China’s needs may open doors for American opportunities

Before Xi Jinping, president of China, met with President Barack Obama, he went to Costa Rica, where he met President Laura Chinchilla, to discuss commercial and energy projects, including upgrading the Central American country’s oil refineries and developing a free-trade zone.

He went to the Caribbean Republic of Trinidad and Tobago, where he met Prime Minister Kamla Persad-Bissessar and announced they had discussed ways to cooperate in key areas of energy, minerals, infrastructure development, telecommunications and agriculture.

In Mexico, he met with President Enrique Peña Nieto to determine ways to reduce Mexico’s large trade deficit while strengthening trade links.

The common link were a slew of trade and business agreements with real dollars (or RMB) attached.

By the time he got to the United States, the goody bag must have been empty, because there were no substantive trade deals announced. Instead, the news was about “pivots” and “twirls.” We pivot on Asia, and they twirl around Latin America.

The part that is difficult to understand is what it all means. At a time when we are in the midst of a shaky recovery and China is switching from an export to domestic consumption emphasis, it seems like the wrong time to be putting on your dancing shoes.

On the U.S. side, it is hard to understand where the good economic news is coming from and how sustainable it will be. Delayed demand and a weaker dollar (although not recently) is one thing, but a faltering world economy does not bode well for our exports long-term and a shrinking middle class, whose median income fell by 5 percent and net wealth by 28 percent over the last decade, does not portend well for a consumption boom.

In China, exports grew 1 percent, their lowest level in 10 months (mostly due to a crackdown on hot money inflows that had been disguised as sales), the CPI and PPI trended downward to 2.1 percent and -2.9 percent, respectively, while retail sales increased 12.9 percent and overall GDP was pegged to 7.5 percent.

In other words, things pretty much followed the government’s forecast. Whether China’s growing consumption can counteract its slowing exports and still maintain a robust growth is something we will have to wait and see. What is clear is that the middle class is growing and this bodes well for long term consumption.

Unfortunately, if you read the views of most Western economists, many of whom forecast economic Armageddon if oil ever went above $60 a barrel, low inflation and increased sales are a bad thing, a sign of China’s impending demise. True, there are daunting over capacity, real estate, aging and environmental issues, but these seem to take secondary consideration. Point being, things are not looking worse for us in the short term, but given our better energy situation and vast resources vs. China’s need to rebalance its social and economic situation, the long term could be positive.

So, how do you survive in the meantime?

Read the China Daily, owned by the government (it’s free). The paper presents what China is doing and if you look carefully it will give you plenty of ideas of what you have that China needs. For example, over three days, I noted some things, which might be of interest:

And on. So read, enjoy and learn. n

Einar Tangen, formerly from Milwaukee, now lives and works in Beijing, China. He is an adviser to Heilongjiang Province, Hebei Province QEDTZ, China.org.cn, China International Publishing Group, Beijing Baotong and DGI DESIGN. He is also a weekly public affairs commentator for CCTV News’ Dialogue and the author of “The Kunshan Way,” an economic development history of China’s leading county level city. While in Milwaukee, he was a partner at Jackson, Morgan and Tangen, president of E-Tech and a senior vice president at Stifel Nicolaus. He chaired various boards in Milwaukee and was a member of the Federal Home Loan Bank of Chicago. Readers who would like to submit questions or suggest areas of interest can send an e-mail to steve.jagler@biztimes.com.

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