For Briggs & Stratton Corp, the biggest maker of lawnmower engines, a 15-year bet on China's hinterland may earn it some government largess.
The US company set up shop in Chongqing, 2,000km up the Yangtze River from Shanghai, hoping to sell engines to the nation's 700 million farmers. For now, it exports 90 percent of its production. The government favors larger, noisier and cheaper diesel engines.
As China steps up a campaign to lure investment to its neglected west, home to a quarter of its 1.3 billion people and only a seventh of its economic output, things may be looking up. By investing there, foreign companies hope for greater access to China's east and coastal regions, where 85 percent of all economic activity takes place.
"The government may look at us favorably because we were willing to take a chance on western China so long ago," said Mike Schoen, who runs international operations at Milwaukee, Wisconsin-based Briggs & Stratton. Though he hasn't had an indication that's the case yet, "Our investment will ultimately prove to be a wise choice." Local governments are trying to overcome geographic isolation and a poorly educated workforce by giving firms tax breaks and trumpeting abundant natural resources.
Lafarge SA is one example. The French building materials company received an exemption on local value-added tax, free passage over a toll bridge and access to the area's abundant gypsum after establishing a business in Jiangjin, a city about 62 miles upstream from Chong-qing along the Yangtze.
``These firms can help promote the development of the west,'' said Xu Rongsheng, the city's vice mayor. ``The government gives them special attention.'' So far, foreign companies participating in China's ``Go West'' campaign -- a decade-long, US$96 billion effort that began last year to revitalize the western three-fifths of the country -- have little to show for their efforts.
And it isn't easy doing business in Chongqing, a city of 30 million where local companies tout themselves as being based in ``the Land of the Preserved Sichuan Pickle.'' At Bank of Nova Scotia, the only foreign bank licensed for business, branch manager Danny Chen says it's tough to find employees who can speak English. Local government officials often lapse into a local dialect, bewildering Chen, a Hong Kong native who speaks fluent Mandarin.
Yet there have been payoffs. Scotiabank arrived in 1998, reckoning it had a good chance to earn a commercial license after China designated Chongqing a municipality directly under the supervision of the central government.
The bank received a license to open its second China branch in Chongqing. Now it hopes to become the first Canadian bank to upgrade its representative office in Beijing to full branch status and move into Shanghai, joining the likes of HSBC Holdings Plc and Citigroup Inc.
``Certainly it doesn't hurt to be seen to be supporting government policies,'' said Patrick Rooney, who heads the bank's China business. ``When decisions are made for licenses, it certainly helps.'' Boston-based Liberty Mutual Insurance Co, for one, has a US$150 million private equity fund that aims to target China's western regions. It's hoping that buying stakes in local companies will speed the granting of a license to open a wholly owned property and casualty insurance business.
Liberty Mutual's proposed branch in Chongqing would be the first overseas insurance business in western China. All other foreign insurers opened branches in Shanghai and Guangzhou on the prosperous east coast.
One possible investment is a chain of liquefied natural gas stations serving Chongqing city taxi fleets, said Tim Tuttle, president of Newport Pacific Management, whose US$2.8 billion of assets include Liberty's fund.
``Liberty Mutual asked us to begin increase its investment presence and investment activity in Chongqing,'' Tuttle said.
``Clearly there is no public equity market there, so our only approach was to go in and attempt to do private equity deals.'' Manufacturing firms have had an easier time of it, by taking advantage of low labor costs. The region's per capita annual income is about two-thirds China's $850 average. That makes it cheaper for Briggs & Stratton to make cast-iron engine blocks in Chongqing for Filipino fishermen because it can't sell its products in the Chinese market.
General Motors Corp affiliates Isuzu Motors Ltd and Suzuki Motor Corp already make light trucks and cars in Chongqing. GM is in talks to buy a third of Luizhou Wuling Automobile Co, a minicar maker based in southern Guangxi province, which is also included in western development plans.
`The government has made it clear that it would like to see western expansion,'' said General Motors spokesman Alan Adler.
The government is also trying to lure Hong Kong investors.
Hong Kong Chief Secretary Donald Tsang led a group of 220 businessmen on a 10-day junket through the region last month.
Nevertheless, Chongqing has a ways to go before it can convince foreign investors it offers more gain than pain. `You find a lot of Western businessmen who come here for the trade fair, then just leave after one day, without signing deals,'' said Scotiabank's Chen.
The Philippines is working behind the scenes to enhance its defensive cooperation with Taiwan, the Washington Post said in a report published on Monday. “It would be hiding from the obvious to say that Taiwan’s security will not affect us,” Philippine Secretary of National Defense Gilbert Teodoro Jr told the paper in an interview on Thursday last week. Although there has been no formal change to the Philippines’ diplomatic stance on recognizing Taiwan, Manila is increasingly concerned about Chinese encroachment in the South China Sea, the report said. The number of Chinese vessels in the seas around the Philippines, as well as Chinese
‘A SERIOUS THREAT’: Japan has expressed grave concern over the Strait’s security over the years, which demonstrated Tokyo’s firm support for peace in the area, an official said China’s military drills around Taiwan are “incompatible” with peace and stability in the Taiwan Strait, Japanese Minister of Foreign Affairs Takeshi Iwaya said during a meeting with his Chinese counterpart Wang Yi (王毅) on Thursday. “Peace and stability across the Taiwan Strait is important for the international community, including Japan,” Iwaya told Wang during a meeting on the sidelines of the ASEAN-related Foreign Ministers’ Meetings in Kuala Lumpur. “China’s large-scale military drills around Taiwan are incompatible with this,” a statement released by the Japanese Ministry of Foreign Affairs on Thursday cited Iwaya as saying. The Foreign Ministers’ Meetings are a series of diplomatic
URBAN COMBAT: FIM-92 Stinger shoulder-fired missiles from the US made a rare public appearance during early-morning drills simulating an invasion of the Taipei MRT The ongoing Han Kuang military exercises entered their sixth day yesterday, simulating repelling enemy landings in Penghu County, setting up fortifications in Tainan, laying mines in waters in Kaohsiung and conducting urban combat drills in Taipei. At 5am in Penghu — part of the exercise’s first combat zone — participating units responded to a simulated rapid enemy landing on beaches, combining infantry as well as armored personnel. First Combat Zone Commander Chen Chun-yuan (陳俊源) led the combined armed troops utilizing a variety of weapons systems. Wang Keng-sheng (王鏗勝), the commander in charge of the Penghu Defense Command’s mechanized battalion, said he would give
‘REALISTIC’ APPROACH: The ministry said all the exercises were scenario-based and unscripted to better prepare personnel for real threats and unexpected developments The army’s 21st Artillery Command conducted a short-range air defense drill in Taoyuan yesterday as part of the Han Kuang exercises, using the indigenous Sky Sword II (陸射劍二) missile system for the first time in the exercises. The armed forces have been conducting a series of live-fire and defense drills across multiple regions, simulating responses to a full-scale assault by Chinese forces, the Ministry of National Defense said. The Sky Sword II missile system was rapidly deployed and combat-ready within 15 minutes to defend Taiwan Taoyuan International Airport in a simulated attack, the ministry said. A three-person crew completed setup and
RSS