Doug: Hello and welcome to another edition of the U.S. Commercial Service market brief. Our guest today is Barry Friedman; he is the minister counselor in Beijing China.

Barry, you have been barnstorming around the United States for the past couple of weeks trying to help Americans understand the latest developments in China. Would you give us some inside information on where you think the next big growth will be in China?

Barry: Thank you for having me Doug. I have been speaking to a lot of companies around the country and letting them know where the markets of the future are going to be in China

They are going to what are known as emerging urban centers, also known as secondary cities. It is hard to call these “secondary cities” because they have eight to ten million people in them. These cities outside the major centers and are located away from the coast in the interior, very large urban cities that are now having the buying power and industrial development that we have seen throughout the other parts of the country, this is where Americans should be looking at and if they want to be in business with China in five years this is where they should be looking.

Doug: How fast are these emerging markets growing Barry?

Barry: Their GDP is growing at about two percent faster than the rest of the country (which is 10.5%); we are talking about a growth of about twelve percent plus in these cities. That is not only a growth in GDP but also a growth in imports in these cities.

Doug: Give us a sense of where these cities are and what they are, they are not household words to most Americans.

Barry: First time companies to China should not go to cities they cant spell or find on a map, stick with what you know and see where your customers are, and follow your customers who have moved to China, a lot of these cities are cities Americans have never heard of. There are the more popular cities like the special economic zone, Shenzhen and also Dalian in the north.

They have major infrastructure, and buying power on the consumer side and industrial side to buy the products that we sell. China has been spending 125 billion dollars on connecting these secondary and tertiary cities to large urban centers; they have spent about 200 billion on extending railways to connect cities with rail, building another thirty airports, upgrading airports and building new ones over the next five years.

These cities have the infrastructure and the commercial setting to be doing business; American companies should be doing business there. They should be getting inquiries from these companies and should be making calls when they go to Beijing and Shanghai

Doug: For those of us that frequent Chinese Restaurants and like Chinese beer, Tsingtao, are they one of them [emerging urban markets], the coastal city of Tsingtao?

Barry: Oh absolutely, Tsingtao is a city that we look at very closely, it is the center for consumer electronics in the country, its one of the largest ports and a lot of American products that enter China enter through Tsingtao, it is a rapidly expanding urban area and it has very good connections with the countryside. When we look at a city like Tsingtao and the buying habits of the populations are very similar to those of Beijing or any large urban centers, the same kinds of products you can sell in Beijing you can sell in Tsingtao. The percentage of the disposable income, yet their disposable income is a little lower than the larger cities, is about the same. Did you know that China represents about ten percent of the sales of all luxury goods, can you believe that, and they are going to places like Tsingtao? They love American products in China, they like the American quality, they believe American products have a high degree of integrity and are safe, Chinese especially in these secondary cities they trust Americans because we back up what we sell, they have had positive experiences with American companies.

Now is the time for American companies to visit these cities, talk to local officials, do some networking, see what your competition is doing, your competitors from Europe and Japan are starting to go to these cities but the competition is not as saturated as in Beijing or Shanghais. Now is the time to go to these cities.

Doug: What do we do, do we just point a finger to a random place in China, or how would you advise us to strategically look at these places and decide where to go and put our money?

Barry: If I were a small or medium sized business and had some experience with exporting, I would go to the export assistance office nearest my office, sit down with them and look at what a business plan is for China, are you China ready? We have a great site that has a checklist on it and you can see for yourself before you come into our office, are you ready to go to China and if you are, are you ready to go to a city you wouldn’t think of right away? We have a network out there in China to help people, beside our 5 main cities offices; we have an international partner network of American trading centers in partnership with the China Council for the Promotion of International Trade where we can deliver the same services (appointment making, gold keys, company profiles, etc.) that we deliver in our five main offices outside those offices. There are fourteen of theses cities that are spread along the coast and in the interior and which specialize in certain product areas where we think they will have an advantage.

Doug: Can you give us an example of a company that you have helped recently look at or enter one of those markets?

Barry: We have one company out in California that was selling cleaning technology, very expensive equipment, to analyze some part of the environment. We got them to sell in Xian, you know Xian is where the Terra Cotta warriors are, and people think it is only a tourist city but it is also a very serious industrial city that has a environmental element and science and technology element and also research and development side to the city. They sold to one of the universities out there to take their equipment and do complex data runs.

Doug: How did you help they find a university in Xian of all places?

Barry: Well they came to us and they wanted to find a distributor to help them sell their product and we prescreened a bunch of people and found a few that could help them and one of them had some leads already and they were able to make the match.

Doug: How about the protection of intellectual property, what is the situation there and how are you helping?

Barry: You know I tell people now that before you go to China make sure you have your passport, ticket, and money and make sure your going to register your trademark and your company name and your intellectual property you know because you cant go anywhere in the world without making sure you decrease your level of risk of doing business there, and one thing to do is to make sure one the most valuable items your company has which is intellectual property is protected. You have your name, client list; these are things that need to be protected. Our websites have terrific information about how to protect yourself, where to go for advice, we have a lot of free advice we are willing to give you.

Doug: I understand that some Chinese companies are developing intellectual property and want to protect that property; do you think that that is going to set off a reaction that is going to improve the intellectual property in China?

Barry: Well certainly that is going to be one of the factors that will help raise the awareness and the level of enforcement as well as the laws to protect intellectual property. Certainly the Chinese are developing, they are very innovative companies in China especially within the IT area and ICT area and they want their products protected as well. We spend a lot of time reminding the Chinese that they have to, if they are going to be fair trading partners with us in the global marketplace they have to follow the same rules and they have to protect us in China and our products and the integrity of our products. So we lean on China a lot to keep up their standards, to what we think are global standards on this issue, but at the same time the Chinese consumer is demanding to have the genuine product and quality product

Doug: Barry, what about trade shows in China as a strategy for entering the market, as an exhibitor at one of these shows? Would you recommend that and if so where are the shows and how does the Commercial Service help people?

Barry: You know every product and every company has a unique market entry strategy, not all products and not all companies are going to be best at trade shows and you have to select your trade shows selectively. We have about forty shows, that’s an enormous number, which we have picked and are supporting for Americans to show their products. We also police these shows to make sure that no one will show a product that is going to be a copy or pirate of a product, of a genuine product, that an American is showing. And we work with those exhibitors to make sure.

We have just concluded a show this week of about 60 American companies being at an oil and gas technology show which I understand was terrific, we have 18 amazing success stories right from the floor of the show of very significant level and we are looking forward to more shows like this. We do a show every autumn, bank technology, mostly IT and security, which last time we had about 25 companies and all of them had significant success stories, not one missed out. So work with our office, work with the export assistance office, I should mention that right here in Washington we have a business information center which in national in scope, you can pick up the phone and call an 800 number and get on the spot advice.

Doug: After viewing this video, what would the next step be in terms of getting more information in order to develop a strategy for entering this part of China?

Barry: I would say any time day or night look at www.buyusa.gov., and take a look at what we offer, take a look at the business information center, take a look at what our offices in China offer, go and take a look a www.stopfakes.gov to see what we’re doing with IPR, there is a wealth of information on the internet. You can find the office near you online and taking a look at export assistance offices. Send them an email, set up an appointment, stop in and see them. I urge companies to contact their export assistance offices.

Doug: We appreciate all your information, go to the resources after watching this program and we wish Barry the best on his trip back to Beijing.