State by State: China and Minnesota Trade

May 8, 2015 Posted by China Briefing Reading Time: 5 minutes

Known as the “Land of 10,000 Lakes,” Minnesota is the second northernmost state in the U.S. In 2013, the state’s real GDP reached US$312 billion, up 2.8 percent from the previous year and significantly outpacing the 1.9 percent national increase. Major industries in Minnesota include medical devices, biomedical technology, renewable energy, environmental technologies, agribusiness and financial and insurance services.

Trade and Exports

Since 2005, trade with China has become an important source of economic growth for Minnesota. Last year, the state saw a record breaking US$21.4 billion worth of exports to foreign countries, with China its third-largest export market. In 2014, Minnesota’s manufactured exports to China reached US$2,233 million, just behind Canada and Mexico. Medical products, electrical machinery, plastics and wood pulp are the top four exports to foreign countries. China is one of the state’s largest markets for optic fiber, optical/checking instruments and integrated circuits. Interestingly, export of food products to China grew by 25 percent compared to the previous year.

State-Province Relationships

Minnesota’s relationship with China dates back to the 1870s, when the first Chinese immigrants traveled to the state. Since then, the bond between individual Chinese provinces and Minnesota has grown significantly.

Minnesota-Shaanxi

In October 1982, Minnesota and Northwest Shaanxi Province established a sister-state relationship, which is currently managed by the U.S.-China Peoples Friendship Association, Minnesota Chapter. While the two share a great deal in common – both are cultural centers with important agricultural areas and prestigious universities – their economies are complementary.

Shaanxi’s mineral reserves rank the highest of all the provinces in China, whereas Minnesota lacks fossil fuels and doesn’t have deposits of coal, natural gas or petroleum. Large reserves of natural resources in Shaanxi have been a spur to heavy industry such as oil drills, mining equipment manufacturing, railways, petroleum, and chemical processing. The province also has a strong pool of well-educated workers that rank third in the country, next only to Beijing and Shanghai.

Minneapolis-Harbin

Minneapolis, the largest city in Minnesota, and China’s Northeast city of Harbin have maintained a sister-city relationship since 1992. As the capital of China’s Heilongjiang province, Harbin is a key political, economic and cultural center in Northeast China. Due to its close proximity to Russia, the city serves as the country’s gateway to trade with Russia and hosts the China-Russia Expo every year. Since the 1950s it has become a hub for mining and steel production.

Investment Opportunities

Today, numerous Minnesota-based companies have been established in China, including 3M, Cargill, Best Buy, Target, General Mills, Medtronic, Hormel, Imation, Ecolab, Thomson Legal & Regulatory, Carlson Companies and Anderson Corporation. Exporters across Minnesota, from farmers to manufacturers, are looking to sell to China’s vast and lucrative market. Great investment opportunities can be found in the medical device industry, hospitals, healthcare, commercial services, education, food industry, and particularly the clean energy industry.

China aims to increase the share of renewable energy (excluding natural gas and nuclear) in its overall energy profile from nine percent in 2009 to 15 percent or more by 2020. To achieve this goal, coal and carbon energy will need to be replaced by renewable clean energy, namely wind, solar, hydropower, biomass and other viable alternatives. However, China’s lack of supporting technology and professional personnel have greatly impaired the development of its clean energy industry. As a result, the Chinese government released documents encouraging foreign investment in the construction of clean energy power stations, with various tax incentives provided.

In Minnesota, the clean energy sector is one of the state’s fastest-growing and most promising industries. The number of clean energy companies in the state has climbed 122 percent since 2000, and more than 15,000 people are now working in this industrial sector. Minnesota is among the top 10 exporters of water and wastewater treatment technology in the U.S.

Minnesota Representative Office in China

Minnesota Center China (MCC)

The Minnesota Center China (MCC), supported by the Minnesota Department of Employment and Economic Development (DEED), was formally established in 2012 with a mission to develop business relationships between Minnesota and China. Companies can go through the Center to export Minnesota products to China.

Tax Treaty – US 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 Minnesota-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.

For further Minnesota Asian trade data, please also see our articles on trade with ASEAN here, India here and Vietnam here.

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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