Europe loses, US wins – the WTO column

(Soon in Chinabiz)

What have Shell, BAT, VW and HSBC in common apart from their European headquarters? In the past weeks they all dealt with major setbacks in China, where often their American competitors ran away as the winners.
Shell decided – after BP did earlier the same – to withdraw from the US$ 18bn pipeline project with Petrochina. BAT gave way to its competitors by claiming it had permission to build a 100bn cigarettes’ factory, a permission that proved to be less solid when it had to be produced. Volkswagen kept on losing market share in the sedan market, where it had started with 80 percent ten years ago, now down to 30 percent at the beginning of this year and sliding. Its major competitor GM came out of the struggle as the largest winner. And in a survey of Euromoney China CFO voted overwhelmingly in favor of Citigroup as their most preferred international bank, leaving long-time competitor HSBC behind with a large margin.

There was of course not only bad news for Europe-based companies. HSBC bought a 20 percent stake in the Bank of Communication, for the first time a foreign bank bought more than a symbolic stake in a Chinese financial institution. Well, we still have to see whether this is going to be good or bad news of course: first movers in China do not always win.

The strong euro has of course already a downward effect for a few years on Europe’s trade with China, but there seem to be more structural problems too behind the rosy press releases European companies send to the media. They have lost touch with reality, the government and more important: the Chinese customers.
Since I’m not in the position of a CFO, I can only guess why they appreciate the services of Citigroup over those of HSBC. In the case of Volkswagen, after having a market share of 80 percent, they could of course only lose.
But here in Shanghai it is the Buick that is winning. Why? In spite of the hopes of the car manufacturers, Mr. Average in China is not buying a car. Here in this region it is the group of well-to-do people who have been buying a few apartments and have no other way to spend their money apart from buying a car. They have not enough money to invest it abroad, but they are doing well. They do not want to be associated with a brand name that has been so closely associated with the now defunct state-economy. They want really an expensive looking car – not necessarily an expensive one.

Are European companies losing their clout here in China? The recent explosion of new flights between the US and China are just another indication that the US is moving ahead very fast in its economic relationship with China, where Europe is lagging behind in a major way. Budweiser is winning in the bars I go to and even the mixers of Amcham are events that cannot be missed. Europe is losing.

Fons Tuinstra