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Insight: Governors go where national politicians won't -- China

Italian-American artist Arturo Di Modica's Charging Bull statue stands at the financial square on the Bund after its unveiling in Shanghai
Italian-American artist Arturo Di Modica's Charging Bull statue stands at the financial square on the Bund after its unveiling in Shanghai

By Emily Flitter

(Reuters) - In October 1984, Iowa's governor, Terry Branstad, made his first trip to China. He and his wife flew to Beijing and took an old steamer train about 200 miles southwest to Shijiazhuang, a city in the Hebei province.

"It was kind of like going back in time," Branstad told Reuters.

Local government officials greeted the Branstads with flowers and a band. One member of the welcoming committee was a young man who would eventually ascend to the ranks of China's top leadership, Xi Jinping. Currently China's vice president, Xi is widely expected to succeed President Hu Jintao, who is set to step down next year.

"The friendships you build, you never know when it might pay off in the future," said Brandstad, who has stayed in touch with Xi over the years. "Treat everybody well. You never know when they might someday be very important."

Branstad's friendship with Xi, whom he met again on a trip to Beijing this fall, may give him an edge in an increasingly fierce competition among U.S. governors to do business with China.

Even as national politicians bash it over currency manipulation, intellectual property theft, and human rights abuses, state officials are scrambling to engage China, hoping its growth engine can energize their distressed economies. At least 14 American governors have traveled to China so far this year, according to the U.S. State Department, up from 8 in 2010.

U.S. export numbers suggest the visits aren't hurting: sales to China rose by nearly a third to $91.9 billion from 2009 to 2010, reversing a fall in sales the previous year, according to the U.S. Department of Commerce.

THE RACE IS ON

State officials admit they're anxious about getting there first, before other states crowd them out. That is why Delaware's governor hired a press secretary who speaks Mandarin and spent nine years in China. It is also why Virginia opened an office this year in Shanghai with two full-time staff members.

"Competition between the states exists and is increasing," said Paul Grossman, director of international trade at the Virginia Economic Development Program, who accompanied Gov. Bob McDonnell on a visit to China in May.

"That's largely driven by the weakness of the U.S. economy and the desire to recruit jobs from wherever they may come," Grossman said. "The nutshell of it is that in 2010, Chinese firms spent about $5 billion in the U.S. -- we would like to capture our share of that $5 billion pie."

Brian Robinson, deputy chief of staff for Georgia's Gov. Nathan Deal, accompanied his governor on a trip to China in late October.

"It's highly competitive," he said. "We weren't the only governor in China at the time. Bev Perdue from North Carolina was there; Governor Abercrombie from Hawaii was there, Governor Gregoire was there. They weren't there to see the Great Wall and to visit Tiananmen Square."

POLITICAL DISCONNECT

In contrast, U.S. politicians have been trying to outdo each other with tough talk on China. The Senate last month passed a bill that would punish China for keeping its currency artificially low. President Barack Obama said at an economic summit meeting in Hawaii last week that China's economy was "grown up" and its leaders had to start acting that way.

In the Republican presidential debates, China is a frequent target of hostile policy proclamations. "We can't just sit back and let China run all over us," Mitt Romney said during a Nov 12 debate in South Carolina.

During a debate in Washington on Tuesday both Texas Gov. Rick Perry and former Utah Gov. John Huntsman brought up China when asked about the greatest threat to US national security.

The National Committee on U.S.-China Relations, a New York-based non-profit with 700 individual members and 85 corporate members, offered each Republican presidential candidate a trip to China this year to meet with businessmen and government officials. They all refused.

In Texas, however, Perry actively courted China's Huawei Technologies, which in 2010 expanded its headquarters in Plano, Texas. In August, this became an issue in his presidential bid after reports that Huawei's founder had ties to the Chinese military. The company has long been deemed a cyber-security risk and been blocked from other U.S. deals.

Yet that did not stop Virginia from successfully courting Huawei as well; the company opened an office in Reston, Virginia this year, roughly 15 miles west of the U.S. Central Intelligence Agency's headquarters in Langley. The U.S. House Intelligence Committee announced last week it would hold a hearing to investigate possible security threats posed by the presence of Huawei and other Chinese telecommunications companies.

PUSHBACK

There is occasionally pushback at the state level as well. Late in October, the Missouri legislature rejected a package of tax credits proposed by Gov. Jay Nixon for Chinese investors looking to turn Lambert St. Louis International Airport into a cargo hub. Despite the setback, Nixon announced a week later a deal to export $4.4 billion in Missouri products to China over three years.

Iowa is another state that has greatly increased its exports to China -- mostly in agriculture. "My approach has always been that foreign policy is decided at the national level and I want to do all I can to grow my state," said Iowa's Gov. Branstad of his ties to China. "From time to time, these questions get brought up, but generally most Iowans have been very appreciative and very supportive."

Georgia's Gov. Deal recently announced that Chinese concrete equipment maker Sany Group Ltd., owned by Liang Wengen, China's richest man, would open a new research and development facility in Peachtree City. Robinson said the new facility will employ 300 people making an average salary of around $70,000.

An Atlanta television crew was invited to come along when the governor traveled to China to seal the deal. Deputy chief of staff Robinson described watching a reporter asking Liang why he chose to locate his company's U.S. operations in Georgia.

"The state's obviously courted his company for many years and there's been a lot of relationship-building," Robinson said. "We would have loved for the answer to have been 'Georgia's got a great work force,' or 'the low cost but high quality of living there.'"

Robinson said he was surprised by Liang's response.

"His answer was, 'I'm a big fan of Margaret Mitchell and Gone with the Wind.'"

(Editing by Lee Aitken)

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