Empire State Eyes Middle Income
 

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SHANGHAI FDI

W

hen word hit Wall Street that

Chinese companies were listing

on the London and not

the New York exchanges, New

York City financial leaders

feared the worst. That was earlier this decade.

Wall Street was just beginning to dig itself out

of more than a trillion dollars in 9-11 related

loses, while London, unlike New York, shared

its financial day with emerging China.

Empire State Eyes Middle Kingdom

With various foreign regional investment groups – representing cities, states, port authorities –

racing to do business with Shanghai, and China, it is a wonder that the State of New York remains

idling on the sidelines.

By Bill Marcus

Kathryn S. Wylde, President and CEO of the

Partnership for New York City, a non-profit business

organisation founded in 1979 by David

Rockefeller, and others urged the State of New

York to establish itself in China. Finally, this past

April lawmakers appropriated USD200,000 for

a trade representative to represent the state, of

which New York City is a part. “This is an important

start,” she said. In June, New York City

hired a China tourism representative.

But New York, despite its historical China

connection (New York City has seven Chinese

newspapers and two Chinese-language

television stations), is late to the game.

Twenty-nine other American state and regional

governments are already attracting

investment and incubating businesses or

marketing tourism and education. Delegations

representing sub-national stewards

from across the globe have been tripping over

one another as they pass through Pudong

International Airport.

All Eyes on China

In the past two years, representatives of Rotterdam,

the State of Victoria, and Tuscany,

consecrated their sister city relationships with

Shanghai in investment missions like the

one by Rotterdam which sent a delegation in

May of last year. California, last November,

promoted its foreign trade above a cacophony

of screaming fans angling for a glance at

one of the more famous sub-national public

officials, former movie star and California

Governor Arnold Schwarzenegger.

Size does matter. Like New York State,

California’s population and economy is so big

it competes for China’s total outbound FDI.

(That FDI, in 2006, totaled USD16.1 billion,

an increase over 2005 when it doubled, compared

to 2004, according to statistics from the

China Ministry of Commerce, Department of

Foreign Economic Cooperation.)

However, despite the size and potential

of states, cities and port authorities, China

doesn’t allow them to represent themselves

directly as governmental entities. So New

York, California and others must contract

with individuals who incorporate themselves

as a consultancy, says Jonathan M. Heimer,

Acting Principal Commercial Officer for the

U.S. Consulate General in Shanghai.

Often they turn to someone like Ning Shao, an

American-educated native of Hefei, Anhui Province,

who represents the State of Maryland.

SHANGHAI BUSINESS REVIEW

AUGUST 2007 www.sbr.net.cn 25

Visitors to the Maryland Center China, the

trade, tourism and investment office that Shao

runs – and also headquarters for some 20 U.S.

institutions in China, including the State of

Pennsylvania, Capital Region USA and the

Toledo Region of Ohio – are greeted by hall

posters bearing the states’ icons and flags.

Pioneer Paves a Path

Inside the 1,500-sq.m office on the fourth

floor of Tomorrow Square JW Marriott complex

at 399 West Nanjing Road is the Smith

Conference Center, where an Executive MBA

degree from the University of Maryland’s

Robert H. Smith School of Business can be

gained for USD40,000, half the price in the

United States. The 150-seat Smith Center,

now in its second year of educating Shanghai-

based foreigners and Chinese nationals,

is China headquarters for the Robert H. Smith

School of Business of College Park, Maryland,

which also has locations in Washington, D.C.,

and in Europe, with one in the works for New

Delhi, Shao says.

“I worked three years on that,” says the

45-year-old as he displays a glass model of

the USD250m Shanghai Science Museum.

He jaunts across his corner office to another

bookcase to show a guest an architect’s rendering

of Shanghai’s USD2bn North Bund

project. Both were designed by RTKL Associates,

Inc., of Baltimore, a global architectural

firm Shao helped grow in Shanghai

from one person to 50.

In 1996, as one of his last acts,

the outgoing governor of Maryland

zeroed out the budget of the state’s

Hong Kong office after determining

that it was no longer “relevant” as

a trade gateway to China. Shao,

then a doctoral candidate at the

University of Maryland and a

“very junior international trade specialist

who helped organise the trade missions”,

suggested to the incoming administration

that they establish an office in Shanghai. His

proposal, made in February, was operational

by October. Shao recalls his boss telling him,

“You can have this but you have to go to

China.”

He did, but he often returns stateside.

“When I go to Maryland I will probably do

10 meetings a day, average,” says Shao, who

spends much of his time assuaging the fears

and concerns of business leaders.

From Reservation to Resolution

The first question from a company eyeing

the Shanghai market is whether China is

relevant for their business. The next decision

to make is whether a firm should build its

own operations here or get a distributor to

tap into the market, he adds. “If they don’t

get properly represented in China they’ll get

overwhelmed,” Shao says. They need access

to customers, government decision-makers,

and good managers. Intellectual property

protection is, as always, a major concern.

A trade representative will help a nascent

firm research the market, and find suppliers,

distributors, and translators. They will

introduce companies to trade shows and help

them get paid. Mostly they work with SMEs,

and usually they focus on durable goods, not

agricultural commodities.

Last year, the China trade office generated

USD308m in exported business for Maryland,

five times the amount of its first full

year, 1999, according to a spokeswoman for

the Maryland Department of Business and

Economic Development. The state spends

USD252,219 a year on the centre, USD42,219

of which comes from the Maryland Port Administration,

a port spokesman says.

Clients have included Maryland establishments

such as hospital developer and

operator United Family Healthcare, of Bethesda,

and the Johns Hopkins-Nanjing Center, a

top-flight educational institution. Stationary

seller Raymond Geddes and Company Inc.

of Baltimore grew from zero to USD20m in

China sales under the centre’s guidance. Others,

says Shao, like industrial water testing

equipment manufacturer LaMotte Company

of Chestertown will likely forever be in an

incubator.

The offices are also home to corporate

pavilion developer IMAX of New York which

hopes to capitalise when the 2010 Shanghai

Expo comes to town.

Still Looking On

Two years ago consulate and state trade officials

here organised the Council of American

States in China (CASIC) based on

a model extant in Hong Kong and

Taipei. The Shanghai-based office,

currently led by Shao, now includes

27 of the 29 American state

and municipal trade representatives

in China. A third is based

in Beijing. For RMB2,000 a year

members gain the opportunity to

pool their resources under a CASIC

trade show umbrella and combine their voice

when dealing with Chinese officials.

The list of members stretches from sea to

shining sea and even includes a couple of

official bodies – Virginia’s Hampton Roads

Economic Development Alliance and the bistate

Port Authority of New York and New

Jersey. As of press time, even California’s a

member. But the State of New York, whose

Empire State Development Corporation

has yet to settle on a location – Beijing

or Shanghai – remains absent from the

list.

http://www.sbr.net.cn/sbrarchives/08-2007.pdf