What do US Businesses Want from China?
The journalist asked some extremely interesting questions during our interview yesterday, which I’ve summarized below:
- President Xi JinPing initial mandates / objectives: Increase domestic consumption, reduce graft, improve the environment
- What’s happening with China’s economy now?: Every country, even one with a planned economy like China, goes through 7-9 year economic cycles. China is doing whatever it can to help stabilize the economy— adjusting interest rates, its currency, domestic spending, Foreign Direct Investment (FDI), and governmental spending.
- What would my “big question” be in the Seattle business leader room?: How would the Chinese president evaluate its economic success 3-5 years from now? What metrics would he use?
- Difference in key metrics: US and China: Formerly, one of China’s principal key metrics was FDI (Foreign Direct Investment). In the US, it’s the Dow’s performance, along with new housing starts, interest rates and unemployment. Moving forward, two of the key metrics in China for success might well be the amount of clean water (as suggested to me by a leading Hong Kong economist, David O’Rear) and to what extent people will want to spend their own money in the economy as a demonstration of faith / confidence. Also note that China has a much longer perspective on success than we do in the US.
- Would you invest in China now?: I think it’s a great buying opportunity for non-Chinese businesses due to lower valuations, but it’s far removed from an all-or-nothing approach. I’d go sector-by-sector to determine which assets are undervalued.
- Patriotism vs. Protectionism: Chinese vs. non-Chinese business support (protectionism) is still very much a work in progress. I’m hoping that once the economy gets stabilized things will revert to where they were 5+ years ago. As it relates to technology, and supporting Chinese vs. non-Chinese firms, I believe he/she who has the best technology will win the race over time (i.e., note the proliferation of Apple even in the wake of an impressively strong Chinese brand like Lenovo).
(Photo from International Business Times).