China, November 2001

By Secretary of State Sam Reed

 

 

The way the stereotypes describe it, China is a Communist country with ubiquitous propaganda, mao jackets, packs of bicyclists and few motor cars or modern buildings. On a recent, privately-sponsored trade mission, our 22-person delegation found something entirely different: a country with a rapidly growing economy and vast potential for Washington State trade.

In fact, we were surprised at the influence Washington State has already had on China. We flew to and all around the country on Boeing airplanes and watched students on Chinese television learn Microsoft Excel. We even stopped in a Beijing Starbucks. The presence of the western world is unmistakable. In Beijing, we found McDonald’s and Kentucky Fried Chicken on every block, American cars, giant skyscrapers to rival Seattle’s tallest, American equipment and factories, and entrepreneurs putting their American educations to work. Yet, as we were soon to learn, in terms of trade potential in China, the Northwest has only scratched the surface.

It is a country in rapid transformation with ample resources, a population yearning for more development, and competitive labor. It is a region with plenty of unchartered territory and a government determined to work well with business to encourage growth. The country, however, is moving so quickly, Washington State’s private and public sectors must work together now to seize the moment.

In November, I was fortunate enough to help. As you know, the government in China plays a considerable role in business development. There’s a strong belief in protocol and discussing business in person. As Secretary of State, I was able to open doors by introducing Washington’s key business people to their Chinese counterparts and Chinese elected officials. Our discussions were eye-opening; they revealed the most fruitful business deals for the Northwest are not only in Hong Kong and Shanghai.

From our vantage point, the areas ripe for growth are in northern China. In ten or twenty years, the economic engine for the country may shift thousands of miles from Hong Kong to the north. One example is Baotou, which looks about the size of Spokane. But it has two million people. The area is rich in natural resources like natural gas, coal, and rare earth. The people are eager to further trade with the state of Washington and enhance business and cultural development. We met Mr. Wang Fong Zhi, the Vice Chairman of the Inner Mongolian Autonomous Region who specifically expressed his interest in business dealings with the Northwest. We met a couple of entrepreneurs who bought state-owned industries in the city for a dollar each and transformed them into million-dollar enterprises. A meeting in that city initially set up for five to fifteen participants drew a crowd of 120 people--- all wanting to meet and negotiate business with the delegation from Washington State.

The welcome and interest we received in Baotou City was true in each of our destinations: Beijing, Guangzhou and Macao.

In particular, five business discussions during our November trip seem most significant and likely to materialize into profitable deals for the state of Washington:

  • Exporting auto parts to China
  • Importing cashmere for customized logo clothing
  • Establishing western style supermarkets in China
  • Importing Asian specialty food products to the United States
  • Providing construction services for the 2008 Olympics in Beijing

Our November team is now in the follow up phase of this trade mission enhancing relationships and working out details to help these projects solidify.

With this kind of potential and transformation in China noted worldwide, projections figure the country’s trade status with Washington State will climb until it is our number one trading partner in ten years. Other predictions are as follows:

  • China’s population of 1.3 billion and the economic growth rate are both expected to increase 6% to 10% each year;
  • Over the next 20 years, one million American aerospace jobs in America will be directly supported by The Boeing Company’s airplane sales to China;
  • According to the World Bank, China will spend an estimated $750 billion in new infrastructure over the next decade;
  • Goldman Sachs, a global investment banking and securities firm, estimates China’s entry into the World Trade Organization will could result in $13 billion in new U.S. exports by 2005.

Trade in China does not come without caution. The United States Embassy warns:

  • China often lacks predictability in it business environment;
  • China has a government that tends to be mercantilist and protectionist;
  • China has the remnants of a planned economy.

With our nation on high alert, expanding opportunity for America and the Northwest has never seemed more necessary. We’re fortunate to live in a state with such a natural role in our globalizing economy. After all, we are considered the “Gateway to East Asia”. Yet history has taught us well opportunity is never automatic. Success will only follow hard work, good judgment, and commitment of both the private and public sectors. The first step is an open attitude to put an end to the country’s stereotypes and position Washington for growth.

(Statistical information provided by the Washington State Department of Trade & Economic Development.)


By Andreas Udbye, Executive Director, World Trade Center Tacoma

1. BEIJING 12 million people
2. BAUTOU (Inner Mongolia) 2 million people
3. BEIJING  
4. GUANGZHOU  
5. MACAU 438,000 people
6. HONG KONG 6.5 million people

The World Trade Center's Andreas Udbye also visited Tacoma's sister city, Fuzhou (6.3 million people), prior to meeting up with the delegation in Beijing.

SOME NOTES ON CHINA AND WTO (info from briefings with officials):

  • China's WTO membership to exert far-reaching influence on its economy.
  • The shift of the role of the government from an omnipotent player in the economy to a rule maker of the market.
  • Government required to withdraw State ownership from non-strategic sectors.
  • Government will have to drop its personnel controls in enterprises.
  • Efficiency will improve.
  • The legal system will be modified and perfected.
  • China will be taking over manufacturing from the rest of the Asian region.
  • Surge in imports expected.
  • Unclear what the net effect on China’s trade balance will be.
  • More foreign firms will bring in new technologies urgently needed for industrial upgrades.
  • The country's 800 million farmers will find it hard to compete with foreign products from modern Western farms.
  • Tariffs on agricultural commodities will fall from 31% average to 17% average (14% on key U.S. agricultural products)
  • China's strictly regulated and struggling financial institutions will have hard time competing with foreign banks and lenders.
  • Chinese consumers will benefit from lower prices, improved services and higher quality.
  • For example, the tariffs on auto imports will fall from 80% to 25% by 2006.
  • The WTO entry is not expected to make the impoverished western areas rich overnight, in fact, the economic development gap between the eastern and western areas may be enlarged.
  • The average GDP in the western areas is only 60% of the national average.
  • Inner Mongolia, the huge autonomous region in the north (almost the size of Alaska), has ambitious growth plans.  By 2010 it wants to be at the Chinese GDP average, and by 2015 in the forefront.
  • Presently, the market capitalization of the Chinese stock market is about US$350 billion, making it the biggest Asian market after Japan's. 

Some current trade data (2001):

  • China's GDP rose 7.6% in the first nine months of 2001.
  • Foreign exchange reserves were US$ 200 billion at the end of October.
  • China's exports rose 7% in the first nine months of the year.
  • The U.S. is now China’s second largest trading partner.
  • China is now the U.S.’s fourth largest trading partner.
  • China's entry into the WTO is expected to double the country's imports of US goods by the end of the decade to $44 billion (average annual growth of 7%)
  • Foreign Direct Investment for the first nine months of 2001 were 20.7% higher than the same period last year.
  • China now produces more than 2 million cars per year (four times higher than ten years ago)
  • China's foreign trade declined by 0.1% in October, however, for the first ten months of the year, trade is up 7.9% (imports $200 billion; exports $218 billion.
  • The Pearl River Delta, China's richest area, has a year 2000 GDP per capita of $2,800.  The national average was $870.
  • Macau's per capita GDP was $15,200, while Hong Kong’s was $24,000.

PARTICIPANTS IN THE WASHINGTON STATE DELEGATION:

Mission Leaders:

Sam Reed Secretary of State State of Washington Olympia
Ron Chow Director Seattle Pacific Trading Lakewood
David Graybill President Tacoma-Pierce County
Chamber of Commerce
Tacoma
Andreas Udbye Executive Director World Trade Center Tacoma Tacoma

Participants (in alphabetical order):

Larry Bourland Consultant Supervalu Inc. Tacoma
Lei Wei Chao President Two Thousand Eight Inc. Seattle
Jae Chung Director Seattle Pacific Trading Tacoma
Wendy Copper Partner Marketplace of Queen Anne Seattle
Stephanie Coy Marketing Manager World Trade Center Tacoma Tacoma
Linda Danforth District Director Congressman Adam Smith Tacoma
Lucy deYoung President Red Rock Enterprises Woodinville
Steven Excell Asst. Secretary Secretary of State's Office Olympia
Patsy Excell   Secretary of State's Office Olympia
Jeff Gerbing President Gerbing's Heated Clothing Union
Paul Kapioski Member Associated Grocers Seattle
King Lee President Monarch Trading Corp. Seattle
John Brian Losh Chairman and CEO Ewing & Clark Inc. Seattle
Patrick McDonald Special Assistant Secretary of State's Office Olympia
Margie Reed   Secretary of State's Office Olympia
Raymond Wong Director Seattle-Pacific Trading Seattle

Total: 20 participants

 

"Please note the following disclaimer:  The mission reports are written during or right after the missions by mission participants.  The views, comments and statements in the reports are solely their own, and do not necessarily reflect the opinions or any official positions of this office.  The reports are reproduced here because they give an interesting and detailed account of the day-to-day experiences and impressions that participants typically encounter on these missions."