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chinese consul general on china & US

Friday 27 May, 2011

Had breakfast with Yang Guoqiang, the Consul General of China in Chicago @ the Niagara Foundation where he talked about THE RELATIONS BETWEEN CHINA AND THE U.S.: STATUS, POTENTIAL AND PROSPECT.  He led off by noting that the bilateral relationship between the US & China is 1 of the most important in the world.  Hu Jintao’s visit yielded a historic bilateral agreement which spelled out a mutually respectful partnership which pursues common goals.  A fundamentally good relationship between these 2 countries is better for the whole world.  Never before have we worked so closely on so much.

China recently unveiled it’s 12th 5 year plan, which outlined projections for China’s economy, politics, society, & culture.  It sets 3 goals:

  1. Continuously rising living standards-the focus is on bringing low-income earners to equality in China’s midwest & west.  There has already been big changes, reflected in increases in the price of food.  Whereas earlier, they would eat pork once/week, they are now consuming pork 2-3X/week.  The poor are rising as a result of the dynamics of supply & demand, which will affect domestic consumption.  For the 1st time in 20 years, they had a trade deficit.
  2. Upgrade industries-to add quality & higher value as businesses & manufacturing shift.  Inflation will create wage increases.  The shift to higher value-added products will lead to a shift from east to west.
  3. Environmentally friendly & sustainable economy-clean energy.  They recognize that massive development leads to less environmental control.  Their goal is to share lots of business opportunities.

China is a pro-free-trade country which contributed 20% to global growth.  Education will be a focus to reach 4% of GDP.  Many municipalities are already meeting this goal.  While China’s economic growth was 10.2% in 2010, that is being scaled down to 7.5% for the next 5 years, with more investment in infrastructure, agriculture, & transportation.  They target 3% of GDP going towards science & technology.

Q&A

  • Economic development creates demand for oil throughout the world, especially among the BRIC countries.  The world must work together to solve this problem.  It’s not just the price of gas that’s the problem:  it leads to less systematic stability.  Better technologies which are clean & sustainable have not been developed yet.  The US Dept of Energy is working with China in monthly & weekly meetings.
  • China has invested in pork production in the US & imports pork, meat, feed, corn, soy from the US.  Food processing has good potential in China, of which there are 500 enterprises in Chicago.  This report discusses Chinese investment in the US:  An American Open Door? | Asia Society
  • Rich Daley has made 2 trips to China in the past 6 months to make Chicago the most China-friendly city in the US with a focus on education & creating business relationships.  Pat Quinn is going to China in the fall with a group of other governors.  China is determined to invest in manufacturing abroad so that they can learn better management skills.  They recognize that transportation, trucking, etc. are best in the midwest.
  • High speed rail is 1 of 10 core innovation technologies China is developing, which is taking a global focus over the next 8-10 years.  Their technology is suitable to a flat environment & urbanization will happen along those lines.  It will never pay for itself, but the world needs it because air traffic pollutes the most on a per capita basis.  China has 5K miles in operation with Shanghai-Beijing coming online in June & more in the next 2-3 years.
  • Yang is no expert in exchange rates, but China believes the rate must be decided by the market with governmental guidance, as all governments exert some control over exchange rates, right?  They watch & monitor other currencies & established an exchange rate swap market in Shanghai.  Given the experts say China’s currency should appreciate, the question becomes how to do it in a stable & sustainable manner.  The Chinese government has 2 concerns:  1.  hot money which creates opportunities for speculators, & 2.  the capability for industry to digest an appreciating currency, which are ultimately passed on to end-users/customers/consumers.  If prices increase too much too quickly, consumers won’t pay , & businesses won’t be able to adjust.  Exchange rates are reflected on retail racks in 6-12 months & have risen 4-5% in the past few years.
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