GE China’s Growth Stems from China's massive infrastructure investment
11/16/2012 2:18:00 PM
Mark Hutchinson, CEO of GE China, met with Johnson students to discuss the growth opportunity provided by China over the next ten years.
China is seen as a huge growth opportunity for General Electric Co., as it expects to nearly triple its $7 billion in revenue to $20 billion there in the next 10 years, according to Mark Hutchinson, CEO of GE Greater China. GE, a diversified manufacturer, will need to expand in China through partnerships and its own physical plant to sustain its double-digit growth there, he added.
China is planning large investments in clean energy, aircraft and health care – all strong suits for GE – as part of the nation’s twelfth five-year plan through 2015. China is adding 1,000 gigawatts of electrical generating capacity – equivalent to the current capacity of USA, in the next ten years with increasingly more power coming from natural gas instead of highly-polluting coal. GE is also entering partnerships with local manufacturers in clean energy and a big opportunity is to connect the 20 gigawatts of wind power to the nation’s electric grid.
Among the big investments in China, GE will provide engines for seven of 10 aircraft sold in China. GE also intends to providing advanced medical technology to many of the 90,000 hospitals in China.
The funds from GE’s industrial divisions support loan growth at GE’s financial arm, which accounts for 31 percent of revenue.
While others have cut back on research & development, Hutchinson says a full 6 percent of GE’s industrial revenue is dedicated to R&D. ThenCompany has five Global Research Centre one being located in Shanghai.
One of the great ways to think about designing a product is co-creation and coinnovation, Hutchinson said. By thinking about how customers use your products, it will change your designs. The company has located local design centers in Xian, Chengdu and Shenyang and two healthcare R&D centers located in Beijing and WuXi to bring design, delivery and decision making closer to GE’s customers, Hutchinson said.
“You need to take the long view of China and innovate in order to stay ahead of the competition,” said Hutchinson, who was selected to head GE China 18 months ago because of his international track record. He acknowledged that the company has grown from its drive for product excellence and adherence to the rule of law, but underperformed in China due to the lack of capacity.
The company has built capacity by forging close relationships with China’s leaders and forming partnerships with state-owned enterprise, giving GE access to China’s markets and the Chinese firm global access.
China’s extraordinary economic growth during the past 20 years revealed some risks, overcapacity, lack of innovation, and falling into the middle income trap – a condition when an emerging nation grows but fails to evolve to a high-income economy that produces high-value goods. Economic growth has significantly improved living standards in China, but it needs to continue as more people migrate from the interior, where people are largely poor, to the coast where most of the jobs are.
Hutchinson said he is confident that the Chinese economy will avoid a hard landing, but it is challenging to increase consumption, a factor in sustaining that growth, in the nation of 1.34 billion people whose thrift is embedded in the culture.
In Hutchinson’s discussion with students at Johnson, he recommended students to read “China 2030: Building a Modern, Harmonious, and Creative High-Income Society” by the World Bank to get an overview of expected economic development for the next 20 years.
On a more personal note he also advised students to take risks with their careers and take the path of most resistance.
“If you have the opportunity to do easy and hard, do the hard thing and be the best of what you are doing,” Hutchinson said. In his career he found that GE recognized his strengths and give him opportunities and the company looks for leaders with people influencing skills with passion and are team players.
“Mobility serves me well. I got jobs because I was mobile.”