China’s Xi Seeks Second Front for U.S. Ties in Iowa Return

Chinese heir-apparent Xi Jinping’s trip to the U.S. this week will focus on building relations with local officials clamoring for investment and export markets, expanding a second front for bilateral ties as anti-China rhetoric rises in Washington and on the campaign trail.

Xi, set to arrive late today in the U.S., will travel to Iowa and Los Angeles after meeting President Barack Obama at the White House. The visits coincide with an explosion of city-to- city and state-to-province ties, a surge in U.S. local governments setting up trade offices in China and increasing demand for foreign investment as U.S. unemployment remains at historical highs.

“Strengthening local cooperation and exchanges is an important foundation in consolidating friendly Sino-U.S. ties,” Commerce Minister Chen Deming said in a written response to questions. “It also is an important driving force in deepening economic and trade relations.”

Vice President Xi, 58, in line to assume the leadership of the ruling Communist Party later this year and the presidency in March 2013, will likely find a more receptive audience in Iowa and California than in Washington, where members of Congress and President Barack Obama criticize China over its currency and trade policies, human rights practices and military expansion. Outside of the Capital Beltway, officials want to attract investment from the world’s No. 2 economy.

Sister Cities

“Everybody is focused on jobs, everybody wants Chinese investment,” said Bob Kapp, the former president of the U.S.- China Business Council. “The states want the jobs and the governors and mayors make their way to China as they have for so many years.”

Commerce Minister Chen said there were 176 sister city relationships between China and the U.S., 38 state-to-province matchups and more than 30 state trade offices working in China. The trade representative for the state of Kentucky, for example, inserts miniature bottles of Jim Beam bourbon into gift bags at Beijing events to promote the brand.

Iowa Governor Terry Branstad and Los Angeles Mayor Antonio Villaraigosa have both traveled to Beijing within the past six months. The governors of Washington State, Georgia, Hawaii and North Carolina in October met some of their Chinese counterparts in Beijing.

Contrast on Display

The contrast between Washington and the states was on display last year when President Hu Jintao visited the U.S. Senate Majority Leader Harry Reid called him a “dictator” and some members of Congress, including House Speaker John Boehner, stayed away from his state dinner. A day later in Chicago, then- mayor Richard Daley called Hu a “man of vision” and urged more Chinese investment.

This year the rift is exacerbated by campaigning ahead of the November presidential election. The 2013 budget proposal that Obama will submit to Congress today seeks $26 million for an Interagency Trade Enforcement Center that will monitor and enforce trade agreements, according to an administration official.

In his State of the Union Address last month, Obama announced that the unit “will be charged with investigating unfair trading practices in countries like China.”Republican candidate Mitt Romney said that if elected president, he will direct the U.S. Treasury to list China as a currency manipulator.

Adding Jobs

Those statements aren’t stopping Lu Guanqiu, the billionaire founder of auto-parts maker Wanxiang Group (WANGPZ) Co., from adding hundreds of jobs in the past year to his sales and manufacturing facilities in the U.S. The company now employs more than 6,000 people in at least 14 states, he said in an interview last month at the company’s headquarters in Hangzhou.

Lu accompanied Hu last January on his trip, visiting the White House and showing off his company’s electric-vehicle dashboards to Mayor Daley at a warehouse in the Chicago suburbs. Lu said he plans to accompany Xi on this trip, which will include meetings between U.S. and Chinese companies in Washington, Iowa and Los Angeles.

Policy Speech

Xi will make a policy speech on Feb. 15 in Washington at an event co-sponsored by the U.S.-China Business Council. The Washington-based group’s chairman is Coca-Cola Co. Chief Executive Officer Muhtar Kent, and other corporate members include Procter & Gamble Co. and General Electric Co.

Xi’s trip is an opportunity to shape the perception of China in the eyes of Americans and also burnish his image at home ahead of this year’s Communist Party Congress, where he is expected to replace Hu as general secretary. The U.S. public saw Chinese leader Deng Xiaoping don a cowboy hat at a Texas rodeo in 1979, softening the image of a country that had only a generation earlier fought a war with the U.S. on the Korean peninsula.

Zhao Ziyang, who served as premier and then general secretary in the 1980s, met President Ronald Reagan in 1984 at the White House in a western suit, demonstrating China’s increasing focus on business after years of Americans seeing images of masses of Chinese wearing identical blue Mao suits.

In a written response to questions from the Washington Post, Xi said China has taken steps to meet “legitimate U.S. concerns” on intellectual property rights and trade imbalances, and will press ahead with reforms of the yuan exchange rate. He said China hopes the U.S. will ease restrictions on high-tech exports and set a “level playing field” for Chinese companies that want to invest in the U.S., according to the Post.

Increased Imports

China’s economic growth is driving an increase in imports from the U.S. China’s economy expanded 8.9 percent in the last three months of 2011 from the year ago period. The U.S. economy grew 1.6 percent during the same period.

In the first 11 months of 2011, U.S. exports to China rose to $94.2 billion from $81.8 billion a year earlier, a 15.2 percent increase that topped the 9.7 percent rise in imports from China, according to the U.S. Commerce Department. That still left a trade deficit of $272.3 billion, $19.9 billion more than a year earlier.

Farm products are driving the U.S. export growth. U.S. exports to China of grains, including corn, wheat, barley, sorghum and soybeans, surged 77.8 percent to 695,063 bushels from a year earlier as of Feb. 2, according to the U.S. Department of Agriculture.

Stronger Yuan

Another factor aiding in the export surge: a stronger yuan. The currency reached an 18-year high on Feb. 10. The yuan advanced 0.1 percent last week to 6.2986 per dollar in Shanghai, according to the China Foreign Exchange Trade System.

Iowa is the biggest corn-producing state and people there say Xi will get a warm reception that contrasts with the tone in Washington and on the campaign.

As a local official in northern China’s Hebei province in 1985, Xi stayed with an Iowa family in the city of Muscatine as part of a delegation to study corn technology. He is scheduled to return to the city on the Mississippi River for a reunion.

“We feel so honored,” said Sarah Lande, 73, who hosted a dinner for Xi in Muscatine during the 1985 visit. “For us, to have the vice president of China and possibly soon-to-be president back is flattering. We want to do our country well.”

Lande remembered that about 10 people including Xi attended the party, where she served beef, salad and corn on “good china” with silver. During his time in Muscatine, Xi visited a feed company and a hog farm, and the group was especially interested in knowing how Iowa bred leaner pork, Lande said.

While there, Xi was also greeted by O. Richard Maeglin, a 74-year-old retired entrepreneur. Maeglin said his family has hosted visitors for decades, including officials from Europe, Asia and South America, and he sometimes takes them to visit a hog farm or to facilities owned by Monsanto Co. (MON)

“If you’ve had perhaps 75 people from other countries stay in your town, you can’t tell if the person is an average priest or a pope,” Maeglin said. “He ate cereal with you, chatted about things, and it was a wonderful experience. In general, when someone stays in your house, they’re not a dignitary, they’re a person.”

To contact the reporters on this story: Michael Forsythe in Beijing at mforsythe@bloomberg.net; Vivien Lou Chen in San Francisco at vchen1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.