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Roadblocks That Might Stall China's 'Unstoppable' Rise

SCOTT SIMON, HOST:

Throughout this last week while the Chinese vice president was visiting the United States, there was a lot of talk about America and American business finding new opportunities in China, selling more to Chinese consumers instead of just buying so much from the world's second largest economy. Many Americans also see China as an unstoppable economic force that's surpassing the United States. But how does all this look from China? We're going to now to NPR's Shanghai correspondent, Frank Langfitt. Frank, thanks for being with us.

FRANK LANGFITT, BYLINE: Hi, Scott.

SIMON: And, you know, you listen to American businesspeople talk, and it's as if there's money flowing out of the ground in China. How do American businesses begin to scoop that up?

LANGFITT: Well, one of the things that people are talking about here, particularly American businesses, is that there are a lot of very cash rich Chinese companies that are looking for places to put their money, and not just here in China. But, you know, U.S. companies are also wary, particularly in the high tech business, there's always the concern about losing your technology.

In fact, you know, many U.S. businesses keep their best technology in the states because they are worried about it getting stolen. In terms of investment here, things are very profitable for quite a few companies - American companies. But it's also a tough environment, and what you're seeing is continued complaints about the bureaucracy and kind of the state-keeping market access being kind of difficult in certain sectors of the economy, and the other thing is that costs are really going up here. I mean, China is no longer a low-cost country.

SIMON: Hmm. And how do the Chinese feel about so many Westerners wanting to do business there?

LANGFITT: Oh, I think they welcome it generally, but I think that actually it's less welcome than it used to be. I think there's a sense, you know, a lot of like lower-end manufacturing that they don't really need Western business as much. Their real interest is to get - frankly, learn a lot in terms of high tech, and the Chinese want to actually innovate themselves.

They realize they can't continue to grow this economy if they're just making cheap stuff in, you know, small factories. What they need to do is come up with their own iPhone and things like that, and so they're really interested in American companies that they can really learn from and kind of move up the value chain so they can get more money of what they're exporting.

SIMON: New poll by Gallup apparently shows that a majority of Americans believe that China is already economically stronger than the United States and has already surpassed the U.S. as the world's largest economy, which I gather most economists say just hasn't happened. How is that seen in China?

LANGFITT: Actually, it's fascinating. The perceptions are very, very different here I think. To some degree you'll hear a lot of pride and people will sometimes complain, oh, the United States used to be rich and you made all these mistakes going to war and spending a lot of your money and building up debt. But a lot of Chinese are actually worried and concerned about their own economy and system.

I mean, one thing that you hear is, you know, with this low business cost model ending, they don't really have a new one yet. They want to drive consumption here, and they want to do innovation, but they haven't kind of made this transition. So I think Americans to some degree are looking at kind of the old model of China and thinking it's just going to continue, whereas here people are saying, well, what's kind of next? What are we going to do?

The other thing is, ordinary people are still quite poor here. And I'll give you an example. I was in a cab yesterday, I was talking to a guy and I was saying, like what's happened to your income in the last 15, 16 years? And he said that it had actually tripled, he's now making about $1,000 a month. And I said, do you feel a lot better, and he's like, no, because inflation has been so high that I actually feel like I've lost my purchasing power, and he complains that the renminbi just wasn't, you know, the Chinese currency just wasn't all that valuable.

SIMON: Hmm. So although it's been growing, the Chinese economy has also been slowing down, compared to what it was doing.

LANGFITT: It is, and you're beginning to see some cracks. I mean, I think it's going continue to slow. A fascinating area is real estate. You look along the river here in Shanghai, you're talking about million to multi-million dollar apartments. Most Chinese are still very low wage, they can't get anywhere near that. It's hard for them to buy real estate. The government is trying to bring the price of real estate down, and we're beginning to see sales really fall dramatically.

The concern is, does the market crash? Because a lot of people have invested in real estate here and developers are beginning to run into some cash flow problems. They may have to start dumping more and more units on the market, and that could drive both sale and prices down.

SIMON: NPR's Frank Langfitt in Shanghai. Thanks so much.

LANGFITT: Your very welcome, Scott. Transcript provided by NPR, Copyright NPR.