GE China capitalizes on environmentally-efficient products
According to GE China President and Chief Executive Officer Mark Norbom, China is in the process of evolving from a low-quality product manufacturing center into a high-quality one, in which he sees vast market potential by bringing into the nation his company's environmentally-efficient products and services.
"If you look at some of the measurements, such as the purchasing managers' index, they are all heading in the right direction, with China's exports rising for the first time in December. So now I can absolutely see a recovery starting to happen in the manufacturing sector of China," he said in an exclusive interview with China Daily.
"Like Japan, which started initially as a low-cost product base globally, China is moving towards better and higher quality product manufacturing a leader in technology development and research."
US conglomerate GE is viewing China not only as a manufacturing hub and sourcing center but also as a base for product innovation and research and development (R&D). Last year it spent 4.5 billion U.S. dollars on product sourcing in China.
So far, among the 13,000 people GE employs in China, 2,000 are focused on R&D and product innovation.
For example, the company developed a new near-shore wind turbine specially for the Chinese market.
Norbom hailed China's 4-trillion yuan economic stimulus plan as "well-targeted" and "fast to the market".
He said: "You can judge it from the annual GDP growth of 8.7 percent China obtained last year. That speaks for a success." He forecast the nation's economy could grow faster at 9 to 10 percent in 2010.
He said all of GE's infrastructure business in China had seen an increase in opportunities.
In addition, because part of the stimulus program was targeted towards technology, particularly in environmental areas, it benefited Ecomagination, a business initiative GE launched in May 2005, to address worldwide environmental challenges. This involved launching more than 80 products and services focused on being environmentally efficient in areas such as clean coal, water treatment and the wind business.
GE pledged to increase the revenues in its Ecomagination drive to more than 25 billion dollars by 2012, and double its R&D spending to 1.5 billion dollars per year on environmental projects.
It also vowed to reduce greenhouse gas emissions, make water usage in its internal business operations more efficient, and help improve public awareness "to make sure everybody becomes more aware of the need for environmentally-efficient products".
Last year, revenues from Ecomagination products sold in China reached 953 million U.S. dollars, ranging across products such as the world's most environmentally efficient aircraft engines to energy and water treatment equipment.
In his view, there is no "offsetting" between obtaining higher GDP growth and cutting pollution because of the tremendous economic boost globally in the area of green technology development.
"I think the biggest way to balance these two goals is to put a big focus on developing environmental technology and products. Entering into partnership with GE will help accelerate such efforts," he said.
"We have a lot of technologies and we are ready to bring them in by working with industry-leading Chinese companies. It's our objective to work with them to go after the China market and go global together," he said.
For example, the company is working with the China South Rail Group and China's Ministry of Railways to go after locomotive engine production, and tapping potentially high-speed rail opportunities in the US.
It has also worked with China's State Grid Corp on the transmission and distribution side of Smart Grid applications.
GE also signed an agreement with Shenhua Group to work on clean coal projects together.
In the aviation sector, GE signed an agreement in December last year with AVIC to build avionic products, potentially targeting China's C919 jumbo jets.
It is also working with Shenyang Blower Works Group (SBW) in the area of oil, gas and pipeline compression equipment.
Clean coal is one area GE is interested in. Currently more than three-quarters of China's energy consumption is coal-based and it is the biggest cause of greenhouse gas emissions in the country.
With China not moving away from coal any time soon, how to address the problem of emissions is posing a big problem for the nation.
GE offers a "gasfication" technology, which turns coal into gases and burns them in an efficient manner, rather than just burning the coal. With its leading technology in clean coal, GE has applied gasfication technology through licensing agreements with 40 power and coal-chemical facilities in China.
Looking forward, Norbom said there was one exciting area that he wanted to promote in China. It involves bundling all the GE products and services together and providing integrated packages to cities seeking greener, more sustainable development, instead of going after individual industrial projects.
Through all these innovative products and services, the business for GE in China may grow at a range between 20 to 25 percent in 2010 because "our portfolio of products fits well with what China needs today".
GE obtained a sales growth of 18 percent last year in China, with its mainstream infrastructure business rising by 26 percent.