Alaska is benefiting from China's economic explosion
By Greg Wolf
For the Journal
It is certainly no secret that China's economic and political ascent is having a significant impact on its neighbors in Asia and, indeed, on the rest of the world. Since the late 1970s, when the liberalization of its economic system got underway, China's economy has expanded rapidly, averaging 9 percent growth annually between 1993 and 2003.
For Alaska, the expansion and modernization of China's economy has translated into significant export opportunities. Following a decade of exports in the $100 million to $150 million range, this year shipments from Alaska to China have risen sharply, up 60 percent through the first nine months of the year. For the full year 2004, it is anticipated that the state's exports to China will reach $250 million. For the first time, China will become the state's third largest trading partner, assuming the position long held by Canada.
What does China import from Alaska? Primarily, seafood to help feed its large and growing population. Through the first seven months of this year, this category accounted for approximately 70 percent of the state's exports to China. Seafood exports to China included cod, crab and salmon. The Chinese are also important buyers of fish waste products (fish meal) that are used in their aquaculture and agricultural industries. In addition, China buys logs from Alaska.
Alaska is fortunate to have "on-the-ground" representation in this dynamic market. Two years ago, the state of Alaska established a trade representative in Beijing. The representative assists Alaskans seeking to identify and pursue business opportunities. Also, the Alaska Seafood Marketing Institute has a representative to promote Alaska seafood exports. Their representative is based in Shanghai.
It is important to note that Alaska's business ties with China are not limited to commodity exports. Companies in Alaska also export technical "know-how" to China, participating in infrastructure development projects and other endeavors related to the service sector. Anchorage-based VECO Corp., for example, has partnered or worked as a subcontractor with some of China's largest energy companies. Their work has included project management and engineering in connection with oil and gas field development. The company's successful involvement with these projects has led to ongoing business.
Alaska also plays a growing role in the transportation of air cargo between China and the United States. Chinese air carriers, China Southern Airlines and Air China, utilize the Ted Stevens Anchorage International Airport as a fuel stop on their cargo flights between China and the United States. Also, two Hong Kong-based cargo carriers, Cathay Pacific and Air Hong Kong, make stops at the Anchorage airport on their cargo runs to and from the Lower 48. These operations generate fees for the airport, fuel sales, payments to hotels for crew lodging and a variety of other economic benefits for Alaska.
It is not only Chinese carriers that are moving cargo between China and the United States. FedEx, for example, was recently awarded 12 additional weekly frequencies to China, bringing their total to 23 weekly flights, more than any other U.S. carrier. Currently, FedEx offers the only direct flight between the United States and the booming Pearl River Delta area in southern China with a daily flight from to Shenzen to Anchorage.
Besides their flight operations, FedEx now uses the hub in Anchorage to sort and manifest all of its North America cargo bound for China. This business is growing rapidly, and in the last quarter FedEx saw its China-bound cargo volume increase by 52 percent. FedEx has been active in China since 1984 and offers guaranteed service to more than 220 cities. The company's China operations are headquartered in Shanghai.
UPS also serves the China market from Anchorage with a daily flight to Shanghai. Like FedEx, UPS was awarded 12 additional frequencies during the latest round of bilateral negotiations, bringing their total now to 18 weekly frequencies. In China itself, UPS has strengthened its position by purchasing its local partner, Sinotrans. The $100 million acquisition will give UPS direct control of its international express operation in China's largest cities by the end of next year. The two companies have been partners since 1988 when UPS first entered the China market.
As trade, tourism and other business expand between the United States and China, Alaska's role is poised to grow as well. It is important for Alaska to aggressively pursue trade ties with China.
As the world's largest emerging market, and with gross domestic product growth averaging 9 percent annually during the past 10 years, the opportunity to build significant trade and investment ties is simply too big to ignore.
At World Trade Center Alaska, we are working closely with the state of Alaska and with the U.S Department of Commerce to help Alaskans establish business relations with companies in China. We also network with World Trade Centers located in China and with Chinese government trade agencies to gather information and garner their assistance.
Looking back, the state's pioneering trade development work with Japan in the '60s and '70s, and later with Korea in the '80s, has paid handsome dividends. Alaska exports to those countries grew dramatically as those countries rose to economic prominence.
With the once slumbering big dragon of Asia now fully awake, the China opportunity can follow the same successful pattern for Alaska. Indeed, it could even surpass our previous successes.
- Greg Wolf is the executive director of the World Trade Center Alaska
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