Rural China offers good opportunities for U.S. firms

The recession that has impacted the United States has had a domino effect on the rest of the world. One by one every country has been impacted. As the primary consumers of the world's products, when we struggle financially, we decrease spending at our local retailers, who in turn purchase fewer products from suppliers who many of them are located overseas.

China has felt a large brunt of the economic storm. For example, a report by the Xinhua News Agency, China's official news agency, said that in 2008 about 3,631 toy factories have closed their doors, which is about 52 percent of all toy factories in China. Among the victims was one of China's largest toy factories, which employed over 7,000 workers and was even listed on the Hong Kong Stock Exchange. This factory made toys for many toymakers, including Mattel and Hasbro.

The Chinese government has long relied upon their exports to sustain the country. However, this practice would inevitably need to end in order for China to continue to progress in the future. Simple manufacturing, such as textiles, toys, etc., would need to change to high-tech electronic manufacturing, financial services and other advanced industries.

China is now a large enough economy where seeking imports of services and products is appropriate and needed for continued progress. The Chinese government has just released plans to stimulate domestic consumption in China. According to a document released after the executive meeting of China's State Council, it said, "to stimulate domestic consumption, efforts should be made to improve the rural circulation network, increase the variety of commodities available in rural markets, improve urban community service-facilities, promote upgrade of durable goods, support development of circulation companies, stimulate holiday consumption through exhibitions and step up supervision over product quality and safety."

This focus on the rural part of China is a very smart move, since a very large majority of the Chinese population still resides in the countryside. Chinese farmers in rural areas are much better off than in the past. Many have multiple family members who are working in the cities who send money back home to support their families. Liu Shinan of the China Daily has said it best of these rural farmers in China, "They [rural farmers] hope to own domestic electric appliances, even personal computers. However, manufacturers of these appliances are traditionally urban-oriented. Their products do not adapt to rural conditions. Farmers need practical, easy-to-use and wear-resistant appliances with fewer fancy functions. They also need to buy quality farm tools and they hope to build new houses.

"Investing money in manufacturing more rurally adaptable products and improving commercial networks in rural areas seem to be more practical in promoting domestic consumption. And we should also remember that there are still many rural regions that are still struggling to get rid of poverty."

This is a very good opportunity for U.S. businesses that are seeking new opportunities to expand their business overseas or to counter the negative impact of the global financial crisis. Labor costs are still relatively low, and Chinese demand and consumption is only going to increase.

Aaron Wong, of Provo, is the founder of AQI (Arrow Quality International), the first and leading Chinese Bridge consulting firm.

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