THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, May 1, 1995 TAG: 9504290207
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
SOURCE: BY J.R. BULLINGTON
LENGTH: Medium: 81 lines
Trade between the United States and China has emerged as a major factor in the economies of both countries.
Until the late 1970s, China mattered little in global trade. But in 1978 it abandoned Marxist dogma to embark on a largely capitalist system that retains Communist political dominance.
The results: China's economy has been growing at an average rate of 9 percent per year for the past 15 years, making it the world's most rapidly growing large economy. At this rate, its output doubles in less than a decade. By World Bank estimates, it is already the world's third largest economy (after the United States and Japan), and it will probably overtake Japan within the next year or two.
Even more striking is the growth in China's international trade, which has risen since 1978 at the astounding rate of more than 16 percent per year.
China has now become the seventh largest U.S. trade partner, with two-way trade increasing from almost nothing in the early 1970s to nearly $50 billion in 1994. However, U.S. exports were less than $10 billion, while imports approached $40 billion. This deficit was second only to our deficit with Japan.
(A recent study by the Institute for International Economics, however, indicates that the deficit with China is probably overstated by a third. The official figures include Chinese products imported through Hong Kong but do not count U.S. goods exported to China via Hong Kong.)
Chinese growth will almost certainly slow down from the double-digit rates of the past few years. Inflation is a serious threat, as are corruption and lawlessness, growing income disparities between rich and poor, potential political instability, and a host of other problems.
Nonetheless, China has clearly become a major force in the world economy and - barring political collapse or other unforeseeable catastrophes - is likely to continue to grow more rapidly than the U.S., Europe and Japan for several more years.
This has enormous implications for the global balance of power - political and military as well as economic - and for policymakers in both government and business.
With 1.2 billion people, more and more of whom are enjoying the income levels necessary to make them consumers of internationally traded goods, China represents a vast market for consumer products. Sales of American cigarettes, colas and fast food are growing rapidly, for example. Avon already has 40,000 Chinese women selling its cosmetics.
China is currently an important, growing market for U.S. aircraft, computers, plastics, fertilizer, food products, waste paper, and scrap metal; and with the progress in protection of intellectual property now getting under way, it should also become a substantial market for American computer software, movies, music and similar products.
And planned infrastructure expansion - highways, railroads, ports, electric power, telecommunications - represents a multibillion-dollar opportunity for U.S. firms.
In 1997, China will absorb Hong Kong, the world's busiest port and a territory of 6 million people enjoying per capita income almost equal to the U.S.
Moreover, economic linkages with prosperous Taiwan are burgeoning. This integration is creating an economic ``Greater China,'' which is already the world's second largest economy and our third largest trading partner.
In terms of business and commerce, it makes sense to consider Greater China as a single economy, an economy of great importance now, with immense future potential.
Although most U.S. trade across the Pacific moves through the West Coast, the Port of Hampton Roads, with 15 steamship lines serving Greater China, is a significant participant.
While Chinese imports through Hampton Roads have declined slightly in recent years, exports have shown strong growth.
In 1993, about 116,000 tons of freight worth $139 million was exported to China through the port. This was up from 27,000 tons worth $61 million in 1989. Shipments through the port to Greater China in 1993 totaled 687,000 tons worth $577 million, up from 301,000 tons worth $447 million in 1989. MEMO: J.R. Bullington is director of the Center for Global Business and
Executive Education at Old Dominion University.
by CNB