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Baton Rouge seeks investment from Far East

Advocate business writer
Published: Apr 4, 2010

What’s China worth?

Its economy will match the U.S. economy by 2035, according to the Carnegie Endowment for International Peace, with some measures placing that milestone a decade earlier.

In a land of 1 billion-plus consumers, where retail sales grew fifteen-fold since 1990, China’s consumer market represents “the largest niche-play opportunity in the history of world commerce,” writes Edward Tse in Booz & Co.’s “Strategy + Business.”

With that backdrop, Baton Rouge Mayor-President Kip Holden returned to the People’s Republic of China this week, his second trip to the mainland and sixth to the Far East since 1988.

“I think it’s important to say that that role is critical to building relationships in foreign markets,” said Adam Knapp, the Baton Rouge Area Chamber’s chief executive officer.

Mayors and governors, Knapp said, have “tremendous cachet” in soliciting foreign investment. Holden hopes to parlay that cachet several steps closer to Chinese investment in Baton Rouge. In the next year, he hopes an international trade effort will yield jobs across the region, tie into research at LSU and Southern University, and lay the foundation for new business parks.

“We’re trying to basically sell Baton Rouge in a light that it’s never been sold in before,” Holden said.

(Li Fahong, the deputy mayor of Heze in the People’s Republic of China, speaks during a sister-city ceremony in Baton Rouge while Mayor President Kip Holden looks on in 2008. By RICHARD ALAN HANNON/The Advocate)

The roots of his China strategy go back two decades. In 1988, his first year in the Legislature, he toured Taiwan with the Southern Leadership Conference. He’s been back three more times. One Taiwan model continues to captivate him.

“They wanted me to see what they were doing with what they call science parks,” Holden said, describing developed tracts of 400 to 600 acres. “A lot of it used to be sugar cane farms. They’ll put in the basic infrastructure — roads, sewer, fire, police, a school — and then living quarters.”

Residential, retail and office space combine with corporate research in parks teeming with activity, Holden said, adding: “This is something worth trying to boost our economy.”

By 2009, Baton Rouge business acquaintances put the mayor in touch with Iron Stone LLC President Eugene Ji.

A Baton Rouge consultant, Ji has helped companies from Houston to New Orleans, in fields as diverse as oilfield technology and textiles, exploit the Chinese economy. Among them are The Shaw Group Inc. and Ferrara Fire Apparatus.

Ji, who guided Holden’s China trip a year ago, earned $25,000 in a city-parish contract last year and will receive $45,000 this year. The contracts exclude travel costs and include Ji’s services for recruiting Chinese companies and for showing their executives what Baton Rouge has to offer.

“I feel like this is a mayor who wants to do something,” Ji said. “He wants to go global and help businesses go global. We have a lot of small businesses here in Baton Rouge (that) have great products.”

A native of China’s Guizhou province, Ji studied graduate economics at City University of New York, moonlighting as a translator. In 1988, when Holden first traveled to Taiwan, Ji took a dozen Chinese businessmen to the Deep South.

“(Agriculture commissioner) Bob Odom’s people hosted a big crawfish boil and party for us with this agriculture delegation coming down to visit Louisiana,” Ji said. “I became a certified Cajun after eating 10 pounds of crawfish in a half-hour: that flavor, that smell just kept me here since then.”

While Chinese groups have explored agricultural trade in Baton Rouge trips, many have dealt with technology. And with that, talk inevitably turns to Baton Rouge’s universities.

Holden’s first China targets are plants to make whole-body gamma radiation devices that treat cancer, along with light-emitting diodes that could replace conventional bulbs.

Huiheng Medical Inc. expects FDA approval for U.S. use of its “gamma knife” within 120 days, Holden and Ji said. That’s a key step toward building a $20 million plant and hiring up to 300 people who could make $65,000 to $75,000 a year. No site has been selected yet.

In Shenzhen, Holden will visit Pepnice Corp. and Liantronics Co. Ltd., both LED manufacturers, after company executives visited Baton Rouge in January. That effort could yield 200 jobs as the firms establish an LED hub that could include a Southern University research center, Ji said.

Separately, Changsha-based Broad Air Conditioning could cut Southern energy costs in half with another project. Broad uses natural gas and waste heat to avoid using electricity in powering its ventilation systems. All Southern needs is a $300,000 energy audit of its campus, funds it hopes to obtain from the U.S. Department of Energy within 30 days, to kick the project in gear. Broad did similar work at the University of Texas.

“We can become a living laboratory of that technology,” said Michael Stubblefield, Southern’s vice chancellor of research and strategic initiatives. “But we can also encourage a company like that to have manufacturing facilities in East Baton Rouge Parish: It’s research for us, we’re saving money, but at the same time they get to show their wares to the state and the country, too.”

Moving to the science park model, Holden expects some companies he’s pursuing to locate near Metro Airport, adjacent to Coca-Cola’s nearly $200 million bottling complex.

Taiwan recruits manufacturers, suppliers and exporters of the same product to boost the parks’ success, he said. Among Metro Airport assets is a foreign trade zone that would help manufacturers avoid duties on goods imported into the area for sale elsewhere.

LSU connections

Holden sees LSU playing a prominent China role, too.

One LSU tack involves the Baton Rouge Area Digital Industries Consortium. Launched in 2007, BRADIC is backed by the mayor’s office, the chamber, LSU and the Baton Rouge Area Foundation to attract digital media firms.

At LSU’s South Campus, Electronic Arts Inc. operates a testing center for its sports games, a 200-job project that resulted from BRADIC, state and city-parish efforts in 2008.

“We’re now going to see whether there’s a strategic hookup between China and our effort to expand our digital media consortium,” said Holden, who wants to increase digital media training in East Baton Rouge Parish schools.

Knapp said the LSU South Campus that’s proposed as a research park could play host to Chinese firms like Huiheng.

“The development that is proposed is exactly in line with the facilities they’ve seen elsewhere around the world,” he said. “But there are many sites in the market, including the airport, if they need air service, if they need interstate access.”

William Jenkins, the LSU System president emeritus, said Holden and Ji’s work to bring hundreds more Chinese students a year to Baton Rouge could boost the region.

  (Baton Rouge leaders hope to bring 500 more Chinese students to area colleges. Named honorary Baton Rouge citizens in August were LSU students, from left in foreground, Yifei Deng (red camera), Ziyu Liu, Xue Zhao, Zhang Lei, Zhou Xuan and Wenguan Wu. Standing at back is LSU’s Kathy Hill. By BILL FEIG/The Advocate)

“From a university perspective — not only LSU and Southern, but Baton Rouge Community College — there are going to be many opportunities,” Jenkins said. “And very clearly Eugene Ji understands this: The role of … graduate students fostering business development and economic development is very important.”

The chamber role

BRAC has taken a back-seat role to Holden’s official effort. But that will change.

When Holden returns, he plans to meet with BRAC and state Department of Economic Development officials about incentives for Huiheng’s medical manufacturing plant.

The independent structuring of deals will be necessary. Ji, for instance, said he represents Broad as a 14-state sales agent because the Chinese firm’s equipment is “the best in the country.” But such an arrangement would compromise his role as an independent negotiator for Baton Rouge, should Broad invest here. The city-parish pays the chamber $500,000 annually to direct economic development efforts that retain or add jobs in the parish. Holden and Knapp see a more formal chamber role on China emerging this year.

“I don’t want to get ahead of the chamber, but the chamber also is looking at the fact that if we’re going to be viable, we have to look at the international market,” said Holden, who also traveled to Turkey in 2009 and will travel to France this year in pursuit of business.

The mayor won’t establish a special office or job for international trade, but he’ll encourage BRAC to build relationships overseas. BRAC recently hired two Phoenix-area economic developers — Rod Miller and Iain Vasey — who have international experience in structuring business investments. It also will unveil its next Campaign for a Greater Baton Rouge later this year, a follow-on to a 2006 campaign that raised $15 million to fund much of the chamber’s work the past five years.

BRAC continues to take input from members about the campaign’s scope, Knapp said, and discussion may include international business. The state Department of Economic Development also has contracted with agents in Europe and Asia to bring investment to the state.

“If we all wanted to step up the level of commitment by making contributions to an international strategy, I wouldn’t close the door on that possibility,” Knapp said. “But it wouldn’t be necessary for us in terms of doing what we already do on project work.”

The market motivation

Baton Rouge’s China strategy comes at an interesting commercial crossroads.

Last month, Google Inc. conducted a public spat with the Chinese government. The search-engine giant rerouted Internet traffic from mainland China to Hong Kong after bristling at censorship from China’s Communist Party. The party’s Central Committee, while opening up business opportunities in recent decades, has been criticized for manipulating currency values and controlling access to some sectors.

Tse, the Booz & Co. senior partner, said Beijing decided in the early 1990s that consumer goods were not strategic to China’s stability, so firms in that arena have enjoyed a high level of ownership freedom and product market freedom.

Not so for media, telecommunications, refining, chemicals, banking and auto manufacturing, though restraints on the latter two sectors, in particular, are loosening, Tse said.

Chinese companies do need something from the U.S. in pursuing global brands, said Zhihua Yan, a principal in the Shanghai firm, Z. H. Studio.

“I believe the next couple of years will see more and more Chinese companies setting up manufacturing plants — and R&D centers, distribution and investment facilities — in the U.S. marketplace,” she said.

Haier Co. Ltd., the Chinese appliance maker, began manufacturing its first U.S. refrigerators in Camden, S.C., in 2000. Other Chinese firms have established a U.S. presence in auto parts and furnishings. U.S. consumer distrust of Chinese products and a perception that Chinese goods are “dumped” at prices unfair to U.S. firms are reasons the trend will grow, Yan said. And China’s labor-cost edge will shrink over time.

Some Chinese firms, she said, find overseas plants a viable way to avoid trade barriers. Chinese manufacturers also court U.S. investment.

(Chinese businessmen David Hu, left, and Tiger Liu, far right, meet with Baton Rouge Mayor-President Kip Holden, second from right, and Holden’s liaison for Chinese development, Eugene Ji, in a January luncheon at City Club. Holden and Ji return from China this week after a second trip there in two years, one in which they were to continue working on a proposed Baton Rouge project with Hu, the chief executive officer of Pepnice Corp. and Liu, the CEO of Liantronics Co. Ltd., both of Shenzhen. By BILL FEIG/The Advocate)

Musheer Robinson, a Baton Rouge-based consultant, formerly worked as an executive at Marsh & McLennan Cos. Inc., the $10.5 billion-a-year global risk and insurance firm. Robinson has played a supporting role to Ji’s efforts to recruit Chinese firms to Baton Rouge.

Days after Holden returns, Robinson will take venture capitalists to China to seal U.S. investment in Huehing.

Robinson moved from Memphis shortly after Hurricane Katrina to make a difference in the state, setting up Williams-Wallace Management Consultants Inc. in Baton Rouge. More than a year ago, he met Ji at a local coffeehouse and the two have worked on the strategy.

“China’s going to be the biggest economy in the world (but) you can’t chase everything,” Robinson said. “The issue is how do we focus on what works for us. So I help Ji think about the market segments. Then we focus on the different kinds of companies that can fit in the Gulf South — because you need a broader strategy than just Baton Rouge or Louisiana.”

Attracting Chinese investment to Baton Rouge, matching it with U.S. capital and tying it to university research makes “a very powerful model,” said Robinson, who gets no city-parish money but consults for a fee for firms with whom he builds a relationship.

“I think the Southern-airport link might be the front door,” Robinson said of the Chinese opportunities, which include potential research and manufacturing facilities to the south. “Let’s not forget about St. Gabriel. St. Gabriel is a fabulous place for heavy industry.”

Ultimately, the China play could mean work for Rodney Harris. A senior mechanical engineering major, Harris came to Southern from Flint, Mich., on a track scholarship.

In December, he and seven other Southern students traveled to China, and Harris already is mulling a job offer from Pepnice, the LED manufacturer. He also visited Liantronics, Broad and an air conditioning controls firm in China.

“They’re doing a ton of things, and I think it’s only going to get better,” Harris said of the China initiative. “Of course, there’s going to be trial and error. But I can see 10 years from now there being strong relationships between Baton Rouge and China and these four companies.”

[See original story at here.]


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