Presidents Joe Biden and Xi Jinping are trying to ease tensions and calm trade fights between the world's top economies. The collapse of a project in the American heartland shows just how deep a chill has set in.Biden dispatched Secretary of State Antony Blinken for a visit to Beijing and a meeting with Xi last week, and Treasury Secretary Janet Yellen is planning her own visit in July, according to people familiar with the matter. But Biden’s gestures are accompanied by a souring national mood on China. Underneath the pomp of top-tier visits by US officials, there is growing resentment among ordinary Americans and state and local politicians toward Chinese attempts at US investment. There’s no clearer example of the grassroots shift in sentiment than in Grand Forks, North Dakota, where a failed agricultural complex led to new proposals at both the federal and state level to restrict China-linked development.The city this year abandoned a project that, just two years earlier, it had aggressively sought as an economic bonanza: a $700 million corn mill that would have risen from rich farmland on the outskirts of the community. The mill faced a groundswell of opposition, especially regarding its owner: a Chinese company, Fufeng Group.
The saga touched off a battle emblematic of growing US angst about Chinese investment. It combined swirling local concerns, opaque federal rules, saber-rattling politicians and potential loopholes in security laws, ultimately concluding with an unusual public warning from the Air Force that the corn mill posed a national security threat.The ripples reached beyond Grand Forks, as Biden’s administration in May quietly moved to tighten scrutiny of foreign property purchases near the city’s Air Force base and other military facilities.
Read more: Blinken’s China Trip Yields Best Possible Result: More TalksThe abandoned corn mill also illustrates a political shift. Politicians who once backed the project— including North Dakota’s governor, Doug Burgum, a Republican running for president — now oppose it. Some Republican-led states, including Burgum’s, seek to restrict or outright ban Chinese property purchases. The mayor of Grand Forks, Brandon Bochenski, says cities like his shouldn’t be left to determine foreign investment policy.
“Until there is an actual strategy, I don’t see how you can have really any investment from China — whether it’s ag, or tech, or anything,” Bochenski said in an interview in a city building that once housed the local newspaper.
“Right now, I think that’s the problem,” he said. "There’s no clear direction from the federal government.”
`Great Day for Grand Forks’
Fufeng Group’s corn mill once looked like an economic prize. It promised hundreds of jobs and enough corn products to fill 180 train cars a week. Grand Forks won the project over about two dozen other Midwest locations.
Fufeng Group, founded in 1999 and listed on the Hong Kong stock exchange, is the world’s largest manufacturer of the common food additives monosodium glutamate and xanthan gum, according to its website. Its investors include Treetop Asset Management, Blackrock Inc. and the Vanguard Group.
The company’s US representatives declined interview requests but said in written responses to questions that it “does not pose a national security threat.”
“Our plant is designed to mill corn and make livestock feed ingredients,” the company’s spokespeople said. “Neither the US company nor the Fufeng Group have any ties to any government, political party, or official.”
Fufeng’s US subsidiary sought in the spring of 2020 to build its first US wet corn mill. The endeavor was dubbed “Project Peony,” after a flower popular in both China and the US. Grand Forks officials were jubilant when the company notified them they’d won.
“Great Day for Grand Forks, Great Day for North Dakota!” Keith Lund, who leads the city’s economic development agency, wrote in an email.
Local opposition focused at first on concerns such as pollution, subsidies and land use, but soon shifted to the mill’s ownership.
"Larger and louder than all of the other concerns was a fear of Communist China," said Katie Dachtler, the only member of the city council to initially vote against the project, who has since left office. "And we can't talk about the Chinese without them being 'communists.'"
People in Grand Forks who opposed the project from the start say their political leaders should have seen the trouble coming.“You come here because you can get away with stuff,” said Frank Matejcek, a farmer who lives just outside the city.
“Everyone kept saying they would do due diligence, and look into this, and the company had been vetted and all this stuff, when actually none of this was happening,’’ he said.
Fufeng Fighters
The city and Fufeng signed a deal in May 2022. But as complaints mounted, city leaders grappled for a clear answer about whether the mill could be a front for Chinese spies. City and state officials, including its two senators and the governor, requested a review by the Committee on Foreign Investment in the US, or CFIUS, a secretive panel led by Yellen.
It would not have been Grand Forks’s first experience doing business with China. Cirrus Aircraft Corp., which operates a factory in the city, is owned by a Chinese government-controlled firm, China Aviation Industry General Aircraft. Cirrus’s purchase by CAIGA in 2011 was subject to a CFIUS review, which yielded an agreement allowing the government to closely monitor the business’s operations.
But CFIUS told state and local officials it didn’t have jurisdiction over the mill. Building the project on land Fufeng had already bought — for $26,000 an acre, according to its opponents, a price they regarded as suspiciously inflated — wasn’t considered an acquisition, and the property wasn’t close enough to the base to trigger a probe, under rules in effect at the time.
“If a wet corn-milling plant run by Fufeng isn’t under CFIUS jurisdiction, then CFIUS has a problem,” said Kelly Armstrong, the state’s lone House member.
The Air Force would have its own say. In January, the service’s assistant secretary, Andrew Hunter, wrote to the state’s two senators, Kevin Cramer and John Hoeven. The Air Force’s “unambiguous” view, Hunter wrote, was that the mill posed “a significant threat to national security, with both near- and long-term risks.”
The one-page letter didn’t elaborate. But political support evaporated, and the city council voted Feb. 6 to end the project — two days after President Joe Biden ordered an alleged Chinese surveillance balloon shot down after it floated across the country.
Spokespeople for the Air Force and the Grand Forks base declined further comment.
Cramer, who received a classified briefing on the project in December, said he has little doubt about Fufeng’s motive.
“It was highly likely that the investment was made to take advantage of its proximity of the Air Force base,” the senator said in an interview.
Local opponents — who call themselves the Fufeng Fighters, a play on the name of the rock band Foo Fighters — say the federal government should have been more involved from the start.
“It’s easy to see how there needs to be more federal scrutiny,” said Ben Grzadzielewski, a contractor who organized a petition over a range of concerns, including the mill’s environmental impact and public subsidies. “Because at a local level, it’s pretty easy to convince them of how great things are, and get them to run with it.”
Burgum Reversal
Burgum, the governor who helped woo Fufeng to North Dakota, “initially expressed support for the value that a wet corn mill would add for the area’s corn growers and the economic benefits to the region,” his spokesman Mike Nowatzki said in a statement.
But he said the governor “urged an expedited review of the land purchase and shared our U.S. senators’ concerns about the project several months” before it was canceled.
The project’s demise has been felt far beyond Grand Forks.
The Treasury Department in May proposed adding the Grand Forks base and seven others to a list of military facilities around which foreign investment within 100 miles triggers a CFIUS review.
The North Dakota saga ended hopes of reviving plans by Chinese state-owned food processor Cofco Corp. to purchase an interest in a Cargill Inc. and CHS Inc. shipping terminal, according to a person familiar with the proposed transaction.
North Dakota passed a law this year banning foreign purchases of agricultural land, except by Canadians. A similar bill in Texas passed the state’s Senate but died in the House. Florida’s government has been sued over a law it adopted earlier this year banning all property purchases by Chinese nationals.
Fufeng still owns its Grand Forks land but is seeking “alternative options.” The US political climate is working against it.
Bob Scott, the mayor of Sioux City, Iowa, another city Fufeng considered, said in an interview that there’s no longer any interest. “Following that, up in North Dakota, they’re going to have a very, very difficult time getting a community,” he said.
--With assistance from Tyler Kendall, Dave Merrill, Hallie Gu and Isis Almeida.