China Business Blog and Podcast

Kent Kedl spoke to Marketplace’s Scott Tong about efforts underway in China to beef up the country’s rail system. Listen to the story or read the transcript here to hear how Kent compares China and its economy are like a skilled but clumsy 7-foot-2, basketball-playing teenager.

Steve Ganster is featured in a Journal of Commerce article discussing the recent WTO ruling against China. A World Trade Organization panel ruled that by raising its tariffs on imported vehicle components, China violated its obligations to the WTO. From the JoC article:

The Chinese market for imported vehicles and components is booming, and the WTO ruling will have little or no economic impact on that growth, Ganster said. “The impact will be mostly psychological,” he said. In little more than a decade, China has become one of the world’s largest auto markets, and it is a profitable “magnet” of U.S. producers of autos, original equipment and after-market parts. Restrictions on foreign ownership have been relaxed, and many parts suppliers are wholly owned by non-Chinese investors.

You can read the full article on the JoC’s Web site (subscription required).

In its first official condemnation of Chinese commercial practices, the World Trade Organization sided with the United States, Canada and the European Union in ruling that China has been unfairly taxing imported car parts at the same rate at which it taxes whole automobiles.

The basis of the compliant is that China’s higher taxes on imported car parts give its domestic auto makers incentive to use domestic-made parts, which in turn motivates foreign parts manufacturers to establish operations in China. The United States, Canada and the EU claim these incentives cause lost jobs in their respective countries and say that China promised not to tax car parts as is does whole cars when it joined the WTO in 2001.

Steven Ganster, managing director of Technomic Asia, a consulting firm that helps Western companies develop China business strategies, agrees that China should come into line with its WTO commitments but said cost concerns are not the only reason companies look to China for business opportunities.

“Lower costs are perhaps the first thing many people think of when they think about setting up shop in China,” said Ganster, who leads Technomic Asia’s U.S. office in Chicago. “Depending on the business, motivations include gaining direct access to local markets, better control of the supply chain and more effective distribution.”

Technomic Asia’s clients include many Fortune 500 companies and dozens of small and midsize businesses, including many automotive manufacturers and parts suppliers. Ganster and his colleague Kent Kedl, who runs Technomic Asia’s Shanghai headquarters, are the co-authors of “The China Ready Company,” a book that guides executives through the considerations to be made in developing a strategy for doing business in or with China.

“The WTO and foreign governments need to continue to pressure China to uphold the agreements it made when it joined the organization, but foreign manufacturers shouldn’t sit and wait for WTO sanctions to force China to change its tariffs or other practices,” Kedl said. “No one knows how long that could take, but it won’t be quick. Rather than wait, foreign companies should become more active in China to assess their opportunities and to build an effective supply chain in-country.”

(Original news release here)