Summit assesses Sino-US relations
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| Henry Paulson, secretary of the US Treasury, speaks at the China Institute Executive Summit in New York city, US, on November 8. Paulson reiterated his support for a "strong" US currency, a day after it fell to a record low against the euro. Dan Barry/Bloomberg News |
"As major global economic participants we both have responsibilities. Our discussions have not been about the directions of reform, but rather about the pace. Implementation is the name of the game. The question is not whether China can grow quickly over the short term; the question is whether it can grow differently and consistently over the long-term," Paulson said.
Paulson stated that for China, balanced growth requires continuing economic reform, including moving the currency very quickly. He brought up the recent G7 Finance Ministers' meeting in Washington that called for a specific renminbi appreciation to back up his key point of debate. Paulson called China's exponential growth as a "resource-intensive and export-intensive economic model", but he noted that it led to growing imbalances, a threat in internal harmony and spurred trade conflict.
"I've got to believe that they (China) understand that it's an unnatural act to be as integrated into the global economy in terms of their trading goods and services and not in the financial markets, and that they're clearly proceeding on the path of liberalization," Paulson said.
Another expert at the Summit - who also called himself an optimist - was Ha Jiming, chief economist of China International Capital Corporation (CICC). Ha said that he thinks Paulson is doing a good job of making his and the United State's opinions very clear, but he disagrees on the required pace of economic reforms and national priorities.
"Everybody in the world knows that China is a very open economy, and starting from the '80s, when China initiated economic reform, it started to attract foreign direct investment into the country and it has been going on for three decades," Ha said.
To describe the state of China's economy, Ha used a jocular analogy of the human body, saying that it can only take in so much before it must take out some of what has been ingested, and that would only help to regulate the nation's growing wealth that has not translated into a consumer-driven market.
Capital outflows
"In my opinion, I think it's very important to encourage capital outflows; if you have so much money because of inflows and huge household savings, together they push up domestic prices to a higher level when dividends turn into deficits," Ha said.
"Just as we don't want to see a disorderly depreciation of the dollar, people don't want to see a disorderly appreciation of the Chinese renminbi - particularly given the weaknesses in the Chinese economy that can't be resolved overnight, like the social security system and high savings rate. We cannot at this stage rely only on the exchange rate instrument to correct all the imbalances. There should be other concerted efforts, including the establishment of a social safety net and rationalization of other factor prices such as energy prices and environmental pollution," said Ha as he touched on topics that were featured on the agenda for Friday's panel discussions.
Ha alluded to the Chinese proverb about patience, saying those who lack patience will not get the hot tofu - a comment not only on Paulson's hopes for China's economy but also the outlook of Westerners keen on catching the speeding train that is the current Chinese economy. Several eager entrepreneurs and tycoons in attendance heard advice from experts on China's financial regulations, forthcoming energy and environmental responsibilities and struggles in building a brand and marketing to the Chinese audience.
With a focus on what China must do next to sustain the rise and improve income disparities, Friday's speeches touched on everything from sponsors gearing up for the Beijing Olympics to the emergence of the entertainment industry and the influence of young Chinese consumers.
Shaun Rein, founder and managing director of Shanghai-based China Market Research Group, spoke about the short-term prospects of making money in China and pointed out examples of who he thought failed to make their mark (GM's Buick brand) and who succeeded in the Chinese marketplace (BMW). He said the keys to doing business in China are identifying your target audience and figuring out how to market to them.
"Seventy percent of multinationals are making money in China, but some will fail. Buick has done the worst job of positioning its brand, and market shares have dropped as a result. They first tried to market themselves as an executive's car, but they later made watered-down $10,000 cars that secretaries bought, and this confused buyers. Nobody knew what to think," he said.
Rein sat on the "Marketing China" panel with Brion Tingler, an associate director at Gavin Anderson & Company, who worked in China for nearly five years. Tingler helped several Chinese companies with their "Going Global" communications strategies. He outlined the main challenges Chinese companies face when doing business outside of China, citing business-cultural differences; Chinese companies' resistance to engage beyond business audiences; how the 'Made in China' brand is under attack around the world; differences in the legal environments of the United States and China, as well and many companies' natural inclination to think 'what worked at home will certainly work abroad'. He said: "While some difficulties lie ahead, Chinese companies have proven themselves adept at overcoming challenges. They have tremendous potential as they expand abroad."
Not forgotten at the Summit was the importance of cooperation on the environmental front from the two largest carbon emitters on the planet. Paulson said the United States realizes the necessity of discussing climate change, alternative energy or cleaner technologies with a new economic leader such as China, and he added that if the two nations are to be successful in their environmental talks it would have to have to be with the backdrop of strong economies to fund innovations.
The idea that the United States and China - as the two countries with the world's largest coal reserves - should form a joint scientific team was brought up by Maurice R Greenberg, who served as President and CEO of AIG, the largest insurance company in the world, and was a pioneer for Americans doing business in China for more than 30 years. He said that he's been impressed by the talent he's seen at Chinese universities since the late '70s, and he's wanted to see more international training programs developed by American companies, including scientific research centers.
Green concerns
Barbara Finamore, founder and director of the Natural Resources Defense Council, spoke on both nations' interests on the environmental issue and echoed Paulson's sentiments. But she noted that China's rapid changes have happened faster than what world history has previously witnessed.
"The extent to which China's pollution and environmental impact are affecting the rest of the planet has never been seen before. To produce $10,000 worth of product in China, China uses seven times more resources than Japan, six times more resources than the US and, most embarrassing, three times more resources than India," she said.
Finamore was encouraged that the Chinese government has announced in their five-year plan "what may be the most ambitious energy program in the world", because the aim is to cut energy use per GDP by 20 percent by 2010.
"Most remarkable to me is the effort at the central government level to rate the performance of local government officials and factory owners on how well they meet energy and environmental targets. In fact, the law has now been amended," she said.
The two-day Executive Summit featured presentations on "Finance, Equity and Hedge funds in China", "Energy, Environment & Economics" and "Marketing China". Talks resume next month as the United State's and China's representatives will meet for the third installment of the SED in Beijing.
Founded in 1926, China Institute in America is a non-profit educational and cultural institution that promotes understanding, appreciation and enjoyment of traditional and contemporary Chinese civilization, culture and heritage, and provides the cultural and historical context for understanding contemporary China.
(China Daily 11/13/2007 page15)
