East Meets World

Scaling The Great Wall

Nearly one-fifth the world's population resides in China-yet small businesses have traditionally had trouble penetrating that market. But a new trade agreement between China and the United States could change that.

According to Nicholas Platt, president of the Asia Society, an international relations organization, the new agreement will offer benefits to small businesses, including:

Reduced tariffs. Industrial tariffs will drop from an average of 24.6 percent to9.4 percent by 2005, and to 7.1 percent on U.S. "priority" industrial products, such as wood, paper and medical equipment. Computer, semiconductor and Internet-related equipment tariffs will zero out by 2005.

Expanded opportunities for services. Entrepreneurs in telecommunications, insurance, banking, securities, audiovisual and professional services "will have expanded market access under the agreement," says Platt. Besides benefiting those trading directly, this also benefits subcontractors with bigger companies selling to China.

No middlemen. "For the first time, China will permit the import and export [of industrial goods] without a middleman," says Platt. This gives companies "trading rights," or the ability to market directly to retailers or end consumers. It also lets businesses set up distribution channels and transportation, and provide for the repair and maintenance of their own products. (Platt warns, however, "The Chinese distribution system is very complicated, so you do need partners.")

Predictability. "Once permanent, normal trade relations have been approved by Congress, you'll have a new level of predictability of trade," says Platt. He warns, however, that China may take several months to accede to the WTO. In addition, Platt points out, the debate in the United States on normalizing trade relations with China is far from over. "It may still be put off," he says.

In the meantime, U.S. entrepreneurs can take steps to improve current business with China. Charlotte Cheung of Chinadotcom, a provider of Internet solutions, says, "Chinese consumers are engaging in more online purchasing, particularly for clothes and manufactured goods." With the number of Chinese Internet users growing fast, Cheung recommends entrepreneurs "establish brand presence on the Internet now."

Despite advances in trade, working with China still has its challenges. Platt advises: "Don't think this is going to be a quick and easy process."

Moira Allen is a freelance writer in Mountain View, California, and editor of Global Writers' Ink, an electronic newsletter for international writers.

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This article was originally published in the April 2000 print edition of Entrepreneur with the headline: East Meets World.

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