China’s global reach

Today China is the biggest new frontier for international companies. In many ways, the Chinese market has a more international flavour than many other markets around the globe. Many unique characteristics have evolved along the way. Countless international business people are singing their favourite songs and doing their traditional dances - all in one theatre. So far, some have danced better than others.

Overseas Chinese Inc v foreign multinationals

Up to now, the “Overseas Chinese Inc.” has been the biggest investor in mainland China. The United States is in second position, followed by Japan and numerous European nations and South Korea.

Businesses from Hong Kong had an early start. Most, if not all of the factories in Hong Kong have moved over the border. Today, about 240,000 Hong Kong residents work and live in China. Their employers are mostly small and mid-size companies focusing on low-end consumer products. Their strengths are best illustrated by their vast numbers.

China’s expanding market has created tremendous opportunities for the global giants, especially in capital-intensive and high-tech sectors. These giants have made a huge difference in helping China connect  to the global markets.

US multinationals v others

Overall, globally, the US companies as a group are the biggest. The power of the United States is the most influential in many markets but now in China, the US group is just one among many foreign business groups.

Relatively speaking, the Koreans are more active today than the Americans. To the Koreans, coming to China is a necessity, because their home market is small. They aim to use China as a new engine for growth. But US companies have a huge market at home and they are less willing to venture out. Except for a few large players and high-tech companies, most sizeable American companies have only 10 per cent or less international business. This is quite different from the situation of many leading companies from Europe, Japan and South Korea. They may well have much bigger international sales than their US counterparts.

Many Korean companies in China have been latecomers in relation to Japanese and Western companies, but they have made great strides. Several are already household names, especially LG, Hyundai and Samsung.

LG has been a star performer. By 2003, LG had invested $2.4 billion in China. The company has become a leader in the consumer electronics and home appliances sector. Its China business reached $8 billion in 2003 and $10 billion in 2004. LG is still expanding its investment programs and is hoping to make China its second home.

Samsung is another success story. Its product lines - semiconductors, mobile phones, consumer electronics and home appliances - fit China’s needs. By now Samsung has transferred most of its personal computer manufacturing to China.

What underlies the success of Korean companies is a combination of good timing and the right products. Above all, the Koreans are committed to China for the long term and their success has inspired envy among international competitors.

In fact, Korean companies now treat China as their own production centre, as well as a big market. The average monthly salary in a manufacturing job is $1,524 in Korea, but only $115 in China. In addition, China is a huge market, much bigger than Korea - something the Korean companies cannot ignore. They intend to move most of their production from Korea to China, increasing the efficiency and profitability of expanding around the globe.

It seems that the Korean giant, Samsung, has found jade in China, which Samsung intends to make its biggest market, hoping to reach $14 billion in sales by 2005. To this end the company has extendied into new programs and has already become a leader. Because it has found a big space in China, the Korean giant will become even more powerful.  How do Chinese consumers view foreign players in general? They seem to pay less attention to national origins than one might think; in many ways they are rather indifferent to nationality and to consumers, all the foreign players are important.

Auto competition

GM and Ford are only two players among many in China. GM set up its Shanghai joint venture only in the late 1990s. The largest player so far is Volkswagen which has operated in China since 1985.  Volkswagen has kept its leadership role by expanding its programs and adding joint ventures. Of Volkswagen’s global sales, China now accounts for about 20 per cent. Volkswagen is talking another 10 billion euros and wishes to make China the centre of its global business.

GM confronts numerous competing players in its price range. Honda and Toyota are two of these. Korea’s Hyundai landed in China in 2002. Hyundai hopes to make China its biggest market and is now in a hurry to achieve this goal. So far, progress has been huge. In 2004, Hyundai sold 150,000 cars in China, making it one of the top four car makers here. Another US giant, Ford, does not want to be left behind. Its most recent project was to build an auto factory in Nanjing in partnership with Japan’s Mazda and a Chinese company. At the present time, all global auto players are busy. They expect China’s auto market to reach 10 million by 2010, from 5.2 million in 2004.

All in all, China has become a new arena for global business. All multinationals have taken their unique roles. They are all important for now, and they all want to become even more important. In order to do so they must fight hard with one another, as well as with China Inc.