By Tom Still
MADISON – Sales by two very different Wisconsin companies illustrate why doing business in China, even with its risks, will influence the state’s economy for years to come. But the boom could fade unless innovative state firms continue to produce goods the Chinese can’t eventually make for themselves.
In the days before Gov. Jim Doyle left for Japan and China with a delegation of business executives and others, Oshkosh Truck Corp. announced it will build six airport fire and rescue vehicles for Beijing’s airport in time for the 2008 Olympics, and Madison-based TomoTherapy Inc. unveiled the sale of one of its radiation therapy systems to one of China’s flagship hospitals.
Oshkosh’s Striker fire trucks and TomoTherapy’s Hi-Art treatment system both employ the latest in their respective technologies, of course, but they’re also linked by another factor – the size of the Chinese markets where both products will be deployed.
China is expected to build at least 50 new airports in the next three to five years, a massive investment in transportation infrastructure that will require fleets of “pump-and-roll” fire trucks along the lines of those being built in Oshkosh.
Similarly, China has less than one piece of radiation therapy equipment for every 1 million people, compared to about 13 linear accelerators for every 1 million Americans. With more than 1.3 billion people and reports of rising cancer rates, even a modest upgrade in Chinese medical equipment will means sales of hundreds if not thousands of high-end radiation therapy systems.
Wisconsin companies such as Oshkosh Truck and TomoTherapy can’t hope to capture all those sales, of course, but winning even a portion of the huge Chinese market produces a sizable bulge in the revenue line. That’s why many Wisconsin companies are successfully entering the market.
China is already one of Wisconsin’s largest trading partners, with $870.3 million in goods and services purchased in 2006. That’s No. 3 on the state export list behind only Canada and Mexico, ahead of even Japan.
Wisconsin makes the kinds of goods China needs at this point in its development. Heavy equipment manufacturers such as Joy Global, Bucyrus International and Manitowoc Co. are prominent examples of companies that have found demand for their products in China. It only makes sense given the scale: China is building the equivalent of one new city of Houston every few months. In addition to airports, China plans to build 20 nuclear power plants, billions of square feet of housing and thousands of miles of railways, highways and more. An army of cranes, trucks and construction equipment will be needed.
Medical equipment manufacturers such as TomoTherapy and GE Healthcare are symbols of China’s thirst for high-tech electronics. In part because China and other emerging economies are driving demand, Wisconsin ranked fifth among the 50 states in electro-medical equipment exports ($1.1 billion) in 2006. The 2007 “Trade in the Cyberstates” survey also showed total Wisconsin high-tech exports at $4.2 billion, with industrial electronics (eighth) and computers and peripheral equipment (14th) among the leaders.
During the first quarter of 2007, Wisconsin’s exports to China grew by 75 percent compared with 15 percent for American exports to China as a whole. As of March, Wisconsin ranked 14th among the 50 states in exports to China.
There’s no guarantee the Chinese will import Wisconsin goods and technology forever, agree business executives who know the market. Some old China hands suggest it’s better to sell “last year’s technology” due to lax, even non-existent, protections on U.S. intellectual property. And even if copycat technology is more anecdotal than endemic, the Chinese are rapidly building their own capabilities to manufacture high-end goods.
Still, Wisconsin businesses can maintain and even build upon their edge in this emerging market by remaining innovative and a step ahead of the competition. China is part threat, part opportunity. It’s probably healthy to keep both realities in sight.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.