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Governor's Mission: Prove China Needs Calif.

Schwarzenegger is expected to sell the state's expertise on his weeklong visit.

November 14, 2005|Don Lee | Times Staff Writer

For example, table grapes are one of California's top farm exports. But members saw huge grape plantations in places such as Shandong province that to them represented a threat, not an opportunity.

At Zhaoyuan Feiying Seedless Grape Co. in Shandong, about 1,000 farmers work on 100 acres of grapes. The company has been selling the fruit to Asian countries for some time, company executive Yang Dengli said, and this year it exported 33 metric tons to Europe.

Yang doesn't foresee shipping to the U.S. anytime soon. "We welcome American companies to invest here or cooperate with us," he said. "We can provide land and workers."

With cheap labor in mind, California's largest electronics manufacturers, such as Intel Corp., Applied Materials Inc. and Hewlett-Packard Co., have been investing in China for years. But software and service companies have been much more wary, worried about exposing their copyrighted content or programs to piracy.

Recently, however, that caution has given way to a burst of activity in China by Bay Area companies.

Over the summer, Yahoo paid $1 billion in cash for a 40% stake in the Chinese e-commerce firm Alibaba.com to gain an edge in China's fledgling online auction and Internet search engine business. Adobe Systems Inc. sharply lowered prices for some of its design software in China as part of an expansion effort dubbed Adobe China Storm. Electronic Arts Inc., the giant video game publisher, plans to sell online games in China next year and is building a design studio in an undisclosed location in Shanghai that reportedly will have a staff of 500 in a few years.

EA declined to comment, but analysts reckon that the change in game plan wasn't just because of China's expanding consumer base. Global companies, they say, can't afford to ignore the budding engineering and technical talent in China.

"Many people think of China as a sweatshop," says Oded Shenkar, a management professor at Ohio State University and author of the book "The Chinese Century." "But there is a significant amount of research and development going to China."

Does that mean high-paying American jobs are being lost to China? Few analysts believe it's a zero sum, but Shenkar says it's pretty clear what some firms will do: They'll set up an R&D in Shanghai, where they can hire 100 engineers for the price of 15 in San Jose.

China is also beginning to entice Hollywood, not just as a market for its movies but also as a place to shoot them.

Bill Kong, the Hong Kong producer of such hits as "Crouching Tiger, Hidden Dragon," says he expects China to compete with Russia and other countries in Eastern Europe that have become popular filming sites. The same low labor costs that make China a manufacturing hub apply to movie-making economics. Moreover, Kong says, China's large size, varied landscapes and undiscovered regions make it a natural draw.

"Hollywood is taking a very serious look at China," Kong says.

Schwarzenegger, in his first visit to China since becoming governor two years ago, is expected to use his considerable Hollywood appeal to sell the "made-in-California" message to the Chinese while prodding their leaders to do more to stop piracy, which has huge repercussions for companies in the Golden State

When Schwarzenegger last toured China in the spring of 2000, fans in Shanghai and Beijing went wild. Sales of his "Terminator" movies were said to have soared, although the profits almost certainly went entirely to bootleggers.

This time, he has a lot more on the line.

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