ABB (China) Ltd is an arm of Swissbased ABB, a multinational company specializing in robotics and power and automation technology. Gu Chunyuan, chairman and president of ABB China and North Asia, sat down with Shanghai Daily to discuss doing business in Shanghai and the new Free Trade Zone.

Q1: What is ABB’s business plan for the Shanghai Free Trade Zone?

A: In September 2014, ABB registered a new company in the zone. Its business scope is:

To conduct wholesale, commission agency (except auction), import and export, technical support, technical consultancy, after-sale services and other relevant supporting services of power equipment, automation equipment, components and parts of power equipment and automation equipment, and software products;

To conduct international trade, entrepot trade, trade and trade agency of enterprises in the free trade zone;

To conduct storage and distribution business mainly for power equipment, automation equipment, components and parts of power equipment and automation equipment, and software products;

To conduct commercial simple processing and bonded exhibition within the free trade zone;

To conduct enterprise management, investment management and investment consultation business.

We will start trading business first, estimate a large business volume and plan to integrate our international resources via the Shanghai FTZ. We wish to utilize the Free Trade Zone’s open policies and customs clearance effectiveness to make our new company as a platform to integrate our international resources. In the future, we will innovate more business models in services and maybe in manufacturing, but for the time being, we will focus on trading first.

Q2: The FTZ’s latest version of the negative list has opened more opportunity for the manufacturing sector. What does that mean for ABB?

A: ABB has not faced much restraint in terms of policies concerning manufacturing in China. As a highly localized company, 80 percent of our products and systems are relatively free from limitations. ABB is quite market-oriented in China, and its localization covers sales, services, manufacturing, and research and development. As a large multi-national company, exports and after-sales services are a very important part to us, which is also profitable.

In the past, due to restrictions, tax-free after-sale warranties repair and service for exported products didn’t go smoothly.

Now, however, we have received support from the Shanghai government in this regard. Both domestic and foreign companies will benefit from improved services concerning after-sale warranties.

Q3: How has ABB’s collaboration with the Shanghai government fared? What beneficial policies would you like to see?

A: The local government has been very supportive toward foreign companies, and that is why ABB has been able to develop so smoothly in Shanghai. The Free Trade Zone is, in itself, a trial reform in terms of policies and government public management. We regard it as a very good format to benefit the economic development of Shanghai.

Q4: How does ABB see its business future in the zone?

A: After ABB registered the company there, we look forward to transacting a large volume of business in international and transit trade, as our export volume is huge, and our domestic customers also have such requests. We hope to enjoy the benefit from the simple and convenient management of the Customs in the Free Trade Zone in business of trade and manufacturing as well.

Q: Shanghai is transforming its economy by shuttering some traditional and low-end manufacturing industries. How does that change affect ABB?

A: Shanghai is one of China’s most advanced cities in terms of industrial infrastructure. It is inevitable that many industries have to face upgrading. ABB has been doing very well in Shanghai. We have six subsidiaries and one branch in Shanghai. Focusing on high-end automation, like robots, electronic machines, hydrojets and transformers. We do not merely produce or assemble products, we also push forward system integration and research. We have been on a very sustainable development path, which suits Shanghai’s standards well. Our Shanghai companies are very high-tech oriented.

Q: ABB is well-known for its focus on high-end manufacturing. How do you balance industrial production with environmental protection?

A: ABB has a strict auditing system for energy consumption and it has also been carrying out internal energy audits every year. It has been trying to save water by improving equipment. On average, this year’s water consumption has dropped 18 percent from the same period in 2013. Our challenge is to cut energy consumption without reducing production capacity. ABB is also stepping up reforms in factories by establishing new energy projects.

Q: ABB has been an active player in the new energy field. Has it been successful? How do you see it playing out in the future?

A: ABB has been involved in many new energy projects in China. In terms of wind power, ABB has provided a series of products, such as dry-type transformers manufactured in Shanghai that can regulate voltage. ABB will also take part in offshore wind power programs in the future. Inverters play a significant role in solar energy, and ABB is the world’s second-largest inverter manufacturer. ABB will seek to raise the efficiency and reliability of solar energy. In China, we have a factory dealing with that realm.

Micro-grids have been rather popular in foreign countries. China is also emerging in this field. ABB has developed a micro-grid, utilizing ecological concepts. It has shown good results in Europe. ABB has a large array of grid products. We have established charging services for electric cars in Shanghai and Guangzhou.

Q: Can you tell us about technological innovation at ABB and, in particular, in the Shanghai region?

A: This year, ABB’s focus in Shanghai is automation. China has a high demand for automation products. Higher technological standards have been set, and we are pushing forward the practical application of robots. Therefore, we need a large amount of advanced technologies and skilled workers. ABB values investment in technology. At the same time, given China’s unique conditions, we do not simply copy successful models from other countries. We have to explore China’s own needs and competence. Interaction between the market and enterprises can create the stimulus. We also encourage the localization of managers and expertise.

Q: What is the strategic role of ABB’s business in Shanghai?

A: In Shanghai, we are now developing new products. To be more specific, we are placing emphasis on mechanical electronic and grid digitalization. We locate production and research in China, yet we aim to serve the global market.

ABB is the world’s largest painting robot manufacturer. All such robots are made in China. It’s quite a demanding process in terms of technology because one robot may be required to do a dozen different colors. Customers of the robots involve many famous car brands. For ABB itself, production is local and that is why we need Shanghai support concerning technology and policies.

Q: Unlike the situation in 1992, when ABB first entered the Chinese market, there are now more Chinese managers working for multinationals in China. How does that benefit your company?

A: For ABB, this is a natural process.

When we first entered the Chinese market, we had to integrate resources from elsewhere into China. Through years of training, the capacity of local staff has been greatly enhanced. We now employ 2,500 employees in Shanghai’s Kangqiao office. We also want our Chinese employees to have the opportunity to be trained at our corporate headquarters in Europe.

We have not actually reduced the numbers of foreign staff, but their roles have been changed and diversified. When we started operations in China, we had managers from overseas. Nowadays, we mostly use research experts from abroad. At our Kangqiao office, there are dozens of foreign experts. Some take care of quality, while others are responsible for operations.