Exports to China give Bay State firms boost
Massachusetts exports to China have nearly doubled from just two years ago, making China one of the state's biggest foreign markets.
Including Taiwan and Hong Kong, Greater China is on track to buy more than $2 billion in goods from Massachusetts companies this year, more than any other trade partner except Canada, Germany, and the Netherlands. As China rapidly modernizes, it is increasingly demanding the sophisticated products and services in which Massachusetts specializes, giving Bay State firms footholds in the booming economy.
In just the last year, exports to the mainland have surged more than 60 percent, and jumped almost 70 percent if exports to Taiwan and Hong Kong are included. The three entities are often viewed as a single market, even though Taiwan maintains its political independence from the mainland government.
''China is where they're building electronics," said Mark Rosenzweig, BTU's president and chief executive. ''There's $1 billion a week being invested there and that creates a lot of demand."
BTU illustrates the flip side of the China story, one that has largely been told in lost jobs, shuttered factories, and surging US imports. Certainly, the rapid expansion of China's manufacturing sector, fueled by cheap labor, has hurt US companies and other competitors around the world, particularly makers of consumer products. But as BTU shows, this expansion is not only increasing demand for raw materials to feed Chinese factories, but also advanced machinery, instruments, and other technology to help them run.
Last year, in fact, with manufacturing output growing at more than four times the US rate, China's imports increased faster than its exports, in large part because of the sector's demand for expensive machinery and equipment, known as capital equipment, said Todd Lee, an economist specializing in Asia for Global Insight, the Waltham forecasting firm.
That represents a particular opportunity for Massachusetts, which has a high concentration of companies, like BTU International, which make capital equipment and components. China is modernizing other sectors, too, including telecommunications and health care, creating potentially big markets for other Massachusetts technologies.
Already, these products are Massachusetts's leading exports to China -- and growing quickly. Exports to China of electric machinery, which includes circuitry and telecommunications equipment, more than doubled over the past year, according to the World Institute for Strategic Economic Research. Industrial machinery, including computers, increased nearly as fast. Instrument exports, which include medical devices, jumped 24 percent.
The state has hired a trade representative, based in Shanghai, to help Massachusetts companies navigate the still complex and challenging Chinese business environment. About 800 Bay State firms have sought help in trading with China, according to the Massachusetts Export Center, an agency jointly funded by the state and federal government. Many of these companies will join in the fall to launch the Greater China Business Council of New England to provide information, advice, and support to companies pursuing Chinese markets.
''China is not only one of the fastest-developing economies, but also has a culture that values technology," said Barbara Berke, the state's departing business and technology director. ''They are building their productive capacity, building out their telecommunications infrastructure, and, at the same time, helping to create jobs here."
Exports drive economic growth because they capture income from outside a region and inject it into the local economy, boosting profits, wages, and jobs, economists say.
Massachusetts manufacturers, for example, have added 5,000 jobs since September, and David Pace, a regional economist at Global Insight, attributes at least part of that hiring rebound to the state's strong export growth, now running at a record pace.
In the first half of the year, Massachusetts exports grew nearly twice as fast as the national average. The state's exports to China also grew nearly twice as fast as the nation's.
Still, many companies say, China remains a challenging place to do business, despite the shift from a state-run to a market economy. Local partnerships and personal relationships are critical to succeeding in China, and they can take years to develop, company officials said. Navigating the complex Chinese bureaucracy also takes time.
Business law is still evolving in China, with intellectual property protections, while improving, still a key concern of Massachusetts companies, which realize much of their value from patents and copyrights. Unlicensed knockoffs of US products have been rampant in China.
But the lure of the world's biggest emerging market is proving hard to resist for Massachusetts firms.
Even financial services companies, such as Liberty Mutual Group, the Boston insurer, are trying to break into China.
Many companies, however, expect it will take some time for China's potential to be realized.
These companies are betting that their patience will pay off as China develops and standards of living rise.
And the signs look promising: Wages in China have been rising at double-digit rates for much of the past decade, according to Global Insight.
The rising standard of living is already helping to drive an overhaul of the Chinese health-care system, which is getting help from Harvard.
Harvard Medical International, a nonprofit subsidiary of Harvard University, recently signed a contract with Hua Shan Hospital in Shanghai to develop a health-care network of up to eight hospitals, while upgrading medical skills, facilities, and equipment.
Other companies are making similar bets.
Broadbus Technologies Inc. of Boxborough, a maker of video-on-demand systems for cable television, is just breaking into the Chinese market, expecting to begin sales next year. More than 100 million cable subscribers in China would seem incentive enough for Broadbus, but there's an added sweetener, said company president Jeff Binder. Only about 1 in 5 Chinese households has cable.
''It's still early, and it's going to take time to deploy the technology," Binder said. ''But it's an enormous market, and room to grow is huge."
Robert Gavin can be reached at rgavin@globe.com.
