Melissa Proffitt Reese, partner at Ice Miller LLP, is one of the business and community leaders participating in Governor Mitch Daniels' trade and investment mission to Asia September 5-16, 2009.  The trip includes the first economic development mission to China by an Indiana governor in more than a decade.  The governor also will make economic development stops in Japan--his fourth visit to the country since 2005.

Melissa's daily blog will provide insight on the trip, including a look at Asian culture.

More than 42,000 Hoosiers are employed by the more than 200 Japanese companies in the state with investments of more than $9.8 billion. Daniels hopes to see modest Chinese investment in the state parallel the growth of Japanese investment in the future.

The cost of the state delegation is being covered entirely through private donations to the Indiana Economic Development Foundation and utilizes no tax dollars.

Last evening we had dinner with government officials and business leaders that combined traditional American and Japanese food with Japanese entertainment.  The music was played from ancient instruments and the dancing was beautiful.

I've mentioned in previous posts that the Japanese put a lot of value on cleanliness and organization.  There is no trash in the streets.  The children wear uniforms and walk in very straight lines.  This emphasis even crosses over to their taxicabs.  Cabs have crocheted linens over seats, the drivers wear white gloves and there is special carpet installed.

Today was the closing of the Midwest U.S.-Japan Association and Japan-Midwest U.S. Association Conference.  Part of this day consisted of a panel discussion that included:

• Takehiko Kiyohara, Chairman and CEO, The Sankei Shimbun
• Katsuaki Watanabe, Vice Chairman, Toyota Motor Corporation
• James Mueller, Vice President – Pacific, United Airlines-Japan
• Katsunari Yamaguchi, Ph.D/CMA, President, Ibboton Associates Japan, Inc. a Morningstar company

Two of my fellow delegates, Jeff Knight at Old National Bank and Kevin Kelly with the city of Noblesville, made interesting observations regarding the panel discussion.

Comments from Jeff Knight, Old National Bank
The first speaker, Takehiko Kiyohara, is in the newspaper business.  His primary point of concern was the declining populations in the Asian markets (China, India and Japan) and the impact that will have on the economy.  He indicated that in Japan, by 2055 the Japanese populations will be 20-30 percent less than what it is today; losing about 1 million in population per year.   There have been several proposals to address this issue which are:

• The current government has proposed that each family receive approximately $300 per month per child.
• Raise retirement age from 60 to 70 years old.

James Muller from Pacific, United Airlines-Japan spoke about the difficulties of the airlines in the past 10 years.  He underlined the importance of the Asian market to United Airlines and keeping good customers and clients.  United Airlines designs programs to keep high paying first class business customers.

Katsuaki Watanabe from Toyota Motor Corporation addressed environmental concerns and talked about the Kyoto Protocol, which Japan signed.  India and China produce 50 percent of the carbon emissions in the world and environmental concerns need to be taken seriously.  Toyota hopes to refine the new technology on the hybrid batteries a market in which they currently have a competitive advantage.  Toyota has sold more than 2 million units with the goal of selling more so we can all breath cleaner healthier air.

Overall, one of the most significant things we learned was the importance of mingling the culture with business.  This is particularly true in China.  The trip was very positive and important for Indiana and our businesses.

Comments from Kevin Kelly, City of Noblesville
It's been a wonderful trip for the Indiana delegation.  We went to both China and Japan in order to help establish new relationships between the state and Chinese and Japanese companies.  Perhaps more importantly, we came to cement and strengthen existing relationships.  Indiana is a leading state for foreign direct investments from Japan and we're trying to be a leading state with China as well.

The state's history with Japan goes back over 30 years.  The Chinese initiative is much newer and under Daniels leadership a new emphasis has been placed on building relationships in China.

All the delegates feel it's been a productive 12 days.  Some are staying on to continue building their own relationships at the community and company level.  I am proud to have had the opportunity to participate in this trade mission.

Closing Comments from Melissa Proffitt Reese
Something that stands out for me regarding the entire trip is that the governor's efforts are really, after five years, starting to be recognized, especially in Japan.

The fact that Daniels' leadership is being recognized on the national level has helped, especially in China.  Some of the events, especially the banquets, happened because of the governor's prominence.  The Chinese view him as someone they want to partner with especially if he does something more like run for president (despite what he says).  Even though he says "no" he's being recognized.  He had an article run in the Wall Street Journal that was reprinted in the Asian Wall Street Journal while we were in China.  They see he is a man of great respect in America and that's helped him receive much respect in Asia.

The governor has spent a lot of time building Japanese relationships and understands the value of these relationships goes a long way.  The timing is right for these relationships in China also.

Tomorrow we head home, tired and very excited.  The future is bright.

Japan is the world's second-largest economy.  Their gross domestic product was over $4.8 trillion in 2008.  As I mentioned in a previous post, Japan is expanding ties with other countries in Asia to help diversify their economic relations with the U.S. and Europe, although those ties are still strong.  Because the Japanese-American relationship has such a large technological and economic impact on the world, they cooperate on a broad range of global issues, including development assistance, combating communicable diseases and protecting the environment and natural resources.  Both countries also have strong collaboration in science and technology.

Japan is slightly smaller than the state of California and about 73 percent of the country is mountainous.  Because there isn't much flat land, many hills and mountainsides are cultivated all the way to the summits.  Their agriculture consists of rice, vegetables, fruit, milk, meat, silk and fish.  Japan is an urban society with only about 4 percent of the labor force engaged in agriculture.

The agricultural economy is highly subsidized and protected.  Japan has few natural resources, fish being their primary natural resource, and trade helps it earn the foreign exchange needed to purchase raw materials for its economy.  Japan is the largest foreign market for U.S. agricultural products, with total agricultural exports valued at over $10 billion in 2007.

Japan's population, over 127 million, has slowed due to falling birth rates.  In 2005, Japan's population declined for the first time.

Japan is a major market for many U.S. products, including chemicals, pharmaceuticals, films and music, commercial aircraft, nonferrous metals, plastics and medical and scientific supplies.

Day 8 - Monday, September 14
We attended the opening ceremony of the Midwest U.S.–Japan Association Conference.  Mitch Daniels is one of three U.S. governors who is attending this conference.  Governor Jennifer Granholm of Michigan and Governor Jim Doyle of Wisconsin are in attendance as well.  There are four Japanese governors participating.

Several members of the delegation were able to meet privately with a representative from Sony.  He discussed that Sony's top issues right now are quality and the environment.  He also discussed the increased need for universities and businesses to collaborate more; specifically pointing out excellent programs at Purdue and Rose-Hulman that would be of importance to Sony.  This representative is happy with their Indiana connections and feels that Indiana strives to keep the costs of conducting business in the state low.

Overall, Japanese business leaders are looking to expand relationships throughout Asia and not rely so heavily on the U.S. and Europe  The current economic conditions that the U.S. and Europe are facing have impacted Japan because of their market presence.

Over the weekend Governor Daniels announced that beginning in 2010 the Indiana State Fair will feature a different country each year.  Japan will be the first country featured.  Japanese exhibits will include performing arts, cuisine, interactive displays and educational opportunities.

Day 7 – Sunday, September 13
Today was the first opportunity the delegates had to do some sightseeing on their own.  Some of the delegates visited Japanese shrines but I decided to do a bit of shopping in the "fashion capital of the world!" 

The Ginza District of Japan features many of the world's best designer shops as well as smaller shops featuring hand painted stationery, paper, umbrellas and fans.  The Japanese culture emphasizes order and cleanliness.  For example, you must take your shoes off when entering a dressing room and put a cloth over your face to protect the clothes.  On escalators, you hear instructions on which side to stand and reminders to hold small toddlers.

This emphasis on order and cleanliness even translates to their public restrooms.  The toilet seats in public restrooms are heated and all the restrooms have bidets.  Restrooms are easy to find and are on located on every floor.  There is a special deodorizing spray and you hear a continuous flushing sound to protect your privacy. 

In Japan you'll find that many stores have a lot of customer service representatives to assist you. In one small section of a department store I found 3-4 representatives designated to help customers in just that one section.

The Japanese stores tend to only carry three sizes: small, medium and large.  In America, I usually wear an extra small but in Japan I'm a medium. Most of the Japanese women are very slender and all are about the same height.  You'll find very little obesity among the Japanese.

Today's weather, beautiful, clear and in the mid-70s (similar to our Fall), gave me an opportunity to observe interesting aspects of the Japanese culture.  Even in the summer many Japanese wear boots.  As in China, pale skin is preferred and many of the women carry umbrellas.  Japanese society is very disciplined.  The city streets are clean and people don’t dress as casually as they do in the U.S.  For example, you don't find many people wearing flip-flops.

Sunday Evening
In the evening we attended the gala reception for the Midwest U.S.-Japan Association Conference in Tokyo.   For nearly three decades, business leaders from the Midwest region of the U.S. and Japan have met on an annual basis to discuss the growth and progress of economic relations of the American Midwest and Japan.  The Midwest U.S.-Japan Association is comprised of ten member states including Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio and Wisconsin.   Membership in the Japan-Midwest U.S. Association is comprised of corporations that have direct economic ties to Japan or are interested in developing them.  The association has some 100 corporate members including Toyota Motors, Mitsui & Co., Saison Group, Sumitomo Chemical, Kajima Corporation, and Sony.  The associations reinforce the economic, political and cultural ties that link the national economy of Japan with the regional economy of the Midwest.

Day 6 – Saturday, September 12
We traveled by bullet train to Tochigi Prefecture, Indiana's sister-state in Japan.  The bullet train was very comfortable and is an extremely efficient mode of transportation for the Japanese.  The train is low energy, low noise, seats a very high capacity of passengers and is easy to maintain.  The Japanese culture emphasizes order and you see that in their transit system.  Their average delay is less than one minute.  Everything is on time and there are no last minute changes.  Seventy-two percent of transportation is done on these bullet trains in Tokyo central and 56 percent in metro Japan.

When we arrived we attended a ceremony to celebrate the 10th anniversary of the sister-state agreement by planting a tulip tree, the official state tree of Indiana, in the central park of Tochigi.  This park is beautiful with many fountains and tulip trees.  The Japanese mentioned that the relationship between Tochigi and Indiana was fate.  Tulip trees were planted in this park 15 years before we became sister states and they feel there is strong significance in the fact that the tulip tree is Indiana's state tree.  These goodwill gestures were further endorsed by the fact that it was a rainy afternoon, but the clouds broke just as the planting ceremony began.

After the tree planning ceremony, we attended the 10th Anniversary Commemorative Symposium at the Tobu Hotel.  Over 100 Japanese government and business leaders attended this event.  Governor Fukuda, the governor of the Tochigi Prefecture, expressed his appreciation and his view of the importance of the delegation coming to Japan.  Personal connections are very important to the Japanese and these face-to-face visits are crucial to successful relationships.

After thy symposium, we attended a reception for the Indiana delegation which was hosted by Fukuda.  We were able to witness the tradition of the "breaking of the barrel."  Six Japanese officials broke a barrel, filled with Saki, with wooden hammers.

An interesting observation that I've made is that many of the roofs in Japan are "green."  The tops of the buildings have grass, trees and bushes.  Not only is this great for their environment, but it is a way for the Japanese to have yards in an area that is highly populated.

Our trip to China was a big success.  It was important for Indiana leaders to visit this country face-to-face and show the sincere interest in enhancing and creating business ties.  The size and scope of the delegation seemed to go a long way in making an impact during our meetings.

An influential Chinese businessman still has a token of Governor Orr's trip to China over 20 years ago sitting on his desk.  It was the last trade mission trip an Indiana governor made to China.  The importance of Indiana making this trip again shouldn't be ignored.

In addition to the wealth of economic and business benefits we've been able to establish, I have truly enjoyed observing and participating in many aspects of the Chinese culture.  As I mentioned in a previous post, tea is one of the traditions I have enjoyed learning more about.  Every place we visited in China served us tea.

During this trip, we were able to visit a vineyard-like grower of tea.  You can buy tea, taste tea, shop for anything tea related from tea pillows, to tea candy and tea marshmallows.  Anything you want in tea, they sell.

There are many aspects of the tradition of Chinese tea.  Some that I found especially interesting are:
• It takes eight hours to make two pounds of tea leaves.
• The entire procedure must be done by hand; no machines.  The Chinese believe the only way to make things well is by hand.
• If you have too much tea that is too strong, you can get "tea drunk," which is similar to alcohol drunk, where you can get a headache, a stomachache and generally don't feel very well.
• They have a tea ceremony similar to wine, where you shake it and smell it.
• There is a special way to hold your cup when you're drinking tea.  You hold the cup with your right hand and put your left hand under the bottom of the cup. 
• China does not export their highest quality tea because there's not much of it and it's incredibly expensive. 

Three common types of tea are black tea (where the tea leaves are totally fermented), green tea (where the tea leaves are not fermented at all) and oolong (which is semi-fermented).  All three have different tea plants and fermentation processes. White tea is a special variety of unfermented green tea.  Chamomile tea is considered an herb, it is not a tea.  You serve different teas at different times.  For example, black tea is in the morning and green tea is after eating.

Green tea is very low in caffeine; black tea has eight times more caffeine than green tea.  You can tell good tea by the color of the leaves and the size of the leaves.  The lighter the color and younger the leaves the better the tea.  Also, the smaller the leaves and stronger the smell the better the tea.

We were able to participate in a tasting.  They put a few tea leaves in our glasses, added a tiny bit of water, we smelled it and then swirled it around in the glass.  They then added additional water.  When they pour the water into the tea glass, the woman pouring the tea flicks her wrist three different times, very high up above the glass.  If she doesn't spill a drop of water it means you are warmly welcomed.

A very common way of saying "thank you" in Chinese tea ceremonies, business matters and in the general culture is to take your forefinger and your middle finger and hit them against the table three times. 

The Chinese don't put milk in their tea.  Milk is only for English tea, because English tea is bitter.  Green tea should be served hot or room temperature.  To slurp your tea is completely unacceptable and if you do slurp you're called a "buffalo drinker."

Chinese tea is loose.  They don't use tea bags or a strainer, so you have to manipulate drinking the tea so as not to swallow the leaves.  They always have tops to the teacups to keep it warm and it's served with washcloths in order to wash your hands.  According to the Chinese, tea bags show the worst quality of tea.  It's considered tea dust.  They compared it to drinking instant coffee.

Today, we visited Zhejiang University and met with the president of the university, Yang Wei.  Zhejiang University has over 40,000 full time students at its five campuses.  In comparison, Indiana University (IU) has about 101,700 students on all 8 campuses; including 42,500 on the Bloomington campus.  There really isn't a school in China that's the size of our large universities, which is surprising considering their population.  We were at the largest campus and all of the campuses have names related to water.

Twenty-five percent of the people in China attend universities or technical colleges.  The government only spends money to educate the best and the brightest traditionally, although they're moving more toward private money paying for education.  Considering China has 1.3 billion people, the U.S. is behind in the number of students attending college.

Someone asked how students are accepted to these schools and we learned that students take a national entrance exam they must pass.  Students spend their entire last year of high school to prepare for this exam.  Zhejiang University gets a large portion of the top performing students.  The 2,700 students admitted this year to Zhejiang University were from the top 4,500 ranked students who applied to all colleges in China.  Meaning, of the top 4,500 students taking the national entrance exam, 2,700 of them went to Zhejiang University.

There are certain instances in which you can bypass this entrance exam to get into college.   They, for instance, can pick 500 students in specialty areas with special talents, such as students who are really excelling in language.  Also, high schools can recommend some of their very top students.

There were a lot of new buildings at Zhejiang University, including a new school for agriculture and life sciences.  This demonstrates their commitment to renewed energy and agriculture.  They also built a new indoor-outdoor stadium which was pretty fantastic. 

Yang, who has visited IU, spoke about the economics of the country and how its impacting the school.  He stated that Zhejiang University is looking at three main ingredients for economic growth: investment (which is doing well - it grew almost 30 percent in the last year); consumption (which is also doing well – it has increased about 15 percent); and import/export (which unfortunately has decreased about 15-20 percent over the last year).  The university wants to do more "internationalization," and by that they mean more international collaboration and also recruiting more international faculty. 

The research grants have increased dramatically since 1998 to 2008.  And patents have also greatly increased since 1998.  For the last three to fours years Zhejiang University has been the leader in the application of patents.  They have two different types of patents: invention patents and progress patents.  An important component of growing the number of patents is to train faculty on the importance of patents, and also the respect of having patents.

There are major reforms in place at Zhejiang University.   The first is dealing with their undergrad program.  In the past, they had 112 undergrad programs in 24 schools, and now they've put everything into just 6 categories.  They believe this allows students more time to develop their interests.  For the first two years they are exposed to a variety of classes because they take what we would consider "general studies" and in the last two years they focus on a specific area.  Each of the six different categories have different color t-shirts that the students wear so they can be easily identified.  This is obviously more ritualistic than in the U.S.

Another major reform in the university is that they've signed an agreement with the Hangzhou government to bring more investment and to grow the university in other regions.  They've added a national park and another university, and they're working to build campuses about the same size as the existing campus that we visited today in another location within the city. 

The university has a river on the main campus, and they're trying to connect the river to the main river locally, and then to the main river in Zhejiang.  This would allow a continual flow of water from the campus all the way up to Beijing. 

The university has a hospital system and a medical school on the main campus, which consists of seven affiliated hospitals and a staff of over 7,000.  The amount of money generated from the hospital system is significant; about $750 million in U.S. dollars.  This is approximately the same amount of revenue generated by the total university.  The university has joint research centers with other international universities, such as Singapore, Hong Kong, and the University of California. 

Important new initiatives the university is focusing on include sustainable energy, water pollution, e-service (which is a collaboration they have with IBM), social entrepreneurship (which includes a law school supported by a Taiwanese foundation), as well as a digital library which includes over 20 universities. 

Zhejiang University is in close collaboration with both Purdue and IU.  In fact, Zhejiang University has 16 students attending Purdue this year and they also have administrative staff that are going for training.  The Zhejiang University intends to double its student exchange in the next three years.  The majority of overseas students are language students.

In the afternoon, we attended a seminar dealing with investment and cooperation opportunities in Indiana for representatives of Chinese companies seeking to invest in the state.  There were over 84 participants at this seminar.

We also visited a "vineyard" for tea.  Tea is such a traditional drink in China that I'm going to go into more specifics in a later posting.

We ended the day at a banquet hosted by the governor of Zhejiang, Lu Zushan.

Tomorrow we are traveling to Japan and I look forward to learning about these very different Asian business and social cultures.

Wednesday, September 9, 2009 – Afternoon and Evening of Day 3

This afternoon we attended the launch of the Hangzhou hybrid transit buses motorized by Cummins Engines.  Cummins sold 95 hybrid buses to Hangzhou and to the Hangzhou Public Transit.  This is a tremendous step in Hangzhou utilizing a transit system that will provide energy savings, low emissions and high performance.  The Hangzhou officials stated the importance of having the launch on 9/9/09 because of the significance the number 9 plays in the Chinese society. 

In the evening we attended a banquet hosted by the party secretary of the Zhejiang province, Zhao Hongzhu, celebrating the 22nd anniversary of the sister-state agreement between Indiana and Zhejiang.  Former Governor Robert Orr signed a sister state agreement with Zhejiang in Indianapolis in 1987. 

In the U.S. these types of banquets would typically include a speech or comments given to the entire group.  In China, it is custom for the hosts to go around to each table to give toasts.  These toasts are the means by which business is conducted.  I mentioned these toasts in a previous post and I have learned during this trip the significance the Chinese place on them.  In China, it is not appropriate to decline a toast or drink.  It is a sign of your ability to stand behind your word and your product. 

During this banquet I was able to observe first hand the beautiful silk dresses that are associated with formal Chinese dress.  The banquet also included beautiful music from Chinese children and a wonderful 10 course meal.  The ceremony and presentation are very important to the Chinese.  The fact that our delegation was a strong representation of Indiana political, business and economic development leaders demonstrated a great deal of goodwill and our serious intent to build bridges, develop economic ties and conduct business together.  It was a very beautiful event and was genuinely and sincerely attended by all the parties. 

While I've been in China I've been able to observe and learn about many aspects of the Chinese culture.  I've noticed that many women carry umbrellas or parasols.  In this society it is desirable to be as pale as possible.  Chinese women don't understand why women in the U.S. go to tanning salons and sunbathe. 

I've also learned that the education system is similar to that in Japan.  Heavy emphasis is put into what we would consider primary education (K-12) and college is typically more of a technical training, like an Ivy Tech.

I've also had the fortune of learning that jade and pearls are very popular here.  And I have purchased a few tokens of these delights to bring home with me.

Day 3 - September 9, 2009 – Traveling to Hangzhou

I was really looking forward to traveling by train to Hangzhou and I was not disappointed.  It was a great opportunity for me to learn more about the Chinese culture and see more of China's beautiful landscape.

Hangzhou is in the Zhejiang Province located about 112 miles southwest of Shanghai.    Hangzhou has a population of over 6 million people, which is small by Chinese standards, and has a beautiful fresh water lake called West Lake.  West Lake is surrounded by mountains on three sides and is very well known in China.

Many Chinese homes, especially in farm villages, have temples on top of them to pay homage to their ancestors.  Ancestry and history play a large part of the Chinese culture and the temples are another example of these influences.

I also thought it was interesting, that unlike the U.S., Chinese grooms and their families pay for about 80 percent of the cost of their weddings.

It is early in the day of September 9, 2009 – 9/9/09 – and 9 is a very lucky number in the Chinese culture.  If fact, the Chinese celebrate the ninth second, of the ninth minute, of the ninth hour, of the ninth day, of the ninth month of the ninth year.  The luck of nine did not rub off on the number four in this culture.  Four is considered very unlucky, similar to the U.S. perception of the number 13.

I look forward to reporting more about this day's events in tomorrow's blog.

September 8, 2009 - Day 2

We spent the first part of our day with the American Chamber of Commerce for a discussion on "green collar" jobs.  Chinese carbon emissions are escalating and China has seven of the 10 most polluted cities in the world.  As a result, environmental protection has become more important to the Chinese.

Later in the day we traveled to Eli Lilly's facility at the Pudong Science Park.  Lilly has over 2,000 employees in China, which means China has the second largest Lilly operation in the world.  Pudong is one of Shanghai's newest districts with a focus on three main industries: life sciences, software and integrated circuits.

Some of us were also able to visit ShangPharma.  ShangPharma provides research services to pharmaceutical and biotech companies.  They currently have over 1,600 scientists.  An interesting question was raised about how intellectual property is protected for the company and its clients.  The uncertainty of intellectual property protection is not isolated to just ShangPharma.  It is an issue that China is addressing as a country.

Following these visits we had a traditional Chinese lunch that was again served on a lazy Susan.  There were six different courses that included duck, shrimp, squid, scallops, fresh vegetables, jellyfish and fried rice.  Beer and wine were again offered.  Chinese meals are traditionally very  large.  I was curious how the society remains so thin.  Meal preparation seems to hold the answer.  They use vegetable oils and other "waist friendly" and heart healthy preparation methods.

The day concluded with a Friends of Indiana reception.  Guests included companies that have a business connection to Indiana or have an interest in doing business in Indiana.  Eli Lilly, Cummins and Alison Transmission all attended.

I'm really looking forward to traveling by train to Hangzhou tomorrow.  It will be a great opportunity for me to see some of the rural parts of China and its landscape.

We've arrived in Shanghai China!  China is the world's most populous country with a population of 1.3 billion (with over 700,000 million living in rural farm villages) and one of the largest producers and consumers of agricultural products.  Over 40 percent of China's labor force is engaged in agriculture, even though only 10 percent of the land is suitable for cultivation and crops.  China is among the world's largest producers of rice, corn, wheat, soybeans, vegetables, tea and port. Industry and construction account for about 46 percent of China's gross domestic product (GDP). 

China is the second largest producer of oil after the U.S.  Coal makes up the bulk of China's energy consumption and is the largest producer and consumer of coal in the world.  China is home to 7 of the world's top 10 most polluted cities. 

China is now one of the most important markets for U.S. exports and in 2007, U.S. exports to China totaled $65.2 billion. 

Shanghai is beautiful with many high-rise buildings and lovely architecture.  It's approximately 200-300 years old, relatively new by Chinese standards.  It's very cosmopolitan and has one of the world's largest buildings.  The highways are elevated and the transportation system is very efficient with subways and lots of taxis, but traffic jams are not uncommon. 

The average age of marriage is 25 and it's not uncommon for many generations to reside in the same household.   This makes defining China's "middle class" difficult.  A young adult will have low expenses because they live with their elders, but they have a large impact on spending.

We concluded the evening with a wonderful 7 course dinner.  Keeping with tradition, we changed chopsticks with each course.  Dinner consisted of many "firsts" for me including sautéed prawns in chile sauce, shredded chicken soup, steamed garoupa, pan-fired beef and mushrooms, and a sweetened almond crème with pastries for dessert. 

During dinner many toasts were given, as is tradition in China.   When a person receives a toast they must participate by taking a drink.  Many high ranking officials and business leaders have people who help "protect" them from toasts so the leader isn't required to drink a large amount of alcohol.  When receiving a toasting you should hold your wine glass below the glass of the person who is making the toast as a sign of respect.

Monday, Sept. 7, 2009
We had a briefing at the hotel by the U.S. Commercial Service and we talked a lot about China.  We started off breakfast before the presentation with a combined traditional Chinese/American breakfast.  On the Chinese side we had soups, dumplings, fresh seafood, salad and loose leaf tea.

China's GDP is about one-third of the U.S. and they have the third largest global economy.  China has had 5 years of rapid double-digit GDP growth.

Shanghai is not representative of China as a whole.  The standard of living between large metropolitan cities and farm villages is vast with marked differences in health care and education.  It is very cosmopolitan and an important economic center.  Like most countries, China has been impacted by the worldwide recession.  Exports are down 7.8 percent as of last year and they have had over 100,000 factory closings.  There are 26 million unemployed Chinese migrant workers.

China was the first major country to enact a stimulus package.  They injected $582 billion in their economy with a majority of the stimulus funds targeted toward infrastructure (air, railways, highways and power grids) and earthquake reconstruction. They have had a 2009 economic revival with a growth rate of 7.9 percent, mostly due to the stimulus package and an increase in lending.  Auto sales are up 25 percent and for the first time China has surpassed the United States.  Home sales have also improved recently.

Daniels was the featured speaker at a conference hosted by Cummins, Inc. for representatives of some of Cummins’ top Chinese suppler companies and members of the Indiana delegation.  Steve Chapman, Cummins’ group vice president for China and Russia, who lives in Beijing, introduced Daniels. The governor discussed Indiana’s business climate and encouraged conference attendees to visit the Hoosier state as they consider setting up operations in the U.S.  The governor was the guest of honor at a luncheon hosted by Cummins at the conclusion of the conference.

There has been quick growth in U.S. exports to China since China joined a common trade union in 2002.  There are many U.S. companies in China and a significant U.S. presence in human capital.  China has surpassed Japan as the U.S.'s largest export market behind Canada and Mexico.  U.S. companies with a presence in China tend to be profitable in their operations and include companies such as General Electric, 3M, GM, Boeing, Cargill, IBM  and Caterpillar.  The Chinese are less likely to have large corporate centers in the U.S. because they don't experience managing a worldwide work force and because labor is much more expensive in the U.S. compared to China.   The average labor cost in the U.S. is $25/hour compared to $1/hour in China.

Shanghai has a population of 20 million and is the commercial capital and one of the wealthiest areas of China, similar to Manhattan.  Shanghai is the economic powerhouse so an important area for Governor Daniels an our delegation to visit.

In the evening we met with the Shanghai Foreign Commerce Commission to discuss why Chinese companies should do business in Indiana.  Governor Daniels discussed how businesses would benefit from working with Indiana including the fact that Indiana has higher capital and foreign investments than any other U.S. state and Indiana does not raise taxes to pay for unbalanced budgets.  After we left the commerce commission, we immediately  went to the Hoosier Club of Shanghai reception at the yacht club.  Members of the Hoosier club are comprised of alumni from Indiana universities.  The governor spoke and commented on the importance of student exchange programs.
 
To end the evening we went to an authentic Chinese restaurant featuring several courses including shrimp, soft shell crab, beef and avocado.  The food here is incredible and made from many natural ingredients.