General Motors ended the second-worst fiscal year of its 100-year history with an annual loss of 30.9 billion U.S. dollars in 2008. Its earnings in China are still unknown, but vehicle sales climbed 6.1 percent in China while global sales plummeted 10.8 percent from 2007.
GM is the epitome of a handful of transnational corporations (TNCs) whose China earnings have partially offset trouble in the global recession and even saved some smaller multinationals from closure, analysts say.
"China is one of GM's most important markets. A success in China will be crucial to the company's global business," says a GM (China) spokesman.
Although on the brink of bankruptcy, GM is expanding in China because of the sales growth, in contrast to the U.S., where it's shutting plants and seeking government bailouts.
The auto giant planned to introduce at least 10 new models to the Chinese market in the next two years.
Toyota Motor, the Japanese auto giant, sold 17 percent more vehicles in China last year while its global sales tumbled 5 percent from 2007.
Growing China sales have become a highlight in the annual fiscal reports of many multinationals. Some, such as Siemens, PepsiCo, Coca-Cola and ABB, have even announced new investment in China.
"A company will be able to resist the global financial crisis only after its products are sold and it has the money to weather financial difficulties," says Zhang Hanya, an economist with the National Development and Reform Commission (NDRC), the country's economic planner.
China has an irresistible attraction for TNGs because of the huge population and increasing buying power, Zhang says.
Despite the economic slowdown, urban per capita disposable income increased 8.4 percent year on year in 2008, and rural per capita net income rose 8 percent, according to an NDRC report submitted to the National People's Congress, China's top legislature.
Retail sales climbed 21.6 percent to 10.85 trillion yuan (1.59 trillion U.S. dollars), it said.
Large TNCs considered China to be the most attractive destination for future foreign investment, because of market size, higher market growth rates and cheaper labor, according to the World Investment Prospects Survey 2008-2010 by the United Nations Conference on Trade and Development.
Tesco, Britain's top retailer, opened four new stores in China in the first two months this year, bringing its total to 64 since 2004.
"We value the development outlook of the Chinese market as well as the government's resolution and ability to fight the financial crisis," says Zhuang Nanbin, vice president of Tesco (China).
"China is one of Tesco's most important markets," Zhuang says. The company planned to increase its presence in relatively undeveloped central and western inland areas.
"The TNCs are like ships on the ocean. When a storm comes, they will find a safe port," says Wang Zhile, director of the Research Centre on Transnational Corporations affiliated to China's Ministry of Commerce.
China is considered safe because the impact of the global financial crisis has been relatively small and the performance of enterprises the TNCs established in China is better than their global average, Wang says.
Meanwhile, overseas investors are more optimistic about the market as the government's economic stimulus plans boosted confidence.
Since late last year, the government has announced aggressive measures to ease the domestic impact of the global downturn. These included a 4-trillion-yuan stimulus package, a plan to expand rural home appliance purchases and support plans for key industries.
"China is viewed not only as a buffer against global financial meltdown, but also a platform to recover from the crisis," Wang says.
However, China's actual use of foreign investment plunged 32.67 percent year on year to 7.54 billion U.S. dollars in January. Foreign investment use has fallen since October, when a 2.02-percent annual drop was recorded.
"There are some multinationals remitting profits or withdrawing investment to help ease fund shortages at home," Deng Xianhong, deputy director of the State Administration of Foreign Exchange, has said. "But this does not mean they have lost confidence in the Chinese market."
On Dec. 31, the Union Bank of Switzerland (UBS) sold 3.378 billion H-shares in the Bank of China when the lock-up period expired. The Royal Bank of Scotland Group and Bank of America followed suit, offloading stakes in Chinese lenders.
Lu Suiqi, vice director of the China Financial Research Center of Peking University, says the foreign banks need funds to offset ugly results elsewhere and the sales will bring impressive profits as the Chinese banking industry had been growing steadily.
UBS gained 841 million U.S. dollars from its transaction, while the Bank of America netted 2.8 billion U.S. dollars after selling a 2.41-percent stake in the China Construction Bank.
Analysts believe the multinationals still have a big role to play in China. Wang says the government should guide them to contribute more to the country's efforts to ensure economic growth, boost domestic demand and adjust industrial structure.
(Xinhua News Agency March 8, 2009)
