Gov. Phil Bredesen and a statewide delegation of around 100 political and business leaders from across Tennessee recently spent 10 days on a trade mission to China, a cash-rich country of 1.4 billion people that will one day be the world's largest economy.

The aim was to foster greater economic ties between Tennessee and China, currently Tennessee's third largest trade partner. During the trip, the state opened an economic development office in Beijing. Bredesen met with Mme. Ma Xiuhong, China's vice minister of commerce, signing a memorandum of understanding establishing "next steps" in the trade relationship between Tennessee and China. One Tennessee business, Seymour-based technology company Phenotype Screening, announced it was entering the Chinese market.

Given China's fast-expanding economy, Tennessee companies clearly stand to benefit from strengthening ties and trade there, but what about Chinese investment in Tennessee? The buying out of American businesses with all that cash in an effort to expand China's footprint around the world?

Chinese expansion beyond its borders is hamstrung by a number of factors, not the least of which are human rights concerns. But hurdles of corporate conscience aside—and it seems inevitable that they will be put aside—China's increasing interest in the acquisition of American companies is too conspicuous to ignore. Steven G. Livingston, professor of political science and a senior research associate at the Business and Economic Research Center at Middle Tennessee State University (who is also the editor of the quarterly Global Commerce) predicts an increasing rate of Chinese companies buying out American-based commodities companies, including some in Tennessee. Though not definable as "green field" development in economic expansion lingo—bringing new jobs, new plants and new tax revenues into play—such acquisition is a positive for shareholders of a particular company, and often leads to new investment in existing businesses that would not have otherwise occurred.

Livingston also stresses that the Chinese are not in the business of slashing workforce or relocating operations.

"That's the difference between a hedge fund or something else buying it versus the Chinese. They don't focus so much on rate of return. In fact, they are focused on getting long-term access to materials and manufacturing capacity," Livingston says. "The Chinese have a lot of cash, and they are looking down the road and seeing where the big bottlenecks are going to be in their economy, Much of it is going to be raw material-related, so they are going out and trying to lock that stuff up."

There is a case in point right here in Tennessee. At roughly the same time that Tennessee officials were traveling in China this past October, Fushi International (NASDAQ: FSIN), a leading Chinese manufacturer of bimetallic wire, acquired its main competitor, Fayetteville, Tenn.-based Copperweld Bimetallics. The purchase price of $22.5 million, including $8 million in assumed debt, is especially significant in that it represents Tennessee's largest investment to date by a company from the People's Republic of China. At present, there are less than a dozen Chinese-owned manufacturing operations operating in North America.

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Copperweld is to copper-clad wire what Kleenex is to tissue. America's leading manufacturer serving the communications, utility and transportation industries in both the United States and international markets, it generated $70 million in revenue for the year ended in June 2007.

The Copperweld acquisition is the latest event in a very busy year for Fushi as the company was listed on the NASDAQ Global Market in August. It is now the pre-eminent supplier of bimetallic products in the world with pro forma revenue for the twelve months ended June 30, 2007 of approximately $152 million.

Bredesen met with Fushi officials, including Chairman and CEO Mr. Li Fu, during his trade mission. Nathan Ward, director of economic development for the Fayetteville-Lincoln County Industrial Development Board, was also on that trip and made building the relationship with Fushi officials his primary focus. Ward even took a multi-day side trip to Fushi world headquarters to tour the company's facilities.

So what's next for Copperweld under Chinese ownership?

Last week, Fushi announced plans to invest approximately $3.2 million in new machinery for its Copperweld facility. The new machinery is set to be installed in the first quarter and operational in the second quarter of 2008. The equipment will enable the drawing, bunching and stranding of copper-clad aluminum (CCA) wire for the rapidly growing energy sector. It will bolster Copperweld's ability to manufacture a wider array of finished goods directly and allow them to discontinue outsourcing some phases of their production to other companies.

Fushi's facility in Dalian, China, specializes in CCA and has developed the capability to draw bimetallic wire down to diameters as small as 0.03 millimeters—about one-fifth that of the average human hair. The wire's lightweight aluminum core is bonded to an outer copper strip. The combination of the two metals has potential in a range of applications for customers as varied as automotive suppliers, appliance companies and electronics' manufacturers, who use a variety of wire constructions. As a result of these investments, Fushi will be manufacturing those new products in Fayetteville.

"One of our biggest challenges has been getting people to wake up to the reality that the Fayetteville facility is an important part of our future moving forward," says Copperweld CEO Chris Finley, the person overseeing worldwide manufacturing and sales for Fushi, including Copperweld's Fayetteville plant. "By expanding our product line, we will reverse some of the value migration we have experienced here in years past. Fushi management in China wants the Tennessee facility to grow its operation and move further along the value-added supply chain."

Are there more Copperweld's out there ripe for the plucking by Chinese companies? "Many more," Livingston says.

Residents of Tennessee communities that had local leadership representatives on the recent China trade mission have reason to be encouraged. Clearly, the trip gave local leadership the exposure they needed to lay the groundwork for future business opportunities in China, or to help keep these communities top of mind the next time a deal with China comes around.