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Originally published Saturday, October 5, 2013 at 8:04 PM

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Gary Locke: China ‘hungry’ for U.S. products

Former Gov. Gary Locke, now the U.S. ambassador to China, says the People’s Republic presents many economic opportunities for American companies, ‘but be very careful.’

Special to The Seattle Times

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Gary Locke, the tenth U.S. ambassador to the People’s Republic of China, is arguably in the nation’s most important diplomatic position overseas. His job bridges the No. 1 and No. 2 economies on the planet, nations that are tightly connected by trade and debt, yet also have some potential geopolitical disputes.

The former Washington governor and President Obama’s former commerce secretary has been on the job in Beijing for two years. He was in Seattle last week to speak to the Washington State China Relations Council. China is Washington’s largest export customer.

Locke sat down with me before the speech.

Q: What is the most important thing that Americans need to know about China?

A: China is the world’s oldest civilization and yet in many ways it’s most modern. And it’s hungry for more modernization. What America produces is in high demand in this China — everything from medical devices and precision instruments to airplanes and environmental solutions. There are lots of opportunities.

Q:And yet China is blamed for the loss of millions of American jobs, especially in manufacturing.

A: Part of this is the nature of a changing global economy. Manufacturing processes leave for other countries. Some manufacturing is leaving China now. But there’s such high demand there. For example, China is our No. 1 agricultural-goods destination. About 700,000 U.S. jobs depend on selling goods and services to China. Now China is beginning to set up factories in the U.S., much like Germany has done with BMW and the Japanese automakers have done.

Q: What is President Xi (Jinping) like in person?

A: He’s very gregarious, very down to earth. He talks without notes. He spent time in Iowa when he was a young county official and visited again when he was about to become president. ... He was very engaging, asking the farmers how many employees they had, what daily rural life was like. He was amazed at what our farmers could produce with so few people.

Q: In the States, we read about China trying to reposition its economy from such heavy dependence on exports, and also about a slowdown. What’s the reality on the ground?

A: There is a slowdown. Some sectors are slowing but other parts are going like gangbusters. So they’re expecting growth of 7½ to 8 percent this year, and that’s not the double-digit growth they had seen, but it’s still amazing. They are trying to rebalance the economy from one that is driven by low-wage jobs and exports to more domestic consumption and better-paying jobs. That will take time.

The government has to focus on educational quality to make that happen. ... Our students are truly well-rounded, they are taught critical thinking, not just memorization, which is the case in China. That’s why (Chinese students) want to come here. Our system teaches young people how to solve problems that will crop up tomorrow rather than just knowing about the ones from yesterday.

Q: What is the most important thing U.S. businesses need to know about China?

A: The opportunity they have there for American products. Take financial services. If China is really going to rebalance, the average Chinese citizen needs more disposable income. Right now, they save like crazy for health care and retirement. If this can be solved, more products can be sold to the Chinese.

Q: As a former governor, what do you find Washington state’s reputation to be in China?

A: Washington has a very, very high reputation there. People are flying on Boeing airplanes. Starbucks is all over. Microsoft is the same. Washington cherries are flown directly to China. Boeing has a great future there. China is opening airports that are three and four times the size of Sea-Tac.

Q: What advice would you give American businesses that want to export to China?

A: There are great opportunities but be very careful. Study the market. Perform due diligence. Get outside advice from experts in the law and so forth. It’s tempting to enter into a two- or three-page contract with a Chinese partner. But that won’t be adequate to protect you from disputes or other hiccups that can happen.

Q: How is China reacting to President Obama’s “pivot to Asia”?

A: Most leaders understand it’s a rebalancing. As our operations wind down in the Middle East and Afghanistan, our presence in Asia becomes bigger. The Chinese believe we’re not a threat to them, but are a stabilizing influence. This is the message President Obama has conveyed. We have been a Pacific power for two centuries. Today, 60 percent of world GDP comes from the Asia-Pacific region. We will be even more engaged with China.

The United States welcomes the rise of China, but one that takes on greater responsibilities in world affairs. And that is happening. China has been a help with Syria. It has joined international efforts to combat piracy. We want a more prosperous China. For one thing, that means more appetite for goods and services made in the U.S.

Q: And yet, China plays by its own rules in trade, with stealth protectionism, currency manipulation, requiring American companies to locate operations there and share ownership with state-owned firms and shielding so-called strategic industries from competition.

A: The Obama administration has not been reluctant to file cases at the World Trade Organization and China has modified its behavior as a result. We are trying to impress upon them the need to provide a level playing field and allow foreign competition in ...

The U.S. has long been concerned about artificial appreciation of the Chinese currency and we’ve made those concerns known. To China’s credit, the currency has been appreciating some.

The biggest problem is the protection of state-owned industries and the exclusion of foreign companies. Even open sectors have subsidies, procurement treatment that favors state-owned companies. This isn’t good for China. The privately owned Chinese companies don’t like it, either.

You may reach Jon Talton at jtalton@seattletimes.com

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About Jon Talton

Jon Talton comments on economic trends and turning points, putting them into context with people, place and the environment in the Pacific Northwest
jtalton@seattletimes.com

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