It’s nearly July 4 and US companies have a lot to consider about their interdependence with China.
Recent remarks attributed to GE’s CEO, Jeffrey Immelt, had him railing against China’s policy of taking technology from the West and making it its own, and “colonizing” Western companies in the process. Whether or not Mr. Immelt actually used those words or meant them, the facts are on the ground. China is growing at a very rapid rate and is at the same time moving far beyond its own borders, often overtaking Western corporate stalwarts in markets they once owned.
Our recent public war game, The Battle for China’s Smart Grid, confirmed the outcome that Mr. Immelt perhaps fears most. One key prediction: Western companies will need China (or a Chinese company) as a partner if they are to succeed in building out massive infrastructure projects such as the proposed smart grid in China.
Does China have to play a bit fairer? No doubt. It has appeared to have done some long-term corporate-relations damage with its policies despite the undeniable fact that it offers a large market opportunity for a Western firm, such as GE. As the war game demonstrated, working with China could also help US and European companies mitigate political and financial risk abroad if let’s say a GE and a Chinese company partner in building out smart grids elsewhere in the world. Just take a look at this clip from the war game regarding the team’s portrayal of Cisco’s China grid strategy that speaks volumes about the dynamics between Western companies and China and the choices they are about to make over the next few years.
Partnering can mean everything from a handshake and a contract to joint ownership. What became clear in our strategy event is that joint ownership may likely be where some of these very large business opportunities are heading. Can you imagine a portion of GE being sold to a Chinese entity? What if a GE and ChinaCo jointly own such an entity? These are the options that I am sure Jeffrey Immelt and his fellow energy industry CEOs have considered.
I wish you a happy Independence Day this July 4. Will companies be wishing each other a happy Interdepence Day in just four or five years from now?