International Trade and Global Business

 

In the Midst of a Trade War, Can US SMEs Still Thrive in China?

In the Midst of a Trade War, Can US SMEs Still Thrive in China?

If your company does business in China, or hopes to, you’ve probably been following the trade war rhetoric very closely—and were relieved by the news of an apparent breakthrough during the G20 Summit in Japan. 
 
Doug Barry, Director of Communications and Publications of the Washington, DC-based US-China Business Council (USCBC) points to several promising developments from that meeting: Presidents Xi and Trump ordered their negotiators back to work. The US agreed not to impose a 25 percent tariff on an additional $300 billion worth of Chinese goods imports. It will allow US companies to continue to sell to the Chinesetech company Huawei. And the biggest news for US farmers: China will resume buying US agriculture products. 
 
Does this mean that the trade spat is history? It might be more accurate to say it’s paused. The critical issue is that the two countries are negotiating again. 
 
China hasn’t always played by the same trade rules as other countries, and it’s not yet clear how much that will change. But that hasn’t stopped western companies that do business there from enjoying immense success. Barry doesn’t think it should stop companies from moving forward now, even as ongoing negotiations leave some uncertainty. 
 
The opportunities that China presents, not just for today, but for the future, are so profound, that difficulties that might derail business in another country—even a trade war—can, in the long term, be worth the effort. 
 
“First of all, it is a 1.4 billion person market, which has attracted companies from around the world since the very beginning,” says Barry. “A third of the world's economic growth going out in the next decade or two will come from China. Why wouldn't a small company want to consider being there and selling?” 
 
But in-depth, accurate information about the workings of Chinese businesses and bureaucracy is more important than ever now. That could make membership in the USCBC a wise choice for any SME selling, buying, manufacturing, or sourcing in the country. 
 
The USCBC began operations in the pivotal period between the world-changing 1972 meetings in China between Nixon and China’s leaders, Mao Tse-Tung and Chou En-Lai, and the official recognition of the People’s Republic China by the US in 1979. Formed by a group of American businesspeople (its membership rolls are still exclusively American), “It was set up to gather intelligence, better understand the political environment, and also get to know some of the government officials on the ground who would be involved in granting various licenses and permissions to operate,” says Barry. 
 
While it lists some of the world’s largest companies among its members, smaller firms are also taking advantage of the guidance it provides, while gaining access to high-level introductions that only a group with extensive connections and inside knowledge can offer. 
 
“If they go to China to meet people, we can help set up those meetings and assist them in other ways,” says Barry. “If they have to establish an entity there, we can assist them with the registration processes, which have become easier over the years but still represent some challenges for a smaller company whose ownership and staff may not be fluent in Mandarin.” 
 
The USCBC closely monitors a number of industries, and Barry says that its focus on e-commerce could be particularly beneficial for SMEs, whether they have platforms of their own like Webport Global (which is joining the USCBC), or are interested in selling on Chinese platforms such as Alibaba. 
 
China’s e-commerce market is the largest in the world. And though it also, unfortunately, has been the source of the bulk of counterfeit products, Barry says that intellectual property protections are improving rapidly. Thanks to new algorithms, Chinese authorities are getting much better at discovering and prosecuting offenders. The stepped-up efforts are not just because they want to protect global trading partners, although that’s a major impetus. Officials also recognize that local Chinese businesses are harmed by fraudulent merchandise in the market. 
 
Barry says the USCBC is heartened that Presidents Xi and Trump have ordered their negotiators back to work, though he doesn’t minimize the seriousness of the issues still to be resolved. His inside knowledge gives him insights into the thinking on both sides, with reason to be cautiously optimistic. 
 
“The communist party has always put great stock in its ability to give people meaningful work,” he says. “If that were to stop because of policies and practices that it has made or contributed to, then there's always the worry that there will be social unrest.”   
 
And, just as China considers the importance providing for its people, the US recognizes that starving domestic industries that rely heavily on trade with the country is in no one’s interests. 
 
As the negotiators return to talks, Barry has sound advice for both sides. “Make some compromises. You’re not going to get everything you want, but come up with an agreement we can live with and then, go on later to tackle some of the other thorny issues.” 
 
Trade is a major driver of employment, innovation, and prosperity. “It’s always better to be actively negotiating differences, than to not be negotiating,” says Barry. 
 
For more information about the US-China Business Council, please visit: https://www.uschina.org/ 

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