China’s need to rapidly diversify its economy to sustain growth rates will require the country to develop stronger service and innovation/technology sectors, which should create opportunities for Connecticut trade and direct foreign investment.
That was one of the observations made by Gov. Dannel P. Malloy just days after he returned from a nine-day trip to China that included a stop at the World Economic Forum in Tianjin.
For Malloy, the trip represented a return to a country he visited nearly 10 years ago as mayor of Stamford, and he said the country has changed dramatically since then.
“Nothing can prepare you for 10 years of rapid change that was well executed on all fronts except the environmental impact,” Malloy told a gathering of 50 or so members of the World Affairs Council of Connecticut at a meeting in Hartford last week.
China’s rapid economic development in recent decades has been powered by significant coal consumption, which has led to environmental concerns there.
Malloy said he experienced the effects of that first hand. During the three days he spent in Beijing, Malloy said he wasn’t able to see the sun because of heavy smog.
In terms of the purpose of the trip, Malloy said he had several reasons to trek halfway around the world at a cost of about $20,000 to state taxpayers.
The ultimate goal was to re-establish relationships in China that will allow Connecticut companies to grow exports and attract foreign direct investment.
While Connecticut has had a sister relationship with China’s Shandong province for nearly a quarter century, not much has come from it in terms of economic development and the ties were in serious jeopardy of being severed, Malloy said.
For the past 22 years, Malloy said, Connecticut governors have largely ignored the relationship and Chinese officials felt slighted by that.
One prime example, Malloy said, is when the state decided to swap a statue of Mark Twain with officials in Shandong Province in return for a statue of Confucius. That Confucius statue still sits outside the Bushnell in Hartford, but when Shandong officials brought it to Connecticut, they weren’t greeted by high-level officials from the state.
The Chinese felt slighted by that, Malloy said. The fact that a governor hasn’t visited China since the 1980s hasn’t helped either, he added.
“We were in the cross hairs of losing that relationship,” Malloy said.
On the economic development front, Malloy said one of the greatest opportunities for building stronger Connecticut-Chinese economic ties is on the technology and innovation front. China has advanced rapidly thanks largely to a low-skill, low-cost manufacturing surge, which has helped lift about 300 million people in China out of poverty.
But to lift the remaining 700 million poor Chinese citizens out of poverty, China will need to advance its economy beyond simple production.
“They are good at replication but now they are getting used to being their own innovators,” Malloy said. “This is an economy that must diversify rapidly.”
Malloy said he spent a lot of time in China explaining Connecticut’s recent investments in bioscience and the arrival of Jackson Laboratory in Farmington.
He also played up the state’s close relationship with Yale University, which is well known among Chinese officials. Not much else about the state, however, is known there, which presents challenges.
In many ways, however, Connecticut firms have benefitted from China’s fast economic growth in recent years. The Asian country is Connecticut’s fifth largest export destination with nearly $1 billion in goods being shipped there annually.
That is up over 1,000 percent from nearly a decade ago. But the potential for more growth is immense, with Chinese investors sitting on nearly $3 trillion in reserves and an appetite to flex their economic muscles internationally.
Malloy said he is contemplating hiring either staff or contractors to represent Connecticut in mature or fast developing countries. It’s something many other states do to try to spur more economic activity.
But Connecticut hasn’t had permanent representation in a foreign country since the early 1990s when the state decided to close trade offices in Germany and Japan.
In terms of the itinerary, Malloy made stops in Beijing, Hong Kong, and the Shandong and Guangdong provinces. He also appeared at the World Economic Forum in Tianjin.
Anne Evans, the district director of the U.S. Department of Commerce, who accompanied Malloy on the trip, said she presented Chinese investors with information on a portfolio of about a dozen Connecticut bioscience companies with hopes of spurring foreign direct investment. Most of the companies are in Connecticut Innovations’ investment portfolio.
While no deal was finalized, Evans said the governor’s presence in China will make a significant difference down the road in building relationships there.
She said they went to dozens of meetings with government and business officials during their nine-day trip and said follow-up conversations are underway to cement the relationship and possibly strike a deal.
“I think the trip went well,” Evans said. “The focus was on helping Connecticut companies selling into China and increasing sales.”
