Interview: ＂I'm a long-term bull in China＂ -- Honeywell CEO
Despite the country's current economic slowdown, Dave Cote,chairman and CEO of U.S.-based technology and manufacturing multinational Honeywell,said he is still a long-term China bull.
The prospects of the Chinese economy will "depend on continuous evolution of the economy and how the government interacts with the economy," Cote told Xinhua in an interview in Beijing during his recent visit to China.
"The track record in China is very good when it comes to evolution. It is one of the reasons that I am a long-term bull in China," Cote said, adding Honeywell's story in the country will become brighter.
Cote became Honeywell's Chairman and CEO in July 2002, when the company was at its most difficult period following a failed acquisition by American multinational conglomerate GE. Over the last 13 years, he remade the struggling century-old, U.S.-focused firm, into a highly profitable global multinational.
MEMORIES OF CHINA
Cote's earliest memory of China dates back five decades ago, when his mother persuaded Cote and his siblings to eat liver for dinner.
"She would say that there are starving children in China who would love to have that liver,so you should eat it.... that was how we thought about China 50 years ago," Cote recalled.
That was around 1965 when China was on the eve of its 10-year Cultural Revolution, when poverty and starvation were not uncommon among Chinese families.
But 20 years later, when Cote visited China for the first time, things were changing for the better following historical reforms and an opening-up drive. Still, it was not a very nice first encounter for Cote.
"I couldn't buy a souvenir for my sons because I was not allowed to have (the Chinese currency) RMB. The only place that I could use the U.S. dollar was in a friendship store.And I remember going to Friendship Store No. 2, and they (sales staff) were not very friendly to me," Cote said, laughing.
And now China has become the world's second largest economy -- second to the U.S., after achieving spectacular growth over the last 30 years.
"Now when I come to China, it is like going to the most modern city in the world.... It is just unbelievable. This is the evolution that I am talking about," he said.
EVOLUTION
Cote said China's evolution has been rapid, and the Chinese government has been evolving with the economy.
"One of the reasons that I am so bullish about where the country can go is that I see China recognizing what the issues are and addressing them. That is the important part of being able to evolve," Cote told Xinhua.
"Every government, country, company, organization, and every single person need to evolve because the world is always changing around you."
Cote said evolution was one of the main reasons behind Honeywell's astonishing transformation into an industrial powerhouse with a double-digit profit growth and an enviable balance sheet. "I always say that Darwin's point is not the survival of the fittest, it is survival of the most flexible."
"As a company, we need to be constantly evolving faster than our environment.Competitors, customers, technologies, countries, and everything is changing all the time.We need to be changing even faster than them."
Accompanying an economic slowdown are lots of adaptations going on in the Chinese system right now, including the anti-corruption effort, the state-owned enterprise reform,and the shadow banking discussion, Cote said.
China's economic expansion has slowed down in recent years, which is officially called"New Normal", with growth rates falling from 8 to 10 percent annually to current 7 percent.
Cote believes China's economy will continue to do well as long as the Chinese government keeps evolving and addressing the issues, adding that a 7-percent growth was still pretty good and it would be terrific if the world's economy would expand at the same pace.
BE PART OF CHINA
Against the backdrop of an economic slowdown, the Chinese government has stressed environmental protection, vowing to improve air and water quality, which Cote said is"very consistent with the evolution of the economy".
Such efforts also meant significant business opportunities for Honeywell. "If you take a look at things like air and water quality in particular, those are big spaces for Honeywell."
Cote is also in favor of China's Belt and Road initiative, which was proposed by President Xi Jinping in 2013. Honeywell is well positioned to support this initiative through its unique China growth strategies -- East for East and East to Rest.
Honeywell divides its businesses into three parts -- aerospace, which is responsible for 39 percent of the company's global revenue; automation and control solutions which generate 36 percent; and performance materials and technologies for the remaining 25 percent.
With all of Honeywell's major businesses doing well, its shares, trading last week at 101.58 U.S. dollars -- 16.6 times this year's expected earnings -- could appreciate by about 20 percent in the next year and nearly 50 percent in the long term, according to Cote.
High growth regions, including China and India, currently account for 23 percent of Honeywell's annual revenue. China alone takes up around 6 percent, at record 2.4 billion U.S. dollars in 2014, making it the largest sales market outside of the U.S. for Honeywell.
In the last 13 years since Cote joined Honeywell, sales in the China market have grown more than five times.
"If China is going to be the No. 1 economy in the world, then I want us to be a fundamental part of it from the beginning. I want Honeywell to become part of the very fabric of China.I want people to think about Honeywell in China as a Chinese company," Cote said.
Cote said Honeywell would continue expanding investment and adding to its work force in China -- currently at around 12,000 -- as the business is growing at a double-digit rate.
Honeywell aims to raise annual sales to about 52 to 56 billion U.S. dollars by 2018, from current 40 billion U.S. dollars, and China will no doubt be a fundamental part of that growth, making a big contribution, Cote added.
