Chicago builds China

Chicago wins as China builds its own Rust Belt We've got what they need: heavy equipment, parts December 20, 2004 By Sandra Jones Martin Simpson's packaging firm, Daubert Cromwell, found a $3-million market in China almost by accident. "It wasn't a planned attack," he says. "We just sort of grew into it." Photo: Brett Kramer China, the nation Midwesterners often blame for taking away factory jobs, is turning to Chicago for the heavy equipment and assembly parts needed to fuel its industrial expansion. The Chicago trade district, which spans from Rockford to Peoria to Gary, Ind., shipped a record $1.7 billion in goods to China through October. Chicago exports to China rose 67% in that time frame, the most recent data available, compared with 28% for the U.S. as a whole, according to Global Trade Information Services Inc., a South Carolina firm that tabulates U.S. Department of Commerce trade statistics. "If you look at the industrial base around Chicago, it fits closely with what China is doing," says Doug Smith, an international trade consultant at the University of Texas in San Antonio. Two industries linked to Chicago's manufacturing roots, machinery and electrical components, together accounted for $1.2 billion, or 72%, of the total goods the Chicago region shipped to China through October. A few examples: raw materials for cardboard boxes from Smurfit-Stone Container Corp. Unassembled automobile power train systems from Chicago's BorgWarner Inc. Tractors and wheel-loaders from Caterpillar Inc. in Peoria. Surplus engine parts and cockpit equipment from AAR Corp. in Wood Dale. And components from local mid-sized manufacturers, used to make everything from refrigerators to pairs of scissors. PREDICTING THE MARKET Jeff Ding, an engineer from China, predicted his native country would need industrial products from the U.S. as its manufacturing base matured, so he moved to Chicago in 1997 to set up shop as an exporter. His company, Flurida Industries in Naperville, gathers products from around the U.S. — from welding machines to electronic sensors for air conditioners — and ships them to China. "Chicago has many, many factories located here, and it is easy to travel to the East and West coasts," says Mr. Ding. "That's why we chose to set up the company in Chicago." Schaumburg scrap metal broker Consolidated Mill Supply Inc. exported about $20 million worth of mill scale, fine particles of metal produced while working steel, to China this year to meet the country's exploding demand for iron ore, which is in short supply. "Some of this stuff had no place to go until China ran out of iron ore," says President Kenneth Pies. China's economy has been expanding at a rate of more than 9% this year, and Gene Huang, chief economist at Tennessee-based FedEx Corp., the largest international express carrier in China, predicts that pace will continue at least through 2005. "China is becoming a manufacturing assembly base for all of Asia, and that creates the need for capital goods like electronics and machinery," he says. "These are strong areas for Chicago industry, and that bodes well for Chicago exports.">