Luke Gakstatter believes that all John Deere has done in China over the past 36 years was not miss any opportunities in the fast-changing and increasingly competitive market.
Luke Gakstatter believes that all John Deere has done in China over the past 36 years was not miss any opportunities in the fast-changing and increasingly competitive market. [harvestsalvage.ca]
John Deere's expansion plan in China includes a new factory for large agricultural equipment in the city of Harbin, Heilongjiang province, two new factories in the city of Tianjin, and a harvester manufacturing unit in Ningbo, Zhejiang province.
"The market in China is advancing very quickly and we as a company need to continue to get very good at moving quickly, reacting and developing and planning for that rapid change," said Gakstatter, president of John Deere China.
Gakstatter's sense of urgency was shared by Zhang Monan, a deputy research fellow with the Economic Projection Department of the State Information Center.
According to Zhang's observations, China's long-held model that built its economic success over the past three decades has been under greater pressure to transition since the onset of the global financial crisis.
Weak demand in Europe and the United States -- China's two largest trading partners -- would slow down China's economy that formerly relied on cheap labor and low-cost land to boost exports, analysts said.
To achieve steady growth, China will continue to expand domestic demand and develop the real economy to stabilize economic growth this year, according to a government work report delivered by Premier Wen Jiabao on March 5, setting the tone for policies this year.
Zhang expected external demand to remain weak for a very long period of time, while rising costs domestically would press China's manufacturers to accelerate industrial restructuring.
"I think capital inflow to the low-end manufacturing sector will slow when the country decides to focus on the real economy," Zhang said, adding that advanced manufacturing and high-tech foreign-funded enterprises are more likely to benefit from China's industrial restructuring.
Data from the Ministry of Commerce showed that China attracted 116.01 billion U.S. dollars in foreign direct investment (FDI) last year, up 9.72 percent year-on-year despite external uncertainties.
Although rising labor costs may have had an impact on attracting FDI, the government's moves to expand domestic demand amid rapid urbanization would make China very attractive to foreign companies like John Deere, said He Shushan, a deputy to China's top legislature from northern Tianjin municipality.
Premier Wen said in his report to the parliament that expanding domestic demand -- consumer demand, in particular -- is essential to ensuring China's long-term, steady, and robust economic development and will be the focus of government work this year.
"We will move faster to set up a permanent mechanism for boosting consumption," said the premier.
Spurring demand in rural areas is one of the government's prioritized policies, which include subsidies for agricultural production.
The Chinese central government spending on agriculture, rural areas and farmers exceeded 1 trillion yuan (158.73 billion U.S. dollars) last year, or 183.9 billion yuan more than a year before, according to Wen's report.
"All of that is a clear indication to us at John Deere that the prospects for agriculture here in China are tremendous," said Gakstatter.
He noted that the Chinese government understands China will continue to undergo significant urbanization and be very focused on food security and the overall development of agriculture.
What differentiates China from any of the other markets is not only the speed of change, but the pace of growth, Gakstatter said, adding, "Pace of growth is very phenomenal in China over the past couple of years."
"That's really what causes us to continue to be optimistic about the future of China and how we should continue to be aggressive in investing in people and processes and new products and in new facilities," he added.