Missoulian - Asian boom helps sustain state growth, experts say

The rapidly expanding economies of some Asian countries, and China in particular, are at least partially responsible for Montana's recent economic growth, according to the director of the University of Montana's Bureau of Business and Economic Research.

Sustained high demand for raw materials in China and other growing nations is helping to push commodity prices upward, which is fueling a natural resources boom in Montana, Paul Polzin told an audience of about 100 at the bureau's 32nd annual economic outlook seminar in Missoula on Friday morning.

But that's just one of the reasons why the economic slowdown gripping the rest of nation has yet to hit Montana, he said. The overall economy of the United States is expected to slow from 3.5 percent growth last year to 2.2 percent growth in 2007.

“This may make a lot of difference to a lot of people around the country, but I don't think it's going to make a lot of difference to people in Montana,” Polzin said.

Montana has also not yet seen the deceleration in home prices that the rest of the nation is facing. Eventually, he said, slower price appreciation and construction will force the state's growth to slow as well.

However, no single industry can claim to be Montana's only economic driver, he said. A handful of industries are contributing to its recent growth, with about 90 percent of that growth split among its tourism, mining, manufacturing, agriculture and government sectors, Polzin said.

Missoula has an especially diverse economic base; its strongest drivers are in university and government, health care, and construction and real estate.

Also, Missoula is the second largest trade and service center in the state, and the largest trade center in western Montana, Polzin said. However, Missoula is beginning to suffer from the “Billings disease,” he said, explaining that the Garden City is watching other western Montana communities eat away at its market share. Hamilton and Kalispell are eroding Missoula's domination as a trade center, he said, but Missoula remains a hub for health care and services.

Missoula was the third stop for the traveling half-day seminar, co-sponsored by First Interstate Bank, that will visit a total of nine Montana cities by March.

“For the past few years, this has proven to be one of the most anticipated economic seminars” in the state, said Charles Keegan, a presenter and moderator for the seminar.

As in past years, various experts took turns providing their predictions for the major sectors of the state's economy, including forest products, manufacturing, agriculture, health care, and travel and tourism industries.

However, the theme of this year's seminar is “Rising Asia and Montana: Becoming Closer Neighbors,” and the role of overseas economies in Montana was a recurring topic.

UM historian Philip West, the Mansfield professor of modern Asian affairs, kicked off the seminar with a discussion of Asia's ties to Montana, starting with legendary Montana Sen. Mike Mansfield's travels to the Far East as ambassador to Japan.

“He was making statements about becoming closer neighbors more than 20 years ago,” said West, who has himself traveled to China, Japan and Korea many times.

West pointed out that some experts predict the Chinese gross domestic product will displace the United States' by 2040, and that when it comes to the number of science and engineering graduates, the U.S. may have led the pack 15 years ago but today India and China are both turning out more.

“This is rising Asia, this is dynamic Asia,” he said.

However, it's difficult to predict whether China will be able to sustain its current rate of growth. The country faces a number of significant challenges, West said. It is, for instance, facing a true water crisis. The gap between its rural poor and urban rich is growing, which could destabilize the entire nation. Environmental pollution is rampant.

In fact, one of Bob Brown's first glimpses at the country as his plane touched down in Tianjin, China, was obscured by a mustard-colored fog.

“China has almost indescribable air pollution problems,” said Brown, a former state legislator, now a senior fellow at the University of Montana's O'Connor Center for the Rocky Mountain West.

As members of the audience finished their lunches, Brown recounted his visit to China as part of a faculty exchange with Nankai University.

China is a large, and largely mysterious, country, he said. Tianjin, he noted, is a city of 10 million - twice the size of Chicago. In fact, China has 250 cities with populations of more than 1 million.

The Chinese government is funding massive public works programs to keep its giant population employed. Fifty percent of the world's cement is being used in China, and 25 percent of the world's copper, he said. China's heavy use of petroleum, which is used in asphalt to build roads, is driving prices skyward.

With all the roads being built, it's interesting to note that very few Chinese own or drive a car, Brown said. Still, it's the goal of many Chinese to eventually own one, and an efficient, compact car called the Chery is being manufactured to make that dream more attainable for the majority of Chinese. Cherys, which are expected to hit the U.S. market in 2008, retail for a little less than $4,000.

“It's at least remotely in reach of an upwardly mobile Chinese person,” Brown said.

The per-capita income in China is the equivalent of about $15,000 in U.S. dollars.

The outlook seminar is scheduled to stop in Billings next week, followed by visits to Bozeman, Butte and Kalispell. This year, the seminar will also stop in Sidney and Miles City in early March. For more information, call (406) 243-5113 or visit the BBER's Web site at www.bber.umt.edu.

Reporter Tyler Christensen can be reached at 523-5215 or at tyler.christensen@lee.net.

Find out more

For more information about the “Rising Asia and Montana: Becoming Closer Neighbors” seminar, call (406) 243-5113 or visit the Bureau of Business and Economic Research's Web site at www.bber.umt.edu.

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