Justin Hu says his fabric company from central China‘s Hubei province had $50 million in sales last year, mainly from exports.
But to take the Hubei Jinghua Textile Group to the next level, the company wants to cut out middlemen and reach U.S. consumers who will pay more for new product lines like higher-end linens and luxury fabrics made from plants like hemp and bamboo.
Despite these ambitions, Mr. Hu knows breaking into the U.S. market won’t be easy. Few Americans have heard of his company, which exports fabric as raw material mostly to Europe and Japan but has little experience marketing finished products like underwear and socks to Americans, he said.
“We don’t know what the consumer wants and needs,” Mr. Hu told GlobalAtlanta. And the language, culture and government regulations are different in the U.S., he said.
Thanks to a new showroom facility in Atlanta for Chinese companies, Jinghua Textile hopes to learn U.S. business practices and search for partners without the expense and hassle of setting up a presence here.
Along with 100 or so other Chinese companies, its products are on display at the Hubei Enterprises America Marketing Center, which opened Dec. 14 at Atlantic Station.
Chinamex, a Beijing-based company that helps Chinese firms expand overseas, operates the facility. Chinamex announced in July that it would put its Americas headquarters in Atlanta, partnering with Hubei to provide a portal for firms looking at the U.S. market and beyond.
While it’s being called a business incubator, the Hubei companies won’t actually have workers there. It’s their products – a yellow jet ski, industrial saws and drills, fountains, cell phones, crank shafts, rims, clothing and solar panels, to name a few – that will stay there permanently. The showroom on the ground floor of the 201 17th St. building in Midtown has windows on three sides, so passersby can also see nearly 20 large, blue and green displays and touchscreen kiosks that contain information about the Hubei regions where the products are made.
For Mr. Hu’s firm, it’s exposure that wouldn’t have otherwise been possible.
“It will give us a chance to show our products to American consumers,” he said.
Chinamex and Hubei leaders, flanked by local and state officials, unveiled the showroom Monday, Dec. 14, to considerable fanfare. Beyond the ribbon-cutting, dragon dancers and speeches, the central message was that the partnership, the result of five years of work, would focus on building business ties in both directions.
“We believe that Chinamex will bring a diversity of companies here to explore and learn this marketplace,” said Ken Stewart, commissioner of the Georgia Department of Economic Development, who added that the “warm” relationship with the province means that the state will likely include Hubei on future trade missions in China.
The Chinamex facility is scaled back from its original plan. In 2007, when the company first announced it was considering Atlanta, leaders said it could bring hundreds of millions of dollars here. So far that hasn’t materialized, but local officials seem to see the greatest potential not in the showroom, but in future investments Chinamex could foster by building relationships.
Chinese investment overseas has climbed dramatically since earlier this decade, when the Beijing government enacted a “go global” strategy encouraging companies to explore markets abroad.
Mark Lytle, director of international investment for the Georgia economic department, said the state saw “strong interest” from prospective Chinese investors in 2009, mostly in manufacturing.
But while they’ve gained significant experience as the Chinese economy has grown, some companies are still hesitant to make the leap overseas. Unlike German and Japanese firms, which have steadily invested in Georgia over the past 20 years, on a broad scale Chinese managers don’t have experience dealing with the challenges of overseas investment.
“I would say that they have less experience than many of the other countries that we’ve dealt with, and the reason for that is that it’s really only been recently that they’ve looked outward in terms of investing,” Mr. Lytle said.
Part of the disconnect is that Chinese firms are coming from a country rapidly transitioning from a planned to a market economy. Learning how to deal with new laws and regulations, buying land, and hiring consultants can be difficult for novice investors in the U.S., said Penelope Prime, an economics professor at Mercer University.
“It’s a steep learning curve, just like it was when our companies went to China to figure out how to do business there,” she said.
Georgia’s three major Chinese investments, all announced in the past few years with excitement similar to that which greeted Chinamex, have at various levels fallen victim to a mix of inexperience and economic doldrums.
Visa issues at times have slowed the progress of Kingwasong LLC, a Chinese food products manufacturer that announced a $15 million plant in Newnan in 2006.
General Protecht Group, an electrical products manufacturer that announced a $30 million plant in Barnesville in 2007, has fought through multiple patent-infringement lawsuits since its initial splash in the U.S.
The 200-acre Barnesville plant site is empty, and the status of the investment is still uncertain after its CEO, Chen Wusheng, said earlier this year that he was being investigated by the FBI for allegedly obtaining illicit pricing information in a bid to sell to Atlanta-based Home Depot Inc.
Sany Heavy Industry Co. Ltd., which makes concrete pumping equipment, has delayed its planned $30 million assembly plant and R&D facility in Peachtree City for more than a year.
The company is running a sales office here with about 80 people but wanted to time the building of the plant with an upturn in the construction industry, where its products are used, Matt Forshee, CEO of the Fayette County Development Authority, has told GlobalAtlanta.
Sany’s site is located in an industrial park adjacent to Peachtree City’s Falcon Field airport. The company ran into problems when the 250-foot crane it wanted to use in the construction of its facility was downstream of the flight path. Sany’s now waiting on Federal Aviation Administration approval for a lower crane height and other aspects of construction near the airport, Mr. Forshee said.
Dr. Prime said the Chinamex model represents a more incremental approach that could help Chinese companies prevent some of these issues.
“This approach is actually better than these companies trying to come by themselves, because it gives them contact with other companies that are doing it,” she said. “It gives them a point of reference, a starting point, and it gives people who can help them a way to find them early on.”
Shi Minghui, deputy director of foreign trade for Hubei province, said helping Hubei companies understand U.S. processes is the “biggest challenge.”
The new center will help with branding, technology and capital because it wants these enterprises, which have been vetted by the province, to succeed in the U.S., Mr. Shi told GlobalAtlanta.
The Georgia-Hubei investment relationship is only beginning, but “I believe that large-scale cooperation is possible in the future,” he said.
The facility won’t only help the Chinese cause, said Jan Sauer, trade commissioner of Denmark in Atlanta. Adding another portal for foreign companies helps Mr. Sauer and trade officials from other countries make their case for Atlanta as an entry point to the U.S.
“This is more fuel to the fire,” said Mr. Sauer, whose office runs an incubator called the Accelerator for Danish companies in Atlanta. “(Chinamex) chose Atlanta over any other city in the U.S. That’s what you’ll be hearing me say every day this month.”
For more on Chinamex, please see previous GlobalAtlanta articles below.