China

China acceded to the WTO four years ago and is currently in the process of completing a seven-year transition. Accession to the WTO symbolizes China’s ongoing integration into the world economy. There is no doubt that China’s transition from central planning to market-based regulatory principles offers significant improvements in market access for many American exporters.

Despite the high level of interest, China remains a medium-sized market, albeit one with vast potential. Last year, China’s GDP was USD1.24 trillion. This is about the size of the economy of Italy. Spread over a population of 1.3 billion, this does not represent a large amount of disposable income for the people of China. Last year, rural per capita GDP was USD 298.66 and urban per capita GDP was USD 906.89.

To be a success in China, US companies must thoroughly investigate the market, pre-qualify potential business partners, take steps to ensure they will be paid, and develop contracts that minimize misunderstandings.

The problems of doing business in China can be grouped into four major categories:

• China often lacks predictability in its business environment
• China has a government that tends to be mercantilist and protectionist
• China has the remnants of a planned economy
• Foreign businesses have been over-enthusiastic - excited by the prospect of 1.3 billion consumers; thousands of foreign firms have rushed into the Chinese market, often without fully investigating the market and making the necessary risk assessment, and failing to get counsel

Companies must deal with the current environment in a realistic manner. Risk must be clearly evaluated. However China’s accession to the WTO brings new opportunities. Some have described it as, "the beginning of time," for trade relations. Problems will not disappear over night, but with WTO accession, the tools become available to address the many challenges of doing business in the Chinese market. As disposable income grows, China’s market potential will expand as well. This will be a gradual process, but the combination of WTO and an expanding economy bode well for U.S. business in the years ahead.

In 2004, Arizona exported over $629 million worth of products to China excluding Hong Kong

Best prospects (by sector) for US exports:

• Telecommunications Equipment
• Oil and Gas
• Medical Equipment
• Pharmaceuticals
• Audio Visual Equipment
• Pollution Control Equipment
• Insurance Industry
• Airport and Ground Support Equipment
• Computers and Peripherals
• Building/Decorating Materials

Source: US Foreign Commercial Service

A full copy of the Country Commercial Guide to China can be obtained through the Market Research resource at: http://www.export.gov/