Our second meeting today was with representatives of the American Chamber of Commerce in the Peoples Republic of China (AmCham-China). Representing AmCham-China (as members of the Chamber) were Tate Miller, Chief Representative, Beijing Office of the American Forest & Paper Association and Jeff Bi, General Manager of Shandong Tralin Packaging Co., Ltd Beijing.
Messrs. Miller and Bi did not have a formal presentation, but we had a wide ranging discussion over lunch that provided context for the things we have seen and learned in China, from the perspective of people trying to do business in China.
Takeaways:
1. There is great opportunity in China, but also great risk. The Danone-Bright Dairy breakup is but one of many failed joint ventures. Many foreign joint venture partners have simply walked away from their investment.
2. Deals are done business to business, but everything happens within the context of the government's central planning. If the central government makes something a priority, they have tremendous resources available. Policy can change overnight. Example: In coated paper, China went from nothing to the world leader in 8 years, because the central government made it a priority.
3. The overriding concern of the central government is social stability, especially among the lower classes.
4. Provincial and county governments are also important, and may be easier to work with.
5. The central government is providing huge amounts of cheap capital to various sectors of the economy that it wishes to promote. (For example, we were told earlier that the Liu family described in this post has benefited from such financing because the government is promoting the dairy industry.) Private investment companies from the West are also providing huge amounts of capital with lax oversight. No one wants to miss out on the boom. The result is reminiscent of the dot com boom in the U.S. As one small example, we were told of $60M of private venture capital being offered without so much as a business plan. (Another example--many of the buildings in my photos are empty.)
6. Chinese consumers are increasingly interested in high-end quality products, because their income is increasing. There are opportunities for niche or unique products. Maple syrup may be an example (it can't be made in China).
7. The wood products industry is one of the industries that China has made a priority. They already import almost no finished products, and may soon import few logs. China has planted more trees in the past 15 years than any other country in the world. Huge Russian forests are also available nearby. There may still be opportunities in hardwoods.
8. The Olympics will have a huge impact on China. In addition to the effects described in the previous post, all of the foreigners coming to China will leave behind bits of their culture after 2008.
Tate Miller described something affecting China's attitudes toward the timber industry that none of us in the delegation had ever heard of--the 1987 Black Dragon forest fire in Manchuria, perhaps the greatest fire in history. I find it amazing that this fire is so little known in the West. I cannot even find a mention of it on Wikipedia, but there was a book written about it. It is now out of print, but used copies are available on Amazon. There is so much to learn.
This was the last meeting of our trade mission. One more post about the place where we met with Messrs. Miller and Bi, and then time to be a tourist! Posting may be light.
