China: Competitor or Market Opportunity?

You’re selling your products in a global market, demand is going through the roof, and you’re about to build a new factory that will double your capacity and enable you to manufacture a whole new line of high-end products.

As you begin to source the precision machinery for your lines, where will you look? Think about it for just a moment….

Whatever your answer was, it probably wasn’t China. And guess what? The people building factories in China to double their capacity think the same way. To quote one sales VP who will remain anonymous, “They don’t trust their own stuff.”

This is the other side of the China coin: China as a market. The fact of the matter is, there is a huge demand in China for U.S. products.

An new report from the US-China Business Council (USCBC) quantifies this. The highlights:

·   A majority (406 out of 435) of U.S.congressional districts showed triple-digit growth in exports to China between 2000 and 2007.

·   Of those 406, 400 showed triple digit growth specifically in manufactured goods.

The report also argues that many districts in states thought to be hit hard by job losses attributed to the China factor - Pennsylvania, Indiana, North Carolina, Michigan, Ohio - are having significant success exporting manufactured goods to China, e.g. machinery, electronics and transportation equipment.

During the course of this year’s political campaigns there will be a lot of talk about what these numbers really mean. One admittedly over-simplified argument goes like this: A worker is making $20 per hour at a mill. His job gets moved to China and he takes a job at a big box retailer for $8 per hour. But the same free trade policies that cost him his factory job enable him to buy a warm winter coat  made in China for $20, whereas the same coat made in the U.S. would cost $50. Extend that price differential across all the items people have to buy and things even out.

I’m not sure I buy that argument, but the truth is, for many manufacturing companies here in the U.S. (who, by the way, provide those $20 per hour jobs) the whole question is irrelevant. Due to free trade, China is now a growing market that will top $100 billion (my guess) before we know it.

It’s time to get some of that action.