GE to invest $2bn in China in 5 years

General Electric plans to invest up to $2bn in acquisitions and other deals in China over the next three years as part of a strategy to double its revenues in the country.

The world’s biggest industrial company, which stunned investors last week when it announced its worst quarter of financial results in five years, is looking to hire a team of 20 “in-house investment bankers” to conduct the deals in China.

“If we do not invest $2bn over the next three years, I would be disappointed,” said Steve Bertamini, chairman of GE’s greater China operations, in an interview with the Financial Times.

The aggressive investment plans, which will include acquisitions and joint ventures, underline GE’s intention to expand its China business rapidly at a time when its domestic operations face a slowing US economy.

Mr Bertamini said the team of deal specialists had already been expanded from two to eight and the recent sharp drop in the mainland stock market, which is down nearly a half from its peak, would make it easier to negotiate investments.

“One of the reasons we have not done much so far is because the prices have been so high,” Mr Bertamini said. “The risk...is that share prices take off again.”

GE said it would continue to enter into joint ventures with leading Chinese companies, in part because in several of the sectors where the group is active – such as infrastructure and power generation – there are foreign investment restrictions.

GE plans to increase its 2007 revenues in China of $4.4bn to $10bn by 2010, which would require the company to expand more than twice as fast as the economy’s double-digit rate of growth.

“The wider problems in the credit market and the signs of a slowing in the overall global economy have not entered the picture [in China],” said Mr Bertamini.

The comments come just days after GE slashed its full-year earnings forecast because of the effect of the credit crunch.

As part of its plans to expand manufacturing in China, the group intends to import fewer components to its plants and will increase both sourcing and design in China.

GE also plans to expand its presence in some of China’s rapidly expanding second-tier cities.

Mr Bertamini said GE was closely watching opportunities to expand in financial services. However, the regulatory and legal framework were not yet in place in many areas. “It will be five to 10 years before the financial services sector really begins to open up,” he said.

(Financial Times)

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