L.A.-China Paper Trail

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Los Angeles County is no paper tiger when it comes to international trade.


Led by such paper exporters as America Chung Nam Inc. and Allan Co., the county accounts for almost 40 percent of American exports to China, which have swelled in recent months in the face of China’s torrid economy.


As China threatens to supplant Japan as the third-largest U.S. export market, local companies are finding that China’s appetite for everything from old paper to chemicals to semiconductors is on the rise.


“The Chinese standard of living is improving,” said Stephen Young, president of Baldwin Park-based Allan Co. “When the standard of living improves, the use of paper increases two- or three-fold.”


The Journal of Commerce this month released its rankings of the top exporters in the country, with 19 Los Angeles area companies making the list. Young’s company was the second-largest local exporter by bulk in 2006, sending almost 100,000 shipping containers each about the size of a school bus and each packed with paper out of the ports of Los Angeles and Long Beach.


The company came in just behind City of Industry-based America Chung Nam, which has for several years been the largest exporter by bulk in the nation. The paper the companies send to China is used to make cardboard and similar packaging, for the most part.


And while paper companies are the face of local exports to China, their product is by no means the only one going to China. Plastics, chemicals, metals and textiles have all been hot commodities, and some of the fastest growing sectors are technology, environmental products and medical equipment.


“China is by far our hottest export market,” said Dan Griswold, director of the Center for Trade Policy Studies at the Cato Institute, a Washington-based libertarian think tank. While imports from China still dwarf exports, U.S. exports to China have been increasing an average of 24 percent each year for the past five years, according to Cato’s figures.


“The obsession is with what the Chinese are selling us, but what a lot of (people) don’t appreciate is the tremendous opportunities for California and U.S. companies to sell into the Chinese market,” Griswold said.


China’s booming economy has been marked by a shift from an export orientation to a more consumerist approach. Last year, the United States exported $55 billion of goods to China $21 billion of which came from L.A. County. And while Los Angeles’ imports saw a modest increase in 2006 over the previous year, the county’s exports to China grew by a staggering 32 percent.


“It just blows our exports to Canada and Europe out of the water as far as the growth trend,” Griswold said.


And the growth is having spillover effects for some local companies.


Chatsworth Products Inc., a Westlake Village company that designs and manufactures storage and security equipment for the information technology industry, is one of the companies benefiting from growth in a related sector.


Joe Weber, director of international sales for the manufacturer, said as large IT companies like Intel Corp. and Microsoft Corp. grow their business in China and build data centers, companies like Chatsworth Products see their exports to the country rise dramatically.


“As the Chinese market opens up we have more and more U.S.-based multinationals landing there, and we’re following them,” Weber said. “We follow them to be able to service their needs.”


He said the company’s revenue in the Asia Pacific region has increased almost 300 percent in the past couple of years.


China’s economic prosperity has also allowed more local companies to export fully assembled products, which breaks from the traditional model of companies sending raw materials to the country. Torrance-based Pelican Products Inc., which makes durable cases and flashlights, assembles its products in its local facility and ships them from there. The company has been greatly expanding its business in China, opening an office there in March.


Lyndon Faulkner, Pelican chief executive, is eager to point out that his company’s business model of finishing products in America to ship to China “is the opposite of how it usually works.”


Thirty percent of the company’s revenue now comes from international sales.


The Los Angeles and Long Beach ports handle the majority of the exports to Asia a point which, while a boon to the American economy, is making some forecasters nervous. A report released last month by the Boston Consulting Group predicts that the “explosive” growth of U.S.-China trade will overwhelm West Coast ports within the next few years.


“North American ports and rail systems are beginning to choke, and delays and uncertainties are increasing,” the report said. “The longer Western management teams wait to sort out their China strategies, the greater the risks their companies face.”


As U.S.-China trade expands, more companies are looking to break into the Chinese market or expand their existing China presence in nontraditional regions, said Vance Baugham, president of the World Trade Center Association, Los Angeles-Long Beach, a group that assists local companies as they pursue international markets. More companies, he said, are looking to export to second-tier cities like Nanjing and Shenyang, rather than immediately going for Beijing or Hong Kong, and those alternative markets are very willing to accept American products.


“That second tier of cities in China they seem to be more aggressive in importing U.S. products,” Baugham said. “They represent almost half of all Chinese imports. This is something we’ve noticed in the last year or so.”

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