China’s New Normal

Moderated by Rick Badie

China, with its dynamic energy, boasts the world’s fastest-growing economy as well as its second-largest. A guest essay suggests the country stands ready to conduct business with our region, a potential benefit for job creators and investors in Georgia. A companion write-up shines light on the country’s smoking habits and efforts to combat its people’s deadly smoking addictions.

China’s new normal could be a boon for Georgia businesses

By Greg P. Chafee and Gary S. Freed

Dragons are legendary creatures in Chinese mythology that symbolize, power, strength and good luck. Much as dragons transform their shape and size, China is transforming from a rapidly expanding production-focused economy heavily dependent upon exports and foreign direct investment to a “slow and steady” growth consumer-focused economy with rising demand for higher-quality goods and services.

This “new normal” is changing the relationship between the U.S. and China. It’s creating enormous new opportunities for Georgia businesses, workers and investors.

On May 11, the Atlanta office of the Thompson Hine LLP Law Firm — in association with Shanghai-based Hui Ye Law Firm, Frazier and Deeter LLC and the DeKalb Chamber of Commerce — hosted the first in a series of seminars covering a wide range of topics vital to U.S. businesses operating (or considering operating) in China, including intellectual property, corporate governance, tax planning and investment.

Entitled “The New Normal – What Every American Business Needs to Know to Succeed in China,” the theme that emerged in the presentations and discussions at the event is that Georgia’s future as a global economic leader is linked to China’s investment in Georgia and to Georgia’s investment in China.

Despite China’s “normalization” goal, Chinese investment worldwide will grow from $500 billion today to more than $2 trillion by 2020. Chinese investment in the U.S. rose to $17 billion in 2014, with a significant amount in technology, consumer products manufacturing, agriculture and real estate. China is the second-largest foreign market for Georgia business, with more than $3.6 billion in exports.

Georgia’s top exports to China are shifting towards a technology focus, including aircraft, paper products and machinery. China is increasing R&D expenditures more than 20 percent annually. The success of Georgia’s technology sector is critical to the state’s long term economic health – from enterprising startups to Fortune 500 companies and from densely populated urban centers to rural areas. With our well-educated and well-trained workforce and growing technology base in the automotive industry, software, medical devices, energy and advanced engineering, Georgia should be attractive to Chinese investment.

Building a solid economic bridge between Georgia and China will not simply happen. The Southeast is a highly competitive market for top-tier Chinese investment and regional rivals are scooping up the rewards. Chinese-owned Volvo just announced its $500 million factory and 4,000 jobs will go to South Carolina. Moving ahead of the competition, and staying ahead, requires a firm commitment to collaboration, creativity and leadership involving all stakeholders, from Georgia’s state and local government officials to business and civic leaders to private entrepreneurs and investors.

Georgia took an important step in Feb. 2013 when the state Department of Economic Development opened a trade office in China. Gov. Nathan Deal then led a high-level delegation of state officials and business leaders to Shanghai, Qingdao and Jinan. The combined efforts are starting to show results. Two Chinese companies announced locations and expansions in Gwinnett County in recent weeks and the Department of Economic Development is committing to hire a new representative for the trade office in Qingdao.

Much like the dragons of Chinese folklore who are friendly and wise, Georgians can show their own wisdom by welcoming Chinese business to the Peach State, expanding opportunities for all.

Greg P. Chafee and Gary S. Freed are partners at Thompson Hine’s Atlanta office.

Hope for China’s clouds of smoke

By Michael Ericksen

When considering the global problem of cigarette smoking, the leading cause of preventable death in the world, China rises to the top of the list. There are nearly as many smokers in China as there are people in the United States. Each year, Chinese people smoke more than 2 trillion cigarettes, one out of every three cigarettes smoked in the world. It’s also more cigarettes than the next 29 top cigarette-consuming countries combined.

More than 1 million Chinese die each year as a result of their smoking addictions. While Chinese men are 20 times more likely to smoke than Chinese women, this does not mean that Chinese women are spared from the harm of tobacco use in China. A Chinese woman is more likely to die from lung cancer due to chronic exposure to secondhand smoke from her husband’s smoking even if she does not smoke.

Why is the cigarette situation so dire in China?

The answer is without a doubt complex, but in many ways, it comes down to money. China grows 43 percent of all tobacco in the world and has tripled its production over the last few decades. Not only is China the greatest producer of tobacco leaves, but it also manufactures, markets and sells cigarettes through a government-owned monopoly – the Chinese National Tobacco Corp.

As with most countries, the Chinese government secures tobacco tax revenues. The Chinese government is different, however, in that it also receives the profits from the sale of cigarettes. An estimated seven percent of all Chinese government revenue comes from tobacco taxes and profits, making the tobacco monopoly the most profitable of all Chinese state-owned enterprises — even more profitable than the petroleum and the mobile communications monopolies.

Given the economic significance that the Chinese tobacco industry holds, is the hope of reducing smoking rates in China simply a “fool’s errand?” Indeed, it is not. In fact, it is just the opposite.

China is already aware of the public health harm that smoking causes. In fact, many of those 1 million deaths each year occur among working-aged people, weakening the workforce and negatively affecting the Chinese economy. China has also become very concerned about health care costs as it transitions to various universal health care programs. Like the rest of the world, China realizes that it is cheaper to prevent a disease from occurring rather than to treat it after it has developed.

China, like many countries, is faced with a dilemma of balancing short-term revenue and long-term public health benefits. The Central Government has not yet stated a clear course of action, but recent signs suggest that China is beginning to readjust its position from encouraging unfettered smoking to focusing on public health. For example, China has ratified the World Health Organization’s Framework Convention on Tobacco Control, along with 179 other governments.

The central government has also announced plans to pass national legislation that will prohibit indoor smoking and prohibit the marketing and advertisement of tobacco products. Legislation prohibiting indoor smoking has already passed in Beijing with the law taking effect June 1.

Beijing, and cities like it, can more easily implement tobacco-control strategies compared to the central government. The Bill and Melinda Gates Foundation, and recently Pfizer Inc., recognizing the influence and nimbleness of cities, support the work of Georgia State University and Emory University to change social norms regarding smoking, to emphasize the rights of nonsmokers to clean air, and to encourage smokers to quit in 23 cities with a combined population of over 180 million people.

One thing China has clearly demonstrated is its dynamism and ability to change. While the final chapter of this story has not yet been written, there is reason to be confident that, with the right political will and economic strategy, China will soon be viewed as a tobacco-control success story, rather than the currently projected public health catastrophe.

Michael Eriksen is dean of Georgia State University’s School of Public Health.

 


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