biz.hk May 2014 by The American Chamber of Commerce in Hong Kong

20 14

FI NA G N UI PR CIA DE OV L S TO ID ER ER VI S CE S

May 2014

PLANNING AHEAD

FOR A BETTER

May 2014 Vol 46 No 5

Contents

Richard R Vuylsteke

Editor-in-Chief 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) 3753 1206 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 Tel: (852) 3596 8466 Email: ray.chau@overa.com.hk Website: www.overacreative.com ©The American Chamber of Commerce in Hong Kong, 2014 Library of Congress: LC 98-645652 For comments, please send to biz.hk@amcham.org.hk Single copy price HK$50 Annual subscription HK$600/US$90

Publisher

COVER STORY

CHINA CONFERENCE

TRADE & INVESTMENT

EDUCATION

The issue of fuel mix for power generation is now a “very real and important one” because many of the existing coal-fired electricity generators – which became operational in the 1980s – are scheduled to retire starting from 2017. Under Secretary for the Environment Christine Loh talks about Hong Kong’s current situation

Panels of business executives and analysts engage in a conversation at AmCham’s 2014 China Conference to identify and discuss issues facing China in rapidly changing business environment

With a delegation of 70 representatives from 22 US states and cities in Hong Kong, Executive Director of SelectUSA Vinai Thummalapally explains why there has never been a better time to invest in the US than now

Director of Yew Chung Education Foundation Dr Betty Chan Po-kong talks about nurturing a future generation of youngsters capable of communicating with and caring for others with a global outlook

AMCHAM NEWS AND VIEWS 04 Hong Kong Needs Immediate Copyright Reform Urgent action is required to re-introduce the Copyright (Amendment) Bill in order to bring Hong Kong more vigorously into the new digital era and to refurbish its competitiveness so that it remains one of the world’s top international commercial centers

07 New Business Contacts 36 executives joined AmCham’s business network last month

20 A Historical Moment in China Frank Lavin, Founder and CEO of e-commerce platform Export Now, addresses four key areas in an analysis on the current state of China where a maturing economy continues to provide vast business opportunities

22 The Two-Speed Economy of China Jing Ulrich, Managing Director & Vice Chairman of Asia Pacific, JPMorgan Chase & Co, talks about how China has emerged into a “two-speed economy” – where new sectors are developing while more traditional industries are mired in overcapacity

TRADE & INVESTMENT

45 Mark Your Calendar

24 US Delegation Promotes FDI in PRD

COVER STORY 08 Planning Ahead for a Better Fuel Mix The issue of fuel mix for power generation is now a “very real and important one” because many of the existing coal-fired electricity generators are scheduled to retire starting from 2017. Under Secretary for the Environment Christine Loh talks about Hong Kong’s current situation

CHINA CONFERENCE

With a delegation of almost 70 representatives from 22 US states and cities in Hong Kong, Executive Director of SelectUSA Vinai Thummalapally explains why there has never been a better time to invest in the US than now

28 Pacific Bridge Initiative: Collaboration between US and Hong Kong The Hong Kong TDC has worked closely with the US through the Pacific Bridge Initiative (PBI) – a program launched in November 2010 (and recently extended) to facilitate US exports to Asia through Hong Kong where international trade is made easy

31 Nevada: A state of business opportunities

14 Managing in a Maturing China Panels of business executives and analysts engage in a conversation at AmCham’s 2014 China Conference to identify and discuss issues facing China in rapidly changing business environment

32 Carson, California: A business-friendly city Mayor Jim Dear is determined to make his city in southern California a model community for America by promoting initiatives and policies that are beneficial to business partners

33 Canton, Ohio: Reinventing for global investment Mayor William J Healy II attributes falling unemployment to the dedication and hard work of local businesses and their efforts to attract foreign investment

EDUCATION 34 A Pioneer in International Education Director of Yew Chung Education Foundation Dr Betty Chan Po-kong talks about nurturing a knowledgeable and cultured future generation of youngsters capable of communicating with and caring for others with a global outlook

FINANCIAL SERVICES 38 The Financial Impact of Cyber Threats Cynthia Sze, Head of Financial Lines, AIG Insurance Hong Kong Ltd, discusses what’s at stake and how companies – large and small – should protect themselves against data breaches in an era of unprecedented Internet connectivity, cyber attacks and fraudulent activities online

Lieutenant Governor of the State of Nevada Brian Krolicki speaks about an ideal location with unique geographic features and access to a consumer base of 60 million people

3 2

biz.hk 5 • 2014

biz.hk 5• 2014

Board of Governors Chairman

Peter Levesque

Vice Chairman

Walter Dias

Treasurer

Tom Burns

Executive Committee Evan Auyang, Sara Yang Bosco Belinda Lui, Alan Turley, Richard Weisman Governors Donald Austin, Brian Brenner, Ewan Copeland Janet De Silva, Rob Glucksman, Robert Grieves John (Jack) E Lange, Ryan Mai Catherine Simmons, Eric Szweda, Colin Tam Elizabeth L Thomson, Jennifer Van Dale Jay Walder, Frank Wong, Eden Woon Ex-Officio Governor President

James Sun Richard R Vuylsteke

Chamber Committees AmCham Ball Apparel & Footwear China Business Communications & Marketing Corporate Social Responsibility Energy Entrepreneurs/SME Environment Financial Services

Walter Dias Colin Browne Seth Peterson Lili Zheng Charlie Pownall Oliver Rust Diana Tsui Rick Truscott Laurie Goldberg Jim Taylor Beth Smits

Food & Beverage Hospitality & Tourism Human Capital

Veronica Sze Damien Lee Peter Liu

Information & Communications Technology Insurance & Healthcare

Rex Engelking

Owen Belman Hanif Kanji Intellectual Property Gabriela Kennedy Law Clara Ingen-Housz Pharmaceutical Stephen Leung Real Estate Charles Kelly Senior Financial Forum Al Miyasato Senior HR Forum Bianca Wong 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 Michael Harrington

biz.hk Editorial

t was an encouraging sign when Chief Executive CY Leung in his 2014 Policy Address addressed the “great potential” of Hong Kong’s creative industries and expressed a commitment to enhancing their competitiveness. Consistent with this viewpoint, the Administration subsequently submitted to the Commerce and Industry Panel of the Legislative Council its recommendations on the issue of copyright reform. A key attribute of Hong Kong’s competitiveness is its ability to attract and retain innovative companies and creative talent. High standards of intellectual property rights protection are needed not only to protect and enhance the competitiveness of Hong Kong’s industries but also to develop key economic opportunities for Hong Kong’s knowledge-based businesses. Unfortunately, Hong Kong’s current copyright legislation and policy lag far behind other jurisdictions – including the UK, Australia, Singapore, Taiwan, and Korea – in addressing the operational realities of working in the digital age. This problem has garnered the attention of a number of governments around the world as they realize the impact of strong IP protection to domestic and inbound investment.

biz.hk 5 • 2014

HONG KONG NEEDS IMMEDIATE COPYRIGHT REFORM In Hong Kong, there has been a disappointingly long period between realizing what is needed and actually implementing it. Discussions on the digital copyright agenda began almost a decade ago, but thus far the results of the protracted discussions and public consultations on the Copyright (Amendment) Bill 2011 have been unsuccessful. AmCham HK supported the Bill that was first discussed in 2005, but as yet not passed, in recognition of its importance to “technology-neutral communication rights” in affording copyright owners some protection against unauthorized online distribution of their works. Creative industries in Hong Kong have suffered tremendously as the debate about copyright reform has languished. Illustrative of this point is the decline of film production in Hong Kong over the last 20 years. The local industry has moved from producing some 300 films yearly in the early

biz.hk 5• 2014

1990s to only 48 films in 2013. Yet, film markets in other parts of Asia, including India and Korea, have prospered during the same period. Hong Kong ought to be committed to safeguarding and fostering the film production ecosystem. Instead, many global media and entertainment companies have relocated their regional headquarters out of Hong Kong, moving to jurisdictions deemed to have more comprehensive rules for protecting intellectual property. In addition, there is a growing risk that Hong Kong will be missing out on a broader range of benefits from information and communication technology investments. Urgent action is required for the Copyright (Amendment) Bill to be re-introduced in order to bring Hong Kong more vigorously into the new digital era and to refurbish its competitiveness so that it remains one of the world’s top international commercial centers.

AMCHAM AMCHAM Means Means Business Business

Members Directory

New

Business Contacts The following people are new AmCham members:

w w w. a m c h a m . o r g . h k www.amcham.org.hk

w w w. a m c h a m . o r g . h k

Academy International Limited Dominic Cheung Senior Manager - Quality Assurance Bingyang Sun Asia Operations Manager Lynne Sprugel Vice President & Managing Director Int'l Sourcing Operations

East-West Property Advisors

Nielsen Hong Kong

Sam Van Horebeek Director

Mary McHale Clark Vice President, Senior Engagement Manager

Global Payments Asia-Pacific Ltd Melody Hsu Senior Vice President & Head of Strategic Development

Orangefield ICS Limited

Hinrich Foundation

Pacific Capital Advisory

Callan Anderson General Manager

ACE Insurance Limited Doug White Country President, Hong Kong, Taiwan and Macau

ACE Life Insurance Company Ltd Allan Lam Country President

Over 500 500 pages pages in in three three major major sections, sections, including including aa complete complete guide guide to to chamber chamber services, services, Over corporate sponsors sponsors and AmCham Charitable 1,700 corporate Charitable Foundation. Foundation.This Thisdirectory directorylists listsabout over 1,800 members from from over about700 700companies companiesand andorganizations. organizations. members ISBN 978-962-7422-18-1 ISBN 978-962-7422-20-4

LC 98-645651 LC 98-645651 NON-MEMBER PRICE Local Delivery HK$1500 Overseas Delivery US$195 Shipping costs: Local HK$45 (per copy) US/International HK$50 (per copy)

MEMBER PRICE HK$800 HK$104

Capital Tax Limited Vicky Xu Senior Accountant, CPA Eric La Cara Managing Director

Carter's Global Sourcing Ltd

Ting Xu Research Program Director Felix Lee Portfolio Manager Analyst Kathryn Dioth Chief Investment Officer and Legal Counsel

Hong Kong Academy Stephen Dare Head of School

Hong Kong Professional Golfers' Assn

Alan Chan Managing Director

Elina Lee Chief Executive Officer

Centre Testing International (Hong Kong) Ltd

Kerabeo Ltd

Eric Qian Managing Director

CLP Power Hong Kong Ltd Ian Tuft Director - Group Operations and Construction, CLP Holdings Ltd

Cognizant Technology Solutions (Hong Kong) Ltd Clarence Low Financial Service Senior Sales Manager

Credit Agricole CIB Sebastian Van der List Head of Commercial Banking Asia, Client Coverage & International Network

Isabelle Lunven Managing Director

KKR Asia Limited Steven Okun Director of Asia - Pacific Public Affairs Anita Davis Senior Manager - Public Affairs

KPMG

Charles Regan Managing Partner

TMF Hong Kong Limited Gillian Pang Regional Human Resources Director Digby Ross Director, Global Business Development Mark O'Sullivan Managing Director - Hong Kong

Transamerica Life (Bermuda) Ltd Damiaan Jacobovits de Szeged President & Chief Executive Officer

Typhoon Consulting Catherine Cole Director Lily Ng Director John Eyres CEO

Zuellig Pharma Limited Andi Umbricht Chief Operating Officer Charles Tang Chief Executive

Stephen Mercer Partner

Mayer Brown JSM Anita Lam Consultant

View our other members at: http://www.amcham.org.hk/index.php/AmChamMembers.html

3753 1208

biz.hk 5 â&#x20AC;˘ 2014

COVER STORY

PLANNING AHEAD

FOR A BETTER

The issue of fuel mix for power generation is now “a very real and important one” because many of the existing coal-fired electricity generators – which became operational in the 1980s – are scheduled to retire starting from 2017 and because no new coal-fired units had been allowed since 1997 for environmental reasons. Under Secretary for the Environment Christine Loh talks about Hong Kong’s current situation and explains the purpose of an on-going public consultation on the issue

By Kenny Lau

biz.hk 5 • 2014

he supply of electricity in Hong Kong is one of the world’s most stable and reliable – and it has been nearly 30 years since the city experienced a major blackout in the mid-1980s. Reliability of Hong Kong’s two power companies, Hongkong Electric and CLP, together exceeds 99.999 percent – a figure above those of many other large cosmopolitan cities and from which unplanned interruption was less than 3 minutes per year for each customer between 2009 and 2011. Meanwhile, electricity tariffs for an average user in Hong Kong are also lower than those in Singapore, London, New York and Sydney. According to a survey in 2009/2010 by the Census and Statistics Department, expenditure of each household in Hong Kong on electricity was on average less than 2 percent. “What we sometimes take for granted is the level of high reliability of our electricity on a day-to-day basis,” Christine Loh, Under Secretary for the Environment, Hong Kong Environment Bureau, says in an interview with biz.hk. “While there is a public focus on the price of electricity, most people don’t think much about it.” “Hong Kong is not unique from any other cities in having to meet the demand for energy, but we are under a number of circumstances different from other places,” Loh says. “Because of our history, we have traditionally generated all the power ourselves, and our power companies are also privately owned and operated. Then, in 1994, we started being able to buy nuclear power from China.” “And, it is important as we make policies going forward to consider all the components of our electricity supply, and to make sure that our goals in safety, reliability, affordability and environmental performance are met in a well balanced way,” she adds.

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Time for a decision Indeed, Hong Kong has some major decisions to make in reviewing and planning ahead for the future of local electricity generation and supply, including revamping the current fuel mix used to generate electricity for the city where as of 2012 coal was the dominant fuel type (53 percent), followed by nuclear power imported from Daya Bay in Mainland China (23 percent), natural gas (22 percent), and oil and renewable energy (2 percent). The fuel mix issue is now “a very real and important one” because many of Hong Kong’s existing coal-fired electricity generators – which became operational in the 1980s – are scheduled to retire starting from 2017 and because no new coal-fired units had been allowed since 1997 for environmental reasons. Coal as a fuel type has the highest emissions that are hazardous to human health and to the overall environment.

“We need to start reviewing now. While you can extend the use of these plants somewhat, they will eventually be phased out,” Loh stresses. “Therefore, we need to think about whether we want to replace them, what we want to replace them with, and what other options we have to maintain a stable supply of electricity for Hong Kong.” “If you have something in your home that needs to be replaced, you can obviously delay your decision a little bit but will eventually have to do it,” she says. “Why do we need to make a decision now? That’s because planning for and putting in place new infrastructure actually takes a long time.” The demand for electricity in Hong Kong at the same time is also projected to rise, albeit at a relatively slow rate of about 1-2 percent a year. According to the Environment Bureau, Hong Kong’s total consumption is estimated to increase from 43 billion kWh in 2012 to 48 billion kWh in 2020 and 50 billion kWh in 2023.

Reliability of electricity supply in major cities 100.0000%

99.9999%

99.9998% 99.9996% Note: 1) 2009-2011 average 2) *New York figure excludes impact by major typhoons / storms

99.9980%

99.9963% 99.9960%

99.9946% 99.9940%

99.9925% 99.9920%

99.9900%

99.9880% HKE

Singapore

CLP

Hong Kong

New York*

Sydney

(Central Business District)

London

Source: Environment Bureau, HKE and CLP

“Hong Kong’s electricity consumption [at an annual growth rate of about1.3 percent from 2008 to 2012] has been very modest when compared to our GDP growth [at 19.3 percent] during the same period,” Loh points out. “Nevertheless, our demand for energy will increase, and we have to take into consideration of all the things that drive our economy, such as data centers and railway systems. These things take a lot of electricity.” There is an environmental aspect to it as well, Loh says. Electricity generation is a major source of air pollutants in Hong Kong – 47 percent of sulphur dioxide (SO2), 28 percent of nitrogen oxide (NOx) and 16 percent of respirable suspended particulates (RSP) in 2012. This is largely due to the heavy use of coal despite already having applied technical improvements to the current coal-fired plants – and switching to a cleaner fuel mix is essential in reducing emissions and achieving targets set to improve air quality.

Consultation The Environment Bureau has launched a public consultation to solicit views from the general public on the issue of fuel mix. “What we are doing with the consultation is to share the issue of fuel mix with the community, and we are asking for your views,” Loh says. “This is a planning horizon as Hong Kong has some hard targets that will need to be met in relations to air quality and carbon emissions by 2020.” “In many respects, we already have a fuel mix for electricity generation today,” she notes. “What we want is to have as many options as possible, and our goal is to create the best possible arrangement for Hong Kong.” In the consultation, there are two proposed options – and under either option nuclear power will remain an important part of the overall fuel mix. “Obviously, we’ll continue to buy

nuclear power from China as we have a contract for another 20 years,” Loh says. “The issue with nuclear power is that there is a limit as to how much more we can buy from Daya Bay because some 70 percent of its generation are already being supplied to Hong Kong.” Under Option 1, Hong Kong could import more electricity through purchase from the Mainland power grid to meet about 30 percent of its demand. This is in addition to the existing supply of nuclear power for another 20 percent of the demand, while local generation will meet the remaining demand (50 percent) by using mostly natural gas. In other words, China would help fulfill half of Hong Kong’s overall needs for electricity under this option. In Option 2, Hong Kong would continue to import nuclear power (as in Option 1) without making any additional purchase of electricity from Mainland China and would significantly

Fuel mix of Hong Kong in 2012 Hong Kong Overall CLP

Others 2%

HKE

Others 2%

Nuclear 23%

Nuclear 31% Coal 49% Natural Gas 18%

Natural Gas 32% Coal 68%

Natural Gas 22%

Coal 53%

Moving forward One of the questions being raised is whether Hong Kong is confined to only two options as proposed in the consultation. The answer is no, Loh says. “We genuinely say that this is an

Source: Environment Bureau

increase the use of natural gas (which is a much cleaner but more expensive form of fuel) for local generation from the current 22 percent to 60 percent of the total fuel mix. A slightly higher portion of coal in the fuel mix is also proposed to keep it more affordable. “One of the key questions we are asking in the consultation is whether Hong Kong is ready to consider tapping into China’s power grid in 10 years’ time,” Loh says. “This is also what people are raising questions about because it is sort of a new idea for Hong Kong.” “The reason we can explore this issue and consider it as an option today is because China has made tremendous progress in building up a huge program and increasing the supply of electricity,” she adds. “This was simply not a viable option a decade ago because China lacked capacity. “It doesn’t mean we give up on local generation – which has had a very high level of reliability – but it means we have an extra option. We are suggesting that we could consider buying a percentage of power from the grid in China.” In fact, Hong Kong’s energy system – in terms of power generation and fuel supply – is already closely tied to that of Mainland China, Loh points out. “We get 23 percent of our power supply from Daya Bay. The natural gas we burn to generate electricity In Hong Kong either originates from China or is distributed through China. And, China Southern Power Grid Co Ltd is already connected to Hong Kong.”

biz.hk 5 • 2014

Christine Loh

Comparison of electricity tariff in Hong Kong and other major cities 3

HK$/kWh $2.61 $2.30 $2.04

$1.74

$1.00

HKE

$1.08

CLP

Hong Kong

Singapore

London

NewYork

Sydney

Remarks: - Comparison based on average monthly domestic consumption of 275 kWh. - For Hong Kong, net tariff for 2014 is adopted. - For other countries, tariff and exchange rate at November 2013 are adopted. Source: Environment Bureau

Proposed fuel mix options IMPORT FUEL MIX

NATURAL

COAL

GAS

(& RE)

(DBNPS)

GRID PURCHASE

23%

22%

55%*

20%

30% 40%

10%

60%

20%

NUCLEAR

Existing (2012)

OPTION 1

OPTION 2

Importing more electricity through purchase from the Mainland power grid Using more natural gas for local generation

Total : 50%

20%

*Inclusive of a small percentage of oil

open question. Obviously, people are already coming up with more ideas and some are suggesting a mixture of the options.” “People can come to us and explain their proposal as we are open to any suggestion,” she adds. “We’d like to have as many people respond as possible, and we expect a lot of people will provide us with comments and advice.” Regardless of the option adopted, electricity will certainly cost more not only because of an increase in global energy prices and a wider use of cleaner but more expensive fuel but also because of “substantial capital investment in new transmission or generation facilities” for Hong Kong in the near future. But, it is difficult at this stage to predict the exact implication on the actual cost because of a number of fluctuating factors. “The price of energy is going to be more expensive going forward. This is a worldwide problem as prices are

going up everywhere,” Loh says. “We are able to keep current tariffs lower because we are burning more coal today, but it also has a huge implication on our environment. That’s why you also see in our consultation a question of whether we should maintain a bit more of coal to help us modulate price in the future.” The key is how Hong Kong can secure access to reasonably priced power that is also clean and reliable, Loh stresses. “We absolutely don’t want to compromise on safety and reliability, and we absolutely don’t want Hong Kong to have a sub-optimal option. Striking a right balance among the four energy policy objectives is a delicate act.” “What we want to point out at this stage is that grid purchase is technically feasible and is a new option for us to think about as we explore what we want our fuel mix to look like in 10 years’ time,” she adds.

biz.hk 5 • 2014

CHINA CONFERENCE

Managing in a Maturing China In a highly interactive platform for an exchange of ideas and best practices to create successful business strategies in China, panels of business executives and analysts engage in a conversation at AmCham’s 2014 China Conference to identify and discuss issues facing China in rapidly changing business environment

By Kenny Lau

Peter Levesque

Photos: Silver Image

biz.hk 5 • 2014

An invisible hand

Panel 2 (from left): Yu Liming, William Overholt, Brian Murray and Robert Grieves

Panel 1 (from left): Jay Walder, Michael Klibaner, Michael Jones and Peter Levesque

fter 30 years of remarkable growth, China’s maturing economy is driving many international business leaders to re-think their overall strategy in a country where rising labor costs, growing domestic competition and imminent reforms are creating a vastly different business environment. It is a complex issue and a topic open for discussion among leading experts and business executives at a recent AmCham conference. “As China matures, there will continue to be new economic challenges, new political dynamics and a new emphasis on maintaining social harmony as well as new business opportunities,” AmCham Chairman Peter Levesque says in his opening remarks at AmCham’s 2014 China Conference.

“From a business perspective, managing in a maturing China is about understanding the ‘pros’ and ‘cons’ of China’s rapid development and being able to identify the new business opportunities that are being created as a result of China’s historic transformation.”

Urbanization With more than 700 million urban residents and more than 150 million expected to move into cities from the countryside in the next ten years, urbanization is increasingly an important driver of economic growth and development from what is to become a wave of unprecedented migration within China. The economic opportunities and

social implications of urbanization are the topics in the first panel discussion with Michael Jones, VP, Global Business Development, General Electric; Michael Klibaner, Regional Director & Head of Research for Greater China, JLL; and Jay Walder, CEO of MTR Corporation. “Hong Kong is an exemplar city,” Walder says. “It’s the 21st century definition of a dense city built around public transportation,” creating a place with some of the highest usage of [public transport] and resulting in some of the lowest emissions of cars than many other major cities in the world. MTR Corporation has five rail lines running in China and is currently working on another one in Shenzhen. The key to urbanization in China is whether it will be able to draw integrated

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Panel 3 (from left): Seth Peterson, Ben Simpfendorfer, Alan Turley and Colin Browne

land use and development of metro systems together in a way that facilitates long-term objectives, Walder says. And, infrastructure often needs to be in place before it is required, Klibaner notes. “It’s a model of ‘Build it and they will come.’ Just-in-time delivery of office buildings doesn’t work too well because the economy is developing so quickly.” The challenge, Klibaner adds, is a rebalancing act of gradually moving away from investment-led growth towards growth based on consumption by an expanding middle class as China

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goes through a learning process of managing in a lower-GDP growth environment. China’s demand for natural resources is also going to drive higher use of unconventional resources in order to maintain sustainable growth in the future, Jones says, noting a fundamental change in the way businesses operate and a serious focus on renewable energy such as wind and solar power. “China will not wait around until they’re done with urbanization to look at the environment,” he says.

A question facing China today is whether its economic structure has become too constraining, after having grown economically by a factor of seven since 1992. The next stage of Chinese economic reform will entail a change from investment-led price control of money and credit to more of a consumer-led market with an invisible hand, notes Brian Murray, Group Chief Economist, Investment Department, AIA Group. There will be a liberalization of interest rates and more competition in the financial system in which the market sets the price, Murray points out. And, enterprises will also have more freedom in an environment where they are allowed to operate a wider range of businesses except those on the “negative” list (as opposed to only a limited set on a “positive” list). Dynamism in the China market will come from SMEs because they are inherently less controlled, says William Overholt, President of Fung Global Institute. “But, it will require more market competition because big banks can’t rationally lend them money at the moment. Once you level the playing field, they are in a whole different ball game.” “What we will see is a gradual development of a market currency, an open capital account and more sectors open to foreign direct investment,” Overholt adds. “But, foreign companies will be prevented from playing a dominant role in the Chinese market.” The Chinese leadership is now focusing on introducing reforms that will lead to higher quality, more organic and sustainable growth driven by market forces, notes Yu Liming, Vice President of China Merchants Group. “The guidelines for comprehensive reform will allow market forces to have a decisive role in allocating resources and promoting effective corporate governance.” “The visible hand is not completely replaceable, but the government will be

smarter and continue to play an important role in the maturing economy of China,” Yu says.

platform when China needs 4.0. Plan your pricing strategy very carefully as Chinese consumers are very sensitive to price points.” “Social [media] has absolutely shifted the leverage,” says Sujith Abraham, Group VP of Asia Pacific strategy & Sales Development, Oracle. And, “new entrants such as Alipay and Wechat can capitalize on newer technology because they don’t have a very long history, and they create new business models and move much faster.” There will be “an equilibrium between online sales and physical sales” in the future amid an increase of e-commerce platforms, while physical stores in a shopping mall will need to offer more to keep customers coming, Abraham adds.

HK’s role in PRD The Pearl River Delta region is an economy the same size of the Netherlands or Turkey, and it has a cluster of cities tightly concentrated with a distance between most cities of around 90 km. “This is a region that can sustain mid- and large-size companies, and it is a real powerhouse,” says Ben Simpfendorfer, Founder and Managing Director of Silk Road Associates. “CEOs no longer look at the GDP figures only. The question is whether you have a presence in China and which part of China you are in,” he says. “The PRD wins compared to other parts of the country, and that’s good news for Hong Kong.” What Hong Kong needs is to re-think its business model, Simpfendorfer believes. “It needs to go beyond being a gateway to China and position itself as a springboard to the rest of the world for China. In fact, MNCs are actually relocating some of their managers from China back to Hong Kong where they can develop an international mindset.” “A number of Chinese companies are now beginning to set up in Hong Kong where we are in a position to help them acquire IP rights, develop design skills and marketing strategies,” he adds. Chinese companies are indeed thinking about taking their businesses to other countries, says Colin Browne, VP & Managing Director of Asia Sourcing, VF Asia. “Instead of going into China looking for factories as we did 20 years ago, we are now partnering with these companies to go overseas.” “In the early days, Hong Kong was the multiplier that facilitated international brands to go into China. Time has changed, and it has reversed the flow the other way,” Browned points out. “The challenge for Hong Kong now is how to become a multiplier that will take China to the rest of the world.” The point is that Hong Kong has always been a commercial gateway of

Panel 4 (from left): Thibault Villet, Sujith Abraham, Josh Goldman and Frank Lavin

Financial reform

south China (63.7 of export from Hong Kong went to China in 1924), notes Alan Turley, VP for International Affairs (Asia Pacific) at FedEx Express. “Hong Kong is part of the integration of the PRD. It is not something new.” What Hong Kong does well is to offer connectivity, Turley points out. “While ports in China have overtaken that of Hong Kong, the city has the largest cargo airport in the world, with almost twice the cargo throughputs of airports in Shenzhen and Guangzhou combined. It is one of Hong Kong’s competitive advantages and something it offers to the rest of PRD.” “At the same time, integration needs to be with the rest of Asia and the world for Hong Kong to play a leadership role in the integration of the PRD,” Turley adds.

Perhaps no other area in the changing landscape of China attracts more attention than financial reform anticipated for the near future in a time when China’s annual GDP growth is gradually slowing down. There has been an enormous increase of money supply and credit within China in the past five years, and as a result China is entering into a de-leveraging phase, Anthony Neoh, former chief advisor to the China Securities Regulatory Commission, points out. “You will see a decreasing number of loans from major banks. Banks are now having to increase their capital base,” he says. “The focuses are now stability, credit worthiness and their ability to deal with shocks in the economy.” Meanwhile, China is moving towards an open capital account by which RMB is to become fully convertible. In other words, there needs to be sufficient liquidity of the currency internationally. “Once becoming fully convertible, RMB could join the basket of other international currencies. Eventually, we will find internationalization of the RMB much faster and come to a point where it will be included under

E-commerce When online sales generated RBM 5.75 billion on Singles Day 2013, it highlighted the growing importance of e-commerce in China where online sales could reach RMB 650 billion by 2020. In 2013, China surpassed the US as the world’s largest e-commerce market

in which growth on a business-toconsumer basis has quickly outpaced that of consumer-to-consumer. “By 2020, e-tailing could lift China’s private consumption by four to seven percent,” says Frank Lavin, Founder and CEO of Export Now. “[It] could boost labor productivity in China’s retail sector by 14 percent.” But, it is a very complicated process to enter the Chinese market for e-commerce sales and distribution, Lavin adds, noting everything from market insight, inbound logistics, regulatory compliance, store setup, online marketing and advertising, to management of customer relationship, financial and IT systems. In a survey conducted with KPMG of 10,200 Chinese consumers, authenticity of products and ease of online payment were highlighted as concerns in e-commerce, says Thibault Villet, CEO, Glamour Sales China, which has launched Lancome China’s original e-platform. “The key is to find a fine balance between your global direction and localization,” Villet suggests. “Customers in China really rely on their group of friends and will be the advocators of your brand. Don’t launch a 1.0 web

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IMF’s Special Drawing Rights.” The most significant problem facing China’s banking system is a relatively short history of credit risk management, says Simon Gleave, Regional Head of Financial Services at KPMG. “There was simply no credit assessment in 2000. By 2005, Chinese banks had a system of measuring bad loans but not a system of credit risk management.” “The problem is with the vast balance sheets of loans which have been mispriced in terms of risk,” Gleave says. “With a slowdown of growth, Chinese banks must face the reality of having to manage rapidly growing MPLs as overdue loans have

Despite an uncertainty with regards to China’s economic environment, particularly in the financial sector, “there is unlikely a massive risk,” says Robert Kung, China Country Executive & Head of Global Client Management, BNY Mellon. “Of course we will see bumps and some imbalances along the road, but we will not likely see a hard landing going forward.” “As a banker living in China, my concerns are more about how we can distinguish the needs of our clients and how to meet their needs,” he says. “And, there is not a real distinctive first-mover advantage in China where it is sometimes better to sit and wait. Yet,

Panel 5 (from left): Robert Kung, Simon Gleave, Anthony Neoh and Beth Smits

shot up. The days of vast expansion of balance sheets are gone, although we won’t see a systemic collapse because they are well capitalized.” “The real question is how much of that asset base is bad and will default. We have misallocated an enormous amount of capital for a long time, far more than what people think,” he adds. “For the government, it is about trying to manage it in a way that a growing economy creates new businesses and credit which will pay for the consequences of the past. The problem is not going to go away soon.”

if you wait too long, you may lose out. Timing thus becomes very important. The key is to know when to go in and how to go in.” “What also keeps me awake at night is how we could meet our own needs for human capital,” Kung adds. “Where do I find talent? How do I retain the best talent? That’s very challenging when everyone is hungry for new initiatives. These are very critical issues that everyone has to address.” (Blessing Waung contributed to this article.)

Frank Lavin

A Historical Moment in China By Kenny Lau

n a keynote speech at AmCham’s China Conference, Frank Lavin, Founder and CEO of e-commerce platform Export Now, addressed four key areas in an analysis on the current state of China where a maturing economy continues to provide vast business opportunities amid a rapidly changing economic, social and political environment. “This is a historical moment, not just for China but for everybody else as well. China is the last remaining polity that is defining itself in a number of areas, including its international role,

domestic economy and social policy,” says Lavin, who has previously served as US Undersecretary of Commerce for International Trade and as US Ambassador to Singapore. “This is the first time in modern history that we have all these questions in front of us, and we have a question mark about a consequential nation that is still writing its own story.”

on GDP growth going forward, Lavin suggests. “Businesses should not be adhering to a business model that requires a specific rate of GDP growth in order to be successful. It isn’t a model for most companies that operate in countries around the world, and that is not how we should look at China.” “What’s more important is to come up with a model with which you are comfortable in China right now,” he says. “The key to happiness here is that you’ve got to take a view towards China consistent with your view towards other countries. Business success cannot be predicated simply on precise GDP performance.” For a long time in modern China, there has been an ideological competition between economic rationalism and economic nationalism, Lavin notes. And, China has had a relative movement towards economic rationalism where growth is a key priority – which ultimately means pressing down on market distortions, allowing more international play and moving towards a consumer-based economy. “All those impulses are genuine. It is a right kind of diagnosis,” Lavin says. “There is, however, a frequent tendency in the Chinese economic system to make competition harder.” Nevertheless, China has had some success in promoting reforms, especially when they are carried out indirectly. That’s because it is often easier, for instance, to introduce competition by first granting Chinese entities commercial privileges before allowing foreign investment, or to improve efficiency in a given industry sector by allowing a joint venture between a Chinese and a foreign company. “China’s economic growth will largely stay on track but it will be a slowdown from the peak,” Lavin predicts. “There will be some economic reform underway but it will only be a percentage of what needs to be done.”

Domestic economy Stability & political reform While China has experienced tremendous growth in the past 10-15 years, there should be less of an emphasis

Because of recent headlines on protests in the local labor market and

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stories about ethnic and religious extremism, “it is easy to come away as a pessimist on the topic of social stability,” Lavin notes. “We have a challenge that the basis of the country’s social contract is not entirely clear.” “The challenges are somewhat accelerated because of technology and social media that have led to greater civic awareness as well as more transparency and accountability in government,” he says. Yet, there are very strong forces that are in place and conducive to maintaining social stability: high rates of economic growth, a strong sense of nationalism and an effective domestic repressive apparatus, Lavin points out. “If you put all of these together, there is a very strong mechanism for social stability, at least in the near term.” And, even in a system that is traditionally closed like China, there is now more discussion about public policy and government accountability, Lavin adds, noting increased public awareness and responsiveness on highly sensitive issues such as pollution. “For the near term, I think the forces of stability will remain despite some of the issues – such as anti-corruption – that China is facing. These are reasonably addressable and containable,” he says. “It is really a question of ratio and balance in dealing with these problems, and the strengths of the Chinese system outweigh the challenges in that system. “When the Chinese government talks about political reform, they mean a mechanism to preserve the system by making it better, not to change the system. So, there is an appetite for reform in China, but it is on those terms.”

Chinese leadership With some turmoil over the area of Chinese political leadership in the last 18 months, including the arrest and trial of former Politburo Standing Committee member Bo Xilai, it is highly unusual for the Chinese Central Committee to “go this far” and engage in a dramatic public campaign – which

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resulted in a criminal trial of a highprofile party member and raised a broader question about leadership cohesion and stability of the system internally. Stability within the Chinese political system might come under pressure because some of the on-going reforms, but there remains a high degree of stability in the leadership, Lavin says. “To get to a senior leadership position in China, your job interview is 50 years long. And, there is one question in the job interview: are you one of us?” “The fundamental requirement in order to advance in that system is fidelity to the system,” he notes. “Everyday you are demonstrating that you are a good team player. Yes, you can even experiment against stipulated protocols, and there is certainly latitude for changes. But, it is latitude within defined parameters.” It is no surprise that the political system works best when the “pie” is expanding in a growing economy because “we can indulge everyone’s preference and appetite.” At the same time, it is a little harder if the “pie” is shrinking and when you are in a reform mode, Lavin points out. “It might come under some pressure, but there is enormous stability in the system,” he believes. “What we are seeing doesn’t necessarily reflect a factional or ideological split in a systemic way but a set of circumstances.”

Foreign policy Historically, China has never been a part of an international system or sought a foreign policy, but has only focused on management of neighboring states. As China continues to grow, it is poised to participate internationally more as an equal party. However, foreign policy is an issue that could spell trouble for a nation perceived to have been a non-dominant player in international relations in the past centuries. “It is an area in which we are likely to see problems – which is different than saying they will happen,” Lavin

says. “This is a new role for China, and it involves a strategic view from Beijing and an ability to calibrate long-term interests against shortterm problems. It also requires an ability to navigate through whatever popular sentiments at the moment to think more about China’s long-term interests.” In the past, when Deng Xiaoping came to power, he articulated a foreign policy which was meant to “hide your strengths and buy your time” in order to defer any potential disputes. “It is what the classical international relations doctrine tells us how an ascending power would want to behave,” Lavin points out. “It is striking that China has in recent times taken the opposite view and seemed to play premium on low value but high publicity incidents in the East China Sea, which engender friction but play to domestic sentiments,” he says. “It raises a question whether foreign policy is only the foreign dimension of a domestic policy.” The good news is that China by nature is a somewhat conservative power. “It is a cautious power, and there has been some positive development in US-China relations over the last few decades,” Lavin says.” If the next 30 years are as positive as the past 30 years, we will have a very good bilateral relationship. And, we are a million miles away from a new cold war.” “A little bit of friction should not surprise us because it is just normal diplomatic give-and-take,” he adds. “I would strongly argue against an adoption by Washington of a policy of containment because a successful outcome will depend on whether China is able to play a proper role in the world, protect its interests and consider for the interest of other countries as well. “While noting is given, there is simply no reason that the US and China can’t have relations that are positive and mutually beneficial and at the same time help move the world along in the years ahead.”

think they can do – but we are about to see some structural reform beginning to be unveiled.” This is all part of a process of letting the old go and the new emerge, she adds. “Industries with massive overcapacity and inefficiency will have to be shut down, and some pain is to be expected. In the housing market, for example, there could be some bankruptcies among developers who are undercapitalized.”

A key challenge

Jing Ulrich

The Two-Speed Economy of China By Kenny Lau

ith economic growth hovering just above seven percent in recent times, China has emerged into a “two-speed economy” – where new sectors such as e-commerce and Internet-related services are developing very rapidly while more traditional industries like steel manufacturing are mired in overcapacity, said Jing Ulrich, Managing Director & Vice Chairman of Asia Pacific, JPMorgan Chase & Co, speaking in a conversation with Tara Joseph, Editor-in-Charge of Reuters TV, Asia.

“You have a distinction between the new and old sectors, and their growth rates are vastly different,” Ulrich says. “However, sectors in the new economy – which are mostly private companies – are not getting sufficient support yet, and their borrowing costs are much higher. We need to give the new economy more support because it represents the future of China. “But, the old economy also has to somehow survive somehow, and it continues to leverage a large amount of credit. We are at a juncture where they want to maintain that growth – which I

The challenge for the Chinese leadership is a balancing act of maintaining a decent level of GDP growth – which is critical to employment and social stability – and undertaking structural reforms to resolve an imbalance in the economy, Ulrich points out. “In a way, the goals of maintaining growth and introducing economic reform are somewhat conflicting,” she says. “Because reforms will likely lead to a reduction of inefficient capacity by shutting factories down and laying people off – which in a near term could lower growth. And, if growth fell below a certain level, you would potentially have some social problems.” China has introduced some fiscal measures to maintain a level of growth amid a slowdown in the economy, particularly in the first quarter of this year. However, a massive fiscal stimulus program is unlikely, Ulrich says. “They are not prepared to launch a large-scale stimulus program because it would lead to inflation, overuse of credit and lower quality of growth.” Instead, China is focusing more on bringing forward some of the infrastructure projects to accelerate near-term growth, she adds.

Financial market In the midst of a recent default in China’s domestic corporate bond market, investors for the very first time are realizing that it simply isn’t bullet proof and that more defaults in the financial market are inevitable. More

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importantly, it is indicative of a “mispricing” of money in the Chinese financial industry, Ulrich says. “When retail depositors get fed up earning no money from their bank deposits because of low interest rates, some will choose to channel their money into short-term higher-yielding financial products,” she explains. “It is all well and good if borrowers return the money and retail investors get their higher interests, but there is also a potential of a default – which has happened.” It is, however, not a systemic risk in China’s financial sector simply because Chinese banks are very well capitalized, Ulrich points out. “We need to differentiate short-term issues and long-term risk. While China also has a debt problem, its nature is different from those in other parts of the world.” “Firstly, China’s Central government has a lot of cash and its debt level is very low, at about 16 percent of GDP. That is very different from the US where federal debt is almost 100 percent of GDP,” she says. “The problem in China is with the local governments, which have very few ways of raising revenue and have incurred quite some debt in the last several years. “Moreover, individual households in China have relatively healthy balance sheets and minimal debt. They may have mortgages but they have vast amounts of savings – as of today we have roughly US$20 trillion of bank deposits, and there is very little risk of deposits being pulled out because China has a closed capital account.”

Housing market The housing market is undoubtedly one of China’s pillar industries – one that has defied gravity in terms of expansion and growth, despite a short history of only 16 years since privatization in 1998. “It has been going up every year in the last 16 years,” Ulrich points out. “But nothing can defy gravity forever, and we are beginning to

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see some signs of a correction, with transaction volume coming down.” “There is an oversupply in the housing market, particularly in thirdand fourth-tier cities, and you could see developers running into financial trouble because of it,” she adds. “But, you also have some long-term positive drivers, one of which is urbanization in a country where roughly half of the 1.3 billion people currently reside in the countryside.” In the next 25 years, some 400 million people are expected to move into the cities where demand for good quality housing in top-tier as well as lower-tier cities will subsequently increase. “We should all be prepared for a correction but shouldn’t forget about other long-term positive drivers,” Ulrich says. “And, because land sales are a significant source of revenue for local governments, it is important for the central government to undertake fiscal reform,” she adds. “Local governments need to have alternative means of financing themselves, such as issuing municipal bonds.”

RMB The recent phenomenon of e-commerce “players” getting into the money management business in China is a reflection of artificially low interest rates for bank deposits – from which depositors are essentially getting negative real rates due to inflation. The proliferation of such products is also one reason to deregulate interest rates, Ulrich says. “This situation needs to correct itself because it encourages overcapacity when companies are able to borrow money at a very low interest rate.” China’s central bank has indicated that there will be some form of liberalization of rates within the next two years – which means depositors will benefit from higher interest rates from their banks. In the longer term, as interest rates are more liberalized, investors will naturally gravitate towards putting their money back into bank accounts, Ulrich points out.

The Chinese currency is open and convertible on the trade account but remains closed on the capital account. Some have indicated 2020 as a timeline for the currency to become fully convertible, Ulrich says. “As we begin to see more financial products across borders, the pace of RMB being internationalized may actually accelerate, not only on the trade account but also for investment purposes.” “The reason few countries have invested in the RMB is that it is not yet fully convertible, but we have seen some banks buying RMB as part of their foreign exchange reserves, including the Hong Kong Monetary Authority,” she adds. “Of course it won’t rival the US dollar or the Euro in the near term, but I do expect the RMB to have a larger role in the next five to 10 years.”

Overall The road to reform towards 2020, given the complexity of issues facing China, is expected to be less than smooth, but it is important to distinguish between short-term cyclical trends and long-term secular trends, Ulrich stresses. “By 2020, we can expect the Chinese economy to be another 50 percent larger at the current annual growth rate. In the long run, given China’s size, even if the economy grows at four or five percent, it is still pretty good.” “We need to stop blindly pursuing just economic growth and to focus more on the quality of growth,” she says. “Whether GDP growth accelerates or decelerates is not the most important thing; what’s more important is to achieve higher quality, more balanced growth. “Sometimes, it may not be possible to achieve quality growth and a 7.5-percent growth at the same time, and we all know that the high rate of growth we’ve had in the last 20 years has come with a heavy cost. If we had to choose between quality and quantity, we’d absolutely have to go for quality.”

TRADE & INVESTMENT

US Delegation Promotes FDI in PRD The SelectUSA PRD Roadshow, launched by the US Commercial Service offices in Hong Kong and Guangzhou, was a first-of-its kind event held in the region about investment in the US. A delegation of almost 70 representatives from 22 US states and cities began the tour in Hong Kong on April 15 and moved to Shenzhen and Shunde before finishing in Guangzhou on April 18. In an interview with biz.hk, Vinai Thummalapally, Executive Director of SelectUSA, explains why there has never been a better time to invest in the US than now

By Mabel Sieh

peaking at an investment forum last October in Washington DC, President Barack Obama told business leaders there that the US is open for business. “I’m here because I want your companies to know – I want companies around the world to know – that I believe there is no better place in the world to do business than the United States of America,” he said. Helping to move the President’s agenda forward is Vinai Thummalapally, Executive Director of SelectUSA. The agency – using the President’s own words – is the “first-ever, fully coordinated US government effort to recruit businesses to invest and create new jobs in the United States.” Housed within the US Department of Commerce, SelectUSA’s main tasks include facilitating foreign investment in the US, acting as a single point of

contact at the federal level to assist investors to navigate in the US market and playing the role of ombudsman when necessary. In mid-April, Thummalapally took a group of 68 delegates from the US on the first-ever Pearl River Delta SelectUSA Roadshow. Hong Kong was their first stop in the four-day journey, followed by visits to the Mainland cities of Shenzhen, Shunde and Guangzhou.

Why invest in the US Speaking to biz.hk on the sideline of the Roadshow, Thummalapally reiterates that the United States welcomes foreign investment. “We believe there has never been a better time to invest in the US than now,” he says. The US economy, he says, has turned a corner from the financial turmoil a few years ago and more

Executive Director of SelectUSA Vinai Thummalapally

Photos: Silver Image

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foreign investors are discovering the advantages of setting up businesses in the US. And, one of the advantages is that the US boosts a huge domestic market as well as access to a significant number of trading partners around the world. With a forecast of over three percent GDP growth this year, Thummalapally says that Americans today are more confident compared with a few years ago and that consumer behavior are more predictable and stable. “People [in the US] are feeling more optimistic; they have a sense of stability with more confidence in future prospect,” he says. “With consumers willing to buy more products and service, it is a great time to invest in the country now.” In addition, “America is a great place for investors because we have a large consumer base – 370 million of consumers in the US alone and 460 million total in the whole of North America. It’s a very attractive proposition,” he adds. It is also important for investors to pay attention to supply chain issues and to take the location of potential customers into account when deciding where to invest, Thummalapally suggests. “Years ago, people talked about going to Thailand to open a factory because it was cheap there,” he points out. “Modern analysis tells us that we should take into consideration of the whole supply chain and of the physical distance from the production line to delivery and to end users. “Think about what happens when the items you produce are sold out or become unfashionable and need a quick replacement. Is it easy to get the parts quickly? You’d better have the factory closer to your customers and not far away.” In addition to being closer to consumers, the cost of manufacturing in the US has become more competitive. “Our total cost of manufacturing is lower than before. Our wages have been relatively flat while the wages overseas such as in China, Singapore, Japan,

Investors engage in dialogues with representatives from 22 US states and cities about investment opportunities during the SelectUSA Pearl River Delta Roadshow in Hong Kong.

India and Hong Kong have gone up significantly,” Thummalapally notes. “In 1996, the cost of energy in America was less than one third of the cost in Japan. Today, it’s one-fourth. We have an abundance of energy, and we’re also more cost effective,” he says. And, SelectUSA is open to all businesses – large and small – and its services are free of charge.

“I am always interested in talking with small and medium enterprises (SME). We will try to cater for their needs by giving them industry specific analysis and all the information available, including labor rules for employees,” Thummalapally says, noting roughly half of the enquiries directed to SelectUSA are related to issues on immigration and work visa.

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Chinese investors With a growing number of Chinese investors looking to go global and invest overseas, particularly in the US, an important task of SelectUSA is to make them feel welcome, Thummalapally says. He also dismisses worries that Chinese investment

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would harm the US economy as “absolute rubbish.” “I was born and raised in India, and I went to college in the US in 1974 as a teenager. I remember vividly in the 1980s, people were talking about Japanese investors taking over America when they bought a golf resort in Pebble Beach, California,” he recalls. “There was a news story

saying, ‘If they could buy the Pebble Beach, what’s next?’ Now we all laugh about it whenever we look back.” “So I want to tell [Chinese] investors that there’s no such concern among the vast majority in America that China will come and swallow us,” Thummalapally stresses. “China is our 28th largest investor, and we believe [the momentum] is just starting. “The trend in the past few years shows that Chinese investment has grown by 76 percent year on year. The potential for Chinese investors is barely tapped. Our number one job is to invite Chinese tourists and investors to the US and make them feel welcome.” Although a majority of Chinese companies have so far kept a low profile, Thummalapally says there are many success stories in the US worth promoting. While Thummalapally – who is a former US ambassador to Belize – only took up his job at SelectUSA late last year, he has already reached out to Chinese-invested US companies in the past few months to learn more about their businesses. One of his visits was to the corporate office of China Construction American (a unit of Beijing’s publicly-listed China State Construction Engineering Corp) in Jersey City, New Jersey. “I met with Ning Yuan, President of CCA, in New Jersey last December and had a wonderful meeting with their staff,” he says. “They are a leading visionary construction company not just in China but in the world – I was fascinated by one of their projects in the Bahamas because it has employed more than 200 service providers in the US. That clearly has a [positive] impact on employment opportunities [for Americans].” Thummalapally hopes that the latest Roadshow in the Pearl River Delta is a beginning of many great investment opportunities to come in the future. “We are looking to see where investments are happening. And, we’re at your service. Use us. We want you to be hugely successful.”

Pacific Bridge Initiative: Collaboration between US and Hong Kong

Executive Director of SelectUSA Vinai Thummalapally, left, and Assistant Executive Director of HKTDC Raymond Yip

he Hong Kong Trade Development Council is a strong supporter of the US National Export Initiative (NEI) and has worked closely with the US through the Pacific Bridge Initiative (PBI) – a program launched in November 2010 to facilitate US exports to Asia through Hong Kong in a city where international trade is made easy because of zero tariffs, a free flow of capital and an English-speaking trading community with high regards to intellectual property rights protection. The PBI is a “non-confrontational approach to rebalancing trade imbalances between the US and Asian

countries” by matching the demand of consumers to the supply through promotion and generating awareness. A key focus of PBI is on SMEs, particularly those with little experience in international trade (which together make up about 99 percent of some 30 million US companies). According to the US Commercial Service Hong Kong, cases of “export successes” and “new-to-market export successes” increased by 11 percent and 4 percent, respectively, in fiscal year 2013 (Oct 1 – Sept 30) when compared to fiscal year 2012, while the total amount in dollar values of these “export successes” also increased significantly. Trade fairs in Hong Kong are an

important way to initiate exports and are credited for the success of PBI. In fact, Hong Kong is home to the three largest industry trade fairs in the world and another six largest in Asia. HKTDC’s trade fairs in 2012/13 attracted more than 680,000 buyers – over 255,000 were from Asia, including some 166,000 from Mainland China. Hong Kong International Film & TV Market (FILMART) and Eco Expo Asia are prime examples of trade fairs in which a US pavilion is featured each year as a result of PBI. Some 45 US exhibitors participated in FILMART 2013 and generated about 175 deals worth more than US$8 million for US companies, while 18 companies were part of the US pavilion at Eco Expo Asia 2012. Furthermore, there were 21 companies from California showcasing their products at the Food Expo 2012, which over 16,000 buyers and nearly 700 exhibitors attended. A side-trip to Shenzhen was organized as “a valueadded service” for US- and Hong Kong-based companies to explore the food market in southern China. In addition to a series of fairs, HKTDC also spearheaded Hong Kong’s largest trade promotional campaign (with 200 government and business leaders from Hong Kong and Mainland China as well as five business delegations) in the US last year. Dubbed “Think Asia, Think Hong Kong,” it attracted over 2,300 participants to the symposiums and information sessions held in New York and Los Angeles, where over 900 businessmatching meetings were arranged. To maintain a close partnership between Hong Kong and the US, PBI has been renewed in November 2013 for another three years. A number of sectors will be a key focus, including renewable energy and technology, financial and professional services as well as IP-related businesses. More state-level engagement in Hong Kong are anticipated, while HKTDC offices in the US will strengthen collaboration with state governments to encourage participation in Hong Kong trade fairs. – Kenny Lau

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A LAND OF OPPORTUNITY

Nevada: A state of business opportunities

During the SelectUSA Pearl River Delta Roadshow, representatives – including government officials – from different sectors across the US were in Hong Kong to meet with potential investors looking to invest in the US. Mabel Sieh talks to two mayors and one lieutenant governor in a series of interviews about their ideas of attracting foreign direct investment to their jurisdictions

Canton, Ohio

Nevada

Carson, California

Carson, California Incorporated: 1969 Area: 19 sq. miles Population: 91,714 Density: 4,800/sq. mile

Nevada

Canton, Ohio

Rank: 35th largest state Area: 109,781 sq. miles Population: 2,700,551 Capital: Carson City Most populous city: Las Vegas

Incorporated: 1854 Area: 25.48 sq. miles Population: 72,683 Density: 2,867.5/sq. mile

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hen 68 American delegates across the US arrived in Hong Kong for the SelectUSA Pearl River Delta Roadshow in midApril, all were eager to show what they had to offer in terms of business and investment opportunities. One of them was Brian Krolicki, Lieutenant Governor of the State of Nevada. “Nevada is an ideal location for industry-leading companies,” says Krolicki, who is also Chairman of the Commission on Tourism and a member of the Governor’s Office of Economic Development. “Our location in the western part of the US provides unique geographic access – within one day’s drive from Las Vegas and Reno – to an estimated 60 million customers and major US deep water ports that serve the Pacific Rim,” he says. And, Las Vegas – Nevada’s most well known city – has earned a reputation as the “entertainment capital of the world.” “Every year, 40 million people visit Las Vegas. Of the 40 million, 5 million come for conferences,” Krolicki points out. “Last year, Nevada hosted 22,000 conventions and conferences.” Among all visitors, Krolicki has one particular group of tourists in mind that he wants to see more of them visiting Nevada. “Chinese visitors are the fastest growing outbound tourist market in the world now, and it will probably become the largest outbound market in about four years,” he says. “Every day, we look for ways to bring more Chinese guests to Nevada. I’m proud of our government that we have gone from a 90-percent rejection rate of visa applications [for Chinese tourists] a decade ago to a 90-percent approval rate today.” According to Krolicki, investors are attracted to the

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Brian Krolicki

“Silver State” not only because of tourism and conferences but also for Nevada’s rich natural resources. “We are the third or fourth gold-mining state in the world, and we are a source of rare earth metals such as lithium,” he points out. “We are number one as a producer of solar energy per capita and geothermal energy in the US. Nevada has plenty of sunshine. We have the technology and efficiency for the production of solar energy, and we are close to the market in California.” Nevada is also an ideal location for the application of research and development as well as manufacturing of solar panels, he adds. “I have had multiple and regular conversations with many Chinese companies who are interested in our solar technology and solar panel production.” “We have a presence in China and Hong Kong, and we constantly look for friendship and business relationship that are mutually beneficial,” says Krolicki, who is a regular visitor to the region.

Carson, California: A businessfriendly city

he city of Carson in southern California used to be a “drive-by” city – there were few reasons people had to stop in Carson unless you lived or worked there. But Mayor Jim Dear is determined to change that. “I want to make Carson a model community for America by having great ethnic diversity and prosperity,” says Dear, who has been mayor of the city since 2004. “I can create initiatives and promote policies that are beneficial to our business partners. One of my policies is to make the city of Carson business-friendly.” Home of the movie industry in southern California and half way between Disneyland and Hollywood, Carson enjoys the best climate and weather in the world, Dear says. “We’re a relatively young city and we’re an ‘industrial and bedroom’ (meaning domestic) community at the same time.” Nonetheless, Carson enjoys a unique geographic advantage compared with other US cities – four freeways in and around the city in addition to two of the busiest US ports situated within eight kilometers, Dear points out. Dear – who became mayor in 2004 – admits that things were slow in Carson in the old days when a Starbucks coffee shop was nowhere to be found within the city. “Starbucks said we didn’t have enough ‘rooftops,’ meaning that there weren’t enough households. But it doesn’t make sense because we do drink coffee in here.” “So, I talked to Magic Johnson who has retired [from playing in the NBA] and is now a businessman,” he recalls. “I knew he has an association with Starbucks and I invited him to open one in our city, and it became successful overtime. In fact, we now have seven Starbucks in Carson. “I worked hard to make that happen. I am personable and business friendly, and we’ve streamlined our

Canton, Ohio: Reinventing for global investment

F Jim Dear

business process because we understand that sometimes the government can be slow.” The city of Carson has also seen other significant development, Dear points out. “We are the location of the StubHub Center, which is home to world-class competitions in soccer, tennis, cycling and other sports, and is home of two Major League Soccer teams – the Los Angeles Galaxy and Chivas USA.” “There are five Porsche Automobile Driving Experiences (Porsche facilities where customers can test drive their vehicles) around the world, and one of them is in Carson,” he says. “We are now building a premier outlet mall that will open in about two years, and we hope to attract many Chinese tourists.” Dear says he has a special reason in welcoming Chinese investors to Carson. “My father has lived in Shanghai for four years as a young man, and I as a history teacher myself have great respect for Chinese culture and history.” “Personally, I think Chinese culture is very valuable as it can bring good work values, openness and compassion to American society. I’m a strong supporter of Chinese investors in Carson,” he adds.

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our years ago, the city of Canton in the US state of Ohio suffered from high unemployment – 15 percent. Today, the jobless rate has fallen to about half of that. Mayor William J Healy II attributes the turn-around to the dedication and hard work by local businesses and their efforts to attract foreign investment. “Lots of factories have closed down in the past years, and we have to reinvent ourselves,” Healy says. “Since I became mayor seven years ago, I’ve worked hard by focusing on different sectors and opening our doors to the outside world.” As mayor, Healy’s priorities are to find new business opportunities and to create jobs in Canton, Ohio. And, he had placed a special emphasis on cooperation between local governments and developing international trade. As a result, “we are starting to see international exposure in Canton. We now have a ChineseAmerican company with over 1,000 employees and they are going to hire 600 more,” Healy says. “We helped them in setting up the plant and with the recruitment of employees.” “Within three and a half years, they’ve become one of the top five employers in the city. In addition to that, we also have the largest Mexican-owned steel company [in the US] and a waste-water treatment facility run by a Japanese company,” he adds. Because Ohio is simply not New York or California, one of Healy’s priorities is to “put Ohio on the map.” When deciding on a destination for investment, Healy says it is important that investors should more often consider the whole package instead of focusing only on a single issue such as tax incentives. “I’d say to investors that what you should care

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about is the total package in terms of the operation cost for doing business,” he says. “Our cost of living is lower than just about anywhere in the country. And, our costs of labor and land as well as of natural gas, electricity and water are among the lowest in the US.” The city of Canton has one particular advantage over most William J Healy of other US cities – its access to shale gas, Healy points out. “Our city is centrally located over the top of the shale. We now have the technology of ‘horizontal drilling’ to access the shale. “As a result, everybody is coming to our region – and this creates a lot of job and investment opportunities. It is also projected that in about four or five decades, Ohio will become the second largest natural gas location in North America.” Healy also pledges to help facilitate foreign investment in Canton. “I’m willing to make myself available so that things can happen. We have to change our way of doing business if we want to work with international partners.” “My approach is ‘whatever it takes,’” he says. “We are going to find a way to meet your needs. If you tell me what your project is, I’ll customize it for you. My goals are simple: I want your business to happen in my city and I want your business to succeed.”

EDUCATION

Betty Chan Po-kong

A Pioneer in International Education With an emphasis on a blend of cultures and a holistic approach to education, Dr Betty Chan Po-kong, Director of Yew Chung Education Foundation, talks about nurturing a knowledgeable and cultured future generation of youngsters capable of communicating with and caring for others with a global outlook

By Shirley Lau

hen giving a speech on education at a recent dinner event, Dr Betty Chan Po-kong recalled a dream that her husband had. It was no nightmare, but for the veteran educator, it echoed and encapsulated her concern over the future of Hong Kong’s education sector. “He dreamed of traveling to space and then returning to Hong Kong, but the city became a strange place to him. The surroundings had changed; people spoke a completely strange language he didn’t understand,” Chan says. “For me, this sounds somewhat like the future of education in Hong Kong – an unfamiliar territory beyond recognition.” “The biggest challenge today is that there’re many uncertainties lying ahead,” she adds. “The local education system has been changed again and again; it’s still unclear which language is going to be the leading medium of instruction. When you are lost, how are you going to provide proper education for young people?”

A clear vision However inconsistent Hong Kong’s education agenda may be, Chan is anything but that. As the director of Yew Chung International School (YCIS) in Kowloon Tong, she has a clear vision of what quality education should be. In a city that is seeing a surge in demand for international schools, Chan believes quality education should be anchored around three major elements: a curriculum with a global perspective, holistic teaching methods and an emphasis on character building. “Education is not about equipping a group of young people with the financial skills to make money, but a future generation who is knowledgeable and cultured, capable of communicating with and caring for others, and has a global outlook,” she says. If these sound high-minded ideals, it is because they have been built on a solid institutional foundation that

dates back to 1927, when Chan’s mother Tsang Chor-hang, together with a few friends, founded Yew Wah, a one-classroom school at the junction of Nathan Road and Bute Street. It was a turbulent time in Mainland China, caught in a civil war and under threat of Japanese invasion. Tsang, a cheongsam-clad 16-year-old girl wise beyond her years, believed education was the most effective way to make her home country stronger. She decided that “thrift, modesty and honesty” would be the motto of the school – and its name literally means “bringing glory to China.” It was later renamed “Yew Chung,” which bears the same meaning. The school was closed four decades later when Tsang retired. But soon, Chan – after having completed a PhD in the US, took up what her mother left behind. In 1972, she opened a nursery school also called Yew Chung in Kowloon Tong. Over the years, the school has evolved to become what YCIS is today, with campuses in Hong Kong, Mainland China and the US, and a student population of more than 60,000. Academically, YCIS stands out with an average International Baccalaureate (IB) score of 35, a notch above the global average of 30. The university acceptance rate for its IB graduates has remained at 100 percent.

A blend of cultures The rise of an institution from a humble beginning to extraordinary achievement is not an exceptional case in Hong Kong. And, YCIS is outstanding because, despite its international school status, it gives equal weight to both Western and Chinese cultures and stays true to its mission of offering a global education. The school adopts a bilingual policy, whereby one principal represents the Western culture and the other Chinese. The two principals complement each other and are supported by an

ethnically diverse team of teaching staff. Such a multicultural setting is meant to provide students a role model of effective cross-cultural collaboration. Another important message is that all cultures are equal, says Chan. “I want to tell our students that there is no such thing as one culture being better than another,” she explains. “For us, an international school does not mean Westernoriented but blending different cultures. We have a multicultural setting firmly in place to get that message across, and students don’t feel ashamed speaking in Chinese or think it is a language subordinate to English.” The use of Mandarin and English as instruction medium is also meant to equip students with the linguistic skills to become truly global citizens. “The Eastern and Western cultures have by far the biggest impact on human civilization,” Chan says. “English is spoken by some 800 million people in the world and Chinese by 1.4 billion. Two billion people are a big part of the world population and economy.” “For our young people to become leaders of the future, they need to have a good grasp of both languages,” she adds. “In Hong Kong, we have a lot of international school students who study Chinese as a subordinate language, but many of them can’t say one sentence in Chinese without stammering.” This emphasis on Chinese culture and language is rather bold in Hong Kong, where many local parents believe good English, not Chinese, is the ticket to a promising future for their children. But Chan is undaunted. “I’m sure some parents don’t fully understand our philosophy and believe English is what matters. Our bilingual system is about offering a global education.” “And, it’s important for our future generation to have well-round skills and a global perspective,” she adds. “It is often senior company executives and diplomats who are ready to buy this idea without hestiation.”

Photos: Silver Image

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ASSET MANAGEMENT & FINANCIAL SERVICES PROVIDERS A holistic approach At YCIS, global education happens in and outside the classroom. Students from Year 10 to 11 have to take a “global perspectives” course, learning everything about world wars, global financial crises and sustainability, while students in Year 7 to 9 make a two-week trip abroad every year to visit places such as the John F Kennedy Space Center and others in Tanzania and South Africa. A global studies course targeting junior secondary school students is currently under development. The school also has several in-residence programs with professional artists, scientists and musicians

to inspire students through personal interactions and various activities. Every year the artist-in-residence hosts a 24-hour art-making event for which an annual art show is held in a spacious gallery at the school to display final-year students’ artworks. Similarly, students in a science fair explore their ideas in experiments such as testing for environmentally friendly soaps. “An all-round development from an early age is very important in early childhood education,” Chan says. “The traditional Chinese way is to make a child study, but there are much more to it. “All these programs outside the classroom serve to broaden students’ knowledge base and cultivate their confidence and sensitivity to others.

We try many ways to ensure our kids are independent and don’t have a big ego.” Chan’s efforts are well recognized. In March, she was awarded an honorary fellowship by the Hong Kong Institute of Education for her contribution to international education in Hong Kong. Some time ago, a past student thanked her in a letter for Yew Chung’s bilingual, multicultural education – which he attributed as having helped him land a job in New York during the peak of the global financial crisis a few years back. Chan speaks of the alumnus with a smile but remains modest about her achievement. “I’m just a very stubborn person. I do listen to people’s advice, but I also persevere in doing what I believe in,” she says.

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2014

Sze: Our research shows that there has been a significant rise in cyber attacks in the region as well. According to Hong Kong InfoSec (a government website on information security), the number of computer crime cases in Hong Kong increased by 83 percent in two years from 1,643 in 2010 to 3,015 in 2012 – and financial losses due to cyber attacks increased by 466 percent to reach HK$340 million during the same period. Hong Kong has had a series of cyber threats, but not all threats come from hacking alone. Data breaches can occur easily because of human error or negligence, particularly when there are an increasing number of small data storage devices available. Therefore, in addition to maintaining customer trust and protecting brand and corporate reputations, businesses in Hong Kong also need to take cyber risks seriously because the cost of something going wrong can be exorbitant.

The Financial Impact of Cyber Threats In an era of unprecedented Internet connectivity, business organizations are increasingly prone to cyber attacks and fraudulent activities online. Cynthia Sze, Head of Financial Lines, AIG Insurance Hong Kong Limited, discusses what’s at stake and how companies – large and small – should protect themselves against data breaches

biz.hk: How serious of an issue are cyber threats? What’s the impact? Sze: The financial cost of a cyber attack can be enormous, and it could come as a result of a loss of productivity and intellectual property, legal intervention or damage to your brand and reputation, coupled with the loss of customer confidence. The consequences of cyber threats vary but they can certainly derail an organization. Both intentional and unintentional cyber threats can have serious operational, financial, legal and reputational implications. There is a relatively low level of awareness about cyber risk management in Asia. Business executives and managers should be aware of the severe threat that any cyber incident may pose, and they need to take cyber risk seriously because it’s real and it’s growing – as evident in all the recent incidents highlighted in the press.

Cynthia Sze

Besides the direct impact on their business operation and performance, it could have a negative impact on the share prices of listed companies. biz.hk: What exactly are those risks? Sze: Cyber risks come in many different forms and are found in many different parts of a business – they could be malicious or non-malicious in nature and could be initiated by an insider or an outsider. Malicious attacks generally include cyber theft, cyber terrorism, cyber warfare and hacking, whereas nonmalicious attacks are usually due to human error or a major system failure. This is especially important because outsourcing of work involving personal data is increasingly common. The Personal Data (Privacy) Ordinance in Hong Kong, in fact, requires a data user to take all reasonably practicable steps to safeguard the security of

personal data. Whenever personal data is entrusted to a third party, a data user is responsible for any act of the third party with regards to the data. To combat cyber threats and protect customers’ personal data, companies must improve the way they manage digital risks. Yet, there is still generally a low-level of awareness regarding cyber risks amongst many companies and in turn a low-level of preparedness for the consequences of a major security breach. Given that there has been a 20-fold increase in cyber-attacks over the past three years, with more than 49 percent of them originating from Asia-Pacific, according to Akamai’s State of the Internet Report, Q3 2011, this low-level of awareness is a genuine exposure. biz.hk: Is Hong Kong also prone to the same risks?

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biz.hk: How significant are the costs associated with cyber crime? Sze: In PricewaterhouseCoopers’ 2014 Global Economic Crime Survey, one in every four respondents reported that they have encountered some form of a cyber attack, while more than 11 percent of these incidents had a financial impact of anywhere between US$1 million and US$100 million. Deloitte has also pointed out in a report that US financial services companies lost $23.6 million on average from cyber security breaches in 2013 – a figure that is 43.9 percent higher than in 2012. Meanwhile, the average annual cost for a company to tackle cyber crime increased significantly by 43.9 percent from US$16.4 million to US$23.6 million, according to Ponemon Institute’s 2013 Cost of Cyber Crime Study. biz.hk: How prepared are businesses for risks of a cyber attack? Sze: It is my experience that businesses are somewhat unprepared for cyber risks. According to Verizon’s 2013 Threat Landscape in Financial Services Study, global financial

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Financial losses due to computer crime cases in Hong Kong Year

Financial Loss (HK$ million)

2013

916.9

2012

340.41

2011

148.52

2010

60.38

2009

45.1

Source: Hong Kong Police Force(InfoSec website)

Total number of computer crime cases in Hong Kong Year

Total No. of Cases

2013

5133

2012

3015

2011

2206

2010

1643

2009

1506

Source: Hong Kong Police Force(InfoSec website)

services firms’ response time to attacks indicates significant gaps in preparedness: in 2013, 88 percent of the attacks initiated against these companies were successfully carried out in less than a day; however, only 21 percent of these incidents were discovered within a day, and only 40 percent of them were able to recover within that one-day time frame.

biz.hk: How does AIG help protect other companies against cyber risks? Sze: AIG has been protecting companies against cyber risks since late 1990s when the cyber insurance industry was in its infancy. AIG has underwritten thousands of cyber insurance policies. Some of the largest companies and more than 20 million individuals have trusted us to help them respond to

some of the most serious data breaches. CyberEdge is a comprehensive risk management solution for cyber insurance offered by AIG. It provides an additional layer of protection to a company’s own IT system against cyber threats. It helps clients stay ahead of the curve and provides responsive guidance based on our years of experience. Other than safeguarding against breach of personal or sensitive corporate data, a key focus of CyberEdge is to help a company respond to an incident better, quicker and more systematically with an extensive network of experts always on stand-by. biz.hk: Does CyberEdge cover costs and expenses incurred from an incident of data breach? Sze: The costs and expenses of having to notify impacted “data subjects” about a data breach are covered, in circumstances where the client is required to make such notification. In addition, as the first 24 to 48 hours after an incident is the most important timeframe in mitigating any effect of a data breach, immediate and direct access to public relations specialists and legal experts is made available to help a client in recovering from such breach. The expenses associated with these specialists and experts are covered. The policy also covers the cost associated with restoring, recreating or recollecting electronic data where possible. A client may also want to engage a forensic service advisor to identify whether a breach has occurred and the cause of the breach, and to receive recommendations as to how this may be prevented in the future; again, the fees, costs and expenses of this are covered. When data subjects file claims to seek compensation for damage from an incident, you as a client are covered for expenses incurred from hiring legal service and paying compensation for which your company is determined to be legally liable, in addition to defense costs regarding investigation brought by regulatory agencies.

Top concerns among C-suite executives and risk managers Cyber Risk

86%

Loss of Income

82%

Property Damage

80%

Workers’ Compensation

78%

Utility Interruption

76%

Securities and Investment Risk

76% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: AIG

biz.hk: Which industry should consider such a policy? Sze: Any commercial entities that are involved in collecting, handling or storing personal information and data would benefit from a policy like CyberEdge. Protection against cyber risks is important and is no longer just the purview of IT. The severity and potentially huge cost of cyber threats demand much broader attention. Organizations need to have a cross-functional risk management team addressing the issue of cyber risk. This team should report to the Board and principal officers and the board should assess cyber risk in the same manner as it assesses any other major risk and constantly review their level of exposure to cyber threats. As part of such comprehensive risk management strategy, organizations should also insure themselves against any potential legal liability. There is a need for business to identify cyber threat as a new risk category, meriting its own bespoke insurance coverage, and not merely an

incremental extension of existing risks. biz.hk: What does the CyberEdge Mobile App do? Sze: Some 80 percent of respondents in one of our surveys have said they found it difficult to keep pace with the issues surrounding cyber risk management because it is an area that is evolving very rapidly. In response to this survey, we launched the CyberEdge Mobile App last year to make information more accessible. The app was developed in response to the demand for information about cyber risks and how to respond to them. It features the latest cyber news and real-time information on data breaches, and incorporates a calculator for breach cost, an events calendar and a glossary of common cyber terms. The idea is to provide users with cyber information at the touch of their smartphone screens. The app is the first-of-its-kind and is now available for the iPad,® iPhone®, and AndroidTM.

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Asset Management & Financial Services Providers 2014

ACE Insurance Limited

AIG Insurance Hong Kong Limited

25/F, Shui On Centre, No. 6-8 Harbour Road, Wanchai, Hong Kong

46/F, One Island East, 18 Westlands Road, Island East, Hong Kong

Key Personnel

ABOUT ACE IN HONG KONG

Key Personnel

Company Activities / History

Doug White Country President Hong Kong, Taiwan and Macau

ACE Group is one of the world’s largest multiline property and casualty insurers. With operations in 54 countries, ACE provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. ACE Limited, the parent company of ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 index. With both general and life insurance operations, ACE has been present in Hong Kong for more than 90 years via acquisitions by its predecessor companies. A niche and specialist general insurer, ACE’s product offerings include Property, Casualty, Marine, as well as Accident & Health programs for large corporates, midsized commercial and small business customers. In addition, the AA- long term insurer financial strength and counterparty credit ratings by Standard & Poor’s are indicative of the company’s strong capitalization. Over the years, ACE has built strong relationships with clients by offering responsive service, developing innovative products and providing market leadership built on financial strength.

Marc Breuil President & CEO Tse Kai-Lee CFO Peter Gregoire General Counsel Gary Wong Head of Consumer Lines Cynthia Sze Head of Financial Lines

AIG Insurance Hong Kong Limited is the wholly owned, Hong Kong based subsidiary of American International Group, Inc. (“AIG”). AIG is a leading international insurance organization serving customers in over 130 countries and jurisdictions worldwide. In Asia-Pacific, AIG has general insurance operations in Hong Kong, Macau, China (Shanghai, Beijing, Guangdong Province and the City of Shenzhen), Guam, Japan, Korea, Malaysia, Indonesia, Philippines, Papua New Guinea, Singapore, Taiwan, Thailand and Vietnam. AIG Hong Kong has been serving Hong Kong customers for over 80 years offering a full range of commercial and consumer insurance products. Our customer base includes large multinational companies, SMEs and individual consumers. The blend of local expertise and international experience we offer uniquely places us to provide comprehensive general insurance solutions to customers of all ranges. AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc.

Year Established 1919

Staff size Over 100 employees (Hong Kong) Over 20,000 employees (Worldwide)

Products / Services General Insurance Tel: (852) 3191 6800 Fax: (852) 2560 3565 Email: Inquiries.HK@acegroup.com

www.acegroup.com/hk

More information can be found at www.acegroup.com/hk ACE Group is a registered trademark of ACE Limited.

ACE Life Insurance Company Ltd. Key Personnel

ABOUT ACE LIFE IN HONG KONG

Allan Lam Country President

ACE Life is the global life insurance division of ACE Group, one of the world’s largest multiline property and casualty insurers. With operations in 54 countries, ACE provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. ACE Limited, the parent company of ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 index. ACE's core operating insurance companies are rated AA for financial strength by Standard & Poor’s and A++ by A.M. Best. With both general and life insurance operations, ACE has been present in Hong Kong for more than 90 years, via acquisitions by its predecessor companies. Specifically to meet the needs of financial protection and security of its broad range of customers, ACE Life in Hong Kong offers a comprehensive array of quality life and medical insurance products and services.

Staff size Over 150 employees (Hong Kong) Over 20,000 employees (Worldwide)

Products / Services Life insurance Tel: (852) 2881 0688 Fax: (852) 2577 0866 Email: Enquiries.HKLife@acegroup.com

More information can be found at www.acelife.com.hk

Over 300 employees

Products / Services General Insurance

Tel: (852) 3555 0000 Fax: (852) 2893 7553

www.aig.com.hk

Key Personnel

Company Activities / History

James Sun Managing Director

Charles Schwab, Hong Kong, Ltd., a subsidiary of the San Francisco-based Charles Schwab Corporation, is registered with the Securities & Futures Commission (“SFC”) in Hong Kong. We offer comprehensive US investment products and services, including US stocks, fixed income, market research, online trading platform and financial consultants in Hong Kong. At Charles Schwab we believe in the power of investing to help individuals create a better tomorrow. Through its operating subsidiaries, The Charles Schwab Corporation (NYSE: SCHW) is a leading provider of financial services, with more than 325 offices and 9.1 million active brokerage accounts, and $2.25 trillion in client assets as of December 31, 2013. With Schwab Hong Kong, you will have access to your investments and US market insight through our web site www.schwab.com.hk, telephone access (+852-2101-0511) and local office.

Year Established 1997

Tel: (852) 3198 4200 Fax: (852) 2506 4756 Email: asia@schwab.com.hk

www.schwab.com.hk

www.acelife.com.hk 42

Staff size

Suites 1607-1611, 16/F, ICBC Tower, 3 Garden Road, Central, Hong Kong

33/F, ACE Tower, Windsor House, 311 Gloucester Road, Causeway Bay, Hong Kong

1988

1931

Charles Schwab, Hong Kong, Ltd

(Incorporated in Bermuda with Limited Liability)

Year Established

biz.hk 5 • 2014

(1013-6806/CSHK-1279)

Asset Management & Financial Services Providers 2014

Mark Your Calendar Jun

Citigold Private Client

6/F, Wheelock House, 20 Pedder Street, Central, Hong Kong 3/F, Wai Fung Plaza, 664 Nathan Road, Mongkok, Kowloon

Key Personnel Maria Leung

Director and Head of Citigold Private Client

Tel: (852) 2860 8888

www.citigoldprivateclient.com/hk

Male Champion Panel on Gender Diversity Stephen Golden, Head of Global Leadership and Diversity, Asia Pacific, Goldman Sachs Hayden Majajas, D&I Director, Asia Pacific, BP Keith Pogson, Global Assurance Leader - Banking & Capital Markets, EY Anna-Marie Slot, Partner, White & Case (Moderator) Join us for a panel of our past Male Champion winners who will discuss being an advocate for gender diversity within their organizations and in the community. The panel will focus on being a champion of change, creating awareness and sponsoring female talent. Key takeaways will include how to benefit from and gain the benefit of gender diversity in your career. Stephen Golden began his career at Goldman Sachs in 1993 as a technology analyst in New York. He moved to London in 1995 and later changed his career to be a project manager focusing on both technology and compliance. Golden became co-head of the Goldman Sachs European Gay and Lesbian Network in 2004 and moved into a full time diversity role in London in 2005. Hayden Majajas supports all businesses in implementing BP’s global Diversity & Inclusion vision and Ambition strategy to deliver a measurable improvement in diverse workforce representation and work environment inclusion, with a particular focus on Asia Pacific countries. He is also a Member of the Board of “The Women’s Foundation” in Hong Kong (TWF). Keith Pogson maintains a very active role in driving the wider EY business in Frontier and Emerging markets and has previously led EY’s Financial Service Practice in Asia Pacific, a multi-disciplinary practice of approximately 2,800 professional staff specifically serving the Financial Services Industry. He was President of the Hong Kong Institute Certified Public Accountant in 2012.

Company Activities / History

Citigold Private Client provides a unique banking relationship specially tailored for individuals with US$1 million and more. At Citigold Private Client, we provide highly-tailored private-bank financial solutions to high-net-worth clients. The bank’s highly skilled team of industry-leading experts become partners to help clients stay ahead of the curve in managing their wealth. The experts work in investment, treasury, insurance, mortgage, market research and commercial banking to provide tailored financial solutions to clients. We are committed to crafting personalized portfolios from our private banking products and services to meet our clients’ unique needs and help sustain wealth success in the future. Citigold Private Client pioneered the “best of both worlds” approach that clients enjoy the combination of an easily accessible, convenient retail banking network alongside a comprehensive private banking business platform providing sophisticated and exclusive products for a unique private banking offering.

Building a Winning Team: How to Attract, Hire, and Jun Retain Talent as an SME

Felicia Choy, Cofounder, Choy-Valentine & Company Bianca Wong, Group HR and Corporate Communications Director, Jebsen & Co Ltd Nate Taylor, Enterprise Sales Manager, LinkedIn Max Von Poelnitz, Founder, Secret Ingredient Due to the competitiveness of the talent market, hiring and retaining the best people is often seen as one of the top challenges faced by SMEs in Hong Kong. During the interactive panel discussion, speakers will share their experience and insights on: - How do we find the right person for the open positions? - How do we advertise the company and the positions as an SME? - How do we motivate our employees and make them stay? - Is a job opportunity with a SME attractive to the young talent? Felicia Choy previously served as GM/Asia Pacific for Hewlett-Packard and COO of the Armarda Group and has worked and lived in Hong Kong, Singapore, and the United States. Bianca Wong was Managing Director of North Pacific Human Resource Services and Asia Pacific Human Resource Information Systems at FedEx Express, overseeing all human resource functions at Japan, Korea and Taiwan, as well as the HR process and system design for the region. Nate Taylor has more than 10 years of international experience in a variety of fields including technology, media and geopolitics across Europe, The Middle East, Africa and Asia. He works with companies in Hong Kong to build and market “Employer Brand” and to find and hire the best talent. Max Von Poelnitz has maneuvered his way through various hiring and retention challenges while growing his team at Secret Ingredient, which provides a delivery service of fresh ingredients for ready-to-cook dishes.

Capital Markets Professionalism - A key to HK’s role as

Jun China's global financial center

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2014 Jun

Brian W Tang, Managing Director, Asia Capital Markets Institute (ACMI) Hong Kong’s regulators are very serious about holding the capital market’s perceived gatekeepers accountable to maintain Hong Kong’s role as a leading international financial center. Hence, the professionalism of such capital markets practitioners and gatekeepers is critical to capital markets integrity. This presentation provides an overview of recent capital markets trends and a new industry-wide multi-stakeholder educational initiative to re-emphasize professionalism in client service excellence and to give voice to shared values of capital markets integrity. Brian W Tang is a corporate finance and capital markets lawyer with nearly 20 years of experience in Hong Kong, New York, Silicon Valley and Australia. As an award-winning investment banking counsel at Credit Suisse in Hong Kong until 2013, Tang has advised on some of the largest and most cutting-edge equity, debt and M&A transactions across the Asia-Pacific region. He has also led inter-disciplinary teams on strategic transactions (such as establishing the bank’s Chinese investment banking joint venture) and was chairman of Credit Suisse’s Hong Kong Charity Committee. For information, see website: www.amcham.org.hk

Tel: (852) 2530 6900

Fax: (852) 2810 1289

Venue: The American Chamber of Commerce in HK 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong

Sun

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Venue: The American Chamber of Commerce in HK 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong

Wed

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Time: 12:00 - 2:00pm (Sandwiches & beverages included)

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Fee(s): Member: HK$280 Non-member: HK$380

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Time: 12:00 - 2:00pm (Sandwiches & beverages included) Fee(s): Member: HK$280 Non-member: HK$380

Venue: The American Chamber of Commerce in HK 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong Time: 12:00 - 2:00pm (Sandwiches & beverages included) Fee(s): Member: HK$280 Non-member: HK$380

Email: byau@amcham.org.hk