Every evening Qingdao’s beaches fill with bathers who wade in the sandy waters, many fully clothed. On shore, muscular old men do squats and stretch, as they have for decades. Back then, this northeastern coastal Chinese town was all low-level seaside resorts, slow-moving bicycles and retirees.
Nowadays, throngs of holiday makers pack the beaches, mucky but clean by Chinese standards, and high-rises tower over what was sand less than two decades ago. They gorge on local seafood and guzzle the namesake Tsingdao beer, made at the brewery established in 1903 by German settlers.
The boom has drawn business to Qingdao, too, along with one brand-new player planting its flag: the state of Georgia.
Gov. Nathan Deal, accompanied by more than 50 state officials and business leaders, last week opened the first commercial office of any U.S. state in Qingdao, in Shandong Province. Abandoning its previous outpost in Beijing, the state is shifting from past trade efforts to a broader program of soliciting investment, product promotion and tourism sales.
“We want to be known as a state (that) is willing to reach out to parts of China that perhaps have not been considered to be the place of primary importance by other states,” Deal said in an exclusive interview with The Atlanta Journal-Constitution, hours prior to the opening ceremony at the headquarters of Hisense, one of China’s biggest companies.
Hisense has its American headquarters in Suwanee, and the close relationship is a key reason for the move to Qingdao. The state’s new office is on the 14th floor of Hisense’s tower.
“Obviously, the safe route is to go where everybody else is,” Deal added. “That’s generally not the most productive route. We think being a trailblazer is important.”
Deal is the latest in a parade of Georgia governors to seek big trade payoffs from China visits, but results to date have been tepid. Chinese companies have opened only 19 facilities employing about 400 people in Georgia.
Still, the opening of the Qingdao office, and the presence of an entourage of executives from powerhouse firms like Gulfstream, Intercontinental Hotels Group and Delta Air Lines, reiterated China’s allure and importance as a trade partner.
“China is the number one exporter of products into the state of Georgia,” Deal said. “They are the number two importer of Georgia products. So, we have a very significant trade relationship.”
He noted that the eight-day trip – continuing to Japan to mark the 40th anniversary of the state’s office in Tokyo - was the largest overseas mission in Georgia history.
The battle for China trade and business investment is intense. About 20 U.S. states have offices in China, with more cities, universities and industries following suit.
China is no longer just the world’s sweatshop, but also an insatiable customer for products, travel and services. In 2012, the U.S. exported over $108 billion in goods to China, noted a report by the US-China Business Council. Georgia’s share is estimated at $3.6 billion.
Zippy Duvall, president of the Farm Bureau of Georgia, said China is a huge market for state poultry and livestock, nuts and other agriculture.
“They have more people than food, and we have more food than people,” Duvall said.
Many Georgia companies are already flying high in China, including Savannah-based Gulfstream, the maker of high-end private jets that opened a major maintenance facility in Beijing nine months ago.
Executive jets are still a novelty here, but China’s growth creates potential for sales and services. The Beijing facility has 40 employees, and will serve not only China, but the entire Asia-Pacific region.
“It’s is a unique market by any measure,” said Jay Neely, Gulfstream’s deputy general counsel.
Georgia’s new Qingdao office will be run by Marietta native Seth Jacobs, who has lived in China for a decade.
Jacobs, 34, graduated from Georgia State University with a degree in finance and marketing. He took over the state’s China operations a year ago and had been working from Shanghai.
From his modest 14th floor office at the Hisense building, he looks over a promenade made famous with the hosting of sailing events at the 2008 Olympics. Where others see only beaches and resorts, Jacobs sees untapped economic potential.
“This location may seem odd to some,” he conceded, “but Shandong is one of China’s top provinces for outside investment.”
Jacobs said the office will build relationships in a country where connections – or guangxi – are essential.
R.G. Lamar, grandson of the founder of family-run Lamar Pecan of Hawkinsville, said such assistance will be crucial. Lamar, on his fourth visit to China with the Deal delegation, also made side trips to places like Lin’an, a town on few maps and hard to pronounce. But savvy nut sellers know it well.
“It does maybe 70-75 percent of all the nut roasting in China,” he explained. Lamar produces 3 million pounds of pecans a year, shipping 75 percent to China, where pecan consumption has soared of late.
“Traveling with the governor lends huge credibility, and that’s important in China,” Lamar said. “Plus, on a trip like this, you can use their local contacts, the people who really know China and have connections. That’s a huge benefit.”
The benefits of connections flow both ways. Wanjiong Lin, founder and chairman of Self Electronics, probably China’s biggest indoor light manufacturer, opened an office in Duluth in 2011. The investment was about $550,000, and of Self’s 1,100 employees, only eight are so far based in Georgia. But it’s a start toward a Georgia-based stateside expansion.
“When we first arrived in Georgia, we were really lost,” he said through an interpreter. “We didn’t know where to look, or how to do anything. They gave us a lot of support – basic things, like getting lawyers, finding space to lease. They really held out hands.”
In Qingdao, he beamed about meeting Deal. “We can feel the commitment. That means a lot to any newcomer. I tell other companies all the time about the advantages of Georgia.”
Still, many question the wisdom of moving the state’s office from Beijing to Qingdao. Even though it has 9 million residents the city is still considered a backwater by most in China.
Chris Cummiskey, commissioner of the Georgia Department of Economic Development, said the strategy is to avoid fighting for slices of a bigger pie in cities like Shanghai, Guangzhou or Beijing.
“Why go out there and be one of 30, all competing for the same slice of pie? We’ve decided to be different,” Cummisky said.
Jacobs said Georgia has longstanding links to Shandong via a fellowship association, and close ties not only to Hisense, but also Haier, Qingdao’s other major company, and a global leader in appliances. Early this year, Haier chose Georgia as the location for a distribution center.
He noted Georgia is not entirely alone. The Netherlands and Canada staff offices here, and Bavaria trades on historic ties to Qingdao, which was briefly a German colony at the end of the 19th Century.
“Qingdao is like Shanghai in the 1990s,” said Wei Wei Siauw, who heads the Netherlands office. “When other markets are saturated, it makes sense to find new markets.”
Peter Hu, Trade Commissioner for Canada said: “Qingdao makes great sense. You really can work with people here, and when you need, you can always use the Canadian offices in Shanghai and Beijing.”
On the other hand, both countries maintain a network of offices in China. Georgia doesn’t have other offices.
Pat Wilson, with the governor’s office, said Georgia hopes to leverage its close relationship to Hisense. “We can really use their contacts, and work with their supply chain as we look for new business investment elsewhere.”
But there are no sure things. Haier long ago chose South Carolina for its American headquarters in a deal orchestrated by John Ling, who runs the state’s investment program from Shanghai.
“Obviously, you can set up anywhere in China. If you have the knowledge and contacts, the location doesn’t really matter. But clearly, in cities like Beijing and Shanghai, there is more opportunity for networking,” Ling said.
It could be years before the success or failure of Georgia’s Qingdao gambit becomes clear. Ling, for instance, relocated from South Carolina in 2005.
“Nothing really happened for years,” he said. “We worked on small things, but nothing like what we see today.”
The budget for the new China office is around $145,000 this year, including $20,000 in set up costs, Wilson said. Sources at other offices said costs run $200,000-$500,00, depending on the staff and activities. California’s recently opened office in Shanghai has a budget of $1 million per year.
“By being first in a new market like Qingdao, you probably enjoy some first mover benefits,” said Scott Kronic, president of Ogilvy Public Relations, North Asia, which advises U.S. companies, officials and Chinese governments. Location is less important than engaging China, he said.
“You cannot do China with one foot in and one foot out. You have to be committed,” he said. “Nothing is easy, but everything is possible in China.”
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