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Grand Forks’ Fufeng deal — expected to bring hundreds of jobs — runs up against anxieties over China

But for backers of the new factory — and even for some tough-on-China observers — these questions miss a bigger point.

Fufeng Group1.jpg
Fufeng Group USA Chief Operating Officer Eric Chutorash meets with the Local Government Advisory Committee, which includes select members from all four of Grand Forks’ property-taxing groups Wednesday, in this photo from Jan. 12, 2022.
Eric Hylden/Grand Forks Herald<br/>
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GRAND FORKS — When city leaders announced Fufeng Group was poised to build a new corn-milling facility in Grand Forks, it was big, exciting news — dangling the prospect of hundreds of new jobs for a city that’s had slow workforce growth for decades.

Then came the chatter about China.

In the weeks since the prospective deal was announced, it’s become entangled in American anxieties over the Far East, where Fufeng Group is based and where the United States increasingly sees its biggest international rival. That’s made some observers wary of a deal that puts a China-based company in the U.S. heartland — and has raised questions about Fufeng Group’s ties to a nation that’s dismal on human rights.

“In what direction does your moral compass point?” Randy Oliver, a Northwood resident, posed to Grand Forks leaders in a recent letter to the Herald. “Does it point to morality, human rights and patriotism? Or does your moral compass point only to the money, humanity and patriotism be damned!”

But for backers of the new factory — and even for some tough-on-China observers — these questions miss a bigger point. China has been doing big agricultural business in the United States for years, buoying prices for North Dakota farmers and, in this case, creating American jobs.

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According to the North Dakota Corn Utilization Council, roughly one third of last year’s U.S. corn exports were sold to China. Those are big numbers, and heartening ones for growers, pushing prices up and providing a market for a national food surplus.

“We know that the Chinese population is significant. They are a major world customer,” Jean Henning, the utilization council’s chief, said in an interview. “So for us to have that market, that is a huge impact on the price of corn our farmers here in North Dakota really see.”

But suspicions of China’s reach — and its global ambitions — persist. Sen. Kevin Cramer, R-N.D, said the Fufeng Group project in Grand Forks “requires due diligence,” because “China is not a reliable partner.”

“The critical missions our military executes at Grand Forks Air Force Base must be protected, and the jobs and economic benefits for Grand Forks and North Dakota farmers must be balanced with the long-term concerns of China infiltrating our food supply chains,” he said in a statement provided by his office.

‘Strategic adversary’

China’s growing presence in the American agricultural sector has raised alarm bells — most recently this past year. Politico reports that in early 2020, Chinese owners “controlled about 192,000 agricultural acres in the U.S., worth $1.9 billion,” plus “major agribusinesses” like Smithfield Foods.

“America cannot allow China to control our food supply,” former Vice President Mike Pence said in July , calling for Washington leaders to “end all farm subsidies for land owned by foreign nationals.”

U.S. Rep. Kelly Armstrong, R-N.D., told KX news last year that China’s land-buying practices are a serious concern, and that there’s “no real distinction” between Chinese big business and the country’s government.

“I don’t think there is any doubt that our biggest strategic adversary moving into the 21st century is China,” he said in July. “We compete with them everywhere. They have a 100-year plan. Their goal is to overtake and usurp the United States, but I think more importantly … we promote democracy. You can look at how we do that in Africa. And that just simply isn’t the case with China.”

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But on the question of Fufeng Group’s new plant, Armstrong argues that it’s investment in a new business, and not in a land-buying scheme.

“Our ag markets are completely intertwined with China now — they’re going to be in the future. They’re the world’s second largest economy,” Armstrong told the Herald this week. Whether it’s fuel or food or feed, he said, “we can hold them accountable and sell our ag products to them at the same time.”

There’s a similar logic for Gov. Doug Burgum, who traveled to Grand Forks to help woo Fufeng Group leaders to build the new plant. If corn is already exported out of North Dakota, keeping it here to process it is a win for the state’s economy.

“With Fufeng in Grand Forks, it will be North Dakota — not China — that reaps the benefits of the jobs, facilities, economic activity and tax revenue associated with processing the corn,” he said in a statement provided by his office. “And, most importantly, it will give our state’s farmers a more profitable market for their corn by reducing transportation costs.”

Ditto for Sen. John Hoeven, R-N.D., who stressed not just the importance of “due diligence” in negotiating the project, but also the “better value” farmers will get selling to such a nearby plant.

RELATED: Gov. Doug Burgum, Fufeng Group leaders visit Grand Forks as city finalizes deal

There are also worries about what happens to North Dakota’s economy in the result of a future trade war, like the spat President Donald Trump’s administration had with China. UND economist David Flynn points out that bringing a Chinese corn-buyer to Grand Forks — tying the local economy and local jobs more tightly to China — could put the region at risk.

“The big risk or concern I would see is that, suddenly, in an effort to exert pressure on the United States, China talks about changing corn-buying practices,” Flynn said, adding that ripples in the market could easily come from either country. “Those are the kinds of concerns or worries you have to have at a larger policy level.”

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Frayne Olson, an agricultural economist at NDSU, downplayed concerns about China’s ambitions in the American agricultural sector. Yes, American ag land is part of some portfolios — but it’s hardly a crisis for the U.S. food supply. The same goes for Chinese acquisitions of big agribusinesses; there’s still a lot of global competition, Olson said.

“We also had some of these same kinds of concerns and issues when the Japanese started buying not only some U.S. agricultural processing facilities, but also got into joint ventures with U.S. (agriculture) firms,” he said, pointing out far-reaching investments that persist in manufacturing.

“You look at Nissan and Toyota … they have manufacturing plants here in the U.S., and there’s definitely economic activity because of that,” he said.

Fufeng Group

Fufeng Group, according to company documents , is a sprawling company — traded on the Hong Kong Stock Exchange, with dozens of subsidiaries incorporated in China, Hong Kong, Singapore and beyond. Notably, one of them — First Biotech, Inc. — is already incorporated in the U.S.

The company’s products run from starch sweeteners to various food additives to xanthan gum, all of which have been affected by the pandemic. Its 2020 performance saw flagging demand in China amid COVID and rising corn prices. Despite those challenges, though, the company told shareholders in last year’s corporate report that it met its 2020 production and sales goals.

The potential new plant in Grand Forks was announced in November. It’ll bring more than 200 jobs to the community, according to estimates, and indirectly create hundreds more, consuming about 25 million bushels of corn each year as it produces animal feed products.

Eric Chutorash, the COO of Fufeng USA, Inc. — the American subsidiary handling the Grand Forks project — said it will produce corn gluten meal, corn gluten feed, lysine and threonine, all primarily for sale in the “animal nutrition segment.” Through a city economic official, he declined an interview with the Herald, but answered questions for this report via email.

RELATED: Company chooses Grand Forks as site for ‘historic’ agribusiness project

“The majority of the product will be sold to customers in the U.S.,” he wrote in an email to the Herald. “We already have U.S. sales that are from imported products, and this will be transitioned to U.S. supply. We envision that we will supply some volumes to the (European Union) and South America over time, where we also already have existing sales, but this is not a primary focus at this point in time.”

Critics of the company have pointed out that it’s headquartered in China, where the famously authoritarian Chinese Communist Party is known for not only tight control not only of the political world, but of the business sector , too. And according to company documents, Fufeng Group Chairman Li Xuechun was a member of the Shandong Province 12th People’s Congress (Chutorash said Li is no longer a member).

James McGregor is a former Wall Street Journal reporter posted in Taiwan and in China, and is now a consultant with APCO Worldwide, specializing in relations with China (he has also covered Washington, D.C., for Knight-Ridder, the Grand Forks Herald’s former parent company). He said Li’s title doesn’t mean much — beyond that Li is leading a business within a communist country, and had to play by communist rules.

“It doesn’t mean anything other than the guy is looking out for himself,” McGregor said. “If you’re a big business person in China, of course you’re going to be a member of the party and connected to some kind of government organization, like the city legislature or the national legislature or the provincial legislature. You’ll be a delegate — it has no meaning, other than the guy is just dealing with his own system.”

Perhaps the most troubling aspect of business with China is the country’s treatment of its Uyghur population, a Muslim ethnic group living in the country’s northwestern region. China has been accused of detaining significant numbers of Uyghurs in “re-education camps” and into conditions of forced labor

Chutorash said that neither Fufeng Group nor any of its subsidiaries have ever relied on forced Uyghur labor. And Grand Forks Mayor Brandon Bochenski provided an audit of a Xinjiang Fufeng Biotechnologies facility, which he said was performed by a third party hired by Fufeng at the group’s only Xinjiang Province facility. It says that “no forced labor was identified during the audit.”

Business as usual?

The concerns about China, though, have provided a steady background hum to ongoing negotiations in the deal, which have continued for weeks toward a financial agreement to actually bring a new facility to Grand forks.

Those complaints have grown loud enough that the city has had to respond. Mayor Brandon Bochenski, in an email to a critic of the deal, compared Fufeng Group to Cirrus Aircraft — which was acquired by a Chinese company a decade ago, boasts a Dutch CEO and exports its products around the world. And critically, Bochenski pointed out, the company has roughly 300 jobs in Grand Forks.

“We are no fan of the Chinese government and their increased hostility over the past number of years,” Bochenski wrote. “This company has zero Chinese government ownership and is listed on the Hong Kong Stock exchange.”

Bochenski’s email is a defense of the Fufeng deal as business-as-usual. But worries over China have introduced an unexpected wrinkle into ongoing talks with the company; critics point to Fufeng Group Chairman Li’s apparent government service in the communist country, as well as China’s poor record on human rights.

City Council member Jeannie Mock said she’s heard from a constituent — who she said likely represents the worries of plenty more — who frets about a business relationship with a company from communist China. At a recent City Hall meeting, she asked about the company’s ownership; she’s satisfied with the answer she got. She also said she’s glad she asked.

“I don’t believe in shying away from these questions,” she said. “I just want people to hear the answer so they can evaluate it for themselves.”

Bochenski spoke with the Herald earlier this week. He argues that doing business with Fufeng Group — a private company — isn’t the same as doing business with the Chinese government.

“Obviously, tensions have increased between governments,” he said. “It’s always a challenge when you see those types of tensions.”

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