Northwest Indiana companies have opportunities to do business in China, where the middle class is as large as America's total population and where consumers put a premium on American-made goods, according to America China Society of Indiana Executive Director Colin Renk.
Renk told the Gary Chamber of Commerce at a luncheon at the U.S. Steel Yard that China is still growing fast, at about 7 percent a year, and is a huge market that could be tapped by manufacturers and other companies despite the ongoing trade conflict. He cited the example of Indianapolis-based Eli Lilly, which has had operations in China for 100 years and survived two World Wars, the Cultural Revolution and U.S.-China turmoil.
"You have a unique situation, being between Chicago and Detroit on a corridor of investment," Renk said. "It could open the doors."
China is Indiana's third largest export market, behind only Canada and Mexico. The Hoosier state exported $3.1 billion of goods such as grains, pharmaceutical drugs, auto parts and medical equipment to China in 2017, and exports to China have grown by 110 percent since 2008, as compared to 37 percent to the rest of the world.
Indiana also has exported more services, such as education, travel, royalties from industrial processes and the installation, maintenance and repair of industrial equipment, to China in 2017 than to any other country in the world, according to the America China Society. Hoosier exports of services to China totaled $856 million last year.
That's grown by 480 percent since 2007 as compared to 52 percent to the rest of the world.
"If you include goods and services, there is no trade deficit," Renk said.
Chinese direct investment in Indiana, mostly acquisitions of existing firms and companies, has been declining, partly because of the administration's trade hostilities and an injunction by the Chinese government against "unnecessary foreign investment," Renk said. Chinese foreign direct investment declined by 35 percent over the past year, but it still takes place as wealthier Chinese people look to park their money abroad to protect it from their government.
Indiana firms have ample opportunities to do business in China, such as by selling through Alibaba, the Chinese version of Amazon that does as much volume as the five largest American brick-and-mortar retailers combined and that lists more than 1.7 billion products.
"There's a huge demand for American and foreign-made goods," Renk said. "The U.S. is seen as a stamp of quality."
There are obstacles to overcome, such as firms not doing homework, the Chinese perception that only Indians live in Indiana, which translates into the "Land of Indians" in Chinese, the misconception that China is a single monolithic market and Hoosier naivete about how Chinese business people communicate, such as that yes doesn't always mean yes.
Gary Chamber of Commerce President Charles "Chuck" Hughes suggested Northwest Indiana pursue more business opportunities with China, such as perhaps by having Gary pair off with a Chinese sister city.
Renk said companies interested in China must do due diligence and cultivate the right relationships, such as by working with Chinese organizations in Chicago. His organization helps Indiana and Chinese interests facilitate relationships, pick sites and handle government relations.
He cautioned against going to China just to cut manufacturing costs because of cheaper labor.
"Firms think they can save some money but then what they manufacture deteriorates within six months," he said. "If you're looking to make something cheap, they're looking for ways to make it even cheaper so they can make more money."