Trade ties that bind

Kansas has time to nurture links with China

Fellows Fall 2005

By Alan Bjerga

June 03, 2009

Kansas Governer Kathleen Sebelius on a trip to China in October 2005.

Kansas Governer Kathleen Sebelius on a trip to China in October 2005.

BEIJING, China -- "Excuse me for my frankness," said Andy Wei, pouring a cup of tea, "but Americans... don't know China."

If Americans did, he said, they would have a better picture of their own country's future as well.

Wei heads the Beijing operations for Goodrich, which builds and sells aircraft products in China. Looking over China's capital city from his high-rise World Trade Center office, Wei said China will continue to grow in global prominence, whether Americans like it or not.

And as China's economy continues to grow, American companies and governments who want to prosper from it will have to adapt to a changed business climate.

For Wichita, that means understanding China's aviation industry. The globalization fueling China's rise is "a fact," said Janet Harrah, director of the Center for Economic Development and Business Research at Wichita State University. "You're not going to turn the clock back on it."

And that fact makes the challenge clear: How to develop strategies and partnerships that allow Kansas to prosper as China grows.

Building business abroad

The ceremony was short and simple. In front of a Kansas flag backed by a red curtain, Gov. Kathleen Sebelius in October unveiled the state's new China trade office, which is attempting to seek greater trade ties to the country and build the understanding Wei said is lacking.

"There's money to be made in China," said Karl Zhao, who heads the office, located on the 31st floor of a building that, three years ago, didn't exist.

Part of managing China's growth, Zhao said, is to actively steer it in the right direction by connecting its development to Kansas companies.

Sebelius said that's part of the state's strategy to combat the downside of China's growing economy: The loss of Kansas jobs as China becomes a more compelling low-cost competitor.

"I think that there's no question that there are jobs that are being lost to China," she said. "I want to import jobs from China by exporting Kansas products."

The tradeoff

Wichita economic development director Allen Bell said the globalization tradeoff is that companies often have to place work in other countries to help open those country's markets.

"We'd like to see everything done in Wichita, but that's just not the way the world is set up anymore," he said.

But if Wichita plays to its strengths, a highly trained work force and top facilities in research and design, it can reap benefits as China grows, Bell said.

Those efforts are already under way. On Friday, Olathe-based Global Ground Support received a $4.2 million contract to supply 18 mobile de-icing trucks for Chinese airports. It's the first contract given to a business that took the governor's trip.

Eventually, Bell said, Kansas investment in China could lead to Chinese investment in Kansas.

That idea may seem odd at first, he said, but so did the thought of Airbus in Wichita before the year 2000.

Now the European planemaker employs 200 engineers in Old Town, a form of outsourcing that benefits Kansans.

Wichita's focus will always be on nurturing and retaining the businesses it has, Bell said, but that type of outside investment is crucial to succeed in a closely linked world.

"One thing we need to do more of is go out and find international companies to invest in Wichita," he said.

Time to prepare

The good news is that Wichita and Kansas have time to prepare and opportunities to exploit.

If trends continue, China promises to become a much more important market for large and small aircraft. It will also take on a larger share of world aircraft production.

But both will take time to develop, for reasons ranging from government regulation and culture to a lack of the infrastructure that supports both the sales of aircraft and the development of an industry that can compete with America.

"It's a huge ship in China," said Mark Paolucci, a sales vice president at Cessna. "When that boat pulls away it's not going to be very fast."

China's growth-in-progress gives Wichita breathing room to act on staying prosperous in a world changed by China. Harrah said there is "no one single bullet" for how workers, businesses and governments can deal with China's development. But a combination of approaches can help the city meet the China challenge.

What needs to be done

The federal government, she said, has to keep the international playing field fair, ensuring that China follows global agreements on trade and the environment and monitoring its progress in human rights and treatment of its workers--issues a city or state can't handle by itself.

Kansas and Wichita, she said, can maintain their skills edge by supporting programs like the National Institute for Aviation Research at Wichita State University, which is receiving another $12.2 million in funding through this week's congressional defense bill, and the new Kansas Technical Training Initiative, the local aircraft industry's work-force training effort.

Labor and management have to be realistic in how they treat one another as well, Harrah added. She said management needs to communicate to workers what needs they have and give them a chance to respond.

If workers knew how to adjust to new demands and had an opportunity to do it, both the workers and the businesses would benefit, she said.

Finally, Wichita needs to diversify its labor market beyond its dependence on aviation, she said.

All of these solutions take time, and they're often easier said than done, she noted.

"How will Wichita look in 10 years? We'll still be designing and building aircraft, but the landscape will be different," Harrah said.

"I think we have some advantages we can put to use."

Understanding required

Bell said that Wichita can win in global competition if it plays smart, understands the challenges ahead and faces them cooperatively.

That's ultimately the best outcome Wichita could want, he said.

And ultimately, it's what Wei said is his hope for America as it relates to China. The countries, whether they like it or not, are becoming increasingly tied together, America for its wealth and skills, China for its size and potential, he said.

China won't improve itself economically or politically, Wei said, unless America also continues to prosper.

Understanding between the two is imperfect, but growing, he said.

"This is an evolution," Wei said. "The world will have to adapt."