US looks to increase exports to China

China’s growing middle class and subsequent rise in demand for foreign products presents a huge opportunity for U.S. firms and a potential boost to the economy.  

With U.S. exports hitting record levels last year, businesses should take a more aggressive tack in selling their goods and services in China, Chris Devonshire-Ellis told The Hill in an interview. 

{mosads}Devonshire-Ellis is the founder of Dezan Shira & Associates, a firm that advises businesses on trade issues.

The Chinese middle class has expanded rapidly in the past 20 years to about 200 million, and that number is expected to double by 2020, creating massive potential for U.S. businesses, said Devonshire-Ellis, whose firm started in 1992 and has seen China’s progress first-hand. 

“This is a wake-up call that China is open for business and buying,” he said. 

“The time was yesterday to get into the market, but it’s not too late.”

Devonshire-Ellis argues that while large U.S. corporations have a well-established presence in China, smaller businesses got sidetracked and have lagged behind, mainly because of fear or apprehension about doing business there. 

“It is really a bit of an attitude or a perception issue over the last couple of decades,” Devonshire-Ellis said. 

“Americans are partially educated to view the outside world with a little bit of fear, and there’s a natural reluctance to go overseas for business,” he said. 

“Americans are wonderful at making great stuff, but over the past couple of decades they’ve become a bit insular,” he added. 

Now, he says, is prime time for U.S. firms to take a chance in China, a nation whose people admire American products, with many brands already a part of the consumer psyche. 

The proof is in the numbers. 

U.S. exports to China last year eclipsed $100 billion for the first time ever, and 30 states count the country as one of their top three export markets, according to a report by the U.S. China Business Council (USCBC). 

“American companies from every corner of the nation are exporting high-value computers, electronics, agricultural products, chemicals, transportation equipment and machinery to an expanding marketplace in China,” said USCBC Vice President Erin Ennis.

The report shows that total U.S. exports to China rose 542 percent to $103.9 billion in 2011 from $16.2 billion in 2000, making the communist nation the third-largest U.S. export market. 

“While $100 billion is a milestone, it’s going to develop significantly and there are implications for U.S. businesses,” Devonshire-Ellis said. 

All told, 48 states have seen at least triple-digit export growth to China since 2000, far outpacing growth in their exports to the rest of the world. 

In those two decades, the face of the Chinese middle class is now a 37-year-old consumer — up from the average 23-year-old 20 years ago — with a rising income, who is married, has a child, a mortgage, probably a car and dependents such as parents — and, notably, a much different set of demands from his or her youth. 

With China’s overall population aging quickly, it will be looking for products, like healthcare and medicines, to help the older population. With more leisure time, there are greater opportunities to travel, a major issue for the U.S. tourism and travel industry and Congress right now. 

Earlier this week, Michael Scuse, an acting undersecretary at the U.S. Department of Agriculture, said demand in China for U.S. agricultural products is on the rise — offering a potential new market for products such as corn and wine. 

Scuse, who was wrapping up a weeklong trade mission in China with 39 American agricultural businesses, said soybeans are the biggest agricultural export. China signed an agreement with the United States to purchase more than $4.3 billion worth of soybeans in the coming year. 

Last fiscal year, for the first time ever, China was the No. 1 market for U.S. food and agricultural exports, Scuse said in a recent blog post.

Wang Haifeng, director of international economics at the Institute for International Economic Research, a think tank under the National Development and Reform Commission of China, said the export figures show that U.S. businesses have a great opportunity to penetrate the Chinese market. 

That USCBC reports shows “the great potential of U.S. exports,” which will reduce trade imbalances and help lower unemployment and speed up the economic recovery, he told China Daily.

While Devonshire-Ellis acknowledged some obstacles — there is tough competition for some products and many tariffs are prohibitive — he credited the Commerce Department for giving U.S. businesses opportunities — grants and other help — to provide an avenue to export. 

China has been part of the World Trade Organization since 2001 and its economy has been growing rapidly since then. 

In 2010, President Obama introduced his National Export Initiative, a plan to double U.S. exports by 2014. To hit that goal, exports will have to increase 15 percent a year, on average, for five years.

So far, China is the only market where that figure has been reached. 

Overall, Devonshire-Ellis said the expansion of the Chinese middle class wasn’t really much of a surprise — a 1950s economic theory predicted that a growing workforce would bank more wealth, then reinvest in education and innovation, eventually arriving at this turning point, where demand is sustainable. 

He sees the same trend in India, which by 2050 could leap-frog into the position of the world’s largest economy, according to a report released on Friday. 

India, the fourth-largest economy in the world in terms of purchasing-power parity, is expected to become the largest economy by 2050, according to the The Wealth Report, released this week by global property firm Knight Frank and Citi Private Bank. 

The report also predicts China, currently the world’s second largest economy, will take the top spot from the United States by 2020.

By 2050 the Indian economy is expected to be worth $85.97 trillion, while China’s gross domestic product would be around $80.02 trillion, well ahead of the U.S. GDP of $39.07 trillion by 2050, according to the report. 

With their growing wealth, Chinese tourists are waiting in line, literally, to visit the United States. 

The U.S. Travel Association, the National Retail Federation and the U.S. Chamber of Commerce are among the leading groups pushing for increased tourism by updating and streamlining visa rules to boost international travel to the United States. 

An average Chinese tourist spends about $6,000 during a trip to the United States, the highest level of any country. 

Getting those tourists here has been the trick, as demand eclipses the U.S. ability to meet it. 

A bipartisan group of senators is aiming to introduce a package of bills designed to bolster the economic recovery by reducing costs, speeding up visa times and easing restrictions for visitors interested in traveling to the United States. 

In June, delays in China averaged 48 days but, with the State Department ramping up efforts to process visa applications, that wait time has dropped to about five days on average. 

Travel from China is expected to increase by 151 percent by 2020.

“While we support efforts undertaken so far, now is the time to make the necessary changes to ensure that we are not having this same conversation in 18 months,” Thomas Donohue, president and chief executive of the U.S. Chamber of Commerce, told the Senate Judiciary Committee this week in support of the legislation.

Retailers also have led the charge on improving visa wait times. 

“We applaud the improvements they have made, but they need to be sustained for the long term,” Jon Gold, vice president of Supply Chain and Customs Policy with the National Retail Federation, told The Hill. 

“We need to see those improvements continue and State needs to plan appropriately for the growing demand from those and other nations,” he said. 

“The legislation will help them continually make the changes and plan for the growing needs and it will push State to improve the process and set realistic time frames for them to meet on visa processing.”

Gary Locke, U.S. ambassador to China, recently reiterated the need for the State Department to speed up the visa process to meet rapidly growing demand. 

“Measured against the past and where the relationship has been,” Locke said, “our two sides have made enormous progress.” 

“Measured against the future and our potential, there is much more progress still to achieve,” he added. 

Locke discussed the importance of encouraging more Chinese investment in the United States and facilitating travel to the United States as key initiatives the U.S. embassy is working on to strengthen the economic relationship of the two nations.

The White House also continued talks on Wednesday with nearly two dozen chief executives as the nation’s largest travel companies met with senior administration officials and pressed for policies that would boost economic growth and job creation in the nation’s $1.9 trillion travel industry. 

“President Obama’s call for a national travel and tourism strategy was one of the most significant developments for our industry in the past decade,” said Roger Dow, president and chief executive of the U.S. Travel Association. 

“The travel industry has the ability — and stands ready — to quickly hire many of the unemployed workers in our country, but to do that we must have policies in place that increase travel to and within the United States,” he said. 

The industry supports 14.4 million jobs.

“This administration and most in Congress understand that, and we look forward to bipartisan support for legislation that supports America’s travel industry,” said Dow.