American Business: Chinese Progress

Why growing American Business in China is Good for China

Lincoln Cave

INST 492

December 10, 2014

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Introduction

Going to a supermarket, buying a new piece of electronic equipment, or even shopping

online for a new T-shirt, you would be hard pressed to find any location that does not include

items made in China. Rapid industrialization, lower worker standards, and decreasing

transportation costs all were conditions needed for China to become the mecca of production that

it is today. This change brought new found jobs and wealth to China. In fact, China, in

purchasing power, recently overtook the United States to become the largest economy in the

world (Bird). However, just as China has invaded world markets with its cheaper goods,

American businesses have done the same in China, accessing that new found purchasing power,

and spreading American products and culture with them. Technology and industry have brought

China wealth and power, as well as poor working conditions and environmental dangers;

however the economic progress that has been achieved for China, in part by American brands,

cannot be ignored. American brands are, and have been, beneficial to the Chinese market

because they provide jobs, offer higher quality products, and supplement governmental services.

Survey of Scholarship

In my paper, I have studied the ways that American business and companies have

benefited China in various ways. To begin, I started with how American business provides jobs

for many Chinese. Literature on this topic was extensive, though I was unable to find any

literature that talking specifically about how many jobs the United States alone helped provide,

but instead how much of China’s economy is dependent upon industry, a sector that is greatly

intertwined with its relationship to the United States. Economic data was plentiful for this

section, with my two main sources being from the United States Census Bureau and the CIA

World Fact book. These sources helped me show a vague picture on just how massive the US-

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China trading partnership is. In this section, I also chose to address factory conditions, as it

would be ignorant to address manufacturing jobs, without discussing China’s infamous labor

standards.

In the next section: higher value goods, I found it difficult to find material on how

Chinese view foreign goods specifically, such as product reviews or a form of mass observation.

Instead, I went off of the premise that if a company is expanding its business in China, and has

been for many years, then their business must be profitable enough to do so. I went further with

this by discussing a few possible aspects of American products or brands that could explain this,

corroborating with some evidence showcasing higher product quality, or American branding

value. In this chapter, I also pointed out the risks of relying too much upon these qualities, as if

they were to be tarnished in any small way, there could be massive damage done to a company’s

reputation.

The next topic: supplementation of governmental services, I decided to focus mainly on

education in China, while also discussing environmental health briefly. There is much literature

and data on education in China, from attendance numbers, to subject matter. I used data to

showcase how much demand for education has increase in China in recent years, to follow up

with my argument for how American businesses try to gain some of that demand through

offering premium English education services. The main example being Disney English, I wish to

showcase the business model that they undertook in order to make a media companies venture

into education have short and long term profitability.

I have overcome research gaps by focusing on the data that has already been recorded,

and using liberal economic principles, explain why that happened, and how American businesses

can either help benefit the future. In researching this topic, I will not only have to look at the

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economic motives for Chinese citizens to purchase American products/services, but also the

cultural significance in doing so, giving a broader, yet more applicable view of the American-

Chinese business relationship.

Background Information

During October, 2014, China overtook the United States as the largest economy by

purchasing power (Bird). This economic feat is an important milestone in today's economic

world as it signifies the change that has taken place in China throughout the latter half of the 20th

century. The China that we see today is enormously different from the one we would have seen

post-communist takeover in various aspects; from population distribution, wealth, and aspects of

their markets. What prompted these changes can be debatable, however we can safely give credit

to two different moments during the 1970's as "kick starters" towards this change.

The first of these events is Nixon's diplomatic visit to China in 1972. Certainly not a

popular president in hindsight due to his involvement in scandal, one thing that President Nixon

did accomplish that many critics can applaud is his opening of China to the West, or at least the

United States. Though not the extreme economic power it is today, China in the 1970s was still

an important player in its regional politics, and Nixon understood this. During a discussion with

some of his cabinet members, Nixon said "You [can't] have any policy in the Pacific that will

succeed in preventing war without have the Chinese be a part of it" (Oval Office Tape Excerpts).

His opening of diplomatic relations in 1972 between the two nations set the stage for American

investment in China to dramatically increase in later years, prompting economic growth.

As the world opened up to China, China became more interactive with the world. In 1971

the People’s Republic of China replaced the Republic of China as the official representative of

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mainland China, and took its place on the Security Council (Tieh). As China opened up

politically, it also began to release its markets. Key to the economic growth of newly opened

China was the development of Special Economic Zones (“China-Overview of Economy”). The

four Special Economic Zones were: Shenzhen, Zhuhai, Shantou, and Xiamen (Rodrigue, Jean).

These areas were chosen because of their proximity to factors that would encourage trade, either

by being near Chinese interests, such as Taiwan or Hong Kong. Once these areas had shown

success in developing, China further developed its other coastal cities, especially their ports. This

access to ports is key to the develop strategy that China would be following for the next few

decades.

China’s economic reforms were heralded by Deng Xiaoping, who gaining in power in

1977 remained in control of China until 1997. Though wanting to keep China more tightly

controlled than other nations, certainly those in the West, he understood the value of the change

economic reform would bring to China (“Deng Xiaoping”). Understanding the power in the

market, Deng Xiaoping once said, “Poverty is not socialism, to be rich is glorious”. As the state

gave up more control over the Chinese market, the effect that had over the Chinese economy was

staggering. From 1978-1995 China's GDP grew at around 8% every year (“China-Overview of

the Economy”). China’s spectacular growth in the latter half of the 20 th century would certainly

continue into the 21st.

This extreme growth has been fueled by China's export oriented market, with hundreds of

companies choosing to produce in China for its cheaper labor or more relaxed environmental

laws. In fact, in 2014, according to the United States Census Bureau, China exported around

$440 Billion worth of goods to the United States, compared to around $121 Billion imported

from the United States ("Trade in Goods from China"). However, the economic relationship with

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China certainly does not end with just the trading of goods. There is also a large amount of

American companies "setting up shop" in China. In the food industry for example, the first

McDonald's opened in China in 1990, with many more following ("The First McDonald's in

China"). Foreign, and especially American companies played an extensive role in China's

economic development during the 20th century, and they will continue to aid China in various

ways in the future.

China’s economic transformation has also transformed many other aspects of Chinese

society. Following global trends, as of 2011, according to the CIA World Fact book, the

percentage of people living in an urban setting was above half at 50.6% (“China” CIA). By

Chinese migrating to denser urban centers, the opportunities for businesses to cater to their

demands have increased. As China’s economy grows, as does the average wage for the Chinese

worker. Urban wages in China are higher than those found in rural communities, with the

average around $7,561 (“4-14 Average Wage of Employed Person in Urban Units). However,

the true consumers that businesses try to cater to are the higher- income families, which have an

income of around $30,000 (Gambini; Marianera, 237). As the wages and concentration in urban

centers increase, domestic and foreign companies have a stronger market to cater to and thusly

will try to provide them with a greater variety of goods.

Though today, the United States trades billions of dollars’ worth of goods to China each

year, and has thousands of American businesses within China, they are not always seen as

partners (“China” CIA). The difficulty of getting business licenses to operate in China for United

States’ companies is difficult, and often a limiting factor (“China Promise Clashes”). United

States software company Microsoft has also had a difficult time in China recently. In August of

2014, several of Microsoft’s offices in China were raided as part of an investigation into whether

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or not Microsoft violated anti-trust laws (Chuang). This raid was following several other

incidents of the Chinese government giving unfair treatment to other foreign companies.

Whether or not this was meant to bolster domestic companies is unclear, but the giving of

preferential treatment to domestic companies generally goes against neo-liberal economic

principles, and those of the World Trade Organization, which China became a member of in

2001 (“China and the WTO”).

Besides being a bad sign for foreign businesses either in, or wanting to enter the Chinese

market, it is possible that such actions signal a troubling trend between United States and

Chinese relations. A recent example of how cold relations between two nations reflects their

business interactions would be that of Russia-United States and McDonald’s. In late August of

2014, Russia shut down several of its McDonald’s for “sanitary purposes” (‘Макдоналдс’).

Though reopening several months later, rather than simply not allowing the business to sell any

tainted products, the Russian government actually closed the restaurants entirely. Perhaps more

symbolically, one of the first McDonald’s to be closed was also the first McDonald’s to be

opened in Russia in 1990. China has recently had a case of unsanitary conditions in a

McDonald’s, dealing with expired meats; instead of closing the restaurant entirely, they simply

were unable to sell the tainted product (Jargon). These closures coincided with rising tensions

among the conflict in Ukraine. Since the restoration of relations between the United States and

China with Nixon, American business has made stronger ties with China, and that relationship

can continue to grow if the Chinese government will allow it to.

The history of China’s spectacular economic development is one of a closed economy

releasing its potential. Through modernization allowed by Foreign Direct Investment under Deng

Xiaoping, the releasing of public sectors to the global markets, and embracing an export oriented

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market, China has become one of the most dynamic economies of both the 20 th, and the 21st

century (“China-Overview of the Economy”). American business has been with China since

Nixon began dialogue with the communist country over 40 years ago, providing investment,

purchasing goods, and eventually setting up shop in the mainland itself. Although the two

economic partners face challenges ranging from domestic economic health, environme ntal

health, and cultural differences, both partners can benefit from accepting the business of the

other.

Provide Jobs

China’s introduction into a market driven society several decades ago certainly

transformed the socialist society that had once been so tightly controlled. Labor was de-

commoditized, having every workers actions being decided upon by the state, giving the state

complete control over the worker’s actions, and controlling most aspects outside of their

workplaces as well (Eli; Ching). As China transitioned, its workers had to adjust to a world in

which their employment was no longer guaranteed, along with other benefits such as welfare or

retirement. China’s population distribution during the first few decades after World War 2 also

shows that much of China’s population worked in rural areas, working in agriculture (“The

Greatest Migration: China’s Urbanization”). However, as we certainly know, as China’s cities

grow, and as it become more connected to the world, where its citizens work and what they do

for work will change dramatically.

According to the CIA World Fact book, in 2014 China’s urban population had surpassed

its rural population at 50.6% of its population. China’s workforce by occupation rates also

changed, with 33.6% from agriculture, 30.3% from industry, and 36.1% from services (“China”

CIA). Industry is perhaps a business sector most dominated by China, in 2012 China exported

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$1.948 trillion worth of manufactured goods (“Export Value…”). China’s export market has

been a particular boon too its economic rise over the last few decades, with American markets

being a prime destination for their goods. In 2013 alone, the United States imported $440 billion

and is on track in 2014 to surpass that number (“Trade in Goods with China”). Combining trade

between the two countries, the total was around $560 billion in 2013. The trade between the

world’s two largest economies has been explosive throughout the past half century, and has

sparked waves of consumerism in both countries that have created jobs and opportunities for

China.

Making a list of all retailers that sell products made in China would be impossible. From

the giants such as: Walmart, Target, Kohl’s, J.C. Penny and hundreds others, United States’

retailers have been an asset to China’s industrial machine. With 33.6% of China’s 797.6 million

strong workforce in industry, it is safe to assume that millions of Chinese jobs are directly linked

to American business. However, not all companies seek to export their product out of China, and

as economic situations change, so do the prospects of foreign companies in the Chinese market.

When companies enter new markets, they do so for one goal, profit. Whether it be that

the market lacks a similar product, or that theirs has a comparative advantage, the fact remains

that if their product is successful in making a profit, they will stay. As wages increase in China, it

will only encourages foreign companies to enter into the market ("4-14 Average Wage of

Employed Persons"). American companies have taken advantage of this rise in wages by selling

their products in China. In some instances however, a further step is needed, creating factories,

and therefore jobs, in China to sell in China, perhaps the most famous example is Coca-Cola.

For a soft-drink seller, it would be extremely inefficient to transport product across the

Pacific, even transporting the syrup would be costly. An article by The Coca-Cola Company

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itself, describes the creation of its 43rd Production Facility. On October 23rd, 2014, production

at the facility began, and perhaps more noticeably the company advertised this fact more than its

increased supply ("Coca-Cola Continues Strong Investment). This article details not only how

the company wishes to increase its supply in China, but it also details how it wants to strengthen

its image to the Chinese public. The article emphasizes the jobs created, which if sentiment is

anything like in the United States, would be welcomed by Chinese. To further cater to the

Chinese, discussion on how the plant is environmentally friendly is key to addressing concerns

about China’s environmental challenges. Zhang Jixiang, President and Chief Operation Officer

of COFCO called it a “world-class plant”, alluding to a sense of modernization and safety.

Another significant point is that what is produced in this factory is made to be sold in China

itself, rather than exported. This differs significantly from the export oriented view that many, if

not most, companies have had on China in the past.

Addressing concerns about factory conditions, both for the environment and the workers,

is needed as Chinese factories have a long history of poor labor standards. The BBC reported in

2011 that a factory strike in 2010 in China was caused by exhaustive work hours with unfair pay

(“China’s Factories Hit by Waves of Strikes”). Being paid under a dollar an hour and working

nearly 11 hours a day all week, workers began a spontaneous strike that was struck down by

authorities. For Foxconn, a company producing computer components, it faced criticism for its

harsh treatment of employees in exchange for increased productivity. In response, it has “nearly

doubled” but only after several worker deaths occurred. This shows some progress towards

worker’s rights, however the question still should be asked if the United States and China have

done enough to ensure the protection of the workers.

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As being one of China’s main export partners, the United States has a clear incentive to

promote the rights of Chinese workers. Foxconn, the same company that was forced to double

worker wages in 2010 also puts together Apple products which Americans buy in the millions.

While an actual regulation or law against companies that have Chinese workers work in poor

conditions is unlikely to be passed by the United States government, public outcry against the

companies that sell these products has been prevalent. In response to various American protests

and campaigns, such as from Change.org or Sumofus.org, Apple has pledged to have worker

standards as one of its top priorities, assuring the public that it is doing its best to ensure its

suppliers are complying with fairer labor standards (“Supplier Responsibility”). Whether or not

this is simply whitewashing, deceptive marketing giving the image of social responsibility, is

unclear, what is clear is that Apple does see the value in having the American public’s positive

view.

Early August 2014 a metal factory in China exploded killing over 75 and injuring

hundreds of workers (Sant). The conditions of China’s factories differ dramatically from those in

the United States. From wages, safety, and hours, the difference in expense that is paid for fair

labor is apparent. In October 2013, the average US wage for manufacturing jobs was $24.56

(Catts; Kolet; Robinson). Comparing that to China’s $1.80, and the stark difference between the

American worker and Chinese worker begins to be clear. Perhaps one of the main culprits in

causing the inequity for Chinese workers is their lack of organization. In 2010, the International

Trade Union Confederation described the Chinese system as being unable to unionize and protest

without disobeying the law (“International Labor Comparisons”). In the few instances where

they can unionize, they must do so through the governmental organization: the All-China

Federation of Trade Unions. In the Chinese Constitution, under “Fundamental Rights and Duties

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of Citizens”, article 43 lists the “Right to rest” as a fundamental right for all Chinese citizens,

however enforcement of that law remains lacking (“The People’s Republic of China”). As long

as China doesn’t take steps to protect its workers, domestic and foreign companies will take

advantage of their cheap labor to produce cheap products to sell on the international market.

Higher Value Products

As China changes to a market driven society, consumerism has a greater effect upon its

population, and with greater spending comes a greater amount of products from across the globe.

In 2013, China imported $1.95 trillion worth of goods according to the CIA World Fact Book,

the primary goods that were imported were machinery, fossil fuels, medical equipment, and

motor vehicles (“China”, CIA). From the United States, the main export to China was grain,

followed by seeds, then fruit. However, the story of American goods being sold in China doesn’t

always begin with them shipping into China, instead American companies often produce and sell

them there. Many cultural icons such as Coca-Cola, McDonald’s or Ford are setting up shop in

China to take advantage of the new wealthier market.

This development however differs from many of the companies origins in America.

Many of these companies were pioneers in their fields, McDonald’s being one of the earliest fast

food chains, or Ford streamlining the production process. Burgers and relatively inexpensive cars

had already existed in China prior to their arrival (Watson, 72). However, even though they were

entering a market with several other competitors that had nearly the same resources as they did,

they had access to two different aspects that gave them an advantage: higher product quality, and

cultural value. In demonstrating higher product quality, I will be discussing the car industry and

China’s massive bootleg product market; while for cultural value I will be addressing

McDonald’s and KFC in China.

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When purchasing a car, there are several factors one must look into before making a

decision. Besides the type of car, such as truck, SUV, sedan, etc. one must take into

consideration price, safety standards, and quality of the vehicle. It is within those final two

aspects: safety standards and quality, that foreign products, American included, gain an

advantage. When discussing why Chinese auto makers recently dropped in their hold on market

share, from 50% in 2010 to 42% in 2012, Greg Anderson, a political risk consultant for Pacific

Rim Advisors said, “Chinese brands have suffered tremendously at home because of quality

issues and because foreign brands are perceived by the Chinese consumer to be of much higher

quality” (Young). Norihiko Shirouzu corroborated suspicions of lower safety standards in his

article for Reuters, stating that China’s Zhejiang Geely Holding Group Co. only performed 20-25

crash tests on a certain model, compared to a Global standard of 125-150. Higher care for quality

in a product does not only occur in cars, as the Chinese bootleg product market is expansive and

often sells products that simply do not work.

To counter this point of higher quality making a product more popular than its domestic

counterpart, the sale of bootleg products in China, especially of pirating software is a blatant

example of how the dependable Western producer is left out to dry. In China, the prevalence of

bootleg goods is well grasped. It would be difficult to find any reputable Western media source

that has not discussed Chinese piracy of software, or its knock-off IPads. Melanie Lee describes

her experience in buying a bootleg copy of Microsoft’s Windows 7 (Lee). For $3 dollars what

would cost her nearly $70 here, she purchased her copy and installed. Working perfectly at first,

once she restarted her computer, it crashed and required a boot-up from a genuine copy of

Windows XP. However, even though these results are common, piracy and the sale of bootleg

goods is not seen as the same burden on society as it is in America. Instead it is considered “good

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ole entrepreneurship” (Rapoza). In a country that can mass produce perhaps any product, copies

of the original are bound to appear on the market almost instantaneously. However, for the

Chinese market to gain reliability in their products, or at least the “American” products that they

sell, the Chinese government has to take a firmer stance on the subject.

An American business model that has been copied, altered, had its altered version copied,

and then altered again: fast food, has a large presence in China, and it is thanks to perhaps its

greatest resource, cultural value. The first McDonald’s to open in Beijing was a monument to the

American way of commercialism. “Two floor, 700-seat building” with a statue of Ronald

McDonald right outside the building (Yan, 89). Yunxiang Yan describes the allure of

McDonald’s since it arrived in Beijing as being viewed as “American” which also means

“modern”, and contrary to what we would normally do in the United States, customers were able

to take tours to view the cooking area. This sense of cleanliness and order appealed to Chinese

consumers and McDonald’s has enjoyed a wide range of success. KFC offers a similar dining

experience to McDonald’s as they each “decontextualize” the dining experience as Yan states,

and fits well with the type of mass order that is common in Beijing. As of February 2014, there

are now over 2000 McDonald’s in China alone (Yue).

McDonald’s has enjoyed major success by providing a clean and orderly place to eat,

providing a modern atmosphere that is considered American and modern, however even though

McDonald’s has clear cultural value in its origin, that does not make it immune to other aspects

that the food industry needs to consider. In July of 2014, a major supplier of McDonald’s meat in

Asia was accused of selling expired meat to McDonald’s (Jargon). McDonald’s had to stop

selling several of its items for several days, but the damage to its image was worse. Losing the

image of cleanliness and modernity, McDonald’s has had a severe drop in sales in Asia. KFC

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and Pizza hut, each owned by Yum Brands, also saw a significant decrease in sales (Sacks). This

instance makes it clear that the Chinese public’s image of “American” as “modern” is a fragile

one, however, if American Businesses can regain this image, then they and their Chinese

consumers will each benefit.

As China has opened itself to the world market, it has been bombarded with new ideas

and technologies. It has seen thousands of new products being produced within its borders, and it

has seen thousands of new products line its shelves to be purchased. With these changes, Chinese

consumers have been able to compare their domestic goods with those of foreign competitors,

and though value is relative to each person, American businesses have a reputation of selling

high quality goods, with an interesting cultural origin to be explored by the new Chinese

consumer. As this market expands, and the consumers change their demands, the demands on the

Chinese government may change as it has to adjust to new international demands, and possibly

new demands of its populace.

Supplement Governmental Services

The role of governments, and how they should be run has been changing since they began

millennia ago. The services they provide now make them essential in contemporary society, from

policing, protecting private property, providing education, to national security. However, it is

impossible, or perhaps too inefficient for governments to provide every service needed or desired

by its constituents. That is where the private market comes in, and sometimes even foreign

companies, which in the case of China, is becoming increasingly more common. American

companies aid or supplement governmental services in various ways, two of which are education

and environmental protection.

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When one thinks of business, it isn’t often that we imagine our childhood lessons on

literature, mathematics, or the myriad of other basics that we needed to study to get the gold star,

however, for many countries, especially China, the gateway to further development lies in its

education system. “Investing in education is the single most effective way of reducing poverty”

(“Education”). That sentence, or something similar to it, can be found on hundreds of different

websites that advocate for various reasons from human rights to development. For those who are

already out of poverty, education is still a way of maintaining that status as well as seeking one

even greater. The various resources required to create a functioning, efficient, and effective

education system are great, from the teachers, administrators, equipment, and buildings. Not only

that, but various degrees of schooling are created, from pre-primary, primary, secondary, and

postsecondary schooling. Creating such a system in a country of more than 1.35 billion people is

quite the challenge.

Primary school in China begins at the age of 7, with secondary school beginning at the

age of 12 ("China", UNESCO). The sheer number of students participating in just these two

sections of the education spectrum would be daunting to most other countries. Primary education

enrollment rate in 2012 was 127.9% at 111.8 million. Achieving over 100% was possible due to

the benchmark being set to the age that the students should be at primary school, and those that

are in it due to either being the appropriate age, or being held back. The number of students at

secondary schools numbers at 89% in 2012, with 60.2 million. In 2003, the enrollment rate for

secondary schools was only at 60.2%, rising every year. In fact, according to Fang Cai, “there

were 3.5 times as many students enrolled in senior high schools in 2006 than in 1995” (Cai,

Fang; Wang, Meiyan; Wang, Dewn 47).

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This increase education increases not only the number of services the government has to

provide, but also in the desire to get one’s child an advantage over the next, which is where

international, or American companies come in. There are several “American” schools in China,

offering a different curriculum than those of their public counterparts. These schools, in the past

mainly for international students, have gained popularity in local populations for their English

focused curriculum, a statistic from World Education News and Reviews’ Nick Clark stated that

around 80% of all students in international schools originate from wealthy locals (Clark). From

“Shanghai American School” to the “American International School of Guangzhou”, there are

plenty of options for affluent Chinese parents to get their child an educational advantage. This

educational advantage does not stop at only the primary and secondary level, but also continues

into the college level, as many Chinese seek admission into American universities.

A study done by Academic Partnerships details Chinese interest in American higher

education. The study went over various factors from their knowledge of international

universities, mainly those of other English speaking countries such as the United Kingdom or

Canada, when they began thinking about going to an American University, or where United

States higher education ranks in the world ("Definitive Study of College Bound Students in

China"). The students surveyed responded with confidence that they considered American

Universities to be among the highest ranking in the world. That confidence was surprising as

many of those asked were “self-motivated” to go to United States Universities, meaning their

parents had little influence in their decision making. Around half the students asked said that

they wanted their schools to aid them in aspects that would make the decision, and the process of

going to an American University easier, such as learning English, or aid in finding schools.

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However, English is not only a useful skill to learn for gaining admittance into a school, as it is

also a gateway into success in business and politics.

China has gained its prominence today by being a global mecca of trade, which in turn

requires adaptation to laws, culture, and especially language. Jiening Ruan, an associate

professor of literacy at Oklahoma State University said “English has been studied in China since

the eighteenth century for political and economic reasons” (Ruan, Jiening; Leung, Cynthia, 1)

Both the economic and political prospects are numerous, both are aided by being able to

communicate with then especially British, and now especially American foreigners. Just as being

able to speak a foreign language here is considered helpful for employment, it is the same in

China. The parent’s desire for their child to receive an education in English is so strong, that

many send their children to the American schools mentioned earlier, and one extremely well-

known American company is responding to that market, Disney.

Disney English, with 10 schools in Shanghai in 2010, several more in different cities with

even more on the way, is an attempt by Disney to profit off of the English education market as

well as other means (“Middle Kingdom Meets Magic Kingdom”). In 2010, “Disney [estimates]

that the market for children's English- language education in China is growing by 12% annually”,

with spending in the billions of dollars. Their primary age group that they cater to is pre-primary

students, whose parents want them to get a head start on their English language education, and

their cost, in 2010 was around $1,800 a year. With thousands of students applying, the benefits

that are reaped by Disney financially could mean more competition by other American

companies in the future. However, in the meantime, the benefit of not only the tuition, but also of

the early association of Disney characters are good for Disney’s prospects in the growing

Chinese market.

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As China leaps forward into the 21st century, American business not only will help

develop its education system, but also advance its progress in environmental protection. China

has made positive steps towards environmental responsibility in recent years, creating hundreds

of regional environmental courts, making pollution fines have a bigger impact on corporate

profitability, and increasing public awareness of its pollution dilemma (Farren, Zoe). Increasing

public awareness on pollution, especially air pollution is important in China, in 2010 it was

estimated that air pollution contributed to 1.2 million deaths in China alone (Wong, Edward). As

China increases its demand for a cleaner economy, American companies are prepared to fill in

the gaps that domestic companies leave open.

With China’s relatively sudden boom onto the world stage, and it’s even more sudden

move towards a cleaner economy, some aspects of its environmental protection sector require aid

from outside of China. In the Wall Street Journal, Elaine Wong, a prominent business woman in

China with ties to a businesses that reduces carbon emissions described how China is buying

services and products from the United States to supplement their own technology (Deng, Chao).

One of such companies selling their environmentally safe products to China is cooling system

producer Phononic Devices, based in North Carolina. As China begins to fully embrace its

environmental challenges, Elaine Wong discusses how not only American companies are

bringing their environmental products into China, but look to “collaborate with early adopters

looking to have an impact”. As China increases its own investment in environmental safety, it

will undoubtedly find many American companies and minds to streamline the process, and

relieve pressure on its own resources.

The roles that governments take vary dramatically between each state, and while China

has dramatically opened up its market and decreased regulation, the strain that is put upon its

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government is extreme to say the least. With millions of lives comes the challenge of providing a

fair education for them all; with millions of jobs and billions of dollars’ worth of goods being

produced in China, the environmental challenges it faces can be daunting. However, with

American business filling the gaps left by the government and domestic businesses, China can

ensure that its population has the education it needs to be competitive, and the environmental

protection it needs to be sustainable. American business in China, while good for American

companies and many back home, provide many benefits to China which, were it not there, we

may have not seen the massive growth in China that we have today.

Conclusion

The United States and China have been economic partners for decades, and each country

has shaped the other’s history. From the opening of China with Nixon dialogue and Xiaoping’s

reforms, to reaching the point where the two countries have become the economic powerhouses

of the world. This change was started by the two governments coming together, but it was

carried on by business leaders trying to make as much profit as they can. American businesses

make this profit by responding to the demand of the Chinese market, whether that demand is

created by the public or the government. Chinese businesses are able to respond to most of this

demand, however there are some areas in which American businesses have a comparative

advantage.

Many American businesses have a long history, dating back half a century in their

respective markets. McDonald’s has been around for more than half a century, and in that time

has become an icon for all things American. Many American businesses can use their brand

power to gain a quick advantage in Chinese markets by exerting cultural influence or going off

of a history of higher quality, while other American businesses can take advantage of their

20

origins in America to accommodate demands of niche markets, such as pre-primary English

education. The experience that American businesses have has given them an advantage over their

Chinese competitors when it comes to consumers that are looking for higher quality goods or

education. As China’s industries age and develop, we may see a reversing of this trend and a

welcoming of Chinese business into the United States outside of importing goods for retail.

For the average citizen in Beijing, seeing the effect of American business in China is as

easy as going down the block to get a snack. As more and more American businesses try to take

part in the growing Chinese market, we will see more Chinese take part in what many would

consider American culture. These businesses will also bring goods and services that would

otherwise be unavailable to the Chinese market, or at least not in the form that they would prefer.

Therefore, in a liberal market, it is important to allow “the invisible hand” of capitalism. In this

case, the Chinese government should ensure fair business practices, to allow that invisible hand

to guide American businesses to their proper place in the Chinese market. Doing so will allow

them to provide jobs, offer higher value products, and supplement governmental services.

Allowing certain businesses to use their comparative advantage leads to greater efficiency in the

market, and that in turn for China will lead to a market that provides the needs for as many as

possible.

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