Working with China: Alaska's growing export partner.

• Author: Salov, Alex
• Position: Special section: WORLD TRADE CENTER ALASKA 25th Anniversary

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For decades, China was considered an underdeveloped, closed-command economy, but since the 1990s it turned into a market-oriented economy that currently plays a major role in the global market. In 2010; China became the world's second largest economy and the largest exporter with the world's largest labor force (five times that of the United States). It is the world's leader in gross value of industrial output and its insatiable demand for natural resources continues to grow.

One important factor is the growth of the emerging markets within China that have become very lucrative markets for the imported goods. By the "emerging markets" within China we mean so called "second-tier" cities (large cities other than Beijing, Hong Kong, Shanghai and Guangzhou). Second-tier cities include places like Tianjin, Wuhan, Chongqing, Shenzhen and others. The growth of the second-tier markets is driven by China's rapid urbanization.

According to McKinsey Global Institute, by 2025 more than 400 million Chinese will migrate from rural areas to cities. Already there are more than 160 cities in China with populations of more than 1 million people. According to the U.S. Department of Commerce, China's top 15 second-tier cities account for 60 percent of U.S. products imported to China. These cities are growing economically and are less filled with imported goods.

Growing middle class is another factor that influences growth of Alaska's exports to China. According to China's National Bureau of Statistics, the country's middle class will expand from 5 percent of the population in 2009 to 45 percent in 2020. Naturally, as the people have more disposable income, they have an increased demand for higher quality goods. U.S. products have a good reputation among the Chinese consumers and are successfully competing with other foreign products. Chinese buyers also prefer the products packaged in the country of origin rather than China to avoid possible counterfeits.

Also, in 2005, Chinese government has made the decision that moved yuan (RMB) away from fixed U.S. dollar (USD) peg. As a result, between 2005 and 2011, the yuan rate has risen by about 28 percent (Forex), thus making Chinese exports to the U.S. more costly, but also making U.S. goods more affordable in the Chinese market.

For Alaska's exports, China has been a very dynamic market that grew almost 9 times in value during the last 10 years--from $102 million in 2001 to $923 million in...