ALTERING BUSINESS GENETICS

By Tao Zihui

One would be hard-pressed to find anyone who would describe the rear quarters of the BMW X5 as“cramped.” It’s positively spacious， in fact. But in China， where legroom matters most， the regular model just won’t do. So， in response to the world’s largest market and its demands， the Bavarian carmaker decided to make a change.

On March 31， BMW launched its X5 midsize luxury SUV， joining a bevy of Chinaonly long-wheelbase BMWs. Its launch also marked the model’s first time ever to be wholly made in China.

According to the company， the X5 has been among its best-selling models worldwide since its debut in 1999. What made the launch of the new version especially significant， was its position as “the flagship of BMW’s locally produced lineup.”

“The new car again reaffirms our targeting the Chinese market as top priority，” said Johann Wieland， President and CEO of BMW Brilliance Automotive Ltd. （BBA）， a joint venture between BMW and Brilliance China Automotive Holdings Ltd. This is just one example of how global brands are shifting gears to serve local requirements.

Yin Zheng， Executive Vice President of French multinational Schneider Electric， takes the view that his company operates as if it were Chinese.

A global energy and automation digital solutions provider， Schneider Electric entered the Chinese market in 1987 with a small jointventure factory. It started massive investment in 1995 and has since established an integrated local operating system.

Last May saw the unveiling of Schneider Electric Digital Industry Demonstration Park in Yizhuang New Town， home to the Beijing Economic Technological Development Area. Part of a continuous drive to increase research and development （R&D） in China， the park marks another step toward the nation’s completion of an industrial ecosystem comprising research， production， marketing and suppliers.

And efforts are paying off. Today， China is Schneider Electric’s second largest market worldwide. In the past five years， the company’s R&D investment here has increased by more than 15 percent annually.

“China is already the world’s leader in electro-mobility， a key driver of digitalization， and now decisively pursues high-quality growth and a circular economy. It is a perfect place and a great partner for us to push transformation to the next level by going electric， digital and circular，” said Yin， who is in charge of the company’s China operations. “We’re creating a real Chinese-style company. We grow and develop together with China’s society， economy and industry.”

“Despite pandemic-induced uncertainties， Schneider Electric remains optimistic about its long-term market position in China. The new opening-up measures demonstrate China’s inclusiveness， which provides further opportunities for mutually beneficial cooperation with our Chinese partners，” Yin told Beijing Review.

According to the latest data from the Ministry of Commerce， paid-in foreign direct investment into the Chinese mainland expanded 37.9 percent year on year to 243.7 billion yuan （$38.29 billion） in the first two months of the year. China remains one of the top investment destinations for multinationals.

China’s commitment to high-quality and institutional opening up also offers overseas investors promising projections. More and more foreign-invested companies already have their localized production in place， meaning they’ve started developing products based on the Chinese market and sold only there.

Yin believes in the ambition to localize both R&D and manufacturing. With the wave of consumption and industrial upgrading， Chinese consumers have a broader outlook on and a higher acceptance of new technologies， Yin explained. “Schneider Electric’s products and solutions must home in on Chinese market needs and become more responsive，” he added.

Carmakers， too， are getting their slice of the pie.

On January 1， a shortened negative list for foreign investment came into effect， with offlimit items cut to 31—from 33 a year earlier， including the removal of the foreign capital cap in the auto industry. This has enabled more European enterprises， like BMW， to expand their China operations.

On February 11， BMW strengthened its partnership in China by extending the jointventure contract of BBA until 2040 and increased its shares from 50 percent to 75 percent by investing some 27.9 billion yuan（$4.4 billion）.

That same month， another German automaker， Audi， cooperated with China’s leading automobile manufacturer—FAW Group， and officially launched a project to produce purely electric vehicles in Changchun， Jilin Province.

Bearing a total investment of over 30 billion yuan （$4.71 billion）， the project intends to serve economic and trade cooperation between China and Europe， as well as help revitalize the host country’s old industrial base in the northeast.

New technologies and a shared pursuit of green development， too， have become growth boosters between China and the EU.

After the carbon-neutrality goal was first proposed in the 2015 Paris Agreement， the large industrial giants began to target new markets generated by the trend.

Some logics are common. Digital transformation can improve business efficiency and reduce energy consumption， and， at the same time， can promote the reduction of carbon emissions in the supply chain.

The transition to a low-carbon and digital economy is a crucial element in China’s industrial progress， Yin said， adding that Schneider Electric is committed to building a “zero carbon future”together with its Chinese partners by accumulating technical experience in energy management and automation.

“There is a global consensus on the need for a green transition and a low-carbon scenario， and China is pivotal in this process，” he said. “We continue to empower the world with original Chinese green and digital products.”

“We see China as a pacesetter in fields like electrification or digitalization. What moves China today will move the world tomorrow，” Oliver Zipse， Chairman of the BMW AG Management Board， told Xinhua News Agency. He added that BMW’s four innovation and digitalization bases in China are its largest R&D bases outside Germany.

Moreover， the localization of management has become the key to unlocking the Chinese market for various companies. Hong Ting（pseudonym） is in charge of business development and corporate strategy at a ChinaGerman joint venture in Beijing. She raises an interesting point—her German boss is well versed in standard Chinese culture and even has a basic understanding of fengshui， a traditional practice which claims to use energy forces to harmonize individuals with their surrounding environment.

But the most obvious for her is the gradual yet overall change on all levels： The top of the marketing department is moving from foreign to Chinese employees， and the midlevel is progressively dominated by Chinese employees.

“This is a typical example of Chinese localization starting from the top down； with that kind of change， any foreign brand can instantly find its footing on the market，” Hong explained. BR