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Special Report: US Exports to ChinaUS Exports to China Hit New HighIn the last seven years, exports to China have surged dramatically, topping $65 billion last yearThe hype about US store shelves overflowing with Chinese-made products in recent years must be coupled with a new reality: that of US exporters sending an ever-increasing supply of goods to China. According to a recent report by the US-China Business Council (USCBC), publisher of the CBR, China is now the United States' third-largest export market, with exports in 2007 surpassing the $65 billion mark ($85 billion when Hong Kong is included, see Table 1). The United States exports more only to its immediate neighbors, Canada and Mexico, each of which has a free-trade agreement with the United States. US exports to China since 2000 have shot up 301 percent, dwarfing the 81 percent growth of the next fastest-growing export market, Belgium. In contrast, US exports to the rest of the world grew only 50 percent during the same period. The surge in US exports to China can largely be attributed to the trade liberalization that followed China's entry into the World Trade Organization, but other factors have also been at play recently. China's real per capita gross domestic product has nearly doubled from ¥3,945 in 2000 to ¥7,400 in 2007, according to International Monetary Fund estimates, fueling higher demand for foreign goods that were previously unaffordable (see The Challenge for Brands in the Other China). In addition, China's currency, the renminbi, has appreciated roughly 20 percent against the dollar since July 2005, making US exports cheaper for PRC importers and consumers. Nineteen states each exported goods worth more than $1 billion to China in 2007, and another ten states each exported goods worth more than $500 million. The top state exporters were California, Washington, Texas, Louisiana, and New York (see Table 2). Several states that are not usually considered beneficiaries of trade with China made the top 15 exporters list: Illinois, North Carolina, Georgia, Ohio, Michigan, Pennsylvania, and Wisconsin. Together, they recorded an average of 418 percent growth in exports to China in the past seven years. Exporters sold a diverse array of goods to China in 2007. In terms of overall value, computers and electronics ($13.3 billion) ranked first, followed by transportation goods, chemicals, waste and scrap, and non-electrical machinery (see Table 3). Besides the top-five products, several other products were top exports in certain states. As might be expected, agricultural strongholds Kansas ($206 million), Arkansas ($111 million), and Nebraska ($100 million) exported a cornucopia of processed foods. In the largely rural states of Louisiana ($1.8 billion) and Mississippi ($156 million), crop production exports topped those of other goods. Forested Georgia and Maine exported paper products worth $320 million and $110 million, respectively. Alaska sold seafood products worth $427 million. Nevada, whose exports earnings have skyrocketed faster than any other state at 3,678 percent since 2000, sold $263 million in minerals and ores in 2007—no doubt driven at least in part by China's construction boom. All data used in the USCBC study come from the US Department of Commerce's Census Bureau and the International Trade Commission. For each of the 50 US states, the report tracks the annual volume of exports to China over the past eight years, 2000-07 growth in exports to China, 2000-07 exports to the rest of the world, top-five export markets, and top-five exports to China. The complete report is available on the USCBC website (www.uschina.org). To illustrate the importance of China's market to US exporters, the CBR asked several US companies that earn a significant portion of their revenue from exports about their export products and markets. The following company profiles are based on their answers. —Arie Eernisse
Applied Materials, Inc.Applied Materials, Inc., based in Santa Clara, California, specializes in nanomanufacturing technology solutions, with a broad portfolio of innovative equipment, services, and software products for the fabrication of semiconductor chips, flat panel displays, solar photovoltaic cells, flexible electronics, and energy-efficient glass. The company assembles modules supplied by US and foreign manufacturers at its Austin, Texas, facility and conducts research and development (R&D) in its Santa Clara location. Overseas markets account for the bulk of sales, with North America sales contributing 16 percent to total revenue.
Earnings from exports to Asia contribute the greatest portion of Applied Materials' revenues. In 2007, the company exported products worth $8.18 billion, or about 80 percent of total revenue, with 74.2 percent of export revenue earned from sales to the Asia-Pacific region. Southeast Asia and China, not including Taiwan, contributed 12.4 percent of total exports, and in the second quarter of 2008, 18 percent of all new orders came from the subregion. Exports to China alone have risen 235 percent from 2003 to 2007. In addition to marketing products in Asia, Applied Materials uses China-sourced materials, which are typically exported to the United States or Singapore for final integration into the finished item. Export sales enable Applied Materials to invest $1 billion each year on R&D, helping the company maintain its position as a global industry leader. These sales allow the company to attract, hire, and retain highly talented individuals from around the world, and more than half of Applied Materials' 14,500 employees are based in the United States. To stay competitive as a US manufacturer, Applied Materials is optimizing its supply chains, using a more flexible workforce structure, increasing productivity, working more closely with customers, and seeking new markets. —Dan Strouhal GE TransportationGE Transportation, a unit of General Electric Co. based in Erie, Pennsylvania, is a leading global supplier of railroad, marine, drilling, mining, and wind industries. The company produces freight and passenger locomotives, railway signaling and communications systems, information technology solutions, marine engines, motorized drive systems for mining trucks and drills, and high-quality replacement parts.
In 2007, GE Transportation revenues exceeded $4.5 billion, driven largely by global sales. John Dineen, former president and CEO of GE Transportation notes, "Despite a slowing of the North America rail market, GE Transportation is maintaining its double-digit profit growth and has increased its US employment levels due to wins in international locomotive markets." Even though GE Transportation's business is down 30-40 percent in North America, it is up 300-400 percent globally, according to Dineen. In 2007, GE Transportation's total locomotive production hit 907 locomotives, one of the highest production numbers in GE Transportation's 100-year history, and 4 of every 10 locomotives currently on order are slated for export. China is playing an integral part in GE's export growth. The country's economic success offers rapidly growing markets for GE's infrastructure and its green technologies. In 2007, GE Transportation exported products to China worth $54 million. And recently, the company shipped its first of 300 cutting-edge Evolution Series locomotives to the PRC Ministry of Rail. The first China Mainline locomotive was scheduled to arrive in August 2008. GE Transportation employs 5,600 people in Erie and 11,000 worldwide. Its operations support jobs at more than 3,000 suppliers around the world, including jobs at more than 100 suppliers in Erie alone. —Dan Strouhal The Dow Chemical CompanyThe Dow Chemical Co., based in Midland, Michigan, delivers a broad range of products and services to customers in roughly 160 countries, supporting 22,000 US jobs through domestic manufacturing and exports. With annual sales of $54 billion and 46,000 employees worldwide,
Dow exports various chemical and plastic products, including polyethylene (plastics used in durable goods, consumer goods, packaging, and coating wire and cable), polystyrene foam boards (for insulation and construction applications), polyurethanes (thermoplastic used in durable goods, auto parts, and consumer applications), and water filters. China is one of Dow's main export markets, and exports to Greater China have increased by 15 percent in the past two years to over $660 million. Dow's exports to China serve as inputs to the company's growing investments and operations within Greater China and help the company to produce a broad range of products for the Chinese economy. Many of Dow's products are necessary building blocks for downstream Chinese customers, who turn the various chemical products into useful consumer products for the Chinese and global economies. Dramatic change in the petrochemical industry—specifically the rising and volatile cost of hydrocarbons and energy—has led Dow to advocate sustainable energy policy improvements in the US Congress and with governments around the world. As part of the company's innovative business model, Dow has pursued an "asset light" strategy to accommodate these rising energy costs by partnering with key companies like the Shenhua Coal Co. By using joint venture structures in various locations around the world, Dow creates stronger companies—and long-standing partnerships—that can compete successfully throughout industry cycles. —Arie Eernisse Quality Float Works, Inc.Quality Float Works, Inc. (QFW), based in Schaumburg, Illinois, manufactures hollow metal float balls and vessels that level liquids in industries such as gas, plumbing, oil, and agriculture. Some typical applications include chemicals, surge tanks, flasks, liquefied gas storage, pumps, valves, and electronics.
In 2003, QFW expanded its product line to make entire float assemblies used to purify water in developing nations. As the dollar recently weakened, QFW aggressively marketed its innovations, winning new customers abroad. Foreign customers often find it easier to purchase QFW's products manufactured in the United States and ship them overseas than to purchase floats locally. For products shipped to China, QFW uses stainless steel materials and stainless screw products from the United States. QFW's international sales have skyrocketed from 3 percent of total sales in 2003 to a projected 20 percent of total sales in 2008, leading to revenue growth of about 105 percent—the highest in the QFW's 93-year history. About 1 percent of QFW's exports go to China and 8 percent to Asia. Total 2007 exports were worth approximately $374,000, with about $5,000 going to China and $176,000 going to Asia. QFW has seen steady business from China, with one or two orders filled each year since 2004, mainly in Guangzhou, Guangdong. Customers in North America, Europe, Latin America, and Asia—including E.I. du Pont de Nemours and Co., Ford Motor Co., General Dynamics Corp., W. W. Grainger, Inc., the US Department of Navy, and the Walt Disney Co.—use QFW floats as vital components in the operation of their equipment. Thanks to QFW's recent success tapping export markets abroad, the company has significantly increased revenue and doubled the size of its highly skilled workforce. —Arie Eernisse  Copyright 2008 US-China Business Council |
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