GE takes long term view in China

11 May 2012

BEIJING: General Electric, the US conglomerate, believes taking an innovative, flexible and long term approach will be essential to succeeding in China.

The firm anticipates its sales in this market should rise by 15% in 2012, roughly tripling China's forecast GDP growth, not least thanks to the government's on-going emphasis on infrastructure projects.

John Rice, GE's president of global growth and operations, told the China Daily that fluctuations in performance were still probable, but the broader outlook remains extremely positive.

"Although in any quarter you could see a challenge in the business, in the long run we believe China will be the world's largest economy, making it a place where companies have to take a long-term view," he said.

Further obstacles that follow on from trading in China include an uncertain regulatory environment covering areas such as joint ventures and intellectual property.

"But I feel it in other countries too. Sometimes the decisions that the government makes aren't always clear to people like myself," said Rice. "We have to be agile and flexible in our business model in terms of how we participate into the Chinese economy."

The multinational corporation generated revenues of $5.7bn in China last year. Of this, GE's industrial-led units delivered $4.9bn, just 9% of the global returns for this aspect of its activity.

Operating costs are also rising, but GE does expect overseas players to gain greater freedom to take on projects in the energy and transportation sectors, where it is strong.

"I think it's important for us to focus on the creation and competence abilities in the work we do in China, which would ensure that we could offset inflation and the cost of higher wages with productivity and other advantages."

Innovation will be a key component of GE's strategy in China. It currently runs two R&D centres, in Chengdu and Sichuan, with a new site planned to open in Xi'an in July.

"The Chinese market is one of the most important markets that we have in the world. It's important because of the size of the market, but also because of the thought leadership that takes place here," said Rice.

Expanding its geographical presence through western and central China, which are attracting growing numbers of brand owners, is vital to GE's prospects, he added.

"You have to be there, to be an investor and know the local government, the mayors, and the provincial government. That's what is going to determine our success in China over the next 50 years," said Rice.

Data sourced from China Daily; additional content by Warc staff