As we usher in the Year of the Rat, take a look back at some of the activities that made 2019 our most successful year to date!
At a ceremony in Washington D.C., President Trump and Vice Premier Liu He signed the Phase One trade agreement between the United States and the People’s Republic of China. In front of an audience of more than 200 government and business leaders, President Trump lauded the deal as a “sea change for international trade” which will bring a “more stable peace throughout the world”.
Details of Phase One Agreement
China will import more than $200 billion of American goods over two years including:
$50 billion on agricultural goods
$75 billion on manufacturing goods
$50 billion on energy purchases
$40+ billion on services mostly in the financial sector
Additionally, the deal includes provisions that address intellectual property enforcement, forced technology transfer, and currency devaluation standards and restrictions.
Tariffs Remain… for now
According to President Trump, U.S. tariffs on Chinese goods will continue throughout the Phase One agreement citing the need for negotiating leverage. The President expects all tariffs to be removed under a Phase Two deal, which will be negotiated soon.
Stay connected with us as more details are announced!
On October 22nd, ACSI hosted its fourth China Business Conference and Annual Gala at the Hilton in downtown Indianapolis. With more than 310 business and government leaders from the United States and China registered, the half-day event focused on the evolving business dynamics between the U.S. and China, how Indiana businesses can mitigate risk to develop successful strategies, and ended with a celebratory dinner with entertainment.
The Business Conference began with an Indiana-China Business Update by Weilin Long (China Director, Indiana Economic Development Corporation), a US-China Economic Briefing by Kingsley Lam (Vice President, J.P. Morgan Chase), and a Political Overview by Russell Menyhart (Partner, Taft Stettinius & Hollister). Welcoming a special delegation from the Chinese Academy of Social Sciences (CASS), Dr. Yao Zhizhong (Deputy Director, CASS) gave some thoughts on the Chinese perspective of the Trade War followed by an Intellectual Property Strategies presentation by Lee Li (Partner, Faegre Baker Daniels), and Trade & Tariffs Briefing by Christine Sohar Henter (Partner, Barnes & Thornburg).
Following a networking reception break, the Gala started with a special string quartet performance by Chinese students studying at Indiana University’s Jacobs School of Music. The Gala continued with opening remarks by ACSI Chairman Mr. Harrison Ding followed by remarks by Indiana Secretary of Commerce Mr. Jim Schellinger and Chinese Consul General Mr. Zhao Jian. The Gala concluded with an award ceremony with Jingu N.A. Corp. winning ACSI’s “Friend of Indiana” Award and Dr. Joe Xu winning the Chen Legacy Award.
Governor Eric J. Holcomb concluded his inaugural economic development trip to China today after meeting with government officials and business leaders in Shanghai, China’s most populous city.
“Our time in China was incredibly productive and inspired further ideas for partnerships and collaboration,” Gov. Holcomb said. “I’m more than optimistic about the potential for future business investments as well as cultural and academic exchanges between Indiana and China. We were warmly received everywhere we traveled, underscoring the point that this was the perfect time for our visit to broaden and deepen our relations.”
The delegation hosted a Friends of Indiana luncheon in Shanghai with U.S. Consul General Sean Stein and leadership of Indiana-based Faegre Baker Daniels, which has an office in Shanghai. During the event, Gov. Holcomb and Indiana Secretary of Commerce Jim Schellinger addressed approximately 80 attendees representing U.S. and Chinese economic partners and prospective companies, highlighting the state’s largest business sectors, commitment to innovation and competitive business climate.
The Governor also met with U.S. Consul General Stein to learn more about Shanghai’s business climate, how Indiana can continue to support its 21 Chinese business establishments, and new areas of potential economic growth between Indiana and China.
Gov. Holcomb and the delegation met with Shanghai Party Secretary Li Qiang to highlight Indiana’s commitment to strengthening partnerships with Shanghai business leaders and government officials. As a global financial, innovation and technology, and transport hub, Shanghai is China’s biggest city by gross domestic product, according to CEIC Data.
This concludes the delegation’s trip to China, following visits to Beijing and Zhejiang Province last week. While in China, the Governor was joined by Naomi Kwang, attorney and president of the America China Society of Indiana (ACSI); Colin Renk, executive director of ACSI; Harrison Ding, chairman of ACSI; as well as Weilin Long, director of the Indiana Economic Development Corporation’s office in Hangzhou, China.
Governor Eric J. Holcomb and the Indiana delegation joined provincial officials from China’s Zhejiang Province this week to renew the Indiana-Zhejiang sister-state relationship, celebrating the economic, cultural and educational connections shared between the two states. In Hangzhou, the provincial capital city, the delegation also met with Indiana and Chinese businesses with operations in Zhejiang Province, establishing new connections and strengthening partnerships across the region.
“Now in the fourth decade of our sister-state relationship with Zhejiang Province, this visit is the perfect opportunity to reaffirm our commitment to growing together,” Gov. Holcomb said. “Our 32-year-old partnership has blossomed into a transpacific friendship that’s fueling business, academic, government and cultural exchanges on both sides of the Pacific. We look forward to what the future brings both our states in the decades ahead.”
Indiana has shared a sister-state relationship with Zhejiang Province since 1987, when the agreement was first signed by former Indiana Governor Robert D. Orr. In 2017, Gov. Holcomb joined officials of Zhejiang Province in Indianapolis to commemorate the 30th anniversary of the partnership, and this week, the Governor again affirmed Indiana’s commitment to Zhejiang, renewing the sister-state agreement with Zhejiang Party Secretary Che Jun.
In Hangzhou, the delegation also met with Zhejiang Governor Yuan Jiajun to further emphasize Indiana’s commitment to strengthening the mutually-beneficial partnership between Indiana and Zhejiang Province. Since its inception, the Indiana-Zhejiang sister state has increased economic ties and cultural and educational exchanges between Indiana and China, and, last year, the Indiana Economic Development Corporation established a business development office in Hangzhou to further support and strengthen the many opportunities for collaboration.
The Indiana delegation met with representatives of the region’s economy during a business roundtable with Gov. Yuan and the Zhejiang Department of Commerce. Gov. Holcomb offered remarks highlighting Indiana’s pro-growth business environment and promoting future investment opportunities, and Secretary Schellinger provided an overview of Next Level initiatives currently underway to enhance connectivity, talent and quality of place across the state for years to come.
Indiana and Zhejiang Province already share many business ties. In Hangzhou, Gov. Holcomb and the delegation met with leadership of China-based Zhejiang HengFeng Top Leisure and its Indianapolis-based subsidiary, Westfield Outdoors. HengFeng is one of the largest exporters of outdoor leisure goods, producing more than 10,000 products, such as foldable chairs and beds, tents, fishing tackle and hunting gear, and garden furniture for customers worldwide. The company’s Indiana operation, Westfield Outdoors, was established in 2004 and supports R&D and U.S. sales for the products manufactured in Zhejiang and sold at popular retailers like Cabela’s, Bass Pro Shops, Target, Walmart and Costco.
The Governor and Secretary also met with leadership of Zimmer Biomet China & Hong Kong to offer the state’s continued support on both sides of the Pacific Ocean. Zimmer Biomet, which is headquartered in Warsaw, Indiana, and launched its China operations in 1994, employs 2,000 associates in China and 10,000 in the U.S., with nearly half of its U.S. employees located in Warsaw.
Additionally, the Indiana delegation visited the global headquarters of Alibaba Group, which offers a technology suite of e-commerce platforms, cloud computing, digital media and entertainment, and innovation services. The group met with executives to discuss opportunities for Alibaba to support Indiana companies on its online retail platforms as well as the company’s new strategic partnership with Salesforce, which operates its Salesforce Marketing Cloud operations in Indianapolis. With this partnership announced in July, Alibaba is now the exclusive provider of Salesforce to enterprise customers in mainland China and Hong Kong, while Salesforce is the exclusive enterprise CRM software suite sold by Alibaba.
Governor Eric J. Holcomb, Indiana Secretary of Commerce Jim Schellinger and the Indiana delegation began the Governor’s first economic development trip to China this week, meeting with U.S. and Chinese government officials, university partners, business executives and Indiana business prospects in Beijing.
In Beijing, Gov. Holcomb, Secretary Schellinger and the delegation visited the headquarters of Shougang Group, the second-largest iron and steel enterprise in China, to meet with executive leadership of Shougang and its subsidiary, BeijingWest Industries (BWI). In 2017, BWI announced plans to locate its first U.S. production facility in Greenfield, Indiana, creating up to 441 new, high-wage jobs by the end of 2021. BWI recently celebrated the grand opening of its more than $80 million, 276,514-square-foot facility and is on pace to employ nearly 200 Hoosiers by the end of this year.
The Governor also met with U.S. and Chinese government officials, including Wang Qishan, Vice President of the People’s Republic of China, and U.S. Ambassador to China Terry Branstad, to express the importance of China to Indiana and its numerous contributions to the state’s economy, academic network and communities. Gov. Holcomb shared his appreciation for the close ties Indiana shares with its sister state, Zhejiang Province, and noted the state’s commitment to continuing to support mutually-beneficial exchanges and partnerships between Indiana and China.
The Governor and delegation hosted a business roundtable event in partnership with the American Chamber of Commerce – Beijing, connecting with executives of U.S.- and Indiana-based companies operating in China, including Allison Transmission and Cook Group. Gov. Holcomb and Secretary Schellinger highlighted the state’s commitment to increasing global connectivity and international partnerships and their dedication to supporting Indiana companies both at home and across the world.
On Wednesday evening, Ambassador Branstad hosted a Friends of Indiana reception at his residence, gathering business executives, government officials, academic stakeholders and alumni of Indiana universities to create new connections and celebrate the Indiana-China relationship.
While in Beijing, the delegation met with Li Xiaolin, president of China People’s Association for Friendship with Foreign Countries (CPAFFC), a nonpartisan organization focused on deepening international friendships and oversees sister-city and sister-state relationships. The group discussed the important role of the 32-year, Indiana-Zhejiang Province sister-state partnership and the 23 sister-city relationships Indiana communities share with communities across China.
On September 17th, ACSI and IEDC teamed up to represent the state of Indiana at the China General Chamber of Commerce- Chicago’s Annual Gala in downtown Chicago. With the aim to promote the business and trade developments between United States and China, the full day event hosted 45 delegates from seven Chinese cities with more than 300 corporate and government leaders learning more about business opportunities throughout the Midwest.
On September 16th, the China Investment Promotion Agency (CIPA), the bilateral investment department under China’s Ministry of Commerce, visited Indianapolis to learn more about our state’s business climate. Led by Deputy Director-General Mr. Li Yong, the delegation met with representatives of the Indiana State Department of Agriculture, Indy Partnership, Indiana Manufacturers Association, Taft Stettinius & Hollister, Indiana Economic Development Corporation and America China Society of Indiana. CIPA previously visited Indiana with full delegations in 2014 and 2015.
Indiana Wheel Corporation (IWC), a startup manufacturing company specializing in the production and distribution of steel wheels, announced plans today to establish operations in Marshall County, creating up to 117 new jobs over the next few years.
“Indiana’s fiscally-predictable, pro-growth business climate and talented workforce continue to attract companies from around the world, with foreign direct investment committed to Indiana up more than 300 percent since 2016,” Governor Eric J. Holcomb said. “We’re pleased to welcome IWC to Indiana and look forward to the company’s growth and future contributions to the Marshall County economy and community as a whole.”
The company, which is a joint venture led by China-based Jingu Company Limited (Jingu), will invest nearly $23 million to purchase, renovate and equip a 300,000-square-foot production facility at 2935 Vanvactor Drive in Plymouth. The new facility, which will undergo immediate on-site infrastructure improvements, will feature more than $14.5 million of state-of-the-art, specially-designed equipment to support IWC’s manufacturing operations for the trailer and recreational vehicle (RV) industries. Upgrades will begin this summer with production expected to start later this year.
To support its growth in north central Indiana, IWC plans to add 60 full-time employees toward its goal of 117 by the end of 2019. The company will begin by hiring for executive-level positions, skilled machinists, and operations and administrative associates.
”With a low-cost, business-friendly environment and highly-skilled workforce, Indiana is the perfect place to launch and grow our manufacturing of steel wheels for the trailer and RV industries,” said David Saylor, president of IWC. “As we scale IWC’s operations in north central Indiana, we plan to build our customer base and exceed expectations in both quality and service. We appreciate the strong relationship established with the city, the state, and with our partners, and we look forward to growing together right here in Plymouth.”
With its investment in IWC, Jingu, which was established in 1986, will add a major U.S. location to complement its global steel wheel manufacturing operations. Jingu, a publicly-traded, tier-one supplier for leading automotive companies such as General Motors, Volkswagen and Ford Motor Company, is the largest steel wheel manufacturer in China. The company is headquartered in Fuyang City, Zhejiang Province, which has shared a sister-state relationship with Indiana for more than 30 years, promoting and encouraging economic, cultural and educational ties between the two states.
“Marshall County and the city of Plymouth have made great strides to prepare ourselves for new business expansions, and we believe IWC will benefit from our preparation,” said Plymouth Mayor Mark Senter. “We are grateful to our economic development partners who have significantly weighed in to make the project feasible. We’re thankful for the high-quality jobs and automation that this expansion will bring.”
The Indiana Economic Development Corporation (IEDC) offered IWC up to $1.2 million in conditional tax credits based on the company’s job creation plans. These tax credits are performance-based, meaning until Hoosiers are hired, the company is not eligible to claim incentives. The city of Plymouth will consider additional incentives at the June 10 meeting of the Plymouth Common Council at the request of the Marshall County Economic Development Corporation.
IWC joins a network of more than 950 foreign-owned business establishments operating in Indiana, including more than 21 China-based businesses, including SF Motors, BWI North America, Westfield Outdoors and Nanshan America Advanced Aluminum Tech.
Trade negotiations with China stalled on Friday, leading the Trump administration to impose a 25 percent tariff on approximately $200 billion of imported Chinese merchandise. The broad tariff appeared to rattle financial markets earlier this week; investors may be anxious about global supply chains, and many fear retaliatory measures that could curtail US access to the Chinese market.
The bigger picture, however, tells a more reassuring story. America’s trade deficit is hardly the crisis it’s made out to be, and its real issues with China are resolvable. Ultimately, global commerce offers too many benefits for trade relationships to be rolled back—Asia’s developing economies run massive trade imbalances today, but their growth is creating expansive new markets for US exports.
Who Really Pays Tariffs?
By definition, tariffs are taxes paid by the consumers of imported goods. The latest round of tariffs was intended to raise the price of Chinese goods on the American market, which could dampen consumer demand and hurt China’s export-focused manufacturing sector.
In the real world, however, tariffs don’t always translate directly into higher retail prices. For example, when the Trump administration placed some $35 billion in tariffs on Chinese goods last summer, the People’s Bank of China responded by devaluing the yuan by 10 percent against the US dollar. The falling exchange rate more than offset the tariffs’ effect on retail prices, and Chinese imports remained affordable for American consumers.
China’s reaction to the current round of tariffs may not follow the exact same script. But the Chinese government has displayed considerable flexibility in addressing trade barriers and preventing economic disruptions. China is committed to maintaining a steady growth trajectory, and the central government has the power to enact fiscal and monetary stimulus measures to offset the impact of new tariffs.
The Deficit Red Herring
America’s trade deficit dominates discussions of the US-China relationship, but focusing on the nations’ balance of trade is misguided. China may be the world’s second-largest economy, but its consumers are still relatively poor; Chinese GDP per capita is only 13.7 percent of the US average. It’s unrealistic to expect nations with such uneven standards of living to sustain an even flow of trade.
Despite alarming rhetoric to the contrary, the US trade deficit has actually been declining for several years. A boom in exported services has pushed the trade deficit to one-third of last decade’s heights, largely due to an influx of foreign students studying in the US. This is a natural consequence of globalization: America imports low-cost consumer merchandise from developing nations abroad and exports high-value services like tuition at world-class universities.
Although large in absolute terms, the US trade deficit with China has been stable for almost a decade, holding slightly below 2 percent of GDP. This moderate imbalance should gradually fade as the Chinese economy matures and its massive consumer market emerges.
The Long View
Ultimately, the rewards of globalization vastly outweigh its disruptions. China’s rise dislocated some sectors of the US economy as low-cost imports began to compete with domestic products on store shelves. But China is on track to become the world’s largest consumer market, and it’s already an important destination for high-end US exports. The US-China economic relationship is too important—and has the potential to generate too much wealth—to be sacrificed for short-term protectionism.
That doesn’t mean a resolution to the real issues separating the nations will come easily, or that either side will be likely to soften its stance when negotiations resume. The US has real grievances regarding intellectual property theft and forced technology transfers. But neither side would benefit from disrupting the flow of trade or reversing the integration of the global economy.