Georgia leaders sell their China trade missions as a chance to bring home jobs for their citizens.
But with the state tied for tops in the nation by number of gubernatorial visits to the country since 2009, it’s worth asking how productive their visits have been in fostering deals within the country most say is poised to be the next big direct foreign investor in the United States.
According to a new map and list compiled by the U.S. China Business Council, Georgia is one of just seven states whose governors traveled on official missions to China three times in the last five years – former Gov. Sonny Perdue once and current Gov. Nathan Deal twice.
Many look to the diversity and frequency of deals that Georgia has generated as signs of a successful recruitment strategy, but some of those announcements have failed to deliver.
According to the Rhodium Group consultancy’s China Investment Monitor, Georgia has attracted 26 deals worth $157 million from China, including 22 greenfield investments like factories and distribution centers worth $112 million and four acquisitions worth $45 million. In the South, only North Carolina has more China deals (46). North Carolina’s governors have also visited China three times since 2009.
Sany America Inc. has been the poster child for Georgia’s Chinese advances. The Hunan-based construction equipment manufacturer says it has spent $60 million on its massive plant in Peachtree City and that it has hired 100 workers. But that deal was announced in 2007, and it’s the only one of Georgia’s first generation of major China manufacturing investments that is still standing. Since then, Chinese manufacturing investments in the state have largely been stagnant.
The fact that neighboring states have brought in investments without sending their governors to China, along with Georgia’s recent wins from India, a country where the state has no office and has sent no governors in recent memory, suggests that little correlation exists between gubernatorial visits and inbound investments.
The USCBC map, which lists 58 trade missions total, is blank in South Carolina, Alabama and Mississippi.
But over the last year South Carolina has announced Chinese textile investments worth hundreds of millions of dollars to complement its premier Chinese factory: a refrigerator plant operated by the Haier Group. In Alabama, Golden Dragon Precise Copper Tubing Co. has opened a $100 million plant.
That doesn’t faze Georgia, which benefits from the region’s ascent, said Kathe Falls, deputy commissioner of international trade for the Georgia Department of Economic Development.
“While we are disappointed when projects go to neighboring states, the fact that they are locating in the Southeast underscores our stance that the Southeast is the best region for growth. We typically sell the region before we sell the state,” she said.
Of course, gubernatorial trade missions aren’t all about bringing home foreign-direct investment. On his last trip in August 2013, Mr. Deal used the occasion of opening an investment office in Qingdao to showcase Georgia’s broader commercial relationship with China. One speaker at the event was Gulfstream Aerospace Corp.’s Jay Neely, who laid out Asia’s importance to the Georgia-based business jet manufacturer. Less than a year later, a Chinese leasing company ordered 60 Gulfstream jets.
Mr. Deal’s 2013 trip included a visit to a tourism show in Shanghai and coincided with an agricultural trade mission. He also installed a new trade representative in China who is keen to help consumer products firms navigate China’s burgeoning e-commerce market. A followup trip this year to the Qingdao horticultural exhibition saw Georgia’s academic institutions heavily promoted. The number of Chinese students here is still on the rise, totaling more than 4,000. They bring tuition and tourism dollars and get an introduction to the state that could help them remember it later in life. Georgia’s export growth to China slowed 2 percent in 2013, but the total was still significant: $3.9 billion.
“The governor is the state’s chief salesman. When he leads international missions, it not only markets the state as an ideal place for jobs and investment, but it opens doors for economic development at the highest level,” Ms. Falls said.
Thilo Hanemann, research director at the Rhodium Group, said he hasn’t studied the correlation between governors’ visits and investment dollars, but he said the bigger the deal, the more likely it is to happen without this type of assistance. A massive state-owned firm buying a shale gas field is very different from a small manufacturer setting up shop in South Carolina.
But the perception of a receptive government that can provide incentives goes a long way for the smaller companies, and governors can help shape that image when they visit China.
“It’s especially true for Chinese companies which often times venture abroad for the first time and need a lot more handholding than that the traditional multinational customers from Europe or elsewhere,” Mr. Hanemann said, adding that it seems important to have an investment promotion operation on the ground in China.
He said state investment promotion agencies have tended to emphasize greenfield investment over merger activity, possibly due to political risk of being seen as selling off companies and land to the Chinese.
“They don’t even look at acquisitions from a strategic point of view in terms of the job-creation element,” Mr. Hanemann said.
But Chinese investment now supports some 80,000 jobs in the U.S., according to Rhodium Group, and in 95 percent of cases where they have acquired U.S. firms, Chinese investors have maintained or increased the workforce, Mr. Hanemann said.
He gave the examples of Cirrus Aviation and A123 Battery, firms that were turned around after Chinese cash flowed in. The message that Chinese money actually may help some jobs come back from China is starting to get out to unions and legislators, Mr. Hanemann said.
The U.S.-China Business Council breaks down state exports to China by congressional district in order to give policy makers a better picture of how trade with China impacts their constituencies. Rhodium Group is planning to do the same with its investment data.
Read Global Atlanta’s 2010 report on the Southern Governors Association conference focused on China: Southern States Target China for Investment
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