Within the last 20 years, China has grown more than any economy in the world. In the U.S. that growth meant the dismantling of many manufacturing jobs, and a higher trade deficit. That is changing. In the next 10 years, China will likely be buying more from the U.S. than Mexico, which is currently our No. 2 trading partner after Canada.
Chinese demand will help lower the trade deficit in the United States, though not erase it.
Chinese demand will create new jobs.
"There's a lot of demand coming from China and companies are looking east," says Wes Aubihl, assistant deputy chief of export assistance at the Ohio Development Services Agency in Columbus. "It doesn't matter if you're a big company or a small company. Ohio firms want to go after those 1.4 billion people."
And they are. Last year, Ohio exported a record breaking $3.6 billion in goods to China compared to $3.3 billion in 2011 and $3.01 billion in 2010. A decade ago, those numbers were $800 million.
"For every $180,000 in export sales, Ohio creates one new job," Aubihl told me.
New companies have sprouted up to serve China. Bomoda in New York is a website that caters to Chinese people looking for U.S. and European fashion trends. Christine Lu's Affinity China is only a few years old. China's new rich keep her running from Los Angeles to New York to Shanghai.
China's economy is around 32% consumer spending. It is more than half of the U.S. "If you could get them to spend more and save a little less, the U.S. would benefit," says Michael Silverstein, senior partner of
Between now and the next 10 years, the discretionary income of China's urban middle class will go from a combined $1.18 trillion to a whopping $3 trillion, according to a study released last week by the China-United States Exchange Foundation.
This rising consumer is going to lift many American boats, as Aubihl points out from Columbus. China's growth is no longer a problem for the U.S. It is an opportunity. In the case of smartphones for example, the penetration has soared from zero in 2007 to 50% in 2012. There is also continued opportunities in urban infrastructure. Only 50% of the population live in cities compared to 75% in Brazil, and an 83% urbanized population in the United States.
"We are still in the very early stages of this development," says Joohee An, a portfolio manager at Mirae Asset in Hong Kong. "We're not in the middle. We're definitely not near the end," she says.
China is the No. 1 investor in infrastructure. Companies that have the expertise in building subways, waste-water treatment systems and construction machinery have an opportunity to help China set the course for its next wave in urbanization.
China will strengthen the U.S. economy.
Assuming no change in tariff rules and no strengthening of the Chinese currency, the U.S.-China trade deficit will be around $686 billion even as U.S. exports in goods in services rise from $124 billion to $612 billion. But there is a more likely scenario. The renminbi is appreciating annually by around 3%. In that case, the deficit will be $455 billion. As manufacturing moves out of China, the U.S. trade deficit will improve by an estimated $232 billion, the China-United States Exchange Foundation says.
Of course, no relationship is perfect.
China intellectual property theft is estimated to be around $48 billion. The Foundation estimated that a million jobs would have been created if not for piracy and intellectual property infringement by the Chinese alone.
It's not a rose garden. But the Chinese middle class is growing. They want American brands. They like American companies. In many cases, in growing numbers around the country, companies are hiring because business is booming in China.
President Barack Obama will meet with China president Xi Jinping on June 7-8 in California to discuss bilateral trade. The economic relationship between these two countries will become more important not only for Washington, but increasingly to a developer in Silicon Valley, a soy farmer in Iowa, and an employee at a machine shop in Ohio.
See: Michael Spence, Tung Chee Hwa Disuss U.S.-China Relations with Charlie Rose
