US Firms Not Reluctant to Enter China

Of some 1,500 US firms registered with the American Chamber of Commerce in Shanghai, about 2/3rds are Small or Medium size enterprises, with fewer than 300 employees. There are many small, entrepreneurial American firms in China with less than 50 employees. Most report becoming break-even to profitable within 1 to 2 years.

Do they lose some battles for Intellectual Property? Yes. But they learn how to adapt and harden themselves, to become agile in the contest of business in China.

What about the big US firms? Are they reluctant to be in China? Well, let’s say it is more like cautious eagerness.

Many have been here a long time and been through the first and second waves of the gold rush days into China. They got burnt, badly. But they learned and re-entered with a more sober appreciation of the circumstances.

Most US firms report being in China for the sake of pursuing the China market.

So, who is here and what kind of investment profile do they have? Here’s a partial list from the US State Department:

Intel (under $4 billion) – Includes a $500 million assembly/testing facility in Pudong and
a $450 million chip testing plant in Chengdu. In 2006, Intel Capital invested in several
technology firms. In March 2007, Intel announced its $2.5 billion investment in a new
wafer fabrication facility in Dalian. In 2008, Intel Capital also announced three new
China investments in clean technology and healthcare and established a new US$500
million fund to make investments in China. Intel’s previous China fund invested US$200
million in more than 28 companies.

Motorola ($3.6 billion) – Motorola is one of the largest foreign investors in China’s
electronics industry with more than 9,000 employees in China. Motorola’s investment
includes $800 million in research and development (R&D). In 2007, Motorola opened a
new R&D complex in Beijing, consolidating several other R&D facilities. This coincides
with Motorola’s 20th anniversary in China.

General Motors ($2-3 billion) – In 2007, GM announced plans to invest up to $5 billion
in China through 2012. As of December 2008, GM planned to continue its investments
in China. In December 2008, GM and Shanghai Automotive Industry Corporation (SAIC)
launched Beisheng Joint Venture Automobile Company in Shenyang, following a total
investment of $390.6 million. In March 2008, GM announced the establishment of the
GM Research Center at Shanghai Jiaotong University, where it plans to invest $4 million
over the next 5 years. GM also maintains a $1 billion stake in Shanghai GM, a $472
million investment in Shanghai GM Dong Yue Automotive Powertrain, $282 million in
Shanghai GM (Shenyang) Norsom Motors, $257 million in Shanghai GM Dong Yue
Motors, $54 million in Pan Asia Technical Automotive Center, and $10 million in SAIC-
GM-Wuling joint venture operations. GM currently employs over 20,000 people in
China. In October 2007, GM announced plans to build an advanced hybrid technology
research center in China. GM also plans to build a $250 million corporate campus with
research facilities.

Wal-Mart (over $2 billion) – In 2007, Wal-Mart acquired local hypermarket chain
Trustmart for $1 billion. As of September 2008, Wal-Mart operated 108 stores in China
under its Supercenter, SAM’S CLUB and Neighborhood Market brands. Wal-Mart
employs more than 40,000 associates in China. Wal-Mart plans to open more stores in
2009.

Anheuser-Busch ($1.9 billion) – Anheuser-Busch planned in 2008 to complete a new
$63 million plant in Guangdong province and begin first phase construction of another
plant in Tanshan at a cost of $US 49 million. Other investments in China include a 27
percent stake in Tsingtao Brewery, China’s largest beer maker; ownership of Harbin
Brewery Group Ltd., the country’s fifth-largest brewer; and a 97 percent equity interest in
the Budweiser Wuhan International Brewing Co. Ltd. joint venture, which produces
Budweiser brand beer. In 2008, Anheuser-Busch was acquired by Belgium-based
Inbev. The acquisition was the first case reviewed under China’s anti-monopoly law.
After imposing several restrictions on future acquisitions by the combined company,
China cleared the transaction.

General Electric ($1.5 billion) – GE has established 50 JV and WFOE entities, including
medical equipment, plastics, lighting, power generation, silicones, special materials,
industrial equipment, aircraft engines and leasing, capital services, transportation
systems, and an R&D center in Shanghai. In 2007, GE Commercial Finance invested
$50 million in China’s Credit Orienwise Group Limited. In 2008, GE Water and Process
Technologies launched an expanded manufacturing facility in Wuxi New Zone,
representing an investment of nearly US $9 million. According to UNCTAD, GE has
more overseas investments than any other multinational company in the world.

Kodak ($1.5 billion) – Kodak has sensitizing facilities and facilities to manufacture digital
cameras, medical and commercial imaging equipment, and photochemicals. In 2007,
Kodak invested $50 million in a new printing plate manufacturing facility in Xiamen.

Coca-Cola ($1.3-3.7 billion) – Coca-Cola operates 35 bottling plants throughout China
and one of the largest sales and distribution systems in China with over 700 sales
centers, 30,000 distributors, and 1.3 million retailers. In 2008, Coca-Cola offered
US$2.4 billion to acquire China Huiyuan Juice Group, China’s largest juice and nectar
bottler, which is listed in Hong Kong. The deal would be Coca Cola’s largest ever
overseas acquisition and is currently under review by China’s Anti-monopoly authorities.
In 2007, Coca-Cola launched a new global research center and headquarters in
Shanghai, an investment of $80 million.

ExxonMobil ($1-5 billion) – The bulk of Exxon Mobil’s investment is in production-
sharing contracts for upstream oil exploration, as well as chemical and lubricant blending
plants. In 2007, China approved a $5 billion joint venture between ExxonMobil, Sinopec,
and Saudi Aramco, to operate 750 service stations and expand a petrochemical refinery
run by Sinopec and the Fujian Province. ExxonMobil has a 22.5% stake in the project.
ExxonMobil expects investments in China to reach $5 billion by 2010.

Ford ($1 billion) – Ford is close to completing a $1 billion expansion in China, which
includes stakes in: Changan Ford Mazda Automobile, with plants in Chongqing and
Nanjing producing Mazda and Volvo brand vehicles, Changan Ford Mazda Engine in
Nanjing, a stake in the publicly listed Jiangling Motors Co., and Ford Automotive
Financial Co. in Shanghai. In October 2007, Ford opened a $28 million engine R&D
center. In September 2007, Ford announced that its China-based joint venture,
Changan Ford Mazda Automobile Co, began making small cars under the Ford and
Mazda brands at a new Nanjing-based assembly plant, following investment of $510
million.

Alcoa ($1 billion) – In 2008, Alcoa together with the Aluminum Corporation of China
(Chinalco) jointly acquired a 12% stake in Australia-based Rio Tinto for $14 billion in the
largest ever overseas investment by a Chinese enterprise. This followed Alcoa’s 2007
divestiture of its 7% stake in Chinalco, which it had acquired years earlier for $200
million. In 2006, Alcoa invested $95 million for a 70% stake as the managing partner in
a joint venture with Shanxi Yuncheng Engraving Group to produce aluminum brazing
sheets at a plant outside Shanghai. Alcoa has close to 20 operating locations in China.

United Technologies (UTC) ($1 billion, including Hong Kong) – Several of UTC’s
subsidiaries have operations in China, including Otis Elevator, Carrier, UT Automotive,
Turbo Power Systems, Pratt and Whitney, and the New Training Center, near Beijing Capital International Airport. UTC has over 35 joint venture and wholly-foreign owned
enterprises with over 14,000 employees in 293 offices in 73 Chinese cities. They also
maintain 16 factories and two research centers.

DuPont (over $700 million) – DuPont has 37 wholly-owned/joint ventures in China. Its
facilities manufacture a wide range of products including nylon, polyester, fibers and
non-woven fabrics. In 2008, DuPont announced it will begin construction of a Hong
Kong-based R&D center and a manufacturing facility in Shenzhen, and that it will
contribute $2 million to support graduate student research and education in plant
breeding through university fellowships and a competitive fellowship program. In
December 2006, DuPont announced a joint venture with Dunhuang Seed Co., one of
China’s largest seed production companies, to market new hybrid corn products.

IBM (more than $400 million) – In 2008, IBM announced it will establish a branch of its
Worldwide Banking Center of Excellence in Shanghai. IBM also took a stake of
approximately 20 percent in Hisense TransTech Company Ltd. (HTT) and announced it
will establish the first Cloud Computing center for software companies in Wuxi. IBM also
has a $300 million organic chip packaging base in Shanghai and an $18 million
investment in Beijing Jinchangke International Electronics Co., together with Great Wall
Computer Shareholding Corp.

Cummins ($200-500 million) – Cummins plans to invest $300 million in China through
2010. In April 2008, Cummins announced the opening of its first fuel systems
manufacturing site outside of North America, the Cummins Fuel Systems Wuhan Plant
following an initial investment of US$10 million. Cummins has established factories and
R&D centers producing nine engine families, turbochargers, filters, exhaust systems,
alternators, and gensets. Cummins also located its East Asia regional headquarters in
Beijing, managing Cummins operations in mainland China, Taiwan, Hong Kong, Macao
and Mongolia.

Microsoft ($100-500 million) – In November 2008, Microsoft announced that it plans to
spend more than $1 billion in China on R&D over the next three years. Microsoft has
already established several R&D centers in China.