biz.hk Sept 2013 by The American Chamber of Commerce in Hong Kong

20 13 ’s

“R G EL UI D M OCA E T OV T O IN ION G” &

Journal of The American Chamber of Commerce in Hong Kong

SETTING THE RECORD STRAIGHT

US CONSUL GENERAL CLIFFORD A. HART, JR

www.amcham.org.hk September 2013

COVER SPONSOR

CMY

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September 2013

Contents

Vol 45 No 9 Richard R Vuylsteke

Publisher

Editor-in-Chief

COVER STORY

TRADE & INVESTMENT

CHINA BUSINESS

SPORTS & ENTERTAINMENT

Managing Editor

US Consul General Clifford A. Hart, Jr. gives his first public speech in Hong Kong at an AmCham luncheon, reiterating Washington’s policy towards the SAR remains unchanged

An AmCham delegation spends two days in Hanoi and Ho Chi Minh City to study Vietnam’s investment opportunities and challenges regarding trade

Chengdu and Chongqing are top FDI destinations in China today. An AmCham delegation finds out why the two cities have become favorites among foreign investors

A group of expatriates get to know Hong Kong better by falling in love with a local sport – Dragon Boat racing

Daniel Kwan Kenny Lau

Advertising Sales Manager Regina Leung

biz.hk is a monthly magazine of news and views for management executives and members of the American Chamber of Commerce in Hong Kong. Its contents are independent and do not necessarily reflect the views of officers, governors or members of the Chamber. Advertising office 1904 Bank of America Tower 12 Harcourt Rd, Central, Hong Kong Tel: (852) 2530 6900 Fax: (852) 2537 1682 Email: amcham@amcham.org.hk Website: www.amcham.org.hk Printed by Ease Max Ltd 2A Sum Lung Industrial Building 11 Sun Yip St, Chai Wan, Hong Kong (Green Production Overseas Group) Designed by Overa Creative Co Unit 1613, 16/F Workingbond Commercial Centre 162 Prince Edward Road West, Kowloon ©The American Chamber of Commerce in Hong Kong, 2013 Library of Congress: LC 98-645652 For comments, please send to biz.hk@amcham.org.hk

AMCHAM NEWS AND VIEWS 04 Editorial

CHINA BUSINESS 22 Sichuan – The Land of Opportunity

As Hong Kong fell on the IMD’s global competitiveness annual report this year, many have questioned whether Hong Kong is losing its competitive strength and not as “international” as it should be. Is Hong Kong on a slippery slope?

An AmCham delegation visits Chengdu in September to understand investment opportunities in Sichuan Province in a meeting with Vice Governor Gan Lin

SPORTS & ENTERTAINMENT 36 In Love with the Dragon To be able to really mix and mingle with the locals can be a challenging idea to outsiders who are new to Hong Kong. A group of expats have found their way through by falling in love with a local sport – Dragon Boat racing

26 Chongqing – A City Marvel Chongqing Mayor Huang Qifan briefs AmCham delegatates on the city’s business potential and future partnership with Hong Kong

07 New Business Contacts 63 executives joined AmCham’s business network last month

ENTREPRENEURS/SME

48 Mark Your Calendar

28 The World a Smaller Place through Human Touch

COVER STORY

NETWORKING 44 AmCham Monthly Networking Drinks More than 120 people attend AmCham’s September monthly networking drinks, sponsored exclusively by Swiss watch specialist Breitling

Beverly Sunn of Asia Pacific Properties talks about opportunities and challenges in the China market, Hong Kong’s competitiveness and its role in building bridges across boundaries

08 Setting the Record Straight US Consul General Clifford A. Hart, Jr. gives his first public speech in Hong Kong at an AmCham luncheon, reiterating Washington’s policy towards the SAR

FASHION 32 The HUB – Hong Kong’s New Fashion Show

TRADE & INVESTMENT

Organizers of Hong Kong’s new fashion trade show – the HUB – have had high hopes for the event. Will they succeed?

14 Wither Vietnam? More than 20 AmCham HK members meet with US and Vietnamese government officials as well as business executives in Hanoi and Ho Chi Minh City to learn about manufacturing, trade and investment opportunities

34 Understanding the China Market Clarence Hui of the HUB advises on fashion brands in entering the China market

Single copy price HK$50 Annual subscription HK$600/US$90

biz.hk 9 • 2013

COVER SPONSOR

biz.hk Editorial

Board of Governors Chairman James Sun Vice Chairman Peter Levesque Treasurer Tom Burns Executive Committee Evan Auyang, Janet De Silva, Anita Leung Philip Leung, Belinda Lui, Alan Turley Richard Weisman Governors Sara Yang Bosco, Brian Brenner, Ewan Copeland Walter Dias, Rob Glucksman, Toby Marion Thomas Nelson, Catherine Simmons Colin Tam, Elizabeth L Thomson Frank Wong, Eden Woon Ex-Officio Governor President

Robert Chipman Richard R Vuylsteke

Chamber Committees AmCham Ball Apparel & Footwear China Business Communications & Marketing

Rex Engelking Colin Browne Seth Peterson Lili Zheng Roxana Daver

Corporate Social Responsibility

Robert Grieves

Energy Entrepreneurs/SME Environment

Rick Truscott Donald Austin Courtney Davies Corey Franklin Brock Wilson Veronica Sze Damien Lee Peter Liu

Financial Services Food & Beverage Hospitality & Tourism Human Capital Information & Communications Technology Insurance & Healthcare

Rex Engelking

Owen Belman Hanif Kanji Intellectual Property Gabriela Kennedy Amy Lee Law Clara Ingen-Housz Pharmaceutical Stephen Leung Real Estate Neil Anderson Alan Seigrist Senior Financial Forum Alvin Miyasato Senior HR Forum Jacqueline Algar Sports & Entertainment Ian Stirling Taxation David Weisner Trade & Investment Patrick Wu Transportation & Logistics Jared Zerbe Women of Influence Anne-Marie Balfe Anna-Marie C Slot Young Professionals Alison Carroll

IS HONG KONG ON A SLIPPERY SLOPE?

t the end of May this year, the annual report by International Institute for Management Development (IMD) on the world’s most competitive economies showed Hong Kong losing its first-place standing, falling to third behind the United States and Switzerland. The SAR performed worse than previous years in all four major areas studied – economic performance, government efficiency, business efficiency, and infrastructure. The drop in ranking prompted a flurry of interview requests to AmCham throughout the summer to find out if Chamber members thought Hong Kong was losing its business attractiveness. Interestingly, a number of reporters asked only cursory questions about IMD’s four categories and then focused on the question, “Is Hong Kong becoming less international?” Actually, this topic was on the mark, because it’s a question being raised by many in the business community. This may seem surprising. How can a city that hosts more than 50 million tourists a year be anything but international? Further, Hong Kong has a significantly large population of expatriates who hail from around the world as well as growing numbers of mainland Chinese from both coastal and inland provinces. Listen to languages spoken on the street – Hong Kong seems to be more international than most of the world’s big cities. But the questioning of internationalization these days goes deeper. For Chamber members, a frequently heard complaint, for instance, is that they are having difficulty finding locally trained people who are

sufficiently qualified for the jobs on offer. The shortfall is often both academic and attitudinal. On the academic side, employers with long-term Hong Kong experience complain that the English language capabilities of local graduates are declining. The Chamber has raised this issue for several years. Like it or not, English is the language of business internationally and it’s an absolute requirement for advancement to managerial levels. For local parents who want their children to have a broader choice of careers, it may be time for them to urge government to expand the number of local primary and secondary schools that offer Englishmedium or multi-language curricula. Multiple language skills are learned best when started early. Give local parents more choice. In Hong Kong, Putonghua is rapidly becoming a valuable second language, which raises the question of better integration of that language into schools as well. While no one advocates dispensing with Cantonese language, having that language alone is simply not enough to secure most well-paying jobs. Technical and scientific education is also falling behind international standards of excellence. This is particularly problematic for Hong Kong because the international companies here – be they small or multinational – are trying to compete at the cutting edge in their business sectors. For instance, one major multinational company executive recently complained to the Chamber that he had been trying for several months without success to find local candidates for 25 badly needed technical positions

biz.hk 9 • 2013

for projects already under way in the city. He’s still looking. Conversations with executives in construction-related industries are no less discouraged. The average age of construction workers in Hong Kong is around 50. Parents are generally reluctant to send their kids to work in construction sites that they deem dangerous and of high risks. Also, construction workers are traditionally considered low-skill laborers. But, to be fair, the skills and knowledge required of construction workers have risen significantly in recent years. The Government has done a lot in recent years to encourage young people to enter the field – improved safety standards and better pay, etc. Nevertheless, the shortage of young blood in the industry is real and pressing. Hence, expect labor issues, at all levels of expertise and in all fields, to become more critical to Hong Kong’s future success. The city needs to prepare all its students to excel in line with international standards. A final point on internationalization: While the official languages in Hong Kong are Cantonese and English, the former seems to be on the rise in government meetings, in requirements for admission to civil service jobs, and as the main form of communication in many government-related commissions, boards, and the like. Many worry that if Cantonese becomes the main language of communication in these areas, Hong Kong will have less international flavor and more of a smallish Chinese city. Is the SAR already on this slippery slope? It’s a point worth debating. Competitiveness and internationalization are indeed closely linked.

biz.hk 9 • 2013

New

Business Contacts The following people are new AmCham members: AIA Group Ben Ng CEO, Group Corporate Solutions Allergan Hong Kong Ltd Santosh Ojha General Manager Allied World Assurance Co, Ltd Jota Shohtoku Vice President, Head of General Casualty, Asia Pacific Avery Dennison Hong Kong B V Kenny Liu GM, Hong Kong & Taiwan Baker & McKenzie Adam Hugill Special Counsel Eva Crook-Santner Registered Foreign Lawyer BSI Pacific Limited David Mugenyi Financial Director, Asia Pacific CEVA Logistics Anthony Barnes Vice President - Ocean, Asia Pacific Children's Place (HK) Ltd, The Howard Williams Vice President, Quality Assurance Yuet Ming Cheng Vice President Sourcing, China, SE Asia Coach A (Hong Kong) Co, Ltd Brian Newman Executive Coach Crystal Vision Energy Ltd Alex Hui Director - Business Development Davis Polk & Wardwell Eugene Gregor Partner Digital Realty Fergus Brooks Sales Director Jing Zhou Asset Manager Jihann Pedersen Marketing Director, APAC Eli Lilly Asia, Inc Joyce Chiu Corporate Affairs Director Angela Xu Chief Marketing Officer Ernst & Young John Praides Partner Freshfields Bruckhaus Deringer Ken Martin Partner Gall Jennifer Van Dale Partner

Global Payments Asia-Pacific Ltd Rowell del Fierro President, South and Southeast Asia Konrad Chan President, North Asia GoIndustry-DoveBid (HK) Ltd Hugh Yu Vice President Golin/Harris International Ltd Jeremy Walker Managing Director, Hong Kong Goodwin Procter Yash Rana Asia Chairman HAVI Supply Chain Solutions Stephanie Leung Chief of Staff to COO, HAVI Logistics Hong Kong Science and Technology Parks Corp Allen Ma Chief Executive Officer Hong Kong University of Science & Technology Joseph Palumbo Head, MBA/MSc Career and Professional Development, HKUST Business School Hongkong International Theme Parks Ltd David Lightbody Director, Entertainment & Costuming Hongkong International Theme Parks Ltd Andy Wu Vice President and Chief Financial Officer Intel Semiconductor (US) Limited Jimmy Yeung Strategic Account Director International Intellectual Property Commercialization Council (IIPCC) Johnson Kong Board of Governor Ketchum Newscan Public Relations Ltd Simeon Mellalieu Partner / General Manager Kobre & Kim LLP Shaun Wu Attorney Joyce Xiang Lawyer LinkedIn Rachel Hou Strategic Relay Account Executive Jimmy Li Relationship Manager Nicholas DeMarinis Enterprise Sales Manager Lockton Companies (Hong Kong) Limited Greg McCoy Managing Director, Corporate and Multi-National Clients, Asia Pacific Region Milton Lo Managing Director Lockton Affinity Betty Ho Business Development Director Nora Senn Assistant Vice President, Corporate Risks

Paul Hardy Assistant Vice President, Lockton Financial Services Lord Asia Pacific Ltd Rudra Seegobin Director of Finance, APAC MO Luxury Limited Paige Sinclair Relationship Manager, Asia Nielsen Company (HK) Ltd, The Michael Lee Vice President, Retail Management PepsiCo Hong Kong LLC Adel Said President, Asia Pacific Region Rackspace Hosting Adam McCarthy Director & General Manager, Asia Pacific Six Senses Hotels Resorts Spas Ryosuke Yakuwa Director of Sales & Marketing Asia Pacific Smart Shirts Ltd Wing Xu Chief Financial Officer Edwin Yu Vice President Lei Xu Chairman Southco Asia Ltd Michael Zhang Managing Director, Asia Pacific Totes Isotoner Corp (HK) Ltd Gorretti Lam Office Manager Transamerica Life (Bermuda) Ltd Keith Tucker Head of Human Resources, Aegon Asia Timothy Oliver Chief Executive Officer United Overseas Bank Limited David Chao First Vice President Ricky Ng Head, Commercial Banking Department Viasystems Asia Pacific Co Ltd Brian Barber Senior Vice President Operations Waggener Edstrom Worldwide Emma Richards General Manager World Green Organisation William Yu Founder & CEO Zurich Insurance Group (HK) Steven Bauer Chief Claims Officer, Global Corporate Asia-Pacific

View our other members at: http://www.amcham.org.hk/index.php/AmChamMembers.html biz.hk 9 â&#x20AC;˘ 2013

COVER STORY

he US supports the “One Country, Two Systems” for Hong Kong and that policy is firm and has remained unchanged, new US Consul General Clifford Hart told an AmCham luncheon held at the Conrad Hotel on September 24th. The luncheon is one of a series of AmCham speaker events sponsored by KPMG. Ambassador Hart, who arrived in Hong Kong in July, told the luncheon guests that Hong Kong is a part of China and the city’s high degree of autonomy “has been indispensable to its stability, prosperity, and growth since 1997.” “Let me therefore take this opportunity to set the record straight and reassert unequivocally that US policy toward Hong Kong remains unchanged,” Hart said. “The United States supports the ‘One Country, Two Systems’ concept promoted by Deng Xiaoping in the early 1980s. US support extends to both halves of that formula. For the United States, Hong Kong is of course a special administrative region of the People’s Republic of China, and China is a nation in which America invests tremendous energy to build positive, cooperative, and constructive relations, as highlighted earlier this year at the successful Sunnylands Summit between President [Barack] Obama and President Xi [Jinping].” “Equally, we support the ‘two systems’ element of the equation and the high degree of autonomy guaranteed by the Basic Law, precisely because we believe that Hong Kong’s special status has been indispensable to its stability, prosperity, and growth since 1997,” Hart said.

SETTING THE RECORD STRAIGHT The new US Consul General, Clifford A. Hart, Jr., delivered his first public speech in Hong Kong at an AmCham luncheon in late September. He reiterated Washington policy towards the SAR and reaffirmed Hong Kong’s unique role in bridging East and West. Ambassador Hart, who visited Hong Kong frequently in the 1980s and 1990s, also shared his views of the city which he calls “the best place on Earth for a non-Chinese person to experience Chinese culture.” Daniel Kwan reports

On universal suffrage

Photos: Kenny Lau

biz.hk 9 • 2013

Furthermore, Hart emphasized that the US stance on universal suffrage for Hong Kong remains unchanged: “The United States Government has repeatedly made clear that it supports Hong Kong’s progress

beings … I am confident that strong common goals, the creative practicality of the Hong Kong people, and the mutual forbearance that is a hallmark of Chinese culture will inform the complex discussions and final decisions on universal suffrage.”

Top-flight opportunity

On universal suffrage

toward genuine universal suffrage as laid out in the Basic Law and the National People’s Congress’s 2007 decision. This US policy is unchanged. We believe that an open society, with the highest possible degree of autonomy and governed by the rule of law, is essential to maintaining Hong Kong's stability and prosperity.” He also said that the US will continue to speak out on democratic values, but that doesn’t mean Washington advocates other countries or economies should copy the American model. “Let me also be clear that the United States will always stand for our core democratic values,” Hart said. “We have no prescription for Hong Kong's electoral process. One of the fundamental precepts of democracy is that the people themselves have a full say in how their systems work.

Democracy adapts itself across societies. Far from expecting that everyone out there will copy our system in all its particulars, the United States is on record as enthusiastically supporting the wide range of credible democratic systems that free peoples of the world have established to meet their needs.”

Core values Hart made clear that the US does not take positions on any formulation for Hong Kong to achieve universal suffrage. That, the Consul General said, is a matter for “the people of Hong Kong; their elected representatives and political parties; civil society; the SAR Government; and the Central Government.” “The United States therefore does not take a position for or against any

particular electoral formulation on how genuine universal suffrage is achieved. As the world’s oldest constitutional democracy, we will always advocate the fundamental principles that underlie every successful democracy – open dialogue and debate; a strong and independent free press; an independent judiciary; the rule of law; free and fair elections; and choice among candidates.” Acknowledging that there are challenges, Hart said that he is confident the differences over how universal suffrage can be realized would be resolved. “Every leader I have met cares passionately about the SAR, supports democracy, and recognizes that the region’s future is inextricably linked to the rest of China’s,” Hart said. “Differences on detail are inevitable in any polity of seven million human

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Hart, a career diplomat and formerly the US special envoy in the Six-Party talks with North Korea, took the opportunity to share his personal views about Hong Kong and his impressions of the city he has visited many times over the years. Since his arrival, the Consul General has been seen touring different parts of the city and some local media has shown an interest in his weekly outings, publishing news of his activities on their websites. “Knowing that getting out of the office would be as much a part of my job as the more formal duties, on my very first day at post I treated myself to a quick visit to the Flagstaff Teaware Museum in the middle of beautiful Hong Kong Park,” Hart said. “I was trying to establish a new norm for myself, and ever since then, I have made an effort to do something uniquely Hong Kong each week. “I’ve sampled yin yeung tea in Graham Street, chatted with a used book store owner, enjoyed some gai pai and milk tea at Wanchai’s Kam Fung Bakery, attended a ‘Beginning of School’ ceremony for school kids at a Taoist temple in Sham Shui Po, and sampled the superb local bean sauce produced by the Kowloon Soy Company. “These outings have of course helped introduce me to the people of Hong Kong. As important, however, they have also helped enrich my understanding of what makes Hong Kong unique. As I have said more than once to my wonderful Consulate General colleagues, Hong Kongers and Americans alike, ‘I can’t believe I get paid to do this stuff!’” The new Consul General also said

biz.hk 9 • 2013

With AmCham leaders

that the fact that he’s written about his experience on blogs is nothing special as many diplomats around the world – Americans or Chinese – all do blogs these days. “Anybody who spends time on the Web knows well that modern diplomats around the world – regardless of whether they are American, Chinese, or other nationalities – now spend time away from traditional tasks writing blogs, posting photographs, interacting with local citizens from all walks of life, and generally doing their best to promote people-to-people relations,” Hart said. “The only thing that’s special about me is that I am the lucky one who gets to do this in Hong Kong and Macau.” “In my explorations about town, I have renewed my acquaintance with truths that you all take for granted,” Hart said. “Hong Kong is an international media, cultural, and social networking hub, where the best of the best congregate to share ideas. Hong Kong’s international orientation, its respect for fundamental freedoms, its commitment to the rule of law, its sound regulatory system, its open society, and its advanced higher educational system allow it to attract talent and wealth from around the

world. Similarly, as a recent visit to a fascinating inventors’ fair reminded me, innovation and entrepreneurship are alive and well in Hong Kong. “For my money, the best confirmation of Hong Kong’s strengths and prospects is the decision by one of the world’s premier business schools to move its Executive MBA program here. The people who run the Booth School at the University of Chicago are some of the smartest in the business, and if they are investing in Hong Kong, that is a strong confirmation that Hong Kong is a top-flight opportunity.”

Super connector The Consul General also said that he agrees with Chief Executive Leung Chun-ying who during a visit to New York in June referred to Hong Kong as a “super-connector” in bridging the Chinese and US economies: “I fully concur in the Chief Executive’s observation, and it is an honor to work with him and the Hong Kong Government to deepen these mutually beneficial ties.” On deepening Hong Kong’s roles as a springboard for Chinese investment to go global, Hart encouraged participation in an upcoming investment summit to be held in Washington

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Under the spotlight

DC next month. “The goal of the SelectUSA Investment Summit is to match potential investors with local, state, and regional economic development organizations, to learn more about what makes the United States the world’s premier investment location, and to share views on making the US FDI environment even more appealing. “I look forward to joining leaders of 20-30 Hong Kong companies in Washington for that event next month. I am very grateful to AmCham for the support it has provided on SelectUSA. In fact, with AmCham’s help, we recently founded the world’s first-ever ‘SelectUSA Committee,’ which brings private sector service providers, investors, and US Government officials together into one team. The SelectUSA Committee is diligently working to put together a fine delegation to travel to Washington, D.C.”

The Consul General concluded his remarks by saying that he looked forward to his time in Hong Kong. “US

“The United States Government has repeatedly made clear that it supports Hong Kong’s progress toward genuine universal suffrage as laid out in the Basic Law and the National People’s Congress’s 2007 decision.” Secretary [of State John] Kerry once described Asia as ‘built for the future, not bound to the past,’ and I think that

is a very apt description for Hong Kong in particular. The region cast its spell on me 30 years ago, when I was fortunate enough to stop here for consultations en route to my first diplomatic posting, in Guangzhou. I’ve never lost that fascination with the place, my affection for its remarkable people, or my optimism for its future. Indeed, my enthusiasm for Hong Kong simply intensifies over time. “With its mix of modernity and tradition, its hospitality to foreigners and respect for the past, Hong Kong, in my view, is the best place on Earth for a non-Chinese person to experience Chinese culture. Hong Kong as ever remains remarkable as the world’s premier window into China and China’s window onto the world. Whether it be in the arts, lively public debate, cuisine, or other areas, I look forward to spending the next several years enjoying all of Hong Kong’s riches.”

biz.hk 9 • 2013

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TRADE AND INVESTMENT

WITHER VIETNAM? Two dozen AmCham HK executives met in August with US and Vietnam government leaders and experienced business executives in Hanoi and Ho Chi Minh City for a two-day investigation of manufacturing, trade, and investment opportunities. AmCham President Richard Vuylsteke reports on the delegation’s findings

uring 19-20 August 2013, a delegation of senior regional and global executives from apparel & footwear and financial services companies visited Vietnam to discuss investment opportunities in the country. Many of the brands and manufacturers represented already had a presence in Vietnam and were interested to learn if an expanded presence was wise in the near term. The trip was especially timely, as brands and retailers were keen to establish an ongoing dialogue with their interlocutors regarding the implications of the on-going TransPacific Partnership (TPP) negotiations. Vietnam is seen as being one of the most important Asian economies engaged in the TPP process, but also viewed by many as having the most difficult obstacles to overcome during the negotiation process. The delegates were eager to learn more about Vietnam’s infrastructure development plans, attitudes toward trade facilitation and market access, and possible roles and targets for foreign investment. Given that many companies and service providers have grown their businesses in tandem with the country, they were interested in seeing the quality and size of their investments move to the next level of sustainable development. In short, does Vietnam have a road map for growth that will improve the economy’s efficiency and competitiveness, making it more attractive to foreign investors?

Basic messages The meetings included a wide range of government and non-government interlocutors (see box). AmCham delegates emphasized that US companies see great opportunity in Vietnam’s future, but noted that they also needed to see improvement in a number of areas to ensure a competitive destination for FDI. In particular, companies stressed the needs for greater legal and policy certainty; better labor-industrial

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Hoang Trung Hai, Deputy Prime Minister, (sixth from right)

Dang Ngoc Tung, President of Vietnam General Confederation of Labour (front row, fourth from right)

relations; upgraded workforce development; greater protection and enforcement of intellectual property rights; and expanded physical and human infrastructure to support manufacturing and trade. No less important were the hopes for more serious efforts at streamlining administrative procedures, reducing corruption, and vigorous reform of inefficient state-owned enterprises. The delegation also warned about the

counter-productive impact of “Vietnam-unique” laws and regulations that did not harmonize with the international trading system. The delegates pointed out the obvious strength of attracting FDI: growth of new jobs and personal income; more tax revenues; expanded exports and foreign exchange; and greater technology transfers and introduction of cutting-edge management experience.

What Next? Colin Browne, delegation leader

Bui Quang Vinh, Minister of Planning and Investment (left)

Meeting with AmCham Ho Chi Minh City

On the TPP

Nevertheless, most of the AmCham delegates have seen all this before in other emerging markets in which they have worked. So, despite the long shopping list of challenges, they tended to be bullish on the possibilities for Vietnam, especially if the government takes full advantage of the opportunities offered through successful TPP negotiations. Success in this endeavor, the delegates said, would genuinely help attract investment, promote trade, and spur economic and social development.

cities. These proved to be especially valuable in revealing the challenges and opportunities for business from chamber members, many of whom had a decade or more experience in Vietnam. What topics were addressed? Here is a sampling: • TPP: With respect to the on-going negotiations, what is the government’s position for country of origin rules, industry specific rules, and market access? With respect to the implementation of TPP agreements, what are the plans of the government in dealing with the influx of foreign investment and areas of growth such as apparel and footwear? • Compliance: What are the government policy and mechanisms, including training and education, in place to ensure fire safety and facility integrity? (Many of the delegates have Bangladesh experience and raised the “country brand” results when disasters occur.) Does Vietnam’s new labor code seriously hinder industry growth? • Sustainability: What are the government current plans and policies to promote and encourage sustainable environmental practices? • Product Testing & Consumer Safety Regulations: What more can the industry do to help communicate with the government and suppliers regarding consumer safety requirements?

The delegates suggested that TPP offers a great opportunity for Vietnam to meet socio-economic development goals and renew the country’s growth model. They pointed out that studies have shown Vietnam to have the most to gain of any country currently negotiating the agreement, with export and GDP growth potentially greater than for other partner countries. TPP has the potential for enabling the private sector greater access into key markets to grow and stimulate competition, attract additional foreign investment, and help build key supply chain infrastructure. In short, TPP could assist Vietnam’s strategic drive to industrialize, modernize and globalize its economy. The discussions with US government officials and American business executives in both cities confirmed this view. That said, Vietnam’s current economic status is fraught with challenges. The government’s economic policies are considered opaque and overly restrictive. The legal and regulatory infrastructure needs to grow in sophistication and to become more transparent. Government efficiency overall is seen as inadequate. No less important are the shortfalls in public infrastructure, including transport, electric power, and telecommunications.

Specific questions AmCham delegation trips offer company executives – and AmCham, on behalf of companies – the opportunity to raise tough questions in private, off-the-record sessions with government officials. The Vietnam delegation was also fortunate to have two roundtable discussions with sister AmCham organizations in both Hanoi and Ho Chi Minh City, facilitated by the AmCham Executive Directors in both

People We Met • Hoang Trung Hai, Vietnam Deputy Prime Minister • Bui Quang Vinh, Minister of Planning and Investment • Pham Khanh Toan, Director General, International Cooperation Department, Ministry of Construction • Dang Ngoc Tung, President, Vietnam General Confederation of Labour (VGCL) • Vo Minh Hoang, Deputy Chief of Im-Export and Industry, Department of Industry and Trade, Ho Chi Minh City • Le Manh Ha, Vice Chairman of People’s Committee of Ho Chi Minh City • Pho Nam Phuong, Director of the Ho Chi Minh City’s Investment and Trade Promotion Centre • Bui Hoang Yen, Deputy Director, Ministry of Industry and Trade, Vietnam Trade Promotion Agency, Representative Office in Ho Chi • Minh City Nguyen Hong Ha, Deputy General Director, Vietnam Chamber of Commerce & Industry, Ho Chi Minh City Branch • Ha Nguyen, Managing Director, Vietnam, Bower Group Asia • US Embassy Economic and Commercial Counselors

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Ha Nguyen, Bower Group Asia

• FDI: What are the plans of the government in dealing with the influx of foreign investment and how well can it expedite investment projects? What are the obstacles to FDI investment including the growth of mills or factories that industry needs to know about? • Infrastructure: If there is substantial business growth in Vietnam, what are the government plans regarding ports, airports, road networks, and telecommunications? • Human Resources: What are the government plans to develop Vietnamese human capital? Will the government consider setting up training and education services for the apparel and footwear manufacturing industry?

Beyond the immediate information and insights from this delegation trip, AmCham HK established even firmer relations with its sister chambers in Vietnam. The chamber leaders and members are a continuing resource for Hong Kong-based executives, and they unequivocally urged further such delegation visits to exchange views not only about Vietnam, but also about other emerging business markets and trends in Asia. AmCham Hong Kong will continue to offer similar delegation trips to Asian emerging markets in support of member needs, especially those raised by AmCham committees. In the coming 12 months the following destinations are being considered: Cambodia, Indonesia, and Mongolia, as well as return trips to Southwest China, South China, Bangladesh, Myanmar, and Vietnam. Interested? Please contact the AmCham office for more information. Ming-Lai Cheung (mcheung@amcham.org.hk) for Asia ex China; William Lin (wlin@amcham.org.hk) for China.

SKETCHES

CITY

s I peer from the window of our bus, I see Hanoi has come to life in the afternoon sun. The tree-lined boulevards are gilded in the warm August air, the streets vibrant with people and activity, and the clear sky unblocked by the low exotic shop fronts featuring unfamiliar boutique names. Our bus is a giant, rare creature on the busy road, swarmed by the infinite number of motorcycles and an occasional taxi as we weave through the streets to the Ministry of Planning and Investment. As I scan the streets casually, the motorcyclists look strikingly similar, balancing themselves and often a friend on the back of their machines, their arms and faces hidden behind floral patterned windbreakers and cotton masks. In the cool shades by

Presidential Palace. Others like the National Museum of Vietnamese History boast a mixture of colonial French and Vietnamese styles, adding to the city’s unique exoticism. Since 2008, the city has been expanded into the Hanoi Capital Region that covers Hanoi and six surrounding provinces in 29 subdivisions, tripling its area and including rising metropolitan areas that see construction sites open up daily. But relatively unconquered by modern skyscrapers, old Hanoi’s landscape still bolsters a rich Vietnamese experience. The Old Quarter consists of the original 36 streets of old Hanoi with its early layouts and structures intact, where street names reflect the past clustering of merchandise trade, and some of the oldest sites in the country like the Temple of Literature

is rising to the lure of many other worldclass cities, distinctive in its vibe and energy, yet predictable in the ways one would expect from metropolitan areas like New York City, Tokyo and Hong Kong. Just as the modern communities we are familiar with, urbanization and rationalization in aspects of life from city planning, architecture to consumption habits seem to have taken a toll on Ho Chi Minh City’s cultural texture. Our stay in the Ho Chi Minh City was short and rather confined to the conference rooms of our hotel, and I am certain the city and its people have much more to offer than at first sight. Both Hanoi and Ho Chi Minh City are exciting places to visit. Keep them on your shortlist of travel destinations as you plan your next holiday from Hong Kong. – Michelle Ko Hanoi

FACT FILE: VIETNAM

Ho Chi Minh City

the side walk, groups of young people gather on stools around low tables, pouring over snacks, beer and youth. Hanoi is a city of history, being the political center of Vietnam for over 1,000 years and witnessing power changes over different dynasties, French colonial rule and North Vietnam governance. Under French influence, the city is dotted with villas, mansions and landmark structures like the Vietnam State Bank and the

MacDonald’s is scarce. Life appears to embed in the simple aspects of food, grooming and inexpensive hang-outs with family and friends. In its simultaneously hectic and layback lifestyle, Hanoi offers an interesting balance between tradition and modernization. South of Hanoi and the largest and most populated city in Vietnam, Ho Chi Minh City seems to tell a different story. We take an evening flight from Hanoi to Ho Chi Minh City and as I look through the window from our airplane, I am impressed by the colorful and bright lights that cover the city. As soon as we leave the airport, we are met with the familiar neon signs that flash names of Fortune 500 companies. The city is wide awake at night, with its streets well-lit and shops and restaurants ready for the sleepless population. Ho Chi Minh City

Photo: Thinkstock

and the Vietnam Citadel stand proud and well-preserved. As we drive past, I also notice the thriving entrepreneurship and consumption that dominated the crowded streets. Countless narrow, dim shop fronts line the pavement, many of which seem to be local fashion boutiques that target the younger Vietnamese consumers. There are very few multinational brands and even

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Political environment: The Socialist Republic of Vietnam, as it is officially named, is led by the Commumu nist Party of Vietnam (CPV), which has been the sole political party in Vietnam since the country’s reunification in 1975. The President who is the head of state is elected by the National Assembly for a five-year tenure. The Prime Minister is responsible for the daily operations of the government. At a party congress in January 2011, the CPV called for a more comprehensive approach to the country’s renovation or Doi Moi, promote greater citizens’ participation and unity within Vietnam, and to engage proactively globally. In the same congress, the CPV also re-affirmed Vietnam’s approach to state-led development, and revised key policy documents to

biz.hk 9 • 2013

place greater emphasis on market processes and the private sector. Over the last quarter of a century, Vietnam’s politics and society have gradually evolved towards greater openness and civil society. The ability of the National Assembly to perform the role of a check and balance on the executive has also strengthened. Macroeconomic environment: Political and economic reforms launched in 1986 have transformed Vietnam from one of the poorest countries in the world, with per capita income below US$100, to a lower middle income country with per capita income of $1,130 by the end of 2010. The ratio of population in poverty has fallen from 58% in 1993 to 14.5% in 2008, and most indicators of welfare have improved.

KEY FIGURES Land area (in thousand sq km): 310.07 Population (in millions, 2012): 88.78 Population growth rate (%, 2010-12): 1.1% GDP growth (2012): 5.0% GNI per capita (US$, 2011): 1,270 Public debt as % of GDP (2011): 57.3% FDI (US$ billion, 2011): 14.7 Unemployment rate (2012): 4.5% Inflation (2012): 5.35%

Sources: Asian Development Bank, World Bank, and Southeast Asia – Investment Opportunitie s, Tax and Other Incentives by PwC, 2012

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CHINA BUSINESS

Sichuan –

Sichuan Vice Governor Gan Lin (front row, fifth from right) meets the AmCham delegation in Chengdu

the Land of Opportunity

Foreign Direct Investment in Sichuan (US$)

FDI from 2008 to 2012

$36 bn

2012

$10.6 bn

2013 (first half)

$5.44 bn

ichuan is the powerhouse of China’s southwest. A growing number of foreign companies has been drawn to this inland province in recent years by its low wage costs, huge market, and large pool of educated and skilled workers. FDI into Sichuan reached US$5.44 billion in the first half of 2013 and 255 of the Fortune Global 500 including Intel, FedEx, and Wal-Mart have set up operations in the province.

Foreign businesses’ interest in Sichuan – or western China – was also evident in June when Chengdu, the provincial capital, hosted the 12th Fortune Global Forum. Hundreds of business leaders, government officials, and CEOs from the world’s top 500 firms attended the three-day forum to discuss global business trends and, of course, reform in China. In recent AmCham Hong Kong surveys, Chengdu and Chongqing have ranked among the top three Chinese

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destinations of preferred delegation visits. In response, AmCham arranged a business delegation visit to the two cities in early September, meeting top government officials, local business executives, and members of AmCham Southwest China. The delegation included executives from logistics, finance, aviation, manufacturing, and energy sectors. “For the first AmCham HK delegation trip to western China, Chengdu and Chongqing were the two obvious places to start,” says Richard Vuylsteke,

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President of AmCham and a leader of the delegation. “Our goal was to gain general information on business development possibilities so that subsequent trips can be more focused on specific business sectors. “We were also very interested to see what sorts of Chinese companies were thinking about building international brands outside China. Such companies offer business opportunities for our Chamber’s members because they have the expertise – management, research and technical – to help Chinese companies to go abroad, not only to North America but also anywhere in the world.” In Chengdu, the delegation visited the Chengdu Economic and Technological Development Zone and was given a detailed account of the zone’s strategic plan and the varieties of companies that have already set up in the zone. On the same day, the delegation also had a roundtable discussion with officials from the Sichuan Investment Promotion Bureau, AmCham Southwest China, and representatives of the Hong Kong Economic and Trade Office in Chengdu. The visit to Chengdu was capped with a meeting with Vice Governor Gan Lin, who briefed the delegation on Sichuan’s economic situation and the province’s various goals in attracting foreign investment. According to Vice Governor Gan, Sichuan has achieved a 10.1 percent GDP growth in the first half of the year; he expects the momentum will continue in the rest of 2013. “We have a national goal of building a relatively well-off society by 2020,” Gan said. “To achieve that, it means Sichuan’s GDP growth must average 10.2 percent in the coming eight years. In other words, there is much room for further development in Sichuan.” Gan has over a decade of experience, as he worked in Guangdong before his promotion to Sichuan last year. He was upbeat about the potential for cooperation between Hong Kong and Sichuan as the latter seeks to upgrade its service sector. “Generally speaking, the development of the service sector in Sichuan has lagged behind,” he said. “On the one hand, our service sector has not yet been

Fu Yan, Deputy Director, Sichuan Investment Promotion Bureau

Delegation Itinerary Chengdu • Meet with the China Council for the Promotion of International Trade, Sichuan • Visit Chengdu Economic and Technological Development Zone Roundtable with Sichuan • Provincial Investment Promotion Bureau, AmCham Southwest China, Hong Kong Economic and Trade Office • Meet with the US Consul General and staff colleagues • Meet with Sichuan Vice Governor Gan Lin

Chongqing • Visit Liangjiang New District • Meet with Chongqing Mayor Huang Qifan • Visit Shui On Chongqing Tiandi • Networking lunch with AmCham Southwest China members and Hong Kong business leaders

Visit Chengdu Economic and Technological Development Zone

A New Non-Stop Service As exchange between western China and the United States increases, United Airlines announced in September it has applied to begin in June of next year a new non-stop service between Chengdu and San Francisco. The addition of the Chengdu-San Francisco route means that United will be the first American airline to serve Chengdu, which is the key business capital in western China. United Airlines plans to use its new Boeing 787 Dreamliner for the new route, which will fly three times weekly. According to a United press statement, the new route is subject to approval by the Department of Transportation. If approved, Chengdu will be the ninth destination United serves in the Asia-Pacific region nonstop from its San Francisco hub. Because the new route is a non-stop service, it will save roughly four hours off the current travel time between the two cities, which currently requires a stopover and plane change.

able to fully support our industries. On the other hand, the development of the service sector in Sichuan is about 10 percentage points below the national average. Therefore, there is great potential and we have much room to develop.” AmCham Chairman and delegation leader James Sun, during his remarks to the Vice Governor, also emphasized the great potential for cooperation between Hong Kong and Sichuan in service industry development. In particular, Vice Governor Gan highlighted logistics, research & development, management, and investment consultancy as being what Sichuan enterprises – state-owned and private alike – are targeting for cooperation and partnership with foreign companies. “The service sector covers a wide range of areas,” Gan said. “Based on my knowledge, US companies are very good at high-end services. As far as Sichuan is concerned, and Chengdu in particular, I can see huge demand for such services as we continue to develop.” The Vice Governor especially noted that although Sichuan has been struck by two major earthquakes in recent years, the province is generally safe. “Only seven percent of the land area in Sichuan is vulnerable to earthquakes,” he said. “I can assure you that it is safe to work and live in Sichuan.”

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James Sun

Huang Qifan

Chongqing – A City Marvel

utside China, Chongqing is probably not as well known as cities like Beijing and Shanghai. But in recent years the mega-metropolis – which has a population in excess of 33 million – is no doubt one of the top investment hotspots in China. Known as the “Mountain City,” Chongqing has for centuries been the commercial center in western China. Situated in the southeast of the Sichuan Basin, between the Yangtze

and Jialing River, Chongqing is a century-old transportation hub servicing Xinjiang, Yunnan, Qinghai and Tibet. It is now the fourth directly administered city under the State Council after Beijing, Tianjin, and Shanghai. History aside, Chongqing today is as modern as first-tier Chinese cities like Shanghai and Beijing. In 2010, Forbes ranked Chongqing second on its list of the World’s Fastest Growing Cities for the next 10 years. The urbanization that is transforming

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China is having an obvious impact on Chongqing. In addition to attracting talent, Chongqing is also becoming a magnet for foreign direct investment. Although foreign media focus mostly on coastal cities in their coverage of China, the fact is that Chongqing has made great strides in recent years in attracting FDI. According to a report by the Economist Intelligence Unit, Chongqing ranked 22nd on a list of 31 Chinese provinces in 2007 in terms of FDI. In the past few years, the city pulled in an average of US$11 billion of foreign capital every year. Roughly, half of that came from or through Hong Kong. The influx of foreign companies – Microsoft, Ford, Thyssen Krupp, and General Electric, to name just a few – is clearly a key part of the Chongqing’s success story. While their reasons for settling in Chongqing vary, MNCs clearly have taken note of the city’s booming economy. Chongqing’s GDP reached RMB1,145.9 billion in 2012, up an impressive 13.6 percent from the previous year. In fact, Chongqing has consistently ranked among the top three cities and provinces in China in terms of GDP growth in the past five years. The creation of new economic zones in Chongqing has also facilitated the inflow of foreign investment. A number of the Fortune 500 companies are now residents in the Liangjiang New Area and Chongqing New North Zone. For example, GDP in Liangjiang New Area doubled in just two years as more businesses went on stream and commenced production. Companies set up in Liangjiang New Area include General Motors, General Electric, Honeywell, and Fiat. During a meeting with the AmCham Hong Kong delegation in early September, Chongqing Mayor Huang Qifan stressed that the city and Hong Kong can indeed become great partners in the years to come. He said Chongqing is interested in having more Hong Kong SMEs – those who have traditionally set up production in Pearl River Delta but have also

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Visit Liangjiang New Area

found the Delta to be too expensive in terms of wages and other costs – and would like to work with chambers of commerce in Hong Kong to facilitate the relocation of these businesses.

“This normally takes about 50 days but we can do that by rails through Chongqing in about 20 days.”

In order to attract more Hong Kong companies to settle in Chongqing, the mayor said Chongqing is planning to set aside a prime land site in its business district especially for Hong Kong firms to set up their regional headquarters and offices. Another area for partnership between Chongqing and Hong Kong, Mayor Huang suggested, would be to

Frankie Tai, Deputy General Manager, Chongiing Shui On Tiandi Property

construct a “land bridge” through Hong Kong to ship goods from Hong Kong to Moscow. According to him, Hong Kong ships US$30-40 billion worth of goods to Moscow every year and currently the freight goes by sea to Rotterdam and then on land to Moscow. “This normally takes about 50 days but we can do that by rails through Chongqing in about 20 days,” Huang said.

ENTREPRENEURS/SME

help and to know how to get access to facilities locally like school, hospitals and cultural venues.

The World a Smaller Place through Human Touch

Beverly Sunn

One of the first American entrepreneurs to establish a real estate and relocation firm in the Asia-Pacific region, Beverly Sunn of Asia Pacific Properties has a wealth of experience about mobility and transition services, real estate, and doing business in China and Hong Kong. In a candid interview with biz.hk, Sunn shares what she sees as the opportunities and challenges the China market has to offer, Hong Kong’s competitiveness and building bridges across countries

biz.hk: Can you tell us about your first trip to China? What was your impression then? Sunn: I first went to China in the late 1970s. It was for business and I was just accompanying my spouse as a guest. After I moved to Hong Kong [from Hawaii], obviously we made short trips into China before launching Asia Pacific Properties in 1985. Prior to that, I came to Hong Kong on very short terms – somewhat like an expat assignment. And then I brought my children and my family here - I had never dreamed that I would be here for beyond three years.

biz.hk: When and why did you set up Asia Pacific Properties? Sunn: In my first seven years in Hong Kong in the early 1980s, my family and I went through a number of challenges and suffered in a sense because we didn’t know how all things worked here - and there wasn’t much transparency then. We didn’t know how to get into school or get proper medical care; the result was quite devastating to our family. [Real estate] agents in those days were basically part-timers. There was no such thing as a relocation industry

biz.hk: Did APP engage in both real estate and relocation from the very beginning? Sunn: That was so and the genesis of this organization. I didn’t realize it could be a business. I believed that it could be more of a service – a service to families moving here and also at that time I committed to be a tenant representative. That’s a very different existence. Coming from the US myself and understanding the needs of Americans and US multinationals, I saw a lack of real representatives for them; and because it was a developer market here, agencies are wedded to developers. biz.hk: Who were your first clients? Sunn: It might have been IBM. We started with individuals, and someone have heard of our services and called us. It was so organically grown and our reputation started to spread. Over the years, we’ve represented a number of multinational clients. Our primary market is Hong Kong.

and real estate was in fact a new industry. After I moved here, I determined that if I were to open a business, it would be quite different - it would support people and be respectful of the local community. I was a licensed US broker and I wanted to train people who are bilingual. When I started APP, it was a commitment to a real estate-based organization pioneering the relocation services here as real estate was really an important part of the move. It was a commitment to multinational families moving into Hong Kong who needed

biz.hk 9 • 2013

biz.hk: Why expanding into China? Sunn: Since we were established in Hong Kong, our next step would be China in order for us to grow as a company. I went to Beijing and I looked into Guangzhou and Shanghai to determine where we should set up our office. I met people in the real estate industry, people who were there already, and to do a little bit of analysis in terms of what the market was like, what the housing was like and available in each of the cities and trying to determine where would be the best place for us to establish ourselves. Originally, I thought we should go to Beijing, but as I did more research, I felt Shanghai really was much more commercially-minded in those days and indigenous to that environment was a sense of commerce through the city’s history and it has a great deal of exposure. So we started with a representative

biz.hk 9 • 2013

office in Shanghai first and then we became a wholly-owned company. biz.hk: What services do you offer in China? Sunn: We are really high-level consultancy so we work on assignment with a group that provides very processdriven and transparent services in the real estate arena. So when we receive an assignment, we work with all others in real estate community and with industrial parks and look to provide entry for our clients and then help them through their process with the due diligence and the transparency that’s required. And we represent them in the negotiation process – a true tenant representation. For example, one of our clients is a major multinational. What we did was that we set up all their offices in China – of course just their initial presence. We would go into the local community and work with the local agencies or developers or industrial parks and provide the avenues in which they could go in and look at these properties and help them in a vetting process of determining where they might be best suited, and what pricing could meet their requirement as a real estate representative. It was a commitment as a services provider to multinationals who want to set up their offices in China and then to follow with their people requirements and their mobility requirement and their families moving into China. In China, you are really out in a frontier and bridging cross-cultural differences and experiences. And I would say at that time [in 1990s] it was probably a much slower process because it was a matter of bringing two parties together and achieving greater understanding. We’re always looking at an international baseline [of services] and we always want to keep international standard. So that’s why our services are much more tailored – we are not in the mass market to serve everybody. biz.hk: How different is it? Some people would say relocation is just moving boxes?

Photo: thinkstock

Shanghai Tower

Sunn: I have to say – with all due respect – these are very different industries. Moving services are not relocation services. You can replace even a very rare book (although it’s very challenging) but you can never replace a life. Relocation is a very meaningful support service. We work with people 24/7 and on medical emergency as well. In some ways, it probably goes to a very high level of service, that’s highly individualized and personalized. Of course, I think all companies like to think that they provide that but in these days with companies as large as they are, everybody has different model but this is a simpler model for us and what we commit to.

Our model is that we put a lot of emphasis on training people who are bilingual. Who would know better than the people who speak the language and who come from the environment to share with you and give you insights and what’s happening on the ground so that you are not [living] in a bubble. That’s a commitment. The idea is: this is cultural bridging as well because if you work with someone who comes from the area, you can have a successful experience, and then you have now bridged yourself into the community. Many models feel that if you are from America then you are the best to help somebody from America. Or if you are from Australia, then Australians will be the best because you speak the same language and come from the same background. My own belief is that [in that way] you reinforce one another. The idea of a new venture is to bridge and transition into the new community with people who are indigenous to the community. The concept behind all of these is to train people who are bilingual from the environment into the industry. Our core values have always been integrity and transparency. biz.hk: How would you compare Shanghai with Hong Kong? Sunn: I think Hong Kong and Shanghai serve different purposes and both will co-exist. People talk about Shanghai over-running Hong Kong but I don’t necessarily believe that. Will Shanghai become as international as Hong Kong is? Overtime, yes. The Central Government wants Shanghai to become the international financial center by 2020. Yes, I think that will be the beginning. Hong Kong however offers a different type of opportunities because it is already established. The reason being and again I would go back to [Hong Kong’s] rule-of-law, transparency, adherence to international financial standards. It’s probably going to be a little bit more challenging for Shanghai given that it’s a larger community and

Shanghai is ‘leapfrogging’ in its development. When I first went to China, all of Pudong was flat. It was rice paddies, right? Just a few days ago I was on the 120th floor of Shanghai Tower. It’s going to be a 125-storey skyscraper. I was standing on the 120th storey of the Shanghai Tower. It’s incredulous that how in less than 15 years that Pudong has gone from flat land to what it’s today. It’s just amazing. I also want to say that the feeling of hope and the future is such a driving force in China and it’s just remarkable. Is it sustainable? It’s very challenging for people because you are taking them in rapid speed [to leapfrog] from the 20th to 21st century in such short order; there was no adjustment over time. But human being has great tenacity. That’s the wealth, they have great tenacity. I do believe it’s sustainable when you see how China has mobilized from such a basic society to become the second largest economy in the world within 30 years. You have to give credit to not only what the Central Government has achieved but also the people. What people don’t realize is that after all that’s said and done; you’re talking about one culture. This is why I think culture is important because in China you don’t have the same challenges as if you have 47 different nationalities or cultures. In a sense, you have one language and one over-riding culture, and that understanding is really quite important. So I think a part of sustainability has to do with attitude and hope. biz.hk: Where do you see APP 10 years from now? Sunn: I would like to be able to say that we’ve really made a difference in bridging countries through our work, helping people be successful in Asia by providing them with transitional support and real estate solutions that enhance their experience and life. That’s what I would like to see – that APP has made a mark and making the world a smaller place for people through human touch.

Opportunity is everywhere. So are we.

Profile: Beverly Sunn Beverly Sunn’s professional career spans more than 20 years in the US, Hong Kong and China. She serves on the International Advisory Council of Luxury Portfolio of the Chicagobased Leading Real Estate Companies of the World. She has served on the Members’ Leadership Board of NAI, a network of independent commercial real estate firms, and completed a three year term on the Board of Directors of Worldwide ERC (Employee Relocation Council), headquartered in Washington D.C. As an industry leader in real estate & relocation, Sunn is often asked to participate as a speaker and panel member at international conferences. Sunn is a former President of the American Club Hong Kong and a former board member of the Hong Kong chapter of the International Woman's Forum (IWF). In 2012, she was appointed to Thomson Reuters Founders Share Company Board of Directors.

biz.hk 9 • 2013

UniGroup Relocation is a global mobility network with nearly 1,200 locations serving more than 180 countries across 6 continents. Our broad range of pre-assignment, transportation and destination services are ready to help guide your assignees along every step of the journey, from beginning to end. Experience the difference of a common voice, a consistent standard of quality and unsurpassed local knowledge. Contact the regional office nearest you. Americas: americas@unigrouprelocation.com EMEA: emea@unigrouprelocation.com Asia/Pacific: apac@unigrouprelocation.com UniGroupRelocation.com/amchamhk

FASHION

THE

to learn all that from scratch. It has nothing to do with fashion but it’s all about business and we are business people. We just happen to be business people in the fashion world,” he says. It is a bold decision that they decided to do everything on their own instead of hiring an exhibition company. But they are happy with the results. “We are happy with the first edition of the HUB for the simple reason that our exhibitors left happy. When I was running Evisu a few years ago we spent six months and literally millions of dollars on research trips and consultants beating the bushes to find potential partners for China, and ended up with only two or three reasonable options so I can fully understand the why the HUB’s exhibitors were so satisfied to be in a room with hundreds of potential partners for the cost of a booth,” says Caplowe.

HUB – HONG KONG’S NEW FASHION SHOW Would you do a fashion trade show knowing that you will lose money? The answer is yes if you ask Richard Hobbs and Peter Caplowe. Daniel Kwan reports

Richard Hobbs (left) and Peter Caplowe

Photos courtesy: The HUB

ichard Hobbs and Peter Caplowe are smart business people, with decades of experience in the fashion and branding business. Together they launched the HUB – the “first branded fashion trade show in Asia,” right here in Hong Kong at the Asia World Expo last month. The three-day event raised a few eyebrows in the industry. For many years, Hong Kong holds the Fashion Week at the Hong Kong Convention and Exhibition Center every June – an annual event welcomed by sourcing agents and buying firms. Hobbs and Caplowe started their own show not because they are the Don Quixote of the modern day, but the first edition of the HUB is not about making money. “We’ll [lose money] but, like any business, there is a big investment period in the beginning. We will not make money

for a while and we have to develop the business,” says Hobbs. “We are from the fashion business and we understand that branding, the market and the experience are sometimes more important. You build it with the right experience, and then the profits will come in time.”

Right experience According to a press release, over 1,500 visitors attended the HUB in August. Many were buyers from companies in Hong Kong, China, Southeast Asia, Japan and South Korea. At the same time, over 100 exhibitor companies including brands from Europe, the US and Asia participated. The second

edition of the HUB is now booked for February with a bigger venue. Hobbs says they knew the HUB would not make money in the beginning but felt Hong Kong desperately needs a real fashion trade show. With their extensive contacts in the fashion world, Hobbs and Caplowe are confident that they can pull it off. Both from the UK, Caplowe is known for building the Japanese brand Evisu into a globally successful label and Hobbs is a veteran in branding, design and development of a number of denim and sportswear businesses.

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“The way you get in contact with your customers and the way you introduce your products in the rest of the world is through trade shows,” Hobbs says. “There are established trade shows in Las Vegas, Berlin, New York and London and that’s how people make that connection and these trade shows become a networking event as much as [for] buying and selling. Nothing like that ever existed in Asia, certainly not in Hong Kong.” “We felt that there is a desperate need for it and nobody has done it. They’ve probably tried and for some reasons have not been successful. They may have researched the market but for whatever reasons, they actually didn’t launch the event. We did.” Hobbs, Caplowe and a silent partner started the HUB about a year ago. The founders admit that while they have been to hundreds of fashion trade shows around the world, they were novices in running one. “We have

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Got to be here One such satisfied exhibitor is Man Leung, street-wear distributor and license partner of the American brand Dickies. Leung is a 33-year-old Hong Kong native who moved to Vancouver when he was 16. After four years in Canada, he moved with his family to New York for another four years. While he was in New York, he worked as a salesman for the street wear stores there. Then eight years ago he moved back to Hong Kong and started his own business. He now has his own brand, 11after11. “This is the first fashion trade show in Hong Kong and it will become biggest show in the future. I’ve to be here and got to be the first to be here,” says Leung who has known Hobbs for many years. “Here, you can talk to the right people and reach the right target markets. You can see everyone here. Why not? If you start from scratch, it’s difficult. Hong Kong is like a bridge between China and Southeast Asia. You come here and meet a lot of people. Not just people from Hong Kong but the whole Asia,” Leung adds. Hobbs says the first edition of the

HUB did not feature many American brands but expect more would come after the reputation of the show grows. He laments that American firms are too comfortable in the domestic market and less interested in China. “The problem is that a lot of American brands think that they have a big enough domestic market and they don’t look at Asia – certainly at China – as a serious market. They are happy in trying to do some business in Europe or have an Australian distributor,” Hobbs says.

“This is the first fashion trade show in Hong Kong and it will become biggest show in the future. I’ve to be here and got to be the first to be here.”

“They don’t really embrace the whole of China as a potential market. America is big. It’s 270 million or whatever the population is. But people don’t realize or forget that in five years’ time the middle class of China will be two times the population of America and these are people with spending power. So it’s probably five times the size of the market in America,” he points out. Hobbs’s advice for newcomers is “don’t rush.” “The reason why a lot of people who’ve gotten burnt is because they got into bed with the first person they met,” he says. “You’ve got to have a strategy which is relevant to you and the market. Don’t rush. Going to trade shows is step one. This is where you can come into contact with people and start to develop those connections and nurture the relationship.”

UNDERSTANDING THE CHINA MARKET China is inevitably the focus at the show. The HUB Hong Kong’s China General Manager Clarence Hui has decades of experience in building brands and retail in China. Hui talks to biz.hk about some of the lessons on selling into China and why Hong Kong managers still have an edge

biz.hk: A lot of foreign brands are interested in selling to the China market. Many of them are contemplating how they can penetrate into second and third tier cities in China. What would be your advice to these brands? Hui: The issue is not so much about whether to go to second or third tier cities. In the old days, the key was to have the right guanxi or connections. Don’t forget, online shopping wasn’t really big then and having the right connections would be critical if you were to open a brick and mortar shop since the choices of good shopping malls and department stores were limited. In other words, establishing the right connections used to be the key to a successful [fashion] business in China. What I mean is that whether you can find a distributor who has the right networks of connection becomes extremely important since he can secure prime retail spaces that you cannot. Don’t forget, the customers’ could only shop at shops that were available. Great changes have happened in the past three to four years. The reality is that nowadays customers in China have much more knowledge than what’s available in the market. Again, it is important to bear in mind that there are a lot of bureaucratic hurdles to overcome in entering the mainland market. That’s why second and third tier cities are not the solution. A fact is that the choices of good shopping malls and department stores in second and

third tier cities are relatively few. One of the problems regarding selling to China is that there is a big difference between concept and execution. For example, some brands like the idea of multi-label stores – one single store carrying several different labels. However, quality inspection is a big issue especially the cost of conducting testing is high in China. Say you import three pieces of garments and then you are required to send one for quality testing. This will significantly increase your costs. In other words, brands must take into account the preferences of individual markets in entering China – depending on the size of the market, your scope and scale. In addition, the online platform now does offer a pretty good channel in entering the China market. biz.hk: What about going online? Hui: The biggest problem [of using] a single channel like Taobao or T-mall is that the cost is getting higher and higher now and it can be higher than opening a brick and mortar store. Don’t forget you will have to take into account advertising costs and the so-called ‘hitman’ fees if you opt for the online channel. In addition, you still have to pay for warehousing. Unlike in brick and mortar stores where you may share the warehousing costs among your different stores, you cannot do the same in an online environment. biz.hk: How would you advice fashion brands interested in entering the China market?

Clarence Hui

Hui: My advice for them is that you need to really find a good strategy and a good consultant can help a lot. The reason is because China does not have a uniform practice across the country – the quality testing department, tax authorities, and industrial and commercial bureau in different cities all do things differently. It is true that the Chinese government wants greater integration with the outside world and no doubt that’s the mainstream thinking, different localities act individually. biz.hk: There are many talented people in China. What advantages Hong Kong designers and brand managers have in China? Hui: Hong Kong managers are clearly ahead of their mainland counterparts in areas like visual marketing and merchandising. It is because Hong Kong managers do have a much broader understanding and exposure to the world and we have decades of experience. This is not something that you may learn overnight or by going to a few trade shows in Paris or Japan. Our experience is very solid and we have wealth of experience in terms of brand packaging. Another problem China faced is the rapidly rising manpower cost. Mainland managers who have local connections are even more expensive than managers from Hong Kong. For example, a visual manager from the mainland can easily ask for over RMB15,000 a month and don’t forget that doesn’t include the various welfare funds you are required by law to contribute. The final bill can easily be as much as over RMB20,000 a month but frankly speaking a Hong Kong manager with such pay would probably do a better job.

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SPORTS & ENTERTAINMENT

t 7.30 am on a Sunday morning in September, when a good number of city dwellers are still in bed sleeping off a hangover, Chris Folino is wide awake and full of life as he sits on a bench at the Central Ferry Pier, waiting for his fellow teammates from the Buzz Dragon Boating Society to arrive while pondering over ways to win the race that will begin in two hours in Cheung Chau. The pier, sweltering like a sauna, is teeming with other racers, all carrying big bags and paddles, all looking as energetic as Folino. If there’s one thing that marks his group out, it is their foreign faces. Once the crowd hits the outlying island, the real action begins. At the Buzz booth, which stands next to a team from the local fisherman community, Folino and his teammates quickly change into their yellow jerseys, gulp down a few sips of energy drink, and then dash off to a quiet avenue for a warm-up exercise. The team’s vigorous actions catch the eyes

WITH THE DRAGON Hailed as Asia’s World City, how “international” Hong Kong is? While the city is predominately a Chinese society, Hong Kong is also home to many expatriates – some temporarily and others for longer stay. But to be able to really mix and mingle with the locals can be a challenge to outsiders who don’t speak the language or are unfamiliar with local customs. Shirley Lau talks to a group of gweilos who have made their way through by falling in love with a local sport – Dragon Boat racing

of a local middle-aged couple, who stop to watch and wonder aloud where the mix of English-speaking foreigners and Chinese hail from. But once back to their booth, the presence of the Buzz folks turns not a single head – unlike some years ago when they would get curious looks from locals and asked by fisherman team members to have photos taken with them. “In terms of us being a novelty, that’s long gone because we’ve been around for so long,” says Folino, who was born in Cleveland, Ohio, and joined Buzz about 11 years ago. “I prefer thinking of ourselves as a fisherman team rather than an expat team.”

The team Indeed, Buzz, which is named after fellow paddler Scott Buzby who passed away in 2000, is very much part of the fishermen’s dragon boat community today. Formed by 70 sporty expats and locals from different ethnic and professional backgrounds, the team has a close relationship with the local

Photo: Ian Alexander

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Erin Ruck

fisherman circles from districts such as Chai Wan and Aberdeen. Each year, it competes in about 10 races held by different fisherman groups, and is often the only expat team that gets invited. Kevin Ho, an Australian-educated Hongkonger who co-founded Buzz in 2001 and helps translate for his English-speaking teammates and the locals, says the team’s strong ties with the fisherman circles were established about eight years ago, when it became

acquainted with some local racers. Though they belong to the fisherman circles, many of the locals are not fishermen but from fishing families. Impressed by how the team pulled out all the stops at open championships and during training, some racers offered to store Buzz’s dragon boat and eventually invited the team to participate in their local races. “They are a hardworking lot with a lot of passion,” says Ng Yiu-fai or Fai Gor, the fisherman who helped Buzz

sign up for its first fisherman race. “In the early days their paddling was pretty bad. But they were strong. We tried to help them improve and so I arranged for them to take part in our races. They did very well the first time and we were surprised. Afterwards, they have kept improving.” For Buzz, to be able to get invited to fisherman races is a benchmark for their strength – and an honor not easy to come by. For one thing, there are a limited number of racing slots in any

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given event, and the priority usually goes to teams within the fisherman circles. The closely-knit fisherman community also means it is not easy for outsiders to break into it. Nevertheless, the time has changed and dragon boat racing no longer stays within the confines of a single community. “The fisherman population is shrinking today. We need to keep dragon boating alive. It’s a tradition, and it’s good for health. So we opened up and got the gweilos to join our

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races,” says Fai Gor, who belongs to the Chai Wan Fishermen’s Recreation Club. “By competing with the new blood, we also get to improve ourselves.”

Something in common An activity whose history is thought to have originated in the Pearl River Delta more than 2,000 years, dragon boating has long been a pastime for

Hong Kong’s fishermen. Traditional belief holds that dragon boats are soulful, and a good race would bring good fortune and good health for fishermen. In the 1960s, races held by local fishermen in Stanley started to attract expatriates living in the area, according to the Stanley Dragon Boat Association. By the early 1970s, the expats were racing against the local Chinese. Many other fisherman circles, however, had kept to themselves. Traditionally, women, alongside

foreigners, were off-limits to fisherman races. Racers who had a pregnant wife at home were also not allowed to compete. Today, most old taboos are no longer relevant, although women are still not allowed to lay their hands on fishermen’s dragon boats, an act supposed to spell bad luck. “I would never touch their boats. That would be the end of the world,” says Buzz president Erin Ruck. “But the rules don’t bother me at all. It is their tradition that we have to respect. It’s a big honor to be invited and we are grateful we are the only expat team to be asked to compete in their races.” A Californian native, Ruck intended to join a local sport in order to get closer to the Hong Kong culture when she moved here more than five years ago. The choice of dragon

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boating, despite the intensive training that takes place two to three times a week, has proved right for her. “Without the ties with the local fishermen, our dragon boating would be just another sport played among expats and it wouldn’t be as interesting. For the fishermen, dragon boating has all these cultural traditions steeped into what they do for a living,” says Ruck, regional director of the technology company BoardVantage. “In the city, the local people I see in the MTR or on a taxi ride have no connection with me as we have nothing in common other than the services they provide. With the fishermen, you suddenly have something in common. You both love the sport. They are very jovial people and like to have a great time. Even though there is a language

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barrier, you still feel a connection with them, which is what makes dragon boating so special.” One of the most intriguing cultural experiences in the interaction with the fishermen, Ruck says, comes from the boisterous dinner banquets held before and after the racing seasons, where much of the bonding between Buzz and the locals is done over pints of beer and local food. “They literally have the same dishes every single time. I have learned that the rice and noodles always come last, which for me is quite strange. But I have learned that it is impolite to ask for rice during the meal because it implies the other dishes are not good enough. It’s little things like this that add to the cultural experience,” she says.

Mix and mingle Veteran racers from the fisherman community are aware that the Buzz folks are no match for them in the water. According to Folino, when the team took part in their first fisherman race, some local team members who enjoyed gambling bet the “gweilos” would lose. To their surprise – and much to the dismay of their wallets, Buzz made it to the top 10 final. For the race that followed, the punters got wiser and wagered a bet on Buzz winning. Alas, they didn’t win, and the fishermen lost money again. A joke, rather than ill feeling, ensued. “The fishermen came up to us and went: ‘You got us again!’ We had a good laugh,” says Folino, founder of sourcing company Newvision Asia.

Meet the dragons (from left): Captain Paul Hutchison, Chris Folino, Fai Gor and Fai Gor's wife

According to helmsman Lai Bei, 69, a former hospital worker who grew up in Stanley, while Buzz’s members are long on physical strength, they are relatively short on paddling skill. And the fact that the team has a high turnover rate, due to the impermanent nature of some expat members’ residency in Hong Kong, makes it difficult to maintain the consistency of its overall performance. But the fisherman community is often generous with their encouragement and support for the team. “They are powerful racers, but their performance is not consistent. When they don’t do well, we give them tips on ways to improve. When they perform well, we praise them,” says Lai. The words of encouragement means a lot to Buzz as an “underdog team”, says team member Sebastian Bitticks, who joined Buzz three years ago.

“It is very difficult for Buzz to compete with the Sebastian Bitticks fisherman teams as they are highly competitive. Some the way they socialize reminds me have a roster of some 300 paddlers. of where I grew up, which was a workWhen we compete with them, we are ing class community,” he says. always the underdog. No one expects “Expats in Hong Kong can easily us to win. But we get an awful lot of live a bubble life and you can quickly encouragement from them. They forget there is a larger society and would wave, yell and praise us as we history in Hong Kong than an internawalk past them. Sometimes we get tional banking community. The mentioned in public announcements dragon boating community is one with going: ‘Buzz, next time maybe, but history, real roots and local heroes. As good job still.’ That is most rewardan American, there’s no other way for ing,” says Bitticks, who teaches at the me to talk with people from this City University of Hong Kong. subculture. Many Americans here may A Wisconsin native, Bitticks says think that dragon boating in Hong the fisherman community reminds Kong is about that one Dragon Boat him of where he comes from, and of Festival race in Stanley each year, but the fact that Hong Kong is more than a nothing can be further from the way financial center. “A lot of the people in that it actually is. If one wants to see the fisherman teams are working class the real dragon boating culture, they folks. They are straight forward, rough should consider joining a team like but extremely friendly. You get to see Buzz.” how everyone jokes at each other and

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NETWORKING

AMCHAM MONTHLY NETWORKING DRINKS More than 120 people showed up for AmCham’s September monthly networking drinks, sponsored exclusively by Breitling, a Swiss specialist of technical watches since 1884. Guests were treated to an evening of wine and gourmet canapés at Breitling Boutique Hong Kong in Causeway Bay, where they had an opportunity to introduce themselves in casual conversations over a glass of wine within a group of highly dedicated business professionals. It was also a unique opportunity to learn more about Breitling’s history and its latest collections.

New Membership Contest

Congratulations to our lucky draw winners! Two night stay at Six Senses Con Dao, Vietnam Winner: Bryan Scot Van Dale, Managing Director Manifest Marketing Limited A gift vouchers valued at HK$1,000 to Carnevino Winner: Michael Chiu, Director – FP&A, MetLife

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A gift vouchers valued at HK$1,000 to Lupa Winner: Michael Lee, Vice President, Retail Management Nielsen Company (HK) Ltd

Thank you to our sponsors:

CMY

2013 Oct

Mark Your Calendar VAT reforms in China –

Venue: AmCham Office 1904 Bank of America Tower 12 Harcourt Road, Central

Oct recent and proposed changes impacting MNCs

Lachlan Wolfers, Tax Partner, KPMG China The first phase of the value added tax (VAT) pilot program has been implemented nationwide in Mainland China effective August 1st 2013. In this session we will take a look at the key impacts on multinational companies doing business in, or with, China. We will also look at future phases of the VAT pilot program and what it will mean for businesses in key sectors including financial services, insurance, real estate and construction. This session will examine the impact of the transition to VAT on pricing, overall indirect tax liabilities, changes to contracts, invoicing, and IT systems and processes which will need to be implemented in light of these reforms. Lachlan Wolfers is a tax partner with KPMG China, based in Hong Kong. He is the leader of KPMG’s Centre of Excellence for Indirect Taxes for China, and the regional leader for Indirect Taxes in Asia Pacific. He is regularly asked to advise China’s Ministry of Finance and other regulators in relation to the VAT reforms.

Environmental, Social and Governance (ESG) Reporting Oct Focusing on the environmental aspect of the HKEx guide

Debby Chan, Director, Global Services Business, Fuji Xerox (Hong Kong) Ltd This event will focus on Hong Kong Exchanges and Clearing Limited’s (HKEx) Environmental, Social and Governance (ESG) Reporting Guide issued last year, which is intended to form compliance requirement for Hong Kong-listed companies by 2015. While many listed companies are unsure how to begin the journey towards ESG compliance, Fuji Xerox (Hong Kong), a leading ICT provider, has taken the lead to educate, counsel and provide the necessary tools towards implementation. Debby Chan is Director of Global Services Business for Fuji Xerox (Hong Kong) Ltd, overseeing global services business development, delivery, go-to-market initiatives and innovation for the company’s Enterprise Print Services and Business Process Services offerings. She is responsible for developing and implementing sustainability services as well as promoting green initiatives with customers through global services innovation. Chan joined Fuji Xerox (previously known as Xerox Company) in 1992. Since then, she was appointed a number of positions in sales and marketing management for Mainland China and Hong Kong operations before becoming Director of Marketing at Fuji Xerox Hong Kong and taking on her current position.

China (Shanghai) Pilot Free Trade Zone –

Oct Opportunities in an evolving economic reform in China

Danny Po, Asia-Pacific and China National Leader, Mergers & Acquisitions Tax Services, Deloitte China Join us for an interactive discussion for views and insight on the potential opportunities and challenges to foreign corporations in Hong Kong as a result of the establishment of the China (Shanghai) Pilot Free Trade Zone, or China (Shanghai) PFTZ, which pioneers an unprecedented degree of openness in relation to foreign investment and international trade in both goods and services, with the objective of promoting and leading the development of an open Chinese economy. Danny Po has more than 25 years of experience in China tax and business advisory services to multinational corporations and Hong Kong listed companies. He works closely with his teams in Hong Kong and Mainland China to provide a wide range of transaction related tax advisory services for both inbound and outbound investment and also provide technical guidance on the areas of tax clearance/planning, company restructuring and cross-border business. Po is a member of the Association of Chartered Certified Accountants, the Hong Kong Institute of Certified Public Accountants and a fellow member of the Taxation Institute of Hong Kong. He is an active speaker and an author on M&A tax related topics for trade associations and professional bodies as well as media in Mainland China and Hong Kong.

For information, see website: www.amcham.org.hk

Tel: (852) 2530 6900

Fax: (852) 2810 1289

Time: 12:00 - 2:00pm (Sandwiches & beverages included) Fee(s): Member Fee: HK$250 Non Member Fee: HK$380

Venue: AmCham Office 1904 Bank of America Tower 12 Harcourt Road, Central Time: 12:00 - 2:00pm (Sandwiches & beverages included) Fee(s): Member Fee: HK$250 Non Member Fee: HK$380

Email: kalau@amcham.org.hk

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