ChinaWatch: Forward Frontiers

Welcome to ChinaWatch, WMB’s digest of news from the country with the world’s second largest economy and our chief rival to global dominance. Our aim is to keep you informed.


True Car Culture

After more than an eightfold increase in auto sales over the past decade, China has developed a true car culture.

Amid the buzz for last month's Shanghai auto show, ads for a single car papered entire subway stations in Shanghai, a city of 19 million people. Outside a luxury hotel, an employee is overcome as she takes photos of a red Ferrari. “Oh, it's beautiful!” she says.

Auto plants throughout China, with potted bamboo or fish tanks in break areas, are viewed as essential to the development of smaller cities of a million or more people.

After a decade of double-digit annual sales growth, excepting one year, light-vehicle sales in China topped 17 million last year. While that represented a 33 percent year-over-year increase, it was smaller than the 48 percent surge in 2009.

Still, China's growth is slowing.

Government actions held growth in the first quarter to about 8 percent, compared with a 20 percent increase in the recovering U.S. market, where sales haven't hit 17 million since 2001. Last year, U.S. sales were a below-average 11.6 million.

For Ford Motor Co. and Chrysler Group, which are still getting established in China, the slowing market means they largely missed out on a stretch of record growth, and, in some cases, profits.

Chrysler is leaning on a small business importing Jeeps, while its part owner Fiat is introducing its 500 minicar in China this year and won't have a locally built car to sell until next year. Ford's 2010 light-vehicle share was 3.4 percent.

“We could have gone faster and should have gone faster in China,” says Joe Hinrichs, CEO of Ford China.

For General Motors Co., whose sales in China last year made up 28 percent of its worldwide volume, the slowdown might mean a chance to catch its breath. After having doubled its sales in two years, GM is planning to take five years to accomplish the feat again.

Missions To Mars

U.S. President Barack Obama views China as a potential partner for an eventual human mission to Mars that would be difficult for any single nation to undertake, according to a senior White House official.

Near-term engagement with China in civil space will help lay the groundwork for any such future endeavor, says White House science adviser John Holdren.

He prefaced his remarks, before the House Appropriations subcommittee on commerce, justice and science, with the assertion that human exploration of Mars is a long-term proposition and that any discussion of cooperating with Beijing on such an effort is speculative.

“(What) the president has deemed worth discussing with the Chinese and others is that when the time comes for humans to visit Mars, it's going to be an extremely expensive proposition and the question is whether it will really make sense — at the time that we're ready to do that — to do it as one nation rather than to do it in concert,” Holdren says.

Holdren, maintaining NASA could also benefit from cooperating with China on detection and tracking of orbital debris, stresses that any U.S. collaboration with Beijing in manned spaceflight would depend on future Sino-U.S. relations.

“But many of us, including the president, including myself, including (NASA Administrator Charles) Bolden, believe that it's not too soon to have preliminary conversations about what involving China in that sort of cooperation might entail,” Holdren says.

“If China is going to be, by 2030, the biggest economy in the world … it could certainly be to our benefit to share the costs of such an expensive venture with them and with others.”

ChinaWatch

If you enjoyed this post, please consider subscribing for FREE (link in right sidebar) to WMB and sharing it on Facebook, Twitter, or your favorite social network. Thank you!

GE Invests $2B In China

General Electric plans to sink more than $2 billion into China through 2012 and add more than 1,000 jobs as part of the conglomerate’s efforts to build partnerships in the Far East.

GE says it will likely spend $500 million on research and development and new customer innovation centers, all of which will generate jobs.

More than $1.5 billion is expected to be put toward new joint ventures with Chinese state-owned enterprises in high-technology sectors, according to the Associated Press.

What’s In It For America?

WMB sees numerous benefits in terms of improving our global stance in relation to China, a nation whose trade and economic policies have a great influence on U.S. companies, among them rebounding automakers General Motors and Ford.

GE, which began business in China in 1906, wants to keep pace with the country’s fast growth, perhaps the greatest of any nation on the planet right now.

Chairman and CEO Jeff Immelt, who recently traveled to India with President Obama seeking work for U.S. businesses, says China is the world's fastest-growing market for aviation, energy, transportation, health care and financial services.

GE, based in Fairfield, CT, has 36 wholly-owned entities and joint ventures in China in manufacturing, service and R&D. It has 14,000 workers in China.

GE says the new customer innovation centers, which will be built in six cities, will be used to better serve the west, north, central and south China markets.

Among the cities under consideration for centers include Chengdu, Shenyang and Xian. The new facilities will work closely with existing R&D operations in Shanghai, Beijing and Wuxi.

The centers will concentrate on product development, engineering for applications, sourcing support and delivery in development areas such as rural health care, renewable and clean energy, smart grid, energy-efficient lighting, rail and aviation.

“These commitments represent GE's confidence in China's long-term economic prospects,” says Mark Norbom, president and CEO of GE Greater China.

GE, which operates in more than 100 countries and has 300,000 employees globally, will team with a group of Chinese businesses to accomplish the company’s investment objectives.

GE's Efforts Make Sense

We, at WMB, applaud GE’s forward-thinking approach to expanding its global reach through mutually beneficial partnerships with China, the world’s most populous nation, which also hosts the dynamic economic center of Hong Kong, a special administrative region.

From a political standpoint, the planet benefits from a tighter the bond between global capitalist enterprises and the world’s largest communist system.

The more exposed China’s leaders are to outside influences, the greater the chance for openness and changes to emerge as younger generations rise to prominence within the national party.

New, progressive thinking and cultural exchanges blossom naturally when working relationships are developed between economic rivals and military adversaries.

From an economic standpoint, the United States stands to gain a more equal partnership in terms of trade with another economic giant. WMB firmly believes China and America need each other to prosper, despite differences in political and social systems.

Sure, there are big issues that divide China and the United States, most notably in human rights, but we have to recognize and appreciate the fact that our two nations, arguably, are the two most dominant players on the world stage right now.

China and America have the financial, political and environmental power to shape the planet’s future. As WMB sees it, a partnership based on these three areas works in both countries’ interests.

Solutions to national and world problems need not be complicated. Since the most direct path between two objects is a straight line, expanding business partnerships between China and America just makes good sense.

As for me, I practice what I preach at writenowworks.com. If you like this post, please share it.

New From WMB: ChinaWatch

To our readers: We’ve noticed posts involving China draw higher viewer interest. In response, WMB will provide a weekly digest of business and consumer-related news, ChinaWatch, culled from reliable websites. As always, please share the post and comment if you like. Enjoy – Ken.

Food Prices Jump

Annual food price inflation hit 10.1 per cent in October compared with a year earlier - a level not seen in China since mid-2007 - deepening concerns that the economy is now starting to overheat after two years of stimulus.

Many ordinary people feel the official inflation figures underestimate the true rises.

''Ten per cent? That's a joke,'' says Li Mingwei, a shopkeeper at Beijing's largest wholesale food market. ''The price of leeks has doubled from last year; cooking oil is up by 25 per cent since the summer and rice by even more. Everything is going up.''

This kind of disgruntlement makes China's leaders very nervous. In the past, inflation has been a catalyst for social unrest, including in 1989, the year of the Tiananmen Square massacre, and it remains a sensitive political pressure point.

Investing In Green

China invested 200 billion yuan ($30.12 billion) to boost energy conservation and curb greenhouse gas emissions in the past five years, according to the Xinhua news agency.

He Bingguang - a senior official of the department of resource conservation and environmental protection at the National Development and Reform Commission, the country's central planning agency - made the statement to reporters in Beijing at a clean-technology conference.

The announcement comes two weeks before Chinese officials head to Cancun, Mexico, for climate pact talks, which aim to fix a new framework for tackling global warming.

China, the world's biggest emitter of greenhouse gases from human activity, has made a domestic vow to reduce "carbon intensity," the amount of carbon dioxide emitted for each dollar of economic growth, by 40-45 percent by 2020 compared to 2005.

GM Venture Debuts

General Motors Corp.'s commercial micro-van joint venture in China started producing its first Baojun brand passenger vehicle at a plant in southern China, the U.S. auto maker says.

The Baojun 630 sedan, which is the first model to be produced under the soon-to-be-launched Baojun brand name, rolled off the production line in Guangxi province's Liuzhou city on Monday, GM says in a statement.

The four-door sedan is the first of a series of passenger cars the joint venture, SAIC-GM-Wuling Automobile Co., expects to launch over the next few years under the Baojun brand name. GM says the Baojun 630 will go on sale in early 2011 through a new network of dedicated Baojun dealers.

The new brand was created to address growing demand for affordable passenger cars in China and is aimed at competing with the country's home-grown auto brands including Zhejiang Geely Holding Group Co. and BYD Co., GM says.

Electric Cars May Move Us

With the continuing oil disaster in the Gulf of Mexico, many may wonder if we can wean ourselves off of fossil fuel. Part of the solution obviously resides in green technology and certainly electric vehicles are driving interest as a probable alternative to gasoline powered cars.

Three companies – General Motors, Nissan and Toyota – are gaining traction in the marketplace. GM’s Chevrolet Volt is able to travel up to 40 miles on a single battery charge through a conventional household outlet. This automobile is scheduled for sale to consumers later this year. Nissan is touting a car called the Leaf (top) that has a projected range of up to 100 miles. And Toyota has a plug-in version of the Prius which is nearing public announcement.

These cars may not even require gasoline and can represent a dramatic cutback in exhaust emissions; it's the kind of automotive breakthrough that clean energy advocates have been trying to reach for decades.

The timing couldn’t be better since manufacturers have powerful advocates in government and industry. For instance, the Obama administration is offering generous subsidies to manufacturers which produce electric vehicles and consumers who purchase them. As a result, many automakers are gearing up for electric vehicle production, and venture capitalists are willing to invest in new designs.

Still, the big question is whether consumers will embrace electric vehicles in large enough numbers to make the whole dynamic work.

Gasoline is now less than $3.00 per gallon in most areas of the country. Initial electric-powered cars will cost much more than conventional technology vehicles, even with government subsidies. Current hybrids average about 30 mpg, but until gasoline prices increase significantly more, electric cars may have to wait for consumer attitudes to catch up.

Since electric cars run purely on electrical power, mile for mile these cars will operate at significantly lower costs, given current kilowatt power rates.

GM has designed the Volt (right) with a 40-mile range on a single charge with the capability to be recharged from a 120-volt household outlet. Once the battery runs low, a gasoline- powered motor engages and charges a generator which can result in another 300 miles of driving distance.

The electric Toyota Prius (left) has a range of about 10 to 15 miles and in a similar manner to the Volt, and the Prius can produce about 300 miles. But the Nissan Leaf is slated to be a “pure electric” car able to travel about 100 miles on a single charge. On the downside, the Leaf does not have a secondary power source and that may result in what the industry calls “range anxiety.”

The potential gasoline savings for the new technology is enormous. Currently, the Toyota Prius Hybrid gets about 50 mpg. On the other hand, GM’s Volt is projected to get about 230 mpg, and the Leaf would result in an equivalent 300 mpg. This is no match for conventional gasoline cars.

Electric vehicles vs. conventional cars

One example of a high-end electric vehicle is the Tesla Roadster. It consumes about 110 watt-hours per kilometer and is able to travel about 244 miles on a single charge. The full charge takes about 3.5 hours. Analysts estimate the Roadster ranges from 135 to 400 mpg, depending on how the equivalency between gasoline and electricity is computed. As a sidebar, it should be noted that the Telsa Roadster accelerates to 60 mph in 3.9 seconds; almost instant torque is available with electric cars.

GM Volt Product Manager Tony Posawatz (right) says 100 miles of battery-powered travel will require about $2.75 worth of electricity. This means up to 3 cents per mile based on average electricity rates of about 11 cents per kilowatt hour. If drivers charge their Volt overnight, when off-peak electricity rates are lower, the cost could be as little as 1 cent per mile. Posawatz says at these rates the annual cost-savings on fuel could easily be more than $1,000 for typical driving.

There are potential problems on the horizon with electric vehicles because they require entirely new sets of hardware and software.

Lithium-ion batteries have been used in cell phones and computers for years. However, there is still uncertainty surrounding scale-up and performance requirements. There also are the issues of disposal and repair. Electric car technology will require new training and infrastructure.

The initial cost of electric vehicles also is high, especially for early adapters. Most analysts predict that, at $3.00 per gallon, it takes nearly 15 years to amortize the initial investment. That’s why some manufacturers are willing to absorb some of this cost. Even with government rebates and incentives, many consumers may be reluctant to take the early risks associated with a product without a proven track record and resale history.

Still, the possible emergence of electric vehicles as a dominant product may be just one silver lining in the gulf oil crisis. There are obvious risks associated with fossil fuel drilling. Many lives are at risk and careers are in jeopardy as a result – just some of the lessons learned while BP and the U.S. government continue to grapple with the spreading spill from the exploded rig.

This environmental calamity, with its impact for years to come, may serve to put our lifestyle in perspective … how overly dependent we still are on fossil fuels. Cheaper and greener electric car technology may be the answer for consumers, now and in the future.

This post is from TechMan, WMB co-author who blogs about trends, issues and ideas affecting business, industry, technology and consumers.