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United Taconite, near Eveleth, is partially owned by the Chinese firm Laiwu Steel. (MPR file photo)

Gov. Pawlenty's recent trade mission to China concluded with talk of a possible Chinese delegation coming to Minnesota. Such a visit could give Chinese investors a better idea of what Minnesota has to offer. There's currently meager Chinese investment in the United States, and most of it is on the coasts. But some trade experts say there's a lot about the Midwest regional economy that could attract Chinese investors.

St. Paul, Minn. — In some parts of the U.S., including the state of Minnesota, Chinese investment is but a tiny blip on the radar. The Minnesota Department of Employment and Economic Development doesn't even track Chinese investments individually. The department lumps them together with investments from several other Asian countries.

But state officials do enthusiastically point to one particular example of Chinese investment here -- the Chinese firm Laiwu Steel owns 30 percent of United Taconite on the Iron Range.

Experts are reluctant to speculate about what other enterprises might draw Chinese investment to the Midwest. But the Iron Range example does follow a trend of Chinese investment. According to Nicholas Lardy, a senior fellow at the Institute for International Economics, the Chinese have put money into U.S. natural resources.

I think most (Chinese) companies will be logistics companies. They would use Minnesota as a hub to distribute their products into neighboring states. - Ming Yao, China Council for the Promotion of International Trade

"Whether it's phosphates in Florida, iron ore deposits in the upper Midwest, timber-cutting rights in the Pacific Northwest -- most of it has been in the natural resources area," Lardy says.

But Ming Yao, the deputy director of the non-profit China Council for the Promotion of International Trade, says if more Chinese investors come to the Midwest in particular, it will likely be for a different reason -- its central location.

"I think most companies will be logistics companies," Yao says. "They would rent warehousing here, and they would use Minnesota as a hub to distribute their products into neighboring states. This would be a beginning of a wave of Chinese investors coming to Minnesota."

The ease with which companies can move goods throughout the Midwest gave China's largest auto parts supplier, Wanxiang Group, reason to set up ventures in the Midwest.

Gary Wetzel, the chief operating officer for Wanxiang America, says it's much easier to distribute products to automakers in Detroit from a Midwest location.

"But it's not so easy to do if your facility's in China," Wetzel says. "It just takes a long time for product to get here, and there are lots of hurdles to cross on the way. The wind blows the wrong way, and the ship is off-course, and it might be off by a day or two. "

There are signs that Chinese companies want to learn more about the advantages of doing business in the Midwest. Chinese officials requested the establishment of the Chicago-based MidWest U.S.-China Association. The organization helps educate Chinese companies about investment potential in Midwestern cities.

According to the group's president, John Rogers, the interest is reciprocated. He says a growing number of officials in many Midwestern cities want to raise their profile to Chinese investors.

"The local economic development officials really see jobs. They see it day-to-day and on a very personal level," Rogers says. "They're very interested in attracting what we think is going to be a larger wave of investment than what we saw of Japanese investment in the '70s and '80s."

The commissioner of the Minnesota Department of Employment and Economic Development, Matt Kramer, wants to see Chinese investment here. Kramer says Minnesota's economy is healthy now, but foreign investment could help it stay strong.

"When we get investments, or what I call 'deals,' with other countries, with other companies, it further diversifies our economy," says Kramer. "So we are less dependent on the cyclical upswings of our regional economy, our state economy, and our national economy."

But Ming Yao of the China Council for the Promotion of International Trade says many Chinese companies just aren't ready for foreign investments, because they were in a closed economy until about 25 years ago. He says that means they don't have international experience.

"And also, they don't have the financial resources they need in order to make bold moves into a totally new market," Yao adds.

Yao says Chinese investors are more likely to aim small and miss small. So while he sees strong potential for Chinese investment in Minnesota, he says it will probably take time for that wave to hit.