If President Donald J. Trump gets confrontational with Chinese President Xi Jinping over trade at their Mar-a-Lago summit in Florida in April, the Chinese leader will have potential allies in some surprising places—namely, Austin, Sacramento and Olympia.
The economic ties that bind China to the US are primarily regional and run deep. Now, with a wild card in the White House, the Chinese want even more leverage should bilateral trade relations get hammered. China’s Ministry of Commerce says it’s working to expand various investment agreements with California, Texas, Iowa and other states, deals it estimates were worth $2.5 billion to US and Chinese businesses in 2016 alone.
“‘A good relationship between two nations is based on close connection between their peoples,’” said Sun Jiwen, a spokesman for the ministry, citing an old Chinese saying. “Province-state and intercity economic partnerships provide an important foundation for China-US economic ties.”
While the outreach is a continuation of regional ties promoted for several years by Xi, it’s taken on added urgency as Trump’s economic team weighs whether to follow through on campaign-trail promises of tariffs of as much as 45 percent on Chinese goods.
Part of the thinking is that making more American friends outside Washington could slow the push for protectionist measures, according to a person involved in the ministry’s campaign who asked not to be identified discussing its internal deliberations.
Binding ties
If such cooperation flourishes, “it will not be easy for anyone to shake,” says He Weiwen, a former ministry official who’s now deputy director of the Beijing-based Center for China and Globalization.
Attention has focused on the massive trade deficit in trade of goods with China—$347 billion in 2016, almost half of the US total. But China, with its 1.37 billion people, is also among the top three export markets for 33 states.
Texas oil and gas producers, Michigan automakers and Georgia paper mills would all suffer if China were to impose import restrictions in response to American tariffs. China has also ramped up its investments in the US—by one estimate, they tripled last year to $45.6 billion—which helps create the jobs Trump has promised.
Bus plant
US-China trade ties aren’t solely between Zhongnanhai and the White House. They’re forged in places like Moraine, Ohio, where American workers are employed by Fuyao Glass, a Chinese-owned company that bought part of a shuttered General Motors plant in 2014. Many of China’s cross-border investments are welcomed locally and aren’t the kind of deals that draw scrutiny from the US government, which reviews foreign purchases for national security concerns.
In Lancaster, California, a desert town north of Los Angeles hit hard by the financial crisis, the Republican mayor, R. Rex Parris, in 2008 began courting the Chinese electric vehicle maker BYD Co., which is part-owned by Warren Buffett’s Berkshire Hathaway Inc.
“Saved our city,” he says of BYD’s electric bus plant in Lancaster. BYD now employs almost 500 there and anticipates tripling that within three years. “I’m telling people, ‘you’re going to have to not want a job to not have one,’” says Parris, who expects the local unemployment rate to drop to 2 percent.
China’s Ministry of Commerce began formalizing the provincial-state ties in 2012, when Xi visited the US and talked with governors including Iowa’s Terry Branstad, an old friend from a 1980s cultural exchange, about boosting trade opportunities.
California, Texas, Iowa, Michigan, New York, the state of Washington and the city of Chicago have since signed agreements with the Ministry of Commerce, calling for regular trade visits, business matchmaking and other exchanges. The deals cover 25 Chinese provinces and cities, which sent 22 delegations to the US in 2016, while the US organized 14 trips to China, according to the ministry.
Officials and executives from Shanghai made two visits last year to Chicago, which helped convince the popcorn maker Garrett Popcorn to choose the city for its first store in mainland China, according to a news statement from Shanghai’s commerce commission.