After years of slow going in the state’s efforts to woo Chinese investors, the Georgia Department of Economic Development has made a new hire that shows its commitment to the country for the long haul.
The state earlier this year declined to renew the contract of Seth Jacobs, its former investment representative in the city of Qingdao. In recent weeks, the department brought in John Ling, the man behind South Carolina’s successful recruitment of Chinese manufacturing investments worth hundreds of millions of dollars over the past decade.
Mr. Ling, a native of the Chinese megalopolis of Chongqing, is humble, warm and methodical in his speech. Fluent in three Chinese dialects, he’s also picked up some Southernisms in the 20-plus years since he first arrived as an MBA student in Charleston, S.C.: Now, he uses “y’all” with the ease of a native.
In an exclusive interview with Global Atlanta, Mr. Ling downplayed his success in South Carolina as a fortunate “coincidence.” After graduating in the early 1990s, he worked for a metal products trading company for nearly a decade before in 1999 he offered a helping hand on the first big Chinese manufacturing project in the U.S. Haier Group, an appliance and electronics giant (based coincidentally in Qingdao), invested $30 million to put a refrigerator factory in the city of Camden, S.C. By 2006 the investment had doubled.
That was the first of many projects to come. Mr. Ling soon joined South Carolina’s Department of Commerce in a new role helping companies export to China. Then, in 2005, he opened the state’s investment office in Shanghai, just before the tide that saw the U.S. shed manufacturing jobs to China began to turn.
Rising wages and logistics costs in China, coupled with the strengthening of the Chinese yuan, began to erode China’s cost advantage. Emboldened by years of growth at home and urged by government policy to build international brands, Chinese companies began to invest overseas. Southern states — equipped with cheap land and labor, competitive governments, welcoming people and strong logistics networks — were well positioned to take advantage of the influx, Mr. Ling said.
“On the cost front, you need to be somewhat competitive by U.S. standards, so obviously the lower cost structure states have more advantage over New Jersey or California or wherever,” he said.
Fast forward to today, and Chinese companies employ nearly 3,000 people in South Carolina. Georgia, meanwhile, has seen that metric hover around 400 for the last several years.
The good news, Mr. Ling says, is that the wave of Chinese investment is just gathering steam.
“We are only seeing the first crop of Chinese projects coming to this country. I still consider myself at the peak of my career,” he said.
Georgia is one of few states with the right ingredients, boasting a few tools he didn’t have to work with in South Carolina. For one, there’s Atlanta, the economic center of the region and the home of the third largest concentration of Fortune 500 companies in the country. With companies like Home Depot Inc. and United Parcel Service Inc. sourcing from and working in China, Mr. Ling believes there should be ample ways to tap into their networks.
There’s also Hartsfield-Jackson Atlanta International Airport, along with universities like Georgia Tech and Emory that host hundreds of Chinese students each year from influential families. But even more importantly, the state has a large and growing port in Savannah.
“This is a platform I’ve been looking forward to,” he said of Georgia.
Still, winning Chinese investments is more of a relational art than outweighing cons with pros. Chinese companies rely less on data and more on their instincts, and they’re inclined to move as quickly in the U.S. as they do back home, he said.
“For the most part the majority of (Chinese companies) can’t tell the difference between the West Coast, East Coast, Georgia versus Illinois or wherever. They go where they feel comfortable,” he said.
Realizing that fact over time has helped Mr. Ling forge an approach that seems as counterintuitive as it has been successful.
While he understands the pressure to deliver results for the state, he said he has learned to focus on winning a company’s trust, even if that means advising them to delay their U.S. investment or even to make sure they’ve considered other states.
“When (American companies) decide on our next expansion plan, we always try to get all the numbers, do the feasibility studies and rely on the scientific approach, while in China it’s more about gut feeling,” he said. “What I tell these projects is, ‘That’s probably the right thing in China … but coming to the U.S., my advice to you would be, Take it slow.’”
The irony is that advising them this way usually translates to quicker movement once the decision is finalized, he said.
Keer Group, which broke ground on a $218 million plant in February 2013, was in production by the next year.
“If I represent a state, the last thing I want is to bring a project (where) a company three years from now has folded and it doesn’t speak well for the state,” Mr. Ling said.
That has been part of Georgia’s problem. The state was seen as a leader in Chinese investment early on, but multiple Chinese projects have either shuttered or failed to materialize after big press announcements.
Getting the state’s reputation right is crucial, Mr. Ling said, since Chinese companies talk to each other, not so much in their geographic areas but in their industry clusters. Mr. Ling got the lead for Uniscite Inc., a Chinese company that invested more than $70 million in a factory making plastic films, from the leaders of Shanxi Yuncheng Plate Making Group Co., another firm in the packaging sector which earlier made a much smaller investment in the state.
Mr. Ling has also seen examples of success in an area of economic development that would have been anathema a few years ago: mergers and acquisitions.
This method is now the preferred method of market entry for Chinese investors, according to the Rhodium Group, which tracks Chinese FDI in the U.S. In the first half of 2014, $5.3 billion of the $6.4 billion in deals announced were attributable to M&A. Out of the 88 individual deals, mergers made up a record 53.
The Georgia Department of Economic Development has no interest in helping Chinese firms find struggling Georgia companies to purchase, but it does welcome any investment that helps existing industry and lads to “net new job creation,” said Scott McMurray, director of the department’s Global Commerce division.
He added that the state is focused on helping foreign investors connect with communities around the state, then letting business and relationships run their course.
“We act really like matchmakers; It’s good customer service. We listen to the requirements of the company, and then we look at our state and then we help them find the best location for their long-term success,” Mr. McMurray said. “But, as powerful and at the top of the pyramid the state is, really it’s the community making the deal with the company. Really, we kind of act like it’s a marriage and we’re officiating.”
The state won’t change its FDI strategy in China, he said. It simply has a different person to deploy it.
“Now we have on board the preeminent business development person for inbound Chinese investment in the world right now,” he said.
He added that the office in Qingdao — located in the Hisense building in the coastal city — will remain open and active.
Mr. Ling will be based stateside at the outset but plans to travel frequently to the country to maintain the right level of face-to-face contact for Georgia in a highly relational market.
He’ll be getting his first chance later this month as Georgia economic development Commissioner Chris Carr leads a business and education delegation to China and Japan for two weeks.
Along with the office in Qingdao, which opened in 2013, Georgia has a trade representative in Shanghai helping companies sell their products in the market.
Select Chinese investments in South Carolina while John Ling manned the state’s China office:
Investment: $218 million, 500 jobs
Investment: $70m, up to 100
Industry: Plastic films, packaging
JN Fibers Inc.
Investment: $45 million, 318 jobs promised
Investment: $18 million (after acquiring factory)
Industry: Industrial drills
American Yuncheng Gravure Cylinder Inc.
Investment/Jobs: $10 million, 120 jobs
Investment: $6.6m, 59 jobs
Investment: $6m, 120 jobs