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A Chinese Mall In Milwaukee. Or How To Make The Hummer Purchase Look Good.

By Dan Harris and Steve Dickinson

I never wrote about Tengzhong's purchase of Hummer because I was absolutely certain that deal would never go through. It just never made any sense to me and I thought Tengzhong was playing it up for publicity purposes and that the Chinese government would never give its approval. It is now looking like the Hummer deal may actually go through, in which case my mistake was in not writing about it until now. So in an effort not to make the mistake of overestimating the international acumen of a Chinese company yet again, I am going to get way out in front of a Chinese company purchase that makes even less sense to me than that of Hummer. A Beijing-based company just purchased a "dormant" shopping mall in Milwaukee. Wisconsin, that is. I know about this only because I have a "Google alert" set for co-blogger Steve Dickinson and it just popped up. Seems CNN sees Steve as an expert on US shopping malls and that actually is not all that off base. Steve always likes to say that he was the lawyer on the two largest Asian (Japanese) real estate purchases in the history of the Pacific Northwest and also the lawyer on the two largest Asian (Japanese) workouts in the history of the Pacific Northwest. The article is written by Lara Farrar, a really top flight China based journalist, and it is entitled, "Coming to Milwaukee: A Chinese mega-mall?" Here are the basic facts:

A Beijing-based company will soon open a Chinese-style mega shopping mall in the most unlikely of places: Milwaukee, Wisconsin. "The cost of doing business there is very low," said Wu Li, president of Toward Group. "The people are friendly, the environment is peaceful and the pace of living is slow. It is a good place for Chinese enterprises to go abroad." Loaded with cash, credit and encouraged by the government to expand overseas, Chinese companies have been investing in property abroad at an increasingly rapid clip. While most are purchasing properties in traditional commercials centers like New York, few have ventured into the Rust Belt -- until now.

Steve is underwhelmed:

The Japanese also famously purchased U.S. commercial properties -- such as New York's Rockefeller Center and Pebble Beach Golf Course in California -- while its economy was on the rise. "Did any of them turn out well?" said Steven Dickinson, a China-based lawyer with Harris & Moure, an international business firm. "No, they turned out badly. Because the Japanese were idiots? No. It just didn't work out. What does that suggest for the Chinese? Well, I won't say, but that has been the history." Dickinson advised Japanese firms that bought a spate of American "trophy malls" in the late 1980's, a period when a strong yen and growing global influence encouraged the country to invest overseas, particularly in an overvalued U.S. commercial property market. "You go into a place like Milwaukee, and you have a country that has no clue what people in Milwaukee want in a mall and when they buy it the first thing they do is change it to run like a Japanese mall or a Korean mall or a Chinese mall," Dickinson said. "Well nobody wants to go and then they bail." A Chinese mall is exactly what Wu [Toward's President] envisions for Milwaukee.

The Mall will be called the AmAsia Plaza and Toward is "recruiting retailers from Beijing and Ningbo, a seaport in northeastern China that is also Milwaukee's sister city," to fill it. The plan is to us the mall to boost the image of Chinese brands in the United States:

Two potential candidates include Beijing Wu Yu Tai Tea Company Ltd. and Tong Sheng He, a shoe shop. The goal, he [Wu] says, is to help Chinese brands boost their image in America while enabling American businesses to connect directly with Chinese wholesalers without having to go through a middleman. "It is only a matter of time for the U.S. to recognize Chinese products are high quality," he said. "[The mall] will represent the highest levels of Chinese manufacturing." AmAsia will also feature exhibitions to "show off the rich culture of China." "One month there will be Chinese painting, another month Peking Opera or traditional dance from Yunnan province," Wu said. "Our hope is that it will become a tourist destination for local and regional communities."

That all sounds great, except I have one problem. Who from Milwaukee is going to go there? It seems Milwaukeeans are wondering about the same thing:

But will Milwaukeeans want to go there? "Most things made in China, if it is edible or made out of material, people won't buy around here anymore," said Joe Fall, owner of Culver's, a burger joint a few miles away from the shopping center. "All of the scandals that have erupted through lax manufacturing ... when I hear made in China, I think twice," he said

Wu from the Toward Group, believes "It is only a matter of time for the U.S. to recognize Chinese products are high quality." What do you think? Is China retail really ready for Milwaukee? Is Milwaukee really ready for China retail?

Full post as published by China Law Blog on February 05, 2010 (boomark / email).