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