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Pacific Coast Business Times: Tri-Counties trying to boost trade with China

December 23, 2016
Santa Barbara, California – Published 12/23/2016
By Alex Kacik

Many tri-county companies are looking to up their investment in China, which could bolster the more than $3 billion in trade that flows between the region and the Chinese market every year.

The Ventura County region has an estimated $2.1 billion annual trade flow with China while the Santa Barbara area has $807 million and San Luis Obispo has $447 million, according to the Brookings Institute, a nonprofit research organization based in Washington, D.C. The vast majority of the $3.4 billion in regional trade with China is in electronics, totaling about $1 billion a year, followed by about $600 million in machinery.

Opportunity is ripe for tri-county companies that can produce scalable clean tech and renewable energy solutions in China, especially when it comes to automobile and carbon emissions, water reclamation, and waste remediation, said Ray Bowman, director of the Economic Development Collaborative of Ventura County’s Small Business Development Center.

“China is spending staggering amounts of money on cleaning up their environment,” he told the Business Times. “They do have clean tech initiatives they are putting forward but they need to collaborate with other countries to accelerate their efforts. It could spur a significant economic impact here.”

Bowman represented the region during a recent delegation of California clean tech businesses on a 10-day, five-city business outreach trip to China. There was a healthy mix of policymakers, business leaders and governmental representatives who discussed the state of clean tech and what specific cities were doing to clean up, Bowman said.

“China looks to California as a benchmark in clean tech,” said Bowman, especially in regard to our key industries in agriculture, manufacturing and the government. “We have some of the strictest environmental laws but have one of the fastest-growing new business rates in the country, some of the most venture capital and are very global. They respect that.”

Additional opportunity exists in the e-business realm, as Chinese consumers have a seemingly insatiable demand for U.S. products, he said.

AppScale announced a partnership with e-tailer giant Alibaba in August as the Santa Barbara-based web services firm aims to establish a global reach. Last year, China’s largest e-tailer said it would invest $1 billion into its nascent cloud-computing arm.

TrackR, the Santa Barbara tech company that created a Bluetooth keychain device that helps owners find lost items, manufactures its product near Hong Kong. It is moving about 20,000 units a day, said co-founder and CEO Chris Herbert, which wouldn’t be possible without China’s help.

“If you are in consumer electronics and doing anything in mass scale, it’s not about the cost anymore, it’s the skillset, infrastructure and supply chain that exists in places like Hong Kong and Taiwan,” he said. “It’s essential we have intelligent manufacturing partners that can build quality products at a price point consumers demand.”

Oxnard-based Haas Automation is the largest machine tool builder in the western world and one of the largest employers and privately owned companies in the Tri-Counties. About 20 percent of its business stems from China, a Haas official said.

The Simi Valley phone repair company Encore Repair Services also has a location in Hong Kong. It plans to close its 2175 Agate Court facility in Simi and layoff 116 people by February, Encore reported on Dec. 1 in a Worker Adjustment and Retraining Notification. The company did not return requests for comment.

Over the past five years, many Chinese investors have toured the tri-county’s vineyards and tasting rooms, yet there have not been any deals inked, said Jon Ohlgren of Radius Group. The Chinese are still opting for more well-known areas like Napa and Sonoma counties, where it’s more expensive but regulations are a little clearer, he said.

“They are spooked by our area being less multicultural than Napa, and there is a little more concern over the regulatory environment and availability of water here,” Ohlgren said.

Chinese nutritional supplement developer Bocom Pharmaceuticals looks to capitalize on the displaced Amgen employees that the biotech company has laid off. Bocom purchased two buildings on Corporate Center Drive in Thousand Oaks for nearly $10 million that will house up to 200 employees.

“California has a lot the Chinese are interested in from environment technology to water conservation and high level food production per acre,” said William Irion of Irion Enterprises, a consulting and market research firm headquartered in Kunming, China and Santa Paula.

Yet, the tariffs, taxes and requirements to put products in China are increasingly difficult and costly for foreign firms, Irion said. If it was simpler to live and work in China, it would go a long way to level the playing field, he said.

Many are taking a wait-and-see approach regarding the trade implications under a Donald Trump presidency. Renegotiating trade agreements could be a good thing, but if it results in tariffs and higher-priced goods, it would be a “Pandora’s box,” economists said.

“You don’t know how people would respond,” Economist Mark Vitner of Wells Fargo said at a November economic forecast. “When you think about the industries in the U.S. that export, those are our most competitive industries where we are creating higher-paying jobs. The retaliatory tariffs that we could likely see would hit our most competitive industries.”

There has been rather substantial Chinese investment in Ventura County real estate, sources said, but it will be essential to maintain access to those markets.

“One of the things that will allow us to prosper is foreign direct investment,” Bowman said.

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