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Published: Thursday, 4/12/2007

Economic philosophies shared with Toledoans

BY JOSHUA BOAK
BLADE POLITICS WRITER
John Henry Fullen, executive director of Toledo Sister Cities,
presents Qinhuangdao Mayor Jiang Ruiting with a gift from
Toledo, a traditional gesture during offi cial visits in Asia. John Henry Fullen, executive director of Toledo Sister Cities, presents Qinhuangdao Mayor Jiang Ruiting with a gift from Toledo, a traditional gesture during offi cial visits in Asia.
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QINHUANGDAO, China - The glossy brochure details 54 potential investments, each of which promises outlandish profits to the decimal point.

There is the steel wheels factory, the extruded glass production line, and the Shanhaiguan Happy Ocean Park "that integrates sea animals' performance, diving, and swimming as a whole."

"We have a philosophy that investors are God and taxpayers are parents, so we bring our full services to them," said Qi Zhonghong, a deputy director at the Qinhuangdao Economic & Technological Development Zone.

Headquartered in a building resembling a greenhouse on steroids, the development zone is a hotbed of growth in this coastal city of 2.7 million people. It provides one-stop shopping for foreign investors and proof that internal factors have as much to do with the trade imbalance between the United States and China as international treaties do.

Earlier this week, President Bush filed two complaints against China with the World Trade Organization, alleging China tacitly endorses the piracy of American films while restricting the importation of other forms of American media.

The complaints were filed shortly after an announcement that the U.S. trade deficit with China billowed to $232 billion last quarter, a politically expensive sum for a President working with a Democratic majority in Congress suspicious of the benefits of free trade.

American politicians attribute the deficit to low wages, currency manipulation, lax environmental standards, and export restrictions by China. Yet the experiences of a Toledo delegation in Qinhuangdao reveal there are cultural reasons for the deficit as well.

Wenge Liu, a foreign liaison for the city, chaperoned the delegation. Over dinner, he explained one of the real asymmetries between America and China.

Hewen Slak, chairman of the Chinese Association of Greater Toledo, gives a presentation about investing in Toledo to offi cials with the economic development zone in Qinhuangdao, China. Hewen Slak, chairman of the Chinese Association of Greater Toledo, gives a presentation about investing in Toledo to offi cials with the economic development zone in Qinhuangdao, China.
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The average Chinese household saves 25 percent of its disposable income, according to the World Bank. Americans have spent their entire disposable income in recent years, creating a consumer-driven economy with an insatiable appetite for many Chinese-made goods.

The high rate of savings by Chinese families fosters a national dependence on exports because there is no domestic base of spending to feed the economy. Mr. Liu said the Chinese stock away so much of their income in order to pay for their children's futures.

"This is all that Chinese parents think about, their son or their daughter," Mr. Liu said.

There also is the complex flow of capital between America and China, a problem that became apparent when the delegation met with development zone officials on Monday.

The U.S. economy is a maze of titanic corporations, small businesses, state regulations, and federal laws, while China is more of a straight line hierarchy where personal relationships lead to investment partnerships.

Led by Hewen Slak, the chairman of the Chinese Association of Greater Toledo, John Henry Fullen, the executive director of Toledo Sister Cities, and Lucas County Commissioner Ben Konop, the Toledo delegation lacked any chief executive officers who could directly negotiate partnerships.

But in China there is an assumption that government officials approve investment deals. That mindset elevated Mr. Konop to a trans-Pacific powerbroker honored with liquor and homegrown Cabernet Sauvignon by his hosts, while the Qinhuangdao Mayor Jian Ruiting talked about cooperating on cosmetics or bottling beer.

"Ben's here," Mr. Fullen said. 'That's a big deal. If he didn't come, the legitimacy of this group would be marginalized."

Qinhuangdao officials suggested Mr. Konop could arrange for a Toledo television station to broadcast a documentary about their city. Mr. Konop explained that the media do not bend to his agenda.

The delegation targeted Qinhuangdao, one of Toledo's sister cities, because most international firms bypass regions considered second-tier by Chinese standards, said Ms. Slak, who acted as the group's interpreter.

"Shanghai and Beijing are oversaturated," Ms. Slak said. "And who is going to listen to you when you come from small Toledo? The Chinese have this mentality that they like everything big."

Unlike America, China has a direct pipeline for foreign investment. When Deng Xiaoping consolidated power in the late 1970s and early 1980s, ending the isolation of Mao Zedong's "cultural revolution," China began to establish development zones such as the one in Qinhuangdao.

With 40 employees handling international development, the development zone processes applications, signs off on construction permits, and cuts through any bureaucratic red tape.

The agency's presence cleared the path for General Electric, aluminum giant Alcoa, and Korean electronics firm LG to open plants in Qinhuangdao. Similar zones throughout the country allowed foreign-backed factories to open shop, a set-up that transferred the U.S. trade deficit to China from elsewhere in Asia.

Hong Kong, Japan, South Korea, and Taiwan all shifted manufacturing to China. They accounted for 52.2 percent of America's trade deficit in 1985, according to the U.S. Department of Commerce.

By 2005, Hong Kong, Japan, South Korea, and Taiwan composed 13.7 percent of the American trade deficit. China had a 25.8 percent share, up from zero 20 years earlier.

While the Qinhuangdao development zone can accept foreign capital, it cannot invest abroad. That authority mainly rests with the government, said Wang Yazhou, vice director of the QETDZ. Qinhuangdao has the discretion to invest as much as $3 million overseas. Anything greater must be approved by the central government in Beijing.

Nurtured by this system, private Chinese companies looking to make overseas investments are baffled by the layers of American capitalism, where banks, corporations, governments, and unions all play a role.

Wu Guo Qing is the president of the Qinguan Radian Mirror Co., which makes rear-view mirrors for motorcycles, cars, and trucks. He wants to partner with a Toledo automotive company and asked the delegation about incentives offered by the city and what does America forbid.

"We need a guidebook," Mr. Wu said.

The Toledo delegation came equipped with an 8-minute DVD and a PowerPoint presentation, nothing to help a Chinese firm emerging from decades of communism navigate America's $12.49 trillion economy.

"In America, it's much more difficult because you have to bring more parties to the table," said Mr. Konop, the county commissioner. "It's a classic collective action problem."

Contact Joshua Boak at:

jboak@theblade.com.



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