WCA November 2007

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. 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 ❖ ❖ The new Washington insiders: Indian outsourcing companies

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. ❖