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Trade
Even as Chinese exporters seek non-US
custom, those using the California
portal go for a bigger piece of the
American market
As recently as July, this column took note of the dwindling
importance of the American consumer to Chinese manu-
facturers. That shift away from exports to the US market
continues, with the tacit blessing of Beijing. But of the
$340 billion in merchandise that came into the US from
China in 2006, more than $130 billion worth entered
through the ports of Southern California; and those
Chinese exporters, far from giving up on the US market,
see opportunity.
According to officials in Beijing and economists who have
testified before the US Congress, Chinese manufacturers
exporting to the American market have had to content
themselves with extremely narrow margins. Typically, they
receive 20% or less of the revenue from the goods they
send to the US.
James Flanigan, whose monthly column ‘The Entrepreneurial
Edge’ in the
New York Times
covers small-business trends
on the West Coast, described the sequence: American
companies design and order the products, receive them
at stateside ports, distribute and market them across the
country, and sell them at retail – retaining 80% or more of
the revenue.
That may be about to change, as growing numbers of
Chinese companies set up operations in the US. Already,
Mr Flanigan noted, more than 500 Chinese companies have
offices or operations in California, from which they hope to
either launch businesses or work with American companies
to increase their share of the proceeds from the trade
between China and the US. (‘Chinese Want to Cut Slice
Going to US Middlemen,’ 16
th
August)
In July, to promote the wider distribution in the US of
Chinese products and services, the Asia Pacific-USA
Chamber of Commerce of Pasadena, California, organised
an event in Los Angeles. The China Global Conference
brought together as many as 300 American businesspeople
and the owners and executives of 45 Chinese companies
seeking partnerships with American concerns in the small-
to-medium size range.
Identifying ‘a clear trend’, Mr Flanigan observed: “Although
it is too soon to tell whether they made deals, the Chinese
companies that sent delegates are part of the pattern of
reaching directly for the American market.”
He also noted the irony that this quiet pursuit of mutually
rewarding partnerships is taking place even as trade
with China remains a fiercely contentious issue at the US
government level.
Direct Chinese investment in businesses and buildings
in the US is still minimal (an estimated $1.3 billion to
$10 billion), but the US State Department has said that it
seems likely to grow.
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By way of comparison, the US Bureau of Economic
Analysis reports that companies based in Hong Kong
have invested $1.8 billion in factories and offices in
the US; Japanese companies, $177 billion; British
companies, $252 billion.
On 28
th
August, optimism over China’s economic growth
caused the biggest rally in 3½ years in Chinese stocks
trading in the US. The China American Depositary
Receipt index of the Bank of New York Co climbed
6.6%, the most since January 2004, to 474.02. The
advance in the measure helped limit a loss in the
broader Asian index.
The new Washington insiders:
Indian outsourcing companies
Like the California-centric Chinese exporters of the
first item, many Indian outsourcing companies – whose
work enables their American clients to cut application
development and maintenance costs – are intensifying
their efforts in the US. They are doing it from the nation’s
capital, no less, with a former official in the current
administration as their chief lobbyist.
Most notably, in the view of Anand Giridharadas, who
is South Asia correspondent for the
International Herald
Tribune
, the Indian companies ‘have mastered the
Washington art of waging proxy battles through local
organisations, which allows them to not appear to be
foreigners with an agenda.’ (‘Lobbying in US, Indian Firms
Present an American Face,’ 15
th
August)
Writing from Mumbai at a time when, in the US, the
extended and acrimonious electioneering period was in
full swing, Mr Giridharadas identified the impetus behind
the Indian firms’ new urgency: fear that the pressures
of the presidential election set for November 2008 will
induce candidates to assail Indian companies with the
more or less chronic complaint that they take work away
from Americans.
The focus of the Indian firms’ concern appeared to be
two candidates for the Democrat Party nomination:
Sen Barack Obama, who had dropped hints of opposition
to outsourcing, and John Edwards, a former senator running
a populist (ie working-class activist) campaign. Many Indian
executives consider Sen Hillary Rodham Clinton, also a
Democrat, more of a friend. But the heat of an American
election campaign can very quickly warp even a reasoned
position; and job loss is a hot-button issue with a voting
public deeply conscious of the costs of the war in Iraq.
For the Indian companies, a recent attempt in Congress to
restrict use of the H-1B visa was a worry-point. [Enacted
in 1990, the H-1B visa law allows skilled, specialised
foreigners to work in the US for up to six years and then
pursue permanent residency.] But if the movement against
outsourcing were to re-emerge, wrote Mr Giridharadas:
“It will find itself jousting with a changed opponent.”
The National Association of Software and Service
Companies (Nasscom), which represents the Indian
outsourcing industry, engaged as its chief Washington
lobbyist Robert D Blackwill, a former senior adviser
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