Economists say that capitalizing on China’s growing appetite for items made in America (like California wine) will help rebalance the trade deficit.
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For decades, China’s capacity for cheap labor and manufacturing has been a source of discomfort in the U.S., where intellectual property protections bump up against our own voracious appetite for inexpensive goods of all kinds.
But the complicated relationship between the two countries is changing fast, as China’s economy grows. While the United States boasts a GDP twice its size, China is projected to draw even within the next 20 years. How do both countries benefit from these changes? Economists say that increasing exports to China to try and balance the current trade deficit, and capitalizing on the country’s growing appetite for things made in America, is an essential step.
It’s not a new idea by any means, but tech advances are making business on a global level easier for both multinational corporations and individuals. The US-China Business Council (USCBC), a nonprofit advocacy organization which was founded just after President Richard Nixon’s visit to China in 1972, recently released staggering numbers on the growth of exports to that country. In the last decade alone, U.S. exports to China have gone from $16 to $91 billion—a 468 percent increase.
Some of that is surely part of the modern multinational life cycle in manufacturing, where American companies send high-tech components to China to be assembled into products, and then those products are sent back to the U.S. for consumption. But a large part of that number represents a genuine growth towards balance in the trade deficit.
“A lot of our companies are in China to sell to the Chinese market,” says Marc Ross, a spokesperson for the USCBC, which currently represents some 225 American companies doing business there. “The majority of our membership is in China to sell directly to China.”
Daniel Rosen, a consultant for The Rhodium Group, a global economic advisory group based in New York, Shanghai and New Delhi says that consumers in China will have far different opportunities for fulfilling those needs in the coming decades. While America focuses on the service industry and other forms of specialized economic development, China will be working towards improving roads, housing, and other basic infrastructure, as well as putting in better control systems for protecting the environment.
But despite the caveats, U.S. small businesses still hope to go big across the Pacific. One example is the California wine industry. Though the market share of $1.14 billion in wine exports from the state was fairly small at $45 million in 2010, it represented a 27 percent jump over 2009, according to The Wine Institute, a trade advocacy organization in California.
Linsey Gallagher, the director of international marketing for the institute, says that despite logistical and cultural hurdles—including counterfeit operations for both expensive and inexpensive wine brands—new technology allowing for advance payment and better tracking of shipments are helping to create inroads.
“I spend a lot of time managing expectations, because right now there are only about 12 million people in China who can really afford to buy a nice imported bottle of wine,” says Gallagher. But that’s a market you can really wrap your arms around, which is a good thing. Those people we can reach, they become the influencers as the market grows. If we can connect with those consumers and show a great quality of California wines, they can help us.”
Image (cc) from Flickr user USDA China