By Douglas C. McGill
If there's one thing the swoon in China Internet stocks is telling us, it's that Sino-Western commerce needs some real businesses - as opposed to speculative Internet plays -- to keep things steady during turbulent times.
It follows that any index that wants to reflect the true state of investor sentiment about Sino-Western trade should have some real companies, making real sales and profits, on the list.
But where to find companies like that in China? Look no farther than the Fortune 500. Motorola, the giant U.S. telecommunications and electronics manufacturer, sells about US$3 billion of products in China each year, or about 10% of its overall yearly sales.
In sheer numbers of products sold, China is already Motorola's second-largest global market, and the company's CEO, Christopher M. Galvin, rarely misses an opportunity to say the China market is a linchpin to Motorola's long-term financial future.
A New Symbol
The same can be said of Motorola's two main competitors in the mobile telephone market in China - the Finnish Nokia (which holds the world's #1 spot), and the Italian Ericsson (#3 in the world). They are Motorola's great competitors in the Middle Kingdom. They both make about 10 percent of sales there and see China as the world's greatest growth market down the road. Which makes them both candidates for the VC-30 - but that's a story for another day.
Only five years ago, the U.S. company most watched as the bellwether for the state of U.S.-China if not China-Western commerce was the aircraft manufacturer, Boeing. China's readiness to deal with the U.S. and the West, which is to say the extent of its enthusiasm any given year in opening more to the global economy, was measured in numbers of aircraft contracts won that year by Boeing.
When things were going well the contracts flowed like honey; and when Beijing wasn't happy they either dried up completely or were diverted to Boeing's great archrival Airbus, in France.
Nowadays, who hears about Boeing? True, the Asian financial crisis knocked the stuffing out of Boeing's business in the PRC, but it did the same with all multinationals there. Now that the crisis is over, the company that's become the symbol of U.S.-China trade is the mobile phone maker from Schaumburg, Illinois.
A Happy Employee
This is a very good thing, because unlike Boeing, Motorola's commitment to China goes far deeper than a pile of contracts for goods signed every year. The Illinois company is the single largest foreign investor in China, with US$1.5 billion spent in the country so far on 20 branch facilities, and six major joint ventures.
Last year, the company spent $750 million on locally-sourced materials and components for the products it manufacturers in China, the majority of which are exported. This year, the company has pledged to increase that to $1 billion. It also pushes a policy of "localizing," or hiring and promoting local people to the highest posts in the company, and reinvests all of its profits from China operations back into China.
For an entirely unpaid-for example of the kind of appreciation and loyalty Motorola gets in return from its Chinese employees, check out this personal Web site of an employee at Motorola's Tianjin facility.
The Market Responds
As a result of these steps, Motorola its yearly business isn't the first thing to be held hostage every time a Beijing biggie gets peeved at the U.S. President, or whoever.
Which U.S. multinational CEO was the first to be summonsed by the U.S. Senate Finance Committee in February to testify about the impact on U.S. businesses of the upcoming vote on awarding China Permanent Normal Trading Rights status? Not Boeing CEO Phil Condit but Motorola CEO Christopher M. Galvin.
"No issue currently before Congress will have a greater impact on the high tech community, and America's ability to compete in the New Economy, than China's access to the WTO and the market opening that brings," Galvin intoned in his new businessman-as-statesman voice.
It's not only the politicians and the media that have noticed Motorola's own accession to the status of bellwether of China-Western relations. The market has noticed too. Last year, when news of the U.S.-China WTO accord was passed, Motorola stock jumped up more than 5 percent. Later, when good news regarding contracts for delivery of Motorola-made CDMA devices came out, the stock did the same thing.
For all these reasons, but especially the last, Motorola wins a spot on the Virtual China 30.
To see the Virtual China 30 click here.
