Business forum explores road to China

Maine businessmen paying record-breaking prices for gas, oil and steel and watching factory jobs shift overseas have read the influence of China’s rapid expansion on U.S. markets.

Those effects from China’s recent surge in demand have been seen by many as a temporary shock to the world economy. The reality, says Dr. Robert Kapp, president of the Washington D.C.-based US-China Business Council, is that after 150 years of false starts, the 1.3 billion resident nation is maturing into a full-fledged consumer economy.

“It’s not that China is disrupting the world economy,” Kapp told participants at the Maine-China Networking Conference held at the Maine Maritime Academy in Castine on Thursday. “It’s that the world economy is not the same anymore.”

The flip side of the rising prices are countless opportunities presented by those distant, developing markets. Identifying such opportunities and finding ways to pursue them was the central theme among more than a dozen conference presenters. About 50 participants gathered for the program, some had extensive experience doing business in China, others were simply curious about how difficult the task of exporting overseas manufacturing might be.

Bruce Blakeman, special council to U.S. Secretary of Commerce, put the picture in perspective.

“This is probably the hardest market you will work in anywhere in the world,” Blakeman said.

Although China is rapidly updating its regulations, infrastructure and business culture, immense challenges and barriers to its market remain. Rolling blackouts interrupt electrical power in 26 of 31 provinces. U.S. companies must struggle to obtain permission to withdraw from the country any revenue earned there. The lack of copyright and patent laws means U.S. manufacturers often find themselves undersold by competing products that are carbon copies of their patented designs. Regulations prevent foreign companies from owning or developing distribution networks.

But General Motors will nevertheless sell more then 500,000 cars in China this year. Boeing will do $7 billion of business in the country. One hundred and forty power plants are currently being built, and the government plans to build 2 nuclear power plants in each of the next 15 years. The $1.4 trillion economy grew at almost 10 percent in the first quarter, and is forecast to quadruple in 20 years.

Dr. Sashi Kumar, director of MMA’s Loeb-Sullivan School of International Business, which presented the conference, said Maine businesses have a stake in developing ties to that emerging market. Kumar said Loeb-Sullivan hopes to become a resource to the business community in developing Maine-China relationships. Understanding those connections also is becoming increasingly important to future MMA graduates.

“It is significant to us because we are an international school of business,” Kumar said. “And because there is a strong link between China’s economy and how the shipping industry performs.”

Conference presenters agreed that unlike Japan, China’s regulatory and business climate was anything but rigid, in a rapid state of flux. Important prerequisites to navigating the markets include having an adept translator and advisors who understand the intricacies of the rules and the culture.

Xiao-Lu Li, director of the Bangor Symphony Orchestra and an experienced consultant for companies doing business in China, said corruption detours $40 billion from the Chinese economy each year. Businessmen should take their first steps into the Chinese business world with care.

“Having connections is important,” Li said. “But the quality of the connection is even more important.”

Li, a native of Shanghai, also said similarities in work ethics and priorities on family and community opened the door to broad connections between China and Maine – connections that would also attract investment capital to the state.

“If you associate with China, you will attract a lot of money to Maine,” he said.

Some Maine businesses represented on Thursday already do substantial business in China. John Poyner of Sanford-based Hussey Seating said the company currently has 69 sales people in China. Ed Montalvo, whose Montalvo Corp. makes specialized pulley and pressure systems for laminate and sheet manufacturing, does about $1 million in revenue in China each year.

John LaCasse is president of Medical Care Development, an Augusta-based company that helps train and develop medical care services and support operations in the United States and abroad. The company is a $30 million a year operation that has worked in many African, Middle Eastern and Caribbean countries. China is a much further leap, and LaCasse said the MMA conference supported the idea that his company should pursue a partnership approach to the market.

“It reinforced our thinking that we would need to link up with someone bigger than us,” LaCasse said.

Blakeman said U.S. companies are losing market share to foreign competitors as barriers to trade with China become lower. And while caution is the key word, Blakeman said the rewards often justify the effort and capital needed to bridge the gap.

“I started doing business in China in 1993,” Blakeman said. “And I’ll tell you, it’s light years ahead now, and it’s all been in the right direction.”