Us Trade Relationschina — страница 4

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trade relations with China, the US did not heed these guidelines. In the 1970s, US trade was not very extensive with China, yet many entrepreneurs were anticipating “exclusive deals” in the region. They would travel to Beijing with big hopes, only to find they had to deal with China completely on China’s terms. Importers had more success, as “The China Trade was simple at that time, being primarily the import and export of goods that were packaged in boxes and bales,” (Lubman, page 2). By the end of the 1970s, most American exporters were critical and weary of trade with China, while the importers had had better success. In 1979 with the adoption of the “open door” policy, foreign investors were welcomed into the region, as they anticipated access to billions of

untouched customers. The Open Door policy, in general terms, meant trade liberalization. Yet China did not let an unfettered flow of goods and services enter its market. Rather, it insists that anything that can be made within the boarders will be made at home. With great expectations and aspirations of penetrating a new market, American businessmen and investors plunged into the market. Most American businessmen did not view China as simply a new market to exploit, rather “in the softer vocabulary that the Chinese themselves offered, of friendship and assistance to the country’s modernization,” (Lubman, page 3). Americans were more lenient with deals and transaction terms because they hoped their consideration would yield enormous profits. Another reason special rules

applied in dealing with the Chinese was to make sure the relationship was not built with America’s competitors instead. They wanted to make sure that a relationship and loyalty was forged with them instead of their European or Japanese counterparts. Yet frustration surmounted in part because Americans were used to doing business based on legal agreements, signed contracts and careful attention to financial analysis. However, Chinese businessmen were less apt to sign documents or use lawyers. Another mistake on the American’s side was the lack of research or preparation on companies, culture and the country itself. They believed that the information they were collecting was unique and groundbreaking. Americans did not bother to look beyond what they were doing and learn from

others mistakes and research from the past. The fact was, since the 1970s information was available about how to train people, do marketing research and work out the kinks of doing business in China. The problem was no one knew about previous research or bothered to ask the proper questions about it. Such information could have been used to their advantage, but was overlooked or ignored as businesses virtually learned the hard way how Chinese negotiate and do business. The feeling in the late 1980s was that working with the Chinese was next to impossible. In light of the political turmoil in June 1989, many American investors gave up because they had “overestimated business and technology’s effect on China and underestimated difficulties working in the Communist system,”

(Lubman, page 4). With the Tiananmen Square incident, a “pall” was cast over foreign direct investment (FDI) even as China tried to bounce back and raise FDI. China did this with efforts directed towards promoting investment through policy pursuit, and developing legal institutions while the economy grew. Yet questions about the strength of central government have been raised as local departures from central policy increase. Since the opening policy began, investment has been regulated as laws have been made and then later changed. Inconsistencies between national and local legislation have also been found so much so that Beijing has had to forbid certain tax incentives. Because of the problems with FDI, the strength and role of the Chinese government and pending membership

into the WTO, there are many issues to be sorted out in the trade relationship between the US and China. In reference to the chart in attachment 1, since 1985 there has been an increasing deficit between the US and China. According to the information illustrated, the trade between the two countries declined substantially between 1975 and 1977 because of political unrest in China. This means that economies that are centrally planned, where foreign trade policies are controlled and directed by the central government, the national policies pursued by the country have a tremendous impact on the functioning and performance of foreign trade, (Tung, 3). Success story: E-S Pacific Corporation Not all business relations with China were unsuccessful. One example of a success story is the