China: Exploring the Possibilities

China is a country that stimulates much curiosity for many people. This curiosity comes from the fact known by most people that China is a country churning with activity and a growing economy that has been among the most robust in the world. It is a country with tremendous dynamism and opportunity, while creating wealth at staggering rates. However, it must also confront its numerous social and environmental challenges that if not addressed, will eventually slow the country’s progress.

I recently had the good fortune to spend seven days in China as part of a delegation of presidents of Chambers of Commerce representing the Metro Cities Council of the American Chamber of Commerce Executives. I felt fortunate our trip was sponsored by a company known as Citslink International, Inc. They invited 30 Chamber executives to visit the People’s Republic of China to learn about economic development activities occurring in the four cities of Beijing, Shanghai, Hangzhou and Souzhou.

           sstevens-2008

Steve Stevens, CCE
President, Northern Kentucky Chamber of Commerce

The trip allowed us to visit and experience significant historical and cultural attractions in each community bringing the country’s heritage to life. In each community, we met governmental leaders responsible for the economy and heard from private sector business people from companies who have operations in China.

So, what did I learn from this visit? First, China has an economic growth strategy, but like the rest of the world, is searching for ways to ensure it can keep its momentum going given the economic downturn. China’s robust and nearly 14 percent GDP growth rate in 2007 has slowed and is predicted to be at 6.4 percent in 2009. Still, this percentage is enviable by most of the rest of the world’s standards. China’s performance in the industrial segment is about flat, while other sectors are down 15 to 20 percent from the previous year. Like the U.S., the Chinese government is launching its own stimulus – a $580 billion program that when factored as a percent of China’s GDP, is twice what the U.S. stimulus plan calls for.

At $338 billion in trade, the U.S. is China’s second largest commercial trading partner. For companies wanting to invest and do business there, the Chinese have specifically targeted and emphasizing the automotive, textile, technology and ship-building industries. The bio-medical, petro-chemical, finance and retail segments are also a primary trade focus. The good news is that the U.S. is a world leader with a clear competitive advantage in environmental technologies and producing energy efficiencies.

China is supporting a growing middle class among its population of 1.3 billion. The average annual income of this class ranges from $5,000 to $12,000. With a spending parity factored in, wage earners in this category would be earning a $50,000 income in the U.S. While there are many opportunities for business in China, U.S. businesses must also have their eyes wide open to the challenges of doing business there. Human resource constraints are one of the country’s greatest challenges. China has a high rate of illiteracy, but also lacking are many soft skills in the workplace.

In cities like Shanghai (22 million), no one-stop shop exists that will allow businesses to navigate the maze of licensing and regulation and no rule of law exists to govern transactions. When it comes to rules, everything appears to be open to interpretations. Rule #1 is to understand in China is that everything is “negotiable!”

I found my visit very enlightening and also enjoyable. The country is filled with tremendous beauty and a deep sense of connectedness to its 5,000 year history. I felt a sense of awe visiting The Great Wall and Forbidden City, the vibrancy and opportunity at places like Shanghai’s financial district and Pudong Economic Development Zone and the continuing challenges of the people as they move from pure communism to a capitalist, market economy while walking Tian ‘an Men Square.

As one U.S. official in China stated to our group, “China’s success will depend on how well its governments at the country level and local level balance economic and social issues.” China is seeing the benefits of a capitalist economy and in my opinion, is why U.S. businesspeople and citizens need to continue to push trade relations and encourage Chamber members to examine the benefits closely.

PHOTO ALBUM

The Northern Kentucky Chamber of Commerce, Inc., founded in 1969, is the leading business organization of Northern Kentucky. It is a nationally ranked Five-Star Chamber with more than 2,000 member companies representing over 250,000 employees. The Chamber focuses its efforts on education, workforce development, international trade, leadership development and government relations at the federal, state and local level. Find us at http://www.nkychamber.com. Steve Stevens, CCE is the president of the Northern Kentucky Chamber of Commerce. Robert Hudson of Frost Brown Todd LLC is the Chair of the Board for the Chamber.

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