ABB unveils major expansion plans in China

ABB believes the fast-growing Chinese economy will fuel its own future growth Keystone

Swiss-based engineering group ABB has unveiled major expansion plans in China, which it says should become its largest market within five years.

The announcement is the latest example of the extent to which the most populous country in the world is becoming the key target market for companies worldwide.

Chairman and CEO Jürgen Dormann told a news conference on Monday that ABB planned to invest at least $100 billion (SFr120 billion) in China and double annual sales there to $4 billion by 2008.

Speaking from Beijing, Dormann said China, which would account for $2 billion sales in 2004 out of a total of roughly $18 billion, was currently ABB’s third largest market.

“In five years, I believe that China will be ABB’s number one market,” said Dormann.

“I do not hesitate to say the China market is crucial to ABB’s fate, as it has been for [the company’s recent] turnaround. Driving through any city, you can see clearly the demand for power and automation technologies in China – our two core businesses.”

Realistic targets?

The announcement comes as economic commentators are increasingly warning that the rapid pace of economic growth in China may slow down over the next few years.

They say the big question will be the rate at which it slows – particularly at a time when major central banks are gradually raising interest rates.

However, ABB spokesman Wolfram Eberhardt told swissinfo that ABB’s estimates for sales growth were “realistic, even somewhat conservative”.

“ABB works in the infrastructure sector, and investments there tend to be much more stable than in other economic sectors,” said Eberhardt.

“The Chinese government’s infrastructure development is based on major long-term plans. China has to develop its infrastructure, as continued economic growth without functioning infrastructure is just not possible.”

Swiss investment

China is home to 1.3 billion people, who represent around 20 per cent of the global population. But it is only in recent years that the country has started to assume real importance in global economic terms.

Annual growth (GDP) has increased by an average of eight per cent over the past decade, and China now ranks as the sixth largest economy in the world at market exchange rates.

China is the third largest importer of developing countries’ exports after the United States and the European Union. It is also the largest recipient of foreign direct investment.

According to Switzerland’s State Secretariat for Economic Affairs, Swiss direct investment in China totals about SFr3-3.5 billion, putting Switzerland 15th in global terms.

Food giant Nestlé is the largest Swiss direct investor in China, with total investments of about SFr1 billion.

The Swiss embassy in Beijing estimates that around 250 Swiss companies are active on the Chinese market in one form or another.

swissinfo

Key facts

Total Swiss investment is China is estimated at SFr3-3.5 billion, putting Switzerland 15th in global terms.
China is the largest recipient of foreign direct investment, which is estimated to total SFr65 billion.
ABB had turnover of SFr22.5 billion in 2003, of which 55 per cent came from Europe, 19 per cent from the US and 18 per cent from Asia.

In brief

ABB expects China to become its largest market within five years, thanks to major investment in government-sponsored infrastructure development.

The company has unveiled a new “China strategy” based on organic growth, new investments, cost migration (local production), a new research and development centre in Beijing, and 5,000 new Chinese jobs.