China In Our Backyard (Idaho)

In his 2007 scholarly work, The Black Swan: The Impact of the Highly Improbable, Nassim Nicholas Taleb explains why the black swan is a metaphor about the significance of unexpected events in history. Simply put, black swans are things we were certain could never happen.

For many Idahoans, the feeling of a black swan event is up close and personal – the feeling that China has invaded this resource-laden state. But, is it really a black swan event? It shouldn’t be as it is the result of a decades-old relationship between Idaho businessmen and China.

The following is an excerpt of a speech I gave to a group of North Idaho political conservatives.

Reality Check – China

Excerpt from a 1st Quarter Report from the International Monetary Fund (IMF):

“China’s lead will not be confined to gross domestic product. China is already the world’s largest exporter of goods. By 2030, China’s trade volume will be twice that of the US. And, of course, China is also a net creditor to the US.
The combination of economic size, trade and creditor status will confer on China a kind of economic dominance that the US enjoyed for about five to six decades after World War II and that Britain enjoyed at the peak of the empire in the late nineteenth century.
This will matter in two important ways. America’s ability to influence China will be seriously diminished, which is already evident in China’s unwillingness to change its exchange rate policy despite US urging. And the open trading and financial system that the US fashioned after World War II will be increasingly China’s to sustain or undermine.
The new numbers, the underlying realities they represent and the future they portend must serve as a wake-up call for America to get its fiscal house in order and quickly find new sources of economic dynamism if it is not to cede its pre-eminence to a rising, perhaps already risen, China.”

This rise essentially began with former President Richard Nixon’s visit to China on February 21, 1972. Since that date, Americans believed bringing capitalism to China would bring democracy to China.

Alan Greenspan in his semi-autobiographical book, “The Age of Turbulence” discussed Capitalism in China – “No advocates ever dared call the new model “capitalism.” They used euphemisms like “market socialism,” or the famous phrase of Deng, “socialism with Chinese characteristics.”

Looking at America today – we can ask the question – who influenced who?

The Idaho Statesman in a June 6, 2010 (one year ago) story extolled the efforts of Idaho’s Commerce Secretary Don Dietrich and Idaho Governor C.L. “Butch” Otter to lure Chinese investors to their state:

Dietrich was quoted: “The Chinese are looking for a beachhead in the United States and Idaho is ready to give them one.”  [Now, I’ll confess I am a military brat – my father was career Navy – so the word “beachhead” sent more than a few shivers through me.]

Merriam Webster defines beachhead as “an area on a hostile shore occupied to secure further landing of troops and supplies.”  Dictionary.com says “the area that is the first objective of a military force landing on an enemy shore.”

Was Idaho’s Commerce Secretary’s use of the word intentional or ignorant?

What seems to be missing amid the excitement of bringing billions of dollars of economic investment into American localities is the fact that China’s corporations are instruments of national policy, fully integrated with, and subservient to, the Communist Party of China.  As such, it is not a far stretch to believe China’s corporations do indeed serve as forward troops in China’s global strategic economic warfare.

However, Idaho’s relationship with China actually began in the 1980’s.  On April 23, 1992, McDonald’s largest (at that time) opened in Beijing, China.

Before the JR Simplot Co. (Idaho) could produce French fries for McDonalds in China, it had to develop an entire potato industry there. Simplot brought over potato varieties that were suited to northern China’s soils and climate.  At the time, China allowed foreign companies to do business only as a joint venture with a Chinese company. Simplot and partner, the San Yunan Agricultural Group, developed the farming as they build a french fry factory.

Jacklin Seed Company (Idaho) spent more than a decade funding a turf-seed lab, training students and promoting demand for lawns before its China market took off in the 1990’s.  Today, Jacklin seed covers Tienanmen Square, the U.S. Embassy in Beijing, and was the grass seed for the 2008 Summer Olympics.

And this article excerpt: “The success with Jacklin Seed and JR Simplot companies were built on long-term thinking and the promotion of better businesses, services, and products than Chinese customers could get anywhere else.”

This success was also possible by the combining of politics and corporate ambition as Idaho Governor Otter has been to China several times – first as an executive of Simplot and later as Idaho’s lieutenant governor.
Otter encourages Chinese investments in Idaho as did governors John Evans and Dirk Kempthorne who also visited China.

Chinese Investment Backlash

Have these attempts been successful?

Hoku Materials, Inc., a subsidiary of China’s Hoku Corporation, is completing a $400 million plan to make polysilicon for solar panels in Pocatello. The company predicts the plant will employ as many as 250 people.
Idaho is negotiating with Sinomach (China National Machinery Industry Corp.) who is bidding for engineering, procurement, and construction for a $2 billion fertilizer plant for Southeast Idaho Energy – it is projected to provide 700 to 1000 jobs during construction and 150 permanent jobs.

Sinomach is also negotiating a massive 30,000 acre (a bit shy of 50 square miles) manufacturing, trade, and technology zone near the Boise airport.  What the Idaho Governor’s Office and the Department of Commerce is not going to discuss in the promotional materials is that Sinomach is a commercial-political-military-intelligence instrument of the communist government.

Sinomach’s website says:

“With approval of the State Council, China National Machinery Industry Corporation (SINOMACH) was established in January 1997. SINOMACH is a large scale, state-owned enterprise group under the supervision of the State Assests Supervision and Administration Commission.”  [The State Council is the supreme administrative arm of the Politburo of the Communist Party of China (CPC).]

Sinomach is not only looking at Idaho. Delegations have also been sent to Ohio, Michigan and Pennsylvania (all economically depressed areas). The intent is to use our Foreign Trade Zone (FTZ’s) laws to create Chinese styled Special Economic Zones (SEZ’s). (There are currently 257 FTZ’s across America.)

These SEZ’s are proposed technology zones proposed on the model of science, technology, and industrial parks in China – often fully contained cities with all services included. If you’ve heard about the “ghost cities” in China, they are actually future SEZ’s – money invested during China’s real estate bubble and awaiting a population.

Remember – this is all LEGAL – and it has previous precedent – that is why the political backlash has politicians scratching their heads and wondering why their constituents do not want Chinese investment in their backyards.

Unfortunately, to us, the U.S. citizens, the logic of the backlash is simple!