State by State: China and Arizona Trade

July 15, 2015 Posted by China Briefing Reading Time: 5 minutes

Nicknamed the Grand Canyon State, Arizona is widely known for its natural wonders. China, one of Arizona’s top trade partners and leading export destinations, is also a top source of the state’s foreign direct investment. In 2014, the exports from Arizona to China reached up to US$1.02 billion, making China the state’s 4th largest trading partner.

Additionally, during the past few years, Arizona business leaders have viewed China as an important trade partner to be developed further. Some specific industries that are seen to have some growth potential include the agricultural, the advanced manufacturing and the aviation industries.

Trade and Investment Opportunities

Agriculture

Despite the fact that Arizona is largely a desert, agriculture, an industry worth a whopping US$12.4 billion in Arizona, is the state’s second largest export industry to China. China has recently become a major importer of agricultural goods, and there is strong indications that it will continue to be one.

A USDA 2015 report predicts that Chinese agricultural trade trends will continue its upward growth. China will continue to be a major textile manufacturer, and thus remain a major cotton importer. The past five years has seen Chinese cotton imports of consistently over US$4 billion per year; the country’s cotton imports reached a peak in 2012 at US$12 billion. Interestingly, Arizona is one of the United States’ top cotton producers.

Arizona is also top producer of Alfalfa hay that is in high demand from China. The high protein hay ideal feed for dairy cows, to help satisfy the increasing demand for dairy products in China.

Chinese imports of American hay increased from 2,400 metric tons in 2007 to 779,000 metric tons by 2013. Though Alfalfa export to China hit an unexpected road block due to strict GMO regulations, business leaders in Arizona believe that the demand for the protein rich hay will continue to grow and that Arizona hay is positioned to be a main supplier.

Transportation Equipment

Since China’s civil aviation needs are increasing, the industry has been growing at a rapid pace to keep up with strong demands. The U.S. Federal Aviation Administration and the Civil Aviation Administration of China have endorsed a program known as the U.S.-China Aviation Cooperation Program, which was created to promote technical, political and commercial cooperation between the two countries. As Arizona is a leader in the U.S. aviation industry, there is lots of room for future growth.

Arizona is home to some major players in the aviation industry, Honeywell Aerospace, for example, is the largest manufacturer of aircraft engines, avionics, as well as auxiliary power units and black boxes in the world. With low taxes, government incentive packages and looser government regulations, Arizona is the third largest aerospace supply chain contributor in the United States. Having more than 300 days of sunshine, beneficial for testing and flying, also helps attract industry giants.

Advanced technologies

Arizona’s manufacturing industry is crucial to the state’s economy, as it accounts for more than 80 percent of its exports. According to the Arizona Commerce Authority, advanced manufacturing industry’s leaders including Intel, Microchip, and Raytheon, have moved their manufacturing operations to the state. The State ranks fourth in the entire nation for Semiconductor production and fifth for Space and Defense manufacturing. Furthermore, in 2013, Arizona exported up to US$517 million worth of Computer and Electronic parts. However, due to concerns with U.S. trade deficit and concerns with exporting too much high powered computer parts, there will always be periods of ups and downs when various government agencies implement trade restrictions. Industry experts believe trade restrictions are not practical, and that due to potential blowback, trade restrictions on computer and electronic parts will not last long.

RELATED: Pre-Investment and Entry Strategy Advisory from Dezan Shira & Associates

Tax Treaty – U.S. Trade with China

The United States has signed a Double Tax Treaty with China. This can reduce tax burdens under certain circumstances in both trade and any China legal establishment. Please seek professional advice for specific China investment requirements. Treaty details can be found here.

Further Support from Dezan Shira & Associates

Dezan Shira & Associates can service Arizona-based companies that are looking to further develop their operation in China. The firm can help companies establish a direct office in the country and can guide them through the affiliated tax, legal and HR issues that come with doing so. To arrange a free consultation, please contact our U.S. office at usa@dezshira.com.

About Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email china@dezshira.com or visit www.dezshira.com.

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