Top Of The News China Is Buying
Dan Ackman, 11.13.03, 9:33 AM ET
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NEW YORK - When China joined the World Trade Organization at the end of 2001, the focus was on the force it would exert in world markets as a seller of steel, textiles and other manufactured products. But the world's most populous nation, while still sporting a large trade-account surplus, is emerging as a buyer, too.
Chinese airlines have signed up to buy up to $1.7 billion in planes and engines from Boeing (nyse: BA - news - people ) and the aircraft engine unit of General Electric (nyse: GE - news - people ) in 2005 and 2006, according to a Reuters and AP reports. Meanwhile, the Chinese government agreed to let Detroit automakers sell about 15,000 cars and trucks and more than $1 billion in General Motors (nyse: GM - news - people ) parts over the next two years.
Fifteen thousand cars may not be a lot for the U.S., which in recent years has seen its consumers buy more than 15 million cars a year (with its workers producing about half that number). But for China, whose consumers buy just 1 million cars a year, it's a larger number in context.
In a more structural reform, China also said that it would allow GM to sell cars there directly, without using a local partner. GM also said it was moving into the auto lending business in China.
In related news, soaring demand from China for U.S. crops is fueling a big price rally that is sending a jolt through the American farm economy, according to a report in The Wall Street Journal.
The deals with GM, Ford Motor (nyse: F - news - people ) and the U.S. unit of DaimlerChrysler (nyse: DCX - news - people ), as well as aircraft and wheat purchases, were part of a string of import allowances expected from China ahead of Prime Minister Wen Jiabao's visit to the United States, scheduled for early December. U.S. Commerce Secretary Don Evans presided over a ceremony in Washington, D.C. to mark Boeing's deal to sell 30 Boeing 737s, which officials note will help narrow the trade gap--perennially described as the "yawning" or "growing" trade gap--between the United States and China.
To be sure, the U.S. trade "deficit" with China is still large and is expected to reach $120 billion this year. A significant portion of that surplus is due to Chinese steel exports, which has led to U.S. protectionism and has prompted WTO sanctions in recent days.
It is one of the hoariest conventions of business journalism that the U.S. trade "gap" or "deficit" is reported as a bad thing. As China typically sports one of the largest trade surpluses with the U.S., it is perceived as a threat--even though its trade surplus with the U.S. means that the much poorer Chinese are producing more stuff for much richer Americans to eat, wear, use and enjoy. The relationship is often criticized as "lopsided," supposedly in a bad way.
Just today, the Commerce Department announced that the U.S. trade deficit widened to $41.3 billion in September--another record--with China having the largest surplus of any single nation at $12.7 billion.
The hope is that China will be more of a buyer, which is a policy goal as well as an inevitable growth of China becoming richer. In Beijing last month, Evans, the U.S. Commerce chief, said he received assurances from the Chinese government that it would try to narrow the surplus--and the deal with Boeing and GE is part of that effort.
"These multibillion-dollar contracts are a big victory for Boeing and GE," Evans said. They will generate corporate revenue. They will support high-tech manufacturers and generate thousands of jobs." These U.S. workers, of course, will be working for the Chinese.
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