(FORTUNE Magazine) – On a hot morning in Beijing last June, the CEOs of General Electric's 20 or so businesses in China gathered in a windowless conference room for one of their thrice-yearly internal meetings. Each gave a brief report on how business had been. They heard about GE's new R&D center that had just opened in Shanghai, about how many additional planes (and GE aircraft engines) China's airlines would be ordering, about the red-hot growth in sales by the plastics and medical-systems divisions, and about the huge sums GE had saved by putting its Chinese suppliers online. The discussion was peppered with GE lingo like "critical to quality" and "Six Sigma." The atmosphere was so familiar that you felt you could be anywhere in GE's global empire--until you looked around the room and realized that only two of the business heads were non-Asians, and all except one of the Asians (an Indian) were ethnic Chinese, some from mainland China and some from Taiwan or Hong Kong.

The meeting said a lot about the advanced experiment GE has been running in Asia over the past three years and about GE itself. The company, which for the third year in a row has topped the Global Most Admired list (see following story), is working hard to create a truly global corporation. GE's formula: Take a universal corporate culture, transplant it into a multitude of native soils, and then, by nurturing local talent, let it grow to suit local conditions.

Over the past decade, that formula worked wonders for GE in Europe, where CEO Jack Welch took a desultory group of businesses and turned them into blockbusters. Now Welch wants to replicate that success in Asia. So far he likes what he sees. The company's Asian revenues are growing about twice as fast as revenues elsewhere, and the Asian operations usually enjoy appreciably higher margins. GE has even worked its magic in Japan, which despite hard times is the company's fastest-growing national market.

Odd though it seems, perhaps the biggest secret of this success is that "Asia" is an almost meaningless term for GE. The firm's last overall head of Asian operations moved on in 1999 and wasn't replaced. Says Welch: "The reason we ended up not having an Asian leader is we've built capability in each country. And having somebody responsible for Asia is almost insane. I mean, how do you cover an area that size? All you do is have people on planes traveling all the time."

GE's organizational chart in Asia is driven by business needs, not geography. The plastics business in India reports to the Netherlands; the medical-systems business in India reports to the Asian regional head in Tokyo. Some countries--notably Japan and China--have a country head who has no responsibility for a line of business. In others (like India and Indonesia) the head of one of the business lines also wears the country-head hat.

Nor does Welch have what he considers an Asian strategy. "No," he says flatly during an interview in his Fairfield, Conn., headquarters, "there's no Asian strategy. There's a strategy in Asia for each business. And the way we move forward is a business-by-business issue. We don't have a China strategy for GE. Medical has a China strategy, plastics has a China strategy, aircraft engines has a China strategy. In many ways we're the sum of the business strategies."

Dennis Dammerman, Welch's chief deputy, adds that although GE knows it's important to do business in Asia, "we don't spend a lot of time adding up numbers geographically." As Welch explains: "I don't have a number that will tell you Asia's going to be x percent of GE or it's going to be y percent of GE, because those numbers don't mean anything. It's going to be whatever it is, based on the initiative of our people. We want to expand as fast as we can in Asia. But it will be the result of a lot of inputs. I'm not a believer in 'We're going to put 25% here and 30% here and 20% here' in a multibusiness like this."

Given Asia's size, complexity, and diversity, a localized approach has appeal. In GE's case it is also dictated by the way it runs itself worldwide. In 1999, GE had sales of $111 billion (the world's fifth largest) and profits of $10.7 billion (the world's highest); it is in 20 or so major lines of business. (GE Capital subdivides itself into a further 28.) The firm is highly centralized when it comes to a handful of issues: core values; financial targets; one of the most rigorous and exhaustive procedures anywhere for personnel review, promotion, and expulsion; and the occasional "initiatives" Welch has come up with over the past 15 years. Those initiatives include globalization in the 1980s, a move from products to products plus service in 1995, the Six Sigma quality program from 1996, and e-business since 1999. On these matters everybody dances to the tune called by GE's headquarters in Fairfield. Or else.

GE works hard to mesh this global set of standards, tools, and principles with local conditions. It does this through vast training programs, integrity guidelines that are put online for all to read, and constant conversations about environmental and safety issues. Each local manager is expected to run his business within these global standards. Says Welch: "Those core values aren't negotiable."

But there is more to the soul of GE than a bunch of management tools. As Welch explains: "When everyone asks me over and over again, 'How do you transfer GE values somewhere?' I tell them we can do it because they are really the most simple values of all. It's human dignity and voice. What our managers try to do is let everybody raise their hand and say what they think. And if people have a voice and they have a say in things, they respect it and they like it. Now, that dignity and voice may be a little different in Beijing than in Pittsburgh. But it's nothing other than giving people the treatment that you would always want for yourself in that culture."

Seize the opportunity

GE's instinct has always been to expand when there's blood in the streets. This should come as no surprise to anyone who read GE's 1997 annual report, in which Welch wrote that "the path to greatness in Asia is irreversible" and said that the Asian financial crisis presented GE with a fine opportunity. Welch has been here before: In America, GE Capital stuffed its portfolio with real estate during the savings-and-loan crisis of the late 1980s. In Latin America, the company cut deals after the peso collapse of 1995. And in Asia, GE's expansion since the crisis of 1997-98 has been formidable.

Leading the way is GE Capital Services, the company's monster financial-services division that does insurance, leasing, and lending. GE Capital accounts for about half of GE's total revenues. In 1995 the division had only $1 billion worth of assets in Japan. But then it made a series of big acquisitions after 1997, and now its assets should reach almost $40 billion by the end of this year, or 10% of the division's worldwide assets. That rate of growth was twice as fast as what GE Capital achieved during its big push into Europe in the early 1990s.

Denis Nayden, who runs GE Capital from its headquarters in Stamford, Conn., says that the Asian strategy in the early 1990s was to "gear up" enough of a presence to understand what was happening in the markets, and then wait and see how things would evolve. For example, in Thailand, GE Capital got into business in 1993 with a small operation specializing in car finance. When the Thai baht collapsed in July 1997, Mark Norbom, who headed GE Capital's office there, saw an opportunity: He wanted to buy distressed car loans.

Welch sees this particular deal as an example of how the GE culture allows its people to have a voice. The CEO recalls how he was at home going over a book of investment proposals the night before a GE Capital board meeting, and he spotted a memo from Norbom. "I'm home with my wife, I've got the book on my lap, and I'm flipping through it, and I said, 'Look at this deal here. This guy, this nut, wants us to invest $1 billion in autos.' I said, 'I'm going to blow him out of the water tomorrow. I mean, this guy's got no chance.'"

But according to Welch, Norbom came in and made a convincing case. In a passionate and logical plea, he argued that Thailand has no indigenous car manufacturers. He explained why people would pay the loans (they would want to keep their cars) and why it was a good deal. And in 45 minutes he turned Welch and his fellow board members around.

"So we bet on it," says Welch. "What it was is this guy flying over from Bangkok, and he was in there and he was making the case. It's almost a perfect example of how it works. We were convinced. If you asked me five minutes before the meeting, I'd say, 'Get out of here. What are you, nuts?' And yet he made a great case, and you love him for doing it. You love him for knowing he's walking into the jaws of trouble."

Norbom increased his Thai work force by 1,200 people and GE Capital's assets there from almost nothing to about $1 billion. He's been promoted to Japan.

Nayden says he felt "positive anxiety" about the Asian situation when decisions were being made about things like taking on Thai car debt. Anxious or not, GE Capital didn't flinch from expanding--except in China, where it does little more than aircraft leasing and plans to lie low until the financial system improves. Pramod Bhasin, who oversees Capital's Asian operations outside of Japan from his office in Delhi, increased the unit's Indian assets to $1 billion, split equally between commercial and consumer loans, and hopes for some good M&A opportunities in Indian insurance as the market liberalizes. GE Capital also bought modestly in South Korea when distressed assets there went on the block. Nayden says that the unit's growth prospects for Asia as a whole are much higher than anywhere else in the world--"15% to 20% a year, at least."

Make mergers pay

The overwhelming bulk of GE Capital's Asian firepower is trained on Japan. For good reason: With $12 trillion in personal financial assets (80% of Asia's total), the world's biggest life insurance market, the world's fastest-aging population, and a primitive financial system with weak domestic competitors, Japan is a dream market for GE. Before 1997, GE Capital had been forced to build its businesses from scratch because the Japanese simply didn't want to sell. But once banks and insurers began failing, GE Capital quickly made four big acquisitions--a life insurer, a consumer finance firm, and two leasing companies--and is in the process of negotiating the purchase of Life, a sales-finance company that would almost double the size of its Japanese consumer-finance business.

One thing that GE is especially good at is buying companies and integrating them quickly into its culture. The attitude at GE Capital is that there are no mergers of equals; there are acquisitions. If you don't want to change, don't be acquired. A good example is GE Capital's takeover in 1998 of a defunct Japanese life insurer, Toho Mutual. Rone Baldwin, an American who had been running GE Capital in Japan, was put in charge of incorporating the new firm into the GE system. He quickly converted the company's books to the format GE uses worldwide and then started in on personnel. Dumping Toho's lock-step seniority system, for instance, led to the departure of some resentful grayhairs, but ambitious youngsters were delighted. Baldwin was also careful to keep a local focus. He says that of the firm's 7,000 employees, only ten are expatriates, and all (himself included) are busy trying to work themselves out of their jobs. A good thing, since GE is still on the lookout for other acquisitions; it expects Japan to generate about 25% of its worldwide life insurance business within the next few years.

Nurture creativity

At GE the best ideas bubble up from the bottom. No place better illustrates this than Japan's consumer-finance business. Thanks to some innovative new products and services, profits in Japan, says worldwide consumer-finance chief Dave Nissen, are already almost equal to those in the whole of Europe. A good example is the company's automated credit machines. Takahashi Yamakawa, who is in charge of the Japanese consumer-finance operation, says the firm runs 1,000 of these ACMs, which allow a customer to submit documentation and credit information to a kiosk. Within minutes the ACM can issue a card that allows the customer to withdraw cash from any of 15,000 ATMs that accept GE debit cards. In 1996 about 70% of GE's Japanese customers got credit through its manned branches and 30% from ACMs; today the figures are reversed, which is nice for GE, since the machines can be run for half the cost. But that is just a start. In April the consumer-finance unit launched a mobile-phone Internet version that consumers can use to get credit approval on the run.

GE Capital, however, isn't the whole story in Japan. GE has been in the country for a century and now has 17,000 employees there in almost all its businesses. All told, Japan accounts for about 6% of global revenues. Not nearly enough, says Jay Lapin, an American ex-lawyer who is GE's country head for Japan, and though he has no line responsibilities for any business, he tries to advance all their causes--and new ideas--with their bosses back in America. He is having some success. Since 1997, Japan has been GE's fastest-growing national market in both revenues and profits.

Produce globally, sell locally

One of GE's most powerful global weapons is something it calls cross-border leveraging. This is management-speak for using people, processes, and products the most effectively to enhance businesses in other countries. It is especially important for Japan and GE's other Asian operations because Asia consumes a lot of manufactured goods and, in global terms, produces even more. One of the businesses where this shows up most clearly is medical equipment.

GE's Medical Systems department, run from Milwaukee, is headed by Jeff Immelt (one of the three candidates to succeed Welch when he retires next April). Immelt, who has made a habit of visiting Asia four or five times a year, says that the medical business has two aspects to it--global products and local markets--and that they need to be combined for the business to thrive. GE makes its machines in whichever place offers the right level of engineering talent and the best cost base--and that usually means the market where the demand for those machines is highest and the competition the toughest. For example, the most sophisticated machines are made in America, which also has the biggest demand for top-end medical equipment because it spends the most on health care. Japan is more midrange, with a preference for small, high-quality machines, and China is the center for production of the lower-tech end of products, such as CAT scanners. In all, GE Medical has eight factories in Asia, one each in Japan and Korea, and three each in India and China. All the factories sell both domestically and abroad. But the marketing and services need to have a local flair. As Yoshiaki Fujimori, who runs the Asian operations of Medical Systems out of Tokyo, explains, "You just have to have a lot of popcorn stands."

GE's Asian medical business amounts to $1.5 billion in revenues now (about 20% of the world total). Fujimori expects that to rise to $4 billion five years from now (which would be almost 30% of world sales). The fastest growth is coming from China. Already it is the third-largest national market for medical systems (ahead of Germany and behind America and Japan). At present growth rates it could overtake Japan as No. 2 in less than four years. Chih Chen, who as Welch puts it "would be as much at home in Pittsburgh as in Beijing," is a mainlander who runs the China operations out of Beijing, where the firm has two factories. China is a strong production base--last year it made $300 million worth of equipment and exported a third of it--with, Chen says, the most economical low-end CAT manufacturing facilities in the world. It is also a sophisticated and diverse market. Chen notes that there are 60,000 state-owned hospitals in China; most have budgets that pay for the kind of low-end diagnostic equipment GE makes in China. But on top of that there are private hospitals and clinics in the big cities (where two-thirds of GE's China sales are made). These buy the higher-end stuff that GE Medical produces in America and Japan.

Send the expats home

Finding your way through a market like China's takes local know-how. Toward that end, GE wants to reduce the number of its Western expatriates in Asia to a minimum. Says Welch: "Expats are a crutch and don't support a real global opportunity." The company has already made progress. Chen, for example, has 28 people reporting directly to him, of whom 15 are Chinese nationals and the rest from Taiwan, Hong Kong, Singapore, and Malaysia. All are occasionally rotated out of China for tours in America and elsewhere. Welch estimates that in the past two years GE has probably sent home half the Americans that it had overseas. And that, he says, "has been an enormous benefit for globalization."

Local managers like Chen are particularly important in tough markets like China. "I've been going there for 20 years," says Welch, "and every time I go there I laugh at how little I knew the time I came before. You know, every time I go I think I learn something. The next time I go there I learn how little I knew. It is so vast and so complicated and so hard to figure out. I don't know the answer. I truly don't. That's probably why I'm retiring. Somebody else is going to have to figure it out." Welch takes comfort in that fact that at least GE hasn't lost a lot of money in China.

Opaque bureaucracy and corruption have historically made it difficult for multinationals to operate in China. Sometimes this doesn't matter. Tech businesses like medical equipment, aircraft engines, and plastics, for example, mostly escape the bureaucratic morass. But GE has not had much luck with CNBC (media are poison in propaganda-minded China); locomotives (the Chinese competition is good and cheap); lighting (counterfeiting and local government opposition); or finance. Appliances have been pointless to pursue; as in Japan, American fridges are just too big for most Chinese homes.

But the future looks brighter. China already contributes some $2 billion in revenues to GE, a figure that could easily triple by 2005. And some lines are thriving, notably plastics, for which sales have been doubling every year for the past three years. Gary Rogers, who runs the worldwide plastics business from Massachusetts, reckons that within three years China alone will account for a bigger part of GE's plastics business than Europe and the lion's share of the Asian market. The reason is simple: China is where most of the world's electronic gear is assembled, and all those computer housings and DVD players need plastic.

Leverage the Web

Last year Steve Schneider, who runs the China plastics business from Hong Kong, won some notoriety inside GE when Welch chewed him out (not by name) from the stage at last year's FORTUNE Global Conference in Shanghai for not building a plastics plant in Shanghai fast enough. Addressing the audience, Welch said, "I was here a year ago and this convention center didn't even exist. What the hell are you taking 15 months for to build a plastics factory?" (Guess what? Schneider got the new Shanghai factory built in time for Welch to open it at the end of this September.) Schneider's two existing factories in China supply customers like Canon with plastic parts to build their cameras and other imaging equipment in China.

What's really helping drive plastics growth in China is--surprise--the Internet. Starting in January, GE's e-commerce system put 15% of its plastics orders online in just six months. That saves money, of course, but Schneider says that the flexibility it gives to GE and its customers is even more important. Customers can put in specifications at the design stage and get several different recommended materials for what they want. If a design changes, the output at the GE plants can adjust in a day; it used to take up to two weeks.

E-business is also transforming GE's global supply chain. Because GE operates everywhere, it tries to get the best deals by buying in bulk from one place. For simple machine tools, for example, the world's biggest single source is China. David Wang, GE's China head in Beijing, says that in the year since the GE procurement outfit in China started getting its suppliers to resort to e-auctions, the price quotations GE was getting from would-be suppliers dropped by 85%. GE got to keep less than half of those savings because it had to make deals with "consolidators," which, because of China's creaky distribution system, had to make sure everything got packaged and delivered properly under the new e-auction regime. Still, the savings were big.

Looking ahead, Welch knows GE must do much more if it is to retain its position as the world's most admired company. He believes the next step is the globalization of intellect. "The real challenge is to globalize the mind of the organization. And at least in America, that's the most difficult part of the equation," says Welch. "When you start talking about globalizing intellect and building massive laboratories in Bangalore and building foundries in the Czech Republic, you start really challenging the organization, because moving intellect out of home base is a tremendously threatening thing. Until an organization truly sees itself as capturing the intellects of other areas, it really does have a problem. I think until you globalize intellect, you haven't really globalized the company."

This matters a lot for GE's business in Asia because the continent, albeit poor overall, has a disproportionate share of the world's engineering talent. The company has begun a concentrated effort to cultivate Asian R&D resources. Lewis Edelheit, who has just retired as the head of GE's corporate R&D unit, explains that although there is a small R&D outfit in Shanghai, GE is making its biggest bet in India. GE's only serious research center has, for a century, been in Schenectady, N.Y. ("Not a lot of Asians in this cold place," chuckles Edelheit), where there are 1,600 professionals. An R&D center just getting started in a research park outside Bangalore, in southern India, could end up with 1,000. This development has not been entirely popular in Schenectady, but it is letting GE draw on world-class software talent (and other engineering professionals) at bargain prices.

So what can other companies learn from what GE has done in Asia? Well, what can't companies learn from GE? The main thing, though, is Welch's point about the globalization of the mind--the need for people from very different countries to be shaped by a common corporate culture that encourages them to thrive. If this can work for GE in Asia--and all signs are that it is doing so--it can work everywhere.