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The Business End

American Director Julian Schnabel arrives for the screening of the film "Le Scaphandre et le Papillon" at the 60th International film festival in Cannes, France, on May 22, 2007.
AP Photo
The Pentagon Wednesday cancelled a planned news conference to discuss a plan to ease its "Made in the USA" rule to buy hundreds of thousands of military berets from China and other countries.

The press event was called off because of worries the fallout over the collision between an American spy plane and a Chinese jet.

The beret deal is just a small part of the massive and growing trade between America and China, which with 1.3 billion people makes a very tempting market. Foreign imports to the country have more than tripled in the past decade, reports CBS News Business Correspondent Anthony Mason.

"The Chinese economy is by some measures the third largest economy in the world," said Robert Kapp, who heads the U.S.-China business council. "Any American business that is involved internationally … looks at China and asks itself … 'Is this a place we can ignore?' And increasingly American businesses say 'No, it is not a place we can ignore.'"

When UPS launched the first direct cargo flights to China this week, the company predicted it could bring them another $100 million in business.

"We've been in China for 13 years and our growth last year was 45 percent. So China is a great place to do business," said Mike Eskew of UPS.

However, government intrusion still makes it difficult to do business in China. The state still controls many industries and can easily redirect lucrative contracts to other countries. That's why the latest diplomatic incident could have economic side effects.

"If it poisons the atmosphere severely it could mean the Chinese would be less forthcoming on particular deals," said Harvard University's Joseph Nye.

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Full Coverage
  • Our Regrets
    No apology from Powell.
  • So Far, So Good
    Foreign policy crisis.
  • Beijing's Balancing Act
    Tempering the response.
  • Caught In The Middle
    Crew's families worry.
  • Names Of The Crew
    A full list
  • China-U.S. Ties
    An interactive look
  • However, China also has a lot at stake in its relationship with American businesses. Its economy needs U.S. investment to keep growing: The U.S. is its second-largest trading partner, buying nearly 20 percent of all Chinese exports.

    "There's danger of using business to express your displeasure," said Nye. "'Cause you may wind up sort of cutting off your nose to spite your face."

    China has already been hurt by the slowdown in the U.S economy. Last month, china's foreign trade minister said he was "deeply concerned" that orders for computers and telecommunications products had fallen 20 percent.

    China's anger over the crash and its hopes for increasing trade and growth have been reflected in peoples' reactions to the collision, reports CBS News Correspondent Barry Petersen.


    Click here to learn more about the crash and the controversy.

    State television has featured anti-American interviews. In one, a woman told viewers that, "when I heard that a spy plane crashed into our plane, I was angry. The news is shocking. This is totally wrong. This is simply U.S. strong-arm tactics."

    But a man in Beijing suggested the Chinese are ready to move forward.

    "George Bush has the wrong view of us," he said. "We want friendly relations. What we've got is a cold war mentality."

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