Entrepreneurs Say U.S. Firms Helping China Open Up Economically

By Todd Bullock
Washington File Staff Writer

Washington - U.S. companies have been the most important external factor driving China's economic openness, according to John Frisbie, president of the U.S.-China Business Council.

Contacts with American firms in China brought new ideas and approaches to business in terms of employees, customers and ways to deal with officials, Frisbie said March 7 at a panel sponsored by the American Enterprise Institute (AEI) titled Economic Engagement and Freedom in China.

During his remarks, Frisbie suggested that U.S. businesses have helped make the commercial process in China more efficient.

In the early 1990s, he said, more than 70 percent of China's economy was state-owned, but now that figure has been cut to only 35 percent.  Additionally, the number of ministries in China's central government has decreased from 45 to 28 in the past two decades.

"Many of these ministries ran various industrial sectors, and U.S. businesses had to deal with them, but today hardly any of them are in the industrial sectors," Frisbie said.

The Chinese government wanted to make its economy more attractive to foreign investment, so it instituted reforms to make doing business in China easier for foreign firms and ended subsidies for many state-run enterprises, according to Frisbie.

He highlighted other changes China has made that benefit foreign businesses, such as lifting bans on currency conversion and granting authority to foreign businesses to hire employees directly instead of going through state-run employment agencies.

More recently, American companies have been allowed to sell their products directly to Chinese customers rather than going through Chinese trading companies, Frisbie said.  China also has lifted many import restrictions, which gives greater market access to foreign firms, he added.

All this has helped stimulate trade between the United States and China.  China and Hong Kong together comprise the United States' third-largest export partner, Frisbie said. "U.S. exports to China have grown 150 percent since they [China] have joined WTO."


According to Frisbie, U.S. companies in China have a reputation for not engaging in corruption and for setting a positive example in their business practices.

U.S. companies are subject to the U.S. Foreign Corrupt Practices Act, whichimposes criminal penalties on American enterprises that bribe officials of foreign governments.  They also are subject to export controls that regulate what types of technologies can be sent to China.

"All the times I have done business in China, never once was I confronted with having to pay a bribe," Frisbie said.  "This is not something one has to do to be successful in China."  He noted, however, that Chinese officials have said corruption within China’s provincial governments is a major problem.

U.S. firms are making an effort to improve the rule of law in China, Frisbie said, citing a $1 million grant by the U.S.-China Legal Cooperation Fund.

The U.S.-China Legal Cooperation Fund, established in June 1998, is a program of the China Business Forum, the education and research arm of the U.S.-China Business Council, to fund projects promoting the rule of law.

One such project in southern China provides legal education to migrant works to learn about their rights under Chinese law, Frisbie said.

Engagement with China is the best way to get to these problems and U.S. firms should continue on that path, he said.

"China is continually changing and U.S. companies can promote progress and openness by being there and doing what they do best - exporting best practices," Frisbie said.

For more information on U.S. policies, see The United States and China and Trade and Economics.

More information about the event, including video files, is available on the AEI Web site.