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essence one of forming strategic alliances with local enterprises. Examples include the alliance between BP and Sinopec, between GE and CSR, and between Baosteel and Vale (of Brazil). infernal affairs of competition and cooperation Some other multinational companies both compete and cooperate with local enterprises in China. This is most obvious in the automobile and pharmaceutical industries. On the one hand, these multinational companies have secured favorable positions for global competition in alliance with Chinese enterprises. On the other hand, they have to exercise every means of dealing with the fierce Chinese competition. In the automobile industry, Toyota was affected by the earthquake in Japan, and its market share in China has been declining. It sold 321,400 cars in the first half of 2011, a decrease of 13 percent over the same period in the previous year. Liu Peng, spokesman for Toyota in China, said in an interview that it was very important to localize the third- and the fourth-tier component suppliers in China, since they affect Toyota’s production in the country, indicating the significance of the Chinese market. Gan Wenxiong, CEO of GM China, has different but profound experience on this subject. GM’s business in China was a “cash cow” to GM Global which was on the verge of bankruptcy two and half a years ago. GM China contributed $1.5 billion in net profits to GM Global. Two years ago, GM Global gave up 1 percent of its equity in GM Shanghai so GM Shanghai could prepare a consolidated financial statement when Saic was preparing to exercise its warrants. One and half a years ago, Saic decided to cooperate with GM India, which was experiencing its own difficulties in establishing a new joint venture to enter the India market. This would involve an attack on the long-held market How? positions held by Tata and Suzuki, using low-cost products from Wuling. One year ago, Saic subscribed to 1 percent of the equity, helping GM Global realize the largest IPO in the history of the US stock market. Behind this scene of mutual help and relief in difficult times, Saic has succeeded in building up four of its own brands. Further, the vast amount of technological and managerial expertise attained from GM, have been assimilated in its own vehicles. The two companies are seemingly getting along for the time being but they both know that However, they are now forced to cope with China’s ever-changing situation. they are doomed to compete with each other in the long run. In fact, it is very clear that China’s automobile enterprises are too ambitious to be confined to their domestic market. This can be seen from several cases involving overseas mergers and acquisitions, such as Saic’s acquisition of MG, Geely’s acquisition of Volvo, and Baw’s acquisition of some of the intellectual property rights of Saab. China’s automobile enterprises are poised to compete with multinational companies in their original markets overseas. Relationships like those between Saic and GM can be seen in many other enterprises, such as the relationship between Philips and Neusoft or the one between Pfizer and Shanghai Pharmacy. How long can such competitive yet cooperative relationships last? Chen Jinya EmErging markEts insight 14 China Localization answered with an old saying, “Long term marriages breed divisions, and vice versa.” “There are no permanent friends or enemies in commercial situations, with the exception of permanent interests. Interests are subject to continuous change and adjustment. I believe it is just like a marriage which might last for only one year for some people, or 50 years for others. It depends on your persistence.” Wei Minzhe, managing director of MAN, has a deep understanding of this. 50 percent of MAN’s businesses of diesel and turbo engines take place in China as China dominates the global shipbuilding industry. MAN has 20 cooperative partners alone in its diesel business in China. Even though MAN has built very close cooperative relationships with its partners, some of them have similarly close bonds with Wartsila, which is MAN’s only competitor in the world. Wei Minzhe told China Entrepreneur that he does not worry so much about IP rights but instead about technologies and manufacturing. The same is true for Wu Xiaobin, general manager of Pfizer China. Pfizer was forced to give up part of its animal vaccine business in 2011 to Harbin Pharmaceutical Group after an anti-monopoly investigation by the PRC Ministry of Commerce. Pfizer’s retail sales team was also dismissed due to a lack of progress. The special treatment granted to innovative drugs in China has gradually been withdrawn as the National Development and Reform Commission has decreased the selling price of foreign medicines on several occasions during the past year. Wu Xiaobin is both carefree and skillful in coping with these issues. In a statement to China Entrepreneur, Xiaobin said, “Pfizer hopes to do many things and to do them in alliance with many local enterprises as the market is very large. It is through innovation that Pfizer has survived up to the present. We expect to be challenged closely by our rivals so we have no intention of ever resting on our laurels.”
Wu Jinglian It’s tIme to Go Beyond the ChIna model China’s model for growth isn’t producing the results it used to and needs to change in order to foster sustainable growth. EmErging markEts insight 15 China’s View Profile Reformist economist for market system Wu Jinglian, a distinguished economist specializing in economic policy as it applies to China's ongoing series of economic reforms, is renowned for his unwavering conviction that socialism is compatible with a market system. Wu argues that “old-style Maoists” have been gaining influence in the government since 2004. He claims that such groups are pressing for a return to central planning and placing blame for corruption and social inequality on the very market reforms he championed. SYNDICATION/CHINA ENTREPRENEUR PHOTO/CfP, SHUTTERSTOCk
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