December 3, 2012

China overtaking US as global trader

Joe McDonald and Youkyung Lee / The Associated Press

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Stacey Rassas, right, a quality control manager at a Suntech Power Holdings Co., a Chinese-owned solar panel manufacturer, examines a solar panel with her co-worker Frank Garcia at a company facility in Goodyear, Ariz., recently. The factory makes solar panels for one of the world's biggest solar manufacturers.

AP

Rising incomes have driven demand for wine and other luxury goods, making China a lifeline for European and American vineyards when the global crisis battered traditional markets.

The Chinese have "helped Bordeaux a lot these past three years," said Florence Cathiard, owner of Chateau Smith Haut Lafitte in the Pessac-Leognan area of France's southwest, home of high-end Bordeaux wine.

France's wine exports to China first surged in 2009, and by last year, China had surpassed the U.S. as a customer by volume. Americans still spend more, because they buy more expensive wines. But China is developing a taste for grand cru wine, the "great growths" that are considered exceptional and command higher prices.

Cathiard acknowledged that she was initially wary of China as a reliable market for her high-end wines. But the turning point for her came around 2008, when she was blown away by the number of people showing up for a master class by her chateau at a wine expo in Hong Kong.

China now accounts for 25 percent of Cathiard's sales, making it her largest market.

The owners of Chateau Haut-Bailly, also in Pessac-Leognan, first traveled to China to test the waters in 2000, and it was too early.

"At the time, they didn't know what a cork or a corkscrew was," said Veronique Sanders, the chateau's general manager.

Chinese sophistication has since advanced rapidly, she said.

"The difference with other emerging markets we've gone into in the past is the size of the country, which means it has an absolutely incredible potential."

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The next step in China's trade evolution is to move beyond exporting TVs and lawn furniture to selling services and investing abroad.

The investment trend started with state-owned companies that bought stakes in foreign mines and oil fields. Smaller and private Chinese companies followed, acquiring foreign enterprises to gain a bigger foothold in overseas markets, more access to resources and better technology for their own development.

China is now pushing into construction and engineering, where U.S. and European companies have long dominated.

In Algeria, Chinese state-owned companies pushed aside established French and German rivals to win contracts to build a $12 billion cross-country highway and the $1.3 billion Great Mosque of Algeria. The Chinese have also built highways, dams and other projects in developing countries and are starting to win contracts in the U.S. and Europe.

On a new 50-kilometer (30-mile) highway leading north of Nairobi, the capital of Kenya, dark asphalt stretches across six to eight lanes.

The $300 million road was built by three Chinese companies and financed by the African Development Bank and the Export-Import Bank of China. It has cut a trip that took several hours 18 months ago to 10 minutes, said Joseph Makori, a professional driver.

"When we see the people from America, they say, 'We want to assist Kenya'," said Makori as he looked for work at an interchange about 10 kilometers from downtown. "But I don't see it. China comes and I see one thing: the road."

Chinese companies are starting to win government contracts in Kenya, which has ports that offer access to landlocked Uganda, South Sudan and Rwanda. Governments in Africa are keen to work with China because it does not tie development to human rights or democracy, said Stephen Mutoro, secretary general of the Consumer Federation of Kenya.

"China appears to have a long-term plan based on increasing its commercial interests where governance issues are given a back burner," Mutoro said. The experience of Congo might foreshadow a more complex approach that Beijing envisages for other African nations. In 2008, the two governments signed a $9 billion deal for Chinese companies to build 177 hospitals and health centers, two hydroelectric dams and thousands of miles of railways and roads. In exchange, Congo was to provide 10.6 million tons of copper and 600,000 tons of cobalt.

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