Joe Kaeser, chief executive officer of Siemens AG. BLOOMBERG

German industrial giant sees huge potential from China's growth and upgrading

Siemens AG Chief Executive Joe Kaeser is passionate about a free global economy and a strong supporter of internet-connected technologies.

"We must remain committed to developing global free trade and investment, promoting trade and investment liberalization and facilitation through the opening up, and say No to protectionism," Kaeser said.

As a German and the CEO of a company that generates 87 percent of its revenues outside Germany and employs more than 31,000 people in China, Kaeser said Siemens will focus on areas of electrification, automation and digitalization to enhance its earning ability in the country.

He also said many opportunities would also come from China's ongoing urbanization, industrial upgrading and sustainable energy development, as well as new market growth points brought by the Belt and Road Initiative, the Made in China 2025 strategy and the Internet Plus era.

As China makes progress on the path to an advanced and competitive economy, Kaeser said it would take time for the changes to have an effect. Patience and consistency were needed, he said, as well as continuous reforms along the way.

Kaeser spoke to China Daily on Siemens' strategy for business growth and various other aspects. Following are the edited excerpts from the interview:

How do you see China's market?

China has many world-leading areas, well ahead of the average of the world, especially in infrastructure technologies－just think about Huawei Technologies Co, a world-leading company.

On the one hand, there are leading companies and cutting-edge technologies, but then there are also a lot of developing areas. You have the whole spectrum here, which is unique.

It is unusual to find a country with that huge spread between high technologies, with its global-leading edge, and areas which don't even have electricity.

What is your assessment of the Chinese economy, and how will the country's economic transformation affect your investment strategy?

We continue to invest in China, not only because it is an attractive market, but because of the country's many skilled and talented workers and its big demand. We are very much localized already.

I believe it was a good choice to have one of our two most automated Industry 4.0 production lines located here in Chengdu, and the other flagship is in Germany. So (the German strategic industrial initiative) Industry 4.0 has already arrived in China.

In general, I think the decision made by the Chinese government to open more sectors up to foreign investors was a good one.

Do you have plans to develop markets taking part in the Belt and Road Initiative?

Siemens operates in more than 200 countries and regions in the world. We naturally want to be a partner of any local institution. We wish to have more of those global initiatives which connect local and global partners to a leading system.

How do you assess the prospects of your business in China, in conjunction with the Chinese market and economy?

I am confident about the Chinese market, because China has a lot of well-established companies and universities. For example, if I make phone calls in a city here, I never get a call dropped. In some areas in Germany, this is unfortunately different. Many urban areas in China have the most modern infrastructure in the world. Having this wide spectrum, from basic industries to high technology, integrating it for the government is very hard. I can see that the task is not simple.

How do you see China's ongoing supply-side structural reforms?

We do see the urgent need what is called supply-side structural reform, which is in essence restructuring. I am very familiar with the 13th Five-Year Plan (2016-20), which is also about next-generation manufacturing and high-end manufacturing, in industries such as automotive, aerospace and aviation.

If you look at China today, you have sectors like steel, cement, shipbuilding and mining, where there is massive overcapacity that needs to be corrected in a meaningful and responsible way, because there are so many jobs involved. On the other hand, if you want to add Industry 4.0, more sustainable energy and environmentally friendly technologies, you need to build in the front end of innovation. It has to do with migration to modern manufacturing.

What do you see as the benefits of trade globalization?

I am a person who thinks without borders. The economies of both China and Germany rely heavily on international trade. China is the No 1 exporting nation in the world and Germany is No 3. In 2016, China was also Germany's most important trade partner for the first time. Our economies are linked by strong trade ties; our value chains are increasingly intertwined. What we don't like is protectionism and favoritism. If you protect your own industry for too long, you will lose competitiveness simply because you can't benchmark yourself anymore. This is a global market, and at the end of the day, globalization has helped this planet become a better world. What we need to do now is to tackle and solve such concerns as caring for the environment. There's still a lot to be done.

What do you think about the market potential of China's western region?

The western region of China have a lot of potential in terms of space and its workforce. When China acts on the Made in China 2025 strategy, you cannot have manufacturing only in the eastern coast anymore, simply because of the issue of available space. Just like Singapore: in the late 1980s and 1990s, Singapore was an electronics manufacturing factory.

And then, when it was running out of space, it moved operations to Indonesia or Malaysia. China of course has the space, but there is a lot of competition for human resources from the manufacturing industry. In the coastal areas, people want to be engineers, managers, not manufacturing workers.

What's your advice to Chinese companies wanting to make acquisitions in Germany?

Germany is an especially attractive place for China to do business: Chinese companies made direct investments of about $13 billion in Germany last year, more than ever before. Chinese companies can buy and should be able to buy anything anywhere in the world, as long as German companies can buy anything, anywhere in China. The ultimate goal should be a "level playing field" where Chinese and German companies have equal opportunity.

You are a businessman, but also well known in German political circles. How do you see yourself?

What you need to do is stay human and humble. In top management, the power is only lent or given to you for a period of time. You should treat people the way you would want to be treated yourself.

What do you regard as your biggest achievement in China as the group CEO?

Siemens does business in over 200 countries worldwide. Wherever we do business, our promise is to provide technologies that support sustainable development. That's how we serve society － in China and all over the world.

What's the secret of your business success in China?

The key factor behind our success in China has been our employees in China. We have the best.

We also realize that localization matters. Innovation and technology needs to be brought to the country where we do business. We have been very adamant about it.

For decades, Siemens has been increasing R&D investment in China. We launched Siemens Innovation Center project in China last year, and within this project we established Corporate Technology Suzhou in 2016. Corporate Technology China had already become Siemens' largest research institute outside Germany.

How do you get along with local partners?

We like partnering with customers best. They are our most important partners. And we also honor our relationships with the authorities, our suppliers and society.

How do you motivate your international team?

The key is you need to be there for them, when they need you and show them the way forward. We need to let our people own their job and extend them trust.

I always say: no matter who you are and what you do in this company, always act as if it's your own company. If your manager isn't there to help you, just decide what you believe would be right if that was your company, if that was your money to spend, if that was your reputation to lose.

And we need to make our employees owners of their company. Employees who are also owners of their company act with greater responsibility and motivation, since they directly participate in the company's development.

Currently we have 165,000 employees, who own Siemens shares, so almost every second employee is a shareholder in our company.

CV

Age: 60

Nationality: German

Career:

August 2013 onwards: President and chief executive officer, Siemens AG

May 2006: Member of the managing board of Siemens AG, chief financial officer, Siemens AG

October 2004: Chief strategy officer, Siemens AG

1980-2004: Various responsibilities in business administration and finance

Education:

Studied business administration

Master of Business Administration at Regensburg University of Applied Sciences.