The coming age of Chinese multinationals

Galanz is the premier manufacturer of microwave ovens in the world. Its global market share is around 40 per cent. It takes Europe $80 to produce a simple microwave oven; it costs Galanz only $30. Watch out for Kelon too. It could become a leading global cooling-product maker. This is partly because the old controlling shareholder, a government unit, is now out of the game and Kelon is a purely public company, controlled by a very ambitious 40-something chief. How will these companies enter the big boys’ club? Well, for a start, they are players in the world's fastest-growing consumer market - China. In 2003, China produced 65 million television sets, 22 million air-conditioners and 180 million handsets. TCL alone produced 18 million TVs and 20 million handsets.

But there are many issues to be settled before these Chinese firms can morph into competent multinationals. China will first need to transform all state and private companies into modern business organisations. Turning a state-run economy into a modern market economy will involve some work: as was seen from the mess in China's stock market in January, when about a dozen listed companies were found to be abusing the market and several dozens of senior executives were arrested.

At the next level, the overcrowding in every business sector needs to be solved. China has about 400 air-conditioner makers and more than 100 car manufacturers. All these firms can only mean needless price wars, which as a result, could pull down the stronger ones. Therefore rational consolidation must take place.

If China's consumer electronics and home-appliances makers - now numbering 1,300 - could be reduced to half a dozen companies, those remaining would become some of the biggest multinationals globally.