China is on a major shopping spree in the United States as Chinese President Hu Jintao began his long anticipated visit on Tuesday in Seattle. Hu met with an audience of key business leaders who are all anxious to get in on the buying action. Hu met with Microsoft Chairman Bill Gates and had dinner at the world’s richest man’s massive compound. And, on Wednesday, Hu announced a commitment to buy 80 Boeing 737 jets worth about $5.2 billion at list prices.
Boeing shareholders were excited as China represents a significant market for Boeing. Hu estimates the country will need 2,000 new planes over the 15 years while Boeing estimates China will require 2,600 new planes over the next two decades. Whatever the number, the potential is massive for Boeing and the prospects clearly reflect the vast potential for U.S. companies in China.
I clearly expect China will open up its coffers and close numerous deals on this four-day trip.
On the other hand, there are also some serious issues that need to be addressed with China. Microsoft will discuss the growing issue of software piracy in China and try hard to push for tougher and quicker measures to halt the illegal distribution of software, namely those of the Microsoft operating system. At stake are potentially billions of dollars in revenues for Microsoft as it targets China as fertile grounds for selling its expansive line of productivity software.
The reality is China is a significant market for global companies looking for growth outside their borders. For China, the country must also appease Washington in relation to the perceived high value of its currency as well as the growing and record trade surplus that it has with the United States. Hu will arrive in Washington on Thursday to tackle the problem of surging exports into the United States. The buying will help ease some tensions in the short-term, but you know Washington wants a long-term solution with China in trade.
The visit by Hu is a start and could go a long way to increase U.S. sales to China, yet at the end of the day, China will need to move forward and make Washington happy.