China Emerging_ 1978-2008 - Xiao-bo , Wu [37]
Most of the US$346.2 billion in foreign investment that China attracted to her shores between 1979 and 2000 came after the year 1992. The amount from 1992 to 2000 represented 93% of the total. At the end of 1993, contracted foreign investments reached US$111.4 billion, while the actual foreign investment employed was US$27 billion, which was double that of the previous year.
Every multinational executive came to China with rosy oriental dreams. The best example is that of the CEO of Kodak. With great enthusiasm and confidence, he said, “If only half of China’s population shoots one 36-exposure film in one year, that is already more than one-quarter of the world’s annual demand. If five hundred shots are taken every second in China, the total is equal to the entire Japanese and American markets.” Multiplying the population by any given product in order to come up with the market size was a calculation made by virtually all multinationals when entering China.
International investment was good, but local Chinese companies soon realized that they were facing heavy pressure in some industries, such as traditional home electronics, where the multinational companies were backed by substantial resources. Soon, defensive actions to protect Chinese industries on their home turf were called for.
Liu Chuan-zhi, founder of Lenovo, responded to a question regarding this in an interview. “It doesn’t matter whether or not we are willing to take upthecause;wehavedefactoalreadybecometheflag-bearerforournational computer industry. At the very least we need to play for our lives. If we lose, then we go to our deaths like heroes.” The reporter asked further, “If China completely loses its own national industry, what is really so very wrong with that?” Liu Chuan-zhi’s eyes widened and he retorted, “What’s wrong with it! Nothing,justthatwearesendingourpeopletotheslaughter.”Soonafter,this leading company in the Chinese computer industry was able to introduce a machine that was priced at half of the foreign brands, by using extreme costcutting methods while maintaining the same functions.
In color televisions, TCL in Huizhou, headed by Li Dong-sheng, similarly declared itself as being “willingtodieinleadingthecharge.” It started a price war at the shopping malls in Beijing. Japan was TCL’s competitor,andthepriceofitstelevisions was two-thirds that of Japan’s.
The color television manufacturer Changhong, based in Sichuan, joined in with the slogan, “We will build a new Great Wall with our brands.” It then slashed prices in a ruthless fashion and made the following announcement in its publicity pamphlet: “We deliver every function that a foreign product has; we have the whole product range that they have and any services they deliver, we provide as well. But for the same functions and the same quality, our prices are 30% lower.” After bloodletting price cuts, this
Li Dong-sheng, Chairman of the TCL Group, together with Jack Welch, CEO of General Electric, at a forum in China in 2004. For Chinese entrepreneurs to be seated on the dais together with world-famous executives indicated that the former had begun to get some recognition, even though they still had a long way to go.
In 1995, the Changhong Group in Sichuan was the largest manufacturer of color televisions in China. Chairman Ni Run-feng was known for excelling at price wars; he personally went behind store counters to sell televisions.
company became successful and the reigning champion in the color TV domestic market.
Multinational companies had not imagined that their defeat would come at the hands of these unforeseen price wars. General Electric was soon to face the same problem and lose as well. Based in Beijing, its GE Jiabao Lighting Company was never able to make a profit. Thomas Edison may have invented the light bulb and the company may have made light bulbs for over one hundred years, but its operating and manufacturing costs in China were high.