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China Seeks Business at Fair
by Michael White
10/12/98
LOS ANGELES (AP) -- Businessman Markus Bohi strolled past booths of clothing, cookware and
electronics at ``Guangdong '98,'' a trade fair designed to attract U.S. money and technology
to a Chinese economy threatened by rising unemployment and recession among its neighbors.
As chief executive of Four Star Distribution, a maker of hip snowboarding apparel, Bohi
already buys 95 percent of his product line from Chinese manufacturers. In recent months,
he has been inundated with invitations to buy more as China seeks to bolster export markets
shrunken by Asia's financial crisis.
``I get faxes daily asking for business,'' he said. ``We always got an inquiry once in a
while, but now it seems like we get so much.''
The importance of trade shows such as last week's ``Guangdong '98'' and the opportunity
they provide to develop new markets has increased as the world economic crisis has deepened.
The dollars exchanged from the deals that are struck help bolster China's foreign currency
reserves and help keep its workers employed, both key factors in China's effort to avoid a
currency devaluation that could sink Asian economies further into recession.
``Clearly given the collapse of demand in Asia, they're going to be looking more aggressively
to the U.S. market, first of all because it's still growing, although the growth has slowed,''
said Ross DeVol, an Asia analyst at the Milken Institute in Santa Monica. ``And we import
high-value products from their competitors, and China is now trying to expand their
industries in those areas of high technology.''
Because China has refused so far to devalue its currency, exports ranging from shoes
and clothing to steel have become more expensive compared to competing products sold by
countries whose currencies have weakened.
Meanwhile, Chinese exports to the United States have grown steadily, reaching $38
billion during the first six months of 1998, compared to $32.7 billion during the same
period last year. For all of 1997, the number was $62.5 billion, compared to $12.8
billion worth of U.S. goods that flowed to China, according to Commerce Department figures.
China is Southern California's second-largest trading partner, after Japan, with
two-way trade worth about $26 billion during 1997, according to the World Trade Center
Association.
Because of California's heavy dependence on Asian trade, the state could suffer if
China does devalue its currency. California exports would become more expensive not
only in China, but all other Asian countries that responded by devaluing their own currencies.
At the trade fair, which ended Friday, representatives from companies and municipalities
from China's southern Guangdong province promoted a range of products and services that included cookware, blue jeans, consumer electronics and tourism.
The Chinese also were looking for long-term investment projects in Chinese industries. By last Thursday, officials said they had signed contracts or letters of intent that would bring up to $5.7 billion in foreign investment, mostly from the United States, to China.
``We have so far been successful,'' said Tang Bing Quan, the vice governor of the Guangdong province. ``The amount of interest and levels of technology are higher than we expected.''
That success comes at a time when U.S. business generally has been cool toward investment in China. Companies are hesitant not only because of the economic crisis, but also because of the difficulty of doing business in a country that still is struggling to establish the rule of law and simple bureaucratic procedures.
A better gauge of foreign interest in China will come later this month when buyers and investors gather for the country's two largest trade shows held in the Chinese cities of Guangzhou and Changsha, said James Jin, a senior partner in the Los Angeles consulting firm Pacific East Partners.
``Most importers worldwide are aware of such fairs,'' he said. ``If you need to buy pencils, you can go there and find 100 suppliers of pencils.''
China has said repeatedly that it won't devalue. To do so would boost the cost of technology and heavy machinery the country needs to modernize its industries and infrastructure. That pledge was reiterated this week when Dai Xianglong, the head of China's central bank, visited Washington.
But some believe it may be difficult for China to keep its promise.
Even a sharp increase in Western trade and investment would not be enough to completely offset China's loss in Asian markets, said DeVol. China's trade with the United States account for about 18 percent of its total exports. Asian sales make up a 54 percent share.
``Even though politically China does not want to devalue, if they face rapidly rising unemployment, they may feel they have no other choice,'' said DeVol. ``If they do devalue, the impacts on the rest of Asia, the rest of the world, are very severe.''
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