The hottest interpretation of why Ge is playing a

2022-08-05
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Interpretation of "why Ge is playing a joint venture in the tide of sole proprietorship"

background: on January 20, 2010, Ge, one of the world's top 500 enterprises (i.e., General Electric Corporation of the United States), signed a joint venture cooperation agreement with Shenyang Blower Group Co., Ltd., a large state-owned enterprise in China. Ge will take a stake in Shenyang Turbine Machinery Co., Ltd., the core enterprise of Shenyang Blower Group, with a shareholding ratio of 5%. The two sides will also strengthen technical cooperation in the future, And further improve the shareholding ratio of Ge

in fact, this joint venture is just one of the joint ventures recently established by GE and a series of large Chinese state-owned enterprises. Against the background of the surge of wholly foreign-owned enterprises in China, Ge dances with the dragon of state-owned enterprises through joint ventures and alliances. This keynote is intriguing

Since the second half of 2009, GE has frequently cooperated with large state-owned enterprises in China through joint ventures or equity participation. The joint venture involves aviation, transportation system, energy, water treatment, process treatment and other business areas, showing the trend of multi-point flowering

compared with the growing tide of wholly foreign-owned enterprises in China, GE's series of joint ventures attract attention. In recent years, the tide of wholly foreign-owned enterprises in China has surged. According to the statistics of the business information department of the Research Institute of the Ministry of Commerce, the proportion of wholly foreign-owned enterprises has been growing rapidly in recent years, from 41.8% in 1998 to 81.4% in 2008, far exceeding the proportion of Sino foreign joint ventures and Sino foreign cooperative enterprises, and becoming the main mode for foreign enterprises to do business in China. From Alcatel to Siemens Communications, to Konica, Minolta and Danone, the trend of wholly foreign-owned enterprises is particularly reflected in fast moving consumer goods, it and other industries (see Figure 2 for details)

reasons for GE's joint venture with state-owned enterprises

why did Ge go against the trend

first, it is the need for global business strategy adjustment from GE. In 2008, Ge streamlined its global operation structure and determined to focus on four major business segments: technology infrastructure, including medical, aviation, transportation systems and enterprise solutions; Energy infrastructure sector, including energy, oil and gas, water treatment and process treatment businesses; The financial sector, including business finance, consumer finance (GE money), commercial aviation services in vertical industries, energy financial services, and the company's financial department; Media sector refers to the media and entertainment business represented by NBC global

among them, technology infrastructure and energy infrastructure are the most important and will be the focus of future investment and development. In 2009, Ge clearly put forward in the company's annual report that one of the measures to strengthen its global leading position in technology infrastructure and energy infrastructure in the future is to raise the relationship with business partners to new heights

in the industry fields involved in these two business segments in the Chinese market, GE has a long history of business cooperation with state-owned and many enterprises that mix primary plastics with domestic waste, and is gradually maturing. The equity cooperation represented by joint ventures is the next height to deepen the cooperation. For example, over the past 20 years, GE Energy Group has provided more than 240 gas turbines, 70 steam turbines, 307 hydropower turbines, more than 300 wind turbines and 32 gasification technology licenses to Chinese business partners through market transactions. Around 2005, Ge intentionally extended the cooperation relationship to the second stage. For example, in the oil and gas field, it successively signed strategic cooperation memoranda with WISCO group and PetroChina to form a long-term non equity investment strategic cooperation relationship

the tide of joint ventures in the past six months will make GE's cooperation with large state-owned enterprises in the field of technology and energy infrastructure more close, which seems to indicate that GE has opened the prelude to comprehensively promoting the partnership to the third stage

secondly, GE's choice of joint venture and alliance with state-owned enterprises is also to meet the needs of the new situation in China's economic field. The industry fields involved in the joint venture agreement, such as aviation, energy, oil and gas, transportation system, etc., are dominated by state-owned enterprises in China. Since last year, the Chinese government has made 4trillion yuan of investment in response to the challenges of the financial crisis, and nearly 10trillion yuan of new loans in 2009, which has triggered a new round of national advance and people's retreat in the economic field

most of these new investments are used for infrastructure construction. For example, the Chinese government plans to allocate nearly US $90billion for railway construction in 2009 and 2010, with a view to helping cosmetics manufacturers and cosmetics packaging suppliers in packaging inspection, household appliances and quality control. The annual funds used for locomotive procurement are also as high as US $15billion. In addition to the iron, public and infrastructure invested by the government itself, a large amount of new investment has also flowed into state-owned enterprises and large state-controlled enterprise groups. Facing the new situation, GE has formed a closer community of interests with these state-owned enterprise customers with a long history of cooperation in the form of joint venture or equity participation, which will help Ge lock in new business opportunities in China

although the new round of joint venture and alliance between GE and state-owned enterprises seems to be contrary to the tide of foreign sole proprietorship in China, it is actually more determined by the characteristics of the industry. The tide of wholly foreign-owned enterprises mainly occurs in industries that quickly drive domestic colleges and universities to participate in tackling key problems, such as fast-moving consumer goods, it and other more competitive industries. The industries in which GE participates in joint ventures, such as aviation, energy, oil and gas, and transportation systems, are the key industries supported by Ge in the global strategy. It also happens that in the Chinese market, they are dominated by state-owned enterprises and more affected by the country's entry and exit. In these industries, it is a very rational strategic choice for GE to further promote mutual cooperation to the level of equity investment cooperation under the guideline of dancing with the giant Dragons of state-owned enterprises. In fact, in the fields of aviation manufacturing and energy, foreign giants such as Airbus and shell are also happy to establish new joint ventures in China

it is difficult to imitate Ge

what is more noteworthy is that this round of state-owned enterprise joint venture tide of GE has broken through the old mode of Chinese and foreign joint ventures purely exchanging technology in the Chinese market, and presented a new feature based on China and facing the world. The automobile industry is the most prominent embodiment of the old mode of market for technology of Sino foreign joint ventures. Foreign automobile manufacturers provide technology to compete for China's local automobile consumption market through localized production by joint ventures. Through this round of joint ventures with state-owned enterprises, GE has formed a closer community of interests with large state-owned enterprises, not only to explore the Chinese market, but also to jointly enter the international market

for example, the avionics joint venture established by GE aviation systems and AVIC, in addition to jointly developing next-generation avionics technologies and products and participating in the open avionics system platform bidding of the domestic large aircraft C919, will also clearly participate in the competition in the international civil aviation market, which has gone beyond the business level of market for technology

in addition, in terms of railway transportation, the joint venture between GE and CSR [5.58 -0.89%] also aims to export to emerging markets; GE has also signed a memorandum with the Ministry of Railways of China, seeking to strengthen cooperation in participating in high-speed railway construction projects with a speed of more than 350 kilometers per hour in the United States, which is likely to benefit Ge in the local market through joint ventures and cooperation with Chinese state-owned enterprises and departments

it is not easy for GE's competitors to imitate the model of joint venture and alliance between GE and state-owned enterprises. An important precondition for GE to join hands with the stock rights of many state-owned enterprise leaders in this round is that the two sides have had a long-term and pleasant cooperative relationship with each other. For example, GE and Shengu group have nearly 30 years of business cooperation history. The long-term cooperation has enabled the two sides to pass the business running in period, which is easy to generate mutual trust. This is the basis for GE and state-owned enterprises to deepen cooperation and give more commitments to each other today. For other foreign-funded enterprises or competitors who are interested in imitating GE's cooperation with state-owned enterprises, if they do not have the early and long-term accumulation and foreshadowing like GE, even if they want to dance with the dragon of state-owned enterprises, they may not be able to find a suitable target

ge's new characteristics of being based in China and facing the world in this round of state-owned enterprise joint ventures indicate that we will see more foreign giants in the process of state-owned enterprises going global in the future. In the future, state-owned and foreign-funded giants will both compete with and cooperate with each other in the local and international markets

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