G.E. rides the same path to health, success
Its China chief gives his views on the US giant's directions and its joint ventures in health care, aviation and energy with the Chinese partners
To understand China and how his company might do more business there, Mark Hutchinson got on his bike.
A native of England who graduated from the University of Queensland in Brisbane, Australia, Hutchinson is an enthusiastic bicyclist, pedalling his way through small villages to explore new places.
Yet, soon after the now 52-year-old executive moved to the mainland in early 2011 as the chief executive for China of General Electric (GE), he realised he would be deprived of the hobby - at least temporarily- by the country's poor air quality.
That got him thinking about how GE could tap into China's efforts to develop clean coal technologies. In the past two years, US-based GE has secured partnerships with what it describes as national champions, or major state-owned juggernauts.
In May, it joined hands with Shenhua Group, the country's biggest coal producer, to develop clean coal technologies, through a 50-50 venture.
Around the same time, GE also bought a 15 per cent stake in XD Electric and formed a venture with the Chinese maker of power transmission equipment to upgrade the mainland's electrical infrastructure.
In the middle of this year, GE also established two innovation centres in Chengdu and Xian, both major cities in western China, to strengthen its research in fast-growing sectors such as energy, aviation and health care.
Before he joined GE, Hutchinson was head of the Asian project advisory team with Barclays Merchant Bank, based in Hong Kong. During his time there, he orchestrated the successful privatisations of tunnel operator Western Harbour Crossing and the Route 3 Project, a major highway that connects Hong Kong to the mainland.
Hutchinson, an 18-year veteran of GE, sat down with the South China Morning Post to talk about innovation in China, developing talent and making joint ventures succeed.
You've spent a lot of time travelling around China's rural areas discovering things like the plight of rural farmers and shortages of such basic health care equipment as CT scanners in hospitals. What was the impact of these visits on your understanding of China?
I went out to Gansu earlier last year and to Kaifeng in Henan province last winter. I wanted to really understand what are the real issues with the 700 million people we don't get to see as we flit between the big cities in China. It was a great experience. The visit really reinforced to me that the localisation work we are doing with ICFC [in country, for country] R&D projects is spot on, especially in the health care areas. We just need to do it faster. We have to make the technology more affordable and accessible.
Does GE have to adjust its growth target in China given the slower economy?
The rest of the world is slowing significantly and now it is having an impact on our customers and on China. Basically, our biggest businesses are in aviation, energy and health care. They are all very much aligned to the government's [12th] five-year plan. We are confident that China will keep on track with its plan and we'll keep on track with them.
What do you think about the increasing competition from China's state-owned firms that are favoured for big government contracts?
Competition is a good thing actually. Competition makes companies better. We compete globally with multinationals and we compete locally with local companies. China is not different than anywhere else, but competition doesn't scare us. You got to keep ahead of competition.
How has GE fared in ventures with state-owned enterprises?
You should look at those joint ventures we are doing, for example, Shenhua and AVIC [Aviation Corporation of China]. We do these JVs for two reasons. One is we look at the development of the Chinese market. The JVs gave us much bigger access to the Chinese market. The second part is about how we take the partners to go global. We did a lot work at all these JVs. The JVs we are doing with AVIC is a great example of the philosophy. Our sole purpose initially was to help Comac China [Commercial Aircraft Corporation] to have the C919 [China's commercial jet being developed]. But in a longer term, it is about how we seize opportunities in global markets together. Absolutely, it's all about partnering with all these national champions to go global together. We've got a few JVs already and we will do a few more.
GE seems to have shifted its focus to China's western regions by setting up the first two innovation centres in Chengdu and Xian. Could you elaborate on this "go west" campaign?
We see a lot of growth in the western provinces. The development there is in the industries we are in. For example, as primary health care develops, it's going to be more to do with the western regions than the eastern regions. I'd say the "go west campaign" is very important.
Is GE feeling the pressure from increasing labour costs in China?
I don't think we [can] complain. Actually, we don't make decisions on labour costs. If you look at the products we produce, labour cost is only a small percentage. We do pay attention to it, but labour cost is not a primary driver. It's more about how we access the market and how we get talent.
Is a shortage of skills in China a major concern for GE as it continues to expand?
We do very well in getting skilled talent in. We have relationships with universities. In certain specific areas, we are very involved with universities to develop local talent. It's an ongoing process and it's not something that you can develop in a day or a year. We are contemplating teaming up with some Chinese and US universities as our partners to develop talent together. It's going to be over a 10- to 20-year period.
What about China's shale gas sector? How important is that?
We are deeply involved in the energy sector both in the United States and China. In the United States, there is now a huge tapping of this natural resource. It gives the US much more self-sufficiency on power. I think China is in the same position. There's massive supply of the resource here. It's more difficult, maybe, to get it out of the ground here than in the US. The technology will probably grow extremely fast in China. China should be doing everything to develop shale gas. Ultimately, it will give China a security of natural resources.