A vast opportunity awaits
the U.S. manufacturing sector in China, our third largest trading partner
in the world, consuming over $170 billion worth of American exports annually.
In fact, U.S. exports to China have surged 66% in the last 3 years. In 2004,
the Chinese economy grew by 9.5% and the demand for quality American manufactured
goods has followed suit.
Recent accession to the World Trade Organization has increased opportunity
and healthy competition for Chinese businesses. China has placed a high emphasis
on upgrading its conventional industries with more advanced high-tech machinery
and equipment. They are rapidly moving toward restructuring state-owned, and
exclusively invested private enterprises. These two initiatives, along with
other major national projects, are stimulating rapid growth in the demand
for manufactured goods into the tens of billions of dollars.
Industry Highlights
Machine Tools
Since 2002,
China has been the largest consumer and importer of machine tools in the world.
Some of the leading sectors driving machine tool consumption include automotive,
aviation/aerospace, shipbuilding, and information technology related manufacturing.
Current imports of American machine tools to China constitute 8% of total
consumption, leaving an open door for increased market share.
Demand in the machine tool sector is mostly driven by foreign facilities that require world-class machinery, as well as the aviation, ship-building, and petrochemical industries, among others, that sustain high demand for machine tools. Superior quality and precision technology in these products is not available in China. As China's manufacturing capacity increases, domestic manufacturers are finding it more important to compete on quality - an area in which the U.S. has a considerable competitive advantage.
Automotive
Since the Chinese
market has become more open and adopted economic reforms, their automotive
industry has witnessed rapid growth, including many first and second tier
suppliers setting up operations in China. Compared to international companies,
most Chinese automotive parts manufacturers are not strong in developing new
products due to the small scale of their operations and a shortage of capital.
The Chinese government continues to encourage foreign investment in automotive
component development and manufacturing.
American products are generally highly regarded by Chinese customers. U.S. companies can expect to see the greatest export opportunities in engines; automotive parts and components including brake assemblies, axle assemblies, transmissions, diesel engine fuel pumps, external emission control equipment for diesel motor vehicles, filters, combination instruments and special high-strength fastener parts; and electronic fuel injection systems, safety air-bag equipment, and other automotive electronic equipment systems.
Energy
China's energy consumption
now ranks second in the world, causing this traditionally "off-limits"
Chinese sector to gradually open up to increasing foreign participation. The
best opportunities are in natural gas infrastructure development and offshore
oil exploration and production.
Several large-scale oil and gas projects are underway in China to meet their growing energy needs. Driven by a combination of political, environmental and market factors, these projects include the Guangdong LNG Terminal and Supply Project, West to East Gas Project, coal liquefaction, natural gas exploration, and the Bohai Bay exploration projects. They will continue to provide strong export opportunities.
Good opportunities exist in both upstream and downstream engineering, project supervision, licensing, equipment, technology, consulting, marketing and supply sectors. After several years of poor growth, investment in China's power industry is regaining momentum. Due to short supply and the dismantling of the State Power Corporation (SPC) in December 2002, many U.S. power equipment manufacturers and related construction/engineering firms have formed joint ventures in this market. Market potential for U.S. companies is in controls, monitoring and safety equipment, energy-efficient and environmentally-friendly equipment, and management support systems for power generation and electric utilities. In addition, U.S. companies may see opportunities in alternative power supplies (including wind, hydro and nuclear), power dispatching systems, telecommunications equipment for the power industry, management software, and ultra high voltage transmission equipment and management systems.
Transportation
The Chinese government
is committed to a massive upgrade of their current transportation infrastructure.
Rail tracks are now being doubled to alleviate the freight train conflict
issue. Expressways are being built to cut down on vehicular travel times.
Sealed roads are being extended to new locations. Ports are being improved
for greater use of China's waterways. Airports are being improved across the
country. All of these projects bring opportunities for the export of U.S.
construction equipment, engineering, and electronics and safety device companies,
specifically for projects funded by the World Bank, Asian Development Bank,
OECF, and similar multilateral lending agencies that use transparent bidding
procedures.
Information Technologies
The People's Bank
of China has placed a high priority on reforming China's 112 City Commercial
Banks with over 5,000 branches and US$ 200 billion in assets. On December
11, 2006, China will officially open its banking sector to foreign banks.
In order to compete, China's banks are buying new technologies, creating opportunities for American IT equipment, software, consulting and training firms. China's banks will need credit analysis and financial planning training and software; operations and information management systems; networking and security solutions; digital/voice/video technology and wireless networks; data storage technology and call center solutions; and bank card technology.
Radio Frequency Identification (RFID) systems will play a crucial role in international commerce and will become a trend in China's information technology fields over the next several years. In 2005, the development and application of RFID is regarded as the key project of the China Golden Card project, and an excellent export opportunity for American companies. Furthermore, the development of RFID standards in China is at a critical phase, as fragmented standards will severely impact a growing technology expected to have a potential market value of over $7 billion by 2008. China currently lacks the technological innovation to produce quality radio frequency products. China's primary need is to import high quality core-chips and the design of antennas. China also lacks packaging equipment and assembling foundries for the RFID tag.
Environmental Technologies
The World Bank estimates
that air and water pollution cost the Chinese economy up to 8 percent of the
national GDP. In response, the government has unleashed a burst of environmental
legislation, shut down thousands of small, polluting factories, and decreed
that by 2005 the country will reduce its total pollution discharge by 10%
from the 2000 level.
China is expected to spend $84 billion (1.2% of the national GDP) on environmental protection to meet the goals of the five-year plan (2001-2005). There will be opportunities in alternative fuel technologies, emissions control and inspection equipment.
In 2002, the main Water Resource Law was revised and the public water infrastructure has been opened to foreign capital financing. China's water market reform has created many opportunities for foreign enterprises. Significant amounts of new water infrastructures will be built and the operation and maintenance of all existing and newly built municipal water and wastewater treatment plants have been or will be transferred to private and foreign enterprises. Opportunities will be found in biological de-nitrification and phosphorus removal technologies; manufacturing technology of anaerobic biological reactor; water and wastewater treatment equipment; water saving technologies and equipment; water treatment agents; monitoring instruments; and natural water body rehabilitation technology.
Special Projects
The City of Beijing
is planning to invest more than $23 billion in preparation for the 2008 Olympic
Games. Much of this money will be spent on construction projects in the following
areas: Olympics facilities, transportation, telecommunications, and environmental
improvements. Additionally, Shanghai recently won its bid to host the World
Expo in 2010. Shanghai plans to invest hundreds of millions of dollars in
new urban infrastructure to prepare for this momentous event.
Getting Started
China, though a
challenging market that requires thorough preparation to enter, presents a
good opportunity for American manufacturers. The U.S. and Foreign Commercial
Service (USFCS) offers an array of services to assist in planning your business
strategy. Some services USFCS specialists provide include market research,
information on international trade shows, assisting in trade mission participation,
and overseas marketing.
The USFCS can educate
you and provide the tools needed to navigate the Chinese market, helping protect
intellectual property, meet standard requirements, finding business partners,
and collect fees. USFCS has offices in Beijing, Shanghai, Guangzhou, Chengdu,
and Shenyang. American Trading Centers have just opened in 14 additional cities
to provide even more access to the Chinese market. To find out more, please
visit http://www.export.gov/China
or call 1-800-USA-TRADE (872-8723) to speak to a China specialist.