The visit represents the first time the US and China will be meeting as the two largest economies in the world.
For the better part of three decades this honor was reserved for the US and Japan, but the first decade of this century has seen a new economic order develop and no two countries are more important to the growth of that economic order than the Eagle and the Dragon (apologies to India for the moment).

In order to get things off on the right foot we can only hope that the under-managed nature of Hu’s visit in 2006 to then President Bush (no State dinner, introduced as the “President of the Republic of China”, hecklers in the Rose Garden) and the opposite, over-managed, nature of Obama’s China trip in 2009 (a “town hall” meeting packed with Communist Youth League ringers, no straying from scripted events) are dispensed with and the business of the day is business.

There are dozens of important issues that the US and China must continue to address bilaterally, including foreign policy and defense, sovereignty (Taiwan, Xinjiang and Tibet) shipping lane security etc. Too many to cover here. From a business perspective here are four to keep an eye on:

• The revaluation of the RMB. It’s hard to talk US/China relations without the currency valuation issue taking front and center. As usual opinions on the relative merits and problems of a market valued RMB range from “Let it float” to “Keep it Low” and everything in between. Whatever your opinion there is no doubt that China is looking to rebalance its economy and the US wants better balance between the two economies. Continued progress on the RMB will serve both goals. We feel that the likely result of the summit will be an agreement to continue the slow appreciation but with an end point in sight. This will benefit the long-term prospects of US companies looking to sell their products in China and will help create the “consumer culture” that China seeks to sustain its growth.
• Energy. As I type this, the US and China are consuming 50% of the world’s daily oil output, right now, today. That is unsustainable. One country is seeking to regain its footing economically and the other is looking to keep up 10% annual growth. Any infringement on the use of fossil fuels is a roadblock for both, right? At the same time, if 1.3 billion Chinese consume energy the way 300 million Americans do that is unsustainable, right? But who are we to tell the Chinese they can’t develop the way we did (including messy energy and environmental issues) for China and the world, right? Hopefully the two leaders will look to get clean/green energy cooperation back on track after a lull this past year. This has big implications for American companies in the solar, wind, hydrogen, hydro and other alternative energy industries.
• Indigenous Innovation and Intellectual Property Rights – These two subjects are usually spoken of separately but they are interdependent. China wants domestic companies to have the best, first chance at developing key products, components and technologies (for both domestic use and for eventual sale in markets around the world) and, some say, is giving such companies preference over foreign companies with perhaps more advanced solutions. Also, Chinese companies are seeking the fastest path to indigenous innovation and still prefer the acquisition, legal or otherwise, of foreign IP as the best route. These tensions need to be further addressed as they will have a huge impact on how US and other foreign companies deal with their Chinese counterparts going forward. A move away from state selected products and companies and a move toward respect for IPR will move China closer to the culture of innovation it sees as its future.

US GDP still hovers around 13 trillion dollars and China’s is a third of that and growing. China is in the first month of implementing its twelfth Five Year Plan, a foundation for achieving its economic objectives. There is no escaping the fact that this is the most important bi-lateral economic relationship in the world today. Dialogue and understanding are the key to good politics…and business. With that in mind we wish you a productive few days Presidents Obama and Hu.

In our recent Podcast series, we have been talking with Bill Powell, senior writer for Time and Fortune magazines, based in Shanghai.  In the last Podcast, we got into, what I thought, was a VERY interesting discussion about the uniqueness of what is going on in China these days.  Literally, what we are seeing in China is unprecedented … never before has an economy (and a society) grown and changed so much in such a short period of time.  Understanding it, let alone predicting it, is very difficult and we are all, in a sense, working without a script.  We talked earlier about what the U.S. and other Western economies could learn from China … to wrap up our conversation, I started by asking Bill what he thought China could (and should) learn from the West …

We are in the middle of a discussion with Bill Powell, senior writer for Time and Fortune magazines.  In the first part, we talked about China and the rest of the world, how we try to make comparisons to what is happening in China with what we have seen in the past.  In this Podcast, I wanted to start off by getting Bill’s take on the challenges of covering China.  I prefaced my question by saying that, in our consulting practice at Technomic Asia, we are very careful not to talk about “THE” China market … there are, in fact, MANY China “markets” taking into account big cities, small cities, northern cultures, southern cultures, urban and rural, etc.  I asked him to talk about the practicalities over covering such a vast subject and the challenges he finds in trying to do so …

Over the past 4 years of the China Business Podcast we’ve done many interviews with business people in China, typically leaders of companies or operations.  We’ve talked about the intricacies of doing business here, the opportunities and challenges, and specific strategies and tactics that have worked for them.

Well, I would like to take a chance to back up a bit and view the China environment from a different perspective through an interview with someone who has been reporting on the action, not only in China but around the world.  Bill Powell is the senior writer for Time and Fortune magazines and is based in Shanghai.  We’ve known each other for a couple of years and he calls every now and then to bounce around some ideas and perspectives.  I have always appreciated his perspective and I thought he would make a great interview … and I was right.

Here is part one of that interview …

Last week I posted the first part of an interview with Sayed Jafry of ThermoFisher where we discussed their decision to located the global headquarters for their environmental division in China.  Even though China is not currently a big part of their business, ThermoFisher management thinks that this will change and Asia – particularly China – will figure heavily into their business.  In Part 2 of my interview, we talk about the challenges in making China a global headquarters and how that is signaling some important changes in this market.

Those of you who are long-time listeners to the China Business Podcast have heard us talk, endlessly, about ways that companies need to be looking at the potential opportunities in China, not just the actual ones … to look not only at the present, but the future of China.

I loved to play and watch hockey when I was a kid, and nothing was more thrilling than to see the great Wayne Gretzky play … it was magical, how he would always be in the right place at the right time.  Someone once asked him why he was such a good hockey player and he said, “because I skated to where the puck was going to be.”

And that’s the challenge, isn’t it … to start working in China today based on where it is going to be in the future.  In today’s Podcast, we have a very special treat … we are going to talk with someone who is actually putting this adage into practice.  Syed Jafry is the President of the Global Environmental Division for ThermoFisher Scientific, a very diverse, publicly traded company.  Syed and ThermoFisher are on, what I believe, is the cutting edge of global business and we sat and had a conversation in his Shanghai office on a rainy morning just before the National Day holiday.

The story can be summed up in Friedman’s first paragraph: “I believe future historians may well conclude that the most important thing to happen in the last 18 months was that Red China decided to become Green China.”  While the juxtaposed color metaphors are cool, I think he might be reading too many of the government’s brochures!

Yes, China is starting in invest massive amounts of money into exploring green-tech initiatives, much of it coming from their economic stimulus plan.  However, China will have two ends of the spectrum … one VERY high-tech and “green” development and the other VERY old-school with polluting factories that will continue to dump junk into the environment for many decades to come.  China still generates 70-some percent of their energy through burning coal … I heard a statistic (but cannot support it) that China  brings on one new “clean” power plant a month (water, wind, nuclear) and yet a new coal-burning power plant still opens here EVERY WEEK.  This is the irony of China … kind of like the brand new airport built so far out of town that it is only reachable by dirt roads.

The air and water quality in China’s cities are still some of the worst in the world.  I was out in a Western city a few months ago and refused to eat any of the local seafood … I had seen the state of the fish ponds sitting right next to the chemical factories!  And just yesterday, there was a yellow haze in Shanghai that reminded me of a scene from Blade Runner.  New, high tech, green initiatives will certainly help China going forward, but there is a TON of damage already done to the environment here that is going to be difficult to help with the new magic.

Hopefully, the aggressive, growing edge of China’s green-tech developments will spur the U.S. and other Western countries into truly innovating, as did Sputnik.  China might be able to grow their leading edge, but it is going to leave the trailing edge even farther behind.