Topic Category: World

China offers U.S. companies an expanding export market for high value-added goods, such as aircraft and computers. In turn, China typically provides U.S. importers with inexpensive, lower technology goods that often displace other Asian exports to the United States.

As bilateral trade expands, the annual review process of whether or not to grant China Normal Trade Relations (NTR), formerly called Most Favored Nation (MFN) trade status, has made planning difficult for U.S. companies. And whether or not China is admitted into the World Trade Organization (WTO) could significantly impact your business.

The Impact of Normal Trade Relations

On July 27, Congress, again, voted to extend NTR to China. When a country has this status, its products enter the United States at a normal duty rate. Without NTR, goods are assessed duty rates exceeding 50%, making them noncompetitive here.

Under the U.S.’ Jackson-Vanik amendment to the Trade Act of 1974, a measure originally directed against the former Soviet Union, NTR may not be granted to any non-market economy determined by the President to restrict free emigration. Today, the U.S. does not grant NTR to Afghanistan, Cuba, Laos, North Korea, Serbia/Montenegro, and Vietnam.

The Annual NTR Debate

The denial of NTR for China would result in the U.S. imposing such high tariffs on Chinese goods that trade likely would be severed. In retaliation, China would probably curtail imports of U.S. goods.

Trade analysts believe this would not curb the U.S. trade deficit. Instead, the import gap quickly would be filled by other Asian suppliers. Additionally, denying China NTR could lead to deteriorated U.S.-Chinese relations, fostering an environment of alienation and suspicion. Any future U.S.-Chinese cooperation on sensitive issues, such as human rights, environmental and intellectual property protection, nuclear proliferation, China’s currency stability, and India-Pakistan tensions, would be unlikely.

What China’s WTO Membership May Mean

If China is admitted to the WTO, it will receive permanent NTR status from the U.S. Consequently, the annual review process will cease. But the real benefits of China’s WTO membership include greatly improved access to Chinese markets for U.S. and other WTO member goods, services and investment. Plus, China must also adhere to WTO rules.

China Will Reduce Trade Barriers

With regard to industrial products, if accepted into the WTO, China agrees to allow U.S. firms to import, export and distribute their goods within its borders. China also agrees to significantly reduce tariff levels to rates comparable with major trading partners and to below those of most developing countries, to bind all tariff concessions, and to phase-out all quantitative restrictions on imports.

According to the U.S. Trade Representative, China will reduce average industrial product tariffs from 24.6% in 1997 to 9.44%, and further down to 7.1% on what the U.S. considers “priority” products. Importantly, Chinese duties will gradually decline from 100% to 0% on autos, and from 13.3% to 0% on semiconductors, computers, telecommunications equipment, and other information technology.

China’s agricultural imports will be subject to new measures that address trading rights, distribution, high tariffs, quotas, the application of unscientific standards, reliance on state trading companies, and export subsidies.

China will reduce its average agricultural product tariff to 17%, and down to 14.5% for “priority” products. Thus, duties will drop from 45% to 12% on beef, and from 40% to 12% on citrus goods.

China is among the most closed markets to service imports. For WTO membership, China has agreed to improve access to certain service sectors, including telecommunications and financial services.

U.S. Exports to China Continue to Rise

In 1990, U.S. exports to the People’s Republic of China and Hong Kong were $11.6 billion. Last year, U.S. exports to China, which included Hong Kong, exceeded $27 billion. This represented an increase of 134%.

This emerging powerhouse of almost 1.3 billion consumers is one of the world’s largest economies, and represents one of the United States’ fastest growing export markets. As China’s economy continues to expand, U.S. exporters will benefit — and to an even greater extent if China is admitted to the WTO.

Be Informed and Prepared

U.S.-China policy is delicate. Therefore, as events unwind, your access to China’s market may improve, remain the same, or possibly decrease should unforeseen events occur. Consequently, it’s essential to have a flexible plan that allows you to seize opportunities and mitigate risks.

This article appeared in October 1999. (BA)
Topic: World
Comment (0) Hits: 3325

With more than $50 billion in trade with the United States, Taiwan is both America’s seventh-largest trading partner and seventh-largest foreign market. The small island nation buys half as much from the United States as all of Latin America, less Mexico. Its annual U.S. purchases are twice as much as all of Africa, five to seven times those of Russia or India, almost double China’s, and more than France, Korea, or Italy.

From 1996 to 1997, Taiwan’s gross domestic product (GDP) grew 6.8%, and 4.6% in 1998. It is projected to increase 5.3% in 1999, and forecast to grow 5.6% in 2000. The island’s 21 million people have an average income of $12,500.

Asian Flu Had Little Effect

U.S. exports to Taiwan – and via Taiwan to China and Southeast Asia – are growing. Taiwan is among the largest investors in China and most countries in Southeast Asia. The Asian financial crisis little affected the country’s economy, and Taiwan is now assisting other countries in that region to recover.

Taiwan’s Imports Are Vast

With few natural resources, Taiwan imports nearly all of its energy needs and agricultural goods (it is the fifth-largest importer of U.S. agricultural products), and most of its raw materials used by its industrial and manufacturing sectors. Its government is pro-business and strongly encourages foreign investment and technology. The country’s workforce is well educated, and the island’s proximity to mainland China offers unusual opportunity.

The top U.S. exports to Taiwan include machinery, transportation equipment, chemicals and related products, food and live animals, and crude materials, except fuels. Through September 1999, Taiwan had imported U.S. goods and services worth $13.7 billion and had exports to the U.S. of $25.8 billion.

Daley Asks Taiwan to Increase U.S. Imports

U. S. Commerce Secretary William M. Daley spoke before the 23rd Republic of China (Taiwan) and U.S. annual Joint Business Conference in San Antonio, Texas, in November. He said that trade relations with Taiwan haven taken off, and “we are looking forward to Taiwan’s entry into the World Trade Organization.

“We take in about one-fourth of all the goods Taiwan exports,” Daley added, “and we need Taiwan to take in more of our goods. That includes high-tech areas, such as biotech, and services, like banking and finance. I know many American companies also have their eye on the $150 billion in infrastructure projects anticipated over the next decade.”

Commenting on the earthquake that struck Taiwan in September, he congratulated the business community on how quickly its semi-conductor factories were back on line.

According to Taiwanese government figures, losses caused by the earthquake reached $4.1 billion. Stated earlier, authorities predict the island’s 1999 GDP growth to reach 5.3%. This is below their stronger forecasts of 5.7% and 5.5% announced in August and September, respectively, after a more accurate assessment of the earthquake damage had been concluded.

Competition Is Fierce, but Rewards Are High

The competition in the Taiwanese market is fierce. Japanese firms are well entrenched and European companies are moving rapidly to capture market share. Nonetheless, Taiwanese consumers typically have strong feelings of goodwill toward the U.S. and tend to favor American goods and services. As a result, U.S. firms with quality products and services at competitive prices have found and will continue to find Taiwan a rewarding market.

This article appeared in October 1999. (CB)
Topic: World
Comment (0) Hits: 3276

On July 27, 1999, the U.S. House of Representatives voted to extend Normal Trade Relations (NTR) status to China for another year. This signaled good will to China.

But, next on the agenda are two more issues that could further improve or harm U.S.-China relations. These include: granting China permanent NTR status, and allowing it to join the World Trade Organization (WTO). Both issues could have a major impact on the United States and your business.

Permanent NTR Status

By granting China NTR (formerly known as Most Favored Nation trade status), Chinese products will enter the U.S. at the same normal duty rates offered to most other trade partners, except for Afghanistan, Cuba, Laos, North Korea, Serbia/Montenegro, and Vietnam. In turn, U.S. products will continue to be allowed access to the Chinese market.

However, Congress soon will decide whether or not to grant China permanent NTR status. If approved, this will eliminate the current annual vote for NTR which has made planning difficult for U.S. companies.

China and the WTO

In order to be admitted to the WTO, China must agree to abide by a broad set of WTO rules. As of July, the office of the U.S. Trade Representative (USTR) indicated that China agreed to reduce its average tariff from 35% to 10%. In addition, the USTR said China appears to be willing to improve transparency, eliminate discriminatory taxes and regulations, and abolish export subsidies, as well as phase out protectionist quotas and import substitution requirements.

According to the USTR, China also agreed to eliminate unscientific food safety barriers, plus adopt judicial review procedures for administrative decisions. If accepted into the WTO, China will be subject to trade sanctions under the WTO’s dispute settlement procedures if these commitments are not carried out.

Chinese Agricultural Markets to Open

China’s commitments regarding agricultural market access address trading rights, distribution, high tariffs, quotas, the application of unscientific standards, reliance on state trading companies, and export subsidies.

As a result, China will move toward a system based almost entirely on tariffs. And on most bulk commodities, tariffs will fall to 1%-3%, reducing China’s duties to levels below most American trading partners.

Industrial Product Commitments

Under the WTO, China has agreed to allow U.S. firms to import, export and distribute industrial products within its borders. Additionally, China will reduce tariffs on industrial products to levels comparable with major U.S. trading partners and below those of most developing countries. And, China will bind all tariff concessions and phase out all quantitative restrictions on imports.

Chinese tariffs on high technology products, including semiconductors, computers and equipment, telecommunications equipment, and other information technology, will drop from present levels averaging 13.3% to 0% over a period of several years.

Tariffs on U.S. automobiles will decrease from 80% and 100% to 25% in 2005. Auto parts tariffs will fall to an average of 10%. Furthermore, China’s commitments in the chemical sectors will result in duty reductions to levels similar to other WTO members.

Service Sector Commitments

Chinese commitments on services are comparable to those of most WTO members. Nevertheless, according to the USTR, further negotiations are required. Services included in the agreement cover distribution, telecommunications, insurance, banking, securities, professional services, audiovisual, and travel and tourism.

In China today, foreign firms have no rights to distribute products other than those made in China, or to own or manage distribution networks. China also frequently issues business licenses which limit the ability of American firms to conduct marketing, after-sales service, maintenance and repair, and transportation. China’s commitment significantly liberalizes these restrictions.

Telecommunications and Banking Services

China severely restricts sales of telecommunications services and bars foreign investment. Under the WTO agreement, China will, to a large extent, lift these restrictions. In the insurance sector, China limits foreign participation to Shanghai and Guangzhou. This, too, will be lifted.

In the banking sector, China imposes severe geographical restrictions. For example, only nine foreign banks can conduct business in local currency and are limited to the Shanghai Pudong area. WTO negotiations seek full rights for foreign banks to handle both local and foreign currency business transactions, to serve Chinese as well as foreign customers, and to liberalize investment.

However, as of this writing, no WTO agreement has been signed. And with additional negotiations ahead, China’s commitments to reduce its trade barriers may change.

Importance of U.S.-China Trade

The United States, which accounts for only 4 percent of the world’s population, needs to sell to the other 96 percent. Passing permanent NTR legislation and admitting China to the WTO will help to achieve this. And since the United States is already a WTO member, with a few exceptions, China must make all the concessions. This is good for U.S. exporters, importers and investors.

In 1998, U.S. exports to China, which now include Hong Kong, were $27 billion. If China is admitted to the WTO and anticipated trade concessions are implemented, U.S. exports likely will rise at a faster rate than in the past.

However, if the United States denies China permanent NTR status and prevents it from becoming a WTO member, this could lead to deteriorated U.S.-Chinese relations. In turn, trade relations could be weakened.

Follow U.S.-China Negotiations

In July 1999, China concluded favorable bilateral WTO negotiations with Japan and Australia. During the upcoming Asia-Pacific Economic Cooperation meeting in September, President Clinton and Chinese President Jiang Zemin are expected to meet. What will come of their meeting is speculative. As a result, it’s important to incorporate a great deal of flexibility in your China strategy.

This article appeared in July 1999. (CB)
Topic: World
Comment (0) Hits: 7661

Many analysts believe the current events shaping Asia are the most significant developments in the world today. John Naisbitt, a leading trend forecaster and author of Megatrends Asia, wholeheartedly agrees.

As we move toward the year 2000, “Asia will become the dominant region of the world: economically, politically and culturally,” he writes. This trend presents exciting and profitable opportunities for you.

Topic: World
Read More Comment (0) Hits: 3071

The Brazilian economy entered the 1990s with declining growth, runaway inflation, and an unserviceable debt of $122 billion. As the largest Latin American economy with 162 million consumers, it had one of the most highly regulated economies in the world.

In 1990, Brazil’s first democratically elected government in nearly three decades initiated broad reforms designed to open the economy, curb inflation and attract investment. Additional measures promoting economic stability and the establishment of a new currency, the “Real,” in July 1994 were successful.

President Fernando Henrique Cardoso (former Finance Minister) took office on January 1, 1995. His reforms continue to build on previous ones.

Topic: World
Read More Comment (0) Hits: 3644

The world is quickly becoming economically integrated, forcing unprecedented changes at every level of industry. Foreign companies are becoming more competitive and gaining greater U.S. and global market share.

Whether you’re small or large, manufacture products or provide services, or even have interests limited to the domestic market, fast moving global developments will impact your business.

Topic: World
Read More Comment (0) Hits: 7965

The Caribbean offers a wide range of opportunities. The Dominican Republic, one of the region’s most flourishing performers, has experienced accelerated modernization and now boasts world-class resorts, industrial parks, and export-processing zones.

And with the recent election of President Leonel Fernandez, new policies embracing trade and investment are having a positive impact—creating new opportunities ... and risks.

Topic: World
Read More Comment (0) Hits: 4827

During the week of October 9, Mexican President Ernesto Zedillo Ponce de Leon met with several organizations in the United States. Following a meeting with U.S. business leaders, several key U.S. participants announced direct investment plans for approximately $12 billion in Mexico over the next five years. This is a sign of continued growing confidence in the Mexican economy.

The Mexican manufacturing sector has continually attracted the most foreign direct investment, 40.5%; followed by the service sector, 31%; transportation and telecommunications, 8.5%; and financial services, 8.5%.

Industries expected to receive the $12 billion include some of these sectors, such as manufacturing, financial services, and telecommunications. Other industries receiving this investment -- not considered major destinations in the past -- include energy, transportation and distribution of natural gas; environmental services; agriculture and food processing; and real estate. Some of these had been announced earlier.

The Mexican telecommunications sector has attracted the interests and capital of both large and small U.S. telecommunication service providers. Plans indicate that the Mexican sector will receive $3 billion over the next several years from well known companies such as AT&T and MCI.

An investment of almost $1 billion is anticipated to launch a joint venture between AT&T and the Mexican company, Grupo Alfa, to provide long distance services to Mexican customers. AT&T also confirmed a $40 million investment in cellular telephone manufacturing at the company's Guadalajara plant.

Avantel, a new communications services company forged by MCI and the Mexican bank, Banamex, is to receive an investment of $1.3 billion from MCI. Additionally, a group of smaller U.S. companies, including Nextel, LCC, Associated Communications, and the Carlyle Group, have teamed up with the Mexican firm Grupo Communications of San Luis Potosi. Together, they have invested over $110 million in Grupo Tricom of Mexico to provide wireless communications services in Mexico.

Other investments in the Mexican telecommunications sector include more than $325 million in digital wireless infrastructure by Tricom. GTE, in a three-way partnership with the Mexican bank, Bancomer, and Mexican firm of Grupo Visa, will invest a total of $320 million.

The Mexican energy sector and transportation and distribution of natural gasis expected to attract nearly $2 billion over the next five years. Amoco Corporation announced a $250 million investment with Mexico's Grupo Femsa. Dupont's Conoco division has established an office in Mexico and is expected to invest in the petrochemical sector as the regulatory and legal framework evolves. The firm also plans to continue with an additional $100 million in nylon over the next few years with its Mexican partner, Grupo Alfa.

In the manufacturing sector, General Electric announced the company is reinvesting about $100 million annually in its Mexican operations over the next four years. Eastman Kodak revealed additional investments in the company's CD media production facility at its Guadalajara plant and an already-completed water treatment recycling plant.

An investment of $75 million was announced by International Paper for the construction of a non-woven textile plant near Guanajuato, in addition to new projects in forestry and paperboard. In the apparel sector, Warnco, which currently has six facilities in Mexico, plans to invest over $10 million in the state of Puebla. And Guilford Mills, Inc. unveiled its strategy to establish a major apparel production facility with its partners, American Textile and Mexico's Grupo Alfa, in the state of Morelos.

Some U.S. companies plan to invest in several sectors. For example, a $1 billion infrastructure investment fund was announced by American International Group, a leading global insurance and financial services company, and General Electric. Areas to receive the capital include energy, telecom, transportation and environmental services. American International Group also announced the purchase of 51% of Seguros Interamericana for $35 million, and as a result will control a greater portion of its Mexican insurance and financial service interests.

Mexico's agribusiness industry has also been on the minds of U.S. investors. Pilgrim's Pride announced a $40 million poultry-breeding project in the states of Queretaro and Puebla. The U.S. giant, Philip Morris, announced an investment of $200 million in its Kraft Foods de Mexico plants. This is expected to double their production capacity.

Reichmann International Mexico plans to continue with three major real estate projects in Mexico. These projects represent a total investment of $1.1 billion. Additionally, Journey's End announced plans to build ten executive hotels there representing an investment of $35 million.

On October 11, President Zedillo met with President Clinton at the White House. Mr. Zedillo brought with him the first $700 million installment to begin repaying the United States with interest. This early repayment of a portion of the $12.5 billion that Mexico borrowed from the United States is yet another indication that the Mexican economy is bouncing back.

Stated by President Clinton, "Today's decision sends a positive signal to the financial markets that the tough financial measures Mexico has taken are succeeding and the American taxpayer is being paid ahead of schedule."

The latest figures indicate that Mexican inflation is expected to reach 45% - 50% this year and taper down to about 20% next year. Mexico's inflation for August was already down to 1.66% -- having continuously dropped from 8% in April. Its gross domestic product for this year is expected to fall by 4.5%, but rise to about 3% in 1996 -- indicating a short-lived crisis.

From January through July of this year, Mexico ran a $3.7 billion trade surplus with the rest of the world and a surplus with the United States. However, mid-year figures indicate that U.S. exports to Mexico are down by only 10% -- much less than had been projected.

As the situation in Mexico continues to stabilize and investor confidence grows, Mexican consumption will rise commensurably -- increasing the demand for U.S. exports. This is good news for U.S. companies.

This article appeared in The Exporter, December 1995.
Topic: World
Comment (0) Hits: 3131

As part of its new economic program to promote investment and raise capital, the Mexican Government is undertaking its third major round of privatization since the 1980s. And in a clear demonstration to the world that Mexico is not wavering from the path of economic liberalization, President Ernesto Zedillo is also further opening up sectors to foreign investment that have already been privatized over the last few years. This is presenting a number of significant opportunities to U.S. investors.

Two sectors, petroleum and radioactive materials, will remain under the exclusive control of the government. Ownership of broadcast television, radio and credit unions will continue to be reserved for Mexican private investment. However, Mexican law has recently been changed to make it possible to sell strategic resources that had previously been considered off limits.

The railroads can now be sold to domestic and foreign investors. Natural gas is still considered a strategic resource, but its transmission, distribution and storage is not -- and may now also be sold to the highest bidder. Other businesses open to new foreign investment include satellite operations, telecommunications, secondary petrochemicals, power generation, financial services, ports and airports.

Since the 1980s, nearly 1,000 of the 1,155 state-owned businesses have already been sold to private entrepreneurs, merged or closed. This generated $14 billion in revenue and savings. These businesses included hotel chains, steel producers, mining companies, insurance providers, airlines, banks and telecommunications companies. With an additional $14 billion expected to be generated from the new round of openings, Mexico's ability to raise capital appears undaunted by the recent financial crisis.

Under current foreign investment laws, two-thirds of the Mexican private sector is open to foreign ownership. Cumulative foreign direct investment totaled $50 billion by the end of 1994. The United States and Canada have invested 62% of this; the European Economic Community, 25%; Latin America, 7%; and Asia, 5%. The manufacturing sector has continually attracted the most foreign direct investment, 40.5%; followed by the service sector, 31%; transportation and telecommunications, 8.5%; and financial services, 8.5%.

The new round of privatization and further investment openings will not only raise much needed capital, but will also help Mexico, to a greater extent than in the past, modernize its infrastructure and economy.

Over the years, privatization of companies has not always benefited Mexico to the degree anticipated. For example, in the past many state-owned enterprises were sold to domestic investors only, not allowing sometimes more qualified and cash-strong foreign investors to bid. Many analysts believe that this policy restricted competition, and did not always push new owners to become as efficient as they may have under more competitive, open market conditions.

For example, in 1991 the Mexican Government began selling the 18 largest banks it had seized back in 1982 -- but restricted experienced foreign banks from bidding. The sale of the telephone company and two airlines, Mexicana and Aeromexico, was no exception. As time progressed, some of the newly owned and managed companies seemed to be in little better position than when controlled by the government. Under the new round, open bidding to both domestic and foreign investors and greater scrutiny to ensure an ability to meet financial requirements is likely to minimize, if not eliminate, the problems caused by past practices.

Instead of simply selling the railroads to the highest Mexican bidder, the Mexican Government studied various options for their sale. The first option considered a 50 year concession for the entire railroad system to one qualified owner. Other options split the system into competing private railroads.

Reportedly, in June more than 500 potential domestic and foreign investors attended a meeting in which Mexican transportation officials explained their privatization plans. With the publishing of bidding rules and actual bidding to commence as early as this fall, final plans call for the division of the railroads into three concessions.

Several large U.S. and European lines are considering making offers for the Mexican railroads. Union Pacific and others appear interested in the routes running north to the border and serving automobile plants. Before some companies bid, however, they are requesting answers from the Mexican Government as to the new owners' degree of flexibility on work force and passenger services issues.

Under the North American Free Trade Agreement, Pemex, the Mexican state-owned oil company, was not opened to investment as many U.S. companies had hoped. However, while the production of natural gas remains the domain of Pemex, several activities related to getting the product to market are for the first time open to foreign investment. These new opportunities reportedly attracted about 120 U.S. companies to a series of three day meetings recently held in Mexico City sponsored by the U.S. Department of Energy and Mexico's Secretaria de Energia.

Continued privatization and further opening of Mexican sectors to foreign investment will continue to substantially enhance economic progress and speed recovery in Mexico. Just as important, as the short-term economic crisis abates, U.S. investors in Mexico will have the chance to establish a strong new foothold in Mexico that benefit them well into the future.

This article appeared in The Exporter, September 1995.
Topic: World
Comment (0) Hits: 7171

The People's Republic of China has one of the fastest growing economies in the world. Its gross national product (GNP) increased 13.4% in 1993 and 11.5% last year. Its growth is projected to increase by 9% next year and about 8-9% annually through the end of the century -- one of the highest in the world.

Certain regions in China -- especially those along the coast -- are booming, as many of the residents are becoming more prosperous. Political and economic decentralization has allowed each region to pursue its own interests as local governments and enterprises gain greater autonomy on a daily basis. Some 8,000 companies now have import and export rights. This trend will likely continue.

U.S. Exports to China Rising -- Faster

Foreign trade as a percentage of China's GNP now accounts for nearly 40 percent. From 1991 to 1994, U.S.-Chinese bilateral trade almost doubled -- reaching more than $48 billion. From 1993 to 1994, the United States edged up 18.4% to achieve 12.2% of Chinese import market share. And for the first two months of this year, U.S. exports to China rose 28.6% faster than the same period last year -- a considerable jump when compared to the much smaller 5.7% increase in exports from 1993 to 1994. Although more recent data is not yet available, this trend appears to be continuing.

Principal exports to China include boilers and machinery; aircraft; fertilizers; electrical machinery; and cotton, including yarn and woven fabric.

Last year U.S. imports from China rose considerably faster than exports, as the country moved up two notches to become our second largest supplier of goods. Principal U.S. imports include electric machinery; footwear; toys; games and sports equipment; apparel (unknit); and leather art, saddlery and handbags.

Last year, the U.S. trade deficit with China reached almost $30 billion. In the past, access to China's market of 1.2 billion consumers has been hampered. Recent trade agreements, however, will positively affect this.

Market Access Agreement Reached in March

In February of this year, China signed an agreement to protect U.S. intellectual property. During U.S. Trade Representative Kantor's visit there on March 12-13, he reached an eight point agreement with Minister Wu Yi on market access, bilateral services, and China's accession to the World Trade Organization. As part of the agreement, China also agreed to fully implement the October 1992 Memorandum of Understanding (MOU) which was suspended some time ago. The MOU committed China to make sweeping changes in its import regime, including the elimination of 90% of all non-tariff barriers.

At the March 29-30 market access consultations in Washington, D.C., China additionally agreed to lift quotas and licensing requirements on a wide range of agricultural goods, textile machinery, textile and apparel, computers and heavy machinery. As a result of these developments, U.S. exports will likely increase at an accelerated rate.

Best Export Prospects

U.S. products anticipated to do well in China include aircraft and parts; electric power systems; computers and peripherals; telecommunications equipment; automotive parts and service equipment; agricultural chemicals; industrial chemicals; plastic material and resins; chemical production machinery; building products; pumps, valves and compressors; electronics components; machine tool equipment; oil & gas field machinery; medical equipment; laboratory scientific instruments; and electronics production and test equipment. The list doesn't stop here.

Agricultural products in demand include wheat, cotton, logs, hides and skins, poultry, tree nuts (pistachios), dried fruits, especially raisins, and snack foods .

Obstacles Remain

Although political and economic structures are becoming decentralized, Communism remains intact in China. As a result, the system continues to erect roadblocks that are difficult to overcome. In addition to quotas and high tariffs (50%-250%), many of which will be reduced or eliminated, China inconsistently applies a 17% value-added tax on most imports, limits access to its retail sector, maintains foreign exchange controls, operates under an inefficient banking system, and sometimes applies unreasonable standards and quality control requirements.

Additionally, it is important to become familiar with changing logistical demands and penalties for nonconformance. For example, in order to ship over-sized packages to China, approval must be given from the airlines before delivery. This is especially important for inland shipments.

Plans for Development

The Chinese Government has embarked on an ambitious schedule to improve the country's infrastructure. Many of these improvements will not only help to better facilitate trade, but will also provide U.S. companies with opportunities to supply materials and products needed to complete the projects.

Two of these projects involve electric power generation and transportation improvements, as discussed below.

Electric Power, thermal and hydro: The Ministry of Electric Powers plans to add 15,000 MW per year to China's power generation capacity over the next ten years. Central and provincial expansion plans include the construction of over 35 power stations between 1992 and 1996. Hydro-power projects involve the construction of four huge structures, including the building of the largest hydro-power dam in the world.

Railways: China is receiving loans from the World Bank, the Asian Development Bank and the OECF to build and expand six rail lines and to import communications networks, intermodal container transportation and loading systems, computer and signaling systems, software and track maintenance equipment.

This article appeared in Global Shipper, a publication of Emery Worldwide, June 1995.
Topic: World
Comment (0) Hits: 3596

Page 16 of 16

Quick Search

Stock Watch

FREE Impact Analysis

Get an inside perspective and stay on top of the most important issues in today's Global Economic Arena. Subscribe to The Manzella Report's FREE Impact Analysis Newsletter today!