President Xi Jinping of China visits the U.S. this week amid both economic and political turmoil. The answer to these challenges, from President Obama and other elected and business leaders, should be continued openness in China for both its markets and its people.
China has experienced a boom cycle for almost 30 years, and the country’s double-digit economic growth buoyed the global economy throughout the Great Recession. It is understandable then that a relative slowdown in the Chinese economy sent shockwaves through global markets as recently as last week. With a population of 1.3 billion and the world’s largest emerging market, what happens in China affects the global economy.
Utah’s own local economy is directly connected with China since Hong Kong is the state’s largest export destination and exports to mainland China represent almost a third of state exports. Because of these strong economic ties, a trade delegation from Utah had the opportunity last week to travel to Guangzhou in the Pearl River Delta and Hong Kong to learn about local economic issues firsthand.
Guangzhou has long been known as a manufacturing hub, but as manufacturing moves further inland, the region is establishing itself as a hot spot for innovation and technology. As a result, growth in the Pearl River Delta continues with vigor and the region is becoming an economic powerhouse, as evidenced by the fact that the region has only 1 percent of China's population yet 13 percent of its GDP.
The Utah delegation also visited Hong Kong, one of the world's financial centers. Hong Kong has benefited throughout its history from its natural deep-water harbor. It is also the beneficiary of a stable and predictable economic tradition left by the British. This global city serves as an example of the dynamism and stability that is a result of capitalism and rule of law.
Among the lessons learned by the Utah delegation, one that stands out is how China is transitioning from a stimulus economy to a consumer-based economy. Until recently, many companies around the world saw China as simply a location for low-cost manufacturing based on cheap labor. As wages in China increase, companies are faced with the need to refine their business models to reflect new costs of manufacturing and protecting intellectual property.
China’s transition to a consumer-based economy is good news for Utah in two ways. The first is exports. Trade mission participant PMI Foods is an excellent example of a Utah company taking advantage of the vast Chinese market by exporting high-protein foods to China. Additionally, the massive and growing ecommerce in China, valued at $500 billion, presents a great opportunity for Utah companies in both urban and rural areas.
Cicero Group, another trade mission participant, represents a Utah company exporting services to China. Cicero Group is a consulting company that helps businesses develop strategy-based big data analytics. Cicero Group recently opened an office in Beijing and has seen interest in its services increase dramatically following President Xi’s announcement that state-owned enterprises must undergo reforms based on data analytics.
The second opportunity for Utah comes from the significant increase in Chinese tourists. Tourism contributes more than $7.5 billion to Utah’s economy and continues to grow. This past year the number of people visiting Utah’s five national parks, seven national monuments, 43 state parks and five-star ski resorts was at a record high. Utah will continue to benefit from a growing Chinese middle class that is looking for places and experiences to spend some of its newfound wealth.
Utah has strong connections to China through business and cultural ties. Exports between Utah and China are growing, sister-city relationships are strong and Utah’s dual immersion language programs are flourishing. These ties will be on display next week as the state hosts the Chinese ambassador to the U.S., which will be yet another opportunity to enhance our mutually beneficial relationship.
Derek B. Miller is the president and CEO of the World Trade Center Utah. Previously he was chief of staff to Gov. Gary Herbert and managing director of the Governor’s Office of Economic Development.