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American entrepreneurs hoping to do business in China may be in for a surprise.
The nation of 1.4 billion people is a lot more capitalistic than novice investors might think, said Tom Pellman, a market analyst who has lived in China and studied its economy for eight years. Pellman, an Indiana University graduate who works for an alternative energy company in Beijing, brought that message to two dozen Columbus Area Chamber of Commerce members at a luncheon Tuesday.
In the past decade, China has begun a rapid shift from a top-down, government-controlled economy to one with a lot more competition and a greater openness to foreign investment, Pellman said.
This shift is likely to gain even more momentum under China’s new president, Xi Jinping, who is in the early stages of a 10-year term as leader.
Twenty years ago, China was best known as a low-cost manufacturing center flooding world markets with low-tech, inexpensive products.
Today, China is home to a rising middle-class where wages for industrial workers are rising and foreign investors can tap into tens of millions of consumers demanding better quality goods.
“China’s leaders want to develop the country as a more consumption-led economy,” said Pellman, a market analyst for Vestas Wind Systems, a Danish wind turbine producer.
Pellman’s audience at the Chamber-sponsored event included economic development officials from Columbus, software executives, small manufacturers and even the owner of a frozen yogurt company.
Vietnam and Sri Lanka are among countries that have taken over as the world’s lowest-cost manufacturing havens, Pellman said. Each of those nations has labor rates 30 percent cheaper than modern-day China, he said.
There are lingering risks whenever American companies do business in China, however, including a relative lack of legal protections if entrepreneurs don’t properly safeguard intellectual property rights, he said. Knock-off products remain rampant.
“But China isn’t the free-for-all that some foreign investors fear,” Pellman said, “especially if you compare it to other emerging markets. You could argue that China has a fairly stable business environment.”
The caveat is that foreign companies must register their products or proprietary technology with Chinese regulators when they first enter the country; and if they do so, the companies can often get help from China’s court system if claims of commercial theft arise, Pellman said.
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