Peter Löscher, Siemens AG
Release Date: 2009-12-21
How has the global financial and economic crisis impacted the positioning of China in Siemens international market portfolio, and what are the main objectives behind Siemens’ decision to increase its strategic investments in China’s renewable energy and green technology industries throughout 2009?Siemens’ business in China maintained stable despite a difficult economic environment in fiscal 2009. Sales and new orders remained positive growth, with expanding shares generated from our Environmental Portfolio. Excellent results from our initiative to reduce selling, general and administrative costs, boosted an all time record profit for China. Hereby we laid a solid base for Siemens’ global business, which is rigorously oriented to the major trends of our time. These include climate change, which will transform environmental technologies into the leading industry of the 21st century. At Siemens, green, energy-efficient solutions are already generating more than a quarter of our total revenue. And this is increasing every day.
In which areas does Siemens identify the greatest complementarities between its environmental business portfolio and China’s green development ambitions?
Our performance in the challenging market environment once again proved that our portfolio fits well to China’s demand for decoupling energy consumption increase from GDP growth in the process of accelerated industrialization. We will continue to focus on our core businesses, expand our environmental portfolio and tap all potentials from innovation driven growth areas. In fiscal 2009, green orders generated contributed to stabilizing business operation of Siemens China. We substantially reinforced our leading position in green technologies in China and additionally invested €150 million in expansion of production capacities for alternative energies in China. Earlier in 2009 we celebrated the ground breaking of a wind blade factory in Shanghai. Its opening marked Siemens’ entry to the wind market of China. Experts predict that China could soon become the world’s largest wind energy market. The country not only enjoys excellent wind and solar conditions but has also realized that both economic and environmental goals can be pursued simultaneously and thus incorporated ambitious environmental goals in its five year plan. Siemens contributes to this development. I am sure that this overall strategy will be of mutual benefit.
What are Siemens’s achievements and ambitions in the Chinese market for Smart Grids and fossil power generation?
Energy highways such as high-voltage direct current transmission link (HVDC) systems are a key element of smart grids. Siemens is one of the world’s leading suppliers in this area. Very soon we are going to put into operation an HVDC link in China with a transmission capacity of 5000 megawatts (MW), covering a distance of more than 1400 kilometers. We commission the world’s largest and highest-capacity 800-kilovolt HVDC transformer in China. It is intended for the next even larger HVDC system in China, which at 6400 MW will transport power equivalent to that supplied by twelve average-size coal-fired power plants over a distance of 2000 kilometers. Siemens also secured a large contract to supply a gas-insulated high voltage line with a total tube length of 12.5 kilometers, the longest of this kind in the world, for Xiluodu Hydropower Plant. As a backbone power source for “West-to-East Power Transmission” project, the plant will help reduce China’s CO2-emissions of about 150 million tons per year. This is not only good for the wallet of our customers, but it is also good for the environment. In a nutshell, China’s economy, the Chinese people and China’s environment already benefit from this technology and we would be glad to help China pursuing its green path.
Does Siemens have the intention to use its reputation as a preferred technology partner for the Chinese government and business community to advance overall Sino-German trade and cooperation and reinforce that “Made in Germany” not only stands for world leading technology in traditional industries, but also international excellence in green solutions across Germany’s business community at large?
The economic relationships between the two countries are very dynamic. Today, Germany is by far China’s largest trading partner in Europe, while China is Germany’s most important export market in Asia. Chinese demand for green products made in Germany is also increasing. However, as the world’s largest supplier of green technologies, Siemens doesn’t just export to China; we also produce there. For example, in 2009 alone, we commissioned two additional factories for green products. In addition, Chinese leaders are making major efforts to further improve conditions for companies. For example, it has become more easy in some areas to set up companies in China. Shareholders have substantially more information rights, the credit business is more transparent, and the protection of private property is anchored in law. Chinese companies are also investing increasingly in Europe and in Germany. Consequently, contacts between the two countries are becoming even more intensive, and cultural understanding is steadily growing.
In which ways can the Chinese business community expect to benefit from the strategic alliance between the Chinese government and Siemens in areas such as R&D with local partners, technology transfer, the development of innovative green technology clusters around the country, and supply chain opportunities for domestic players in China’s green industries?
Our history in China dates back to 1872. Today, we have established about 90 operating companies and 61 regional offices. With more than 43,000 highly qualified local staff, Siemens has become one of the largest employers amongst foreign invested enterprises in China and an integral part of the country’s economy. Our order intake in 2009 totaled more than EUR 5.5 billion. We work closely with hundreds of local suppliers and partners. Mre than 250 top-notch innovators are working in world-class innovation labs in Beijing, Shanghai and Nanjing.. As a result, our worldwide best selling Somatom Spirit CT scanner was developed in China. It is also manufactured here and both sold within China and exported to a large number of other countries. We continue to invest heavily in China. In 2009 we spent €150 million for two new factories and in the year before we built the new Siemens Center Beijing for €100 million, let alone. But it is not all about business. Regardless of difficult market conditions, we stick to our commitment to corporate social responsibility. Under the program of “Green Village”, we handed over water purifiers to Shangba county in Guangdong Province. 3,500 village people from then on had the access to clean water. We also launched the nation-wide education program ‘i-green’ to help migrant kids integrate into the urban life. Within three months, the program has been rolled out in a number of migrant schools in Beijing and Wuhan.
With green technologies likely to account for 40 percent of Siemens’ planned order volume for the 2009-2012 period, what will be the medium and long term positioning of the environmental business portfolio in Siemens's growth strategy?
Despite the current economic crisis, we managed to increase our global revenue with green products by 11 percent year- over-year to €23 billion in 2009 and intend to push further growth. For us China is already one of the world’s most important countries for our green technologies. China’s recently announced goal to cut carbon emission per unit of GDP by 40 to 45 per cent by 2020 and the planned massive investment in urban infrastructure will provide tailwinds for further growth. Our environmental portfolio is a perfect fit to the stimulus plan of the Chinese government. We are fully on track in reaching our target of generating RMB 20 billion from the country’s stimulus programs until 2012.
How would you describe the contribution that Siemens aspires to make to China’s green development ambitions, and which role will cities play in your business strategy in the coming years?
Cities are the decisive factor for our climate. Today, more people live in cities than in rural areas, and life expectancy is continually increasing. This trend is very much alike in China. China already has about 170 cities with more than one million inhabitants, each. Experts predict that by 2050 some 75 percent of the Chinese population will be living in cities. Megacities like Shanghai or Beijing have to cope with major challenges. Residents expect a good quality of life. They need clean air to breathe, good water to drink and reliable electricity to power their lives. They need affordable healthcare. They also need to be mobile and have adequate transportation systems in place. Experts predict cities worldwide will invest around €27 trillion in expanding their water, power and transportation systems over the next 25 years. Cities like Shanghai are likely to invest in infrastructure some triple digit billion euros amounts over the next five years. With our unique green portfolio, Siemens is the perfect partner for sustainable urban development. We see huge potential for infrastructure projects such as new railway and metro lines, high-speed trains, HVDC lines, fossil and renewable energy and medical equipment.
What is your final message for the Chinese political leadership and business community?
China is a fascinating country both from a cultural and from a business perspective. I personally enjoy being here several times a year and meet up with government officials, customers and employees. I am very much looking forward to paying EXPO 2010 in Shanghai a visit and I am sure that China will make it a great success.
| Company: | Siemens AG |
| Position: | CEO |
| Country: | Germany |