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Technology Stocks : Loral Space & Communications -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Vayda who wrote (6117)	5/11/1999 3:04:00 PM
From: djane	Respond to of 10852

SJMercury. Bombing may harm trade ties between China, Silicon Valley [LOR reference] Published Tuesday, May 11, 1999, in the San Jose Mercury News BY MARK SCHWANHAUSSER AND MICHAEL DORGAN Mercury News Staff Writers NATO's bombing of China's embassy in Belgrade could have serious consequences for Silicon Valley's burgeoning business ties to China, as well as for U.S.-China negotiations on China's entry to the World Trade Organization -- unless the United States responds properly. ''The way to deal with this is to acknowledge the error, apologize and identify the responsible parties,'' said Lawrence Lau, director of the Stanford Institute for Economic Policy Research. ''It is basically a one-time thing. We don't have to let it get out of control.'' ''It's unacceptable for Sen. (John) McCain and others to simply say, 'We're sorry, tough luck, let's get on with it,' '' said George Koo, a trade consultant in Mountain View and former chairman of the Asian American Manufacturers Association. ''You have to allow the Chinese people to go through a period of mourning and reconciling on this. . . . I don't think smart bombs are a substitute for dumb diplomacy.'' Extensive trade ties Silicon Valley's business ties to China are extensive, though difficult to measure precisely. Virtually all major high-tech companies here have trade and investment links to China, as do an increasing number of small- and medium-sized companies. Over the past nine months alone, more than 10 official delegations from various provinces and municipalities from China have visited San Jose to seek out business ties, according to Joseph Hedges, head of international programs for the city government. If combined, China and Hong Kong would rank as California's fourth-biggest trading partner last year, with $6.1 billion in imports and exports. The state's trading volume with China grew 9.3 percent last year to almost $2.5 billion, while trade with Hong Kong, which now is a ''special administrative region'' of China, rang up more than $3.6 billion. However, China's attraction for Silicon Valley is not so much for the present as for the future. Already, China is the world's third-largest computer market, by some measures. By 2005 China is expected to have at least 250 million new middle-class consumers, a population whose size rivals that of the entire U.S. population. By then, China's market for personal computers is projected to double, and by 2010 it is expected to equal the size of the U.S. market. U.S. companies with operations in China include Silicon Valley heavyweights such as Hewlett-Packard, Intel, Sun Microsystems, Cisco Systems, National Semiconductor and Applied Materials, as well as high-tech giants elsewhere like Motorola. Telecommunications boom Silicon Valley also anchors the $23 billion U.S. commercial satellite industry, which hopes to profit by the rapid expansion of telecommunications in China. Two of the top three U.S. manufacturers of commercial satellites -- Lockheed Martin Missiles & Space, and Space Systems/Loral -- are based in Sunnyvale and Palo Alto, respectively. Michel Oksenberg, a China scholar at Stanford University currently in Shanghai for a conference, said in a telephone interview that one possible long-term consequence from the embassy bombing could be an a strengthening of the hand of conservatives and nationalists in China at the expense of reformers. ''This tragedy undercuts those in the councils of government who would seek to be conciliatory to the United States in a whole range of issues and gives the initiative to those who are suspicious of American intentions,'' he said. The bombing may have inflamed political relations so much that the U.S. and China will be unable to strike a WTO agreement. The bombing has clearly fueled the Chinese nationalist sentiments that were forcing Prime Minister Zhu Rongji, China's leading economic reformer, to pull back some of the concessions he offered President Clinton a month ago. That could create a backlash here. Members of Congress who were wavering about whether to support the deal Clinton nearly had in hand seem virtually certain to reject any accord with lesser concessions. He Weiwen, economic and commercial consul at China's consulate in San Francisco, said his government is eager to not let the incident disrupt trade relations, in which China enjoys a surplus expected to exceed $70 billion this year. ''We need each other,'' he said. ''Our economies complement each other.'' Mercury News wire services contributed to this report. ©1999 Mercury Center.