| China and the US: The World's Most Important Relationship? |
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| China Business Summit |
The economic and commercial relationship between China and the United States has become the rhythm to which the global economy beats. While their interests in trade and legal protections are to some extent converging, China will eventually pose a challenge to American wealth and economic dominance, competing for resources and demanding a greater say in international forums. Businesses and governments need to adjust to China's arrival on the global economic stage and prepare for the inevitable jostling that will result.
"China is now able to do many of the things that were once the basis for a middle class life in the United States," said Robert A. Kapp, President, US-China Business Council, USA.
It is this emerging challenge to American economic superiority that poses the greatest threat to what is otherwise a smoothly operating, mutually beneficial economic relationship, panellists said. Despite the tendency of American politicians to exploit China's trade surplus or the loss of manufacturing jobs to China as periodic campaign issues, said Kapp, most Americans do not mistrust China the way they did the Soviet Union 60 years ago. The United States' sense of its moral role in the world will always be a source of friction, but Americans do not see their nation on an ideological collision course with China.
Yet the United States and China are headed for confrontation, said Jeffrey E. Garten, Dean, Yale School of Management, Yale University, USA. The global economy is now dominated by the United States, but there will soon come a day when China emerges as a second engine of global growth, Garten said. "The United States is not at all prepared to accommodate this," he commented.
The United States and China will compete for resources globally, Garten said, a situation that will require China to adopt a more assertive foreign policy that could compete with US foreign policy in the Middle East, in Asia and in Latin America. Yet China remains under-represented in most international organizations. This needs to change, he said. The United States and China must cooperate at the highest levels to prepare for this evolving relationship. More needs to be done to deepen ties between the two countries beyond commerce, he noted.
For its part, the Bush administration has adopted a policy of "leveraged engagement" with China, aiming to ensure that a senior American official visits China almost monthly to enhance dialogue and resolve economic conflicts, said Grant Aldonas, US Undersecretary of Commerce for International Trade. Chief among those areas of conflict is China's inadequate protection of intellectual property rights. The United States continues to focus on this issue, he said, so that it can protect the ideas of its own citizens and their ability to innovate. While the United States desires to stay involved in the world's most dynamic economy, many American companies are still holding back on investing into China for fear that their ideas and designs will be copied and re-sold without fair compensation. China's own entrepreneurs and innovators need protection if they are to flourish. Most profoundly, added Kapp, enforcing China's intellectual property laws represents an important challenge to the very ability of China's leaders to govern their nation.
The United States also has some work to do to improve its commercial relationship with China, said Yu Ping, Vice-Chairman, CCPIT-China Council for the Promotion of International Trade, People's Republic of China. If the United States wants to reduce its trade deficit with China, he said, it needs to lower restrictions against exports of high technology to China. The United States needs to do more to promote its own exports in China and publicize its desire for Chinese investment in the United States. Few Chinese companies understand that the United States is also hungry for new capital and new jobs. Both sides need to help their small- and medium-sized enterprises explore opportunities in the other's markets. And the United States needs to understand that its restrictive visa policies, including fingerprinting, have become a major non-tariff barrier to trade and investment by China's business people into the United States.
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A USA Product Designer
By FPFIG
Background: The company and newly and unique products with significant market potential. Pricing was however to high and therefore an obstacle to market entry. They needed dramatic cost reduction and had no contacts or resources able to help them in China sourcing.
Execution: AICC took sample products, developed written specifications and then conducted a search for potential suppliers in China. This required hard tooling, stamping, high quality label, assembly and retail packaging skill sets.
Deliverable : Within 60 days
First Pacific Financial Investment Group
identified a supply chain that reduced the cost of one product by 65% and another 85%. In addition ToPacific in cooperation with the newly identified supply chain designed superb retail packaging and redesigned one product resulting in a 66% reduction in freight costs.
Customer assessment : "The results are beyond our wildest drams! We could not be more pleased, this is much more than we expected."
Footnote: AICC remains engaged with the account providing Program Management support activities. |
Case II: We researched and qualified a Chinese supplier for one of the largest distributors of packaging products in USA.
CaseIII: We did customized component manufacturing for some US small and medium companies.
Marketing Entry
We designed marketing plans for a multinationational company's entry to Chinese market by doing marketing research(focus group, survey), SWOT analysis etc. Our client experience includes P&G, Motorola, Siemens and etc.
Joint Venture & Investment
I. We successfully assisted US companies setup joint ventures in Asia. There are two types of joint venture enterprises in China: equity joint ventures (EJV) and contractual joint ventures (CJV).
According to the Chinese law, EJVs are limited liability companies. Usually, the foreign partner of an EJV must contribute at least 25 percent of the capital although there are no limitations on the number of partners in a venture. Profits are distributed according to each partner's capital contribution. Upon successful completion of the pre-approval screening, the Ministry of Foreign Economic Relations and Trade (MOFERT) or a corresponding authority will normally make a decision on approval within 90 days. Depending on the scope of the venture, the contract period may be decided by negotiation among the parties or in accordance with sector specific regulations. The foreign investor may not recover its investment until liquidation or sale of the venture. (However, in practice, investors can sell its shares or receive dividend from the JV.)
Under the law governing CJV, the parties determine the form of operation through the negotiation of a contract. Generally, the parties agree to operate jointly like partners or to form a new limited liability company. There are no set government requirements on the duration of the venture, on the amount of capital the foreign investor must contribute, or on how profits are to be distributed. If ownership of the fixed assets of the venture reverts to the Chinese partner at the end of the contract term, the foreign investor may recover its share of the investment during the term of cooperation. Assuming successful completion of the required pre-approval procedures, MOFERT or a corresponding local authority will make a decision on approval within 45 days.
II. We are doing reverse merger for Chinese companies, we've done several cases on financing in US public market through reverse merger.Reverse merger is a faster and cheaper way for a private company to go public. To do a reverse merger, a private company would find a public "shell" - a public company that has little or no operation and assets. Usually the shell has to be "clean" , that is, with little or no liability, and with no current or potential legal problems. In a reverse merger, the public shell issues shares to the shareholders of the private company to acquire (usually 100%) shares of the private company. Subsequently, the shareholders of the private company become the majority (usually 90%-95%) shareholders of the public company, the directors and officers of the public shell resign and appoint the new directors designated by the private company. A reverse merger deal could be a "cash deal" (in which the majority shareholders of the public shell are bought-out with cash) or a "non cash deal" (in which no cash changes hands).
III. We are providing value-added financial advisory service for Chinese private and family firms, assisting its financing, global strategy, M&A , IPO in USA.
E-business Outsourcing
We designed and implemented an Oracle Database for a drug knowledge portal site.
Entertainment: TV& Film Production
Digital film production, content distribution to Chinese television network. Film investment
Education
We are working on a joint venture on a Master of Public Administration (MPA) program and Membership Programs Training with Unversity of Southern California and American Madison Staff College one of the top 5 programs in the USA. We are looking for partners in China.
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