Reflections: EXIM's 2016 Annual Conference
At this year’s Export-Import Bank of the United States annual conference, Richard McGregor, Public Policy Fellow at the Wilson Center, moderated a panel discussion on the changing dynamics in China and its impact on the global economy, including what this means for American businesses. The three speakers on the panel included Patrick Chovanec, Chief Strategist of Silvercrest Asset Management; Leland Miller, President of the China Beige Book; and Judy Zakreski, President and CEO of China Trade Strategies.
Tigers and Flies
During the panel, the three speakers discussed the political and economic effects of Chinese leader Xi Jinping’s anti-corruption campaign on the Chinese economy and its ripple effects on international businesses operating in China. Xi’s latest anti-corruption campaign, which vowed to take down “tigers and flies”, targets every level of the Communist party and government bureaucracy. The campaign is seen by many as too backward-looking and restrictive for government officials to travel to conferences, even conferences aimed to address the changes needed for institution building and structural reforms. The panelists felt that this had resulted in everyone looking over their shoulder, making it difficult to get things done in China such as obtaining permits, stalling the political reforms and hurting the growth of the economy.
Panelists also voiced the concern there was a lot of over-capacity in China, particularly in the petrochemical and steel industries. By many estimates, China has steel production built for the next 20 years; and the dumping of steel in foreign markets as a result of that buildup is only going to accelerate in 2016. This, in combination with lowering domestic demand, state and local government inaction, and a weakening credit market, could lead to a hard time ahead for the Chinese economy and foreign companies operating in China.
Export Opportunities: The Way Forward
During the Q&A session, a representative from an Ohio firetrucks manufacturer asked the panelists about what her company should do given their business is highly dependent on orders from Chinese municipalities, now the officials in charge are hesitant to engage in talks of procurement for fear of political backlash.
The panelists outlined three recommendations for companies in a similar situation:
- Continue to meet with the officials within the boundaries of the law
- Be patient and perseverance will be rewarded
- Run a consistent, clean business in China and be ready when the government officials are ready to engage again
Finally, while the panelists said that there is no silver bullet to this question, they suggested American businesses continue plugging away until the tide is turned and find ways to mitigate those risks while doing business in China.
Want to Learn How EXIM Can Help To Mitigate These Risks?
Find out more about how EXIM can unlock financing and assist your business in managing commercial and political risks associated with exporting. Download the guide, Export Credit Insurance.
