Deal on mission to China, S. Korea

Governor seeks to expand Asian investment in Georgia

Gov. Nathan Deal is in South Korea and China this week, seeking an investment and jobs boost for Georgia’s beleaguered economy.

The six-day, five-city whirl of visits with business and government officials underscores the importance of Asian investment in Georgia at a time when much of the global economy remains in the doldrums.

Deal’s choice for his third foreign business trip as governor highlights the promise — real and unrealized — of foreign investment. Korean companies, due largely to automaker Kia, have pumped more than $2 billion into Georgia’s economy. South Korea is Georgia’s No. 5 trading partner.

China, the world’s No. 2 economy, offers the tantalizing prospect of dozens of manufacturers and service industries eager for a U.S. beachhead. Georgia is a top-five state for Chinese investment — buildings, equipment and salaries.

Both nations weathered the global recession in good shape, unlike Japan, a much larger Georgia investor. Deal’s delegation isn’t stopping in Tokyo.

“We’ve had great success with Korean and Chinese companies coming to Georgia,” the governor said in an interview Thursday, a day before the trip began. “They say great things about the state of Georgia. As a result, we have seen some other spinoff companies. Those are the kinds of job opportunities we certainly welcome in our state.”

China, though, remains an uncertain investment bet. Communist Party officials loosened overseas investment strictures nearly a decade ago. After a flurry of highly touted, coming-to-Atlanta announcements, the Chinese investment onslaught never materialized.

Two dozen mainland Chinese companies do business in Georgia and employ 240 people, according to the state’s economic development agency. Canadian companies, by comparison, employ 9,000 Georgians.

“The recent history is not surprising; Chinese companies have very little experience in the United States,” said Penny Prime, director of the China Research Center, an Atlanta think tank. “Even though the U.S. is open to investment, it’s a challenge just trying to figure out what works and to do it well enough and fast enough before you go bankrupt. The learning curve here is steep.”

Deal will be joined by nine staffers and economic development officials. The trip will cost $65,000 to $70,000, according to the state, with Chinese hosts paying for most ground transportation and meals.

The governor’s Asia strategy differs little from predecessor Sonny Perdue’s. He’ll toast new relationships with stomach-churning rice wine. He’ll sign largely perfunctory “memorandums of understanding.” And he’ll join five other governors at a forum sponsored by the Chinese People’s Association for Friendship with Foreign Countries.

But trotting Deal around to ceremonies, banquets and boardrooms will pay dividends, China experts say.

“It’s very important; it puts Georgia on the map,” said Prime, an economics professor at Mercer University. “It adds credibility and shows that Georgia is very interested in China. Lower-level officials matter, but a whole lot less.”

Perdue, who visited China three times during eight years in office, said cultivating trade ties is a bit like farming.

“You plant, you water, you fertilize and then the harvest comes later,” said Perdue, who was criticized for waiting four years before making a trip. “Very rarely will you have quid-pro-quo type of deals on the spot. Most companies are going to be wise enough to do their due diligence. They’re going to analyze what their options are.”

Trade delegations typically involve dozens of Georgia government officials and business leaders. Prime and Lani Wong, who chairs the Atlanta chapter of the National Association of Chinese Americans, question Deal’s small, government-only group.

“If a governor brings businesses with him that means that the governor sanctions those businesses and they have the support of the government,” Wong said.

“It’s very important. The Chinese will pay more attention and know that they’ll have the opportunity to do business with someone in particular in the U.S.”

Chris Cummiskey, the state’s economic development commissioner, defends the size and scope of Deal’s first trip to Asia.

“We want to make sure these meetings are kept in control by keeping them small,” he said. “When we go into these prospect meetings, we can’t bring an entourage — there are things, quite frankly, we don’t want public. This not a trade mission, per se, where it makes sense to bring different agency heads, businessmen and elected officials.”

Deal, Cummiskey and Co. will pay a courtesy call on Mong-koo Chung, chairman of Hyundai Motor Group, which owns Kia. Kia employs 3,000 workers in West Point and has expanded production at least twice since opening its $1 billion factory in 2009.

Cummiskey said the delegation will also visit SK Telecom in Seoul and other prospects. More than 50 Korean companies employ nearly 6,000 Georgians. In all, South Korea has invested more than $2 billion in Georgia since 1988, according to economic development officials.

Deal will spend twice as much time in China. After meetings in Beijing with the governors of Shandong and Hunan provinces, the entourage heads to Changsha, home to SANY Heavy Industries. SANY opened its North American headquarters and a crane factory in Peachtree City on Sept. 1.

“The governor of Hunan Province made it very, very clear that he wanted Gov. Deal to come over and do business in China,” said Greg Trainer, a SANY executive who met recently with both leaders. Chinese officials “are pushing Chinese companies to invest outside of China and, in particular, in the U.S. They take a lot of pride in those investments.”

Deal then visits Qingdao for an announced visit with the Hisense Group, before heading to Shanghai and home. Hisense, one of China’s largest appliance and electronics companies, opened a showroom, warehouse and R&D center in Suwanee two years ago.

Gwinnett County, in particular, has hitched its global star to China and Korea, with impressive results. Ningbo Self Electronics, in Norcross, supplies “opto-electronics.” Lilburn is U.S. headquarters for Hailun piano makers. The county also boasts a trade office in Wuxi, Jiangsu province.

“We have a strong relationship with China and it’s absolutely critical that Deal is there,” said Nick Masino, the Gwinnett Chamber’s vice president for economic development. “The state is focused on a couple of key provinces — a very smart strategy. They’re not trying to be everywhere. You eat the elephant one bite at a time.”

Since 2003, Georgia has landed 14 Chinese investments worth $169 million, according to the Chinese Investment Monitor. Georgia ranks fourth nationwide, behind California ($1.4 billion), New York ($1.9 billion) and Texas ($2.8 billion), in Chinese investment the last eight years. Thirteen of the deals were so-called “Greenfield” investments, new ventures like manufacturing.

Not all remain in business, however. Soy sauce maker Lehui Enterprises opened a factory in Newnan in 2006 and closed in 2009. Chinamex, a business incubator and retail showroom in Midtown, opened in 2009 and closed earlier this year. SANY in Peachtree City promised 600 jobs; today, it employs 126 with plans to add another 100 workers within two years.

The recession crippled some Chinese investment in Georgia. Not SANY’s, though.

“But the root problem, really, is that [other companies] probably didn’t have a strong will, desire and financial commitment to Georgia,” Trainer said.

“Plus, Chinese companies face extreme culture shock. You can’t run your business in Georgia like you can in China. The adjustment is very, very difficult.”

Georgia’s investment goals dovetail with Washington’s. Congress approved a tariff-reducing deal with South Korea on Wednesday intended to boost trade and investments. A day earlier, the President’s Council on Jobs and Competitiveness outlined plans to attract $1 trillion in foreign investment within five years.

“There’s no question that Chinese enterprises are becoming increasingly interested in investing in the United States and they’re very serious about the fact that they have money to invest,” said Thomas Wardell, a partner with McKenna Long & Aldridge in Atlanta. “I don’t see it slacking off.”