Michigan: high-revving engine of China trade

Updated: 2016-08-12 11:06

By William Hennelly(China Daily USA)

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Michigan is one of the Rust Belt states that Donald Trump and Hillary Clinton are seeking to capture in this year's presidential race. But Michigan appears to have shaken off any 'rust', particularly when it comes to its usiness with China, William Hennelly reports from New York.

The state of Michigan served as the backdrop of the US presidential campaign this week, as Republican candidate Donald Trump delivered an economic speech in Detroit on Monday. Democratic candidate Hillary Clinton was due in the state on Thursday to detail her jobs plan.

Rust Belt Michigan is a state that both candidates are looking to capture in November's election, along with the key battlegrounds of Ohio and Pennsylvania.

As for "rust", Michigan appears to have shaken any off, particularly when it comes to its business with China. The state, home of the US auto industry, is pretty much in the driver's seat.

 Michigan: high-revving engine of China trade

Michigan Governor Rick Snyder visits the Great Wall of China in August 2015. The governor has been to China five times and has prioritized bilateral trade with the country throughout his administration. provided to china daily

In terms of Chinese direct investment, Michigan has 79 deals open with China, fourth in the United States behind California, Texas and New York, states with much larger populations. Of those deals through the first quarter of 2016, 75 percent of them (close to $3 billion) were in the automotive industry, according to Rhodium Group.

The state's exports to China have increased from $284 million in 2002 to $3.2 billion in 2015, according to the US Department of Commerce.


"We are staunchly pro-Michigan," joked Brian Connors, executive director of the new Michigan-China Innovation Center, when asked about any bearing the presidential campaign could have on the state's economy.

On July 11, the new innovation center opened in downtown Detroit.

"We realized that we have a unique situation in Michigan, where we have tremendous economic assets and also a rapidly growing Chinese community in the state," he told China Daily in an interview.

"The support and excitement among the business community for expanding our business ties with China has been enormous. The state of Michigan government has realized we need a more innovative solution to how we build our relationship with China," said Connors, who spent several years studying and working in China and speaks Chinese.

"We have formed a dedicated resource, a team of bilingual professionals to work full time on building business ties between Michigan and China."

In March, the Michigan Economic Development Corp allocated $5 million for the creation of the center.

"We have a lot to lose by not working very closely with one another. That's the view of our center and certainly that's the view of our current leadership in the state of Michigan," Connors said.

To many people, Michigan, and Detroit, the Motor City, are synonymous with cars, and China has become an increasingly important player in the automotive industry.

"With the exception of FCA (Fiat Chrysler Automobiles), which is technically an Italian company China will be the fastest-growing source of automotive FDI in Michigan," Connors said.

"Michigan companies are doing well in China's automotive industry. The Big Three are all producing there with their joint venture partners. The tier 1 suppliers have also created tens of thousands of jobs in various cities in China supplying China's automotive industry, which is the biggest in the world and still growing very quickly.

Important partner

"We see China as an important partner as Michigan leads the way in transforming the automotive industry in North America," he said.

Michigan's automotive parts manufacturing sector was the site of two major acquisitions last year. In February 2015, China Everbright Ltd bought Burke E. Porter Machinery Co, a maker of automotive testing equipment and precision machined products, for $90 million.

Aviation Industry Corporation of China bought Henniges Automotive, a supplier of sealing and anti-vibration systems, for an undisclosed sum in September.

CW Bearing USA, based in Novi, Michigan, expects to start manufacturing a unique auto part late this year at its new factory near Detroit, which will help boost the Chinese bearing manufacturer's US market share.

A subsidiary of Cixing Group Co, based in Ningbo, the company's research-and-development team in the US designed an integrated ball nut for automobiles' electronic power steering systems eight years ago.

The new bearing component helps reduce exhaust emissions as well as gasoline consumption because it creates "zero friction" by integrating two bearings to the ends of a ball nut instead of attaching the two bearings to it.

With an estimated investment of $26 million, the company is building a 50,000-square-foot plant in Northville, a Detroit suburb. The company also has built new headquarters in Novi for design, sales and advanced manufacturing.

The new factory is expected to generate annual revenue of $20 million and create 125 local jobs, including assembly line workers, engineers, management and sales staff, according to Hu Lirong, president and CEO of CW Bearing USA.

The ball nuts manufactured at the new facility will be supplied to General Motors, which has a contract with CW Bearing USA through 2026.

In July 2015, Chinese auto-supplier YFS Automotive Systems, which designs, tests, and manufactures automotive fuel system components, invested $26.9 million in a new Detroit facility.

The company plans to acquire roughly 12 hectares of vacant industrial property in the city, where it will build a 14,000-square-meter facility and add 160 new jobs to the city's manufacturing base.

But cars are not all Michigan and China have in common.

More than cars

"Auto is an extremely important part of the relationship between Michigan and China, but it is by no means the only part of the relationship," Connors said.

"We have terrific companies such as Dow Chemical, Amway, Whirlpool, Stryker, Kellogg's that are not automotive (that) have (created) hundreds of thousands of jobs in China.

"We have University of Michigan and Michigan State University, the number of alumni there (in China), it numbers over 100,000," he said. "We have 10,000 students on campus right now in Michigan from China.

"Those students are an extremely important part of the bridge between Michigan and China and an indispensable part of that relationship's future," he said.

This November, senior Michigan officials will head to China on a weeklong trade mission, making stops in Beijing, Shanghai, Hangzhou and Shenzhen.

Also in November, Jamie Clover Adams, Michigan Department of Agriculture and Rural Development director, will lead a trade mission to China to focus on connecting the state's food and agriculture companies with Chinese buyers.

The delegation will stop in Shanghai and Shenzhen, and the trip will include one-on-one meetings, retail tours and briefings with US Department of Agriculture officials.

"As the third-largest export market for Michigan food and agriculture products, China's growing middle class provides a great opportunity for Michigan companies," Clover Adams said.

In 2015, US food and agriculture exports totaled more than $20.2 billion, according to the USDA, with a record $71 million coming from Michigan. US agriculture exports to China have grown more than 200 percent over the last decade.

Tourism is one of Michigan's Big Three industries, last year generating $22.8 billion in economic activity and supporting more than 214,000 jobs.

Michigan Governor Rick Snyder, who has been to China five times, boosted the state's attractions on a visit a year ago.

"The Great Wall is simply fascinating, going back 2,300 years and stretching for some 13,000 miles," Snyder said during an August 2015 visit to China's iconic landmark. "And Michigan also offers amazing opportunities for tourists like Pictured Rocks and Sleeping Bear Dunes, which was recently voted the most beautiful place in America."

Snyder, a Republican, regaled journalists with stories of Michigan's Great Lakes and beaches, Mackinac Island and activities in Detroit and Grand Rapids.

"Michigan is a perfect combination with Chicago," Derek Yang, Travel Michigan's marketing and trade representative in Shanghai, told the South Bend Tribune of Indiana.

"After they're done in Chicago, they come to see these beautiful small towns. Most Chinese tourists come from big cities, so skyscrapers are nice, but it's not very special," he said. But these charming small towns, we don't really have those."

Sister-state agreement

Michigan also has reciprocated with Chinese delegations.

"Tonight is a night for action," Snyder said on May 10 at a ceremony marking the sister state-province agreement between Michigan and Guangdong province.

Snyder; Hu Chunhua, Party secretary of the Guangdong provincial committee; Cui Tiankai, China's ambassador to the US; and Shenzhen Mayor Xu Qin were in Detroit to sign the agreement.

The pact formalized cooperation on trade and investment, science and technology, education, tourism and culture.

Hu said Guangdong was upgrading its manufacturing sector.

"Michigan is known for its innovation in manufacturing, and this is one area that we can cooperate and have progress on," he said.

"It can be a path to progress for both regions. Detroit and Michigan are in the process of an economic revitalization, while Guangdong epitomizes the new emerging economy of China, and both can learn from each other," said Jerry Xu, president of the Detroit Chinese Business Association.

"It's hard to imagine a future in which China is not a crucial partner in terms of trade and investment on a subnational level and in terms of solving the world's problems on an international level. We'll remain committed to that no matter which way the winds blow in November," he said.

Lia Zhu in San Francisco and Paul Welitzkin in New York contributed to this story.

Contact the writer at williamhennelly@chinadailyusa.com