Everything about China is big. Its population of 1.3 billion, its cities, its exports, its manufacturing base, its universities – and its ownership of U.S. bonds. Equally huge are its environmental problems, demand for natural resources, growing middle class, and 800 million citizens living in poverty.
China is a country of intense contrasts. Walk along the pedestrian malls in Shanghai, Guangzhou or Chengdu and you’ll see elegant Louis Vuitton and Gucci boutiques. One block away, you’ll find the “old” China of tiny shops selling food, spices, tires, cheap clothing, kitchen utensils and plastic handbags. China’s middle and upper classes drive Buicks and BMWs while its millions of poor walk, carrying their burdens on their backs or on long poles over their shoulders.
I’ve recently returned from two weeks in China, impressed once again by the enormous changes from only a year ago. Shanghai now has 200 buildings over 40 stories high with no end to its construction mania. When I first visited Shanghai in 1989, there were no skyscrapers. Guangzhou’s huge new university complex now has more than 400 multistory buildings, 35,000 students (on its way to 300,000), and 10 universities.
It’s easy to see why the world markets for such commodities as cement and oil face huge demands.
Like it or not, China is already a massive force in the world, important to Colorado and America. Its huge environmental problems provide opportunities for Colorado companies like CH2M Hill, key partner in Kaiser Hill, the company that just completed the difficult cleanup of Rocky Flats. A number of Colorado organizations have teamed together to advance our environmental business with China.
Trade with China is also key to Colorado. Between 2003 and 2004, according to U.S. Commerce Department statistics, our exports to China grew 67 percent. As China’s market continues to grow rapidly, it will become an increasingly important destination for Colorado’s products and services. Chinese manufacturing, despised by many, nonetheless allows companies like Wal-Mart to provide low-cost goods to consumers.
But there are also immense difficulties to consider before leaping into business in China. Electricity shortages are endemic. A General Motors executive told us that even their giant operation in Shanghai is not immune.
There is virtually no clean water – nor even enough water – in China. Smog smothers every city. Although armies of people wielding brooms keep trash off the tourist streets and freeways of some cities, mountains of garbage clog lakes, rivers and open spaces.
Corruption continues unabated. Recent mine accidents in China simply demonstrate its extent. Despite government regulations regarding mine safety, mine owners pay local government officials to ignore the laws. China’s deaths from mining accidents are between 10 and 12 times higher than in the United States. Spread that across the business landscape and you have an environment where work rules are lax, safety is secondary, and understanding how to do business with local officials is essential. That usually takes a well-connected Chinese partner who may make it easier to get a building site or financing, but also causes endless headaches – because your partner is, in fact, owned by the government and wants to do business its way, not your way.
Finally, there’s real potential for a Chinese real estate bubble that could tank the economy. Drive through a major city at night and you’ll see dozens, if not hundreds, of empty skyscraper condominiums. Many high- rise office buildings are also empty. While pedestrian shopping streets are crammed with shoppers, high-end shopping centers are virtually bare. Banks, also mostly government- owned, do what the government tells them to do and, consequently, sit on a mountain of bad loans.
China is a major global power, one we want to do business with and have on our side. But being successful requires patience, excellent partners and contacts, knowledge of the business culture, and a measure of luck. Huge opportunities are there, but only for those who tread carefully.
Gail Schoettler is a former U.S. ambassador, Colorado lieutenant governor and treasurer.
