Page 38 - 2018 White Paper on the Business Environment in China
P. 38
8 White Paper on the Business Environment in China
For all U.S. Foreign Affiliates (USFAs) in China, we translated into Chinese by officials from CAITEC who
estimate that the economic impact, including the have helped disseminate the results in China.
operations of the USFAs, their supply chains, distribution
channels, and relevant employee spending, in 2014 Further Impacts of U.S. and other FIEs/FAs
was US$437 billion on China’s GDP and 23 million in on China2
employment (see Figures 3 and 4). These represented
4.2% of China’s GDP and 3.0% of its employment in that While the impacts reported above are impressive,
year. The leading sectors in terms of their impacts were particularly when compared to the FDI flow data usually
chemicals (including pharmaceuticals), computers and reported, they still substantially understate the impact
electronic equipment, transportation equipment, and of U.S. and other foreign companies on China’s economy.
other manufacturing (Figures 5 and 6). The reason is that there are many impacts that are not
captured by estimates based on the investments and
The numbers also tell us interesting facts about the productive and sales of U.S. and other FIEs / FAs on
presence of U.S. and other FIEs / FAs in China. . According China. These include the benefits to consumers and
to the BEA Survey, in recent years, China has represented customers, from sourcing in China, as well as from a wide
12% to 13% of the foreign employment, 5% to 6% of range of business, technological, and other spillovers
foreign sales, but only 2% of the foreign net income of that have come from the foreign company presence
U.S. companies. This means on a return on sales or “ROS” in China. These may be as important or even more
basis, USFAs in China are less than half as profitable as important than the impacts quantified above.
USFAs in other countries (see Figure 7). Instead of U.S.
companies profiting disproportionately in China, as the Consumer Impacts: Among the main beneficiaries
popular press in China sometime claims, U.S. Affiliates in of the presence of USFAs and other FIEs/FAs in China
China are not nearly as profitable as their counterparts in are Chinese consumers and business customers of the
other countries. USFAs. The value that Chinese consumers and business
customers place on the presence of USFAs can be seen in
The economic impact analysis shows the estimated the sales volumes of MOUSFAs and USFAs, which reached
GDP impact of U.S. Affiliates in China was 185 times the US$341 billion and US$470 billion respectively in 2014.
NBS reported U.S. inward FDI figure in 2014 (see Figure 8). For Chinese consumers, USFAs and other FIEs/FAs have
Thus the most widely quoted numbers when it comes to introduced new products, provided greater variety,
foreign companies in China, the FDI numbers, are almost and introduced entire new product categories. They
completely irrelevant to the actual impact that foreign have also pioneered new retail formats and distribution
companies have on China’s economy. In addition, the channels that have benefited Chinese consumers.
GDP impact of USFAs on China’s economy in recent years As China moves to a more consumption-oriented
has been more than 13 times their net income. In other economy, the benefits that the FIEs/FAs bring to Chinese
words, for every US$1 a U.S. company earns in China, it consumers should increase substantially. FIEs/FAs have
has a positive US$13 impact on China’s GDP. also brought large benefits to Chinese businesses.
FIEs/FAs have provided engineering and architectural
These results are new to U.S. and other foreign support, access to international capital markets, advice
companies, governments, and business groups. They are and contacts to internationalizing Chinese companies,
also new to the Chinese. We have presented the results world-class airframes and avionics to expanding Chinese
with quite a favorable hearing to MOFCOM, CAITEC (the airlines, and equipment and inputs that have advanced
Chinese Academy of International Trade and Economic China’s agricultural, manufacturing, and service sectors.
Cooperation, a research institute under MOFCOM), and
DRC (the Development Research Council, a research Sourcing: China has become the country of choice for
institute under State Council), as well as officials from sourcing manufactured goods. In 2015, China accounted
State Council, the Ministry of Finance, the National for around 25% of global manufacturing output and
Development and Reform Commission, numerous other value added (Magnier; Levinson). It also accounted for
agencies, U.S. and other foreign government officials, 14.2% of global merchandise exports (WTO). China is the
and chambers of commerce, including at the 2017 largest source of U.S. imports, accounting for US$462,813
APCAC meeting hosted by the American Chamber of
Commerce in South China. Our book on the subject was 2 Again, this draws from a similar section in Enright (Developing China 31-
88), though this section focuses just on the impact of U.S. companies.
38
For all U.S. Foreign Affiliates (USFAs) in China, we translated into Chinese by officials from CAITEC who
estimate that the economic impact, including the have helped disseminate the results in China.
operations of the USFAs, their supply chains, distribution
channels, and relevant employee spending, in 2014 Further Impacts of U.S. and other FIEs/FAs
was US$437 billion on China’s GDP and 23 million in on China2
employment (see Figures 3 and 4). These represented
4.2% of China’s GDP and 3.0% of its employment in that While the impacts reported above are impressive,
year. The leading sectors in terms of their impacts were particularly when compared to the FDI flow data usually
chemicals (including pharmaceuticals), computers and reported, they still substantially understate the impact
electronic equipment, transportation equipment, and of U.S. and other foreign companies on China’s economy.
other manufacturing (Figures 5 and 6). The reason is that there are many impacts that are not
captured by estimates based on the investments and
The numbers also tell us interesting facts about the productive and sales of U.S. and other FIEs / FAs on
presence of U.S. and other FIEs / FAs in China. . According China. These include the benefits to consumers and
to the BEA Survey, in recent years, China has represented customers, from sourcing in China, as well as from a wide
12% to 13% of the foreign employment, 5% to 6% of range of business, technological, and other spillovers
foreign sales, but only 2% of the foreign net income of that have come from the foreign company presence
U.S. companies. This means on a return on sales or “ROS” in China. These may be as important or even more
basis, USFAs in China are less than half as profitable as important than the impacts quantified above.
USFAs in other countries (see Figure 7). Instead of U.S.
companies profiting disproportionately in China, as the Consumer Impacts: Among the main beneficiaries
popular press in China sometime claims, U.S. Affiliates in of the presence of USFAs and other FIEs/FAs in China
China are not nearly as profitable as their counterparts in are Chinese consumers and business customers of the
other countries. USFAs. The value that Chinese consumers and business
customers place on the presence of USFAs can be seen in
The economic impact analysis shows the estimated the sales volumes of MOUSFAs and USFAs, which reached
GDP impact of U.S. Affiliates in China was 185 times the US$341 billion and US$470 billion respectively in 2014.
NBS reported U.S. inward FDI figure in 2014 (see Figure 8). For Chinese consumers, USFAs and other FIEs/FAs have
Thus the most widely quoted numbers when it comes to introduced new products, provided greater variety,
foreign companies in China, the FDI numbers, are almost and introduced entire new product categories. They
completely irrelevant to the actual impact that foreign have also pioneered new retail formats and distribution
companies have on China’s economy. In addition, the channels that have benefited Chinese consumers.
GDP impact of USFAs on China’s economy in recent years As China moves to a more consumption-oriented
has been more than 13 times their net income. In other economy, the benefits that the FIEs/FAs bring to Chinese
words, for every US$1 a U.S. company earns in China, it consumers should increase substantially. FIEs/FAs have
has a positive US$13 impact on China’s GDP. also brought large benefits to Chinese businesses.
FIEs/FAs have provided engineering and architectural
These results are new to U.S. and other foreign support, access to international capital markets, advice
companies, governments, and business groups. They are and contacts to internationalizing Chinese companies,
also new to the Chinese. We have presented the results world-class airframes and avionics to expanding Chinese
with quite a favorable hearing to MOFCOM, CAITEC (the airlines, and equipment and inputs that have advanced
Chinese Academy of International Trade and Economic China’s agricultural, manufacturing, and service sectors.
Cooperation, a research institute under MOFCOM), and
DRC (the Development Research Council, a research Sourcing: China has become the country of choice for
institute under State Council), as well as officials from sourcing manufactured goods. In 2015, China accounted
State Council, the Ministry of Finance, the National for around 25% of global manufacturing output and
Development and Reform Commission, numerous other value added (Magnier; Levinson). It also accounted for
agencies, U.S. and other foreign government officials, 14.2% of global merchandise exports (WTO). China is the
and chambers of commerce, including at the 2017 largest source of U.S. imports, accounting for US$462,813
APCAC meeting hosted by the American Chamber of
Commerce in South China. Our book on the subject was 2 Again, this draws from a similar section in Enright (Developing China 31-
88), though this section focuses just on the impact of U.S. companies.
38
