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Firms hope that China will enjoy taste of Utah
This is an archived article that was published on sltrib.com in 2006, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Chinese workers have assembled Orbit Irrigation parts for years - pipes, sprinkler heads, timers and drip systems - and shipped them for sale at Home Depot stores all across America.

But they can't buy the watering gadgets themselves.

That will change if Orbit CEO K.C. Erickson has anything to do with it. Erickson is one of two executives from the North Salt Lake-based irrigation company who is signed on for a trade mission led by Gov. Jon Huntsman Jr. that begins Monday in Beijing.

During the next week, managers from 20 Utah companies will be meeting with Chinese government officials and potential business partners on one of the state's first trade missions to a country with a rapidly expanding capitalist economy presided over by a communist government. Some of the Utah corporations are trying to build on existing relationships and investments. Others are attempting to break into an as-yet-untapped Asian market.

Erickson's agenda is simple: to scope out the competition.

"We want to see what kind of watering products are being sold in China," Erickson says. And then, he says, provide an alternative. He figures his company has about 1 billion potential customers in China.

"As they become more westernized in their buildings and housing and commercial developments, they're going to want more lawns and parks and gardens," Erickson adds.

That business speculation motivates virtually all of the companies on the trip. But for many of the businesses who already have ties to China, this government-sponsored venture is a chance to capitalize on their proximity to the governor. For Huntsman, this is a coming home of sorts. He will return - geographically and psychologically - to his diplomatic roots as ambassador to Singapore and deputy U.S. trade ambassador. His fluent Mandarin Chinese is a remnant of his religious mission to Taiwan for The Church of Jesus Christ of Latter-day Saints and studies at the University of Pennsylvania. He downplays his role, calling himself a "facilitator."

Huntsman says now is the time for Utah and its businesses to jump.

"The numbers are so overwhelmingly large and vast. Nothing comes close to resembling the future of the China market in terms of sheer disposable income in the coming years," he says. "It's hard to imagine where this relationship is going to be in the next 20 years.

"The one thing we can do is try to develop a relationship with leaders in China so that we're known and recognized and given a level playing field."

The governor has singled out Mexico and Canada as key trade partners in the Western Hemisphere. India and China are critical to the state's future in the East, he says. China has become one of Utah's top five trading partners and is the state's fastest-growing export market. Along with India, China also happens to have a massive population and developing economy - characteristics that make the Utah businesses' task all the more urgent as the state tries to get in before others do. A trip to India - a first - will be scheduled perhaps as early as next year, Huntsman says.

With Huntsman's foreign and economic policy goals in mind, the Governor's Office of Economic Development started accepting applications for the trip a few months ago. More than 40 companies bid for a chance to go. Selection teams in Utah and China whittled the finalists to 20, clustering similar industries together and assessing which companies could best accomplish their goals in one week.

"We got a lot more applications than we could logistically handle," says Brett Heimburger, the state's economic development director for Asia.

The core group of businesses, Huntsman and Utah House Speaker Greg Curtis will meet with the U.S. Foreign Commercial Service, U.S. Ambassador Clark Randt and China's Minister of Commerce, tourism officials and the equivalent of the Food and Drug Administration.

Curtis says this it the state's chance to move beyond exporting minerals and metals and importing cheap consumer goods to exchanging nutritional products and technology.

"China has exported to us for years," says Curtis. "This is about us being able to take things we produce - technology, software and other products - to China."

Five "natural products" or supplement companies will travel to China: Nature's Sunshine, NuSkin, Tahitian Noni, USANA and XanGo. Another five manufacturing or aerospace companies, including Orbit, Parker Aerospace and Peterson Inc., will join the trade mission. And three "infrastructure" companies along for the trip will be Zions Bank, Propay and The SCO Group software company based in Lindon. Utah Valley State College, Stevens Henager College and Western Leisure each will send one representative.

Several companies initially on the list have dropped off, including EnergySolutions, which tried unsuccessfully to set up a meeting with a specific Chinese official to discuss a contract to build a plant that mixes radioactive waste from nuclear power plants with molten glass, creating a stable form for storage. The University of Utah's Technology Commercialization Office also decided to wait for a later trade mission.

This trade mission will be focused exclusively on business, skirting the obvious sensitivities that could arise from political discussions about human rights and tariffs.

Many of the companies already have extensive experience managing the vagaries of doing business in a communist-capitalist hybrid economy where the rule of law is a fluid concept.

For example, The SCO Group has sold operating systems in China for two decades through a Hong Kong-based business partner. Post offices, banks and transportation systems all use the company's Unix-based operating system. Sales in China account for 3 percent of the company's revenue. Now, the company hopes to set up a new company to sell a mobile operating system for "smart phones."

SCO Group Chief Financial Officer Bert Young says China is untouched territory for such technology. And his company has a chance to be at the forefront along with one other competitor. SCO software is currently being translated. SCO executives plan to meet with distributors and potential partners this week.

The business potential is obvious, Young says. There are over 400 million phones in China, and less than 1 percent of those are smart phones - sort of minicomputers like the Blackberry. The SCO Group hopes to introduce the idea to millions of Chinese consumers.

"We're trying to set up a new brand. It's not like jumping into Japan where it's already over," Young says. "We think this will help us get a foothold."

For NuSkin, this trip is a chance to move forward with the company's new direct-selling license. Only two other foreign direct-selling companies - Avon and Oriflame - have been granted the right to sell door-to-door with independent distributors in China since the country lifted a 1998 ban on the practice.

NuSkin Vice President Richard Hartvigsen echoes Young's awe at the opportunity to grow. "China has the potential to become the largest direct-selling market in the world," Hartvigsen says. "China offers a great opportunity to teach entrepreneurial skills to people, people who have not had an opportunity to learn those kinds of things."

Other Utah supplement and natural products companies that follow the multilevel marketing model want what NuSkin has.

Tahitian Noni's Bryant Eggett says his company is in the process of applying for a direct sales license. The Chinese affinity for holistic medicine, as well as progressive free market changes, makes the country a vast resource for U.S. companies.

"With the Chinese use of natural remedies and dietary supplement products for centuries, we believe that Tahitian Noni Juice will be easily accepted by consumers," Eggett adds.

Natural product companies are the largest single contingent among the Utah delegation. But state economic development officials defend that decision, noting the supplements industry is second only to Utah's ski industry in annual sales - both hover around $4 billion.

"If you were to consider the companies that hold the most potential, they're probably underrepresented," Huntsman says. "That sector is likely to explode."

Finally, Zions Bank, the bank of many of the companies on the trip, will come along to figure out how to finance a fledgling export market between the state and China.

"We hope to be able to learn what Utah companies, who can enter the market, what financial needs they have," says George Hofmann, Zions' vice president of business banking.

The bank also is sponsoring a student exchange between Shanghai Normal University and the University of Utah.

Although Huntsman's experience in China is a mixture of business and political, the governor says he will avoid talking about the "banana peels" that could slip up Sino-American relations: nuclear proliferation in North Korea and Iran, trade barriers, and questions about human rights and personal freedom.

Huntsman sees his job as "opening doors for the state" while at the same time verbally prodding the relationship along, "so we don't make some of the same mistakes that caused the relationship to be frozen in time."

walsh@sltrib.com

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What are Utah companies' goals?

China is one of Utah's top 10 trade partners, but the Governor's Office expects the nation to climb to No. 1 or

No. 2 in the next decade. As part of one of the state's first trade missions to the country, executives from 20 Utah companies will meet with Chinese government officials and potential business partners in a weeklong trade mission Monday through Friday. Here's what they want:

* Natural products: Companies including XanGo, Tahitian Noni and USANA are seeking prized direct sales licenses. NuSkin is one of three foreign companies that already have received the Chinese license and are preparing to implement it.

* Manufacturing/aerospace: Orbit Irrigation Products executives are going to China to expand beyond a decades-long manufacturing business to retail sales to Chinese customers.

* Infrastructure: Zions Bank managers are along on the trip to figure out how to help Utah companies finance any future export operations and manufacturing plants in China.

* Tourism: Western Leisure will try to raise awareness of Utah as a tourist destination.

Utah business leaders, led by Gov. Huntsman, want to try to connect with a billion potential customers in the nation
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