Last fall, at a meeting of the Chinese Communist Party’s central committee, President Xi Jinping pledged a new stage of growth for China driven by deregulation, a reduction in areas of business requiring government approval and a greater emphasis on the domestic economy. Also in the works, Xi said, are tax and legal reform as well as improved government services. If Xi is even partially successful in his reform efforts, they could have huge implications for foreigners doing business in China.
For Washington state companies that have traditionally conducted a large portion of their business overseas, that situation means new opportunities — and a different approach to doing business in China. Instead of looking to China as a source for low-cost manufacturing, local businesses should consider the country a partner and a great market for western products and services.
Part of the new market comes from the largest migration in human history. Two hundred fifty million rural residents are expected to move to China’s cities in the next few years. This will require almost $1 trillion in infrastructure investment there.
Fast-growing cities are in dire need of transportation infrastructure and a modern logistics industry to arrange the transportation of food, clothing, building materials, consumer goods and other freight. Additional needed resources include modern agricultural methods to improve yields, advanced health care and education, construction of better housing for the urban population, development of urban economies to provide better jobs and more domestic demand for goods and services, and expansion of electrical and telecommunications services.
The Chinese government is also encouraging its companies to invest in the United States and to bring back management know-how, expertise, best practices and technology needed to develop China’s cities and its domestic economy.
With their relative proximity to China and mature transportation and logistics industries, many Washington-based businesses can offer this infrastructure and management expertise to Chinese investors. As well, Seattle has always been a hotbed for startups; entrepreneurs might focus their attention on how China can build businesses that are sustainable as well as profitable.
China’s domestic economy is still on the ground floor. It needs hospitality and hotel companies, high-quality trucking companies, intermodal transportation providers, health care and elder care companies, logistics enterprises, IT companies, warehousing facilities, and consultants offering support services in IT, communications, transport, control systems, and security and data analysis as it transitions from rural subsistence farming to an urban economy.
Especially well positioned to tap the Chinese market are Washington businesses that can address the issues of successful distribution strategies, such as integration of road and rail transportation, development of inland rivers and ports, retail supply chain management and e-commerce order fulfillment.
Another major area of focus is clean energy, especially in power generation, vehicle emissions, green buildings and clean technologies. Seattle was ranked as America’s No. 1 “smart city” based on its government policies and green economy. Business leaders here have an opportunity to export their know-how to create efficient transportation systems while at the same time reducing carbon emissions, preserving clean water and ensuring food safety.
By helping China achieve its goals, Washington state businesses can profit, gain support for their own research and development, improve the global environmental outlook and create an economic engine for our own state economy that results in sustainable growth and job creation.
Sara P. Sandford is an attorney at Garvey Schubert Barer working with clients around the world in all stages of establishing, acquiring and operating businesses across borders.