Technology News
Tue, 19 Sep 2000, 11:19pm EDT
Companies See Boost for Business as China Bill Passes (Update1)
By William Roberts
Washington, Sept. 19 (Bloomberg) -- U.S. companies are ready to take advantage of new opportunities for sales and growth in Asia, following today's 83-15 Senate vote to give China permanent access to U.S. markets. The action moves China a step closer to joining the World Trade Organization.
Companies such as Intel Corp., Boeing Co., Caterpillar Inc., Qualcomm Inc., Microsoft Corp. and Symantec Corp. have begun to gear up operations aimed at the world's most populous market.
``It means sustained and continuing growth of our markets in Asia,'' said Doug Coomer, director of legal affairs for Intel.
Intel, the world's largest maker of computer chips, announced a five-year expansion of its Shanghai chip-assembly plant after China agreed to phase out tariffs -- now 8 percent or higher -- on semi-conductors. ``For us that's a major impetus,'' Coomer said.
China's entry to the WTO could allow Boeing to sell 40 to 60 planes, mostly smaller 737s to China, as Asian air travel rebounds following the region's economic recovery.
``I see Boeing as a primary beneficiary of China's entry to the WTO,'' said Heidi Wood, an analyst at Morgan Stanley Dean Witter & Co. in New York.
The Senate action gives President Bill Clinton his biggest trade victory since the North American Free Trade Agreement in 1993. Signing it will meet a goal of his last year in office.
``When we open markets abroad to U.S. goods, we open opportunities at home,'' Clinton said. ``We will be far more able to sell goods in China without moving our factories there.''
Technology, Financial Companies
Technology shares gained on the news. Qualcomm shares were up 7.69 to 77.50 on trading of 41.9 million shares on the New York Stock Exchange. Adobe Systems closed at 152.88, up 10.88, Motorola was higher at 35.25, up 2.38, and IBM traded at 125.13, up 1.88.
Financial service firms are also poised to gain. Merrill Lynch & Co., Salomon Smith Barney Inc., Deutsch Bank AG, Credit Suisse First Boston Inc., and UBS Warburg LLC are among firms bidding, for example, to handle a $2.5 billion stock sale by China National Offshore Oil Corp.
Chubb Corp., one of the top 10 U.S. insurers, has announced plans to open an office in Shanghai next month. More than 100 insurers have opened about 200 representative offices in China since early 1990s.
Caterpillar Dealers
Manufacturing companies will win distribution rights as well as cuts in tariffs. Peoria, Ill.-based Caterpillar says China's membership in WTO will allow the company to compete on an equal footing with European and Japanese counterparts.
``The biggest benefit is that we are going to be able to operate our dealerships,'' said Bill Lane, director of Caterpillar's Washington office. ``We are clearly a big winner.''
Caterpillar is the largest U.S. maker of construction and earth-moving equipment. Last week it announced an agreement to sell China's national coal company 18 off-highway trucks for use in Shanxi coal fields.
China must finish negotiations with the WTO over issues of intellectual property and compliance, and reach pacts with Mexico and Switzerland, before it can join the organization. Zhang Yuanyuan, spokesman for the Chinese Embassy in Washington, said his nation hopes to finish the process this year, although formal approval might slip into next year.
Companies best positioned to benefit from the future changes are those that already have a presence in China, executives and analysts said. Many companies have been rolling out expansion plans similar to Intel's on expectations of the legislation's passage and continuing growth in China.
U.S. electronic exports to China amounted to $3.3 billion in 1999 and are expected to continue growing more than 15 percent annually, according to the Electronics Industries Alliance.
Motorola, Qualcomm
Motorola Inc., the world's No. 2 cellular-telephone maker, won contracts from China in August to build $283 million in new networks. It also received approval to invest $1.9 billion in a factory in Tianjin, China to make chips for phones and pagers.
Qualcomm Inc.'s CDMA mobile phone technology has been selected by China as one of several providers for China's cell phone market.
After it joins WTO, China will be held to a higher standard of intellectual property rights, which U.S. software companies say will help them combat the problem of piracy in China where an estimated 90 percent of business applications are stolen or forged.
Microsoft Corp. has been promoting use of its operating system and Chinese-language office packages. Symantec Corp. is developing anti-virus products for the Chinese market. Adobe Systems Inc. is tailoring its graphics packages for China.
``By the end of next year, China will probably rank as the third-largest market in the world for PCs, and Internet connectivity is expected to double to more than 20 million,'' said Michael Rawding, Microsoft's director for China.
``These companies are really devoting a lot more resources to selling products, to localizing products for the Chinese market,'' said Robert Holleyman, president of the Business Software Alliance, a lobbying group.
``They have known for a decade that there was potential in China,'' he said.
Surge in Investment
Multinational corporations, attracted by China's low labor costs and proximity to Asian markets, will soon be able to take advantage of China's agreement to allow 50 percent foreign ownership of companies and direct competition in its markets.
``It means, probably, a leap of direct foreign investment in China,'' said Lyuba Zarsky, co-founder of the Nautilus Institute for Security and Sustainable Development in Berkley, Calif.
``As long as China keeps pace with its commitments, the impacts will be large and sustained,'' she said, citing a study by Goldman Sachs that projects foreign direct investment in China will rise to $100 billion a year in 2005 from $45 billion in 1998.
Economic benefits from China's entry to the WTO could boost its annual gross domestic product by one percent a year, Zarsky said.
Reactions
Roger Chastain, president of the American Textile Manufacturers Institute, one of the fiercest opponents of the China bill, called the Senate action ``a vote against the values of the United States, the U.S. textile industry and its 550,000 employees.''
Chastain complained that the U.S. agreed to phase out its quotas for Chinese textiles over a four-year period, while other WTO members had gotten a 10-year period.
North Dakota's Republican Governor, Edward Schafer, set off for Beijing today with a 15-person trade delegation to try to sell wheat to China.
``There's much more at stake here than our economic self- interest,'' Clinton said. ``It's about building a world in which more human beings have more freedom, more control over their lives, more contact with others than ever before; a world in which countries are tied more closely together, and the prospects for peace are strengthened.'' |
