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GE boosts presence in China
Publication Date : 03-01-2014
As the world's leading technology and infrastructure company, GE has been focusing on aviation, healthcare and energy in China. In its efforts to speed up expansion in the country, GE has launched a global offshore and marine organisation to tap into the marine industry.
"We think globally. The way we like to think about the shipbuilding industry is: we power, we propel and we position," said Mark Hutchinson, president and CEO of GE Greater China.
Although China is the biggest shipbuilder in the world, it is more involved with low-end vessels or freighters, said Hutchinson.
But in the last couple of years, it has been moving up the value chain and started to focus on building high-tech ships, he added.
GE exhibited the three key innovations in its marine business - power, propel and position - at a trade fair in Shanghai in December.
For power, GE designs both diesel engines and gas turbines. Offering low emissions, rapid start-up and fuel flexibility, the gas turbine is widely used in commercial ships. For propel, it provides a new control system that is easier to operate. On positioning, it has a dynamic system that is more functional and "mariner friendly". It has also adopted a new human-machine interface with a control panel that is easy to view and understand.
Hutchinson said GE is putting a big emphasis on being a player in the marine industry in China.
"We do a lot of partnerships with local ship owners, the oil companies, and try to figure out how we can innovate together."
The management team at GE has studied China's Five-Year plans and come up with three major focuses for their own plan in the country.
One is aviation, which can help China improve its mass transportation system.
"We do a lot of work with the Chinese airlines, bringing state-of-the-art engine and avionics technology, particularly fuel saving innovation with lower emissions," the CEO said.
The second focus is medical services, especially medical devices.
GE has been doing business in the country for more than 100 years. Hutchinson said it is an interesting market because big hospitals in Beijing and Shanghai use all kinds of leading technologies.
"As the quality of healthcare improves in more rural hospitals, you can't do it the same way because you got to have more accessible, affordable machines. We therefore have a huge focus in China on new technology for the rural healthcare market," he said. "We originally designed the devices for China, but we are now selling them around the world."
The third GE focus is energy. China is now rebalancing its energy portfolio, getting away from coal and turning to renewable energy, particularly gas.
GE is the biggest producer of gas and wind turbines in the world.
"We provide all the equipment to big oil and gas companies. So anything related to extraction and power generation, we do that. We have a really balanced portfolio in the gas energy space," he said.
He also views the country's urbanisation as a great opportunity to expand.
He said the enormous population that will be urbanised in the next 10 years will bring a large demand for better infrastructure such as healthcare, power and "particularly off-grid power".
"As the cities build out, they want to do it in a cleaner way and they want to have better healthcare facilities, better infrastructure like airports.
So the three focuses fit extremely well into China's plans to continue to urbanise," he said.
Growing by double-digits, GE now generates over US$7 billion in sales revenue in China. It also sources a lot of products locally for its global supply chain.
"We source nearly US$6 billion (in products) from China. Sourcing is very important. It also has a huge multiplier effect on the economy," said Hutchinson.
The Chinese market contributes about 7 to 8 per cent of the company's global sales revenue.
He said the Chinese market is the most important for GE over the next 10 years, and the company is very focused on growing its capability in the country.
It spends about 6 per cent of revenue on R&D and has five global research centres, one of them in Shanghai.
The China team works on products for both the global and local markets.
In the past few years, GE has invested several billion dollars in innovation centers in Xi'an and Chengdu. It will open two more soon.
Hutchinson also noted the importance of China moving up the value chain. "If it does not it will be priced out by other countries," he said.
The nation must innovate through the "mid-income trap", said Hutchinson, a situation where a country is stuck in the middle-level income and cannot move forward to become a high-income country.
To achieve that, he said, talent is very crucial.
"University training is critical and so is huge investment in R&D. If you look at industries such as the marine and aviation, pharmaceuticals, biochemicals, and biotech, innovation will only be driven from China if it encourages investment in R&D and focuses on talent development," he added.