U.S. Vice President Joe Biden met with about 20 U.S. and Chinese business leaders in Beijing today, including Coca-Cola Co. Chief Executive Muhtar Kent, to discuss how to improve economic relations.
U.S. companies in China say their profits are growing and that the issue captivating political debate in Washington over the value of the Chinese currency isn’t as important as market access and a level playing field. Almost one in five respondents in an American Chamber of Commerce survey published in March said the biggest risk they faced was a stronger yuan.
“Our members do not think currency is the top issue in our relationship,” said Erin Ennis, vice president of the U.S.- China Business Council. Bigger concerns are “level-playing field issues,” like opening up the Chinese market to U.S. exports and protecting intellectual property.
Biden told Vice President Xi Jinping in a private meeting yesterday that China must address its undervalued exchange rate and remove import barriers so that the U.S. can continue an open trade and investment relationship, according to administration officials who briefed reporters on condition of anonymity.
“Our exports to china have been increasing even as we’ve been growing our business inside China,” Caterpillar Inc. President Richard Lavin, who was at today's meeting, said in an interview last week. Still, Lavin said he’s concerned that Chinese competitors are given access to U.S. markets while U.S. corporations face challenges.
Lavin said the company is growing “aggressively” in China. The Peoria, Illinois-based company, the world’s largest construction- and mining-equipment maker, posted increased profits and sales in the second quarter, largely due to growth overseas, the company said July 22.
Caterpillar’s revenue from China almost doubled last year to $3.3 billion from $1.9 billion in 2009. The company and its dealers have almost 20,000 Chinese employees in China working at 16 manufacturing facilities and the company is either breaking ground or has already started construction on almost half a dozen more.
With elections looming next year, President Barack Obama is under pressure at home to keep pushing the Chinese to raise the value of their currency to damp imports and make U.S. exports to China more competitive. China’s trade surplus surged to $31.5 billion in July as exports rose to a record.
“The trade deficit with China continues to leap so it’s definitely not a problem that is fixing itself,” said Thea Lee, deputy chief of staff at the AFL-CIO, the largest U.S. labor union. “With the economy in dire need of jobs” getting China to revalue the yuan could “create potentially millions of jobs in a very short period of time.”
According to a June study by the Washington-based Economic Policy Institute, which looks at issues affecting low- and middle-income workers, if the yuan and satellite currencies were revalued to their equilibrium levels, U.S. gross domestic product would grow as much as 1.9 percent and as many as 2.25 million U.S. jobs would be created.
Protection of intellectual property will be another issue facing U.S. business that will be raised in the meeting, said Tony Su, corporate vice president and president of DuPont Greater China.
“We have a rising concern about IP protection,” Su said, adding that it is an especially important consideration for his company, the biggest U.S. chemicals maker by market value and second-biggest seed producer in the world. “The government can be an example to industry that stealing technology will be punished by law.”
Sales and profit for most European and U.S. businesses operating in China rose last year, according to surveys published earlier this year.
Atlanta-based Coca-Cola yesterday announced plans to invest $4 billion in the world’s fastest growing economy over three years from 2012. First-half sales in China were running at double the rate of 2010, the company said in a statement.
Seventy-eight percent of EU companies said they had a “significant rise” in sales last year, compared with 50 percent in 2009, according to a survey of 598 EU companies doing business in China published in May. Seventy-one percent said they reported higher profit in China last year, up from 43 percent a year ago.
The performance and perception of EU companies dovetails with that of U.S. businesses in China. In a report released in March, more U.S. businesses said they were profitable last year even as they became increasingly pessimistic about the Chinese government’s commitment to improving market access, the American Chamber of Commerce in China said.
Seventy-eight percent of member companies surveyed by AmCham said their China operations in 2010 were very profitable or profitable, the highest proportion in survey results dating back to 2002, the Beijing-based chamber said in its annual business climate survey.
For U.S. companies doing business in China and exporting their products, yuan appreciation can hurt their sales. The AmCham China survey of its members found that 17 percent said yuan appreciation was the greatest risk facing its organization.
Both the U.S. and EU chambers said the biggest challenge to doing business in China was concern that the regulatory environment was increasingly arrayed against them in favor of state-owned Chinese companies.
EU companies believe that China’s government is increasingly discriminating against foreign-invested companies, according to the survey. Forty-six percent expect China’s government to have policies that discriminate against foreign companies in the next two years, up from 36 percent last year.
In the AmCham survey, seventy-one percent of the respondents said China’s business licensing process discriminates against foreign companies, according to the survey.
According to a list released by the White House the following representatives from U.S. companies are attending today’s meeting in Beijing: President and CEO General Electric Co. Greater China Mark Hutchinson; JP Morgan Chase & Co. Chairman and CEO for China Zili Shao; President for Dupont China Tony Su; General Motors China Inc. President and Managing Director Kevin Wale; Group President Caterpillar Inc. Richard Lavin; CEO Corning Inc. China Eric Musser; Founder/Executive Chairman of Acorn International Inc. Robert Roche; CEO Chindex International Inc. and Chairman of the Board of United Family Hospitals Roberta Lipson and Chairman of Board of Governors of AmCham China Ted Dean.
Yesterday, Biden had private meetings and a dinner in his honor hosted Xi. Later today, he’ll meet with Premier Wen Jiabao and President Hu Jintao. The administration says the primary purpose of the visit is for Biden to get to know Xi, who is expected to become the next president of China in 2013.