that wasn’t the case.

“We worked our buns off,” she said. “It wasn’t a vacation or touristy thing.”

Skvarla said he’s committed to making sure actual business deals result from these kinds of trips.

“We can yak, yak, yak on these things, we can form committees, sign documents and all that, but it’s all talk,” said Skvarla. “Unless we’re going to have true results come out of these things, I’m not flying 18 hours anymore.”

He said he plans to ask for funding to hire a China specialist in his office and to compile a list of possible investments for Chinese investors looking for a place to spend.

“I need some people and some budget,” said Skvarla. “They have to get the sense that the senior people in the state government are committed to this.”

The Charlotte Chamber has an Asian business specialist on staff who is fluent in Mandarin, and the North Carolina Commerce Department has offices in Hong Kong and Shanghai. The South Carolina Department of Commerce also maintains a Shanghai office.

One challenge to an effort to lure more Chinese businesses: connectivity. There is no nonstop flight from Charlotte to Asia, which puts the city at a disadvantage to hubs such as Los Angeles, Dallas and New York. American Airlines, the main carrier at Charlotte Douglas International Airport, operates flights from Charlotte to Europe and Latin America, but it has no plans for a China route.

Yang, who owns companies that import hotel furniture to the U.S. and export food to China, said many Chinese investors aren’t aware of North Carolina, instead focusing on New York, Los Angeles, Seattle and Texas. He said the same is true of China’s emerging middle class, comprising more than 300 million people.

“We need to wake up, or someone else eats our lunch,” said Yang, a Chinese native and American citizen who has been in North Carolina for 13 years. He said he is planning to help bring delegations of Chinese business and political leaders to North Carolina over the next year to show them the state.

Said State Sen. Tommy Tucker, a Union County Republican: “They were not even aware of North Carolina.”

Explosive growth wows leaders

“Unreal.” “Mind-boggling.” “Shock and awe.”

That’s how the trade delegation described what they saw in their nine-city tour, which included visits to Beijing, a massive logistics center under construction in Changsha and the bustling port of Shenzen, next to Hong Kong. Millions of square feet of industrial buildings, office space, apartments – entire city blocks being built speculatively – wowed the North Carolina delegation.

“They’re effectively building empty cities over there” in preparation for an even further transition of rural dwellers to urban areas, said Skvarla. “I continued to be amazed at the economic progress China was making.”

Despite China’s rapid growth, the country still faces problems such as worsening pollution and the lingering after-effects of the one-child policy, which has led to a graying population with fewer young workers. Per-capita gross domestic product in the U.S. is still about seven times higher than in China, according to data from the World Bank.

Still, according to a report from Boston Consulting Group this year, China added 1 million new millionaires in 2014 and is now second only to the U.S. in the number of households with $1 million or more in assets. With so much money being made, the thinking is that North Carolina could both attract investment from and export more goods to China.

“They have a very financially stable middle class who are willing to pay for American goods and services,” said Tucker.

North Carolina agricultural products such as soybeans, pork and tobacco could find a bigger market in China, he said. And North Carolina-manufactured goods, such as furniture, could be sold at a premium to the Chinese middle class as luxury items.

Yang said Chinese investment makes sense for a number of North Carolina industries, such as textiles. As Chinese labor costs rise, the cost difference in onshore and offshore production falls, and cheaper electricity costs in North Carolina than China can make the state attractive. Other industries such as financial services, tourism, higher education and biomedical research and production could also benefit.

“We pay enough attention to Europe,” said Yang, who founded the Carolinas Chinese Chamber in 2012. “If we don’t have enough communication with China, we’ll lose our golden opportunity.”

Ely Portillo: 704-358-5041, @ESPortillo

Trip details

The 17-day tour included Charlotte City Council member Patsy Kinsey, the city’s economic development director Bill Cronin, N.C. Secretary of Commerce John Skvarla, Republican state Sen. Tommy Tucker of Union County and Chinese-American business owners who have formed the Carolinas Chinese Chamber of Commerce. The goal was to find investors and pitch North Carolina and Charlotte as attractive places for investment in finance, tourism and other industries. The Carolinas Chinese Chamber of Commerce footed the bill for public officials on the trip, President Richard Yang said, but he declined to say how much the trip cost. Ely Portillo

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