China calling | A host of Maine industries stand to benefit from China's booming economy — and you don't have to be a big guy to participate

At the 2007 China International Boat Show — the largest boat show in Asia, held in March — delegations from 23 countries descended on the Shanghai Exhibition Center to vie for a slice of the booming Chinese recreational boat market. Delegates from every country with a major boatbuilding industry participated in a glamorous and elaborate opening ceremony that was attended by Chinese dignitaries and was covered extensively by the Chinese media. Australia, Italy, France, Japan and Indonesia were all there — and, right beside them, Maine.

Although the Mainers were part of the U.S. Department of Commerce's delegation to the show, it was Maine alone that represented the U.S. — no one from any other state signed up for the trip. That left several representatives from small Maine companies that sell marine-related products with the chance to mingle with key industry players in China. They were able to meet with Yang Xinfa, the top official overseeing China's recreational boating industry, who they invited for a visit to Maine. In a country where building relationships is a precursor to any business dealings, the interactions were crucial. The message the Mainers delivered was clear: Maine-built boats offer a focus on quality and craftsmanship unique in the U.S. and the world.

"We were treated like VIPs, and we met all the key officials," says Elaine Scott, communications director for the Maine Department of Economic and Community Development and an organizer of the Maine delegation. "During the opening ceremony they had bands playing and all the press was there. It was grand."

No sales or partnerships with Chinese companies have come out of the trip yet, but Scott thinks the connections the group made at the show are an important first step in earning the Maine boatbuilding industry a foothold in the Chinese market. Pulling that feat off would be a huge accomplishment, says Scott. Only the wealthiest two percent of Americans can afford the high-end boats built in Maine, leaving a fairly limited market for the industry. But as China's economy expands at breakneck speed, more and more of that enormous population is gaining the affluence that allows for luxury goods like recreational boats. "How do we grow [Maine's boatbuilding] market?" Scott asks. "If we could get two percent of 1.3 billion people, that would be a great start."

The recreational boat industry is just one of many growth sectors in China these days. While boatbuilding companies are just beginning to forge into Chinese markets, Chinese business for other Maine companies has been thriving. Maine's exports to China hit $150 million last year — a 200% increase over the last four years, according to the Maine International Trade Center. China's economy has been expanding around 10% a year for several years, growth that can only be sustained with the importation of essential resources and products from other countries, ranging from automobiles and lumber to environmental protection technology — and, of course, boats.

There's a common perception that primarily large corporations such as South Portland-based Fairchild Semiconductor — a major exporter to China — benefit from such trade. Increasingly, though, even the smallest of Maine companies are finding opportunities there, with some even making China a crucial component of their growth strategy. And for the state as a whole, any chance to build ties with the fourth-largest economy in the world can't be a bad thing — especially since it was that same economy that has sucked away so many jobs over the years and dealt such a blow to the state's manufacturing economy. Instead of jobs being Maine's primary export to China, the export of actual products may have the chance to once again define the China-Maine relationship.

Uniqueness and relationships
Dean Plaisted knows that if the Chinese could make the products his company, Soleras Ltd., makes, they would stop buying them from the United States. As it is, they are more than happy to pay the added cost that comes with products that are shipped halfway around the world. In the case of Soleras, a 50-employee firm in Biddeford, those products include something called sputtering targets — extremely sophisticated metal coatings that are used in products including LCD television screens and photovoltaic panels. Plaisted says his products are often used like paint to give products a decorative touch, such as the bright-looking chrome finish on an iPod. "As soon as they learn how to produce it in China they will buy it in China," says Plaisted. "Right now, they just don't have the expertise to do that and they don't have the equipment needed. But eventually they will."

For now, Plaisted is optimistic about his company's future in China. "The potential for growth is strong," he says. "We consider China to be very important to our business. It could be 30%-35% of our sales." To reach that target, says Plaisted, Soleras will need to innovate, making more technically challenging, more difficult-to-manufacture products that fill a unique niche.

That's the same approach that has made it feasible for other Maine companies to do business in China. Like Plaisted, Bob Harrison, president of Cape Technologies in South Portland, understands that his company's sales in China are possible only because he is offering a unique product the Chinese aren't yet producing themselves. Cape Technologies, a company with only a few full-time employees, makes kits that can be used to test for dioxin. Harrison says the demand for such products in China is soaring, largely because China is grappling with serious pollution in its air, water and soil.

"The environmental sector in the U.S. is not a growth industry, but in China it is — that's why we're there," he says. "China has a history of pretty nasty industrial contamination, and they're getting to the point where they're ready to do something."

Harrison believes the key to growing Cape Technologies' sales in China is through building strong relationships with clients. Last month he made his second trip to China, where he presented his products to potential clients and offered training on how to use them. He says the Chinese appreciated being able deal directly with the manufacturer of the product, as opposed to a sales representative who didn't know the mechanics of how the products worked. (For more on how U.S. businesses can navigate cultural differences in China, see "New Rules," see below.)

"If we can come over, provide a product and provide training on how to use it, we're offering something they wouldn't be able to get otherwise," he says.

Both Plaisted and Harrison emphasize the importance of building relationships to doing business in China, especially as a way to get started. While they each had been aware of China as a potential trade partner for some time, it wasn't until they made key contacts that business partnerships began to develop.

For Plaisted, it began at a trade show four years ago in Fort Lauderdale, where he happened to run into a group of Chinese manufacturers who were interested in his product. "They asked hundreds of questions," says Plaisted. "They asked around about us and we asked around about them." A few months later Soleras was shipping its first products to China. Since then, Soleras has manned booths at trade shows and drummed up more sales. Now, Plaisted says Soleras is exporting more Maine-made products to China than it is importing the Chinese materials it uses to manufacture them. Soleras even has an agent in China, and maintains an inventory of products in a warehouse in Shanghai. Having products on hand is important, said Plaisted, due to a tendency of the Chinese to wait to the last minute to strike a deal, when they think they'll get the best deal.

"It's kind of a wild-west business environment," says Plaisted. "Within the business world, the Chinese are entrepreneurs all the way."

Harrison was fortunate to have a Chinese friend and business associate who was able to connect him with key contacts in China, leading to Cape Technologies' first China sales two years ago. He says his business fluctuates frequently, but notes that he just filled an order for a Chinese company that was equivalent to about 10% of his total sales from 2006. "Eventually, we could have one-fourth of our efforts devoted to the Chinese," says Harrison.

For many Maine businesspeople who want to explore opportunities in China, the first step is setting their feet on the ground there. The Maine International Trade Center has supported a series of trade missions to China in recent years, including a trip to a massive woodworking machinery and furniture industries trade show in Guangzhou last March, nicknamed Woodmac. Among the attendees at Woodmac was Alan Ryder of Stratton Lumber, a sawmill in Stratton that produces 90 million board feet of lumber annually.

Stratton, which currently makes no international sales, was drawn to China by the country's rapid increase in demand for wood products. U.S. exports of wood products reached $500 million in 2006, an increase of 15% from a year earlier. Ryder says that most of the U.S. softwoods being sold to China, a country where most buildings are made of concrete, currently come from the West Coast. But after making a presentation to a roomful of architects at the show on the use of American softwoods in design and construction, Ryder and the other two Maine companies represented at the show made contacts they believe may open up major markets to Maine lumber.

"We think we made some good connections and we've got some important follow-up to do," says Jim Robbins, president of Searsmont-based Robbins Lumber, which sent a representative to the trade show. Robbins Lumber hasn't landed any sales yet in China, but they've attended two trade shows and are optimistic they'll find a market for their white pine lumber. "There's an awful lot of business going on in China and we're always looking for new markets," said Robbins.

An aggressive approach
Maine's current international trade leaders are Canada and Malaysia, but after steadily moving up the list of major traders in recent years, China reached the number-three spot last year. Pulp and paper products are the state's largest export to China, followed close behind by computers and electronics, and seafood.

According to Stephen Franck, director of the Maine International Trade Center's China Desk in Lewiston, there are many other Maine industries that could boost sales through trade with China, ranging from biotechnology to construction services. "Specifically, Maine businesses active in the medical device and environmental technology industries should pay attention to the China market," Franck says.

And there is also great potential for the 200 companies that make up the state's $355 million boat building industry — many of which are currently joining together in hopes of creating an industry cluster that will further expand Maine's share of the market.

China is a natural outlet for that market, says the DECD's Scott, who also feels that Maine and China share certain cultural values that might make it easier to form business relationships. During the trade mission to the boat show, Scott noticed how well the low-key Maine team got along with their Chinese hosts. "We really clicked with them," says Scott. "I think we really listened and came across as very down to earth. I think that may have broken some of the stereotypes they may have had about Americans."

Chen Ferguson, a business professor at Miami University and an expert on China's recreational boat industry, agrees that Maine boatbuilders could have a special appeal to the Chinese. Ferguson serves as a consultant to the U.S. Department of Commerce and accompanied the Maine delegation to the boat show. Ferguson says she noticed that the Chinese the delegation met were especially impressed by the decorative qualities of the Maine boats they saw in promotional materials, such as the interiors and woodwork. But Ferguson also notes that common Maine personality traits can be a liability in some instances. "Maine people are very humble," she says. "The Chinese appreciate humility as a virtue, but sometimes, when you are doing business, it takes more boldness, more risk-taking."

While she sees great opportunities for Maine boatbuilders in China, she also recommends an aggressive approach to getting into the market — and the same goes for any Maine business eyeing China. She thinks Maine boatbuilders should actively market their products to the Chinese, which means, among other things, translating promotional materials into Chinese. Once companies attract serious interest, they should ship actual boats to boat shows, she says, where potential clients can see and buy them.

Ferguson says the Mainers' meeting with Yang Xinfa, the deputy secretary general of Shanghai Association of Shipbuilding Industry, was an accomplishment for the group, though a limited one.

"He came to the hotel to talk to the Maine delegation," says Ferguson. "Xinfa understands the uniqueness of Maine boats, but he works with everybody — the French, the Italians. Having success in China is going to be a long process, and it's going to need a lot of aid from the state and federal government."

Ferguson says that beyond the boatbuilding industry, she sees countless economic opportunities in China. They're open to Mainers, she says, as much as anyone else. "As long as you can sell your uniqueness and your advantages, you can find a market in China," she says. "It's all about building relationships and getting out there and meeting people."