Commonwealth of Virginia governor Bob McDonnell spent three days in Shanghai and Beijing last month in a high-profile effort to expand the state’s trade relationship with China. McDonnell was joined by a delegation comprised of Commonwealth business and government leaders. The governor met with major Chinese manufacturing, engineering, electrical and venture capital firms with an eye toward drawing Chinese direct investment to Virginia.
In addition, McDonnell used his time in China to promote Virginia tourism, and to increase tobacco, wine and other exports to China. McDonnell also used the visit to promote the strength of Virginia ports, announcing that one “major Chinese shipping company” had agreed to increase the number of stops in the Commonwealth. On May 5, McDonnell opened Virginia’s official trade office in Shanghai, setting the operation in motion with two employees and an initial annual operating budget of US$250,000.
According to the US-China Business Council (USCBC), Virginia did not rank among the top fifteen exporting states to China in 2010. The top three included California, Washington and Texas, respectively. Each of these states exported at least US$10 billion in goods to China and have each experienced at least 250 percent growth in exports to China over the last ten years. Although Virginia did not rank among the top China exporting states in 2010, China is the Commonwealth’s second largest export market.
Like Virginia, other states have been reaching out to China in recent years. Former California Governor Arnold Schwarzenegger and Washington Governor Christine Gregoire made similar trips to China in September 2010, leading delegations of business and government officials to major Chinese cities, including Hangzhou and Shanghai. California established a trade office in Shanghai in 2000. The State of South Carolina also maintains an active trade office in China, and has drawn high-profile investments to the state, including a significant investment from Chinese consumer appliance manufacturer Haier. Michigan moved its Asia economic development office to Shanghai in 2005 and has also worked to draw Chinese direct investment to the state. Both South Carolina and Michigan ranked among the top fifteen American exporting states to China in 2010, according to USCBC statistics.
The state trade offices of Virginia, California, South Carolina and Michigan now operating in China are poised to serve as catalysts for these states to expand exports to meet growing demand from a rapidly expanding Chinese consumer class. Agricultural exports from many US states are already growing exponentially and demand for non-commodity consumer goods is also expected to increase dramatically in the next several years. More significantly, the US state offices now operating in China are well positioned to work directly with Chinese manufacturing and investment interests to articulate and promote the tax, land cost, labor cost and other benefits of direct Chinese manufacturing investment in their states.