Nevada courting Chinese investors

During Nevada's bygone boom times, attracting Chinese investment to the state meant luring big-betting Asian whales to gamble in Las Vegas casinos.

The boom went bust, taking with it nearly 200,000 jobs and the notion that Nevada can build a healthy economy on gambling and little else.

So now instead of merely counting on casino whale hunters to deploy private jets and luxury hotel suites to lure gamblers and their money from China to Las Vegas, Nevada is also turning to tax incentives and conferences to woo conservative Chinese businessmen to bet on the state's mines, factories and power plants.

Whether the state can successfully shift sources for Chinese money depends in large part on Nevada's political winds and whether the electorate's demands for new jobs can trump anti-China fear mongering.

"Anything that is done with a foreign entity will be criticized more heavily," said Ryan Erwin, a Republican political consultant and adviser to Lt. Gov. Brian Krolicki, who in his last campaign was attacked for spending too much time in China.

"The blame is going to be easier to throw; whether it is fair or not is another question."

JOB HOPES TRUMP CHINA FEARS

Demand for jobs has outweighed anti-China sentiment, with Krolicki winning re-election handily in 2010 and continuing to lead efforts to boost exports to China and attract Chinese money to the state.

But fears about China, stoked in large part by worries about outsourcing of jobs and the amount of money the United States owes the Chinese government, have been used to make political attacks this year in two major Nevada campaigns.

In the special election campaign to replace former Rep. Dean Heller, R-Nev., who has been appointed to the U.S. Senate, Republican Mark Amodei used images of Chinese soldiers marching on Washington, D.C., to criticize Democrats and accused them of taking on too much debt.

And in the Democratic primary for U.S. Senate, union leaders in June blasted candidate Byron Georgiou for doing business in China.

"There is something at the base of that that is a little unnerving," said Mike Skaggs, executive director of the Nevada Economic Development Commission, about anti-China sentiment in state politics.

Skaggs said China is exactly the type of place leaders need to look to find markets for Nevada products.

"We look for high-growth economies that are having rapid population gains and a developing middle class," he said.

BRIGHT SPOT FOR NEVADA

China-related growth is one of the few bright spots in Nevada's recession-battered economy.

From 1996 through 2010, annual exports from Nevada to China increased from about $11 million to more than
$455 million, according to data provided by the state.

In recent years Chinese companies have imported copper ore, electronic circuits, pumps and processed food and ingredients.

Now Nevada officials are seeking to strengthen economic ties by going beyond exports and recruiting direct Chinese investment in business in Nevada.

In 2009, Krolicki was among American officials who signed an agreement with Chinese officials to further develop investment opportunities in the United States.

The agreement represented an important step in attracting new business to Nevada, he said.

"Stuff is happening every day, it has been happening for years, now it is just bearing fruit," Krolicki said.

There are already several projects in the works that could produce thousands of jobs in the state.

Among the most prominent is a proposal by the Chinese-run firm ENN Mojave Energy Corp. to buy about 5,400 acres near Laughlin to build a solar power plant and factory.

"Obviously in the last decade China has been one of the economic success stories on the planet," said Richard Bryan, former Nevada governor and U.S. senator, who is helping ENN on the project. "We have become increasingly dependent on them. They are equally dependent on us as the world's largest potential export market."

Patty Wade, a Reno businesswoman, is working on her own deal to get a Chinese company to make Northern Nevada its headquarters for assembling and distributing solar power system parts to markets in the United States and Canada.

"There aren't too many funding sources that are real healthy right now. China is one of them," said Wade, adding that Nevada's low taxes, lack of regulation relative to California and proximity to West Coast markets appeal to Chinese companies.

"They are looking for fat profits and squeezing out all the risks that they can," she said.

Other deals in the works include proposed investments to mine molybdenum and lithium, with the latter including the potential for facilities to process the ore near the mine or use in batteries, Skaggs said.

CHINA DEALS TAKE PATIENCE

But cutting deals that include Chinese investment isn't easy.

Distance and cultural obstacles can add months, or even years, to the time needed to put a deal together.

And foreign investment plans can run into unexpected problems that have the potential to tank deals that are close to closing.

That's what happened in 2009 when the administration of President Barack Obama killed a deal that would have involved a Chinese company buying a majority stake in a gold mine near Fallon.

At the last minute, the Committee on Foreign Investment in the United States killed the deal, presumably over concerns about Chinese control of mining property near the Fallon Naval Air Station. The committee usually approves deals but on rare occasions will reject proposals that raise concerns about national security, though what constitutes a national security concern isn't clearly defined.

The committee, which isn't subject to courts overturning its decisions, was vague in citing security concerns about the Nevada deal, leaving observers to wonder whether the abundance of military property in Nevada could tank future plans for foreign investment.

"If I had a client tell me they were selling their business to a foreign party in Nevada, it would certainly raise a concern," said Gary Jacobs, a Washington, D.C.,-based attorney who worked on the deal with Firstgold, the Nevada company that tried to sell to the Chinese. "It illustrates in certain parts of the country there is a heightened awareness."

NEVADA PLUNGES FORWARD

Despite hurdles and uncertainty, Nevada is plunging forward with plans to attract more direct foreign investment and will continue to target China as a source.

Under Gov. Brian Sandoval, the state's annual economic development budget will increase from about $4.6 million to around $7 million, Skaggs said.

It's a big increase percentage-wise but a pittance compared with what states such as Texas, Ohio and others are spending.

But Nevada does have other assets.

One strength is the potential to offer what are known as EB5 visas.

The visas reward foreign investors who create jobs with a fast-track to legal residency for themselves and family members. One of the requirements is that investment is made in areas of high unemployment, such as Nevada.

"They are looking for citizenship; that is one thing we can leverage," Wade said.

With the state working on reorganizing its economic development efforts to improve accountability and results, observers of the process say that if Nevada's Chinese relationships produce jobs, concerns about political fallout will evaporate.

"Our first objective needs to be creating jobs in Nevada," said Dan Hart, a consultant to Georgiou, the Senate candidate who was criticized for having Chinese business relationships.

"If the investment comes from China, so be it."