Foreign companies want to use China's joint venture global Nuggets
2021-05-26 14:05:48
Over the years, foreign companies have been working with Chinese companies to enter the huge Chinese market. Now, the largest companies in the world are taking the second step and integrating some of their global operations into joint ventures with Chinese companies doing business globally. This move is risky, but it may also pay off.
Lin Zuoming (left), general manager of Aviation Industry Corp. of China, and Jeffrey Immelt, chief executive officer of General Electric Co., announced plans to establish an avionics joint venture last year.
General Electric Co. (GE) is about to complete a plan to establish equal equity joint ventures with a Chinese military aircraft manufacturer, specializing in the production of electronic brains for aircraft - avionics. The deal with China Aviation Industry Corporation will enable GE to engage with the Chinese government in a project that aims to challenge Boeing Co. and Airbus in the civil aircraft market.
General Motors Co. has established a joint venture with Shanghai Automotive Group Co., Ltd., its long-term partner in China this year, to manufacture and sell Wuling brand low-price minivans in India, and eventually to Southeast Asia and other emerging markets.
The two deals show the growing ambitions of Chinese companies to go global and their growing influence on foreign partners. In order to achieve GE's transaction, GE chief executive Jeffrey Immelt made an extraordinary compromise and agreed to integrate GE's existing global business of non-military avionics equipment into this joint venture company. General Motors contributed technology in its trading, manufacturing facilities in India and used its Chevrolet brand name in India.
There are multiple motivations behind the promotion of China’s foreign partners to achieve global transactions, which was unthinkable a few years ago. Large companies supported by the Chinese government now have greater financial resources and increasingly powerful political influence, allowing them to become attractive partners abroad. In addition, the Chinese market has become extremely important to the success of multinational corporations, so Beijing can conduct stronger bargaining.
However, there are risks in this kind of transaction. Due to concerns that Chinese companies will become a strong competitor of partners after acquiring Western technology and knowledge, some of the joint venture companies established in China earlier suffered miscarriage.
Raymond Tsang, a partner at consulting firm Bain & Co in China, said that foreign partners are realizing that they sometimes have to sacrifice or share the benefits of global markets with Chinese partners; some multinational companies complain, but Given that market conditions are constantly changing, if you do not do this, your competitors will do so.
Large energy companies have also been fighting for international deals with Chinese companies. China has already replaced the United States as the world’s largest energy consumer, making access to the Chinese market crucial for global companies. Foreign companies hope that joint efforts with Chinese companies overseas will be beneficial in this regard. Foreign companies provide technology and experience, and Chinese partners provide geographical geopolitical influence, low-cost labor, and easy access to the reputation enjoyed by companies supported by the Chinese government.
The state-owned China National Petroleum Corporation is the first foreign oil company to sign an important contract in Iraq. BP PLC last year cooperated with PetroChina to invest US$15 billion to increase the output of Rumaila's large oil fields. This summer, Royal Dutch Shell PLC and PetroChina, a listed subsidiary of PetroChina, spent $3.15 billion to acquire the assets of Australian energy company Arrow Energy Ltd.
China has spent large sums of money in some resource-rich developing countries to invest in infrastructure projects, which to a certain extent have helped China to have a greater influence in those countries where these US companies do not have a solid foundation. It can also help arrange transactions in countries with which it has good relationships, such as Venezuela and Myanmar.
In the field of financial services, foreign banks have long been eager to enter China's rapidly growing securities industry. In recent years, China has allowed some companies to enter the domestic market through joint ventures, and the proportion of foreign ownership in joint ventures must not exceed about 33%. Chinese regulators also set limits on the types of securities businesses that foreign companies can participate in.
Credit Agricole SA has already participated in such a joint venture through CLSA Asia-Pacific Markets, its Asian brokerage division, but its business in China is not large. In May, CLSA announced that it has reached a preliminary agreement with China's state-owned Citic Securities Co., and the two parties will form a joint venture overseas. The French company plans to contribute to CLSA Asia Pacific and several other international businesses. CITIC Securities will contribute a small international subsidiary in Hong Kong. Crédit Agricoles hopes that helping CITIC Securities achieve its international ambitions will enable it to expand its business in China.
However, the progress of the negotiations was not as fast as expected. The two companies said this month that they have reached an agreement on certain key terms, but the deadline for reaching the final transaction was extended from the end of the year to June 30. They did not explain the reason for the delay.
The development of some joint ventures in China is not smooth. The reasons include the conflict with local partners, or this partnership has enabled Chinese companies to acquire sufficient industry knowledge and become new competitors for Western partners.
For example, Kawasaki Heavy Industries and Siemens AG have collaborated with Chinese partners to help build China's high-speed rail network. Now Chinese companies compete with them in the fight for international contracts—the products they use depend at least in part on the skills of these foreign companies. After a public quarrel over human criticism, France’s Groupe Danone SA received a cash payment last year, ending a joint venture with China’s Hangzhou Wahaha Group Co. The French company claims that Wahaha’s boss produced and sold a Wahaha-branded beverage that would have been owned by the joint venture through another network he owned. Wahaha denied this allegation.
Jim Wasson, president of Growth Strategies International LLC, an aerospace and defense consultancy, said GE's avionics deal with AVIC is also vulnerable. Watson, a former GE aviation executive, said that the concern is that once AVIC has mastered enough technology, they will kick in (GE) and go it alone.
Lorraine Bolsinger, chief executive of GE Aviation Systems, acknowledged GE's concerns about technical protection. When she talked about the proposed deal, she said that it was highly controversial. She said it was our conservative technicians who thought that we had a lot to protect. She concluded by saying that when we and China jointly create intellectual property, we will certainly protect this property.
Recently, large Chinese state-owned enterprises that can obtain low loan costs and other government support measures have stepped up their efforts to dominate the industries that GE and other companies see as growth opportunities, ranging from clean technologies to turbines.
Even so, GE still has high expectations of China, so that Immelt called it "our second domestic market." Immelt said two years ago, China's income by 2010 It will double to reach 10 billion U.S. dollars. However, last year its revenue was only 5.3 billion U.S. dollars.
GE's cooperation with AVIC is seen as an opportunity to boost its avionics business. In this area, it lags behind Honeywell International Inc. and Rockwell Collins Inc. The planned joint venture will have its headquarters in Shanghai. It has been selected as the relevant supplier for the China-developed C919 aircraft, and this model may have a dominant position in the Chinese civil aviation market. Boeing predicts that the Chinese civil aviation market will be worth more than 400 billion U.S. dollars in the next 20 years, second only to the United States.
According to GE experts, the company asked AVIC to make a cash investment during the negotiations to match the value of the technology provided by GE. If the final deal is finalized, GE’s existing and future civil aviation electronic contracts will be owned by the joint venture. Negotiations should have been completed by mid-2010, but the negotiating parties currently hope to complete them by the beginning of 2011.
GE executives said that the deal with AVIC is their closest cooperation with Chinese partners so far. GE’s 45 people are currently involved in the project in China. Even before the final clause dust is settled, it will recruit or deploy hundreds of people to China.
In addition to producing civilian products, AVIC also manufactures fighter jets and helicopters. It has the ambition to go abroad. The company said in a statement that there is no regional market for the aviation industry, only a global market. The statement also stated that AVIC's development strategy is to actively integrate itself into the global aviation industry's industrial chain and become a truly global company.
Last month, China demonstrated the first equal-scale model of the C919 large passenger aircraft. Other foreign companies have negotiated with other similar joint venture companies for the production of other spare parts for the passenger aircraft.
Rockwell Collins of the United States has a joint venture in China for the production of communication systems for the C919. Kent Statler, Rockwell Collins’ executive vice president, said that our hopes and desires are that this joint venture can maintain a win-win partnership and benefit both parties, but we should not be too naive We know that the joint venture may become our competitors.
For GM, the stakes are particularly significant because China became the world's largest car market last year.
As early as 1997, General Motors had decided to invest more than one billion U.S. dollars to establish a 50-50 joint venture with SAIC to produce Buick cars. At the time, this was seen as a risky move because at that time China's car sales had not taken off. According to consulting firm IHS Automotive, GM’s Chinese joint venture is expected to sell nearly 2.27 million vehicles in China this year, while GM sold only 2.18 million vehicles in the United States this year.
GM’s recent sales growth in China has been attributed to its second joint venture with SAIC and another Chinese company in 2002, namely SAIC GM Wuling Automobile Co., Ltd. The company’s van, which sells for only $4,500, is popular in small towns in China. Last year, SAIC-GM-Wuling became China's first car brand with annual sales of more than one million. This year, its sales volume is expected to account for nearly one-sixth of the global car sales. Last month, GM and related parties reached an agreement to acquire SAIC-GM-Wuling’s 10% stake from SAIC-GM-Wuling’s third investor for US$51 million and increase their stake in the latter to 44%. SAIC holds 50% of the joint venture.
General Motors has also established a joint venture in India and it has been in operation since February of this year, which is part of the efforts of GM-China SAIC to replicate its Chinese-style success in other markets. The car produced by the joint venture will be based on the GM Wuling van, but will be sold under the Chevrolet brand. In announcing the signing of a joint venture agreement, an executive from General Motors said that in establishing this joint venture in India, GM has contributed its own brand, Indian factory and dealer network, and SAIC Motor has provided about 300 to 350 million U.S. dollars in funds. .
Kevin Wale, president and general manager of General Motors China, said that we believe that the business model formed with SAIC in China and our product lineup in China are very mature and can be exported to other markets in the world.
General Motors and SAIC have already made less ambitious attempts to join overseas markets. Both will export the Chevy Sail sedan designed and manufactured in China to Chile and Peru, and are jointly developing new models that can be sold globally, such as Buick LaCrosse, which is a Shanghai-based company. The cars jointly developed by the team and the Michigan team in the United States are sold in the Chinese and U.S. markets.
The agreement to reach a joint venture in India has allowed GM and SAIC to take a step forward and no longer just transport co-produced cars overseas. General Motors and SAIC executives and engineers will be stationed in India, responsible for the joint venture's automotive design, production and localization marketing. SAIC's current experience in this area is almost a blank.
For GM, the risk of doing so is that the joint venture will make SAIC better positioned to compete with GM in overseas markets.
SAIC has grown into a powerful company in China, partly because it seeks advice from General Motors. SAIC launched its own brand, Roewe, in China in 2006. Currently, this car competes with Buick, which is jointly manufactured by SAIC and GM, for the domestic market. Roewe is based on technology obtained from MG Rover Group Ltd., which is no longer in existence. SAIC inherits the brand MG Mingju. According to data from JD Power & Associates, an automotive research company, Roewe sold 146,323 units in the first 11 months of this year, and sales rose by 78% from the same period last year. Although Buick sales in China are basically three times that of Roewe, the growth rate over the same period is only one third of the latter.
Michael Dunne, president of Hong Kong investment consulting firm Dunne & Co., is a veteran of the automotive industry. He said that Roewe can not only be comparable to similar products, but also lower prices, this car is grabbing the market share of General Motors and other manufacturers.
Last year, General Motors agreed to transfer its 1% stake in Shanghai GM to SAIC, allowing the latter to obtain a 51% stake and actual control of the joint venture company. General Motors said at the time that the move would make it easier for the company to obtain loans from Chinese banks and lay the foundation for increasing its stake in SAIC-GM-Wuling. Shanghai GM is GM's major joint venture in China.
GM said last month that it is working with SAIC Motor to sell SAIC's MG-branded cars through its former sales channels all over the world. A person familiar with GM revealed that this may open the door for SAIC to enter the British market. Britain used to be the headquarters of MG. In addition, at the time of GM’s IPO last month, SAIC also spent US$500 million to purchase 1% of the former’s shares.
Michael Robinet, a senior analyst at consulting firm IHS Automotive in the United States, said that SAIC Motors has been poised to face Western countries. I have no doubt that both MG and Roewe will become SAIC's overseas players. A very good springboard for the market.
Lin Zuoming (left), general manager of Aviation Industry Corp. of China, and Jeffrey Immelt, chief executive officer of General Electric Co., announced plans to establish an avionics joint venture last year.
General Electric Co. (GE) is about to complete a plan to establish equal equity joint ventures with a Chinese military aircraft manufacturer, specializing in the production of electronic brains for aircraft - avionics. The deal with China Aviation Industry Corporation will enable GE to engage with the Chinese government in a project that aims to challenge Boeing Co. and Airbus in the civil aircraft market.
General Motors Co. has established a joint venture with Shanghai Automotive Group Co., Ltd., its long-term partner in China this year, to manufacture and sell Wuling brand low-price minivans in India, and eventually to Southeast Asia and other emerging markets.
The two deals show the growing ambitions of Chinese companies to go global and their growing influence on foreign partners. In order to achieve GE's transaction, GE chief executive Jeffrey Immelt made an extraordinary compromise and agreed to integrate GE's existing global business of non-military avionics equipment into this joint venture company. General Motors contributed technology in its trading, manufacturing facilities in India and used its Chevrolet brand name in India.
There are multiple motivations behind the promotion of China’s foreign partners to achieve global transactions, which was unthinkable a few years ago. Large companies supported by the Chinese government now have greater financial resources and increasingly powerful political influence, allowing them to become attractive partners abroad. In addition, the Chinese market has become extremely important to the success of multinational corporations, so Beijing can conduct stronger bargaining.
However, there are risks in this kind of transaction. Due to concerns that Chinese companies will become a strong competitor of partners after acquiring Western technology and knowledge, some of the joint venture companies established in China earlier suffered miscarriage.
Raymond Tsang, a partner at consulting firm Bain & Co in China, said that foreign partners are realizing that they sometimes have to sacrifice or share the benefits of global markets with Chinese partners; some multinational companies complain, but Given that market conditions are constantly changing, if you do not do this, your competitors will do so.
Large energy companies have also been fighting for international deals with Chinese companies. China has already replaced the United States as the world’s largest energy consumer, making access to the Chinese market crucial for global companies. Foreign companies hope that joint efforts with Chinese companies overseas will be beneficial in this regard. Foreign companies provide technology and experience, and Chinese partners provide geographical geopolitical influence, low-cost labor, and easy access to the reputation enjoyed by companies supported by the Chinese government.
The state-owned China National Petroleum Corporation is the first foreign oil company to sign an important contract in Iraq. BP PLC last year cooperated with PetroChina to invest US$15 billion to increase the output of Rumaila's large oil fields. This summer, Royal Dutch Shell PLC and PetroChina, a listed subsidiary of PetroChina, spent $3.15 billion to acquire the assets of Australian energy company Arrow Energy Ltd.
China has spent large sums of money in some resource-rich developing countries to invest in infrastructure projects, which to a certain extent have helped China to have a greater influence in those countries where these US companies do not have a solid foundation. It can also help arrange transactions in countries with which it has good relationships, such as Venezuela and Myanmar.
In the field of financial services, foreign banks have long been eager to enter China's rapidly growing securities industry. In recent years, China has allowed some companies to enter the domestic market through joint ventures, and the proportion of foreign ownership in joint ventures must not exceed about 33%. Chinese regulators also set limits on the types of securities businesses that foreign companies can participate in.
Credit Agricole SA has already participated in such a joint venture through CLSA Asia-Pacific Markets, its Asian brokerage division, but its business in China is not large. In May, CLSA announced that it has reached a preliminary agreement with China's state-owned Citic Securities Co., and the two parties will form a joint venture overseas. The French company plans to contribute to CLSA Asia Pacific and several other international businesses. CITIC Securities will contribute a small international subsidiary in Hong Kong. Crédit Agricoles hopes that helping CITIC Securities achieve its international ambitions will enable it to expand its business in China.
However, the progress of the negotiations was not as fast as expected. The two companies said this month that they have reached an agreement on certain key terms, but the deadline for reaching the final transaction was extended from the end of the year to June 30. They did not explain the reason for the delay.
The development of some joint ventures in China is not smooth. The reasons include the conflict with local partners, or this partnership has enabled Chinese companies to acquire sufficient industry knowledge and become new competitors for Western partners.
For example, Kawasaki Heavy Industries and Siemens AG have collaborated with Chinese partners to help build China's high-speed rail network. Now Chinese companies compete with them in the fight for international contracts—the products they use depend at least in part on the skills of these foreign companies. After a public quarrel over human criticism, France’s Groupe Danone SA received a cash payment last year, ending a joint venture with China’s Hangzhou Wahaha Group Co. The French company claims that Wahaha’s boss produced and sold a Wahaha-branded beverage that would have been owned by the joint venture through another network he owned. Wahaha denied this allegation.
Jim Wasson, president of Growth Strategies International LLC, an aerospace and defense consultancy, said GE's avionics deal with AVIC is also vulnerable. Watson, a former GE aviation executive, said that the concern is that once AVIC has mastered enough technology, they will kick in (GE) and go it alone.
Lorraine Bolsinger, chief executive of GE Aviation Systems, acknowledged GE's concerns about technical protection. When she talked about the proposed deal, she said that it was highly controversial. She said it was our conservative technicians who thought that we had a lot to protect. She concluded by saying that when we and China jointly create intellectual property, we will certainly protect this property.
Recently, large Chinese state-owned enterprises that can obtain low loan costs and other government support measures have stepped up their efforts to dominate the industries that GE and other companies see as growth opportunities, ranging from clean technologies to turbines.
Even so, GE still has high expectations of China, so that Immelt called it "our second domestic market." Immelt said two years ago, China's income by 2010 It will double to reach 10 billion U.S. dollars. However, last year its revenue was only 5.3 billion U.S. dollars.
GE's cooperation with AVIC is seen as an opportunity to boost its avionics business. In this area, it lags behind Honeywell International Inc. and Rockwell Collins Inc. The planned joint venture will have its headquarters in Shanghai. It has been selected as the relevant supplier for the China-developed C919 aircraft, and this model may have a dominant position in the Chinese civil aviation market. Boeing predicts that the Chinese civil aviation market will be worth more than 400 billion U.S. dollars in the next 20 years, second only to the United States.
According to GE experts, the company asked AVIC to make a cash investment during the negotiations to match the value of the technology provided by GE. If the final deal is finalized, GE’s existing and future civil aviation electronic contracts will be owned by the joint venture. Negotiations should have been completed by mid-2010, but the negotiating parties currently hope to complete them by the beginning of 2011.
GE executives said that the deal with AVIC is their closest cooperation with Chinese partners so far. GE’s 45 people are currently involved in the project in China. Even before the final clause dust is settled, it will recruit or deploy hundreds of people to China.
In addition to producing civilian products, AVIC also manufactures fighter jets and helicopters. It has the ambition to go abroad. The company said in a statement that there is no regional market for the aviation industry, only a global market. The statement also stated that AVIC's development strategy is to actively integrate itself into the global aviation industry's industrial chain and become a truly global company.
Last month, China demonstrated the first equal-scale model of the C919 large passenger aircraft. Other foreign companies have negotiated with other similar joint venture companies for the production of other spare parts for the passenger aircraft.
Rockwell Collins of the United States has a joint venture in China for the production of communication systems for the C919. Kent Statler, Rockwell Collins’ executive vice president, said that our hopes and desires are that this joint venture can maintain a win-win partnership and benefit both parties, but we should not be too naive We know that the joint venture may become our competitors.
For GM, the stakes are particularly significant because China became the world's largest car market last year.
As early as 1997, General Motors had decided to invest more than one billion U.S. dollars to establish a 50-50 joint venture with SAIC to produce Buick cars. At the time, this was seen as a risky move because at that time China's car sales had not taken off. According to consulting firm IHS Automotive, GM’s Chinese joint venture is expected to sell nearly 2.27 million vehicles in China this year, while GM sold only 2.18 million vehicles in the United States this year.
GM’s recent sales growth in China has been attributed to its second joint venture with SAIC and another Chinese company in 2002, namely SAIC GM Wuling Automobile Co., Ltd. The company’s van, which sells for only $4,500, is popular in small towns in China. Last year, SAIC-GM-Wuling became China's first car brand with annual sales of more than one million. This year, its sales volume is expected to account for nearly one-sixth of the global car sales. Last month, GM and related parties reached an agreement to acquire SAIC-GM-Wuling’s 10% stake from SAIC-GM-Wuling’s third investor for US$51 million and increase their stake in the latter to 44%. SAIC holds 50% of the joint venture.
General Motors has also established a joint venture in India and it has been in operation since February of this year, which is part of the efforts of GM-China SAIC to replicate its Chinese-style success in other markets. The car produced by the joint venture will be based on the GM Wuling van, but will be sold under the Chevrolet brand. In announcing the signing of a joint venture agreement, an executive from General Motors said that in establishing this joint venture in India, GM has contributed its own brand, Indian factory and dealer network, and SAIC Motor has provided about 300 to 350 million U.S. dollars in funds. .
Kevin Wale, president and general manager of General Motors China, said that we believe that the business model formed with SAIC in China and our product lineup in China are very mature and can be exported to other markets in the world.
General Motors and SAIC have already made less ambitious attempts to join overseas markets. Both will export the Chevy Sail sedan designed and manufactured in China to Chile and Peru, and are jointly developing new models that can be sold globally, such as Buick LaCrosse, which is a Shanghai-based company. The cars jointly developed by the team and the Michigan team in the United States are sold in the Chinese and U.S. markets.
The agreement to reach a joint venture in India has allowed GM and SAIC to take a step forward and no longer just transport co-produced cars overseas. General Motors and SAIC executives and engineers will be stationed in India, responsible for the joint venture's automotive design, production and localization marketing. SAIC's current experience in this area is almost a blank.
For GM, the risk of doing so is that the joint venture will make SAIC better positioned to compete with GM in overseas markets.
SAIC has grown into a powerful company in China, partly because it seeks advice from General Motors. SAIC launched its own brand, Roewe, in China in 2006. Currently, this car competes with Buick, which is jointly manufactured by SAIC and GM, for the domestic market. Roewe is based on technology obtained from MG Rover Group Ltd., which is no longer in existence. SAIC inherits the brand MG Mingju. According to data from JD Power & Associates, an automotive research company, Roewe sold 146,323 units in the first 11 months of this year, and sales rose by 78% from the same period last year. Although Buick sales in China are basically three times that of Roewe, the growth rate over the same period is only one third of the latter.
Michael Dunne, president of Hong Kong investment consulting firm Dunne & Co., is a veteran of the automotive industry. He said that Roewe can not only be comparable to similar products, but also lower prices, this car is grabbing the market share of General Motors and other manufacturers.
Last year, General Motors agreed to transfer its 1% stake in Shanghai GM to SAIC, allowing the latter to obtain a 51% stake and actual control of the joint venture company. General Motors said at the time that the move would make it easier for the company to obtain loans from Chinese banks and lay the foundation for increasing its stake in SAIC-GM-Wuling. Shanghai GM is GM's major joint venture in China.
GM said last month that it is working with SAIC Motor to sell SAIC's MG-branded cars through its former sales channels all over the world. A person familiar with GM revealed that this may open the door for SAIC to enter the British market. Britain used to be the headquarters of MG. In addition, at the time of GM’s IPO last month, SAIC also spent US$500 million to purchase 1% of the former’s shares.
Michael Robinet, a senior analyst at consulting firm IHS Automotive in the United States, said that SAIC Motors has been poised to face Western countries. I have no doubt that both MG and Roewe will become SAIC's overseas players. A very good springboard for the market.
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