As General Electric continues to grow, the company is finding that China may not be the treasure chest they once assumed it would be. Recently, the company has turned its attention to Australia. When you look at the growth the company has made in the “outback” it is clear why.
Australia, a country with a population of 22 million, is set to create more revenue in the industrial conglomerate sector this year than China, with a population of 1.3 billion.
And while GE is not giving up on China completely, the projected revenues the company had hoped China would generate are just not being realized.
CEO Jeff Immelt set a goal of earning $10 billion in revenue in China by 2010. As of right now, the company is barely past the halfway mark.
Immelt believes that this is because of China’s strict contract policies and the 50/50 joint venture the company is currently involved in. Vice Chairman John Rice, who is currently stationed in Hong Kong, believes this 50/50 joint venture causes projects to not only “take longer to put together,” but also to take “longer to mature than a company that has full ownership.”
This is why Australia is so appealing. Their reliable legal system and free markets allow GE to grow much faster and produce much higher revenues than they have been in the Asian country.
In GE’s first quarter, the company announced a 26 percent increase in industrial revenues in Australia, which was eight percent higher than the rise in China. Overall, Australia exceeded China’s revenue for GE by $100 million, bringing in $5.8 billion to the company.
Another major attraction to Australia is a $34 billion liquified natural gas project called Ichthys. Recently, Immelt has invested heavily in energy, and it now accounts for about one-third of the company’s revenue.
The company has spent $9 billion acquiring companies that provide services to oil and gas producers.
This is why the Ichthys project is perfect for GE’s growth in Australia. Nearly 560 miles off the northern coast of Australia; it is one of many projects that will push Australia into the lead as the world’s largest exporter of liquid natural gas.
While China will soon become the world’s largest economy and possibly have over 1.5 billion people in it’s population, Rice says it is still a close call to see whether Australia or China will bring in more Revenue for GE over the next few years.