The Real Deal by Lloyd D. Ward
Business Insights Beyond the News
“China has offered to go on a six-year buying spree to ramp up imports from the U.S. in a move that would reconfigure the relationship between the world’s two largest economies.”
– Bloomberg News, Jan. 18, 2019
The above quote is an excerpt from a recent Bloomberg news report that touches on an important new development in Chinese economic policy.
Like Bloomberg, most U.S. news media are focusing on the U.S.-China trade war and the rebalance of power between the two countries, i.e., which will win and which will lose; which leader will blink and which will emerge victorious.
I have been on the ground in China for much of the past six weeks and have been learning first-hand from friends and business associates the full economic story that is far more profound than the resolution of the current trade dispute.
Partly in response to President Trump’s demands, but not exclusively, President Xi has enacted a sweeping policy that not only stops the tit-for-tat dispute between the two countries, but transforms China’s economy. The Bloomberg report of a six-year buying spree represents the tip of the iceberg.
In late December, Chinese leaders gathered at a three-day Central Economic Work Conference in Beijing and, there, they charted the course for their economy for 2019 and beyond.
My Chinese business associates attended the conference and have shared with me their unfiltered views of what they expect the new economic policy to mean for the outlook of their businesses, specifically, and the Chinese economy in general.
President Xi and his party have signaled their intention to show the world a shift from “made in China” to “made for China” with a new policy designed to give equal weight to importing and consumption as it traditionally has given to exporting and production. Chinese consumers will now have more access to western products as well as to their own.
For 30 of the past 45 days, I have been meeting with business leaders in China, consulting them on growth strategies for their companies. They are keenly interested in gaining access to U.S. markets while expanding in their own country. During this time, news of the new economic policy was on the minds of my associates. I had an upfront and close view into the expected impact on small and mid-sized companies.
Over the next few weeks, I will share my learnings with you in a series of informational memos, including details of the policy that have not been reported in the media.
I wanted to use this first memo to share my impressions of the importance of this policy for the positive impact it will have on business in China as well as the United States.
The political and policy implications of this shift in China will be profound, indeed. I predict an end to the trade war very soon. All is in place for President Trump to declare victory.
Correspondingly, President Xi is changing his narrative, at least within his country, from win/lose to transformation. Balanced trade with the U.S. will benefit the growing Chinese middle class as well as Chinese mid- and small-cap companies. It will also encourage innovation and international cooperation.
The potential for spurring small business development and entrepreneurialism cannot be overstated. As you know, business growth and job creation have a tremendous positive psychological impact on a nation’s appetite for consumption.
My Chinese friends and business associates anticipate an insatiable consumer appetite for their own businesses’ goods and services as well as those developed and manufactured in United States.
Within the next five years, the Chinese middle class is expected to explode from 430 million people today to 780 million people. You and your organization have a great opportunity – through my network – to tap into this growing population of consumers and the businesses that are benefiting from a relaxed economic policy.
With these developments as well as a likely resolution to the U.S./ China trade dispute, I believe, and I trust you agree, that there is no better time to build bridges between businesses in our two countries. I am an ambassador in this pursuit. More to come.