As Congress Blusters About Trade With China, U.S. Companies Play Coy Over Profits
By Andrew Browne
February 13, 2006
The Wall Street Journal
Hong Kong -- AMERICAN COMPANIES operating in China enjoyed another year of strong profits in 2005, possibly even setting a record. But you would hardly guess it from company statements or the negative vibes on trade with China coming out of Congress these days.
Corporate America often seems to go out of its way to hide its successes in China. That may not be the smartest strategy as U.S. politicians girding for a possible trade war highlight the corporate losers of trade with China, while ignoring the many winners.
According to the Bureau of Economic Analysis, U.S.-affiliated companies in China -- companies in which U.S. firms have at least a 10% stake -- earned $3 billion in 2004. That's up from zero in 1990. Joseph Quinlan, chief market strategist for Bank of America, says that figure is a good reflection of how U.S. companies are making out in the world's fourth-largest economy. He estimates earnings reached a record $3.2 billion in 2005.
True, corporate profits from China accounted for just a sliver of the $209 billion earned by U.S. affiliates world-wide in 2004. Japan yielded $11.3 billion; Mexico, $7.6 billion. But China is becoming an increasingly attractive market for U.S. companies, even in some of the most competitive industries.
Take the auto sector. As its losses piled up in the U.S., General Motors Corp. reported income from China of $218 million for the first nine months of 2005. This nugget was buried in GM's filings to the Securities and Exchange Commission.
China accounts for 12% of Motorola Inc.'s global sales and is by far the biggest market for the company outside the U.S. The firm doesn't break out income from China.
General Electric Co. said top-line revenue in China hit $5 billion last year, and the company is aiming to double that by 2010. GE doesn't give profit details, either.