A major cash spigot is about to be opened in China in the form of massive government spending. Last November, the Chinese government announced a $586 billion stimulus plan.

Much of the spending will go into projects that will require participation from non-Chinese producers. Bill Brekke, the U.S. Commercial Service’s top representative in China, said that in addition to more of everything, China will spend big on going green.

“Since March 2007, it’s been the official policy of Hu Jintao and Wen Jiabao that China will move to a circular economy,” he said, referring to China’s president and premier. The Chinese use the term “circular economy” as one which balances economic development with environmental and resources protection.

 “Every official in the country is being judged on their ability — on their green work. So it isn’t ‘build the power plant anymore; it’s build an energy-efficient power plant, it’s build a clean power plant.’ So U.S. sales in the environmental area and the remediation areas and energy efficiency areas are way up,” Brekke said.

The U.S. does well in airplane sales and green technology to China, but what about other products where European and even other Asian competitors will want to fight the U.S. tooth and claw? According to Brekke, U.S. companies will do fine.

“Our work with China in the technology sector will hopefully become a model for other sectors and will give us a leg up on the competition. In late 2008, the U.S. and China signed a 10-year framework in energy and the environment. The idea is to cooperate at the highest levels between U.S. government agencies and Chinese agencies to identify pilot projects and areas where we can cooperate. And together we can put together a process for bringing this technology to the China market.”

Brekke said U.S. suppliers have recently sold four nuclear power plants to China with the prospect of four more in the near future. He said the Chinese are prepared to buy American green buildings, wastewater management, integrated gas, combined cycle, healthcare and other expertise. “The U.S. government is working with the Chinese to create a system for proper tendering and proper construction of schools and medical facilities and so forth. So wherever you look, there are opportunities and nuances in airports, hospitals, devices and what not. And that’s where we’re working with the Chinese.”

But with China ready to spend huge chunks of its accumulated treasure on boosting consumption, improving efficiency and repairing massive damage from the 2008 earthquake, getting a piece of the business will not come without effort.

You gotta have guanxi

 “Are the Chinese tough negotiators?” Brekke asked. “Right. Is it a country where logistics distribution and other issues still have to be worked out? It is. Is there one China market? No, there’s at least seven. Is there one set of cities you can target? No. You have the major cities, the secon

d-tier cities where half the wealth is, the third tier, the fourth-tier cities.”
With all the tiers, markets, rules and customs, American businesspeople are advised to find good local partners or others with an informed lay of the land. In addition, there are traders in Hong Kong who have a long history in China and who are eager to help Americans enter the mainland market. While the distribution system leaves much to be desired, it is substantially better than it was even a few years ago thanks in part to U.S. logistics giants UPS and FedEx. Both of them have hubs in China and can be good sources of contacts and guanxi or “connections.”

Also, with five of its own offices in China and coverage in more than a dozen other China markets through partnerships with the Chinese government, the U.S. Commercial Service can supply information on projects coming down the pike, introduce Americans to procurement officials, conduct product evaluation, help register intellectual property and provide myriad advice on conducting business in China.

Some people might question the Chinese government’s ability to shovel $1 trillion out the door, but Brekke insists it won’t take long and that U.S. companies need to act quickly to get a foot in that door. “China’s lag time will be less simply because they have national plans in place,” he said. “China has a five-year plan, which will be wrapped up in 2010, and they’ll start moving on to the next one. So if you had to come up with a corporate plan for yourself, you should be thinking, ‘Where will I be at the end of 2010, at the end of the 11th five-year plan, before jumping into the next one?”

He added, “Those are the timeframes I’d work on. Move quickly: short and medium term. We’ll work with you.”

More information about opportunities and challenges in the Chinese market is available through the U.S. Commercial Service’s China Business Information Center. Its Web site is export.gov/china. 

Doug Barry is a senior trade specialist with the U.S. Commercial Service. He can be reached at 202-482-4422 or doug.barry@mail.doc.gov.