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China's Win-Win Deals: Contracts With U.S. Firms Yield Cash, Political Allies

3 MINS READOct 24, 2002 | 01:44 GMT
Summary

Chinese and U.S. businesses signed $4.7 billion worth of deals in New York Oct. 21, less than a week before a summit between the two nations' presidents. While the timing of the deals is intended to play into the summit, it is not necessarily the "gift" to Washington that many media outlets are portraying it to be. Rather, Beijing has more subtle purposes in announcing the deals now: to accentuate the depth of U.S. business involvement in China and to enlist a highly influential lobbying group inside the United States.

Analysis

At a ceremony in New York Oct. 21, Chinese and U.S. businesses signed a raft of business deals valued at $4.7 billion. The deals cover energy and petrochemicals, telecommunications, alcohol and manufacturing, and they include U.S. companies Exxon-Mobil, Motorola, Lucent Technologies, Anheuser-Busch, Axens North America and Moltech. Government and business representatives from both the United States and China attended the signing ceremony.

The deals are being hailed as a "gift" from China to the United States prior to Chinese President Jiang Zemin's Oct. 25 meeting with U.S. President George W. Bush. But while the timing of the deals does play into the summit, it is less an attempt to butter up the U.S. president and more a way to ensure continued business pressure on Washington to maintain close ties with Beijing.

China continues to struggle with its rapid economic growth, and it needs to receive a steady stream of foreign investments in order to maintain internal cohesion and social stability. Getting U.S. businesses on board both addresses the need for cash and technology and enlists a highly influential lobbying group inside the United States.

U.S. businesses have played a strong role in guiding U.S.-Chinese policies. Following China's entry into the World Trade Organization in 2001, the U.S. business community rallied to support Washington granting Permanent Normal Trade Relations (PNTR, formerly known as Most Favored Nation) status to China. For U.S. firms, China is one of the bright spots in a dismal global investment environment, and keeping an advantage over international competitors is vital to ensuring a good position in China's opening economic sectors.

While manufacturing, energy, telecommunications, aerospace and electronics industries have been at the forefront of Chinese investments, Beijing's WTO entry is opening the door to banking, insurance and even agricultural investments. China's own priorities are to deepen foreign involvement in infrastructure and energy development, high-tech industries and biotechnology.

For both China and U.S. businesses, closer relations between Beijing and Washington could have a tremendous impact on economic viability. Despite the perception in both China and the United States that the two nations are now or soon will be strategic competitors, Beijing continues to open its industries to U.S. businesses, hoping that the infusion of money, the new technologies and the U.S. firms' desire to further expand in China will bring more help than harm to China.

The current alliance remains at risk from competing political and strategic viewpoints in both nations' capitals, but as long as U.S. businesses and investments are vital for the maintenance of Chinese growth — which itself is vital for ensuring social stability — Beijing will continue to broker deals with U.S. companies. And this, in turn, will keep U.S. firms actively involved in trying to maintain the smoothest of U.S.-Chinese relations.

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