This coming month we are running a public war game on The Battle for China’s Smart Grid. We have very quickly seen that this is more than a strategic fight of Western companies for a share of a China mega-infrastructure project. It will likely demonstrate how Western companies can succeed in a very fluid China market – where the opportunity is great the the stakes are high.
Just this past week the New York Times (Academic Paper in China Sets Off Alarms in U.S., March 20) reported on an academic paper written by two researchers from China on the vulnerability of America’s power grid to computer attack. This article resulted in misinterpreted accusations regarding China’s intentions to “take down” the US grid. When interviewed the researchers pointed out that this paper was theoretical and lacked the necessary depth to accomplish what their accusers claim. Besides, they wanted to make it very clear that they used the US case because they were able find enough data in America and not enough on China’s grid to allow them to analyze their own system.
The more substantial question is how extensively will US and European energy and technology companies invest in plant, infrastructure, and product development in China – seemingly a necessity if they are to build out China’s smart grid? Recent concerns expressed by US firms about new PRC government policies that place heavy emphasis on only procuring products and equipment that contains “indigenous Chinese innovation” raise questions about how much of the market actually will be available to foreign companies.
If one just reads the ongoing press about Google’s exit and arguments with the Chinese government, then it is clear that concerns about the PRC business environment are growing. At the same time, with far less noise other companies, such as Applied Materials, a prominent Silicon Valley technology firm is moving some of its technology R&D over to Xian, China (Austin-American Statesman, March 22, 2010). What exactly is the center of gravity regarding foreign business thinking about China?
Finally in response to US trade pressure on China, the China’s commerce minister, Chen Deming, warned against the U.S. beginning a trade war with China (Washington Post, March 22).
So, as you can see the Battle for China’s Smart Grid is far more than just about the technology itself. It is about nations trying to gain competitive advantage. It’s about where the R&D will be taking place. It’s about trust and about how to establish a growing business in a new market with lots of promise.