GE China Deals to Bring in $4 Billion

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General Electric Co. (NYSE: GE) this week announced it would sign a series of deals with Chinese partners in energy, rail, and aviation as it strives to increase its presence in the burgeoning Chinese market.

The announcement coincided with a four-day state visit to the United States by Chinese President Hu Jintao. The deals could be worth as much as $4 billion-plus in sales for the conglomerate over the next decade and are expected to create or help maintain about 4,700 American jobs, the Financial Times reported.

Revenue from the deals would add to GE's top line over the coming five to 10 years, GE spokeswoman Leigh Farris said.

On Monday, GE announced a joint venture with Shenhua Energy, the world's largest coal company, to develop combined heat and power gas turbines for coal gasification plants, with expected revenue of $650 million over the next five years.

That was followed by a signing of an order for 500 exported locomotive kits worth $1.4 billion and related services valued at $350 million. That pact would add or preserve 2,000 U.S. jobs, GE Transportation Chief Executive Officer Lorenzo Simonelli told Bloomberg News in an interview.

The company also confirmed a venture with CSR of China to develop high-speed rail systems to be deployed in the U.S. market.

Finally, GE today (Friday) plans to sign an agreement formalizing a joint venture with China's Aviation Industry Corp. (Avic) to supply avionics for the new Chinese C919 airliner, a contract potentially worth up to $2 billion.

Both the coal gasification and avionics ventures involve sharing sophisticated technology with Chinese partners that raise concerns about the sensitive nature and protection of intellectual property.

GE will share its most sophisticated airplane electronics, including some technology from The Boeing Co.'s (NYSE: BA) 787 Dreamliner, with state-owned Avic, The New York Times reported.

For GE, the deal could expand an already well-established business in China, where the company has booming sales of jet engines, mainly to Chinese airlines that are now buying Boeing and Airbus planes.

But doing business in China often requires Western multinationals like GE to share technology and trade secrets that might eventually enable Chinese companies to beat them at their own game — by making the same products cheaper, if not better.

GE said extensive safeguards are in place for its sensitive intellectual property in both avionics and coal gasification. In fact, a collaboration with a state group such as Shenhua offers better guarantees that such property would be protected, Keith White, who runs its gasification business told the FT.

On the other hand, the joint venture in high-speed rail is more likely to bring Chinese know-how to the U.S. market.

The deals come barely six months after GE chief executive Jeffrey Immelt accused the Chinese government of being increasingly hostile to foreign multinationals.

In a rare broadside on July 10, Immelt told a large audience of Italian business executives that he had major concerns about doing business with Beijing.

"I really worry about China. I am not sure that in the end they want any of us to win, or any of us to be successful." Immelt said before an audience of dozens of top Italian executives.

At the time, Immelt said GE was facing the toughest climate for doing business in China in 25 years. GE racked up $5.3 billion in revenue in China last year.

While acknowledging the importance of the Chinese market, Immelt in November said that the huge U.S. firm would invest $2 billion in the country by 2012, including $500 million to establish six innovation research centers.

Although GE's Chinese sales have been growing at about 20% a year, it has failed to reach its stated goal of increasing annual revenues from $4.7 billion in 2008 to $10 billion by 2010.

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  1. arthur lee davis | January 25, 2011

    So, Jerry is worried about China . Jerry are you sure you can get this accomplishment without
    TOM ( the hacksaw, or the buzzsaw ) ? It does appear to be a good thing to add more than 4,000 jobs to the American economy . My question is what are the trade offs, for those job gains, and how soon thereafter, before the meltdown, of unforseen AMERICAN factories,
    closings, shutdowns, outsourcing, mergers, the sale of entire divisions ?
    Careful Jerry, you may need Tom`s help with this vision of billions of dollar in the coffer deal .

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