C' Morel

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C. Morel Honorary Citizen Shanghai
1978 - 1983 The objective 1983 - 2001 The
reality 2002 - The new approach 1983 -
2003 Conclusions
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C. Morel Honorary Citizen Shanghai
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1978 - 1983 The objective
FIGURES - Set up of joint venture company
1983-1998 - Chinese majority - 300 KL/Y final
capacity - 22 MUSD shareholder capital -
progressive vertical local integration up to
90 - cumulative Antwerp export 380 MUSD (direct
infeed) - SBell expected to be a 50 MUSD
company (yearly sales) STRUCTURE - SBell covers
the only final product (engineering production
installation) - SBell creates one 100 daughter
company for the component production
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1983 - 2001 The reality
FIGURES - extension contract up to 2013
(renegotiated in 1992) 15 years - 15.000 KL/Y
output capacity mobile PABX transmission x
50 - 120 MUSD shareholder capital (via retained
earnings) x 6 - distributed local integration up
to 95 (spread over 10 companies) 5 -
cumulative Antwerp export 2.7 billion USD x
7 SBell proper sales figure 1.4 billion USD
(2001) x 28 SBell consolidated sales figure
2.1 billion USD (2001) x 42
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1983 - 2001 The reality
STRUCTURE - SBell produces several (6) final
products of the telecom-network subcontracts
installation and commissioning per regio per
product (own other companies) subcontracts
high-volume items to low cost Chinese entities -
SBell creates 9 daughter companies with the final
customers as minority shareholder delocalisati
on partnering - SBell joins Alcatel in 4
specific product oriented joint
ventures focus on market segment
technology lean mean
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1983 - 2001 The reality
1988
51
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Shanghai Bell sales (without daughter companies)
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• CRUCIAL MOMENTS OF UNDERSTANDING
• - 1978 Deng Xiaopeng 4 modernisations (
  F.I.E. need)
• - 1983 Chen Muhua import substitution
  (solve forex balance)
• - 1985 Zhu Rongji infant-industry
  (stop Japan dumping)
• - 1986 R. Reagan Cocom-approval (start
  hi-tec inflow)
• - 1987 Zhang Jinfu investment
  cooperation (Min. Electronics
• and Min. Post Telecom)set-up
  BELLING MICRO
  - 1988 Jiang Zhemin
  longterm Shanghai PT support
• - 1992 Yang Taifang cooperation
  extension till 2013 (6 y early)
• - 2002 Zhu Rongji majority-sales in
  critical industry

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1983 - 2001 The reality
MAJOR LESSONS - Trust shock of
cultures evident questionable from one
product to 5 products flexible contract
application (more faster) (different) -
Everybody misjudged the market potential and
especially the growth-speed Chinese government
foreigners - Under estimation of Chinese
creativity and network flat
regional roles distributed decision
making process focussed - Power of dimension
and speed killing economics of scale
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1983 - 2001 The reality
MAJOR EXPLANATION - Reality is 50x original
business plan in nearly all aspects . Why
unpredicted Chinese development a) first
telecom joint venture (3 years ahead of next
one) b) best possible partner (final
customer) c) ongoing provision of latest
technology d) 20 years same dedicated team on
both sides trust understanding e
) open foreign management mentality confidence
and respect for locals real shareholder
attitude long-term view (1992/1998-2013) f)
killing effect of economies of scale
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2002 - .. The new approach
W.T.O. Opportunity China-side - foreign
majority in key sector world-example less
burden - enlarged technology base (local RD
center) - existing global network (export
objectives) Europe-side - integration of 12
companies (3 year period) - stock exchange -
eligible - consolidation of turn-over
Alcatel Shanghai Bell COMPANY LIMITED
BY SHARES from technology transfer via
technology sharing towards technology
creation
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• Conclusions (1/5)
• What was unique
• zero cash transfer for shareholdership (8 MUSD)
• Cocom approval (4 years process)
• substitution principle accepted (forex balance)
• delocalisation and distributed organisation

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• Conclusions (2/5)
• Try to really understand what is going on
• 50 à 90 BUSD F.D.I. per year (no. 1 world-wide)
• latest technologies mostly brandnew (lt 5 y)
• multi nationals delocalise at increased speed
  China production center of
  the world
• purchasing power parity reality (1 million
  GSM/week) (4 million cars/2002 40)
  much bigger
  real market

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• Conclusions (3/5)
• What is amazing about China
• the consistency and long-term view of the
  policies (leaders are experts and stay on )
• the 400 BEUR forex resources (was 20 BEUR end
  1993)
• the policy to share with Asian-neighbours (avoid
  hegemonism-trends/ every USD-export contains 90
  of import)
• the 6th largest trading nation in 2002 (30 x 1978
  figure no.32)(number 2 by 2020 behind USA)

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• Conclusions (4/5)
• What can be expected
• leadership fully supports the private industry
  reform to reduce the unemployment and accelerate
  the economic growth
• China A-share market increasingly opens for
  foreigners
• new leadership decided to implement WTO-requests
  faster and earlier (better positioning)
• long-life employment will be further abolished
  (30 million jobs in 2002), and 90 million farmers
  will be transferred to the townships (SME)

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• Conclusions (5/5)
• Nobody can stop the eager-beavers (15
  210 million individuals)
• Chinese are masters in squeezing you, but they
  take care to keep
• you alive to guarantee further cooperation
• Institutional relations are formally important.
  
• But personal relations are the
  content-drivers
• A business relation based on own profit does
  not survive . It must be
• mutual benefit at least
• 
  TEAM-UP IS THE FORMULA