The U.S. and China concluded two days of high-level talks in Washington D.C. without an agreement on trade, but the trade issue may mean different things for voters and investors.
Voters, of course, may be more in tune with the hue and cry on Capitol Hill about the inequities of U.S.-China trade, including an artificially weak yuan, closed Chinese markets and a largely one-sided balance of trade. Treasury Secretary Henry Paulson once again pushed China to be more flexible on the currency issue. Some in Congress have run out of patience and are pushing for more tangible measures to prod China into action. Proponents of free trade, however, disagree, saying it is best to coax China into change, rather than force a showdown -- partly because it could alienate Beijing and deprive U.S. companies of future opportunities.
The balance of trade means something entirely different for investors and businesses, which want ways to take advantage of the booming Chinese economy, as well as ways to play its equally hot stock market. Given its different classes of shares, liquidity issues and potential volatility, the Chinese market is a particularly complicated one for individual investors. Risks can be high, but rewards can be great.
The U.S. has been prodding China on a number of economic issues for years. One president to the next has tried to lead on the issue, making symbolic trips to China, while Congress has been consistently impatient with the progress.
Here's a sampling of our special coverage, "The China Challenge."
The U.S. has been losing manufacturing jobs to China (and other low-wage nations) for many years, but there's considerable debate about how damagaing that is to U.S. interests and if Washington can do anything about it anyway.
Scott Paul, Alliance for American Manufacturing executive director; and Robert Kuhn, author of "China's Banking & Financial Markets", squared off on the issue with Maria Bartiromo.
Paul -- who called the trade talks "very disappointing" -- argues for pressuring China on the labor issue, while Kuhn says revaluing the yuan "won't help our workers." Paul also backs trade sanctions, if necessary. Kuhn warns that "sanctions will hurt the U.S. as much as China."
China's economy is the fastest-growing in the world and its accompanying entrepreneurial spirit is not always textbook proper. From software to movies to books, China is somewhat notorious for producing counterfeit goods, which sell well below the price of originals and cost U.S. businesses some $2.2 billion a year.
John Taylor, Stanford University Hoover Institution fellow and professor of economics, and James Bacchus, Greenberg Traurig global trade practice group chairman, discussed the intellectual property issues with Sue Herera.
Most market watchers discourage investors from investing directly in China, even if it isn't very easy to do in the first place. Instead, money managers suggest mutual funds or exchange traded funds that hold Chinese companies. In many cases, these are Asia-Pacific funds, which include companies from other countries in the region, and are not so-called "pure play" funds. Investors with braver hearts can invest in Chinese companies that trade on U.S. exchanges, known as ADRs.
Robert Hormats, author of "The Price of Liberty" & vice chairman of Goldman Sachs International, and Mark Headley, Matthews Asian Funds president, talked about the opportunities with Michelle Caruso-Cabrera.
As Mary Thompson reports, there are other, less direct ways to invest in China and cash in on its growth. Investors should look at U.S. companies –- as well as firms from other countries -- with significant business in China or the potential for it.
There's also a commodities play in that China, with the country devouring large amounts of coal, steel and other raw materials as part of an ongoing building boom, which includes facilities for the Beijing Olympic Games scheduled for the summer of 2008.
China's investment in infrastructure and roaring economy in general also mean spending money abroad. Ahead of the May trade talks, Beijing announced some $4.3 billion dollars in deals, what some call "checkbook diplomacy."
As Bertha Coombs reports, the U.S. software industry is a recent beneficiary. Microsoft snagged a billion dollar contract earlier this month, while Symantec just signed a joint venture deal with a Chinese partner.