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Reconciling Differences

The real challenge, said Mastel is how to reconcile China's version of trade and industrial policy with the rest of the world, as the emerging nation seeks to shelter its own self interests while WTO policy mandates call for a much more liberal trading partner.

A major interest for the Chinese is gaining expertise in the manufacture of vehicles needed to move goods and people around the country. China has pursued the auto industry vigorously for a quarter century, with most companies that now are doing business there manufacturing locally for the Chinese market, said Mastel.

But history has a littered trail of trade violations when China felt it was not in its best interest to keep them, he added. "'Actual contracted investment' in China really is a deceptive term. It means what's promised has not always emerged."

And American companies have felt the sting of losing proprietary rights, and of violations of trademarks such as the copying of hood ornaments or vehicle body designs by the Chinese to whom the concept of one person or corporation owning an idea seems foreign.

"It's been a big problem for Western companies operating there," said Mastel. "There are all kinds of horror stories heard throughout the year."

Rightful Ownership

One infamous example was reported in 1995 when Bob Lutz, then president of Chrysler Corp. prior to its merger with Mercedes-Benz, saw a Jeep Cherokee in China but later learned it was a knock-off with Jeep-like panels on old running gear.

So why are multinational corporations willing to risk the loss of trade secrets and designs to gain access to China?

Part of the answer is in hoped-for reforms in China that major industry players recognize must be made if the country is to move out of its tenuous economic past. That is the job weighing heavily on China's Premiere, Zhu Ronji.

"He is a very courageous person," said Vaughn Koshkarian, president of Ford Motor Company's Asia Pacific operations. "He has a huge and heavy responsibility instituting the absolutely necessary reforms of the state-owned enterprises, while at the same time designing a social security type of system that addresses the social consequences of doing that...

"I think he sees it as a necessity and as an encouragement in achieving what China must ultimately achieve. And that's competitiveness on a global scale."

Building from Within

During the five years of economic depression in the Asia Pacific, China maintained its economic growth by improving its infrastructure, said Koshkarian.

"It kind of allowed them to weather the economic crisis by pouring more money into infrastructure which they needed anyway."

And Ford, like its automotive rivals, is eyeing the emergence of China as a major trading partner as a mother lode of opportunity not only within that country but as a launch pad for other points East. Part of the advantage of more business is the ability to use those resources, such as engineering centers in China, for products throughout Asia, he said.

China currently has an annual automotive market - mostly trucks for delivering goods - of about 100,000 units, with all auto makers competing for their share of the slim 20,000 brought in from outside.

"If the market were to grow to 2.5 million units - and that's not unrealistic in the next six to seven years - and (imports rise) to four percent, the 20,000 roughly that's there now could grow to 100,000," said Bill Kelly, who heads international governmental affairs at Ford.

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