On March 28, 2019, nearly 80 people joined TN-China Network (TNCN) in Nashville for our inaugural annual meeting Commemorating 40 Years of US-China Relations.
The lively and interactive event began with an update from TNCN Executive Director Elizabeth Rowland on the progress TNCN has made since our founding in 2014. In 2018 alone, over 530 people attended our nearly 20 seminars, networking, and community-related events from Memphis to Knoxville; 130 companies benefited from TNCN referrals; and over 9,000 people utilized our online resources.
Jim Lambert, TNCN Board Chair and Director of Craft Sales, Asia for Yakima Chief Hops, followed with remarks commemorating the anniversary of the bilateral US-China relationship. He highlighted how far the US-China relationship has come since 1979 – with trade swelling from roughly $3 billion in 1980 to more than $700 billion in 2018; with more than more than 340,000 Chinese studying at American universities and nearly 12,000 American students studying at Chinese universities; and nearly 3 million Chinese tourists visiting the US and roughly 2 million Americans making their way to China annually.
Mr. Lambert also noted that “while there are a number of contentious issues which merit open and frank discussion, so too does the reality the bilateral relationship between the US and China is each country’s most important relationship and is of paramount importance to the stability of the global order”. He then quoted Sinologist David Shambaugh, who said “[y]et, beyond the daily headlines about bilateral friction, quieter interactions and exchanges endure between the two countries. This is what Carter and Deng envisioned 40 years ago, and this is worth remembering today as the two powers increasingly clash over a range of issues.” Mr. Lambert went on to say that by participating in this annual meeting, “we are part of this quiet interaction and exchange. The continued dialogue on this bilateral relationship is the key reason I stay involved with the TN China Network.”
After welcome remarks, we dove straight into the panel discussion on the Past and Future of Tennessee-China Business Ties, featuring the following panelists*:
- Mike Day, Vice President of Supply Chain for Radio Systems Corporation in Knoxville
- Charles Huang, Chief Financial Officer for Wonder Porcelain Group in Lebanon
- Li Weaver, Director of Business Development – China for the State of Tennessee Department of Economic and Community Development in Nashville
- John Scannapieco (moderator), Shareholder and Co-Lead of the Global Business Team for Baker Donelson in Nashville
* Previously announced panelist Ken Strait, Vice President of Product Development and Strategic Sourcing at Tractor Supply Company in Nashville, was unable to participate due to a family emergency.
Tennessee as a Destination for Chinese Investment
Much of the panel discussion focused on greater China investment in Tennessee, with Li Weaver providing an overview of the trends, beginning with the earliest Chinese investments in the state in the 1980s. Chinese investment in Tennessee historically has been mostly generated from mergers and acquisitions, primarily in advanced manufacturing. However, greenfield investment, including construction of new facilities, has grown, particularly with several large investment announcements since 2015.
That year, Hong Kong-based Sinomax USA announced investment in a new foam mattress factory in La Vergne, with the largest jobs commitment made by a Chinese-owned company in Tennessee’s history. That same year, Dongguan-based Wonder Porcelain announced its plans to invest $150 million to build its first US porcelain tile manufacturing facility in Lebanon, the largest capital investment commitment made by a China-based company in the state’s history.
Wonder Porcelain Growing in Middle Tennessee
Charles Huang spoke in more detail about how Wonder Porcelain’s investment in Tennessee is progressing. The product from their first production line was sold out before production even started. As a result, they plan to add two more production lines this year. The second line should be running by May and the third by August 2019. In addition to the additional production lines, TNCN Corporate Member T. W. Frierson Contractor, Inc. is helping Wonder Porcelain build a new $15-20 million warehouse.
Wonder Porcelain in Lebanon currently has a headcount of 171 employees, mostly local hires, but they plan to expand by 50 or so more employees – over the 220 jobs commitment the company made to the state.
Mr. Huang said Wonder Porcelain chose to invest in the US in order to source materials and manufacture closer to the US market. They looked at three other states as possible investment destinations, but Middle Tennessee was an especially favorable location because of the close availability of raw materials and the strategic location near 80% of their US customer base.
With Tennessee’s low unemployment rate and the distance from other tile producers, available workers with experience in the industry are hard to come by. To get local hires ready, Wonder Porcelain has brought in experts from China to provide training. The factory is very automated, so workers have to learn to control the robots in use. Early on, the challenge was compounded by the fact that they had full orders before production had started, so they rushed into production without sufficient training for workers.
Moderator John Scannapieco mentioned that Baker Donelson has been working with Wonder Porcelain on some of these challenges. He said that it is important to train Chinese managers on US law and practices but also to train US workers on Chinese law and practices; for example, how Chinese-invested companies have to follow different accounting procedures to comply with the law back in China.
Ways Tennessee Can Support Chinese Investors
Mr. Huang emphasized that, while that State of Tennessee did an excellent job giving them support and cutting through the red tape during their investment process, one way the State could help foreign investors have an even better investment experience would be if they provided more assistance finding qualified labor.
Ms. Weaver mentioned that Tennessee is often attractive to Chinese investors due to our business-friendly environment. Because Chinese executives are used to living in large Chinese cities with many cultural amenities, she encouraged local Tennessee communities to do what they can to provide community and cultural information to Chinese investors so they can feel more at home. She also mentioned the importance of promoting Tennessee’s colleges of applied technology (TCATS), in order to help investors find qualified labor.
Impact of the Trade War in Tennessee
In addition to Chinese investment in Tennessee, the panel also discussed the impact of the trade war on the state and the panelist companies.
Mike Day explained that Radio Systems has operations in China for sourcing as well as for sales to China. A large percentage of the pet-related consumer products they sell in the US are now tariffed at 20-25%. Radio Systems is taking a variety of steps to adjust to this new reality and to reduce costs. They are working with their contract manufacturers in China to reduce operational costs, as well as adjusting the way materials flow and country of origin to reduce tariff burden. When necessary, they are also talking with their retail partners about price adjustments.
Radio Systems’ challenges selling into China have less to do with the trade war and more to do with product-market fit. Mr. Day emphasized that you can’t take a product designed for the US market and sell it in China. You have to take the time to develop China-specific products. It requires a serious investment of time and money. Success of the product depends on having the right product and the right design for the market.
Mr. Huang explained that all Wonder Porcelain tile made in China is sold in the Chinese market, so they are not impacted by the tariffs.
Ms. Weaver said that the impact of the trade war on Chinese investment in Tennessee depends on the industry. Chinese companies are still investing in the US, because they want to manufacture closer to their US customers. Chinese companies that heavily export to the US are more frequently seeking to establish manufacturing facilities in the US. The investment projects that have stalled due to the trade war are those that are establishing assembly facilities that would rely on primarily imported components.
Opportunities to Expand TN-China Business
In response to an audience question, the panel also discussed areas of opportunity for expansion of TN-China business. When it comes to attracting Chinese investment to Tennessee, Ms. Weaver mentioned several Chinese cities and provinces that are strong regions for outbound investment, including Zhejiang, Shandong, Guangdong, Shanghai, Beijing, and Fujian, among others.
Mr. Scannapieco mentioned that second and third tier cities in China are hungry to do business with the US, as they have not yet been tapped out or saturated. According to Ms. Weaver, service industries provide the most opportunities for Tennessee companies to do business with China, including education, culture and entertainment, and senior care industries.
Previously in the panel discussion, Mr. Day also mentioned that to be successful in business with China, it is important that you get to know your partners well. Put in the time needed to develop a strong relationship and make sure that both sides win.
“Great Networking Opportunity & Informative Discussions”
After the panel discussion, attendees participated in a facilitated networking “Table Topics” lunch. Six China and business experts from across the southeast US facilitated small group discussions on timely China-related topics, including:
- Exporting to China, with Jim Lambert, TNCN Board Chair and Director of Craft Sales – Asia at Yakima Chief Hops in Nashville
- Evolving China Investment Trends, with Steven Gu, TNCN Board Member and Founder of Hamanit International in Atlanta, GA
- Customs & Shipping Strategies for Navigating Tariffs, Derek McKenny, Regional Director, Customs House Brokerage Services at Kuehne + Nagel in Atlanta, GA
- Managing Currency Risk in Uncertain Times, Geoff Brown, Director – Foreign Exchange at Fifth Third Bank in Charlotte, NC
- Belt & Road Initiative, Henry Yu, President of Hong Kong Association of Atlanta
- Chinese Economic & Political Reforms, Jeremy Goldkorn, TNCN Board Member and Editor-in-Chief at SupChina.com in Nashville
With two 25-minute rotations, attendees chose which two topics they were most interested in and ate, connected, and discussed with others of similar interests. Attendees could also choose to network at one of our general networking tables that had no set topic or facilitator.
At the end of the event, we had three door-prize drawings. Neil Owens with the Tennessee Department of Agriculture won a free pair of On brand running shoes from event Gold Sponsor Kuehne + Nagel, and consultant Chris Powers won a signed Predators jersey and puck from event Silver Sponsor Fifth Third Bank. Don Lake of Dunavant Logistics Group won a framed Chinese papercut donated by friend of TN-China Network, Ms. Haisu Huang.
In surveys of event attendees, folks shared that they thought the inaugural TNCN annual meeting was a “great networking opportunity” with “informative discussions” and “with people from a wide range of backgrounds”. One attendee said it was a “great event with lots of very fun people” and others described it as “friendly/open” and “well done, scheduled, relaxed, and conversational”.
Thank you to our event sponsors, panelists, table topics facilitators, and volunteers for making this event possible! And thank you to all of our TN-China Network members for your ongoing support and participation. We couldn’t provide great TN-China educational and networking opportunities without you!
To view more photos from the event, visit the TNCN Facebook page.