how china will change your business

How China Will Change Your Business

Brian Henshaw

Benjamin Allen

China's economy is much larger than the official numbers show. China only reported 1.4 trillion, really 6.6 trillionChina has a huge underground economyChina suppresses their dollar by almost 40%

The growth of China's economy has no equal in modern history.Annual growth of 9.5%30 year run of this, economy has doubled three times

China is winning the global competition for investment capital.The world keeps feeding the Chinese capital1/3 of industrial production is ran off of foreign investmentsChina had 53 billion an investments, US only 40 billion (2003)

China can be a bully.China can put shut down businesses Ex: shut down 35,000 furniture in the U.S. now the Chinese make 40%

China's economy is an entrepreneurial economy.One sock company opens, 8,000 followChina can cut U.S. prices by more than half

The most daunting thing about China is not its ability to make cheap consumer goods.They are climbing the latter in technologyThey are spending more on technology researchSame research, 60% of the price that the Americans charge

China is closing the research and development gap -- fast.spent 60 billion on research and developmentChina’s researchers make only 1/10th of the salary of a American325,000 engineers in 2003

China now sets the global benchmark for prices.Lowest price is now called the China priceCompanies around the world must match their priceIn the US, products fell in every category that China was the top

exporter

China's growth is making raw materials more expensive.Copper prices jumped 37% last year, aluminum and zinc both rose about 25%, and oil was up 33%. China is buying large amounts of each of these products

No company has embraced China's potential more vigorously than Wal-Mart.50%-85% of merchandise comes from ChinaBought 15 billion worth of goods from China80% of suppliers come from China

There are hidden costs associated with doing business in China.Get ready for copy businesses, transfer of technologyMotorola, control’s less than 55% of market, even though they

invented handsets an China

Piracy is a problem.China police fails to police intellectual propertyThey are getting 100’s of billions of dollars from this

China's heavy buying of U.S. debt has lowered the cost of money in the U.S.So they let the US dollar go far in China’s economy, pushing US to buy more, than buy our debt with the continual West investment

Americans and Chinese have become reliant on each other's most controversial habits.China needs the low price currency to keep the exports goingChina earns 1/14th of an American, and the reason is they cannot buy abroad

China pegs it’s currency at a certain level in order to keep it’s economic growth at double

digit figures. A weak Yuan makes China’s exports very attractive to US consumers.

Americans go into debt. China then buys our debt. How long can this cycle continue.

The Bottom Line…

Questions

How long will China continue to grow it’s economy at double digit figures?

How can the U.S. compete for raw materials in the future?

How can the US and it’s allies police China’s lack of belligerent lack of piracy laws?