By: Steve Dickinson
The promise of China as a market for U.S. exports has always been one of the dreams of U.S. businessmen. What many U.S. companies now need to understand is that dream has already been realized. With little fanfare, China has become one of the major markets for U.S. imports. China is already the third largest U.S. export market and the trend is for continuous improvement.
From 2000 until around 2010, my law firm probably wrote maybe three to five contracts a year for American companies selling product or services to China. In just the last year, we have written around a dozen. Our China lawyer friends are telling us they are experiencing similar growth.
All of this is made graphically clear in the newly issued report of the U.S.-China Business Council: U.S. Exports to China by State. The report shows that on a national basis, exports from the U.S. to China grew by 542% during the period from 2000 to 2011. In dollar numbers, exports grew from a modest U.S. $16.2 billion in 2000 to U.S.$ 103.9 billion in 2011. When the figures for Hong Kong are added, the 2011 number is an impressive $140.4 billion. China is the third largest export market for U.S. goods, trailing only our neighbors Canada and Mexico.
The interesting feature of the report is a state by state graphical summary of China exports. These charts summarize the 2000 to 2011 history of exports to China for every state. The state by state breakdown demonstrates that virtually every state has substantial trade with China. For many states, China is the number one export market. For example, take our own state of Washington. Even though Washington shares a land border with Canada, China is by far the largest export market for Washington products. You might be surprised at some of the other states that sell heavily to China. For example, China is the number 2 export market for Virginia and the number 3 market for Arkansas.
Even though the U.S. has done well in China, the Report also makes clear that the U.S. is still just beginning to tap the potential market in China. The U.S. is only the fifth largest exporter to China, trailing Taiwan, South Korea, Japan and the EU. Even without growth in China’s overall market, U.S. companies have tremendous potential in China just by displacing other competitors. When this potential is combined with the predicted substantial growth in the Chinese economy for the next decade, China’s attractiveness as a export market for U.S. products seems certain to grow.
The composition of U.S. sales to China also seems to be changing. Until recently, sales to China were dominated by large-ticket sales made by major multinationals. Think Boeing aircraft and GE power plants, with occasional big equipment sales by mid-sized companies thrown in. In the past three years, however, we have seen more SMEs move into the market in areas such as software, tooling and specialty manufactured products and consumer products. We also have seen a rapid growth in services sales in industries like architecture, education, energy consulting, and marketing. We anticipate that this trend will increase at an accelerated rate as China works to move its manufacturing base and its other industries up the value scale.
China needs the help of American companies and it finally seems to be willing to pay for it.
What are you seeing out there?