PACIFIC RIM TRADE : California : Golden State Finds Golden Opportunities in Asia : Already the U.S. leader in exports to the region, we are at the forefront of helping developing nations improve their infrastructures.
California’s ties across the Pacific were once a simple matter of exports and imports. Not so anymore.
Take Advanced Aerodynamics & Structures Inc., a fledgling North Hollywood maker of corporate jets. Its president, Carl Chen, was born in Fuzhou on the southeastern coast of China, and in 1949, when he was 4, his family fled to Taiwan ahead of the Communist takeover of the mainland.
Chen arrived in the United States in 1968, was educated at UCLA and Caltech and worked for Hughes Aircraft Co. before helping found AASI four years ago. The company’s main financial backers include a Taiwanese industrialist, Yeh Song Gen, who has helped raise $25 million to develop the single-engine Jetcruzer, which is awaiting Federal Aviation Administration certification.
And the company is seeking customers not just in the United States, but also in Europe, the Middle East and in Asia, where Chen’s language capability--he speaks Mandarin and other dialects of Chinese--provides an entree.
It is the foreign ties that Chen hopes will make his firm one of the few successful aircraft start-ups in recent years, eventually creating hundreds of new, high-wage jobs. California cities such as Palmdale and Long Beach already are vying for AASI’s manufacturing plant against competitors as far away as Virginia, South Africa and Israel.
“I think the Pacific Rim will take 30% (of the business) eventually,” Chen said. “Especially China, because they just opened up and they need lots of high tech and aircraft to fill the gap.”
AASI is a prime example of the ever-increasing integration of the economy and entrepreneurs of California with those of Asia--to the benefit of both.
California’s Asian ties now involve firms as large as Hughes Aircraft, which is developing an extensive network of satellite communications for Indonesia and Malaysia, and as small as AASI, which currently employs only 20 to 30 people.
The economies of Asian nations--with Japan a notable exception--are among the most robust in the world, with growth rates approaching 8% a year, said Richard Drobnick, director of the Center for International Business at USC.
And California is uniquely positioned to take advantage of expanding market opportunities there. “Because of our Asian connections through the university systems, through immigration and through all of the Asian firms that have located their subsidiaries here as their entry point into the U.S., we are more connected than other states with these high-growth economies,” Drobnick explained.
Already, California is by far the leading state exporting to Asia. The value figure has grown from $22.4 billion in 1988 to $33.5 billion in 1993, an increase of more than 9% a year, according to the Massachusetts Institute for Social and Economic Research. California’s rising exports to Asia have taken place in a period when its shipments to other parts of the world have remained flat or fallen.
Economics writer Joel Kotkin says the future lies not so much with Japan, whose growth has stalled, but elsewhere in Asia.
“The big change for California in the 1990s will be the shift from being Japan-centered to East Asian-centered, predominantly the Chinese diaspora and China,” said Kotkin, author of “Tribes,” a book that examines the successful business relationships among Chinese immigrants around the world. “It’s already taking place: in investment, in the fastest-growing markets and in the immigration networks that are being formed.”
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Other experts point to South Korea, Indonesia, Malaysia and Thailand as nations with great promise for increased California trade and investment as those economies awaken.
The two-way trade covers everything “from airplanes to xylophones,” Drobnick says. The American and California toy industries, for example, count on Chinese manufacturers for much of their inventory. Asian importers, meanwhile, depend on California for off-season fresh produce such as oranges and cherries.
Lately, however, California firms have been at the forefront of helping developing Asian nations improve their infrastructures and industries, selling them commercial aircraft, telecommunications hardware, computers and software, high-tech equipment, even power plants:
* McDonnell Douglas’ Long Beach-based Douglas Aircraft unit makes and exports MD-80 commercial jets for assembly in Shanghai in a deal valued at more than $1 billion.
* Irvine-based AST Research Inc., a maker of personal computers, was the first major PC maker to enter the Chinese market and remains the biggest seller of such computers there.
* In February, Mission Energy, the Irvine-based power-generation unit of SCEcorp and sister firm of Southern California Edison Co., said it will become a leading partner in an international consortium that will build, own and operate a major new power plant in Indonesia.
The project is one of the most visible in a major push by Asian nations to upgrade their electrical power grids to meet the needs of expanding economies, experts say.
The Indonesia project will involve construction costs of $1.8 billion and employ 3,500 workers to build and operate it. Mission’s partners include General Electric Co., Japan’s Mitsui & Co. and Indonesia’s P. T. Batu Hitam Perkasa. Upon completion in 1998, the plant will be one of the largest privately owned power plants in the world, and a model for others.
“This certainly represents a major element of the future . . . in Indonesia and in China,” said Mission’s president and chief executive, Edward R. Muller. “Mission Energy, based here in California, will be leading such projects all over the world.”
Similarly, Hughes Aircraft’s space and communications company has been designing and making satellites since the 1970s to help tie Indonesia’s 14,000 islands together with modern communications. Last April, the company signed a multimillion-dollar contract to build the third generation of such satellites, the so-called Palapa-C series of two satellites to be launched in 1995 and 1996. All told, several generations of satellites have represented between $350 million and $400 million in Indonesian contracts for Hughes, said project manager George Tadler.
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For Tadler, who has been to Indonesia eight times in recent years to coordinate the projects, the pace at which nations such as Indonesia are investing in California-generated 21st-Century technology results in startling contrasts.
“The countryside is like any other Asian Pacific nation: primitive, with rice fields and people living in substandard housing. . . . People still wash clothes in rivers and bays,” he said.
“But when you get to the cities, like Jakarta, there are tall modern glass buildings, and every place you look they’re putting up new high-rise structures.” As a result, he said, “there’s lots of stuff we can do for Indonesia. There’s direct (satellite) television, which we’re introducing to the U.S. right about now, and . . . it’s certainly something Indonesia could use. . . . Also, there are satellite systems for mobile communications, and they’re thinking and talking about that.”
Indeed, a sister company, Hughes Network Systems Inc., said in April that it had signed an $80-million contract with a public-private Indonesian joint venture to begin supplying a new wireless telephone system for customers in Jakarta.
The California connection works on a variety of levels, and the state could find itself unusually vulnerable to the vagaries of politics.
For example, if instead of renewing China’s most-favored-nation status, President Clinton had decided to revoke or modify it, such a step could have had a considerable effect on the state’s economy, business leaders argue.
California exports to China alone total more than $1.7 billion annually, supporting about 35,000 state jobs, according to the Business Coalition for U.S.-China Trade, an ad-hoc group of about 400 state businesses that opposed eliminating China’s trade status.
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The state’s farming leaders, meanwhile, worry about the prospects of agricultural embargoes by Japan, South Korea and other Asian nations that say they fear importation of the Mediterranean fruit fly.
A February study by UC Berkeley Prof. Jerome B. Siebert predicted that an embargo would focus on several varieties of fruit and vegetable crops, result in short-term losses of $564 million in net revenue a year and ultimately set back the state’s agricultural economy by $1 billion to $1.4 billion.
That loss would ripple through the state’s overall economy, resulting in reduced output and income and losses of up to 14,189 state jobs, Siebert said.
So far, however, there’s no sign that Asian nations will mount such an embargo, and the Japanese, for one, continue to buy California produce.
