In­fra­struc­ture seen as key to fu­ture

Gen­eral Elec­tric views China as a pri­or­ity mar­ket even as growth con­tin­ues to slow, Zhang Haizhou re­ports.

China Daily (Canada) - - EXPATS -

While some peo­ple are un­cer­tain about prospects in China as its econ­omy changes, John Rice is not among them.

“Our feel­ing about China stands on the fact that it is go­ing to be the world’s largest econ­omy, and the de­mand for in­fra­struc­ture will con­tinue to be enor­mous,” he told China Daily in Hong Kong.

Rice is the vice-chair­man of Gen­eral Elec­tric, or GE, one of the big­gest com­pa­nies in the United States.

From its beginnings in the 19th cen­tury as a maker of elec­tri­cal ap­pli­ances, GE has be­come a multi­na­tional con­glom­er­ate with in­ter­ests in a di­verse range of sec­tors from phar­ma­ceu­ti­cals to avi­a­tion.

The con­fi­dence that the com­pany has in the Chi­nese mar­ket can be seen by the fact that all of GE’s busi­ness units have set up oper­a­tions in China, cre­at­ing to­tal in­dus­trial or­ders of $7.8 bil­lion in 2014.

And the con­fi­dence that the con­glom­er­ate has in China has been re­turned by some se­nior Chi­nese busi­ness fig­ures.

Liu Chuanzhi, founder of PC gi­ant Len­ovo, said on Chi­nese tele­vi­sion re­cently that a trip to GE’s study cen­ter in the US in the 1990s pro­vided the in­spi­ra­tion for the growth and di­ver­si­fi­ca­tion of Len­ovo in re­cent years.

GE in China pro­vides tech­nolo­gies and prod­ucts in­clud­ing air­craft en­gines, gas tur­bines, med­i­cal di­ag­nos­tic equip­ment, turbo ma­chin­ery and drilling tech­nolo­gies for the oil and gas in­dus­try, en­ergy man­age­ment for rail and min­ing, light­ing, and equip­ment leas­ing.

Rice said Chi­nese cities, es­pe­cially the big cities on the east coast, still face “all the chal­lenges” that go with ur­ban­iza­tion.

In fact, it is this need to im­prove in­fra­struc­ture that is a key rea­son why Rice re­mains con­fi­dent about the Chi­nese mar­ket, even as the growth of the world’s sec­ond largest econ­omy has slowed.

China’s fac­tory ac­tiv­ity slowed in Novem­ber as do­mes­tic and in­ter­na­tional de­mand re­main slug­gish, and win­ter is nor­mally a slack sea­son for pro­duc­tion.

The na­tion’s econ­omy ex­panded 6.9 per­cent yearon-year in the third quar­ter of 2015, the low­est read­ing since the sec­ond quar­ter of 2009.

“For a com­pany like ours that is con­cen­trat­ing on the tech­nol­ogy in­fra­struc­ture busi­ness, China will be the pri­or­ity mar­ket,” Rice said.

“It has to be the pri­or­ity mar­ket if you are do­ing in­fra­struc­ture busi­ness.”

GE is “do­ing a lot more” not just in China, but also work­ing with Chi­nese com­pa­nies out­side the coun­try, he said.

This comes at a time when Beijing is push­ing for­ward the Belt and Road Ini­tia­tive, which aims to im­prove trade and in­fra­struc­ture along the his­tor­i­cal land and mar­itime Silk Road routes.

In Pak­istan, for ex­am­ple, GE an­nounced in late Oc­to­ber that it will pro­vide two high-ef­fi­ciency gas tur­bines, the largest of the kind in the world, and as­so­ci­ated equip­ment to Harbin Elec­tric In­ter­na­tional of China, a long­time busi­ness as­so­ciate.

HEI will han­dle engi­neer­ing, pro­cure­ment and con­struc­tion of the plant in Pun­jab. The ef­fort will help avoid the elec­tric­ity black­outs that plague the na­tion and meet the power needs of nearly 190 mil­lion peo­ple.

Rice said the project is “a per­fect ex­am­ple” of how GE can work with Chi­nese com­pa­nies in over­seas mar­kets, par­tic­u­larly along the Belt and Road re­gion.

“The world will be not well served if a bil­lion-and-a-half peo­ple con­tinue to lack the ba­sics, if we con­tinue to un­der­spend on in­fra­struc­ture in­vest­ment,” he said.

“So I wel­come any ideas and any ini­tia­tives that will un­lock the po­ten­tial, and we are happy to work with Chi­nese com­pa­nies.”

GE’s in­vest­ment in China and with Chi­nese com­pa­nies comes at a time of flux for the com­pany as it re­views its as­sets and di­rec­tion in the af­ter­math of the global fi­nan­cial cri­sis.

The com­pany is “in the mid­dle of re­fo­cus­ing around tech­nol­ogy in­fra­struc­ture”, Rice said, and is mov­ing out of the fi­nan­cial ser­vices sec­tor.

“Post-fi­nan­cial cri­sis, with new reg­u­la­tions and com­pli­cated reg­u­la­tory en­vi­ron­ments around the world, it’s just not the best busi­ness for us to be in,” he ex­plained.

“Ba­si­cally, we rec­og­nized the com­bi­na­tion of fi­nan­cial ser­vices and in­dus­trial busi­nesses which worked so well in the 80s and 90s.”

Rice quoted GE’s an­nounce­ment in April to say the size of its fi­nan­cial ser­vice busi­nesses will prob­a­bly drop to be­low $100 bil­lion “some­time be­tween now and the end of 2016” from around $600 bil­lion of fi­nan­cial ser­vice as­sets.

To this end, GE agreed to a va­ri­ety of as­set sales last year as it pulled back from bank­ing and fi­nanc­ing that is not di­rectly re­lated to its in­dus­trial busi­nesses.

Ear­lier in De­cem­ber, for ex­am­ple, the com­pany an­nounced that it had signed a mem­o­ran­dum of un­der­stand­ing to sell its equip­ment fi­nance and re­ceiv­able fi­nance busi­nesses in France and Ger­many to a unit of Credit Mutuel of France.

Such stream­lin­ing, and the re­sult­ing re­newed fo­cus on in­dus­trial and tech­no­log­i­cal in­fra­struc­ture, make the com­pany an even bet­ter part­ner for China and Chi­nese busi­nesses to work with for im­prov­ing con­nec­tiv­ity across the re­gion.

Zhang Yidi con­trib­uted to this story.

Con­tact the writer at zhang­haizhou@chi­nadaily.com.cn

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