Business with China: a global frontier for Indiana companies.

• Author: Kaelble, Steve
• Position: Cover Story

OLD IMAGES ARE NOT always easy to overcome. Steve Chapman certainly has found that to be the case when it comes to the People's Republic of China.

Chapman is vice president in charge of international operations at Cummins Inc., the Columbus-based manufacturer of engines and related equipment. He knows what a lot of people think about China--that it's a Communist-run nation full of centralization and bureaucracy that make doing business a nightmare. He knows that many entrepreneurs view Chinese business people as novices when it comes to capitalism. "I've heard a lot of people say, 'why would you want to do business there?'"

But he has a message for such people: "In terms of running their economy, China really runs like a capitalist country, and they are absolutely first-class in running their businesses," Chapman says. "It's not a sleepy country, and it's not bound by bureaucracy These are really capitalist business people, and they are intense competitors. Entrepreneurism is at least as alive in China as it is here."

China is a land of great opportunity, according to Chapman and other Hoosiers who have done business there. "It is an important market for Indiana products," says Steve Akard, director of international development for the Indiana Economic Development Corp. The market is growing fast, he adds. The $295 million tally of Hoosier exports to China last year was up nearly 25 percent over the year before.

And China is an economic powerhouse that Indiana businesses ignore at their own peril. For companies like Cummins, operations there serve not only as a source of current growth but also as a strategy for defending against future competition. If an American company can gain a strong position in the Chinese market, it's less likely that a Chinese company will grow into a powerhouse that will eventually threaten the American company here. Notes Akard, "if companies want to remain competitive, they're going to have to address this at some point."

An increasing number of Indiana companies are doing just that, according to Akard. The IEDC is fielding a growing number of calls from companies thinking about China. "They want to learn more about the Chinese market and how to get started in it."

WHY GO TO CHINA?

For about a decade, the Indiana law firm of Baker & Daniels has had a significant practice involving China, says Joe Kimmell, group leader of the firm's international practice group. "Over the last 10 years the type of business that Indiana companies have sought in China has changed dramatically," he says.

"Before, what you had were multinational companies trying to get into China for the Chinese market itself," explains Kimmell, who is based in the firm's Fort Wayne office but spends as much as two months a year in China, where Baker & Daniels maintains two offices. Indeed, some of Indiana's biggest companies began eyeing the Chinese market years ago.

It was in the mid-1970s that the late J. Irwin Miller made the first Cummins connections in China. And J.K. Lilly Sr.--who took the helm of Indianapolis pharmaceutical maker Eli Lilly & Co. when its founder died in 1898--sent a sales rep to China...