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U.S. market is losing its appeal, Chinese say

Tuesday, April 17, 2007

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GUANGZHOU, China: At booth after booth at China’s main trade fair this week, the refrain from Chinese business executives is the same: the American market is still important, but not as crucial as it used to be.

Chinese producers of everything from socket wrenches to sport utility vehicles say that their fastest growth these days lies in Europe, Africa, the Mideast, South America and elsewhere in Asia. In other words, practically anywhere other than the United States.

Chinese business representatives attending the Canton Fair here are discouraged by the steady decline of the dollar against China’s currency, which makes it more expensive for American consumers to buy Chinese products, weaker growth in the U.S. economy and rising U.S. protectionism.

“The U.S. government is still trying to protect its own markets, unlike Europe, which is very free,” said Huang Yasong, the international sales manager for the Hubao Group, a manufacturer of men’s shirts that is rapidly expanding sales to Eastern Europe, Russia and Brazil.

Hangzhou Jilin Machinery, which makes screwdrivers and other tools, has seen its American sales stay flat, while sales to Africa, Europe, the Mideast and especially Australia are rising.

Zhao Wei, the company’s sales manager, puts much of the blame on the fall of the dollar; the Chinese government raised the value of China’s currency by 2.1 percent against the dollar in July, 2005, and has let it drift up by another 5 percent since then.

“It’s a big problem,” Zhao said.

To be sure, China’s exports to the United States are extremely large. They are also still growing and thus, becoming more and more the focus of attention for many Democrats in Congress, making it likely that Sino-American trade frictions will persist and possibly worsen in the months ahead.

China surpassed Canada in the first two months of this year as the largest exporter to the United States. According to statistics released by the World Trade Organization last Thursday, China also overtook the United States in the second half of last year to become the world’s second-largest exporter overall, after Germany.

China is still nearly 25 times as dependent on exports to the United States for its overall economic output as the United States is on exports to China. Given that the Chinese economy is less than a quarter of the size of the American economy, it is all the more striking that Chinese exports to the United States are worth more than six times as much as American exports to China.

But the government and companies across China increasingly see the danger of becoming too dependent on a single market. So they are stepping up their efforts to sell to other countries as well, particularly those outside the industrialized world.

Great Wall Motor, a maker of sport utility vehicles and sedans, has more than quintupled exports in two years, to 27,505 last year. Much of that growth has come from fast-growing, oil-rich markets like Russia and the Mideast. “Europe and North America are not our primary markets,” said Wei Jianjun, the company’s chairman.

“China has been making more of an effort in recent years to diversify its export markets,” said Frank Lavin, the under secretary of commerce for international trade, noting that China’s share of all American imports is still climbing, but at a slowing rate.

China also has moved beyond just making huge volumes of T-shirts and toys for affluent Western consumers. It now makes a huge range of industrial goods and transport gear, from industrial weaving machines to heavy-duty trucks. It exports them in rapidly growing quantities to developing countries, many of which are profiting from soaring world commodity prices and often need the rough-and-ready durability of Chinese products.

China also ships a growing proportion of its goods to Southern Europe. Sales are especially strong to Spain and Italy, where buyers are often less affluent than in Northern Europe.

The shift in Chinese exports away from the United States has been under way for several years. But the trend has accelerated in the past year and particularly in the first two months of this year as the dollar has weakened against China’s currency, known as the yuan, along with other major currencies.

At the same time, the strength in the euro and other currencies have made Chinese goods less expensive.

China sent more than 31 percent of its exports to the United States in 2000, but that dropped below 24 percent in November and hit 22.7 percent in February, according to a tabulation by Goldman Sachs that includes Chinese goods transshipped through Hong Kong.

Exports to the rest of Asia have leveled off, while exports to the European Union have risen slightly with a shift in favor of Southern and Eastern Europe.

Exports to the rest of the world, notably India, Brazil and Russia, have doubled in the last seven years, to 32 percent this winter.

“Right now, the prices we can get from Russia are a lot higher,” said Sean Zhu, the vice general manager of Ningbo Guotai Knitwear, which makes knit shirts.

Wang Tongsan, a senior Chinese economic forecaster and member of the committee overseeing implementation of the current five-year plan, said that the Chinese government did not have a policy of pushing exporters to focus on markets other than the United States. He attributed the rise in sales to developing countries to the strong entrepreneurial talents of many Chinese.

Several Chinese exporters at the fair said they had not been told by China’s Ministry of Commerce to reduce their dependence on the American market. But government-run trade associations have become more active in helping companies attend trade fairs in Europe and the developing world, they said.

Zhu said that abundant information in Chinese about foreign markets could now be found on Internet sites run by Alibaba of China and by various Chinese government agencies.

Chinese officials are acutely conscious of the risks of rising American trade barriers. The Bush administration opened the door on March 30 to requests by U.S. industries that contend their Chinese competitors receive subsidies. The administration filed two complaints with the World Trade Organization last Tuesday alleging that China tolerates widespread abuses of copyrights and trademarks.

Chinese officials are expected to go on another buying trip to the United States before next month’s round of meetings in Washington to discuss bilateral economic policy. By wrapping together a lot of separate purchase agreements in a few heavily promoted announcements, Chinese officials could portray the United States as needing the Chinese market – although exports to China accounted for roughly four-tenths of a percent of economic output in the first two months of this year, while exports to the United States equaled nearly 10 percent of China’s entire output.

Similar heavily promoted purchases preceded and coincided with President Hu Jintao’s visit to the United States a year ago. Japanese corporate leaders also conducted high-profile buying trips to the United States during the 1980s, when Japan’s trade surplus with the United States became a political issue.

State-controlled media reported Friday that China would proceed with long-expected plans to reduce tax rebates for exporters, especially in sectors like steel that consume a lot of energy and fresh water, both of which are in short supply in China.

To underline China’s desire to increase imports, the legal name of the Canton Fair has been changed starting this week to add imports to the name. It is now officially the China Import and Export Fair, although the organizers and attendees continue to call it the Canton Fair; Canton was the British name for Guangzhou.

Still, old habits die hard. Foreign companies were invited to show their wares, but were relegated to the remote top floor of just one of the more than 30 halls that the trade fair fills at the city’s two convention halls.

Only 18 American companies attended, most of them little-known companies with small booths. One of the few publicly traded companies was Columbus McKinnon of Amherst, New York, selling U.S.-made electric chain hoists.

Zhang Qing, the company’s China national sales manager, said that even with the weakening dollar, Columbus McKinnon focuses on selling top-quality hoists instead of trying to compete just on price with local manufacturers.

But far below on a more heavily traveled ground-floor corridor, executives like Henry Hu, the general manager of Ningbo Rightool Industrial I/E, said that companies were responding to the dollar’s weakness by improving their products. That could make them even more formidable competitors in the long run.

“Everyone is worried, but we focus on increasing the quality of our products,” said Hu, whose business makes socket wrench sets. “The government is encouraging us not just to manufacture but to do more research and development.”

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Chinese prime minister addresses Japan’s Diet

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Wednesday, April 11, 2007

 

TOKYO: Chinese Premier Wen Jiabao heralded warmer ties with Japan on Thursday, calling for a “win-win relationship” between the countries’ economies even as he urged politicians to face up to Tokyo’s wartime aggression.

But Wen’s conciliatory note was dampened by an ongoing spat over undersea gas and oil deposits, with China’s Foreign Ministry asserting exploration rights in disputed waters between the two neighbors.

Wen was on a three-day “ice-melting” trip to Japan as the two countries worked to reverse a deterioration in ties caused partly by disagreements between the former World War II enemies over their painful past.

In a speech to Japan’s parliament — the first by a Chinese leader in 22 years — Wen said he did not want to “dwell on hard feelings” but urged politicians “to remember and learn from the past. He also told Japanese parliamentarians hoped Japan’s apologies would be “turned into actions.”

The two countries have long been at odds over Japan’s invasions and occupation of China in the 1930s and ’40s. China has accused Japan of not fully atoning for its aggression, while some Japanese feel their leaders have apologized enough and that accounts of Tokyo’s wrongdoings have been exaggerated.

Still, much of Wen’s remarks focused on cooperation between Asia’s largest economies. China, including Hong Kong, is Japan’s No. 1 trading partner, and Beijing is eager to boost Japanese technological assistance and investment in its booming economy.

“The Chinese and Japanese economies have a win-win relationship. Our economic development poses the other no threats, only opportunities,” he said in a speech met with standing ovation from the floor.

Wen later had lunch with the heads of some of Japan’s largest businesses, including Toyota Motor Corp. CEO Fujio Cho, where he recited a poem that ended “the winter has passed, and spring has come” in China-Japan relations.

At the lunch, he urged Japanese companies to invest in China, vowing to address vast imbalances in the Chinese economy, improve the natural environment, protect intellectual property rights, continue tax breaks for high-tech companies and remain committed to currency reform.

He then met Japanese Prime Minister Shinzo Abe to launch annual discussions between the countries’ finance and economic ministers to further boost ties. The first meeting will take place in Beijing later this year.

Wu’s visit comes amid an improvement in ties that began when Abe traveled to China in October on a fence-mending visit, after bilateral relations plunged during the 2001-06 term of his predecessor, Junichiro Koizumi.

Chinese leaders were especially irked by Koizumi’s repeated pilgrimages to a Tokyo war shrine that honors Japan’s war dead, including executed war criminals. Abe has so far stayed away from the shrine, though he was a regular visitor before he took office.

In a sign of warming relations, Wen’s visit has involved a series of friendly gestures aimed at the Japanese public.

He promised to send two Chinese ibises to a Japanese bird reserve when he met Abe on Wednesday, and appeared for a jog at a Tokyo park early Thursday, even joining a group doing tai chi. On Friday, he was to throw pitches with college baseball players in western Japan.

Wen also met with Japanese Emperor Akihito on Thursdsay and invited him to the opening ceremony of the 2008 Beijing Olympics. Akihito, who last visited China in 1992, said he would consult with his government advisers, according to palace officials.

But even as Wen struck a friendly note, a dispute over undersea gas and oil deposits threatened to sour the fragile detente.

Tokyo expressed concern on Thursday over a report by China’s state-controlled CNOOC Ltd. that said it began producing oil and gas from a disputed field between the two countries. Japanese officials have asked China for more details of the CNOOC report, a Foreign Ministry official said on customary condition of anonymity.

Japan has objected to China’s exploitation of the gas, saying some belongs to Japan. China insists that the field lies in its territory.

“It is a natural exercise of our legitimate sovereign rights and interests,” Chinese Foreign Ministry spokesman Qin Gang said Thursday at a regular briefing. “We hope Japan will have a clear understanding of this point.”

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ANALYSIS / LDP, New Komeito support key to Ishihara victory

Although newly reelected Tokyo Gov. Shintaro Ishihara called himself an independent, he relied on the significant support of the Liberal Democratic Party and New Komeito to achieve his win in Sunday’s gubernatorial election.

In the previous election in 2003, he enjoyed strong popular support. But this time, he faced harsh criticism by other candidates over his high-handed political style. The support of the LDP and New Komeito therefore played an important role in his decisive defeat of the 13 other candidates in the Tokyo race, including former Miyagi Gov. Shiro Asano.

“A number of joint efforts by LDP and New Komeito members in the metropolitan assembly saw more people in Tokyo agree [with certain policies],” Ishihara said Sunday night, apparently showing his gratitude to the parties for their support.

The main question in Sunday’s election was whether Tokyo voters would allow Ishihara to stay in office. Much attention was paid to matters such as Ishihara’s aspiration to see Tokyo host the 2016 Olympic Games and how metropolitan budgets were being used.

Although Ishihara’s 2003 campaign received little backing from political parties, this time his campaign benefitted from partnerships with the LDP and New Komeito.

Ishihara also frequently joined rallies of candidates standing in metropolitan assembly by-elections and candidates likely to run in ward mayoral elections.

At a major rally Tuesday of the largest support organization for the LDP’s Tokyo chapter, Ishihara said, “I’ve never before called for the support of the party and your power as strongly as this.”

In the wake of criticism over matters including the cost of his travel expenses for his business trips, Ishihara apologized during one speech, saying, “I didn’t provide a full explanation.”

He thus stressed that a Tokyo poll win would mark a fresh start, according to a senior staff member of Ishihara’s camp.

The LDP for its part fought the gubernatorial race as if it had fielded its own candidate. “If [Ishihara] were defeated by a candidate backed by the Democratic Party of Japan in the closely watched Tokyo gubernatorial election, its impact on the House of Councillors election [in the summer] would be immeasurable,” a senior LDP member said.

The LDP made systematic efforts to support Ishihara. LDP lawmakers from Tokyo attracted support for Ishihara by visiting companies and Tokyo metropolitan assembly members of the LDP helped run telephone campaigns from Ishihara’s campaign headquarters.

A senior LDP member said Sunday night, “[Ishihara] faced a backlash to some degree, but his high public profile largely contributed to the victory.”

“We achieved a victory because the party extended support [for Ishihara] with the cooperation of New Komeito, regarding this race as a test for the upper house election,” the LDP member added.

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DPJ disappointed

Asano failed to garner votes from most DPJ and Social Democratic Party supporters and swing voters split their votes between him and Ishihara, resulting in his defeat.

Asano decided to run in the election at the request of civic groups following his decision not to run on a DPJ ticket.

As such, he declared his candidacy only 16 days before the election kicked off.

The DPJ and SDP threw their unofficial support behind Asano, but in the beginning of the electoral campaign, he competed as a maverick, shunning political parties.

He stressed the back-up of political parties in the second half of the campaign following reports on his poor approval rating due to his low name recognition.

Even DPJ lawmakers, including DPJ Acting President Naoto Kan, who have won elections in Tokyo constituencies, failed to make a difference, despite campaigning for him.

DPJ Secretary General Yukio Hatoyama was bitterly disappointed, saying that his party could not give full support to Asano because Asano’s aides had initially asked the DPJ to help from behind the scenes.

Some DPJ lawmakers criticized their party leadership, saying the party should have taken the initiative in campaigning for Asano.

(Apr. 9, 2007)

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