Over the past few years, China has been investigating many corporations and high-ranking officials for signs of corruption. Because many people have been arrested as a result of China’s anti-corruption campaign, businessmen have become more cautious about who they do business with and what projects they start. GE’s China business, in particular, was a company indirectly harmed by the anti-corruption campaign.
It Wasn’t a Slowing Economy that Hurt GE
Fear of China’s anti-corruption campaign was the major factor in GE China’s stunted growth in 2015. GE wasn’t a suspicious business. The problem was most of their customers were in industries undergoing inspection and had to adjust to new regulations. GE China’s local customers became anxious about taking on big projects that were being analyzed by regulators for any signs of corruption or non-compliance with the rules. If the government deemed they were breaking the rules, then they would lose a lot of money.
Most of GE China’s Customers Were Undergoing Reforms
Additionally, many of GE’s customers were undergoing major reforms to stay in compliance with regulations. Going through these reforms naturally made it more difficult for them to do business with GE because they were busy making sure they were in the green. The changes taking place also made it harder for big project purchases to gain approval.
GE China Expects a Better Year in 2016
After a stressful year with the ongoing anti-corruption campaign spreading fear across numerous industries, GE China expects a better year in 2016. China’s anti-corruption campaign shows no sign of stopping yet, so why is GE China optimistic? According to Rachel Duan, CEO of GE China, the green energy market will be lucrative in China over the next five years thanks to the government’s new five-year plan going into effect this month (March 2016).
“There’s going to be a tremendous shift toward clean energy—that’s [natural] gas, that’s renewables, but also
more clean-based coal use.” – Rachel Duan
Conclusion
Sales in China only grew slightly for GE last year, failing to hit the expected double digit goal. Their future for the next few years is likely to be bright, however, because China’s new five-year plan going into effect in March 2016 stresses the importance of green energy. This is good news for GE because they operate in the wind, natural gas, and hydro power markets. Fear of China’s anti-corruption campaign may have made it more difficult for GE, but there will be plenty of opportunities in the green energy industry.
Contact us for advice on how to keep your business safe in China with so many new regulations being introduced.
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