A 2007 survey of the U.S.-China Business Council’s 250 member companies showed that most of them are more interested in tapping into China’s consumers than its cheap labor force, John Frisbie, the council’s president, said in Atlanta.
“By and large the main reason companies invest in China is to reach the Chinese market,” Mr. Frisbie told a luncheon audience at the Georgia Institute of Technology April 23.
Those numbers, to be updated this June, indicate that China’s rising labor costs, growing middle class and a governmental shift toward encouraging domestic consumption will limit China’s days as the preferred low-cost outsourcing destination for U.S. companies, he said.
That could be a good thing, because a wealthier Chinese population means more buyers for U.S. goods.
In a broad-ranging presentation on business potential in Post-Olympic China hosted by the Georgia Tech Center for International Business Education and Research, Mr. Frisbie defended the U.S. trade relationship with China, which he said is beset by misconceptions.
Although the trade deficit is often fingered as a contributor to job loss in the U.S., the problem is much more complicated than can be explained by one bilateral relationship, he said.
The overall deficit in the Asian arena has remained about the same in the past decade. It’s just that much of it has shifted to China away from nations like Japan and Korea.
And at the same time, China has also quietly become the third-largest export market for the U.S. at $65 billion last year, posting 300 percent growth in that sector from 2000-07. China joined the World Trade Organization in 2001.
And all the cash U.S. citizens spend on Chinese goods could eventually come back in the form of outbound investment from Chinese companies, said Wang Jinzhen, vice chairman of the China Council for the Promotion of International Trade, the government’s main export body.
Mr. Wang said at the luncheon that Chinese companies already have $100 billion invested abroad, and that’s only the first wave of a trend he expects to last.
This year, China is celebrating the 30th anniversary of economic reforms that opened the country to outside investment, and it recently negotiated a free trade agreement with New Zealand.
“Open policies have brought benefits to the Chinese people,” Mr. Wang said.
He added that Chinese businesses want to invest further in the U.S., but both sides have to maintain a policy of openness and inclusion. Mr. Frisbie agreed.
“There are a lot of concerns in China that the U.S. is unfriendly to Chinese business, and we need to work hard to dispel that myth,” he said.
While projecting a positive picture overall, both he and Mr. Wang acknowledged that not everything is rosy in the U.S.-China relationship. American companies operating there face many challenges. According to the council’s survey statistics, the most pressing issue is finding and keeping qualified personnel.
Other hurdles include the protecting intellectual property, legal transparency, red tape, market saturation, protectionism and logistics.
Despite the problems and recent political turbulence in the run-up to the Olympic Games in Beijing, Mr. Frisbie believes that maintaining positive ties will be worth all the hard work.
“This is a relationship we both need to get right. No doubt about it,” he said.