Monday, April 17, 2006

Why the Chinese Love Seattle

It is no coincidence that Chinese President Hu Jintao made Seattle his maiden stop on his first visit to the United States as president. Every Chinese leader since Deng Xiaoping has made it a point to spend some time in this pleasant city of half a million people in America’s far-northwest corner.

Deng Xiaping toured the famous Boeing airplane assembly plant during his stopover in 1979. Former President Jiang Zemin added a folksy touch by paying a call on the family of a “typical” Boeing worker in their home.

President Hu by contrast, dined at the lakeside mansion of Microsoft founder and chairman Bill Gates. He will be the guest of honor at a dinner at the Gates’s mansion, though officially hosted by Washington state Gov. Christine Gregoire. Local corporations are paying $20,000 per seat to attend the dinner.

He was scheduled to spend two days in the Seattle region, touring the Boeing aircraft plant and Microsoft campus and giving a major speech on U.S.-China business relations before flying on to Washington, D.C. to meet President George W. Bush.

Among the dignitaries on hand to greet the Chinese president was former Washington state Gov. Gary Locke, the only Chinese-American to become governor of a U.S. state. He is helping organize the visit.

Said Mr. Locke: “Seattle is his first stop, and what he says here will be watched closely. His speech will have significance to the entire country, not just in Washington state.”

Mr. Locke’s will be a familiar face. He met the Chinese president on two previous occasions while he was governor, the first when Mr. Hu visited San Francisco as vice president in 2002 and later in Beijing.

Why do the Chinese love Seattle so much? Washington is probably the most free-trade friendly and China-friendly state in America. Mr. Hu will be hoping to build on that sentiment as he moves east and has to deal with more contentious issues such as China’s enormous trade surplus with America.

While he is in Seattle President Hu will probably hear very little about the usual American complaints: the undervalued renminbi or the burgeoning trade deficit. Seattle’s big beef is Washington’s restrictive visa policy which sometimes makes it difficult for Chinese pilots to come to the US to pick up an aircraft China has just paid $165 million to buy.

Probably the love affair can best be summed up in two words: Boeing and Microsoft. Both corporations were founded and headquartered in Seattle (Boeing’s corporate headquarters moved to Chicago, but Seattle is still the base for its extensive commercial airplane industry) and are well known in China.

It is possible that Microsoft founder Bill Gates is the most famous American in China, possibly even better known (certainly better liked) that President Bush. Add to the mix the giant Starbucks coffee chain. Its original coffee shop is still open on the Seattle waterfront, although Hu’s entourage would not fit in it.

Said Joe Borich, Executive Director of the Washington state China Relations Council,
“On a per capita basis, Washington does more trade with China than any other state.” The official figure is about $5 billion in exports, mostly aircraft.

One local complaint is about intellectual property protection. It has been estimated that 90% of the computer operating systems in China are pirated. Nevertheless, Microsoft has been remarkably tolerant about this, apparently taking the long view that the China market would payoff some day.

Last year it fought a fierce court battle to prevent its China leader from jumping ship to run Google’s operations in China. President Hu was expected to make a major pronouncement on intellectual property protection during his visit.

Indeed, in January Starbucks won a trademark lawsuit against a Chinese company which had used the Starbucks name and logo, translated into Chinese, without the Seattle company’s permission. A court ordered the Shanghai Xing-Bake Coffee shop to pay Starbucks 500,000 yuan (US$62,500) in damages.

While in Washington state Mr. Hu will tour the mammoth Boeing aircraft assembly plant north of Seattle. Boeing’s fortunes were buoyed at the beginning of last year when Beijing, on behalf of six Chinese airlines, ordered 60 of company’s latest model jetliners at a cost of more than $7 billion.

In gratitude Boeing officially named the series the Boeing 787, adding the numeral 8 because of its significance in Asia as a symbol of prosperity. The first Chinese Boeing 787s should be in service by the 2008 Olympic Games in Beijing.

The company is hoping the visit will help it regain its former dominance in the Chinese aircraft market. At one time Boeing made eight out of every 10 new jetliners in Chinese service. In recent years the European Airbus has been making serious inroads, and Boeing now sells roughly six of every 10 airplanes in China.

Washington was among the first states to take advantage of China’s historic market opening. As far back as 1980, one year after Deng Xiaoping’s first moves, Seattle interests snared COSCO, the Chinese shipping line.

The first Chinese merchant ship to visit the US since the beginning of Communist rule in 1949 stopped at Seattle that year. Chinese ships continue to disgorge roughly $20 billion in Chinese exports to the U.S. through the busy Port of Seattle.

The Washington State China Relations Council founded in 1979 is the oldest such state-run organization in the country. It’s founding director Bob Kapp went on to head the U.S. China Business Council in Washington D.C., the premier pro-China lobbying organization.

But for all of this history, there is very little Chinese investment in Seattle or Washington state as a whole. For many years China International Trade and Investment Co. (CITIC) operated out of the towering Columbia Center mostly buying timber. But it closed down last year, as the market moved to lower-cost producers.

The largest Chinese concern in the region is a firm called Xoceco, which makes flat panel TVs and computer screens and has its headquarters in the suburb of Bothell just north of Seattle. But it only employs about a dozen people here.

According to Kent Zhang, who handles China trade for the Washington State Department of Trade and Industry, China buying patterns are changing with its growing wealth. Where it once bought timber and clams, wealthy Chinese are looking to buy yachts. Chinese hospitals are shopping for ultra sound equipment.

The big Boeing 747 freighters that disgorge cell phones at Seattle’s airport by the tens of thousands now go back to China loaded with Washington state agricultural delicacies such as cherries, asparagus and cut flowers.

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September 12, 2006 at 4:14 PM  

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