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Chinese delegation signs $4 billion in contracts during California high-tech shopping spree

SAN FRANCISCO – 05/11/07 – In what may well be one of the most expansive shopping sprees in history, a delegation of Chinese business leaders now in the US has kicked-off its visit by signing 27 contracts committing them to buy more than $4 billion worth of California-produced high technology products.

In its first stop on its whirlwind US tour, the group of executives from more than 200 Chinese companies visited Silicon Valley's high-tech heartland and sealed deals with a number of computer software, semiconductor, and telecommunications companies including Microsoft, Oracle, Cisco Systems, and Hewlett-Packard.

California Lt. Gov. John Garamendi praised the contract signings telling the press that the development was an "important step in furthering the deep relationship between this state, this country and China."

The group is expected to explore more investment in the US and will be meeting over the next few weeks with US counterparts in 24 cities scattered across 23 states, according to Ma Xiuhong, China's Vice Minister of Commerce, who is accompanying the group.

According to sources, the trade mission is seen as a step toward mollifying legislators who have been lambasting China over a number of trade-related issues, including the country’s surging trade surplus with the US.

Underscoring the issue, the trade mission arrived in California just as the latest figures were released by the US Commerce Department showing that China's monthly trade surplus with the US more than doubled in April to nearly $17 billion.

The April trade gap of $16.88 billion was below February's $23.7 billion – the second-highest level on record – but in line with steady increases in monthly trade surpluses over the past year.

On the Chinese side, the government reported a monthly trade surplus of just $6.9 billion in March, while exports rose 26.8% and imports rose 21.3% in April, according to figures published earlier his week by the General Administration of Customs in Beijing.

China reported a global trade surplus in 2006 of $177.5 billion with the Asian Development Bank asserting in a recent report that that figure could balloon to more than $250 billion next year.

Last year, the US reported a record $232.5 billion trade deficit with China. The country’s trade gap with the US is bigger than its global surplus because it runs deficits with other countries.

US and Chinese trade officials will be meeting later this month in Washington, DC for talks on several major issues such as the growing trade surplus, intellectual product piracy, and the volatile issue of Beijing’s currency policies.

Moves are being made on Capitol Hill to push for punitive tariffs on imports of Chinese goods if Beijing fails to ease currency controls that critics say keep its currency undervalued, giving exporters an unfair price advantage and adding to China's trade surpluses.

Washington is hoping the "strategic economic dialogue," led by Treasury Secretary Henry Paulson and Chinese Vice Premier Wu Yi, helps to mollify critics and avert disruption in trade ties.

Much of the criticism over China's trade policies revolves around government restrictions that have helped keep the yuan well below the US dollar.

The spread fuels the trade imbalance between the two countries by making China's exports to the US cheaper while raising the prices of the US exports to China.

The exasperation with China's handling of the yuan surfaced again in Washington earlier this week, when Rep. Sander Levin (D-Michigan), convened an unusual joint hearing of three House subcommittees to address the currency policies of both China and Japan.

Levin, chairman of the House Ways and Means Trade Subcommittee, said he believes the yuan has been undervalued by as much as 10% to 50% because of Beijing’s manipulation of its currency. 

Chinese President Hu Jintao made an unusual personal lobbying effort for the talks this week, expressing hopes for "positive progress" in a phone call with President Bush.

The Chinese government has responded to the charges by asserting it isn’t actively pursuing such large surpluses and has taken steps to rein in exports.

According to media reports, Beijing is also trying to reduce reliance on exports by encouraging more domestic consumer spending, which could boost imports and narrow the trade gap.

However, an official campaign under way to cool off an economic boom has cut imports of factory equipment and other goods while foreign demand for low-cost Chinese products has surged ahead.

Economists had projected a sharp jump in the trade surplus from March to April. They said the February surge was caused by exporters shipping more goods early to beat an expected change in taxes, leaving less to ship in March.

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