The Rise of a New Power (4)

6/20/05

(Page 4 of 6)

Big companies come here for the people, too. General Electric opened one of four global research centers in Shanghai in 2002 to serve the Chinese market but also to tap into Chinese talent. Universities in China issue about 160,000 advanced degrees every year--four times as many as in the United States. And they're not knockoff diplomas. "The quality of university graduates is every bit as good as in other countries," says Bijan Dorri, managing director of GE's China Technology Center.

Flying high . At a brand-new glass-and-steel structure in Shanghai's Pudong area--a swamp until it was filled in and started sprouting skyscrapers 10 years ago--600 engineers, most of them Chinese, do groundbreaking research on electronics, solar energy, plastics, and other advanced materials. Typical pay is about $35,000 per year. One major project involves GE-made jet engines that China is buying for the 100-passenger ARJ-21 jet, the first Chinese-built airliner. GE originally designed the engines to be mounted on the wings and engineers here are figuring out how to retrofit them to the fuselage, to satisfy the Chinese design.
GE plans to staff up the Shanghai lab by about 25 percent this year--but not at the expense of U.S. jobs, according to Dorri. "It's not like we have stopped hiring in the U.S. and are hiring people here," he says. "We need more talent wherever we can find it." Some of GE's employees even prefer China to the States. Chang Wei, an electrochemist, worked at a GE lab in upstate New York for several years, then came here two years ago. "It's where the growth is right now," he says. "It gives me more responsibility and helps me grow."
There are still plenty of danger zones for western firms coming to China. Companies like Intel and Microsoft are so worried about theft of key technology that they won't even do certain kinds of research in the country. Motorola's experience is a cautionary tale studied by many newcomers to China. The company led the market for cellular phones in the 1980s and '90s. But as it invested millions of dollars in local suppliers, those companies learned the business and began to offer their own phones--much cheaper than Motorola's. The local firms have since captured many of the smaller markets and are gobbling up business in big cities, too. Meanwhile, stealing of intellectual property is a problem that's getting worse, not better, according to a recent report by the American Chamber of Commerce in Shanghai, which represents U.S. business interests.
Credit check. The peculiarities of the Chinese market also force creative workarounds. Last year, General Motors Acceptance Corp., the automaker's highly profitable lending arm, got the first license issued to a foreign company to grant auto loans in China, where most people still pay cash for cars. Doing credit checks in China, however, is almost as labor intensive as building a car. Since there are no established credit bureaus, field investigators check out every applicant individually. They visit homes, making sure somebody actually lives there, and even check out their employers' offices if something looks fishy. Christian Weidemann, president of GMAC-China, recently turned down one applicant after looking at photos of his workplace taken by the field investigator. "There were no pictures on the walls. It felt like nobody worked there," he says. "We were the first to open, but we don't want to be the first to get burned."