PORTLAND, Maine — Maine trade officials are hoping Chinese investors’ $120 million bet on tissue papermaking in Baileyville signals the start of a stream of capital from Asia’s financial giant to the state.
The Maine International Trade Center in January opened an office in Shanghai, seeing opportunity to target investors in specific areas, like food processing, aerospace and renewable energy, and earn a share of the increasingly large pie that is Chinese investment abroad.
“The upside [for Maine] is huge,” Thomas Shiekman, director of MITC’s Shanghai investment attraction effort, said during an interview in Portland. “The Chinese have a lot of money and a lot of money in foreign reserves that are getting fairly poor returns in U.S. bonds.”
Relaxed restrictions on foreign investment under the leadership of Chinese President Xi Jinping, who took office in March 2013, opened the door for investment outbound from China to outpace foreign investment into the country for the first time last year, Shiekman said.
With that, Chinese investment in the United States has been on the rise, but not at nearly the clip of the country’s investment elsewhere.
The United Nations Conference on Trade and Development estimated China’s foreign direct investment at $101 billion in 2013. The U.S. Bureau of Economic Analysis estimated the U.S. got about $8.07 billion, or about 7.9 percent, of that amount.
This year, Shiekman’s goal is to organize two trips of Chinese investors to Maine, market the state at seafood shows in Hong Kong and the industrial center and seaport city of Qingdao, and build a list of Chinese companies interested in joint ventures or establishing businesses in the Northeast U.S.
He was in Maine recently for a two-week visit to speak with business leaders and policymakers here before heading back to China with plans to court investors in areas of specific demand in that country, like food safety.
“The Chinese consider Western food as something they can trust,” said Shiekman, who’s worked full time in China since 2006, currently with the business development firm Intralink. “That’s a huge boost from Maine, coming from the U.S. and a really clean part of the U.S. with pristine oceans.”
But that image, he said, is one that may have to be painted for Chinese investors.
“Maine, truth be told, is not on the map. It’s not New York or California, where there are large Chinese populations,” he said. “A lot of what we’re doing is trying to create different ways to educate people about the benefits of the state. Not many know about the benefits of the ports or proximity to Canada and Boston.”
Janine Cary, president of MITC, said looking to China for investment comes “at the right time” as investment from China shifts from raw materials in energy and minerals to manufacturing and production that, in some cases, serve a market to import goods back into China. And the year ahead will lay the groundwork for the three-year project.
“It just takes a long time to develop those leads and generate incoming visits,” Cary said. “Those will be the biggest challenges in year one.”
Shiekman will lead a three-person team at Intralink under the contract with the Maine International Trade Center.
A head start
Wade Merritt, MITC’s vice president who launched and manages the StudyMaine program that brings foreign students to Maine, said Maine’s not starting from zero when it comes to attracting investment from China.
“Some of these students, their father may be a senior vice president for a major Korean conglomerate, or they come from very well-heeled families,” Merritt said. “How do you make that connection?”
Merritt said that transition from being a parent of a student in Maine to getting an investment pitch “isn’t always smooth,” but there’s a balance to strike between giving an unsolicited pitch and “making sure people are aware of the opportunities.”
Merritt said there are about 2,400 students from abroad studying either at the high school or college level in Maine. Shiekman said that travel trends — with more Chinese tourists venturing out independently — also stand in Maine’s favor.
A direct flight from Boston to Beijing started last year and the Boston-based marketing firm Attract China estimates the annual number of visitors from China will by 2020 top the city’s population of more than 630,000.
Maine’s effort to attract more investment from China comes after two recent trade missions to the country and the establishment of two other offices in London and Munich supported in part by a $812,823 grant from the U.S. Commerce Department’s Economic Development Administration in 2014.
Those offices — on contract with the firm OCO Global in Europe and Intralink in China — are all part of trade center’s Invest in Maine program, for which the trade center hired director Maria McIntire last fall.
The challenges ahead
MITC officials cited International Grand Investment Corp.’s St. Croix Tissue project in Baileyville as the largest publicly broadcast example of direct foreign investment from China. It is a U.S.-based subsidiary of the Chinese company Asia Pulp & Paper Co., which purchased the former Domtar mill in 2010.
Scott Beal, spokesman for IGIC in Maine, said the first new tissue machine at St. Croix Tissue is on schedule to begin operation late this year, with the second papermaking machine set to operate sometime in the second quarter of 2016. St. Croix will add nearly 80 new employees when both machines are running. The sister company of Woodland Pulp now has about eight full-time employees.
For future investments, Merritt said the focus will likely be finding individual investors who want to put money into a Maine company, rather than Chinese companies seeking to set up subsidiaries or other operations here. And that poses other challenges down the road, particularly in getting companies comfortable with opening their intellectual property to an international partnership.
“I think a lot of the barrier is to get companies in Maine that have a technology out of the bootstrap mindset,” Merritt said. “They’ve got to be ready for investment of any kind.”
Early in the Invest Maine project, Merritt said that the trade center has already hosted potential investors that came in through its European offices, but it’s still waiting to seal the first deals.