China trade mission presents new markets for Maine

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By Matt Dodge

Participants in the state's first gubernatorial trade mission to China in mid-September are lauding the trip as an important step in establishing business relationships with one of Maine's fastest-growing export markets.

U.S. exports to the country of 1.3 billion are up 97% over the last five years, reflecting the increasing popularity of Western goods among China's booming middle class, whose annual income has multiplied tenfold since 1980. In Maine, $275 million worth of exports were shipped to China in 2011.

“Everything I experienced exceeded my expectations,” says Kevin Khovaneth, a technical relationship manager with Artel.

The Westbrook-based manufacturer of calibration equipment for liquid handling was one of 13 Maine companies that made the weeklong trip organized by the Maine International Trade Center, and was joined by a government delegation including Gov. Paul LePage and various educational interests from around the state.

“We see a lot of potential in China and Asia, so signing on for this trip was really our attempt to reach out to a broader audience,” says Khovaneth, whose company already has a modest presence in China, working with pharmaceutical companies WuXi PharmaTech Inc. and Eli Lilly.

Held in Hong Kong and Shanghai during the second week of September, the trade mission included 77 customized “matchmaking” meetings, group tours, networking events and a trip to the Asian Seafood Expo in Hong Kong. Additionally, MITC prepared industry reports on the specific market needs and conditions of several industries, including aerospace, boating, seafood and wood products.

Khovaneth says he was impressed with the “relevance of the meetings and the individuals I was scheduled to meet up with and the amount of preparation; they knew companies right off the bat they could help pair us with,” citing an example of one meeting with a potential client in Hong Kong.

“They had a booklet that had an 'about' section that explained a bit about what the company did and was looking for. It was nice to have that research done on my behalf,” he says.

MITC reports that past trade missions have resulted in between $4 and $8 million in sales across participating Maine companies, with one 2009 trip to Spain and Germany netting an estimated $20 million in new business.

The goal of the trade mission was twofold, according to MITC President Janine Bisaillon-Cary: increase exports by working with companies to help identify end markets, distributors and agents while promoting foreign investment and educational opportunities in the state.

“This was the year for small- and medium-sized enterprises trying to get into China. They knew it would be a big nut to crack and were using the opportunity of the trade mission to get in,” says Bisaillon-Cary.

Despite a 17% dip in 2011, Maine exports to China have seen 80% growth since 2007 from $153 million to $275 million. Maine's pulp and paper, aircraft parts, biotech and advanced textile industries in particular have seen rapid growth, posting double- and triple-digit growth in exports to China.

“As China has become more affluent, it has become much more of a consumer society. It's opening up the doors for products that 10 or 15 years ago they couldn't afford,” she says.

Bisaillon-Cary recounts some high points of the trade mission for the Maine companies involved. “The representative from Capricorn [Products LLC] said she even got in with the CEO of a group she had been trying to get into for years, and is sensing there is a much bigger market there than what she was seeing through other channels. Lighthouse Imaging also made some inroads and [discussed] new ways that their products would be able to be used in the Chinese market,” she says.

That market also holds great potential for the U.S. food industry, according to Bisaillon-Cary. The USDA Foreign Agricultural Service reports that food exports increased by 38% in recent years as Chinese consumers become increasingly discriminating in their dietary habits in response to concerns around the quality of domestic foodstuffs.

“U.S. food products are valued as very high quality, and China has had a number of scares,” she says, referencing the 2008 milk scandal that saw an estimated 300,000 victims fall ill after consuming dairy products contaminated with melamine.

Chris Farmer is trying to boost foreign investment in Maine using the U.S. Citizenship and Immigration Services' Immigrant Investor Program known as EB-5 through his Franklin County-based company, USA Lifestyles Inc. Under the program, foreign nationals looking to invest a minimum of $500,000 and create at least 10 jobs in a designated rural or high-unemployment area are made eligible to receive a green card.

“China is the No. 1 place to go for EB-5; most of the visas that are issued through EB-5 are Chinese,” says Farmer, who is also the general manager of Saddleback Maine Ski & Lake Resort in Rangeley.

Chinese investment in American companies has been on the rise, growing by $1.2 billion between 2009 and 2010. The China trade mission was a great opportunity to pitch his project to investors and tailor his approach based on feedback. “We spent a lot of time learning what is selling and what's effective. It's allowed me to come back and customize projects,” Farmer says.

USA Lifestyle's first effort is a $15 million to $20 million expansion at Saddleback, with a forthcoming project to renovate the Otis Mill in Livermore Falls into a multi-use facility. Currently, the closest operating EB-5 project is located in Vermont.

“One of the things we learned was that some of the more successful [EB-5] projects have filled their receipts in as little as three weeks, so part of the discussion was why these products sell out so quickly. The big takeaway was 'how do we customize our projects to achieve these [sales] goals quicker,” says Farmer.

Overall, Farmer says he was very impressed with the trade mission, where he was able to present to a group of 46 agents and meet individually with eight. “MITC really exceeded my expectations. I had eight meetings set up and they were all very effective. I was only there for 98 hours, but I got a ton of work done in that time,” he says.

That whirlwind schedule left little time for Farmer to soak up the Chinese culture, but he did come away with one important lesson: “China has as much interest in the U.S. as we have in China,” he says. n