China’s transition to a consumer economy and its aim to sustain itself as a major global trading power offers a wealth of opportunities for U.S. businesses willing to risk lax enforcement of intellectual property laws and navigate local regulatory and cultural channels to sell their products and services there.
So a panel of China trade and banking experts told a business audience from Fairfield County and New York’s Westchester County at a recent discussion on selling into the China market. The breakfast event was hosted by HSBC and the Westchester County Business Journal at the Hilton Westchester in Rye Brook.
Exports from the U.S. to China grew 542 percent from 2000 to 2011, according to HSBC officials. As of July, U.S. exports to China this year totaled $61 billion, well ahead of the pace of trade in 2011, when the U.S. shipped $103 billion of exports to China.
More than 90 percent of the world’s top 500 companies do business in China, according to HSBC.
“It’s a real boom period,” though Chinese government and business officials recognize that the current rate of economic growth is not sustainable, said attorney Paul B. Edelberg, partner at Fox Rothschild L.L.P. in Stamford. “They work hard over there and they want to do business. They love to do business with Americans. It’s a great opportunity.”
“You want to deal with them because it is a Type A country just like us,” said Robbin Price, senior vice president in HSBC’s foreign exchange division. She said she has been impressed by the “very practical” approach of Chinese government officials. “China is removing a lot of the obstacles to doing business and doing transactions” in Chinese currency.
Price advised U.S. companies doing business in mainland China to open bank accounts in Hong Kong for transactions in renminbis, or RMBs, China’s official currency that was opened to limited trading in the international exchange market in 2010. Designating a Hong Kong bank “makes a huge difference” in a country where the third-party payer in an RMB transaction, the bank, “is highly scrutinized,” she said.
“It’s fully tradable now,” Price said of the RMB. “The next step is to start thinking about how to protect yourself from fluctuations in the market.”
Steven L. Henning, partner at Marks Paneth and Shron L.L.P. in Manhattan, said China is making a “slow transition” from a producer to a consumer economy. “As a result, there’s an enormous demand for western products, for luxury products,” he said.
A population migration from rural areas to cities has left Chinese citizens with “a lot more money to spend that is creating that consumer demand,” Henning said.
Henning said Chinese government and business officials show “an enormous desire for a greater understanding of western business practices to facilitate the enormous explosion of growth that they’ve had.” Technical and scientific knowledge also is much in demand with luxury products, he said.
Both Henning and Edelberg advised U.S. owners to seek partners in China for business contracts and local regulatory contacts. “If you go in by yourself, it’s very difficult. It’s very intimidating,” said Henning.
Edelberg said protecting intellectual property will continue to be a problem for U.S. companies in China. “If you can’t deal with it, maybe you shouldn’t be trading in China,” he said.
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