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GE chief gives vent to frustration over China

July 1, 2010

By Geoff Dyer and Guy Dinmore published July 1 2010

There have been plenty of signs in recent months that the corporate world is falling out of love with China, but none more revealing than Jeff Immelt’s remarks on a Roman summer evening. The General Electric chief executive told Italian industrialists at a dinner on Wednesday that he was worried about the way Beijing was treating foreign companies.

“I am not sure that in the end they want any of us to win or any of us to be successful,” said the man who runs the largest manufacturing company. The comments are one of the first public declarations of what many foreign executives have been saying in private over the past six months: that they are being gradually squeezed out of the Chinese market as local companies increasingly get the nod.

Such views are by no means universal.

Many foreign groups sell consumer products, from cars to soft drinks, in China and cannot produce goods fast enough to meet demand as prosperity spreads across the country.

Yet companies whose main clients are some branch of the Chinese state and who face competent local competition are crying foul ever more frequently.

Foreign business organisations have been unusually vocal about what they contend is growing local protectionism.

“After 30 years of progressive market reforms, many foreign businesses in the country feel as though they have run up against an unexpected and impregnable blockade,” Joerg Wuttke, former head of the European Chamber of Commerce, complained in the Financial Times in April.

The American Chamber of Commerce in Beijing has made similar statements, while a new survey of European companies released this week by the European Union Chamber of Commerce in China showed that almost half expect even more problems with regulators during the next two years.

The shift in the atmosphere has complicated roots.

Some blame government rules on technology transfers that have long been in the works but which are only now beginning to bite.

Others say the change reflects a post-financial-crisis political climate where the Chinese state feels emboldened.

The Chinese government has also tried to address some of the concerns.

Wen Jiabao, the premier, met a delegation of European companies in April, and contentious rules on public procurement have been modified.

Yet Mr Immelt’s criticisms are symbolic given that GE has for years been a cheerleader for the potential of the Chinese market and has even boasted about the strategy of alliances it has put in place in the country.

“I don’t think anybody has played China better than GE has,” Mr Immelt said late last year.

In a speech at West Point last December, Mr Immelt was full of praise for China’s industrial planning.

“They do exactly what they say they will do,” he said of China’s leaders.

“They will likely be the biggest economy in the world some day. Man, these guys are good.”

The company has invested heavily in China, where it employs about 13,000 people and which contributed $5.3bn to last year’s revenues.

Last year it set up a joint venture with China’s main aircraft manufacturer to produce avionics systems for the global market, while another with Shenhua Group focuses on coal gasification projects.

GE has gone out of its way in China to be considered a good corporate citizen.

It has established one of its four global research facilities in Shanghai, where it has 20 different laboratories working in such areas as digital electronics and medical imaging.

GE was one of the main sponsors of the Beijing Olympics, at a cost analysts estimated at $70m, and has been one of the biggest contributors to the US pavilion at the Shanghai Expo.

But GE is competing for business in some of the more controversial areas of public procurement.

Foreign producers of wind turbines have complained loudly during the past year that the rules surrounding China’s investment in wind energy favour local manufacturers.

Chinese companies have been big winners in the rapid expansion in high-speed railways and purchases of power equipment.

The frustrations that foreign companies in these areas have faced during the past year could explain why Mr Immelt’s views on China seem to have soured.

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