The China Story - Stupid Is As Stupid Does

To quote Forest Gump related to China, “Stupid Is As Stupid Does”.  Western and Asian companies and countries have stood by for years with the promise of access to China’s huge market providing them with technology as the price for entry.  What technology China did not get as part of these deals, they often stole using cyber theft.  And, China has gone industry by industry becoming global competitors to those very same companies that provided them their technology.  While there are many examples, one of the best is the passenger train industry.  For many years, China was buying it passenger trains from global companies like Alstom, (France) Seimens (Germany), Hyundai (South Korea) and Kawasaki (Japan).  The US stopped making passenger trains years ago because we are a nation built on road and air travel.  

I don’t blame China for being smart as they have become an industrial giant.  I fault Western and Asian companies and countries for being stupid and naïve.  This is what happens when publicly traded companies live quarter by quarter reporting earnings.  The thinking is very short term not looking out 10 – 20 years.  China always looks long term related to their global strategy.  Their goal is to have everything they need made in China.  So they target particular industries until they get there.  

So now, the Chinese Rail Company, China Railway Rolling Stock Corp basically controlled by the Chinese Communist government has an 83% market share of passenger rail cars beating out the very Western and Asian companies that for years sold them this equipment.  Alstom and Seimens attempted to merge to better compete; but the merger was not approved by the EU.  And, to China’s credit, they are now building those rail cars in the United States in factories in Boston, Chicago, Los Angeles and Springfield, Massachusetts for the US market.  As a result, they are creating jobs in the US, which is good.  But in the process because of Chinese government funding, they are able to undercut their Western Asian competitors to win business at lower prices.  

Right now China is focused on passenger rail; but they won’t stop there.   It is only a matter of time before they start producing freight trains.  Currently, there are 4 American companies producing freight trains in the US.  They will be targeted in the future because that is a lucrative industry.  The passenger rail industry is a great example of the way China plays the game.  It is time for Western and Asian companies and countries to wake up rather than playing their game.  If not, it will be more “Stupid Is As Stupid Does” as China becomes the top economic and military power in the world.