New Mexico Seeks Funding in China, Albuquerque Journal

ALBUQUERQUE, NM – For a few days in early October, when the weather began to gild the poplar leaves, 170 Chinese businessmen came to the US hoping to make it big in New Mexico.

Signing a Memorandum of Understanding from left Jian Zhu, Richard Buckler, HuJiebao and Pam Feather. The aim is to promote art and cultural events between China and New Mexico. (Taylor Hood / Albuquerque Journal)

The US-China Business Matchmaking Summit had all the advantages of an international standard conference: speeches by politicians; industry-specific panels; and tours to introduce participants to a city they otherwise likely would not have visited. However, the focus of the event in Albuquerque was on partnering Chinese nationals interested in investing overseas with companies from one of the poorest states in America.

“The main objective was to give companies in New Mexico access to opportunities that most other states already have,” said Deborah Burns, CEO of InvestUS LLC, co-organizer of the event with Jian Zhu of the International Chinese Entrepreneurs Association.

Data from research firm Rhodium Group shows that New Mexico has the lowest Chinese investment of any state in the western United States. However, this could change as soon as companies here increasingly look for access to capital and other opportunities abroad.

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For Doug Christian, owner of the Vertical Limit Aviation Training School, business is already moving in that direction. At the matchmaking summit, Christian signed a Memorandum of Understanding with China-based TTFly, which sparked discussions about the training of prospective Chinese professional pilots here in New Mexico.

“It’s really exciting,” he said. “It’s not a closed deal, but it could be huge for the state.”

Growing interest

In recent years, currency fluctuations and a long economic slowdown have spurred Chinese investment abroad, but it has declined in recent months as the government curbed the outflow. According to the Rhodium Group, mergers and acquisitions of American companies by Chinese companies fell 20 percent in the first half of 2017 compared to the previous year. Now Chinese companies are looking for smaller deals that are less likely to attract the attention of Beijing regulators.

Guibing Li (left), President of TTFly, and Doug Christian, Owner of Vertical Limit Aviation, sign a Memorandum of Understanding at the Business Matchmaking Summit between the US and China in October. (Courtesy Investus / ICEA)

To date, New Mexico has only received a handful of significant transactions with Chinese assistance. There are three Red Lion Hotels in New Mexico; The Chinese conglomerate HNA Group acquired a 15 percent stake in this company in 2015. A medical greenhouse in Acoma Pueblo is being built with funds from Chinese investors as part of the immigration program known as EB-5. The Rhodium Group estimates that Chinese investments since 2000 have been less than $ 10 million and account for less than 100 jobs in the state.

And yet New Mexico has long counted China as an important trading partner. In 2016, China was New Mexico’s third largest export destination after Mexico, at $ 497 million.

Lt. Governor John Sanchez cited this discrepancy as one of the reasons for his June trade mission in the country, sponsored by the China-United States Exchange Foundation. In the past few months, several members of the New Mexican Real Estate and Tech Communities have also traveled to China to look for business opportunities.

“When it comes to doing business in China, it’s all about trustworthy relationships,” said Burns. “New Mexico hasn’t really been able to offer that until now.”

The friendliness of strangers

Not everyone thinks foreign investment is a good idea. In 2010, Idaho governor Butch Otter made an EB-5 program and Chinese immigration investments the cornerstone of his plan to expand Idaho’s economy. But he faced such backlash from his constituents who accused him of selling the state to a foreign power that he was forced to withdraw.

Paul Gessing, president of the Rio Grande Foundation, a research group advocating for limited government, said it was possible that significant foreign investment could lead to volatility in the event of a trade war.

“But the investments here are so small that it is hard to imagine that this will happen in the near future,” he said. “Chinese investments really seem like a ray of hope for a place like New Mexico with all of our economic challenges.”

Yet there are questions about the role of foreign investment at a crucial point for the state. For most of its modern history, the health of New Mexico’s economy depended on factors largely beyond its control: what one journalist called “the kindness of strangers.” Almost a third of the state’s gross domestic product comes from the government and the volatile mining sector, which includes oil and gas development.

Economic diversification has been a popular policy platform in recent years, but progress has been slow, partly because it is difficult for companies to grow here. At a recent conference hosted by the University of New Mexico’s Bureau of Business & Economic Research (BBER), Jeffrey Mitchell, director of BBER, pointed out that New Mexico is behind the business not in terms of business openings or closings, but in terms of business expansions Neighboring states remains behind. The number of business contractions in New Mexico exceeds that of its neighbors.

According to Mitchell, the state is facing a turning point today. The oil and gas industry has stabilized, and the healthcare industry has largely absorbed the boost received from Medicaid’s expansion.

“The question now is, ‘Where is the state going alone?'” Mitchell said. “In the past, the answer to that has been ‘sideways’. If we want to change that, we really have to face our main economic challenges: education and stabilization of public finances. “

Investments from China are unlikely to enable this kind of change. But it could address another problem at the heart of business expansion: access to capital. Charles Wollmann, a spokesman for the State Investment Council, described access to capital as “one of the biggest problems New Mexico is facing”. He said foreign investment could be “an important part” of creating opportunity for business in New Mexico in the years to come.

“Last but not least, foreign investment means more attention to the state, which could lead other investors to learn more about what we have to offer here,” he said.

An innovative solution?

On the last day of the Business Matchmaking Summit, the organizers declared the success to be successful. A total of 15 memorandums of understanding were signed: the aviation partnership; a joint venture to export beef to China; and several other agreements in the solar, manufacturing, and education industries. Five more were signed the following week.

Both Zhu and Burns said they plan to make the event annual. In his closing remarks to the participants, Zhu described the challenges that lie ahead of the further marketing of the concept in China.

“Albuquerque has had roughly the same number of Chinese-Americans for decades, and that means the Chinese don’t know New Mexico,” Zhu said. “They think it’s part of Mexico. They don’t want to go somewhere they don’t know. “

Zhu said the conference was a step to correct this.

In a nearby exhibition hall, the tables were loaded with egg rolls, tray after tray. Jim Wang, an Albuquerque resident who volunteered to translate for the event, examined you carefully before taking a bite.

“Interesting, they don’t taste like regular egg rolls,” said Wang. He quickly added, “But they are very innovative.”

He had expected the fried casing to contain the shredded cabbage and other vegetables. Instead, it was filled with carne adovada, the New Mexican pork-and-chili dish.

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