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Boles: Relationships Are Important In Doing Business With Chinese

In 1985, a little-known Chinese provincial official named Xi Jinping visited Iowa at a time when there was little economic relationship between the two governments.

Xi returns to Iowa Wednesday as the vice president and likely next leader of a Communist nation that has become a major player on the world stage—and business between Iowa and China is booming.

Iowa exports to China hit $599 million in 2010, a 1,231 percent increase from 2000, according to census data. That was the fourth-largest export market for Iowa. Iowa imports from China were $1 billion in 2010.

Iowa’s top elected and business officials view Xi’s visit as a chance to build upon the relationship and boost trade even further.

Gov. Terry Branstad compared Xi’s visit with ones by Pope John Paul II in 1979 and Soviet Premier Nikita Khrushchev in 1959.

“And in fact, economically it may be even more important to Iowa’s future,” he said.

Xi’s overnight visit, with a contingent of up to 200 people, is to include a stop in Muscatine, dinner in the Capitol, and other events.

Hosting Xi is seen as a coup for Iowa. The vice president is visiting Washington, D.C., and California, with the Iowa stop in between.

“I know there were many other states that wish that the vice president was visiting,” said Marc Ross, spokesman for the U.S.-China Business Council. “The fact that he’ll be spending some quality time in Iowa I think is a big credit to what the folks of Iowa are doing to strengthen” the relationship.

Relationships are very important to the Chinese when doing business, experts said. Terry Boles, director of the Institute for International Business at the University of Iowa, has seen this firsthand when teaching at the UI’s master of business administration program in Hong Kong.

“They’re hard to penetrate because they have very strong ties among themselves,” she said of the Chinese. “But once you can create a relationship, the business deals will come naturally.”

Xi’s 1985 trip is an example of that. He stayed in Muscatine and met with Branstad during the Republican’s first stint as governor.

Branstad met with Xi in China last fall, and Xi remembered the names of people he encountered and had saved the itinerary from the 1985 visit.

Leveraging that relationship into further trade would be big for Iowa economically.

China is the world’s most populous nation, with more than 1.3 billion people, and it needs help feeding them all.

China has about 250 million crop acres, compared with 360 million in the U.S., but China has more than four times as many people, said Dermot Hayes, an Iowa State University agribusiness professor.

“I think this state will be more influenced by what happens in China than any other state just because of the phenomenal increase in demand for the kind of products that Iowa produces,” he said.

That includes corn, pork, and especially soybeans. Nearly 27 percent of soybeans produced in the U.S. in 2010 were exported to China, at a value of $12 billion, and Iowa leads the nation in soybean production, according to the Iowa Soybean Association. In 1985, China did not import any soybeans from the U.S., the organization said.

There’s increasing demand in China because soybeans are used to make vegetable oil and meal for livestock, said Kirk Leeds, CEO of the Iowa Soybean Association. When people get more money for food, as is happening with China’s growing middle class, they use vegetable oil for cooking and add protein to their diet, often through meat, he said.

A Sino-U.S. soybean trade agreement is expected to be signed Wednesday.

Biotechnology products and financial services are other potential exports, officials said.

Debi Durham, director of the Iowa Economic Development Authority, said talks are occurring concerning Chinese firms investing in Iowa. She made three presentations last year to business leaders in China interested in new U.S. markets for manufacturing and distribution.

“That’s what we want to continue to do is identify opportunities and make connections,” she said.

While the trade is good for Iowa’s economy, the U.S. and Chinese governments have major differences on a variety of fronts.

China has faced criticism on human-rights issues, its foreign policy in events like the recent uprising in Syria, and for allegedly undervaluing its currency. The U.S. trade deficit with China was a record $295.5 billion last year. China also is a rival for U.S. jobs.

A New York Times article last month used the iPhone as an example of how American companies can get products made more efficiently and inexpensively in China and relayed a story of late Apple leader Steve Jobs telling President Barack Obama those jobs are never returning to America.

Branstad said issues like human rights are the responsibility of the federal government and he won’t broach them with Xi. He acknowledged there’s “room for progress” in China but said the country is a more open society and has a more market-driven economy than in the past.

As for anyone criticizing Iowa doing business with China, he said the relationship has benefited the state.

“If you want to know why we have $6 corn and $12 soybeans, this is one of the main reasons,” Branstad said.

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