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Jeff Immelt is one of the U.S.’s most prominent business leaders, having served as the chief executive officer of General Electric from 2001 to 2017. Immelt worked his way up the executive ladder at GE, serving under and then replacing the company’s legendary CEO, Jack Welch. Since stepping down as the CEO, he has taught at Stanford Business School. In his memoir, Hot Seat, Immelt writes about his career at GE, during which he visited China regularly, helping oversee the company’s major expansion there. In this lightly edited interview, we began by discussing his first experiences of doing business in China.

Q: In your book, you write about what you learned at the helm of GE, and about how you built GE’s capabilities in China. Can you give us a sense of how that began?

A: My first trip to China was in the late ‘80s, when I was working in GE plastics. I flew into Hong Kong and then to Shenzhen. We  were building what’s called a plastics compounding plant in Nansha and I had a chance during that trip to meet Terry Gou from Foxconn. They were becoming a big customer for GE. We sold the plastics that went into housings for HP, Apple, Compaq, Dell — all the big computer companies. In the 1980s and 1990s, they were all moving to Asia, doing contract manufacturing. This was pure outsourcing. I remember that when I met Terry Gou, he said, “Here’s what I’m going to do with Foxconn.” I sat there and thought to myself, “He’s either full of it, or this is going to be the biggest customer in the world.” And by 1995, they were the biggest customer in the world. So right there, that’s a data point. I also went to China with the health care division in 1996. I spent the summer of  ‘97, about two and a half weeks, just in China. I wanted to see the cities beyond Beijing and Shanghai. If you go to Beijing and meet the Minister of Health, and he says, “Look, we’re going to have 50,000 hospitals in China. And the tier three towns, well they’re going to be as good as the United States.” You sit there and say, “OK, that’s either BS or, if true, this is going to be the biggest health care division over time.”

What you’re getting at is that all that talk that almost sounded like a fantasy of supercharged growth, turned out to be true, particularly after you took over as CEO. And this is one clue as to how important China became as a new market for global companies like GE. Is that right?

I was informed by seeing things that I thought were fantasy become true during the 15 years prior to my becoming  CEO. And I’ve always been more of a markets guy than a supply chain guy, just by background. So I reached the conclusion that investing in China was going to be one of the core strategies that the company would engage in over the subsequent 15 years. And it made a difference. [By the time I left GE] we had 22,000 employees in China, including 3,500 engineers. We had a $4 billion healthcare business. The installed base of jet engines in the U.S. went from roughly 16,000 to 19,000. The installed base of engines in China went from 2,000 to 12,000. So just on a relative growth basis, China proved to be a worthwhile place to go. We localized some products. We localized the manufacturing. Clearly, we still sourced in China for the rest of the world, but our imports into China were basically twice that of our exports from China. We became a bigger global company because that’s where the markets went. Let’s just say that from 1980 to 2020, if you disregarded the China market you did so at your own peril. I felt like positioning GE to compete in China was a very American thing to do.

Can you quantify those gains, in terms of revenue?

By the time I retired, our global revenue was roughly $70 billion. And China was the biggest country outside the U.S. but still the room to grow was pretty substantial. Our first rallying cry was “$5 billion by ‘05.” Then it was “$10 billion by ‘10.” I felt we were just beginning and could grow exponentially.

It seems part of that strategy involved partnering with the Chinese government. Why was that so important to your growth trajectory?

We’re basically focused on business-to-business markets. And in China, we looked to the state-owned enterprises. Before my predecessor retired, he had set up a program with SASAC [the State owned Assets Supervision and Administration Commission], which was really like the HR department of China. They’d pick 20 executives from state enterprises to spend two weeks in the United States. We created a curriculum, and they came to Crotonville [GE’s management training campus in Westchester County, New York], and they’d go to Washington DC. This basically gave us a two week soak with Chinese executives. We learned a lot from them. And they learned a lot from us. It was mainly about management practices, and what initiatives we were working on. A lot of times, you start these programs and they turn out to be nothing. But in this case, we could see over time was that we were impressed with the people that they were sending. Those people were going back to become the CEOs of airlines, and the CEOs of utilities. And so we always felt like it gave us a kind of natural edge. We had relationships that mattered. So one pillar of how we were successful in China is that we had good relationships, and it’s a country where relationships matter. 

We were also students of the [Chinese government’s] Five Year Plans. We would read them at a high level and all our local people would read them. We would have BCG [Boston Consulting Group] or McKinsey help, and we’d get an interpretation from Goldman Sachs. We understood the initiatives of the NDRC [the National Development and Reform Commission, the old state planning agency], which for the businesses we were in, that was a counter-party that was important. And we hired local people. And they could see that this was a really great place to work. So we did five or six things that were really critical to build the position from the ground up, and to earn the right to sell in the country.

GE did not just sell to state-owned companies, but partnered with them, setting up joint ventures with firms like COMAC, which was trying to build its own commercial jetliner. But by the early 2000s, I understood that multinational companies — and American firms in particular — had soured on joint ventures, particularly with state firms. Why was GE forming JVs in China, with the Chinese government?

Don’t get me wrong. The preference everywhere in the world was not to do joint ventures. But we also found that in a lot of different places in the world, like India or China, having joint ventures were actually helpful. In  our healthcare businesses, we formed joint ventures early on, ones that we later bought out with the government’s approval and a high level of success. We started with joint ventures, but we quickly moved to wholly owned subsidiaries. In power generation, it was always clear that the [Chinese] government wanted to have three power generation companies, and that we were going to have to do a joint venture in order to be successful in the market. And the trick there was to keep things that were export controlled, like hot gas, on the U.S. side, but to assemble in China, and that worked effectively. So we did all kinds of joint ventures. We had some that failed, and some of them were successful. But the thing we wanted to do is we wanted to participate in the market, and we wanted to protect those things that needed protecting.

What type of relationship building does such deal-making entail? Do you have consultants or a Chinese government relations team, or do you handle that yourself, as CEO?

This was a place where being a conglomerate was a huge competitive advantage. And we used that to our advantage. We could afford to have our own government relations people. We didn’t really have consultants. We used the normal consultants, like McKinsey or BCG [Boston Consulting Group] but we also did it directly. I had my own relationships, as did the senior leaders who worked for us in China. I met with Jiang Zemin a couple of times. I met Wang Qishan a couple of times; Hu Jintao a couple of times. Xi [Jinping] has never wanted to meet with business leaders, but I met with Li [Keqiang]. I always knew the chairman of the NDRC. Liu He was a friend. We were good at connecting the dots. They think horizontally, and we think horizontally. We were able to develop those types of relationships. I was going four times a year for 15 to 20 years. So they see a similar face. When we went to our first meeting with the NDRC we had to be ready for business. When you meet with the Secretary of Transportation in the U.S., you’re going to be talking philosophy. At the NDRC, they’re negotiating aircraft engine deals. It’s a completely different scope. So it’s important to have your own relationships, and it’s important to build them in good times and bad. I always portrayed myself as a proud American CEO to them. “Look, I want to win in your market. That’s my goal.” And they would get a little smile on their face and say, “Okay, Mr. Immelt, you’re not gonna win all the time. Just keep coming back.” That was the way it worked. They saw us building factories. They saw us building local capability. We had a research center in Shanghai. We had local Chinese executives, and they grew to respect that.

But how do you deal with the difficulties of operating in a country where the government is both player, coach and referee? They’re your partner and your regulator. And there are intellectual property issues…

We were always cognizant of that complexity. And that would be true in healthcare, power or aviation. Certainly the markets that we competed in, in almost every sector over the 15 years that I was CEO, would have some complex points. I remember at one point, they said our gas turbines weren’t high quality. They leaked that to the media. That was the government. So we would deal with things like that. But we always kept a long term view. It’s true that they’re a regulator and they’re your customer. They’re also a potential competitor. Let’s look at an essential industry such as aviation. If you go back to 1970 and end in 2020, that’s 50 years. The American air framers once had 90 percent market share; Airbus had 10 percent market share. And in 1970, Airbus had a stated goal of eventually having half the global air frame market share. We made a choice in 1972 to set up a joint venture with the French state-owned aircraft company. The joint venture was called SNECMA.¹See Safran Aircraft Engines And that was ostensibly the only way to participate with Airbus. As time went on, 50 years later, Airbus had 50 percent. SNECMA was a big success over time. 

Now if you sit here today, you have to say that by 2040 or 2050

[the state firm building a commercial jets and GE’s partner] is going to have a third of the global air frame market. You know, China’s huge. It’s got lots of its own technologies. It’s a government sponsored project the way Airbus was a government-sponsored project. And if you’re just realistic, it’s going to have a third of the global air frame market. So if you’re a company like GE or Rolls Royce, how do you play that for 20 or 30 years? You say,  “How do I engage with COMAC as a government-owned entity?” You’ve got to have a long term view. You’ve got to have people understand the complexity. And you’ve got to know where you can play and where you can’t play. Also, you have to be transparent with the U.S. government every step of the way because there’s lots of ways to get in trouble. What we always try to do is tell them what we’re doing.

I’m glad you brought that up. Your joint venture partner in China for your avionics division is COMAC, which grew out of AVIC, a state-owned aviation agency with ties to the Chinese military. Was that a concern that GE was partnering not just with the state, but to a firm with links to the military?

I certainly care about the military aspect. We were very transparent with the U.S. government. We had approvals to do the joint venture [with COMAC]. We had the appropriate firewalls. This was a commercial JV; we had an operation in the United States. It was de novo. So it wasn’t taking jobs away from the United States. It was creating a new set of jobs for new aircrafts. And that was almost 10 years ago. The climate today is different for sure. But we were given the approval [from the U.S. government] to go ahead and do it. That’s the context. But the other thing I would say is that all those decisions were made at my level. We almost never did one thing large or small [in China], that wasn’t going to go all the way to the top of GE, to our board, and in a very transparent fashion. Every year, three or four board members would go to China and spend a week there without me. They would meet with people, and discuss compliance, etc. So we knew there were, I wouldn’t say risky, but difficult areas. And we wanted to make sure that it got everybody’s attention.

What I have heard is that for years, leading up to the election of Donald Trump, the U.S. government’s stated policy was economic engagement and helping American firms expand in China, and that U.S. firms and the U.S. government each saw this as a good thing. Is that the way you saw it as CEO?

There are two threads there. First, I had two meetings with President Obama, with the Chinese. One was in 2009 and one was in 2011. [China’s then President] Hu Jintao was at both of those [meetings]. One was in Beijing; the other one with Hu was in DC. At that moment in time, I would say there was a desire to have a cooperative relationship with China. That’s generally what President Bush and President Obama desired to have. And like I said, any CEO was calling Secretary [of State Hillary] Clinton or Secretary [of State John] Kerry all the time to say, “Look, I’m going to Beijing. Is there anything you want me to not do or say?” Things like that. And so I would say that clearly was the tone at that time. 

Separately, and not so much about China but just in general, there was a generation of CEOs who were my age, who kind of grew up the same way I grew up, who basically thought that we could outsource anything anywhere, and everybody would still love us — whether that was to Mexico or Thailand or Eastern Europe or China. And that stumbled during the financial crisis; it became one of the major vectors in which President Trump got elected. And so this whole notion of making things here, nationalism, things like that had been going on around the world for decades. But President Trump kind of Americanized it. 

Now, my frustration is that when President Trump talked about China, he rarely talked about the market. There are things that he said that are clearly true but he never talked about the [size of the China] market. He always talked about outsourcing. And in 2021, it’s all about the market. And none of that discussion even goes on today. We flipped from being in a cooperative mode. We’re either hostile or preparing for war. We’ve got to decide what mode we’re really in. Shrewd investors understand both politics and opportunity. They say, “Look, this healthcare market in China could be bigger than the U.S. in 10 years. It could be more innovative. It could be more lucrative. It could be more profitable…” But people are afraid to speak up. The voices have gone quiet around how important the market is [in China]. Think about it. This is the second biggest market on earth.

And you believe that we should return to a more cooperative mode, and target capitalizing on China’s vast market. This is what American firms should be doing, despite growing concerns about China’s military and the cyber threat, etc. Is that right?

Let’s say what would be a constructive relationship going forward. Clearly there’s a military and cyber aspect; this is important and should take priority. But at present, President Biden could open up the market and say, “Look, we’d like to ship things in. We’d like a bilateral relationship with China. JP Morgan would be able to buy a bank. We’d like GE to be able to acquire an enterprise. We’d like to be able to participate fully in the [airline] sector as COMAC rises.” That would be a true test. Other than beef, maybe, we never really embarked on testing how open the [Chinese] market can be. I now sit in Silicon Valley, and I’m with a bunch of tech guys all day long. And they could build big companies without the Chinese market. But if you’re an industrial company or an automotive company you can’t be a big company without being in China. We’re still talking about outsourcing but we should be talking about market access. In the current political environment, this debate has largely been lost. I’m not sure I have good answers in terms of how it gets rejuvenated.

But many are skeptical that China has a desire to open the market. In fact, there are growing signs that it does not want foreign firms to be significant players in the local market. That’s why they’ve tightened access. Am I wrong about that?

Let me set the context, just so you understand my generation of global business people: We were treated much worse in Europe than we ever were in China. But our market share in China is twice what it was in Germany. Brussels regulators are more of an existential threat to Facebook and Google and all those guys than the Chinese. Protectionism has existed around the world forever. But I have seen that companies willing to engage in China are welcome. Taking the second biggest market off the sell list for multinational CEOs seems abrupt; it seems really challenging in the long term context. Unfortunately, that’s what the next 50 years are going to be about.

Your book is titled, “Hot Seat,” and I’d like to put you there now with a question about how the Biden administration handles one of the most pressing challenges — how to deal with a rival, a competitor and in some ways, a hostile actor on the global stage. There are so many tension points. Beijing sees the U.S. as a hostile actor, blocking its path; Washington sees an equally hostile actor. What is your advice to American CEOs at this time of heightened tensions? 

First and foremost, I’m respectful of the U.S. government. I wouldn’t want to go into gray areas that they didn’t want us in. But if I was in the old hotseat, I’d be investing in China as much as I could because look at over the last 40 years, anytime the world pulled back, the people that kept investing did differentially well. And I would always see China from the eyes of my employees. I would ask them, “How do I interpret this? Or what does this mean to you? or How should I think about what President Xi really means when he says this, that or the other thing? I would be in health care, aviation, energy. I’d be investing right now, because I think the market is so compelling. If you believe climate change is an existential threat, China is more important to solving this problem than the United States. So the notion that if you’ve got products that can work there… China’s got big problems. They don’t have water. They have big environmental problems. I would be trying to find a way to invest in those things.

And should American firms speak out on human rights issues, social issues, whether or not to participate at the Beijing Olympics? You see what has happened with Nike and other brand, when they came out with statements against forced labor in Xinjiang.

If you’re any U.S. company, and you have products that are being made in that region [Xinjiang] or by Uyghurs [against their will], there’s got to be something wrong with you, fundamentally. On social issues or political issues, you just have to pick your spots. Every company has a different point of credibility, whether it’s in Saudi Arabia or China or other places that are hotspots around the world. Every company has its own context with which they can speak.

If you’re any U.S. company, and you have products that are being made in that region [Xinjiang] or by Uyghurs [against their will], there’s got to be something wrong with you, fundamentally.

Do you have any sense of whether the problem lies not with China but here in the U.S., with a sense of dysfunction and insecurity about the American system and American competitiveness? Some have suggested that this is fear mongering, and Americans turning China into the enemy because of doubts about our own system. Do you buy that?

It’s a great question, because part of our hostility towards China is a kind of acting out on our own insecurities. I still believe that from a technology and market structure standpoint, the U.S. is hugely dominant. But China’s rising in a way that makes other countries take notice. And China is a bigger trade partner than the U.S. with a lot of countries. And second, if you take something like “One Belt, One Road,” it was meant to simulate the [the U.S.] ExIm Bank. Now, in 2015, conservatives wanted to kill the ExIm Bank [The Export-Import Bank of the United States]. So now we sit back and complain about “One Belt, One Road,” when we hated our own ExIm Bank. So in some ways, we’re kind of schizophrenic about where we are. 

I believe CEOs need to be all-in on building the competitiveness of the United States. Globalists won’t last long in this world. You have to be able to play a local game in every country around the world, including the United States. So if it takes the U.S. companies to lean in even harder to localize manufacturing here to train our people better. That is going to be the foundation on which we’re allowed to play big in China and other countries around the world. Some of this is our fault as business leaders. We allowed globalization to equal outsourcing. It’s so friggin stupid. I can’t even describe it to you. What we’ve got to say is, “Globalization is about winning in markets around the world, from Turkey to China to Saudi Arabia to Brazil to the United States. We need the next generation of CEOs to recognize that as a fact. Globalization is not about making a cheaper widget so that you can sell an alarm clock at Walmart. That’s important but that’s not the game. If we can’t solve our own insecurity, we’re not going to be allowed to compete globally, and that’s a bad thing. Let me ask everyone, can you really imagine the next 50 or 100 years with the two largest economies on earth disconnected?

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