At Your Service, China!
Russell Flannery, 05.26.07, 12:12 PM ET
CHENGDU - As trade battlefronts go, the five-star Jin Jiang Hotel in Chengdu, capital of Sichuan province in western China, exudes optimism for foreign business visitors.
The word "jin" suggests prosperity. A first-floor corridor boasts pictures of overseas visitors known to have had some success in the country. Among their number is politician-turned-entrepreneur Henry Kissinger, plus executives from Motorola (nasdaq: MOT - news - people ).
The atmosphere at a U.S.-Chinese business gathering here in China's far west this week couldn't have been more different to that surrounding the high-profile U.S.-Chinese economic talks in Washington. While U.S. legislators lambasted China's trade and exchange-rate policies, the 200 American and Chinese participants who turned out for the second U.S-China Business Matchmaking Conference here were upbeat about the economic outlook in the country and business opportunities.
More than the mood differed. Rather than exports of goods and exchange rates, Americans on the ground saw other priorities. "About 80% of U.S. GDP is in services, and services such as accounting, finance, legal and architecture are industries that Americans can come here and sell," said Barry I. Friedman, minister-counselor for commercial affairs at the U.S. Embassy in Beijing, who traveled to Chengdu to speak at the meeting.
To that end, Morgan Stanley (nyse: MS - news - people ) dispatched an executive director, Hui Li, from Hong Kong to pitch its help to Sichuan corporations. A speaker from global accounting giant KPMG described a fast-growing operation in Chengdu that opened last year and already has 60 employees; next year, it expects to have 200.
That wasn't the only gulf between U.S. politicians and attendees. Whereas most U.S. companies in southern China a decade ago looked to tap a low-cost workforce for export manufacturing, more than half of that group to respond to surveys these days said they invest primarily to tap into China's booming domestic demand and, what's more, are making money at it, said American Chamber of Commerce in South China President Harley Seyedin.
The Chinese-U.S. talks in Washington this week were useful in reducing tension, but the emphasis on shipping goods from the U.S. was "misplaced," Seyedin said.
The Chengdu conference coincided with one of the vast region's most important annual business gatherings, the Western China International Economy and Trade Fair. Chinese leaders are promoting trade and investment there to close the income gap with the more prosperous eastern seaboard provinces.
Land-locked Sichuan, mostly known around the world for its spicy food and pandas, is rich in tourism potential and is home to a relatively large and well-educated workforce. Its population of 87 million exceeds most European nations.
By Chinese standards, the Chinese-U.S. meeting was low on political platitudes that once overwhelmed such gatherings. That said, foreign and local guests alike were treated to a China National Symphony Orchestra Performance of "Soaring China," a piece "dedicated to the great rejuvenation of our motherland" and laden with traditional party propaganda concerning the absorption of Taiwan, plus other topical Communist Party thrusts.
"The day is coming after we have waited for so many years/The torch for the Olympic Games will be burning by the side of the Great Wall," the lyrics went. The work nationalistically concluded, "Soar high, soar high, soar high, my China!"
China's service industry holds promise for foreign companies because domestic ones born after decades of failed central government planning are still weak competitors. Financial services are hot in particular because so many Chinese companies are looking for help in selling stock overseas, and because so many of the country's newly rich are seeking ideas about what to do with their fortunes.
Franchising is another area with wide interest among American companies in China. Industry leaders like Starbucks (nasdaq: SBUX - news - people ) have set up shop in Chengdu and much of China already, amid an improving intellectual property environment. Allway of Seattle has managed to set up 11 Seattle Espresso coffee shops in Guangdong province and is looking to add some in Sichuan, said Vice President Tim Wen. Sichuan's weather and teahouse culture make it ripe for expansion, he adds.
Property investment was also a hot topic among American companies. Zhang Wei, New York real estate service firm Cushman & Wakefield's capital investments unit's managing director for China, was in Chengdu looking for property projects to invest in--one of several firms with the same idea. Probably not what export-minded U.S. politicians have in mind.
Consultant Mike Zelechowski said he once may have been closer to their ideal. A regional manager for Pacific Resources International of Laguna Hills, Calif., Zelechowski used to work with U.S. customers looking to sell machinery in China and recalls taking Chinese on buying missions in the U.S. in the 1990s.
But now, Pacific's main business is to help U.S. and other overseas companies set up production lines in China to make products for the local market. Pacific is working with an Israeli antenna producer, Galtronics, to set up a factory that will supply to Motorola (nyse: MOT - news - people ) locally. China is now the world's biggest market for mobile phones. It is moving up the industrial food chain and is richer, changing the opportunities that are to be found here, said Zelechowski.
Another problem for the U.S. Congress, said the American Chamber of Commerce in South China's Seyedin, is that many relatively small U.S. manufacturers that could succeed in China find the market too daunting and risky. To solve that, policymakers should look at Germany and other European governments that actively help those businesses get their feet on the ground by providing help with services such as low-cost office space. Otherwise, he said, "they won't come on their own."
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G' day Mates,
Aussie
AI
