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Country Commercial Guides for FY 2000: China Report prepared by U.S. Embassy Beijing, released July 1999

CHAPTER I:   EXECUTIVE SUMMARY

This Country Commercial Guide (CCG) presents a comprehensive look at China's commercial environment, using economic, political and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. Embassies through the combined efforts of several U.S. government agencies.

China is rich in contradictions for U.S. firms. The world's most populous nation, China covers an area larger than the United States. Yet the China market is small and concentrated in a few areas along the eastern seaboard. China is one of the world's oldest civilizations, with thousands of years of history, literature and culture. Yet the People's Republic is a mere 50 years old and most of the laws and regulations governing business and trade have been written in the past twenty years. Courtesy toward guests is a virtue in Chinese culture, and Chinese people can be extraordinarily hospitable and kind. Yet everyday discourse in China is rude and confrontational and the China market is full of cheats and swindlers. China is a communist country; the first article of the Chinese constitution states that China is a socialist country under the leadership of proletariat. Yet, over the past twenty years China has moved from a planned to market economy and is now in many ways more capitalist than communist.

The stunning contradictions in China have been nurtured by the unprecedented changes of the past twenty years. Since the beginning of the policy of "reform and opening-up" in 1979, China's economy has grown more than tenfold. Previously rationed goods such as bicycles, textiles and grains are now in over-supply. Foreign invested firms, practically none existent in the 1970s, now number over 300,000 and account for almost 50% of China's exports. Foreign trade has grown from $38 billion in 1980 to over $325 billion in 1998. Although most Chinese firms remain relatively small, under-capitalized and poorly managed, there are pockets of excellence in Chinese industry. Chinese firms have competed successfully with world leaders in the white goods and home electronics markets. Chinese PC manufacturers have won back market share from such firms as Compaq and IBM.

These economic changes have brought relative prosperity to millions of Chinese, and that prosperity has been accompanied by a great expansion of personal liberties for the average Chinese enjoyed by most Chinese.

For over two hundred years foreign firms have been entranced by the enormous potential of the China market, a potential that remains largely unfulfilled. U.S. exports to China were only slightly more than $14 billion in 1998, only two percent of our global exports, and less than U.S. exports to China's smaller neighbors such as South Korea ($16.5 billion), Singapore $15.7 billion and Taiwan ($18.1 billion). U.S. firms are major investors in China and in 1998 actual U.S. investment in China rose to almost $4 billion, but this is still less than U.S. investment in the U.K. ($4.6 billion) or Mexico ($4.7 billion) and is only slightly more than what U.S. firms invested in South Korea ($3.1 billion). The cumulative U.S. direct investment in China is dwarfed by our investments in Europe, Japan and Latin America.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank on CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at HTTP:// WWW.STAT-USA.GOV, HTTP://WWW.State.Gov/, HTTP://WWW.MAC.DOC.GOV. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. Exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRADE or by fax at 202-482-4473.