Hidden amongst the chaos of the debt ceiling / deficit circus, you may have missed a news story trying to sneak by on that ticker at the bottom of your TV screen. This was the announcement that General Electric was quietly moving the headquarters of its 115 year old X-Ray division from Waukesha, Wisconsin to Beijing. Yes, that’s the HQ, not merely some assembly jobs; we’re talking the executives and the whole shebang here! The plan has been in the works for sometime and the press announcement was clearly being held for a moment when it would get the least possible media exposure.
This is another in a long series of kowtows that GE CEO Jeff Immelt has made before the throne of state capitalism as a means of proving that GE is a “friend of China.” That’s the phrase Communist Party apparatchiks use to signal US firms that they will be expected to perform certain acts that cannot be explicitly required by the Chinese government because they would violate WTO rules China has agreed to. However, it is needless to say that those who do not prove to be “friends of China” often find that they have problems with market access.
Just last year GE invested about $2Billion of mostly American capital into authoritarian China despite having disappointing returns. Revenues of $5billion were half of what GE projected for 2010 and down $300million from 2009. Perhaps this is what prompted Mr. Immelt in a rare moment of honesty to warn some Italian Executives that:
I really worry about China . . . I’m not sure that in the end they want any of us to win, or any of us to be successful.
He went on to share his concern that China was “colonizing” many resource rich nations and blasted President Obama with:
Business does not like the US president and the president does not like business.
Tough talk, indeed, but something – we may never know what, but we would love to – inspired Mr. Immelt to do a quick 180 the administration’s pet business guy. In January of this year the GE CEO accepted the President’s invite to a cozy session with Chinese dictator Hu Jintao at the White House – a state visit all the ethical members of congress snubbed. Just a couple of days later he was anointed our nations “Job Czar” or officially “Chairman of the Council on Jobs and Competitiveness” and along came this plan to move an entire GE division to Beijing! You just can’t make this stuff up, because nobody would believe it.
Immelt announced his appointment to the newly named council in a self-congratulatory piece in the Washington Post last January. Among other ironic gems, the king of outsourcing commented:
Persistent and high unemployment – and the pessimism it breeds – should not be accepted.
Tell that to the folks in Waukesha. Yes, GE has promised none of the 120 employees will be laid off when the division closes – that is if they don’t mind sending their kids to a Chinese high school this fall or only seeing them during the Lunar New Year break. It’s a cynical vow from a cynical guy, but even if it were true the ripple effects of tearing out that division will surely contribute to persistent and high unemployment in that municipality of just 70,000. It’s probably not a coincidence that GE recently made a $25,000 donation in support of homeless shelters in the little Wisconsin town where Immelt once lived.
Greg Autry is the co-author of Death by China. He teaches Macro Economics at the Merage School of Business, UC Irvine. He writes and speaks on China, space, economics, investing, and business strategy. He also blogs at The Huffington Post at http://www.huffingtonpost.com/peter-navarro-and-greg-autry