Commentary

Humming in China

The Sichuan Tengzhong Heavy Industrial Machinery Company announced it will buy the Hummer brand from General Motors this week, creating a bit of a stir. First, even though sales of the Hummer have tanked in recent years, many think of this vehicle as quintessentially American–big, gas guzzling, and designed from American military hardware. Second, few people had heard of Tengzhong before its decision to acquire the Hummer. It’s the latter point that should have the U.S. and the rest of the world buzzing.

China is more than ready to enter the world stage as a leading player, and the boldness of Tengzhong’s move is a good example of that global view. Notably, the company is not based in one of the traditional port zones: Shanghai, Fuzhou, or Guangzhou/Shenzhen. Rather, it is based in Chengdu, the capital of the Sichuan Province (home of the Panda), in the interior of this vast nation. Tengzhong sees the purchase of the Hummer brand as a toe-hold in the global automobile market–growing its more traditional domestic chinese construction equipment niche into a diversified transportation company that is globally competitive. Access to Western markets will be key to that strategy, and purchasing the Hummer line serves the purpose even if they lose oney.

Notes the Associated Press article reporting on the news:

“Tengzhong plans to develop more fuel-efficient Hummers for the U.S. market, CEO Yang Yi said in a statement Tuesday. Hummer’s CEO, James Taylor, said the company wants to launch an “aggressive global expansion.” The company said it expects to expand its dealer network, including to China.”

Where is the money coming from to make such a purchase? Internal domestic growth. China isn’t going to make it’s 9 percent growth target for output in 2009, but it’s likely to still push over 6 percent. That’s a lot of new income and wealth in a nation of more than a billion people.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.