US businesses want to be taken on China road trip
While the likes of GE are confident, others are less sanguine about chances
that China is building could someday become the avenues for billions of dollars in increased trade — or become debt-ridden sinkholes. Xi is pressuring companies doing business in China to participate no matter what the prospects.
The hope of future prosperity is enticing. Li and Fung, a Hong Kong company that for decades has sent Chinese-made goods to US and European department stores, is now marketing to small and medium-size retailers in the developing world. It is a bet that the Chinese initiative will lift consumer spending across dozens of countries, said Victor Fung, chairman of the Fung Group, its parent company.
Others are waiting to see whether China’s ambitious idea translates into actual investment — and whether US and European companies will have a place at the table. They are particularly troubled that the programme seems to be mostly about Chinese exports, and not much about imports.
“Tell us what we are going to get out of this,” said James Zimmerman, a lawyer in Beijing who is a former chairman of the US Chamber of Commerce in China, referring to the West. “It’s a non-starter if it’s all about bringing Chinese goods to Europe, or if it’s all one way.”
Transparency
A top official in the Trump administration, Matthew Pottinger, senior director for Asia at the National Security Council, said at the conference that China should provide transparency in the bidding for contracts related to the initiative, to give a better chance to companies that are not state-owned.
China’s industrial overcapacity is a big motivator behind the plan. China can make nearly 1.1 billion tonnes of steel per year, as much as the rest of the world put together, but has domestic demand for only about 800 million tonnes. The initiative might absorb only about 30 million tonnes per year, according to a recent study by the European Union Chamber of Commerce.
Some US companies are taking steps to improve their chances — but that sometimes means manufacturing more in China, not the US. Duan said GE had focused on ways to produce goods in China to meet the country’s requirements that some of the work be done locally. Honeywell said in a statement that it had also been looking for ways to produce more goods in China for the programme.
“When the roads are built, when the ports are built, when the power plants are built, I think the other opportunities will come,” Duan said.
Others are waiting and watching. Investments have been heavily concentrated in Pakistan, Afghanistan, Kazakhstan, Uzbekistan and other nearby countries that are geopolitical priorities for China but that have weak economies.
Vincent Lo, a real estate billionaire who is the chairman of the Hong Kong Trade Development Council, led a team of 50 Shanghai and Hong Kong businesspeople to Thailand and Vietnam to explore investments based on the Chinese initiative, he said. Trips to the Mideast and Eastern Europe may be next. Central Asia is far down his list.
“If Central Asian countries are keen, we will work with them, but of course we’ll have to look at the financial fundamentals,” Lo said. “A lot of these countries will have to do a lot of reforms to be able to receive capital.”
Chinese players look to be big winners from the outset.
Xi has designated the city of Xuzhou — a dusty rail hub roughly halfway along the five-hour bullet train trip between Beijing and Shanghai — as a key manufacturing base for his policy. At the foot of a hill here topped by a new complex of Buddhist temples, Caterpillar has one of the world’s biggest construction machinery factories, making huge pieces of digging equipment.
Nearby, its local rival XCMG is ramping up. Employing 23,000 workers in this city and controlled by the Xuzhou municipal government, XCMG is China’s largest manufacturer of construction machinery, from excavators to cranes to bulldozers.
The factory makes tank-size excavators in a series of four halls with 80-foot-high steel roofs. Almost everything inside is new, from the 13 steel-cutting robots the size of cottages to the costly Italian and Japanese machining equipment that precisely trim steel components.
Wang, XCMG’s chairman, dismissed concerns that the business will not materialise. “We should be persistent and manage our business as well,” he said. “When the spring comes, we will arise abruptly.”