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April 13th, 2010
10:00 AM ET

China Rising: Is China changing U.S. business?

Editor's Note: A shift is underway in how U.S. companies do business. From dinner staples like seafood, to clothes and technology, more companies are opting for the "Made in China" label, and that's making life here less expensive. Today in our original series, "China Rising,” Christine Romans examines how China's powerful economy affects you in just about every way. Tomorrow on American Morning, a colossal middle class is emerging from Shanghai to Beijing, but is the sky the limit for China or is their growth a bubble about to burst?

By Christine Romans, CNN

(CNN) – To see how China's powerful economy affects you in just about every way, look no further than your dinner plate.

Alaskan Sole caught and frozen in the Bering Sea is unloaded in Alaska's Dutch Harbor and from there most of the fish goes to… China.

Bill Orr, president of Signature Seafood, says his catch is cleaned and filleted cheaper and quicker in Chinese workshops than in the United States.

“We sell it to companies around the world, but most of them have the fish sent to China and have it further processed into fillets or portions, have sauces added or breaded, packaged and sent back to Europe, the United States or South America,” he explains.

That's right. Chances are the fish you order at restaurants traveled some 14,000 miles. How can that be possible? Because China's economic miracle of cheap labor and a government-subsidized industrial base has changed everything, even the economics of your dinner plate.

U.S. seafood exports to China were just $82 million in 1996. Today, they’re $597 million. How much of that comes back to the United States is impossible to know in this new globalized world.

From fish, to textiles, to steel, to technology, China's rise is testing American business models. Just ask Google. It searched for a new market in China in 2006, but decided China's way of doing business wasn't for them.

“It hoped for a more open China, it didn't happen. Censorship got worse during this period, the Chinese government's hacking program got worse, and so Google said, no more,” says Gordon Chang, author of "The Coming Collapse of China."

Just last month, Google moved its Chinese search engine to Hong Kong.

“I think that Google's case, in most cases, is somewhat of a special case. Most companies in China, auto companies, grain companies, law firms, manufacturers of electronics and so forth, do not face the dilemmas that Google in particular faced,” says Robert Kapp, a China trade and business consultant.

Could the allure of China's potential market and its cheap manufacturing base be fading? Tough new rules are starting to restrict foreign companies of all kinds, which worries some China watchers.

“The situation is changing dramatically and China is switching over from a free market economy to a totally government-controlled economy,” says Dan Slane of the U.S.-China Economic and Security Review Commission.

That has Congress howling for tariffs on goods imported from China to help correct what it sees as its unfair advantage.

“We are going to give tough medicine. We are going to say, 'We’re going to impose the same penalty on you that will equal the advantage you gain from manipulating the currency,if you don't change,'” says Sen. Charles Schumer (D) New York.

“If we went out and slapped a 30% tariff on Chinese goods because we were gonna punish the Chinese and … if it were actually passed through in full to the person on $28,000 a year trying to put T-shirts on his kids, it would cause a lot of damage,” says Kapp.

Would Americans be willing to pay more for goods made in China if it means more jobs would stay in America? That, in a nut shell is the debate.

For now, Bill Orr says unless the economics change, he'll keep sending his work to China to keep things competitive.

“It just doesn't seem practical on the face of it to be able to send your product to China to be processed and then back to the United States … if we needed to do this ashore we think that cost is probably about 20 to 25 percent higher.

For years, while jobs were growing, consumers enjoyed those cheaper import prices, without much thought to how they were possible.

With nearly 10 percent unemployment, the Obama administration is pushing back against China's currency and industrial policies that, critics say, favor Chinese exports at the expense of American jobs. Chinese President Hu Jintao says they wouldn't yield to external pressure.


Filed under: Business • China Rising
soundoff (6 Responses)
  1. Bill

    Ok, China is responsible for inexpensive goods and has probably controlled inflation thus far. BUT, the decimation of our manufacturing base and chronic unemployment are the result.

    Really, we send them high technology goods and they send us for lack of a better word, crap that sells in Wal-Mart. Our tshirts may cost 25% more? Well, maybe we're buying too much of this useless stuff and should consider bringing more jobs back to our shores. This is no easy task as corporations must temper their greed and unions must temper their "less for more" mentality.

    Our so called relationship with China would be considered spousal abuse if this were a marriage.

    April 16, 2010 at 11:52 am |
  2. jeff

    the US is learning how to play 2nd fiddle in the world...

    and "lassie faire' capitalisum" is NOT the 'be all and end all', perfect economy of the world...

    April 16, 2010 at 9:08 am |
  3. Scott

    Look, the soloution is easy. Companies like Wal-Mart "Encourage" their manufactureers to go overseas so they can produce goods more cheaply. Well then an easy reponse from the U.S. govt. is not to tarriff goods, but to give incentives to companies to hire or sell goods produced by American Workers. Like this, Company A. 75% of your workforce is here in America and your goods are 80% manufactored over here, well then you get a break on taxes. Company B, 10% of your workforce is in the U.S. and your products are 95% manufactured in another country? No tax break for you.
    The same can be done for Wal-Mart
    Ok Wal-Mart, 90% of the products you sell are not manufactured by U.S. employees, or by companies labeled good U.S. employers?, no tax break
    Target, 50% of the goods you sell are manufactured by U.S. employees or Companies labeled "Good U.D. Employers?" Tax Credit

    April 14, 2010 at 9:32 am |
  4. Charles

    I am sorry but when i read about China and Our American Company Traitors that have turned thier back on the American people, just for the sake of cheaper labor. Then i hear about Earthquakes in China and lives lost. All i can think is wow! Maybe some Americans will get their jobs back and that hopefully some of these Corporate American Traitors will have been victims of the Earthquake. That is what they deserve for turning thier back on thier country. The Corporate Traitors are not Americans, and do not deserve any American (real American) to mourn for thier loss. Not necessarily the people of China, i am talking about The Non American So Called Americans. That are the reason for the destruction of our Country.

    April 14, 2010 at 6:21 am |
  5. Howard

    We have to get back to what we do best and that's invent. The top invention companies are located here. We need to invent a green economy and create the job future. China is flooding the world with cheap goods and wiping out indigenous economies in Africa and the Mid east, but this is a short term gain. American companies like Walmart have done more to create the Chinese economy than china by forcing American companies to compete for price with them, which we can't. In the long run we are China's biggest customer but they need to realize that if they put everyone out of work here that our market will dry up for their goods, and American companies have to start supporting American business if we want to rebound.

    April 13, 2010 at 12:32 pm |
  6. Elscotto

    Part of the reason production in China is cheaper is that manufacturers there have little or no responsibility to adhere to labor and environmental standards. Also I heard on a news report (I don't remember which one) that Buick had to set up production in China because of China's 27% import tax on cars. How is it we're not responding to that?

    April 13, 2010 at 11:35 am |