I attended the 15th China International Trade Fair for Investment and Trade (CIFIT) in Xiamen, in the Fujian province of China, in September and came away enthusiastic about investment and trade opportunities for the constituency I represented at the fair: U.S. small, minority and women-owned business enterprises (SMWBEs). As head of the National Minority Business Council Inc.s global arm, my mission in China was to build bridges for entrepreneurship, in keeping with our vision of creating more jobs, wealth and social and economic stability at home and abroad through entrepreneurial activity.
It was my second visit to China. As with my first, I was struck by the difference between the attitudes of the Chinese business leadership and those of its U.S. counterpart. Its a difference that American SMWBEs must recognize if they hope to do business successfully in China.
The fair provided an opportunity to interact directly with business representatives and government officials, not only at the exhibition center, but also at banquets and other related social events. Our delegation felt welcome to engage in business with a people imbued with the confidence of an ancient civilization. Chinese businessmen and women know exactly what they want from their overseas peers and they communicate this with great patience and respect.
I experienced a business culture rooted in humanism, a far cry from the rugged individualism, bottom-line-at-any-cost approach. Quotations of Confucius, the great Chinese philosopher who espoused morality in individuals and government, correctness in social relationships, and justice and sincerity, appear in the brochures of major companies. Confucian values are also reflected in the opinions of senior executives.
As in every country, China has its share of unscrupulous elements waiting to pounce on unprepared foreign businesses. Appropriate due diligence and proceeding with caution are key to a success strategy in China.
I met African and Caribbean nationals who live and do business in China, which reaffirmed the value and timeliness of building bridges of entrepreneurial relationships. The fact that some American small-business owners already do business successfully in China also reinforces that vision.
The challenge of being involved in the worlds fastest growing economy, one with strong social, cultural and economic links to the emerging markets of Africa, Asia and the Americas, is exciting. China aims to have a presence in every part of the world. The government has set about achieving this goal with a methodical precision that makes the imperialism of Europe and the United States seem like mere accidents of history.
Not even the tiny Caribbean has escaped the attention of the Chinese leadership. Chinas vice premier recently spent several days touring different countries in the region to forge political and commercial ties. By contrast, the regions political leaders had to fight hard to obtain a one-day collective audience with the U.S. Secretary of State.
Returning home, excited and filled with expectations for commercial success, I was unpleasantly surprised to see lawmakers on capitol Hill revving up for confrontation with China over its currency. U.S. lawmakers contend that Beijing deliberately undervalues the yuan to make Chinese exports cheaper than American exports. Claiming that America has lost 2.8 million jobs to China during the last eight years largely because of this, Senate Majority Leader Harry Reid promised that U.S. jobs legislation will send a message to China. We’re going to do something about Chinese currency. And we’re going to do that quickly, he warned.
There seems to be a disconnection between our local political and economic interests and the realities of the global marketplace. One may gain political points on the home turf but lose potential market share for businesses that could feed Chinas voracious appetite for a wide range of products and services.
World Bank President Robert Zoellick puts that appetite in stark terms. Today, China is consuming over half of the worlds cement; almost half of the worlds iron ore, steel, and pigs; a third of the worlds eggs. Today, China is the worlds biggest consumer of minerals such as copper, aluminum, and nickel. Today, net [foreign direct investment] inflows into China are around $180 billion, up from some $40 billion just ten years ago. As China shifts from building a foundation of growth, some of this demand for materials and minerals will ease but India will be next to gear up. This is not the 1944 world, he said.
Zoellick was referring to the post-WWII period of unprecedented economic cooperation and prosperity for Europe and the U.S. under global trade and financial rules established and rigidly enforced by the newly created World Bank, International Monetary Fund and General Agreement on Tariffs and Trade. Disadvantaged by those rules, the countries of Asia, Latin American and Africa were left to grovel their way from underdeveloped, to developing to emerging.
As recently as the 1990s, developing countries accounted for about a fifth of global growth and little more than 20 percent of global investment. Today, they are the engine of the global economy with increasing consumption and strong economic performances, and they attract about 45 percent of global investment. By 2025, six major emerging economies Brazil, China, India, Indonesia, the Republic of Korea, and the Russian Federation will collectively account for more than half of all global growth.
Promoting the yuan as a global reserve currency has gained acceptance across Asia, Africa and South America. That acceptance likely will become more widespread as the yuan continues to appreciate against the dollar and provide good returns on yuan-denominated notes. At present, you can exchange yuan for dollars at the Bank of China in New York City.
The first question put to me at a press conference at CIFIT dealt with the global debt crisis. I responded that my preference was to focus on investment and productivity as long-term solutions to a crisis created by credit, greed and policies influenced mainly by short-term political interests.
At the same press conference, the Mayor of Myrtle Beach, S.C., who was part of the U.S. delegation to CIFIT, asserted that the United States eventually would get over the current crisis, a position I strongly endorse. The mayor and I encouraged Chinese businesses to invest and trade with us as we embark on our recovery. I cited the EB-5 Immigration Investment program, under which a Chinese national who invests at least half a million dollars in the United States can obtain a U.S. residence visa.
At a time when U.S. banks are stingy with credit, the EB-5 program could be a source of investment funds for SMWBEs, which create more than two thirds of net new jobs and historically contribute significantly to innovation. Since the program has a job performance component, we should pay attention to ways in which initiatives in proposed job-creation legislation can complement these inbound investments.
Instead of picking a currency battle with China, the single largest holder of U.S. government debt, Washington should get serious about increasing and strictly enforcing federal procurement goals for SMWBEs an excellent starting point for job and wealth stimulation. Moreover, with China already a major U.S. trading partner, Washington should help SMWBEs to increase exports to that nation, a move that would boost U.S. manufacturing jobs.
Our export-related job-growth strategy should also consider collaboration with Chinese small and medium-sized firms around innovation and technology to enter the growing markets of Asia, Africa and South America. Sectors with strong growth prospects, such as biotechnology, alternative energy and bio fuels, are prime areas for such collaboration.
Now is the time, too, to engage China, the other BRIC members (Brazil, India and Russia) and the emerging nations of Africa and Asia in constructive cooperative initiatives around economic interests.
With developing countries growing nearly four times faster than developed countries, SMWBE owners with roots in these emerging economies represent an untapped source of economic, cultural and commercial alliance for the U.S. The number of minority and women-owned businesses is growing faster than the overall number. Between 2002 and 2007, the number of minority-owned businesses rose 46 percent and women-owned businesses rose 20 percent.
In China there are more than 42 million small and medium-sized enterprises. They account for 99.8 percent of the total number of enterprises in China; 60 percent of the country’s total industrial output value; 57 percent of total sales revenue; 40 percent of profits and taxes; and 60 percent of total exports. They also account for more than 90 percent of retail outlets and provide about 75 percent of urban employment opportunities.
Our challenge is to ensure that the potential for relationships between Chinas SMEs and Americas SMWBEs is realized to support long-term creation of jobs and wealth. If we are successful in building an entrepreneurial bridge between the two sides, perhaps we can begin to assure the Occupy of Wall Street movement of social and economic stability.
Fritz-Earle Mc Lymont is the managing partner of Mc Lymont, Kunda & Co., a New York consulting firm. He co-founded the National Minority Business Council Inc. in 1972 as a not-for-profit membership business organization, and is managing director of its international unit, NMBC Global. He may be reached at Fmclymont1@nmbc.org.