Riding the Dragon: China's PCB Industry Goes Global - Feature Articles

The global PCB industry simply cannot afford to ignore China. According to a recent article in Electronic Buyers' News, "Since 1993, foreign investment in China has averaged $35 billion, more than twice the top six competing countries in Asia combined. China's highly underpenetrated market, with a population of 1.2 billion and 1999 GDP growth of 7.1%, has been the initial lure. Only 7% of the country's people have mobile phones, less than 1% have PCs, and a mere 0.2% are Internet users."

Here in North America, electronic equipment companies and their suppliers salivate at the thought of cracking that market. But for many North American printed circuit board manufacturers, the question is how to remain competitive in a market that is moving off-shore. Some are taking steps to establish joint ventures with other Chinese fabricators, while others are moving up the technology ladder, focusing on higher layer counts and continued investment in new equipment. Still other U.S. fabricators are strengthening their relationships with customers, adding services they believe will make them indispensable.

Regardless of one's strategy, the Chinese, like the Taiwanese before them, are now bonafide players in the electronics industry. How should the rest of the world react? For the small- and medium-sized fabricator, the exodus of many large OEM and assembly customers to foreign shores is alarming. Cheap labor, minimal environmental policies, tax incentives, and an emerging middle class with buying power has the worldns electronics industry scrambling to set up factories in China. For some small- and medium-sized North American printed circuit manufacturers, the migration of OEM customers could signal the death knell. The business environment for these shops, particularly those that are trying to compete at higher volumes---will only become more precarious as China takes on more multilayer orders.

It's an entirely different story for the world's largest printed circuit makers, particularly the assemblers who own large fab shops. For them, China's business environment is irresistible. Many of these companies in the U.S. and Europe are closing shops in their native lands, only to announce grand openings in China. Two such examples are Viasystems and Multek. Viasystems shut down its 700,000 sf Richmond facility in late May. The remaining lower-layer-count PCB orders were sent to Viasystems' Chinese operations in Beijing, Guandong, Hong Kong, TongZhou, and Xiaolenzhen. A couple of months before Richmond's closing, Tim Conlon, Viasystems president, shared his enthusiasm regarding the labor talent available in Shanghai at the grand opening of one of the company's EMS facilities in March. "The abundant talent available in Shanghai will maintain Viasystems' position as a market leader in the electronics manufacturing industry," he said.

Not everyone was as excited. According to an angry Pete Catucci, vice president of the Communications Workers of America, Viasystems' replaced Richmond workers who earned an average wage of $18 per hour with Chinese laborers who received $1.66, a move he deemed "unconscionable." However, Barry Brigman, president of the Viasystems North America told the Richmond Times Dispatch, it is ultimately not his company's decision. "When the telecom customers come back, [their business] is not going to come back [to Richmond]. It's going to come to China," Brigman said. "Our customers dictate that, not us."

In a similar move, Multek closed its Austin plant recently, costing 600 American workers their jobs, but production was still strong at Multek's facilities in Hong Kong and Doumen. According to Dr. Hayao Nakahara of NT Information, "Viasystems and Multek have big operations in China. Their combined output in China in 2000 was nearly $500 million, accounting for 14% of the Chinese output."

But the U.S. is not alone when it comes to losing manufacturing work to China. Flextronics International, parent-company of Multek, is shutting down its manufacturing plants in Singapore, sending its board production and assembly to China. And Japanese giant Ibiden inaugurated its new Shanghai facility Ibiden Electronics (Shanghai) Co. Ltd. in November of last year. The slowing economy has only accelerated this exodus.

Apart from the ugly necessity of lay-offs in more developed countries, it makes sense to migrate one's manufacturing base to China. Why? In an industry now dominated by shareholder expectations, the companies that post the highest quarterly earnings, win. And the OEMs are increasingly demanding it. In the words of Michael Marks, CEO of Flextronics, "When business is bad, customers are saying, 'move it.' Two quarters ago, they would have not given us permission to move it." As OEMs continue to outsource manufacturing capacity to large EMS providers, this trend will only increase.

And you thought Survivor was only a television show.

CircuiTree sat down with a cross-section of China's printed circuit industry, from the large multinational companies like Viasystems, to mid-sized fabricators like Dalian Pacific Multilayer PCB Company, to a smaller single-sided shop, Shanghai Hua Yin Printed Circuit Board Company. By interviewing these companies and touring their facilities, we learned why China is a force that must be reckoned with. Although this article is by no means comprehensive, we hope it will provide a glimpse into a country that is becoming a significant player in the PCB market.

The Ying and Yang of Doing Business in China

With all of the rhetoric one hears regarding China's accomplishments, it is still a third-world country. In the three major cities we visited, the sun was dimmed by pollution that hovers above the smoke stacks. For every modern skyscraper, there were ten buildings that looked dubious in their architectural integrity. And despite the often-cited buying power of the "emerging" middle class, it is a slow emergence. Furthermore, many companies want to sell domestically, but the government in most cases applies export quotas to foreign companies to protect local industries until China is admitted in the WTO.

Beautiful Dalian sunsets are a sobering reminder of the industrial city's pollution.

Though China is still working on its warts, the company leaders we met had a strong entrepreneurial spirit. This is complemented by strong government support for business. There is no question that China will soon be a commercial superpower, and many companies are scrambling to get in on the ground floor. Nowhere is this more obvious then when you enter an "industrial zone."

China's PWB industry, according to Dr. Nakahara, consists of three geographic areas: Southern China, Shanghai and its surrounding region, and the rest of China. Currently, Southern China produces about 80% of an estimated $3.3 billion (2000) worth of printed circuits, the Shanghai area about 15%, and the rest of China 5%. By 2005, however, the total output of China's PWB production is expected to double, reaching $6.7 billion to $7 billion, with South China responsible for 60%, and Shanghai about 30%. The contribution from domestic fabricators will be small, with large PCB transplants from the U.S., Taiwan, Hong Kong, and Japan making the lionns share of the profits. To account for such growth in many different manufacturing sectors, China has established "Economic and Technical Developmental Zones" built to attract foreign investment.

In the Zone

In just 16 short years, Dalian's Industrial Zone went from open fields to skyscrapers.

Sixteen years ago, Dalian's nearby industrial zone was a sleepy farming community just south of the Korean peninsula. The Communist Party leader Deng Xiao Ping, seeing that China's future lay in engaging the West, proposed a series of "zones" that would serve as trial areas for foreign investment. The trade-off was simple: foreign investors would take advantage of cheap labor and raw materials while China would gain increased market share, an infusion of capital into a cash-starved nation, and most importantly, experience with many different kinds of industry.

(Left to right): Roy Sakelson, CircuiTree; S.R. Nair, ITN; Steve Gold, CircuiTree; and Fang Hai Yang, Dalian Zone Deputy Director.

The experiment worked. According to Fang Haiyang, vice president of Dalian's Developmental Zone, 51 such zones exist across China, with companies from 38 countries investing a total of $10.6 billion. In 1984, Dalian was chosen as one of the first areas to accommodate foreign investment through such zones. In just sixteen years, the fields surrounding Dalian now resemble the Manhattan skyline. Mountains provide a stark backdrop to this port city, and 28 square kilometers of the development zone's designated 50 square kilometers have seen construction. With five million residents, the city itself boasts seventeen universities, more than 300 scientific and technical research institutes, 150 state-owned enterprises, while the nearby development zone brims with over 1,300 foreign-funded businesses. Companies from Japan, Hong Kong, the U.S., South Korea and France are among the top investors in Dalian's development zone, making everything from printers to pharmaceuticals---to printed wiring boards.

'The World's Market'

(Left to right): Roy Sakelson, CircuiTree; S.R. Nair, ITN; Qu Lian Hu, DPMC President; Steve Gold, CircuiTree; and Joanna Yang, DPMC.

CircuiTree talked with Qu Lian-Hu, the president of Dalian Pacific Multilayer PCB Company (DPMC), one of Northern China's largest printed circuits manufacturers. Qu is among the new breed of entrepreneurs in Mainland China. He understands the nature of capitalism, and what it means to do business in a competitive field such as printed circuits. Qu was also quite open with us about his plans for expansion, and his desire to find more foreign investors who are seeking an opportunity to invest in China's electronics market. We asked him how the young PCB industry has changed since China began courting foreign investment, and what foreign companies could expect when doing business in China.

Qu has spent most of his career in China's PCB market, and said it is changing at an unprecedented rate. But it wasn't always so. Despite the promise of capitalism in the 1980s, the country's PCB market still consisted of state-owned enterprises focusing on the domestic market. Although it promised reform, the government moved slowly, and was wary of joint ventures that gave foreigners some authority over Chinese labor. But bureaucrats also knew they could muster significant investment only by relinquishing control of the majority stake.

(Left to right): DPMC President Qu Lian Hu, inspects PCB quality, accompanied by Quality Manager Joanna Yang, and General Manager Frank Sun.

As with most progress, Chinese entrepreneurs championed the change. Leaders in the Chinese printed circuit community like Qu helped to establish the Chinese Printed Circuit Association (CPCA) in 1990. They convinced the Communist Party members of the Dalian Development zone that joint ventures could work. "It's the world's market," said Qu recalling that time, "not just China's market." The Chinese would gain employment, learn skills and work with newer technologies, while the foreign investors made a profit from the cheaper labor and government subsidies. Today, companies like Toshiba and Pfizer have factories churning out products in Dalian.

In the Beginning

Advertisement

DPMC was one of the first foreign joint ventures in Dalian's development zone, established in December 1986 with an investment of just $3.6 million. "[In 1986], not many other companies had come to do business in Dalian," said Qu. "It was still an agricultural community, but that was changing quickly." DPMC started production in 1989, and by 1991 it was profitable. Out of 2,000 enterprises in Dalian's development zone, and the 5,000 companies in Dalian city, DPMC is among the top ten companies in terms of profit.

A DPMC employee uses Camtek's latest AOI equipment.

In 1998, Qu recognized the advantages of taking his company public on the Shanghai stock exchange. The company was also the first PCB fabricator in China, including Hong Kong and Taiwan, to gain ISO 9000 certification. Today, three-quarters of DPMC shares are owned by the government (Dalian Daxian Group), and the remaining shareholders of the company are foreign. According to Qu, the timing to invest in China could not be better, as "the government is beginning to concentrate on developing the electronics industry." As the market matures, Qu knows competition will only get more difficult, and he is making investments to become a global player. "In the future, we would like to go public in the U.S., possibly purchasing a quick-turn facility there," he said. "We have a strategic plan wenve implemented through 2005."

When asked how going public in the U.S. will help his company in China, Qu didn't hesitate, "More capital," he proclaimed. In 1999, DPMC spent $17 million on expansion. Last year, the company made $34 million in sales revenues, and it looks to sell $40 million worth of PCBs in 2001. With a mixture of double-sided and multilayer product, Qu believes his company can drive that profit margin even higher. Last year, DPMC made 600,000 square meters of boards, half of which were double-sided, and the other half multilayer PCBs. With more foreign investment, Qu is confident he can drive that number even higher.

Reaching Out and Touching Someone

China's developing infrastructure---especially the installation of phone lines and the PCBs the telephone switches require---allows fabricators like DPMC to thrive. According to Pyramid Research Inc. (Hong Kong), Beijing alone spent $40.6 billion in 2000 on its telecom infrastructure, and is expected to double annually through 2003. Furthermore, almost 95 million Chinese now use mobile phones, and China is expected to replace the U.S. as the world's biggest mobile phone market this year.

The building process fuels the market: as base stations and telephone lines go in, more cell phones can be sold and more PCs can connect to the Internet. Obviously, if DPMC can get just a small portion of this business, it will remain strong. "For example," Qu explained, "Shanghai-Bell started operations in 1987. From 1989-1992, [it] created 100,000 lines. Today, Shanghai-Bell produces 20 million lines."

Qu shared an anecdote illustrating the growth of China's telecom market. "When I was in the U.S. in 1986, I called the operator and asked her for China's country code. She knew Taiwan's, Macao's, Hong Kong's--- but not China's country code. At that time if you wanted to call China, you had to first make a country-to-country call, then province-to-province, then city-to-city, then the operator would put you through to your family or business. To get an [international caller identification number] was a complicated procedure. To make an international call, you had to apply to the communications bureau of China to make that available. Today, the situation is much different," he said with a large grin. "When you apply for your phone line, you have to specifically tell the bureau 'I don't want international access! I don't want long-distance! I just want local access!' In just ten years, there have been big changes," he laughed.

DPMC uses state-of-the-art drilling machines.

But Qu also knows that nothing is a sure bet, and he constantly looks for alternative industries, diversify his customer base. The automotive industry, computers and other electronic equipment are among the markets Qu and his staff are developing. DPMC exports approximately 40% of its boards, dividing the regions it serves into four categories: the U.S., Europe, China, and the rest of Asia. The diversity has already paid off. In 1997, Shanghai-Bell cancelled some orders, but DPMC kept the factory full by drawing on some of its European customers. And it works the other way. This year, DPMC expanded its capacity by $7 million in domestic orders, because the European market is slumping.

According to Qu, the need for telecom infrastructure in China is so great, an industry slowdown should not dramatically affect his production of PCBs for switches. "In the past, one phone line would do for one family," he said. "But now, due to Internet connections and fax machines, some Chinese businesses---and even families---might need two or three lines per dwelling. You can't imagine the need for phone lines in the rural areas of China. The potential market is huge."

Joint Ventures and Marriage

Whether he's courting investors or new customers, Qu was adamant that one negotiates with a long-term perspective in mind. "Doing business together is like a marriage," he began. "Both must rely on each other. If you want to get married, you must find the right partner. If one is too rich, and the other too poor, there will be disagreements on how to handle the money, and there will be fighting. . . . Business relationships, like marriage, should be considered for the long-term." Qu is practical regarding a potential partner, recognizing that companies like "Motorola and IBM," would not fit with "smaller fabricators like DPMC." Instead, he's looking for a medium-sized U.S. or European fabricator who seeks a partner in China.

DPMC's greatest challenge, growing its multilayer business by installing capacity, is also its greatest opportunity according to Qu. In 1999, DPMC produced 1.5 million square meters, with a ratio of 60% double-sided, and the remaining 40% multilayer. In 2001, Qu wants to change that ratio to just 20% double-sided, and the remainder in multilayer. Ultimately, he wants to produce 4.5 million square meters of boards annually.

Besides multilayer production, backpanels are also on Qu's technical roadmap. Last year, DPMC made $3 million by producing lower technology backpanels. In 2001, the target is $8 million. In 2002, Qu hopes that number will grow to $16 million. "If there are enough orders, we'll build a new facility dedicated to backpanels. We're planning on building a new factory in 2003, and it won't produce boards under eight layers," he said.

Responsible Growth

The recent downturn has punished fabricators who grew too quickly, anticipating orders that simply didn't materialize. Some large Taiwanese fabricators installed mega-facilities last year, only to watch orders fall by 40% or more. Mindful of this, Qu is determined to grow responsibly. "We strive for a balance between technology and capacity," he explained. "We do not seek orders at all costs; nor will we add capacity outside of our timeline simply to gain a large order. That is not prudent, and we will act more cautiously."

Qu believes that in the rush to penetrate the Mainland Chinese market, fabricators from Hong Kong and Taiwan expanded too fast. "It's easy to build a factory and fill it when you have guaranteed business over the short-term. But what about a longer-term perspective?" asked Qu incredulously. "It's easy to build, but difficult to maintain business. Factories will always cost money to maintain, whereas business is cyclical. You must grow responsibly, and thatns our attitude."

Viasystems' Chinese Adventure

While Qu's strategy is rooted in a joint venture where Chinese owners have authority, U.S.-based Viasystems is another story. Even before the Viasystems Richmond closure was announced, the company's Asian strategy was clear: it had already invested between $50 and $70 million in Chinese PCB and EMS facilities this year. Viasystems has seven manufacturing facilities throughout Asia, all located in China. The company has a total Asian workforce of over 10,000, and offers a full range of assembly and PCB fabrication services up to 16 layers.

According to company management, its Asian presence will continue to be expanded throughout 2001 in Taiwan as well as Mainland China to provide for local content requirements in those markets. "We have made substantial investments in China," Viasystems' Conlon told CircuiTree, "encompassing almost 2,500,000 square feet. In these facilities, we design, engineer, and manufacture full systems . . . cables, boards, backpanels, power supplies, metal racks and cabinets."

As other large EMS providers like Sanmina and Solectron are just starting to penetrate the Chinese market, Conlon proudly explained that his company ". . . has the largest electro-mechanical and PCB footprint of any CEM in Asia, and [and] we possess world-class engineering and manufacturing capabilities in the region." Though business has been down due to the financial woes of its customers, primarily telecom and datacom giants, Viasystems is poised to make great gains when their OEM customers recover.

Building the Foundation

Eric Fung (left), Viasystems' director of PCB sales and marketing; and Anthony Hoon, Viasystems Shanghai general manager.

Eric Fung, Viasystems' PCB sales and marketing director in Asia, gave us a tour of the company's newest EMS facility near Shanghai. Six months before it opened in March, the area was a maze of rice paddies. Today, it is a 150,000 square-foot EMS facility. The local government even built roads to the facility. But before he showed us around, Fung shared a bit of history regarding Viasystems involvement in China.

Viasystems acquired Kalex Printed Circuit Boards in August 1999. Before the acquisition, Kalex had been making PCBs since 1968 in the region, "so we have over 30 years experience making PCBs, starting in Hong Kong and then moving up to China," explained Fung. Before that, Viasystems itself had a small facility in Nantong, a little north of Shanghai, which did backplane assembly work.

The next big acquisition was the Marconi NC&S (Reltec) division. "Two facilities came along with that," said Fung. "The old Shanghai facility (Pudong), and also our Beijing facility." Since then, its facilities on the PCB side have all achieved ISO 9000, QS 9000, and ISO 14000 certification. Whatns more, the company is not done acquiring shops in Asia.

Economies of Scale Illustrated

Fung believes the future of electronics in China is very bright, and his company is taking the appropriate steps to establish relationships with major telecom and computer makers, like Nokia, in the Shanghai region.

Though its Asian Pacific headquarters are located in Tsim Sha Tsui, Hong Kong, the cheap labor and cooperative local governments make Mainland China a logical location for Viasystems' major PCB fabrication and assembly facilities. The company's two main PCB manufacturing facilities are located in Southern China, one in Zhongshan and the other in Guangzhou.

The company's Zhongshan facility, employing 3,500 people, makes double-sided to ten-layer product. Its monthly capacity is about 775,000 square feet per month, serving primarily the automotive and computer markets. According to Fung, there is plenty of room to grow. "We're only using about one-third of the available manufacturing area," he said. "We can expand if and when we need more capacity."

Perhaps more impressive is the facility Viasystems acquired from the Termbray Group, now known as Viasystems-Guangzhou. A mammoth five-story facility and campus, it employs 5,500 people, with a monthly capacity of approximately 1.38 million square feet of PCBs per month. "We make double-sided to 16-layer products [here]," explained Fung. The five-story building is about 200,000 square feet on each floor, with total available manufacturing space amounting to 1 million square feet. The campus also boasts many other capabilities that Viasystems hopes will attract more customers. "We have a cable harnessing operation, SMT operation, and we also have automotive customers' products running in the Guangzhou PCB side," said Fung. "When those customers require heat sinks for their products, we'll be adding that in Guangzhou also."

Before Viasystems acquired the facility, it was only using the bottom two floors. Since the acquisition, the company has already completed the third floor in the building, almost doubling its outerlayer capacity. "We'll outfit the fourth and fifth floors and, in addition, complete our nearby innerlayer production site," said Fung. "This year, we're increasing our innerlayer capacity by 60% so we can move up the layer count and support our customers with bigger and thicker boards. We want to go up to 36 layers in a year."

A self-contained facility, Guangzhou PCB operations are complemented by raw materials storage areas, employee dormitories, a wastewater treatment facility, and power generators. In addition, it also manufactures its own prepreg and laminate. "This way we have better control of the quality and supply," explained Fung. "Also, when the customers have very tight requirements, on controlled impedance or very thin innerlayer cores, we can have much better control on the material itself." Viasystems is betting that once the industry takes off again, it won't be threatened by laminate shortages.

Shanghai-Viasystems EMS Company

The 150,000 square foot Viasystems Shanghai EMS facility was built in just six months.

The Nanxiang-Shanghai facility we visited opened last March. It is a sprawling plant boasting 90,000 square feet for metal enclosure and integration, and about 40,000 sq. ft. for backplane assembly. The company also owns an open lot right next door that Viasystems can use if expansion is necessary. "We're using less than half of the 20 acres we currently own---probably one-third" said the facility's general manager, Anthony Hoon.

"This Shanghai-Nanxiang plant puts together all the capabilities that we had before into one facility," said Fung. "Basically we have backplane assembly, large format SMT line, metal fab, racks, sub racks, enclosures, we integrate the thermal management systems, power supplies, cable harnessing, and final systems test, and final logistics for [our] customers."

Although the plant's capacity was supporting less than half of what it's capable of assembling, Hoon said "we can improve that number by shift work, including Saturday and Sunday and increasing equipment. There is a lot more space for equipment."

When it came to Viasystems place in China, Fung was unequivocal. "No other company in Asia can tap into such an expertise in our own sister facilities ranging from bare board assemblies to our facility in Nantong, building backplanes up to 60-plus layers, the size of a big coffee table," he said. "We have the expertise on the PCB side and the EMS side, and can tap into very readily, just one phone call away. This gives our customers a lot of confidence in us. They don't have to worry about wondering of somebody is really capable, and maybe they are now, but what will happen when new technology comes around---will they be ready and willing to invest in that type of technology?"

Shanghai Hua Yin PCB Company: Taking 'Sides'

(Left to right): Shen Qian, SHPC technical department manager; Akram Zhou, ITN; Zhao Jin Kai, SHPC managing director; and Mao Ji Chun, SHPC vice managing director.

While many fabricators are anxious to make PCBs for the latest gadgetry requiring thicker boards and finer spaces, Zhao King Kai, general manager of Shanghai Hua Yin Printed Circuit Board Co. Ltd. (SHPC), knows the demand for home appliances---like TVs and washing machines---will not diminish any time soon. As many foreign-based fabricators in China spurn the single-sided market, Kai makes money by churning out simple boards and exploring other value-added areas as well. SHPC has added a number of services in addition to its PWB production, including CAD/CAM design, surface mount technology, and flexible circuitry.

Established in October 1996, SHPC is owned jointly by Nippon Technology Co. (Japan), Shanghai Xin Zhuang Industrial Zone, and Shanghai Chang Long Industrial Co. SHPC leadership used to work at the state-owned Shanghai No. 20, so the start-up went very smoothly. SHPCbegan producing PCBs in 1997 under this new joint venture. The company was ISO 9002 certified in March of 1999, and employs approximately 220 people.

SHPC's modest manufacturing area, 15,000 square meters, is almost entirely in-line single-sided board production. Half of the company's products are single-sided PWBs, with the balance made up of carbon film PCBs, carbon-through-hole, silver through-hole, and others. Kai takes pride in his operation's diversification; his boards go into televisions, computers, household appliances, automobiles, and an assortment of other products. Although SHPC claims to be the number one exporter of single-sided boards in Mainland China, it only exports 30% of their products, the majority of which are facilitated by ITN, a U.S.-based trader (see sidebar below). How do they remain number one? In a word, volume---the company has enough capacity to produce 600,000 square meters of boards per year.

An SHPC press operator removes a board.

Unlike the multinational Taiwanese, Japanese, European and American companies, who invest big bucks in Mainland China to produce multilayer boards, smaller shops like SHPC are still content to serve the single-sided market. According to Kai, "About 70 percent of the total PCB production is single-sided in China. Double-sided and multiple layer [production in the domestic market] started only recently."

As the Chinese PCB community grows and matures, Kai sees the percentage of single-sided board production decreasing in the next few years. Still, he believes SHPC is in a "very good position" because it will allow his company to pick up the orders that other PCB fabricators no longer desire.

Sidebar: International Technologies Network: Bridging the Gap

In a country where relationships are a key factor in the success or failure of a joint-venture, investors often seek the advice of organizations that can speak the language, understand the culture and, most important, capitalize on established relationships with Chinese PCB fabricators. One organization we met with in Bejing, International Technologies Network Inc. (ITN), is a Los Angeles-based consulting firm with offices in Bejing and Istanbul, specializing in consultation, venture-developing, and trading in China. ITN's principals have been active around the world, including China and Hong Kong, during which time they have set up three high-tech project's, including China's first ISO-9000 certified PCB shop, and also a laminate plant in Dalian's Industrial Zone, which was sold to Polyclad Laminates, Inc. in July 1995. To learn more about how to invest in China's PCB industry, call 805-777-7155 or visit www.itnusa.com.

Though each of the three companies we visited are pursuing different markets with different strategies, they still share common ground. Each has recognized that China is not just a low-cost manufacturing center. It is also a capitalist's dream end-market. And as for the rhetoric coming from Washington and Bejing, one thing is clear: only by engaging the Chinese, politically and economically, will both sides get what they want: greater freedom and prosperity for all.