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Made In China

As China turns into the world’s factory, Puerto Rico no longer can lure companies with low costs and federal tax incentives


February 3, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

The China challenge

Made in China. These three words, synonymous with low prices, are sending developed economies into a tailspin. With a population of 1.3 billion and access to greater markets worldwide, China threatens to become the global economic powerhouse of the 21st century. With the high costs of operating in Puerto Rico, high wages, and the demise of federal economic tax incentives, how does Puerto Rico measure up to this latest challenge?

When China opened up to the world over two decades ago, it was initially heralded for being a vast market of more than a billion consumers, a major growth opportunity for the world’s retailers and manufacturers. While China’s domestic market is no doubt important and will remain so, China has become a prime location to make products to be sold the world over, a fact that hasn’t gone unnoticed by business leaders in Puerto Rico. Everything from a work force that earns pennies per hour, cheaper rates for factory and commercial space to a growing middle class market, has made China a force to be reckoned with.

In the early 1990s, China was seen simply as a low-cost place to make basic, labor-intensive products. Today, China is competitive in many advanced technologies and is challenging the exporting prowess of many other emerging markets around the world, not to mention developed countries such as the U.S., Japan, and Europe. Consider the fact that China produces more than 50% of the world’s cameras, 30% of the air conditioners and televisions, 25% of washing machines, and almost 20% of refrigerators–and the lists go on. With China’s entry into the World Trade Organization (WTO), the country is set to become an even more powerful force.

China is the third largest nation in the world in terms of land, and the largest in terms of population with 1.3 billion people. China also has the world’s largest coal reserves, and it is the fourth largest oil producer, so it was only a matter of time before it went from being a modest player in the global market, to being an economic powerhouse. Not only has it succeeded in proving its own strength, but it has reached such economic influence that the state of world economies has become almost vulnerable to China’s ups and downs.

China’s real GDP has grown 9.7% a year on average from 1990 to 2003. In 2004, the economy grew by 9.5% and is expected to "slow down" to 8% in 2005. According to the International Monetary Fund (IMF) on the purchasing power parity basis, China is the third largest economy if the euro zone is counted as a single economy. China’s share of global output has risen from close to 11% in 2000 to over 13% in 2004. That is more than Canada, the UK, Italy, and virtually twice as much as Japan. In 1990, China’s share of world exports was 1.9%, by 2000 it was 4%, and 6% in 2003. China’s share of world imports grew from 1.5% in 1990 to 3.6% in 2000 and 5.7% by 2003.

China’s trade volume was $1.1 trillion in 2004, up from $850 billion the previous year. The record annual trading volume, the sum of China’s exports and imports, accounted for 12% of the total growth in world trade, according to the Ministry of Commerce (MOC).

The strengthened capacity of China’s manufacturing industry is a result of economic globalization. It is also a result of the development of multinational companies. According to a Chinese government spokesperson, about 80% of the world’s top-500 companies have invested in China, thanks to its extensive low cost and labor resources.

According to the MOC, there have been over 494,025 foreign funded companies set up in China with a total contracted Foreign Direct Investment (FDI) of more than $1 trillion. The total actual FDI reached has been close to $545 billion, covering about 10% of China’s total asset investment. The volume of export and import by foreign-funded companies accounted for more than 50% of the nation’s total, according to the MOC.

The China challenge

China’s admittance to the WTO in 2001 was accompanied by several regulations for different industries, such as temporary measures that limited to 7.5% any increase in Chinese shipments in affected categories.

However, many of those quotas expired Dec. 31, 2004. The elimination of this limit leaves the doors open for a new source of growth and a new source of fear for other exporting countries that now have to compete with China’s extra-low prices, which can at times offer products for 30% to 50% less than in the U.S.

China’s low prices are made possible by the low wages workers are paid. On average, a U.S. manufacturing worker earns $20.32 an hour, including benefits. In Puerto Rico, workers are paid an average of $10 to $12 per hour, including benefits. In China, workers earn about 75 cents an hour, including room and board.

The average hourly wage in Mexico in 2000 was $4 to $5. A standard 40-hour week adds up to $160 to $200, or an average monthly wage of $640 to $800, a figure much higher than the 2000 wage rate of $186.10 in Shanghai, a high-wage region in China.

China represents an unlimited supply of labor (particularly low-wage, low-skilled labor) to U.S. multinationals. China is also a potential source of low-cost engineering and a scientific work force. With its low wages, China can be an important part of a mainland company’s global production network strategy and can increase its profits. Products made by U.S. firms in China can be sold in China, exported to other Asian countries, or exported to the U.S. and Europe.


Higher levels of employee productivity also come into play when companies consider China. A worker in a south China factory takes 12.5 minutes to produce a cotton shirt. In Bangladesh or India, it takes 22.2 minutes to make the same shirt; Mexican workers need half an hour. Signs are placed in front of every Chinese factory work station noting how many seconds it takes that worker to complete a task; employees are timed by supervisors standing by with stopwatches and only the fastest survive. According to the U.S. Conference Board, the productivity of private industry in China has grown an astounding 17% annually in five years.

The end of quotas will rock $350 billion worth of global trade. One sector to be most affected will be the clothing and textile industries. The U.S. textile and apparel industry, which has lost 355,000 jobs since 2001, expects to lose tens of thousands more of the remaining 691,000.

China’s 16% share of the U.S. clothing market is likely to skyrocket to 50%, according to the WTO. An example of the potential power shift is the fact that the U.S. began lifting quotas on some products in 2002. China’s market share in those items, such as infant wear and socks, soared from a combined 9% to 65%.

U.S. textile makers are asking the Bush administration to implement safeguard measures on several categories of men’s and women’s clothing, and they aren’t alone. The U.S.-China Economic & Security Review Commission, a congressionally appointed panel, issued a report echoing the concerns of the textile industry and calling on the U.S. government to take action against the Chinese economic threat.

Without quotas, retailers such as Wal-Mart, will be free to buy as much from China as they like. This is bad news for other exporting countries such as Mexico, which has already been overtaken by China as a major exporter to the U.S. and is likely to lose further market shares in 2005. Between 2001 and 2003 alone, Mexico lost 200,000 jobs in the apparel sector.

In 2003, Wal-Mart purchased $15 billion worth of products produced in China. In 2004, that number is expected to have reached at least $18 billion. Under quota-ruled sales, 70% of the commodities sold in Wal-Mart were made in China; in a postquota market, the number is projected to increase. Over 5,000 Chinese enterprises have forged supply allegiances with Wal-Mart. According to Xu Jun, Wal-Mart China’s director of external affairs, "If Wal-Mart were an independent economy, it would rank as China’s eighth biggest trading partner, ahead of Russia, Australia, and Canada."

A matter of trade

The Council of Foreign Affairs estimates exports to the U.S. are about five-and-a-half times imports from the U.S., $16 billion a month in exports compared to $2.8 billion a month in imports. This creates a trade imbalance approaching $200 billion per year, about a third of the entire U.S. trade deficit.

China’s total trade volume with North America reached $167 billion in 2004, total trade volume with Europe reached $190 billion. Port activity in China became No. 1 in the world during 2004 when it reached 4 billion tons, 21.3% more than in 2003.

China’s trade with the U.S. and Latin America has led to the country’s growing influence over the world’s most strategic waterways. For example, Hutchinson Whampoa Ltd., a giant Hong Kong-based firm with ties to China, has major investments on both sides of the Panama Canal, gaining control of the Port of Balboa on the Pacific side and the Port of Cristobal on the Atlantic. In 1997, the government of Panama gave Hutchinson a 25-to-50-year contract to operate the two major ports located at the canal’s entrances.

With trade projected to continue increasing between the U.S., Latin America, and China, ships carrying cargo to and from the Panama Canal going to and from China can present major opportunities for transshipment operations in Puerto Rico, which is located on the Mona Channel, the only crossing through the Western Hemisphere with access to the Panama Canal. Last year, more than 15,000 ships passed through the Panama Canal.

The future of manufacturing

The manufacturing industry in the U.S. has also suffered a huge blow in the past few years. Since 2000, 2.7 million jobs in the U.S. have been lost in the sector. What is even more worrisome for many is the fact that manufacturing in China was previously limited to low-end products, but now has expanded to high-tech production, such as computer software.

In 2003, China exported $130 billion in electronic and information technology goods worldwide, and this production is projected to grow to $207 billion by 2007. China’s entrance into knowledge-based industries has infringed upon the advantage that the U.S. retained when competing with other developing nations. Research and development operations for numerous companies are opening offices in China. In fact, Beijing and Shanghai have major stem-cell research centers; and overseas patients with life-threatening illnesses are traveling to China for experimental treatments using stem cells.

In terms of high-end manufacturing, Puerto Rico has been left with little to offer foreign companies. During the electronic boom of the 1970s and ’80s, companies such as Dell, Information Magnetics, Quantum, Digital, Prime Computers, Data Products, and Wang Computers all had manufacturing plants on the island. However, many have left, and only three remain, Hewlett-Packard, Storage Technology, and Celestica. Not only is cheap labor an issue, but also the price that companies pay for factory space on the island. In Puerto Rico, manufacturing companies have to pay on average $7 per square foot per year. In China, companies pay only $1 on average.

Local manufacturing company Vassallo has also felt, to a huge degree, the Asian impact. According to Eddie Fenollal, Vassallo’s vice president of sales, China’s ability to mass-produce exact replicas of different products at lower prices is hurting manufacturers in Puerto Rico and worldwide even though the quality of their products may not be as good.

"It’s uphill for manufacturing plants in Puerto Rico. It is no longer attractive for manufacturers to come here because everything is so expensive. The only way it would be attractive would be to create a niche, but we don’t have that either," explained Fenollal.

Puerto Rico Manufacturers Association (PRMA) President, Reynaldo Encarnación, offered as an example of the China impact on the island the operations of Dual-Lite, an emergency lights manufacturer whose two factories located in Naguabo recently closed and relocated to China.

More companies such as this one are expected to relocate while others are opting to expand their operations primarily in China, thus limiting the growth of manufacturers on the island. An example of this is Nypro, which operates in Puerto Rico. Currently it has 10 factories in China and is planning to open 10 more over the next 18 to 24 months, in the process doubling its employees in China from 7,000 to 14,000.

The PRMA president is also concerned about the local pharmaceutical industry because of significant cost-effective developments in the sector that have been advancing in China. Puerto Rico’s high dependence on this particular sector could eventually be impacted as pharmaceutical companies discover the benefits of operating in China.

Not only is China adding state-of-the-art capacity in everything from cars to specialty steel, petrochemicals, and microchips for the entire world, but it is also aimed at meeting insatiable demand within the country from the 100 million people in the growing middle class, projected to double by the year 2010. Every year China is adding more workers with high income to the work force, including 350,000 engineers a year, young workers who are willing to put in 12-hour days and work weekends.

The growing Chinese middle class is doing its part for the economy by spending. By 2010, the number of Chinese middle-class households with annual income above U.S. $5,000 will rise to 150 million. There are 65 million such households today. MasterCard calls China the world’s largest and most promising market for credit cards, with potential customer growth of 30 million to 60 million annually in the next five years.

The Chinese are keen to spend on travel. There will be 100 million Chinese tourists by 2020, up from 20.2 million in 2003. Latin American and Caribbean nations have been meeting with Chinese government officials in recent months to attract visitors from China.

China has designated 27 European countries as "approved destinations." The countries include Belgium, Denmark, France, Greece, Italy, the Netherlands, Ireland, Spain, and Switzerland. The agreements mean package tours of Chinese visitors will be streaming into Europe.

China opens to foreign investment

The combination of all these factors has presented a "can’t refuse" platform for international companies. In the past five years, international companies, including highly visible American companies such as IBM, Hewlett-Packard, Anheuser-Busch, Lucent Technologies, and Eastman Kodak, have begun to make acquisitions of Chinese companies a key element of their business strategies in China. During the first six months of 2004, acquisitions in China reached $7.3 billion.

Foreign acquisitions have targeted several areas, including banking, insurance, beverage, information technology, automotive sectors, and retail, all on the list of recent deals worth more than $100 million per transaction. According to the U.S.-China Business Council, contracted FDI for the first half of 2004 rose 42.7% compared with the same period in 2003, reaching $72.7 billion. These transactions are likely to increase further in 2005 as strict regulations for foreign investment are retired.

On Dec. 11, 2004, China lifted most of the restrictions on foreign retailers. No longer are there limits on the number of stores, rules confining them to large cities, or regulations capping the foreigners’ stakes in local ventures at 65%. Over the past 20 years, retail sales in China have jumped nearly 15% annually to some $628 billion in 2004 making it the third largest market on earth. In 2003, Wal-Mart sales alone totaled $707 million. Without the restrictions, the prospects for expansion of the megaretailer in China seem endless. China’s first 7-Eleven store opened in Beijing in April 2004, and other chains are expected to follow.

China investing heavily in other countries

Capital flowing into the People’s Republic of China from foreign sources, including the U.S., has attracted much attention from academic researchers as well as policymakers. However, China’s gradual emergence as a major exporter of capital is far less known.

China has made fresh progress in implementing its "go out" strategy, according to the latest news from the Ministry of Commerce. Overseas trade has grown faster with Latin America becoming the largest destination of China’s overseas investment.

From January to November last year, China invested $889 million in Latin America, or 49.3 % of the total amount. During the same period, China’s overseas investment in Asia was $515 million, or 28.6%, and $296 million in Europe, or 16.4%.

Statistics from the MOC showed that from January to November 2004 China registered $1.8 billion nonfinancial direct investment on foreign land.

Chinese enterprises invest overseas for reasons similar to those of U.S. corporations that invest in China: to gain more direct access to the U.S. and other markets and to secure needed resources. To acquire additional iron ore, China Metallurgical invested $180 million in the Channar iron mine in Australia. Obtaining advanced technology is also an important goal for a developing economy such as China, and this is facilitated further by investment abroad.

Chinese computer company Lenovo Group recently announced the takeover of IBM’s personal computer business, which represents a giant step in a multibillion-dollar foreign expansion by corporate China. The $1.75 billion IBM deal is one of China’s biggest foreign acquisitions. It will make Lenovo, already Asia’s leading computer maker, the world’s third-largest producer of PCs.

The commodities factor

As China’s economy expands, so does its demand for oil, gas, coal, and electricity. Today, China accounts for 12.1% of the world’s energy consumption. That’s second only to the U.S., at 24%, and up from 9% a decade ago. China’s whole modernization strategy is based on access to abundant supplies of energy. Its hungry basic industries, such as steel, aluminum, and chemicals, devour electricity and coal. A mushrooming middle class consumes growing quantities of heating oil and gasoline.

By 2010, analysts predict some 56 million cars, minivans, and sport utility vehicles will be rolling on China’s highways, more than twice the number today. By 2020, the country’s demand for oil will nearly double to 11 million barrels a day, natural gas consumption will more than triple, to 3.6 trillion cubic feet annually, and coal use will grow by 76%, to 2.4 billion tons a year, according to a U.S. Energy Department forecast.

A decade ago, China was a net exporter of oil, but now it imports 40% of its crude as output declines at the big northeastern fields near Daqing and Liaohe. What about developing new sources at home? China is sitting on potentially rich reserves in the high, dry deserts of the far west, but gas and oil there lie much deeper than in the northeast and will cost far more to get out of the ground. In addition, given the country’s primitive pipeline and transportation networks, moving it to the coastal cities that need it will be a challenge. By 2025, China probably will import 75% of its crude–nearly twice the percentage today–and consume 10.6% of the world’s oil, the U.S. Energy Department estimates. Although crude has fallen some from its recent $55-a-barrel high, experts expect Chinese demand will help prop up prices for years to come. This is likely to have an impact on the cost of gas and electricity in Puerto Rico unless alternative sources are found.

China’s oil demand has increased in proportion to its economic expansion and the growth of its middle class. In 2003, newly prosperous professionals snapped up over two million cars, an increase of 70% over 2002. The increased demand for oil by China has had a direct impact on oil prices and consequently all world economies that are vulnerable to oil price volatility. In 2005 economic forecasts, oil prices were one of the factors pointed out as a potential risk for the year’s outcome.

Steel prices have also skyrocketed in the last year because of increased demand for raw materials in China. UBS estimates that Chinese steel production will climb 22% this year to 268 million tons and grow a further 14% next year to 305 million tons. In recent years, China has added so much new production of some raw materials, such as coal and aluminum, that even minor shifts in its economy could force it to dump unneeded supply onto the marketplace potentially sending prices down as quickly as they have gone up.

The increased demand for raw materials from China has already had a direct hit on Puerto Rico’s construction industry. The price of construction materials has recently skyrocketed forcing contractors to give higher estimates for all their projects. The Association of Merchants of Construction Materials in Puerto Rico states that the international standard for the price of construction materials has recently increased between 20% and 60%.

Salvador Muñiz, a professional construction estimator in Puerto Rico, points out that the materials most affected by the Chinese demand are metals and electrical products. He estimates that over the past 18 months metals, such as iron and steel, have increased 55%. Electrical products that use copper have risen 70% during the same period. The price of plumbing materials that use copper and iron is up 40%. Other areas affected to some degree are asphalt derivatives used in roofing systems and in the construction of roads. Muñiz predicts some of these materials could continue rising for an indefinite period. These high prices have an effect on suppliers, contractors, and investors as they multiply along the consumer chain.

Local distributors such as Mocoroa & Castellanos, which works with aqueduct and plumbing materials, must make large investments to stock up on materials in fear of future continued increments. When they prepare estimates for contractors, they can only guarantee prices for pieces such as PVC pipes for 15 days because they’ve experienced significant increments in prices every four months. Contractors also have to adjust their estimates to reflect the possibility of future increases, which could potentially hurt their bidding process.

Manufacturer Vassallo estimated the resin they use to make PVC pipes and many other products they sell has increased in price more than 100% in the past year. Consequently, they have had to adjust their entire operation. Their machinery is working below capacity because they aren’t able to produce the same quantity they did before.

Local and global opportunities

Some experts question just how sustainable China’s economic growth really is, taking into consideration the fact the growth emanated from a very low economic base. Whatever the eventual outcome, optimistic economists point out that increased demand from China has presented a number of new opportunities for other countries such as Russia, Brazil, and Australia, which have benefited substantially from the China boom.

For exporting countries in Latin America, the extra demand in commodities thus far has translated into extra business. Since 1995, the share of Brazilian exports going to China has more than doubled from 2.6% to 6.2% in 2003. Argentina has seen the share of total exports going to China rise sixfold in the same eight-year period from 1.4% to 8.4% and double since 2001.

Venezuela recently signed a huge energy deal with China. The package signed by Venezuela President Hugo Chavez and Chinese President Hu Jintao included mutual cooperation in the development of mines, railway projects, shared technology, and agriculture. The agreement also accorded shared exploration of an oil site in Venezuela. "We have a very important agenda in China, which has shown the most notable economic growth of all the countries in the world and brought about a strong demand for energy," said Venezuelan Foreign Minister Ali Rodríguez during one of the meetings between both leaders.

The danger is that a downward shift in China’s economy could just as easily hurt these economies that have exponentially increased production to meet new demand. What the world needs to be vigilant of is the fact the soft or hard landing of China’s economy will resonate far beyond its borders.

The real challenge lies in striking the balance that will allow China to continue growing enough for its own good, but not so much as to overheat the economy. Last year some of the measures Beijing took toward this end were to slow runaway investment in real estate and related industries like steel and cement by limiting bank lending, slowing the supply of land for construction, and halting approvals for new projects. Similar measures will have to continue in 2005.

In order for the U.S., including Puerto Rico, to remain competitive, professionals and industries in general will have to become more specialized. Greater education will be key in order to produce more engineers, scientists, and high-tech designers. Puerto Rico will also have to attempt to make huge strides in shifting into other areas of the economy such as tourism.

Leonardo Cordero, president of the Chamber of Commerce of Puerto Rico, said that although more "made in China" products will without a doubt be seen in Puerto Rico, the island also can benefit from the China boom.

"I believe it presents a challenge, but also an opportunity to revise our system, promote everything that is competitive and productive. Working with China allows businesses to lower prices, it can make businesses more profitable, and allows you to offer better prices to consumers. So not only can businesses benefit, but consumers as well," Cordero said.

Offering a perfect example of how Puerto Rico can remain in the competitive game, Cordero explained the tactics he is using in his own business, Leonardo’s. "Up to now, I had been working with wholesalers and a lot of distributors; now I work directly with China. I can cut my distribution chain and try to get a better price. That is an example of what has to happen in Puerto Rico to reposition the way business is done," Cordero explained, adding that in the process he manages to leave more profits in Puerto Rico rather than with a distributor on the U.S. mainland.

The Chamber of Commerce president predicts that a large number of retailers on the island will continue increasing their imports from China, but that fact, he said, doesn’t have to be negative for smaller businesses. Those businesses, he explained, will have to become more creative and innovative, they will have to form joint ventures with similar companies so they too can win access to the low Chinese prices. "What we have to understand is that forces like that of China can and will change the way we do business. We have to go along with that force; we can’t go against it, because if we fail to take advantage of that force, someone else is going to do if for us," he concluded.

Jorge Galliano, vice president of the Chamber of Commerce & executive president of the Gatsby clothing line, concurs with Cordero, but emphasizes in particular that where Puerto Rico has a vital need to improve is in productivity. "It is the only way that we can have a promising future. In order for us to react fast with efficiency and be productive, we need to make internal changes in government, in business, in all sectors, because we have to come together to facilitate personal initiative, it is fundamental," said Galliano.

Galliano recognizes that although China does create a present challenge for most world economies, Puerto Rico must find the way to specialize and take advantage of education. "Research and development is where we can compete on a higher level and where we have better education. We have to promote the scientific sector, the education and investigation sectors, and it is something we must do with urgency. Puerto Rico needs it," he emphasized.

The positive thing for Puerto Rico and for the rest of the world is that China is making major efforts to make its businesses accessible to foreign business. In fact, this week from Feb. 2 to 5, the China Caribbean Economic & Trade Cooperation Forum is being held in Jamaica. To maximize exchange opportunities for Caribbean and Chinese companies, the forum set up this "Business Opportunity" where Caribbean companies, either participants of the forum, or nonparticipants, are free to publish information on business projects and proposals. Caribbean companies can also browse business information published by Chinese companies in the same system.

The integration of the Chinese and other world economies is a process that will have to gradually redefine itself as the playing fields level out. That will be the only way to prevent the losses for the world economy from overshadowing the benefits of an economically strong China.

Behind the curtain of the Chinese miracle

China’s history and culture serve as the backbone to the country’s present global standing

The current economic powerhouse that China has become is even more impressive in light of its history of economic and political volatility. During its early dynasties, and for many centuries, China maintained a position as the most powerful country in East Asia. This was all made possible by the country’s high production of grain, trained army, tax system, and ability to trade through accessible southern ports.

However, later on, China’s early economic might was cut off. Several political and economic experiments failed miserably. Internal political turmoil and foreign intruders managed to leave the country in a fragmented state for many years. All of China’s economic gains were absorbed by other nations with presence in the region. Britain was one such country. By importing high quantities of opium into the country, it unleashed a catastrophic opium addiction among the population. When Chinese authorities attempted to intervene, it ended up in war from 1839 to 1842, a war that China lost and which left the country more divided than ever.

Years after, Russia’s internal conflicts with Marxist ideals caught the attention of China. Close relations with the country introduced the idea of communism and, although the relationship with Russia eventually became tense; communism was adopted as the country’s identity and way of life when the Chinese Communist Party came to power in 1949.

Chinese culture had always been built around the concept of work, but the ideals of communism further promoted this mentality, which was work for the common good rather than for personal wealth.

To this day, the Chinese are recognized as high-quality producers, workers who are willing to put in extra hours and who design their lives around their work. In fact, most factory workers in China live in company dormitories they share with other workers. They literally eat, sleep, and live at work. This forces some 114 million workers to abandon their rural hometowns and go to cities in search of employment opportunities, sometimes for years at a time. The Chinese are also well-known for maintaining high savings rates when compared with other countries. A part of the Chinese culture that also has remained true for many centuries is their pride in innovation. They are credited with being the inventors of paper, paper money, gunpowder, printing, and the compass.

As a communist country, the Chinese mentality wasn’t one that fostered personal ambition for riches. However, as the Chinese economy has become more open to the capitalist mentality, and younger generations are better educated; the desire for personal wealth also has emerged in the Chinese way of life, no longer carrying with it the stigma of selfishness it once had.

Along with capitalism’s entrance into China has come increased U.S. influence on the Chinese culture of younger generations. In everything from music to fashion, American trends are visibly present in the streets of China; but that wasn’t always the case.

When China became a communist nation, the U.S.—China relationship was profoundly strained. Americans weren’t allowed to send money to China, and Chinese goods weren’t permitted to enter the U.S. The U.S. attempted to boycott China’s entrance into the United Nations but, without much support, they were forced to withdraw their opposition. There was also internal pressure within China to open up to advanced Western technology. After several failed attempts at political reconciliation, in 1971 the Chinese suddenly invited the U.S. table tennis team to visit China. The gesture was accepted and, days after, "ping-pong diplomacy" was born. Afterward, and in a very private manner, U.S. diplomats met privately with Chinese officials to plan for President Nixon’s visit to the country. The process was aided by the U.S. decision to drop many of the anti-Chinese measures. The meeting between leaders of both countries marked an important milestone for their mutual relationship as a joint communiqué was issued with their stances on international issues. Although there was no reconciliation of these views, all the cards were clearly laid upon the table. The meeting also facilitated several massive deals for China with the U.S., Japan, Britain, West Germany, and France for imports of advanced technology.

At the time, there was still resistance to the dependence of China on external economies as the Chinese culture attempted to be as self-reliant and internal as possible. Still, these advancements and negotiations with the outside world eventually allowed China to be crowned as the economic threat it is today and has many external economies looking toward China in hopes of catching a share of the Chinese miracle.

China’s Average Monthly Wage By Region

In U.S. $ in 2002

  1. Tibet: $249.3
  2. Shanghai: $241.1
  3. Beijing: $220.0
  4. Zhejiang: $189.1
  5. Guangdong: $179.3
  6. Tianjin: $163.6
  7. Qinghai: $145.7
  8. Jiangsu: $136.0
  9. Fujian: $133.9
  10. Yunnan: $120.6

Source: People’s Republic of China, National Bureau of Labor Statistics, Asian Development Bank

Selected U.S. Direct Investment in China in millions of U.S. $ in 2001

U.S. Corporation / Value of Investment-Revenue / Venture

Verizon Communications

$ 782.73 / Shanghai Bell Telephone Equipment Mfg. Co.

$ 206.37 / Shanghai Bell Alcart Mobile Communication


$ 178.40 / China Hewlett-Packard Co.

$ 96.89 Packard Electric Shanghai Co.

$ 360.70 / Hewlett-Packard Computer Products (Shanghai)

$ 507.09 / Shanghai Hewlett-Packard Ltd.


$ 143.76 / Compaq (Shanghai) Ltd.


$ 3,769.74 / Motorola (Tianjin) Electronics Ltd.

$ 347.56 / Hangzhou Motorola Mobile Telecom Equipment

Lucent Technologies

$ 292.43 / Lucent Technologies of Shanghai Ltd.

$ 351.62 / Qingdao Lucent Technologies & Communications Equipment

$ 129.42 / Shanghai Lucent Technology International Trade

$ 93.98 / Shanghai Lucent Technological Optical Fiber Co.

Source: Fortune 500

This Caribbean Business article appears courtesy of Casiano Communications.
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