Council Activities

Council Holds Forecast Meeting

Nearly 150 member company representatives attended the Forecast '99 meeting in Washington, DC, on January 26. After Council President Robert Kapp welcomed the gathering, Pei Minxin, senior economist at the Carnegie Endowment for International Peace, kicked off the morning session with a discussion of PRC politics. According to Pei, China's economic problems, including a sluggish external sector, rising unemployment, and banking woes, may increase the number of local protests but will not necessarily lead to a political collapse. However, a maturation of such protests into multi-regional, synchronized demonstrations; the return of high inflation; or the resignation or ouster of a top leader could jeopardize China's stability.

The next speaker, economist Pieter Bottelier, provided an overview of China's economy, noting that urban unemployment, rural unrest, financial system distress, and protectionism are major challenges. Bottelier agreed with Pei that economic, political, and social crises on a national scale are unlikely. In contrast to other analysts, Bottelier asserted that state-owned enterprise reforms have not slowed as significantly as has been widely reported. He forecasted continued reforms, growth, and stability for China in 1999.

The Council's Director of China Operations Michele Mack Liedeker wrapped up the morning session by describing the current investment climate. According to Mack Liedeker, some of the obstacles US companies faced in China last year included a prohibition on direct selling, an uncertain and confusing tax structure, and corruption. She urged US companies to work with their foreign counterparts in China, the PRC government, and Chinese research institutions to solve these problems.

Council Chairman George M. C. Fisher delivered the luncheon address, focusing on Kodak's experiences in China. He stressed the need for companies to commit to long-term, rather than short-term, investments in China.

The afternoon session consisted of three simultaneous workshops. Francis Bassolino, senior consultant in China Business Services at Deloitte & Touche LLP, and Robert Goodwin, vice president and general counsel of US-China Industrial Exchange, Inc. addressed the distribution workshop. Bassolino gave an overview of the PRC's distribution system, pinpointing some of its bottlenecks and suggesting ways that foreign companies can improve their distribution activities in China. Goodwin spoke of his company's China operations and highlighted the newly permitted wholly foreign-owned international trading company as a promising vehicle to help foreign companies distribute their goods more effectively in China.

The workshop on the 106th Congress featured Norman Ornstein of The American Enterprise Institute, Matt Reynolds, Subcommittee on Asia and the Pacific, House International Relations Committee; Naotaka Matsukata, Office of Senator Joseph Lieberman; and Brian Bieron, House Rules Committee. The speakers discussed the issues that will be significant to US-China relations in 1999, including China's many anniversaries, the Cox Report, the annual battle over Normal Trade Relations (formerly Most Favored Nation status), China's human rights record, and the country's bid to join the World Trade Organization.

During the tax workshop, Joyce Peck of PricewaterhouseCoopers outlined the many recent changes in China's tax regime. Peck emphasized the PRC government's new focus on collecting revenues more efficiently. She also addressed the tangled process of transfer pricing, and the ongoing battle among PRC authorities over export processing. Richard Woodruff of VTEL Corp. discussed his company's acquisition of a representative office in Beijing and related tax contingencies.