We left the Minneapolis-St. Paul International Airport last Friday. Now, a week later, we are on our way back. In this short time, so much has happened. I have learned so much, had a lot of fun adventures, met awesome people and thoroughly enjoyed every minute. This trip has truly been the experience of a lifetime.
The Chinese economy has shown itself to be competitive on a global scale and is on par with the world’s most powerful nations, although China does not have the high standards of living 
present in many countries with such strong economies. China is still a very young economic power and still has much work to do before the country can have the same standards and quality present in countries like the United States.
China’s economy is very manufacturing oriented. There are many manufacturing plants in China. We visited three of them. The manufacturing sector is very developed and is moving along quite nicely, but China needs to increase development of its service sector in order to have a balanced economy and serve the needs of its people. Also, China has a shortage of qualified people to fill management positions and organize the operations – this is one reason why so many foreigners are heading to China to run companies.
Chinese trade is very strong, and that will undoubtedly continue. The Chinese export vast amounts of manufactured goods every year and the trade deficit between the United States and China continues to grow. China has some of the lowest-cost exports of anywhere in the world, mostly because labor in China is so inexpensive relative to the rest of the world, even though employee housing is often provided by their place of work.
China’s rapid economic growth is spurring a building boom in many cities. There is so much development and new buildings are constantly going up. China has the greatest concentration of any country of construction cranes per square mile. Construction is everywhere. More high-rises, more office space, more factories are being built all the time. The city of Shenzhen, which 25 years ago only had 7,000 people, is now a bustling metropolis with more than 14 million people.
This trip has also affected me in ways other than just learning about China. I now understand more about the intricacies of trading and business relationships on an international level. It is really awesome to be able to experience business in action and watch as people from two very different places come together with a common trade interest. During this trip, many of my previous notions about China disappeared, only to be replaced by admiration for and understanding of a country that is just beginning to display its full potential.
Archived Journal Entries
November 17, 2005
Today I was planning to write about the Hong Kong economy because I was planning to go to that briefing this morning. However, our plane was delayed and we got into Hong Kong late last night (3 am), so we were excused from our morning activities. Instead of attending the briefing, I 
went to the mall that is attached to the hotel. This mall was incredibly ritzy, with shops like Tiffany’s, Prada and Gucci. It was connected to a system of skyways, which I followed until I came to the open area at the end. The end of the skyway opened into a bunch of high rises, which weren’t quite so ritzy. In fact, they were quite poor. China is like that – a stark contrast between the rich and the poor.
Our first day in China, we went to the Forbidden City and, as we headed back to the buses, we walked down a sidewalk where many people were begging for money. Some of them were 
severely disabled and it was tragic – I felt horrible that I couldn’t help them. They had so little, yet they were right next to a string of luxury hotels, and people so wealthy they had more money than they could possibly spend. The income disparity is readily apparent in China and the contrast is astounding.
I know that China is not the only country like this. Even in the U.S., one of the most prosperous countries in the world, poverty is on view, especially in big cities like Philadelphia and 
Washington, DC. Both countries have large numbers of people living on the streets. When I first went to Washington DC in fourth grade, I was surprised by these people because, having grown up in Brainerd, I had never seen such circumstances before.
But big cities are not the only places where poverty exists. It is present in small towns as well. After hurricane Katrina, the poverty problem in the U.S. was exposed and many people became aware of it for the first time, particularly because the New Orleans area has a great percentage of people living below the poverty line. Minnesota does not have such severe poverty problems. True, there are problems, but they are nowhere near the scale of some other states. The governor, in his speeches, has said that Minnesota has an unemployment rate of about 3.6%, which is about 1.2% below the national average.
China, too, has problems with unemployment and poverty. I always thought that in communist China, the government was supposed to take care of all of its citizens and provide for the 
common good – but clearly, some of these people have been sorely neglected. I heard earlier in the week that the average yearly salary of a rural Chinese farmer is around $1000. Other Chinese workers make similar wages. Obviously, these people are not wealthy. On this trip, we have only seen the wealthy side of China and what we’ve seen of the poor has been glimpsed through our bus windows. But we have seen squalid living conditions and homeless people with next to nothing. We have gotten a small taste of the real China. The poverty is there, despite how well it’s hidden.
November 16, 2005
Today was our only day in Shanghai, but it was a great day and Shanghai is truly a beautiful city. We began the day by attending a briefing on intellectual property rights (IPRs), given by Faegre and Benson, a law firm. Intellectual property is creativity, essentially, because it involves products that are original and new. Intellectual property is closely related to innovation and, in 
China, they don’t have much innovation. Because of this, they rely on other countries to provide it. They manage to swipe new products from other companies and countries, learn how they work and what parts they require and then produce them under a different brand name and sell them. This is termed economic espionage. This severely hurts the company that initially came up with the product. Logically, the company that created the product should have the sole rights to market and sell the product, and other competitors should have to come up with their own products. But this is not the way many companies operate.
In China, IPRs are a big issue. Some of the most notable markets in which economic espionage occurs are the entertainment and accessories markets. Copied DVDs and CDs are for sale all over China, as are replicas of high quality watches, like Rolexes, and designer brand purses. 
U.S. companies do not like this aspect of China because it deeply hurts their businesses. The Chinese legal system has some laws in place to prevent this, but the laws are few, and the few in place are difficult to enforce. Faegre and Benson shared with us a few ways to protect intellectual property. The first is to be confidential and allow as few people as possible to know about high-tech secrets. Companies should also file a trademark and have clear ownership rights because this makes it more difficult to steal ideas. Also register intellectual property with customs because this makes stealing information between nations more difficult. Other good practices to observe are to keep good records and have up-to-date security.
Later in the day, I went to a high-tech park to visit MicroPort, a company that makes stents for hearts. I talked with many people in the medical delegation I was with and many of them said that their companies had experienced intellectual property rights violations and it did indeed have a negative effect on their companies.
IPRs are a very important issue for US-China relations, and much more needs to be done to protect these rights. IPR violations happen quite often and they are basically guaranteed to result in a detrimental effect for the victimized companies.
November 15, 2005
Today, before traveling from Beijing to Shanghai, we attended the CEO forum at the Chinese World Hotel. It was a very important event for global business. The forum lasted just two days, but there were many important people attending and speaking, including former prime ministers of Great Britain and New Zealand, as well as former President Bush.
The first speaker we saw was a Chinese government official who spoke about what the Chinese government needs to do to improve the economy. They need to improve 
innovation and market strategy, he said, while also decreasing regional disparity, class disparity and intellectual property theft. He said they want to emphasize democracy and fairness as they head toward “market socialism.” The goal for the Chinese is, by 2020, to increase the GDP to $4 trillion, increase per capita GDP to $3000 and have an input volume of $1 trillion.
Then Governor Pawlenty participated on a four-person panel to discuss various opinions on the economy and trade issues. In general, all four expressed similar ideas: in order to succeed in a global economy, countries and officials need to understand each other and know where their trade partners are coming from.
After flying to Shanghai, Amy and I visited Jing’an Temple with the first lady. She was very talkative, very curious, and very nice and we had good conversations about Buddhism and the temple itself. The Buddhist temple was quite old (built around 200 AD) and was located right in the city. It looked quite odd sitting there right next to one of the classiest shopping centers and the rest of the high-tech Shanghai. This just goes to show that China is a changing country and is still a diverse mixture of the old and new. The economy needs to accommodate and work with both traditional and with new ideas. China’s trading partners, like Minnesota, need to be aware of this diverse culture in order to form long-lasting relationships with China.
November 14, 2005
Today, our first actual business day, started in the ballroom with a discussion about the mission in general. We then went into our delegation groups for a briefing. During the course of these two talks, I learned a lot about Chinese trade and economy.
During the first talk, we learned that China’s per capita GDP (Gross Domestic Product) is approximately $1,000. Obviously, that is quite a bit less than the per capita GDP of the U.S. China is the 113th poorest nation in the world, and is a “service industry midget.” But one third of Chinese college graduates studied engineering. China exports $600 billion each year, a third of which goes to the United States. But the U.S. has a disadvantage of approximately 23 percent against the rest of the world in exporting because of taxes, production costs and other fees. In order for the U.S. to be competitive with the rest of the world, it needs to lower costs.
During the second talk, the general business delegation briefing, we learned of about 10 major 
Chinese business issues.
The first issue, distribution rights in China, has to do with where companies can sell their products and trade in different areas. The second issue was human resources and costs. Even though China has many, many people, it is difficult to find qualified people to fill open positions in business, especially management. Retaining people in the workplace is also difficult because there are so many open positions that people can keep moving around to find better salaries. An additional problem is that people are loyal to a certain boss but not to the company, so when a boss switches jobs and moves along, many of the people under him will move as well. There are many open jobs in more rural areas, but many people don’t want to move because they’d risk losing their housing and social stature.
One extremely important issue between the U.S. and China is the violation of intellectual property rights. This happens, for example, by copying other people’s ideas and products and 
selling them for less. This happens all over the world, not only in China, and even in the U.S. itself. However, this issue is a big priority for the U.S. government with China. Even though the laws on the subject are good, they are very difficult to enforce. By not emphasizing intellectual property rights, the Chinese also risk stifling innovation, because when people are allowed to steal other people’s ideas, they don’t have any reason to come up with their own.
Another important issue for businesses that operate in both the U.S. and China is the U.S. visa policy. Visas for visiting the U.S. are very difficult to get. Applicants must go through a rigorous application and interview process, be fingerprinted, be able to prove that they will return to China when they are finished with their business endeavors and have an in-depth and detailed description of their activities in the U.S. On the tour bus yesterday, our guide told us that it was essentially impossible for a young, single woman to obtain a visa to visit the U.S., even on business. It’s estimated that Chinese businesses incur losses of $30 billion each year because of this visa policy.
Finally, China has two tax rates, but they are negotiable, just as most things in China are. This results in many businesses paying no taxes at all. This leads to an unfair advantage for the Chinese. They also don’t pay all the required environmental fees and overtime for their employees.
There are many major issues with Chinese business and their relations with the U.S. One of the goals of this trade mission is to discuss these issues and reach a decision about how best to deal with them for the betterment of both parties involved.
November 13, 2005
Flying and Selling
Today was our first full day in China. We arrived
at our hotel last night at about 11:00 pm. Our first flight was
almost twelve hours, but it wasn’t as bad as I had expected
it to be. We flew over Siberia, and when I first looked out the
window and saw the vast fields of ice and snow, it was 
one
of those moments that truly took my breath away. Overall, it was
amazing. I had never in my life seen anything quite like that. Soon,
however, we left Siberia and were quickly approaching Tokyo. After
landing in Tokyo, we switched planes and headed to Beijing. After
going through customs, we took a bus to the Grand Hyatt, our hotel,
and slept.
We traveled to the Great Wall today and climbed up to the
top. There were more steps there than I think I’d ever climbed
before, and they were rather uneven and quite steep. I was pretty
exhausted when I reached the top, but the view was worth it and
I did, of course, take lots of pictures.
We
also went to the Forbidden City, where the emperor lived until 1925,
along with his wives and children. It was positively enormous and
it seemed as though it would never end. When we had finished touring
the city, we walked back to our bus, but many people stopped us
and tried to sell us purses, books, postcards, glass dragons and
watches. Many of them simply attached to people and wouldn’t
leave
them alone until they bought something. A similar case happened
to me with a guy selling watches.
He started offering me a watch for 150 RMB, but
when I didn’t purchase, he went down to one for 100 RMB. When,
at that price, I still didn’t accept the offer, he went down
to two for 100 RMB. His offers kept getting lower and lower, but
I really didn’t want to buy his watches and he wouldn’t
stop asking me to buy a watch, so finally some of the other members
on the mission surrounded me so that he would leave me alone. It
worked and I didn’t have to worry about
buying watches anymore.
I tried my best to avoid other people selling
things on the street after that. Some people were just straight-out
begging.
We saw one mother with her child, begging, and the mother would
approach people and ask for money while the child would try to get
in the pockets of the person the mother was asking. This was really
interesting to me because I had never before seen such blatant attempts
to steal. I had also never seen such pushy salesmen. It was an interesting
experience, and I’m sure I’ll find many more interesting
experiences in China.
November 10, 2005
An Interview with Mr. Abbott
Earlier this week I had the opportunity to talk with
Matthew Abbott, the director of International Trade, Education
and Trade Assistance at the Department of Employment and Economic
Development (DEED).
Mr. Abbott kindly shared with me a little about
all of the planning and preparation that has gone into this mission.
First of all, this mission was no small task to plan; it was, in
fact, rather daunting. The planning for the trip began 12-14 months
ago and continued in full force ever since.
One of the most difficult parts about organizing
the mission was the great number of organizations involved. More
than 100 businesses will be represented, along with many state offices.
With 218 people and 93 events in four cities over the course of
six days, it is easy to see why the planning of the mission was
so difficult and took so long. According to Mr. Abbott, it was,
essentially, the "coordination and facilitation" of "common
goals and objectives" and "incorporating everyone's needs
and wants" that made planning such a major task.
Mr.
Abbott hopes that the mission will cause ":further deepening"
in existing Minnesota-China relations. He said one goal of the mission
is to "increase trade, partnerships, investment and understanding
of relations" and to show that Minnesota is firmly committed
to further and future connections.
As for the students, Mr. Abbott said there's
a good reason that all of us are going on the trip: "When we're
all gone, you are going to be the future business leaders of Minnesota."
He said that the peer-to-peer organization is a big part of it because
he hopes that, with us being your eyes and ears in China, that it
will be more effective for us to communicate with students back
home than for a "bunch of adults" to try to share it from
their perspective.
The mission, as Mr. Abbott emphasized, is "not
just a trade mission that starts on Friday and ends on Sunday,"
but rather it is the "launch pad" for "much greater
things in the future."
October 28, 2005
The Chinese Economy: An Emerging Dragon
On Monday, Oct. 24, we attended the pre-mission briefing and learned quite a lot about the Chinese way of life. A discussion of the Chinese economy, which is growing phenomenally, was particularly interesting.
One journalist referred to the rapidly growing Chinese economy as “an emerging dragon,” and that certainly is what it seems to be. In the first nine months of this year, the Chinese economy has grown an incredible 9.4 percent, an exceptional growth rate for any country. Since 1993, China’s gross domestic product, or GDP, has increased more than 570 percent: amazing growth. Incomes also rose in China. In rural areas they increased an average of 11.5 percent and in urban areas about 9.8 percent. Even at these rates, the average yearly salary of a rural worker in China is only $303, far less than that of the average U.S. worker, whose average yearly salary is around $33,000.
Foreign investment in China has also grown in recent years. Until 1991, China received virtually no foreign investment. But by 1993, just as the Chinese economy started its growth spurt, investment started increasing. As of August 2005, more than 530,000 companies from about 190 companies had invested in China. Of the world’s top 500 multinational companies, about 450 have invested in China. However, the investment in China isn’t necessarily good for everyone. This investment sometimes causes outsourcing of U.S. jobs because cheaper labor can be found in China. This, in turn, can cause people in the U.S. to lose their jobs.
Like investments, Chinese exports are also increasing. Because labor is relatively cheap in China, Chinese goods can be produced and sold for considerably less, and often at a higher profit, than goods produced in places where labor isn’t so cheap, like the U.S. That is one advantage for outsourcing: cheaper consumer goods.
One other important reason that many foreign companies are investing in China is the large and increasingly affluent population. China boasts more cell phone users (330 million) than any other nation, and more Internet subscribers (80 million) than any country except the U.S. The Chinese in general are increasingly becoming consumers, not unlike Americans. Clearly, this is quite an important emerging market for Internet service providers, phone service providers and hardware and electronics manufacturers.
Indeed, there are pros and cons to U.S. investment in China, but in the long run, hopefully the pros will outweigh the cons.
Learn More:
October 24,
2005
Past US-China Relations
At the end of the 19th century, China was not recognized
as an independent nation. But after many years and a lot of work,
China finally got to where it is today in the international community.
At the end of the 1800s, President William McKinley
and his Secretary of State, John Hay, attempted to enact an "Open
Door Policy" that would allow any country to conduct trade
in China. McKinley and Hay were afraid that countries like Japan,
Germany, England and France wanted to divide China into "spheres
of influence," in which only one country could trade, and
that the US would be prevented from trading with China. The Open
Door Policy had three parts to it: nations with spheres of influence
would respect the rights and privileges of other nations within
their sphere; the Chinese government would continue to collect
tariff duties in all spheres; and nations would not discriminate
against other nations in collecting port dues and other tolls
within their sphere of influence. The US sent their proposition
to all nations that had spheres of influence. Great Britain came
closest to accepting it, Russia rejected it, and the other nations
replied that they would accept the agreement if all other nations
did. In 1900 Hay announced that all nations had accepted the policy,
even though no one had formally agreed to it, except the US, of
course. The Open Door Policy went into effect and continued for
many years and China was finally recognized as an autonomous nation
after World War II.
In 1949, when China became communist and formed
a treaty of mutual assistance with the Soviet Union, the US refused
to recognize the new leadership. Instead the US continued formal diplomatic
relations with the defeated Nationalists, who had fled to Taiwan after
the communist victory. During the next 20 years, underlying tensions
were building between China and the Soviet Union.
In 1969, when President Richard Nixon was in
office, one of his high priorities was China. Nixon wanted to
open relations with China, but this was easier said than done.
Nixon's national security advisor, Henry Kissinger, was a big
player in opening relations with China. In 1970, the first communication
between the Chinese government and the US government began, rather
secretly, and often with third parties involved. In 1971, China
sent an invitation to the US table tennis team to tour in China.
The team accepted, and six months later Nixon himself was invited
to visit China. Kissinger went to China, to make arrangements.
Nixon's visit was such a big secret that when Kissinger's bodyguard
saw four Chinese men on their plane, he thought they were being
kidnapped. Finally, Nixon's trip was announced, and most of the
world was quite shocked. During the trip, Nixon held many talks
with Chinese officials, in hopes of being able to recognize the
Chinese government, while still being able to defend the US commitment
to Taiwan, to defend it in the event that mainland China attempted
an attack. By the end of the week, an agreement was reached and
mainland China's communist government was officially recognized
by the US and formal diplomatic relations between the two nations
had begun.
The Open Door Policy allowed the US to maintain
its trading in China. Without this policy, China might have been
separated into spheres of influence, and the US might have been
entirely prevented from trading there. It is because of this policy
and because of Nixon's visit to China, and how he opened formal
relations between the US and China, that Governor Pawlenty's trade
mission is possible for the state of Minnesota.
