Saturday, April 27, 2013

USCBC 2013 report: China and the U.S. Economy

The US-China Business Council (USCBC)'s 2013 report China and the U.S. Economy: Advancing a Winning Trade Agenda is further subtitled "What Americans Should Know about the US-China Commercial Relationship.

The report questions pessimistic assumptions about this important economic relationship and advances an action plan that includes working with China on major challenges and also making important improvements in the US economy. It includes a list of the top 10 commercial issues reported by USCBC members in China in 2012. As the USCBC is more familiar with China than many people in Congress, the report strongly rebuts the charge that China's exchange rate is the cause of America's trade deficit and high unemployment and also the complaint that China's ownership of US government debt is a problem. A strong case is made for promoting Chinese investment in the United States to help create jobs there.


Few issues, says the report, loom as large on America's economic and foreign policy agendas as "our relationship with China", which is a "defining global strategic issue for the United States". China is a USD250 billion market for American companies "and should be more".

China is the United States' third-largest export market, behind only Canada and Mexico. The report urges a push to open the market further for American companies doing business with China.

The report states that "China's exchange rate is not the significant factor in the US trade deficit or US employment that many make it out to be". It points out that the Chinese yuan (renminbi) has appreciated over 30% against the US dollar since 2005. "Let's move on,"it suggests,"to issues that do matter."

Putting the relative size of the two economies into perspective, the report states that the US economy grew in the past two decades by "the equivalent of the entire Chinese economy", and the US economy remains far larger than China's. It is natural that China's economy will eventually be larger, but rather than viewing this is a threat, "this should be viewed as an opportunity for US companies to participate [sic], and benefit, from that growth".

Instead of blaming China for problems in US industrial development, the report insists that the steps that need to be taken to maintain US competitiveness need to be taken "especially here at home".

China is seen as contributing to the US' industrial renaissance. "Investment form China,"it says,"supports jobs in America. US governors and mayors know this better than anyone, which is why they actively seek Chinese companies to invest in their communities."

To those who complain that China's ownership of most of US government debt is a major problem, the report counters that China actually owns only 7% of federal government debt and that this is a non-issue. "If anything,"it continues,"China's holdings of US debt give them a vested interest in our economic success."

The report stresses the importance of US services exports to China, emphasising that these are growing and can get even stronger. The US has a services trade surplus with China, and services industries account of 80% of private-sector jobs in America, including "high-quality, high-wage jobs in the financial, logistics, and legal sectors".

Presumably mindful of the charge that US companies use China as a low-cost base from which to export to the US, the report states that most American companies do business in China to access the local market, strengthening US companies at home. 

When China "doesn't play fair", the USBC says, direct negotiation with China is the best first approach, but if that doesn't work "we can use other sound legal tools" such as anti-dumping investigations and WTO cases, "and have done so successfully".

US companies, boasts the report, have had a beneficial impact in China, from human resources practices to environmental issues. They will continue to have a positive effect on the development of the rule of law, civic institutions, and things like food and product safety.

Most of the answers, though, are, says the report, "here at home". To succeed, the US needs "smart policies on taxation, energy, education, infrastructure, trade, investment, and innovation to maintain the competitive leadership of American companies and workers".

The top 10 commercial issues in China reported by USCBC members are:
  1. Human resources: Talent recruitment and retention
  2. Administrative licensing, business and product approvals
  3. Competition with Chinese enterprises (state-owned or private)
  4. Cost increases
  5. Intellectual property rights enforcement
  6. Uneven local enforcement and implementation of laws and policies
  7. Investment restrictions
  8. Competition with foreign companies in China
  9. Competition with foreign or Chinese companies not subject to US Foreign Corrupt Practices Act
  10. Standards and conformity assessment
[From the USCBC's 2012 China Business Environment Survey]

You can read the complete 2013 report here.

You can also read the 2012 China Business Environment Survey Results here.

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