China's Growing Economy Impacting Maine Businesses
 Last Updated: 5/7/2007 8:31:12 PM

For decades, Moosehead Manufacturing was Maine's largest furniture maker. Now its plant in Monson sits almost empty. A few employees are still filling final orders, but the company laid off most of its workforce in February. Moosehead could no longer compete with furniture made in China.
"The company itself is dissolving. You know, whether or not it closes, or we find a buyer, it'll be under new ownership if it's a buyer," said Moosehead Manufacturing owner John Wentworth.

At Apple Acres farm in South Hiram, this pruning season may be one of the last. But owner Bill Johnson remembers when the Ossipee Valley used to produce 350,000 bushels of apples a year.

"Today, right in this valley, we're the last commercial farm left for apples [in Maine], and we raise about 8,000 bushels," said Bill Johnson of Apple Acres.

Now, this last hold-out is losing money, and facing hard choices.

"We've got to come to some conclusions here about as to what we're going to do. It's very hard to make a living," said Johnson.

Apple growers, like furniture makers, now face direct competition from China. Johnson says Chinese workers are paid about 28-cents an hour.

"When you take 96 percent of your labor cost out of it, they can do a lot of stuff that we can't do, and put food in our markets. And it really hurts us," said Johnson.

For both apple growers and furniture makers, the change has been dramatic and swift.

Just 15 years ago, the Chinese exported almost no apples. Now, China is the world's largest producer. And has flooded the world market.

As for furniture makers, just five years ago, China wasn't even a player in their industry. Now, it is the world leader.

"60 to 70 percent of all case goods like dressers, chests, bureaus and bedroom case pieces are imported. And well over half of that comes from China," said Wentworth.

And it's not just private business, the state is feeling the pressure, too. On its roads.

"Over the last three years, the cost of constructing bridges, roads and other transportation facilities has skyrocketed. It's gone up 35 percent in two years. That's a decade's worth of inflation almost overnight," said David Cole, Commissioner of Transportation.

The reason for the steep inflation is that raw materials, such as asphalt and steel, trade on the world market, and China is using a lot of those raw materials, and driving up the price.

"China is in the midst of building a 53,000 mile interstate-type highway. When it's done it will be longer than our 47,000 miles of interstate highways in the united states. This is not the china of 20 years ago," said Cole.

China's growing economy is a challenge for many Maine businesses, but not all the news is discouraging. In fact, for some Maine companies China's growing economy is an opportunity to expand.

Just last month, a handful of Maine boat builders and marine-related companies went on a trade mission to China. They're trying to tap in to China's emerging luxury market.
"So, it's the reverse trend. Here we have these luxury products which we can now sell to China to grow our industry back home. And I think out of this, I think other relationships will be created with China, that can benefit Maine companies as well and create jobs," said Elaine Scott with the Department of Economic and Community Development.

And for Maine's wood products industry, China is already a major customer. It is now Maine's number one market for woodpulp, and number two market for paper. That's a tenfold increase in those industries from the year 2000.

Stephen Franck specializes in China at the Maine International Trade Center.

"2006 was a record year. We had over $150 million worth of goods leave the state of Maine for the Chinese market. That was about a 30 percent increase from 2005," said Franck.

Franck predicts that in a few decades, China will be the biggest economy in the world.

"I try and tell people they need to look at China from two sides. It is a country that produces a lot of goods for the world, but it is also a country that demands a lot of goods from the world," said Franck.

Commissioner Cole believes Maine can't afford to sit back and feel sorry for itself.

"It's neither good nor bad. The emerging nations are doing what we did in the last century, which is getting out there and competing. And that's the same thing we need to do as country and as a state," said Cole.

The hope is that as Chinese products increasingly flood U.S. ports, there are goods from Maine to fill the container ships, too. A group of Maine business leaders just returned from a trade mission to China whose goal was to do just that. A delegation of boat builders from Maine was the only group from the United States. As a result Maine's Boatbuilding Industry was introduced to the nation with fastest-growing economy in the world.

One of the participants in the trade mission, Hodgdon Yachts of East Boothbay, builds high-end luxury yachts.

"It's all about, really, an exploratory program for us to see what the possibilities are over there, said owner of Hodgdon Yacts, Tim Hodgdon.

Hodgdon says, at first he wasn't sure the trip was worth it, But he changed his mind.

"The whole yachting industry in china is really in its infancy right at the moment. They appreciate quality. They're certainly all about brand recognition," said Hodgdon.

Stephen Franck, with the Maine International Trade Center, also made the trip. He believes this is the perfect time for Maine boat builders to launch a business effort in china.

"It's better to get there while the market's just starting to develop than wait until it's already developed, and those contacts and connections have been made by someone else," said Franck.

For the boat builders, the trade mission to China was just the beginning of what they hope is a long relationship. In fact, they hope to host a delegation from China later this summer.
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