GE to Invest in China - Analyst Blog

General Electric Company (GE) recently announced that it would be making an investment of above $2 billion to expand its research and development activity in China through 2012. The investment will also aid in the development of joint ventures in technology and financial services.

The company plans to invest about $500 million on upgrading its research and development activity and for setting customer innovation centers in the country. General Electric will be creating approximately 1,000 new jobs through its investment. The company will be spending more than $1.5 billion on technology and financial services joint ventures with state-owned enterprises in China.  

China is a developing country, actively engaged in expansion and modernization of its infrastructure facilities related to energy, transportation, health care and financial services. There has also been a boost in the upgrading of airports and airline fleets.

Recently, General Electric entered into four energy and railway joint venture agreements with the Chinese state-owned firms. This creates job opportunities for both the Chinese and US population.

General Electric has one of the best infrastructure franchises worldwide with solid organic growth rates, exposure to favorable secular trends and a large installed base supporting a growing annuity-like service business. Infrastructure businesses of the company are helping to build energy, health, transportation and technology infrastructure of the new century. These businesses provide products and services that help the developing regions to participate in the global economy, while also assisting the developed regions to upgrade with cleaner, more efficient and better infrastructure know-how.

However, the company's global expansion is subject to economic and political risks pertaining to diverse operating regions.

Operating in more than 100 countries globally and employing about 300,000 people worldwide, General Electric Co. is a diversified infrastructure, finance and media company.  Within the energy sector, the company aims to develop and install technology for the efficient use of natural resources. General Electric competes with the likes of Honeywell International Inc. (HON), Siemens AG (SI) and United Technologies Corp. (UTX).

We currently maintain our Neutral rating on General Electric for the long term. The company has a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.