General Electric (GE) is renowned as the training ground of such outspoken champions of American capitalism as former CEO Jack Welch and ex-Home Depot (HD) and Chrysler chieftain Robert Nardelli. So it may come as a surprise to some that every summer since 2000, GE has collaborated with the world's largest Communist party to pick about 25 Chinese executives to attend the company's storied leadership program in the U.S.
The training, at GE's Crotonville (N.Y.) management education campus, helps turn the visitors into allies, GE officials say. Back in China, they can help GE continue to influence decision-makers in the world's fastest-growing major economy. GE's strategy of cementing relationships in the Middle Kingdom has paid off with lucrative contracts to supply jet engines and build wind turbines.
Programs like GE's and other companies' are meant to convince Beijing officials that what's good for those foreign businesses is also good for China. Says GE China Chief Executive Officer Mark Norbom: "We make sure our initiatives are aligned."
The stakes are high. China's economy is poised to pass Japan's this year as the world's second largest after the U.S. General Motors sold more cars in China in the first quarter of this year than in the U.S. Foreign companies that don't toe the party line can find themselves with problems, especially now, as China has become more active in promoting local champions and state-owned businesses. GE's program has trained some 200 Chinese executives in conjunction with the Communist Party's Central Organization Department, which names the heads of China's biggest state-run companies. Alumni of the GE program include Ning Gaoning, chairman of Cofco, China's largest grain trader.
Using information gleaned from program participants, GE designs its Chinese businesses around the country's goals. Building more efficient wind turbines, for one, is in line with Beijing's push to slow carbon-emissions growth. Through a joint venture with France's Safran, GE also is providing jet engines for the new planes China is developing to compete with jets from Boeing (BA) and Airbus. GE's sales in China rose 16 percent last year, to $6 billion; globally, its overall revenue fell 14 percent.
GE pursues more traditional lobbying as well, with about 30 people in its government-relations department in China. According to Senate records, that's almost as many as the 36 people who lobbied the U.S. federal government for GE or its subsidiaries in the first three months of this year.
The bottom line: China has become a market almost every major global business wants to crack. That puts a premium on strengthening ties with Beijing.