California to deepen economic ties with China

California Governor Edmund G. Brown Jr. will travel to China from April 10 to 16 to meet with Chinese government and business leaders, highlight bilateral trade and investment opportunities between the two regions and open a new California foreign trade and investment office.

The trade mission will include events in Beijing, Nanjing, Shanghai, Guangzhou and Shenzhen.

Brown will be joined by a delegation organized by the Bay Area Council that includes approximately 75 business, economic development, investment and policy leaders from throughout California. Senior administration officials will also accompany the delegation.

The trip follows more than a year of significant diplomatic and business exchanges between the State of California and China. In February 2012, Brown welcomed Xi Jinping, then-Vice President, and now President of China, to California. During the visit, Brown announced his intention to visit China, open a trade and investment office and form a China-California Joint Task Force to drive more collaboration, investment and trade between California and China. Later in 2012, the Brown administration convened the inaugural Joint Economic Committee between California and China's Jiangsu Province, hosted a Chinese delegation led by the Vice Minister of China's Ministry of Commerce and met with a Chinese delegation led by Deputy Governor Xia Geng of China's Shandong Province.

US-China trade has risen rapidly over the last several decades. Total trade between the two nations has increased from $4.8 billion in 1980 to slightly more than $536 billion in 2012. US exports to China in 2012 were approximately $110.6 billion, a steady increase from previous years.
 
In 2012, China continued as California's third largest export destination, with more than $14 billion in exports. Computer and electronic products accounted for approximately 28 percent of exports, totaling close to $3.9 billion. Both the non-electrical machinery and transportation equipment categories each accounted for approximately 10 percent of the total, with roughly $1.4 billion in exports each.

A report entitled Chinese Direct Investment in California published by the Asia Society in October 2012 finds that California has attracted more Chinese investment deals than any other US state but remains fifth in the nation in total investment value. Negligible before 2008, Chinese investment in the state is growing at triple-digit levels and could reach $60 billion by 2020, but only if the state and private sector do a better job working together to attract Chinese capital.

The report is the most comprehensive study to date of Chinese investment in the Golden State and in the US overall. It finds that the potential gains for California and China are enormous but that success is far from guaranteed. US-China relations remain tense and protectionism is a serious threat. At the state level, California has had a mixed record of promoting its economic strengths. The report urges policy and business leaders in the state to do better to out-compete other states, and nations, that seek to increase their own shares of the Chinese outbound investment surge.

Compared to the rest of the US, the report finds that Chinese investment in California is disproportionately from private rather than state-owned enterprises, greenfield rather than M&As, and strongest in high-tech and high-value services — areas that the Chinese government and private sector have targeted for accelerated growth.
 
Asia Society, a nonpartisan, nonprofit organization that promotes collaboration between the US and Asia, reported this year that China's direct foreign investment is poised to skyrocket to between $1 trillion and $2 trillion by 2020. California is ideally situated to capture some of that money if it goes after it: China already is California's third-largest export partner after Mexico and Canada.

California has the largest population of Chinese-Americans and is China's top trade partner among US states. Yet it has no trade offices in China, opting to eliminate them in a cost-cutting move a decade ago, and is feeling the pressure from other states that have had a vigorous presence in the world's second-largest economy for years.

California-China Trade and Investment Office

In order to increase direct investment in California and give the state’s businesses a distinct advantage in China, Brown announced plans to open the California-China Trade and Investment Office in China during Xi’s visit in February 2012.

The California-China Trade and Investment Office will provide California companies with increased access to Chinese business contacts and provide Chinese investors with access to California projects that will benefit from increased investment. Financing for the office will be provided by partners in the private sector through the Governor’s Office of Business and Economic Development (GO-Biz).

The Bay Area Council, a coalition of business interests from the San Francisco Bay Area and Silicon Valley, is raising about $1 million a year in private money to operate the office.

The trade and investment office will also help Chinese businesses land and prosper in California, which will feed billion-dollar trade flows, create jobs, and attract more funding to get new projects off the ground.

"The Pacific Rim has become the center of the world economy, presenting California with countless opportunities to grow alongside our neighbors across the ocean," said Brown during Xi’s Los Angeles visit in February 2012. "The office will encourage direct investment and further strengthen the existing ties between the world’s second- and ninth-largest economies."

Chinese consumers have "hundreds of billions in savings," Brown said in an interview, saying that he was determined to persuade at least some of them to spend it by purchasing goods from California and investing in the state's businesses.

In 2003, then-Governor Gray Davis closed California's trade operations in China and shut down the state's trade and commerce department as a cost-cutting measure in a budget crisis.

The opening of the new trade and investment office in China comes at a time when other states, such as Indiana and Ohio, are aggressively courting Chinese business and investment.

China-California Joint Task Force

Brown announced his intention to form a China-California Joint Task Force to drive more collaboration, investment and trade between California and China at a US-China economic forum held in February 2012

The task force looks at new and innovative ways to facilitate greater flows of Chinese foreign direct investment into the State of California and ways to increase export opportunities between China and California.

Investment from China into the US, which has increased by some 130 percent over the past two years, will increase dramatically over the next decade, estimates a report by Asia Society. It is believed that one to two trillion US dollars will flow out of China over the next decade in search of higher yield investment prospects abroad. With its dynamic and growing economy, California anticipates being a major player in this historic shift in trade and investment patterns.

CalChamber to join Brown on trade mission to China

California Chamber of Commerce members will join Brown on the trade mission to China with a goal to expand trade and investment between California and China by identifying opportunities that will be of mutual benefit.

"The business mission to Beijing, Shanghai and Guangzhou led by California Governor Brown will serve to strengthen ties and increase economic opportunities with China—a major trade and investment partner", said CalChamber President and CEO Allan Zaremberg, a member of the business delegation.

"In keeping with long-standing policy, the CalChamber supports free trade worldwide. We encourage the expansion of trade and investment, fair and equitable market access for California products aboard and the elimination of disincentives that impede the international competiveness of California businesses," Zaremberg said.

28 member companies of the CalChamber are represented on the delegation, including: Deloitte LLP, FedEx, Harris Farms, Kaiser Foundation Health Plan, Paramount Farming Company (a part of Roll Global), Siemens, State Farm Insurance, United Airlines, The Walt Disney Company and Wells Fargo.


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