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Economic Evolution in the Great Lake State
Mon September 17, 2012
reWorking Michigan: Trade Mission to China is Michigan's Largest in Years
Business leaders from more than 20 Michigan companies are traveling to China this week on a trade mission. The six-city tour is one of the largest overseas events Michigan economic development officials have ever sponsored. It’s an opportunity to match Michigan farmers, automakers, engineers and manufacturers with potential customers in China.
If Michigan were indeed the first state to plunge into the Great Recession, you’d have never known it by looking at our foreign trade numbers. The U.S.- China Business Council reports that over the last decade, exports from Michigan to China rose more than 11-hundred percent – more than twice the national average.
Such steady growth has spurred several Michigan-based trade missions to China over the years, but none as large as the one starting today.
“We’ve never led a trade mission that includes a business delegation to China,” says Deanna Richeson. She's the export program director for the Michigan Economic Development Corporation. “So this is a first.”
Richeson is helping to coordinate this trip, which includes people from 21 Michigan companies. Most are involved in autos and agriculture, the state’s two flagship industries. But there’s also wide representation from construction companies, information technology specialists, food processors and electronics makers.
Richeson says about half already have business relationships with China.
“The companies will be looking for partners that could either represent their product or their company in China in more regions than where they might already be selling into, or they might not have sold to buyers in China yet and they’re looking for distributors,” she says.
Until about 10 years ago, the state of Michigan operated a trade office in China to aid its homegrown businesses. But in leaner budget times, all the behind-the-scenes work happens at home, including pairing up potential partners.
“We actually have done research for each of the companies and arranged matchmaking meetings for them,” says MEDC international trade development manager Weiwei Lu. “So that increases the potential of the companies finding their partners or distributors or customers in China.”
Some of those meetings are designed to help American vendors understand their Chinese buyers’ cultural tastes. Michigan-made products that sell in Boston or Berlin may need some tweaking in Beijing.
“For the Chinese market, something else needs to change to accommodate the Chinese consumer,” says Richeson.
But that’s not to say there are no niche market opportunities to be had in China. In fact, one mid-Michigan company might have found one.
Aaron Applegate founded his business in Webberville 60 years ago. Today, Applegate Insulation has plants in seven states. The company makes cellulose-based home insulation material. The cellulose comes from wood pulp; specifically, newsprint-grade paper.
Applegate’s product works best in wood-frame houses. Most Chinese homes are made of cinder block. But Applegate says cultural tastes are changing.
“They don’t have the cavities in the walls like we do, or the access into the ceilings like we do,” he explains. “But they’re building now, because a lot of folks have been here and they like the wood houses. So, it will be a developing market if we can get it going there.”
The demand for wood-frame houses may be an indicator of rising affluence in China, and that’s good news for Michigan exporters.
“Twenty percent of the Chinese population are middle class, and it’s increasing by one percent every year,” says Lu. “So, 20-something percent of the Chinese population is almost the entire U.S. population. So it represents a really big consumer market for the U.S. companies.”
The Michigan Economic Development Corporation’s trade mission in China runs until the 28th. Officials are banking on some strong connections from this trip. The MEDC has set a goal of tracking at least $20 million in export sales to China in the next fiscal year.