AmCham biz.hk May 2015 by The American Chamber of Commerce in Hong Kong

May 2015

FULL SPEED AHEAD WITH HONG KONG AND SHENZHEN SPECIAL SUPPLEMENT:

ASSET MANAGEMENT & FINANCIAL SERVICES PROVIDERS

THE AMERICAN CHAMBER OF COMMERCE IN HONG KONG

FAST FACTS COMMUNITY AmCham celebrates over 45 years of promoting business and fostering greater trade ties and community service in Hong Kong

ACTIVITIES Members can access more than 400 programs, seminars, and conferences each year featuring top business and government leaders, industry experts and professional facilitators who address timely and relevant business issues. MEMBERS Over 1,700 members (40 different nationalities) from over 800 organizations, including multinational firms, small and medium enterprises, entrepreneurs, and non-profit organizations. COMMITTEES Our members can join and access up to 28 different committees covering industry sectors, professional service sectors, and special segments of the membership.

The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower 12 Harcourt Road, Central, Hong Kong T: (852) 2530 6900 E: amcham@amcham.org.hk www.amcham.org.hk

BUSINESS NETWORKING

INFORMATION

VISIBILITY AND CORPORATE EXPOSURE

ADVOCACY

ACCESS

May 2015

Contents

Vol 47 No 5

COVER STORY Publisher

Richard R Vuylsteke

Editor-in-Chief Blessing Waung

The highly anticipated launch of the Shenzhen-Hong Kong Stock Connect will be announced soon. In preparation, an AmCham delegation from diverse backgrounds visited the Shenzhen Stock Exchange to discuss the current outlook of the newest stock connect, with an additional visit to see the progress of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone

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

AMCHAM NEWS AND VIEWS 04 Editorial In order to stay competitive in a global economy, companies must ensure that their expatriate packages in Hong Kong remain on top. With increased focus on retaining the competitiveness of Hong Kong, one of the oft-touted advantages that the city maintains is its human capital and depth of knowledge. In order to retain and attract top talent from abroad, multinational companies must continue to prioritize and incentivize packages with compensation reflective of rising costs.

Printed by Ease Max Ltd 2A Sum Lung Industrial Building 11 Sun Yip St, Chai Wan, Hong Kong (Green Production Overseas Group)

07 New Business Contacts

37 Mark Your Calendar

28 executives joined AmCham’s business network last month

©The American Chamber of Commerce in Hong Kong, 2015 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

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18 ENERGY Formerly the energy practice lead for Booz Allen & Hamilton, Paul D. O’Rourke shared his experiences on building competitive electricity markets in the 1990s and recommendations for future Hong Kong

ENTREPRENEURSHIP Securing extended short-term business and travel visas, the number of Chinese startups travelling to US has increased. Experts from Withersworldwide provide possible solutions for young Chinese entrepreneurs to receive US visas depending on the clients’ situations

COVER STORY 08 Full Speed Ahead with Hong Kong and Shenzhen The highly anticipated launch of the Shenzhen-Hong Kong Stock Connect will be announced soon. In preparation, an AmCham delegation from diverse backgrounds visited the Shenzhen Stock Exchange to discuss the current outlook of the newest stock connect, with an additional visit to see the progress of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone

INFORMATION TECHNOLOGY

14 The Computing Cloud’s Silver Lining

With its unlimited web storage capacity for users, Amazon Web Services presents advantages ranging from flexibility to an elastic model, which makes the cloud ideal for companies and startups

ENERGY 18 Energy Reform from a US Perspective Formerly the energy practice lead for Booz Allen & Hamilton, Paul D. O’Rourke shared his experiences on building competitive electricity markets in the 1990s and recommendations for future Hong Kong

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TRADE & INVESTMENT CPSC Chairman Elliot F. Kaye shares the history and the current performance of US exports worldwide in relation to the influence of fluctuation in US dollar, manufacturing and Hong Kong

ENTREPRENEURSHIP 22 A New Pathway for Chinese Entrepreneurs Securing extended short-term business and travel visas, the number of Chinese startups travelling to US has increased. Experts from Withersworldwide provide possible solutions for young Chinese entrepreneurs to receive US visas depending on the clients’ situations

HUMAN CAPITAL 26 Hard Talk Executive Consultant Katie O’Hara from Connect Communications provides seven golden tips when facing difficult situations with clients and staff

TRADE & INVESTMENT 30 Interview with Consumer Product Safety Commission Chairman CPSC Chairman Elliot F. Kaye shares the history and the current performance of US exports worldwide in relation to the influence of fluctuation in US dollar, manufacturing and Hong Kong

biz.hk Editorial

Board of Governors Chairman

Peter Levesque

Vice Chairman

Walter Dias

Treasurer

Tom Burns

Executive Committee Evan Auyang, Sara Yang Bosco, Steve Lackey, Ryan Mai, Alan Turley, Richard Weisman Governors David Adelman, Donald Austin, Anne-Marie Balfe, Owen Belman, Diana David, Sean Ferguson, Robert Grieves, John (Jack) E Lange, Seth Peterson, Catherine Simmons, Eric Szweda, Colin Tam, Jennifer Van Dale, Frank Wong, Patrick Wu Ex-Officio Governor President

James Sun Richard R Vuylsteke

Chamber Committees AmCham Ball Apparel & Footwear China Business Communications & Marketing Education Energy Entrepreneurs/SME Environment Financial Services Food & Beverage Hospitality & Tourism Human Capital Information & Communications Technology Insurance & Healthcare

Ryan Mai Mark Green Michael Klibaner Lili Zheng Charlie Pownall Oliver Rust Virginia Wilson Rick Truscott Laurie Goldberg Jim Taylor Derek Berlin Christina Ellerker Veronica Sze Mark Kemper Shanthi Flynn Rex Engelking

Hanif Kanji Rebecca Harrison Intellectual Property Jenny Wong Gabriela Kennedy Law Clara Ingen-Housz Pharmaceutical Joyce Wong Real Estate Robert Johnston Edward Farrelly Senior Financial Forum Philip Cheng Senior HR Forum Bianca Wong Taxation David Weisner Trade & Investment Barrett Bingley Transportation & Logistics Gavin Dow Women of Influence Anna-Marie C Slot Jennifer Parks Young Professionals Michael Harrington

COMPETITIVE EXPAT PACKAGES IN THE SPOTLIGHT

blaring headline in the South China Morning Post this month announced expatriate packages in Hong Kong were lower than those of their counterparts across the border in Mainland China. Compiled by human resources firm ECA International, which specializes in managing international assignees, the survey used data from more than 300 multinational organizations and more than 10,000 staff. According to the survey, the average middle-manager expatriate package in Hong Kong in 2014 amounted to roughly US$272,000 (HKD$2.1 million), down three percent from the previous year when Mainland Chinese cities first reportedly surpassed Hong Kong. This breakdown includes salary, benefits (including allocation for relocation costs, housing, international schooling, as well as other benefits) and tax allowances. In order to stay competitive in a global economy, companies must ensure that their expatriate packages in Hong Kong remain on top. According to another popular survey, HSBC’s annual Expat Explorer survey in 2014, the top destinations for higher earning expats (more than USD$250,000 yearly) included China at 29 percent, and Hong Kong at 16 percent. The renminbi’s strength against the dollar and the gradual increase of benefits such as healthcare in Mainland China mean it is likely that expatriate packages will be increasingly generous as

well. In order to entice employees to relocate to Mainland China, companies often include “hardship allowances” to monetarily offset problems such as air pollution. Salaries in Singapore are actually higher than in Hong Kong, but the package overall ends up being lower because of lower housing costs. American citizens, additionally, bear the burden of paying income tax based on citizenship, rather than residence. While most expatriates pay much lower taxes than those they would pay at home, this has less of an added benefit for American citizens abroad. Though expats generally report a salary increase from their previous roles before relocating to Hong Kong, with more than half of the surveyed HSBC expatriates associating Hong Kong with higher salaries, there are also many living costs to be factored into the decision. If housing and education were to be further removed from the package equation, Hong Kong would fall even further to below Singapore, the ECA report said. With cities across the globe vying for top talent, this city must somehow remain in the top echelon of global destinations for expatriates to work. Housing in Hong Kong is, according to the study, more expensive than it was in their home country for 69 percent of those surveyed. Such costs are offset by lower utilities fares and more flexibility in disposable income spending, but with rent ranging anywhere between 12,000HKD per month for a one-bedroom to

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COVER SPONSOR

40,000HKD for a modest-sized family apartment, housing stipends are an essential component to the package when initially negotiating. Comparatively speaking, the expenses incurred for housing in Mainland China is still lower than in Hong Kong. However, housing costs are rising rapidly in top-tier cities in Mainland China, with rent in Beijing and Shanghai in some areas equal to that of those in Hong Kong. For many expatriates, one of the foremost considerations is the impact upon family members, especially children of schooling age. Increasingly, international school placements are difficult to find in Hong Kong, especially at the high school level. Tuition fees for the most sought-after international schools have risen anywhere from 20,000 to 40,000 HKD in the past five years. Moreover, with the culture of corporate debentures that aid staff members in securing places for children at school, and more campuses releasing them to raise money for campus expansion plans, the competition will only increase. With increased focus on retaining the competitiveness of Hong Kong, one of the oft-touted advantages that the city maintains is its human capital and depth of knowledge. In order to retain and attract top talent from abroad, multinational companies must continue to prioritize and incentivize packages with compensation reflective of rising costs.

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www.amcham.org.hk

AMCHAM Means Business

Members Directory

Over 500 pages in three major sections, including a complete guide to chamber services, corporate sponsors and AmCham Charitable Foundation. This directory lists about 1,700 members from over 700 companies and organizations. ISBN 978-962-7422-31-0

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

MEMBER PRICE HK$800 US$104

AmCham Member Name: Title: Company: Address: Tel: Fax: Email: Website: copy(ies) of Members Directory Total: HK$/US$ (postage inclusive) payable to The American Chamber of Commerce in Hong Kong check# Bank: Charge to AMEX (US$) Diners (HK$) Visa (HK$) Master Card (HK$) Cardholder's Name: Card# Expiry Date: Issuing Bank: Signature: (Not valid unless signed) The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower, 12 Harcourt Road, Hong Kong. Tel: (852) 2530 6900 Fax: (852) 3753 1208 Email: hchung@amcham.org.hk

New

Business Contacts The following people are new AmCham members:

Burson-Marsteller (HK) Limited Antoine Calendrier CEO and Market Leader

Dow Jones & Co

Mark Rogers Executive Director, Multimedia Sales Asia Pacific

BVI House Asia Limited

Michelle Georges Asia Representative, BVI Financial Services Commission (HK) Limited Heather Tang Chief Operating Officer Elise Donovan Director

Economist Group, The

Sharon Fong Regional Manager, Business Development Jerem Curry Senior Manager, IT Services Asia

Jeffrey Maddox Partner

Candy Tang Account Director

Canterano Futbol Club

Ann Ngan Director

CEB

International School of Nanshan Shenzhen

Anthony Liu Head of North Asia Letty Ma Business Development Director, North Asia

Citi

Mary O'Connor Director of Marketing and Student Recruitment

Wayne Milano Hub Leader

Sara Lai General Manager

Whitney Yoerger Special Projects Manager & Content Writer Derek Black Associate Dean of Academics Kalen Curtis Executive Director of Admission

Tiffany & Co.

Jo Kan Managing Director - Hong Kong & Macau

Li & Fung Group

Michael Beer Equity Research Analyst Asia Transportation, Logistics

Charles Wellins Senior Vice President, Strategic Business Development, Freight

Crowne Plaza Hong Kong Kowloon East

MetLife

Felix Wong Director of Sales & Marketing

PVH Far East Limited

SCAD Hong Kong Hong Kong Academy of Leadership Ltd

John Lewis A Founding Father / Director

Anthony Root Senior Advisor

Regus HK Management Ltd Hamilton Advisors Limited

Cadwalader, Wickersham & Taft LLP

Moelis & Company

Linda Pham Director, Corporate Communications Asia

Walgreens Boots Alliance

Trevor Millett International Strategy Director Wilfred Wong Corporate Development Director, China Zhong Li Corporate Development Investment Director, Asia

View our other members at:

http://www.amcham.org.hk/component/amcham_users/?view=memberlist

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COVER STORY

Full Speed Ahead with Hong Kong and Shenzhen With the upcoming launch of the Shenzhen-Hong Kong Stock Connect highly anticipated, an AmCham delegation coming from diverse backgrounds visited the Shenzhen Stock Exchange to discuss with officials on the current outlook of the newest stock connect, with an additional visit to see the progress of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone

By Blessing Waung

n his opening comments to the visiting AmCham delegation in April, Shenzhen Stock Exchange (SZSE) Vice Director of Hong Kong, Macao and Taiwan Affairs Liu Fuzhong made his intentions clear: “We want to make Shenzhen famous, globally.” With the dizzy anticipation ahead of the launch of the Shenzhen-Hong Kong Stock Connect this year, a 30-member delegation from AmCham HK paid a visit to the SZSE, to build relations with exchange officials and dialogue regarding key initiatives the latter foresees for its future. The announcement, expected to take place within the first half of this year and to be implemented during the second half, will operate under a similar operational and regulatory framework as the Shanghai-Hong Kong Stock

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Connect, but with a possibly expanded scope, such as equity products. “The meeting with the Shenzhen Stock Exchange was very useful for AmCham members to develop relations and gain a deeper understanding of the Exchange’s priorities, including the much anticipated Shenzhen-Hong Kong Stock Connect program, which is expected to launch later this year,” said Steven Chan, vice president and head of regulatory, industry and government affairs, Asia Pacific, at State Street Asia Limited. Chan, who also serves as the co-chair of the AmCham financial services committee, was one of the many seniorlevel executives at multinational financial institutions who was eager to attend the trip and hear the progress, and to have the chance to speak with directors of the Shenzhen Stock Exchange.

“I appreciated the opportunity to ask some important questions about the Shenzhen Stock Connect development, including operating models, implementation timeline, investment of asset classes, quotas and other legal and regulatory issues,” he said. “As the Hong Kong and Shenzhen Exchanges move forward with development and implementation, we will pay close attention to the level of transparency in terms of industry engagement, information disclosure and dissemination, and public consultation.” Shenzhen, with its explosive growth, is often called the Silicon Valley of Mainland China. Working together with massive science parks as incubators for technology, the SZSE is home to an index that is high-performing, which may eventually lead to a higher valuation.

Present at the meeting were Liu, Huiqing Li of strategy and international relations, Jin Liyang, chief researcher, and Wan Fan, membership supervisor for the SZSE. AmCham members raised a number of important challenges for the SZSE to consider, including: sufficient implementation timeline with a suggested minimum of 3 months to avoid unregulated entities being given an advantage - as well as tax and legal issues, such as beneficial ownership. “I think it was really important for the SZSE to be able to hear from the industry about the need for an appropriate time period prior to the launch, as well as, the importance of that time period so that the industry can get everything operational for a smooth go live,” said Rebecca Terner Lentchner,

Photo: thinkstock

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executive director and head of policy and regulatory affairs at the Asia Securities Industry and Financial Markets Association (ASIFMA). “The idea that the industry can simply go live in one or even three months would be to miss the important lessons learnt from the launch of the Shanghai Connect. We don’t want to see that happen with Shenzhen because it’s such a great opportunity.” “The fact that AmCham was able to assemble such a diverse group of

stakeholders to attend was very helpful to the Exchange in my opinion. AmCham members were able to offer wide variety of industry concerns,” Lentchner said. “There were participants from financial services, private equity, manufacturing, hotels, all of these interests together represent the potential investor base for the Shenzhen Connect. And that was a good opportunity both from industry’s perspective and also for the exchange, as AmCham was the one stop to go to

collect all of those important stakeholder voices.” “[We’re] all very impressed with how pragmatic they’re being,” Lentchner said.“I was particularly interested in their training of Chinese arbitration lawyers and judges in Hong Kong for contract disputes that are written in Hong Kong law, which then might be adjudicated in the free trade zone. This would represent an enormous step forward. The more integrated the PRD can be with all of the free trade zone hubs, will help to connect Hong Kong to the greater China market in ways that a wide variety of different participants will be able to benefit from.” “Generally, we did send a message how eager we are as to the launch of the Shenzhen-Hong Kong Stock Connect,” said Tina Tsui, managing director and managing counsel at BNY Mellon. “It’s a very good sign that they actually are willing to listen to us. For example, from the experience of the launch of Shanghai Stock Connect ... it was helpful that participants raised a few points regarding certain issues that market participants have. Hopefully Shenzhen will be more successful.”

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Attendees Arthur Tse Managing Director Alliance Bernstein

Max Burger Chairman Golien

Brian Lo Managing Director AllianceBernstein Hong Kong Ltd

Mike Imam Managing Partner, CEO Silverhorn Investment Advisor Ltd

Candy Kang Director, Transaction Banking Standard Chartered Christie Ju Managing Director Jefferies Hong Kong Ltd Cindy Chen Country Head of Securities Services Citi David Chao First Vice President, Foreign Direct Investment Advisory and Commercial Banking United Overseas Bank Limited

Rebecca Kwan General Manager Lan Kwai Fong Hotel Rebecca Terner Lentchner Executive Director, Head of Policy and Regulatory Affairs Asia Securities Industry and Financial Markets Association Richard Vuylsteke President AmCham Hong Kong Robert Taylor Director, Product Management Standard Chartered Rosemary Bourke

Dipo Sani Director Hindustan Trading Co. Ltd. Geoffrey Allen Galbraith Director Institutional Sales Gina Hudel CEO Cancannot James Sun Managing Director Charles Schwab Hong Kong

Simon Ogus CEO DSGAsia Ltd Steve Wang Chief China Economist Reorient Financial Market Steven Chan VP and Head of Regulatory, Industry and Government Affairs, Asia Pacific State Street Asia Ltd. Tina Tsui Managing Director & Managing Counsel BNY Mellon

James Quinnild Partner PricewaterhouseCoopers

Vanessa Chung Director of Sales Lan Kwai Fong Hotel

Ken Wong CEO QWeUs

William Wong Managing Director Goldman Sachs

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Qianhai: How Can Its Potential Be Fully Unleashed?

ince officially becoming part of the Chinese government’s twelfth Five-Year Plan, the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone has aimed to develop cooperation between the neighboring cities. Dr. Witman Hung is the Managing Director at Qianhai International Liaison Services Ltd., set up by the Shenzhen Qianhai Management Authority in Hong Kong. In this role, he serves as the liaison to the Hong Kong business community. “We are looking for innovations in six areas,” says Hung. “What does Qianhai bring to you? We have tax incentives, capital program, opportunities for development, an incubator center for entrepreneurs, and we try to have efficient and simple services as a government. It’s not an easy task.” As of now, Qianhai has seemingly attracted more domestic Chinese companies to set up shop than Hong Kong companies to set up subsidiaries. Upon the AmCham delegation’s visit, with hulking buildings that have been built over the past year, it’s quickly apparent that the space is not being used to its full capacity. Hung and his fellow speakers answered questions on what can be done to attract more Hong Kong companies to the zone, and why it is strategically crucial for Hong Kong to seize the opportunity to expand its financial services across the border by leveraging Qianhai’s unique services. “The Central Government has agreed that out of 21 different categories, we have 50 percent profit tanks for the corporations,” says Hung. “We also will allow you to nominate certain senior management members of that company

registered in Qianhai to have a personal income tax or 50 percent equivalent. The person has to be a non-Chinese resident, either a Hong Konger or a foreigner. You still have to pay based on the monthly basis, but at the end of the year, you can apply and get a refund of tax, which makes it effective up to 15 percent. There is a name for it -- the Senior Foreign Needed Talent Program.” “What I see that Qianhai gives to Hong Kong comes in two forms,” says Hung. “One is capacity. We have more land, obviously, and we also have access to more talent. In Hong Kong, if you try to get some Mainland talents over, there are a lot of problems with working visas. But if you go to Qianhai, it’s easy to travel [back and forth] and it’s also simple for the local Chinese talents there. That’s an enhanced capacity for talent.” “If you want to register a company in China, it’s easier to do in Qianhai geographically,” says Hung. “With the proximity to Hong Kong and languagewise, it’s a lot easier to get around. There are also certain policies where you can do certain things in Qianhai, whereas if you go somewhere else, you have hard time trying to apply for license.” “This is a new pilot free trade zone, which was launched [in April],” says Hung. “Before there was this citizen equivalent tribune before the World Trade Organization. Basically what happens is in the old China, you have to apply for every single thing.” Now, though, through Qianhai’s capacity for facilitation, the entire process is streamlined. “You can do whatever you want for business except for the [things] on the negative list. For those negative list items, you have to apply for special licenses and go through certain regulatory bodies, or there are

certain restrictions in terms of foreign ownership share holdings. Unfortunately, the list is pretty long — about 150 right now. But it’s a big move from a positive list to a negative list. So in the future, all we have to do is to amend the list.”

Focus on E-Commerce Xufei Ma, associate professor at the Department of Management and Associate Director of the Center for Entrepreneurship at the Chinese University of Hong Kong, has been watching the development of Qianhai and has been put in charge of CUHK’s collaboration with the Qianhai eHub. “The huge market potential is strong growth in e-commerce,” Ma says. “We have cross border e-commerce and the growth rate is significantly higher than the domestic growth. Top five product categories are: cosmetics, skin care, baby products, clothing and electronics. Those giants are moving cross-border in the e-commerce business field.” “Initially, largely speaking, these traditional trading are B2B,” says Ma. “That’s why those national import and export productions companies were so weak. Regulations might be different, and the inspection and tax rate are significantly different, as well as the efficiency. They take about six months for this kind of inspection. But it only takes two weeks in Qianhai.” “Why should you pay attention to cross border e-commerce in Qianhai?” Ma asks. “It’s a fast way to further packaging China’s market. If you want to penetrate China’s market, it’s the right time and right place, especially for SMEs. If you still want to export your products in China and if you haven’t done it, use this type of business model and new place.” “You can reach China’s consumers without any more tests, without tedious failings and taxation, without strong competition with local brands,” says Ma. “And again, with Qianhai’s location advantage, you will become an early bird.”

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INFORMATION TECHNOLOGY

The Computing Cloud’s Silver Lining As more companies move to the cloud, Amazon Web Services speaks to the advantages of storage on the web, with an unlimited web capacity. Flexibility and an elastic model make the cloud ideal for huge companies, as well as startups

By Liana Cafolla

mazon Web Services presented an overview of its operating model to AmCham members last month. AWS, an IT infrastructure company best known for its cloud computing services, defines it as on-demand delivery of IT resources and applications via the Internet with pay-as-you-go pricing. Cloud computing allows customers to access storage, servers, databases and many applications over the Internet through a web application. AWS owns and maintains the hardware and customers can access what they need online and on demand. Cloud computing services work in a similar way to electricity services – when you want it, you switch it on and pay for what you use, and when you don’t want it, you switch it off and pay nothing. Millions of customers in 190 countries around the world are already using AWS’s cloud computing services, including The New York Times, the Washington Post, Hitachi, Pfizer and

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computing pack. According to a New York Times report, AWS had about 28 percent of the market share in 2014, almost three times that of its nearest competitor Microsoft. Amazon expects the company’s performance to expand further during the year. “Amazon Web Services is a $5 billion business and still growing fast — in fact it’s accelerating,” said Jeff Bezos, founder and CEO, in a statement released on 23 April. “Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon. We strive to focus relentlessly on the customer, innovate rapidly, and drive operational excellence.” In tandem with its fast-paced growth, AWS is also offering increasing numbers of new features and services – from about 20 new features and services in 2008 to 516 in 2014 – and cutting prices: AWS has made 48 price cuts in the last eight years, it says, and has never increased its prices.

many other well-known names including several leading IT companies. The reason they use AWS, says the company, is because these companies are not in the business of managing IT infrastructure, and that is AWS’ specialty.

Leader of the Cloud Computing Pack AWS is a business unit of Amazon.com and has had much less visibility among the general public than its retailing superpower parent, but it is likely to become better known following the announced of its widely reported earnings which were announced in April. In its first quarter earnings report, Amazon announced that its cloud computing arm had pulled in revenues of $1.57 billion in the first three months of the year, with an operating income of $265 million, easily putting the company at the head of the global cloud

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Elastic Business Model and on-demand capitalised The benefits of cloud computing services to businesses are myriad, including cost-cutting, enhanced flexibility, and more opportunities to experiment. By using a cloud computing service provider, customers have no need to invest in the hardware they need to support their online services, such as servers, nor devote the time and resources needed to manage and service. Clients only pay for the amount of access they actually use, which can be calculated down to a millisecond, and they are virtually guaranteed never to run out of capacity. AWS estimates that its server capacity is “probably impossible to exhaust”. For customers, this means total flexibility and the ability to access vast amounts of capacity immediately. If necessary, they can discard as soon as they’re finished, paying only for what they have used. It’s a model that can particularly fit the needs of clients whose businesses see surges of use at particular times – for example, a newspaper that may typically be overloaded first thing in the morning, and then be less busy during the rest of the day, or an online retailer making a short-term special offer. This elastic and low-cost model allows businesses to expand and contract their offerings according to demand. It is especially attractive to start-ups who need the capacity to embrace fluctuating demand, but can’t afford permanently high costs. This elasticity also encourages the experimentation that is crucial to new businesses as they find their feet in the market. Companies can build programs or applications that require the support of a single server and get immediate access to another 100,000 servers if the experiment works and they are flooded with demand.

The result of this elasticity is guaranteed availability which results in happy customers, “because you are always able to serve them,” says AWS. “You don’t have to limit your investment to serve X amount of customers.” AWS also offers an auto-scaling service that automatically adds capacity as needed. This allows businesses to be sure that the changing needs of their customers will always be met. As well as scaling up, capacity can also be scaled down for quieter times.

Reduced Capex and Enhanced Security Using the cloud allows companies to benefit from reduced capital expenditure related to buying, maintaining and replacing the servers. Most servers typically need to be replaced after three to five years, according to AWS. The servers used by AWS are the highest quality and the costs of their maintenance and physical storage – such as adequately cooled environments, which can be expensive to provide in cities like Hong Kong – are borne by AWS. Businesses using cloud computing are able to avail of the highest possible security levels

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Game-changing Potential because AWS and everyone in the industry recognize that a breach in security could be catastrophic to the whole industry.

Facilitates Customer Service and Experimentation By using the services of a cloud computing provider, businesses have more freedom to focus on their core offerings and client servicing which adds to the likelihood of the business’s success, the development of good customer relations and consequently, happier customers – a byword at Amazon. Leaving businesses free to concentrate on what they do best also provides them with more opportunities to experiment to enhance their services or products. For example, companies can use a method call “split testing” to show a different page on different browsers, and compare which version increases the number of sales, sign-ins, or completions of purchase. If an experiment fails, businesses have the flexibility to quickly discontinue or change their Internet offerings without having had to expend any upfront costs.

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AWS says it has seen changes in the offerings of some companies, such as Adobe, who have replaced their former one-off package fee with a more flexible monthly subscription. Other companies are offering free trials of their products for a limited time, or different fee structures depending on different storage requirements. While many of its customers are already globally renowned companies, Amazon is excited about the potential of cloud computing to unleash the creativity that is often found in start-ups, including those small enough to encourage students to use their credit cards to access internet services that cost just a few dollars a month. By cutting start-up and experimentation costs, AWS believes that cloud computing can encourage people to risk the uncertainties of setting up a new business. The biggest way cloud computing is impacting business is removing the barriers to entry, says AWS. By being able to access fast, pay-as-you-go, flexible online services, businesses are able to set up at a low cost and adapt to the market demand and customer needs efficiently and affordably. For some companies, this has been a springboard to huge growth – AWS cites Airbnb, Spotify and Instagram as customers who started out by using AWS services when they were very small and have since grown exponentially. Such experiences of watching small start-ups developing into titans has fed into a central feature of the Amazon creed, which is its intense focus on its customers. AWS says it treats small companies with as much individual care as it does the US government – which is also an AWS client.

ENERGY

Energy Reform From A US Perspective Utilities expert Paul D. Oâ&#x20AC;&#x2122;Rourke shares some lessons drawn from the establishment of competitive electricity markets in the US in the 1990s that can bear insight for energy policies today

By Nan-Hie In

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ecently at the American Chamber of Commerce in Hong Kong, Paul D. O’Rourke, formerly the energy practice lead at Booz Allen & Hamilton, CRA International and Putnam Hayes and Bartlett, shared his experience of utilities reform in the US in the 1990s akin to a cautionary tale. Like everyone else, he thought deregulation of the electric market would work wonders, including various savings for customers. However, it didn’t achieve what many hoped for. “The wholesale markets that were designed to be competitive are increasingly re-regulated,” he says. O’Rourke shares insight about this disruptive period, the implications as well as recommendations for Hong Kong’s energy future.

The impetus of market liberalization in the 1990s Many pressures contributed to electricity sector reform in the US at this time but the leading proponent was the high prices charged in some regions. Since the 1970s, electricity prices were rising, but they did not spread uniformly across the US. “In Pennsylvania, even within the state, the price of energy in Pittsburgh were about 20 to 70 percent the price of energy in Philadelphia,” he says. Various reasons were to blame including the regulatory process. “A perceived lack of efficiencies in utilities were based on a bunch of benchmarking exercises and audits that were done rather carelessly in retrospect,” explains O’Rourke. Large industrial customers saw the big price discrepancies and demanded better rates, which was a key driver to bringing competition in the industry. Meanwhile, deregulation in other industries such as natural gas and banking were successful. “There was this hope and dream that a competitive dynamic would reduce costs; it happened in other industries so it has to happen in electricity,” he says. But electricity is unlike other industries.

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Paul D. O’Rourke

From the generation perspective To create competition at the generation level, utilities were forced to sell their generation assets to merchant generators. Then they competed by bidding into an auction process. However, the initial design of the system created an incredibly gaming opportunity to manipulate the

market prices. “The merchant generators inflated the prices bid in the process to earn more money,” he says, “Now it’s tougher.” There is a day-ahead market and a real-time market. The day before the market opens, all the generators bid various prices (based on their start-up costs, minimum load costs and so forth). Initially in the day-ahead market, the generators guessed the demand and what the generators would run to meet that demand. Sometimes the

generators misforecast the supply and demand. For example, hot weather suddenly increased the generation required. Due to potential generation scarcity, some participants bid not their cost but very high prices. “Some of them made their profits in 150 to 200 hours, a small slice of time compared to the number of hours in a year because of this issue of scarcity pricing,” says O’Rourke.

From a wholesale and retail perspective On a wholesale level, competitive markets were established but they were ill-prepared for other market forces that effected electricity: natural gas prices. O’Rourke explains: “[Electricity] market prices are driven by fuel prices. [Electricity’s] marginal cost’s primary component is fuel so if gas prices go up, the price of electricity goes up. Conversely, when natural gas price go down so does the price of electricity.” When the markets were deregulated, natural gas prices were down. A few years later, gas prices arose as it entered a boom period. “Three years after competition was introduced in the retail sector, people got shocked customers suddenly had to pay much more for electricity,” says the industry veteran. Essentially installing competition in the electric market never met expectations for countless reasons. The industry is highly complex and incredibly capital intensive to enter. “In California alone, the last number I saw was US$800 million dollars to create the IT infrastructure to run the competitive wholesale market,” reveals O’Rourke. Other high fixed costs include the customer information systems, customer call centers, billing systems among other upfront investments required. Traditionally, utilities were a Vertically Integrated business which meant power generation, transmission, distri-

bution and retail services were all in one entity, like Hong Kong today. Introducing industry competition meant unbundling these parts. O’Rourke says, for the distribution side especially, it led to a whole set of costs that had to be recovered from customers. Furthermore, competition in the industry led to many consumers switching services but it mostly occurred amongst large users. “All the large customers negotiated very nice discounts with their suppliers, which pushed a lot of the cost back on the incumbent utility,” reveals the energy expert. To recover costs, the supplier redirected them to the remaining customers, notably small customers from lower income and elderly households for most. So there were no savings on customers. “I thought competition would lead to technological innovation, in part greater efficiency, lower wholesale power costs, and greater consumer choice, but generally these things did not happen in the US."

Recommendations for Hong Kong In Hong Kong, opening the market to competition to break up the duopoly of Hong Kong Electric and CLP Holdings remains a continuing debate. The perceived outcomes include more consumer choices and environmental advantages as renewable energy providers may join the market. However O’Rourke thinks these outcomes can be achieved without industry competition. “Creating a wholesale competitive market is going to be incredibly expensive and I’m not sure it can be done in Hong Kong because the market is not big enough,” he says. The government has deferred the competition issue this year in its upcoming public consultation which focuses on the city’s electricity sector, which closes by June 30th. O’Rourke recommends three approaches for Hong Kong’s energy future.

Firstly, focus on the demand. Explore what can be done in the existing framework to encourage customers to reduce their electricity consumption – especially during peak hours, which cost the most – and encourage better energy efficiency and demand management. “If consumers want lower costs give them the technology to get lower costs. Let them decide how much they want to lower costs by putting in Smart Meters or time based rates, for example,” advises the industry veteran. Smart Meters connected to a Smart Grid are technologies that provide much data for users to monitor their energy consumption and how much it is costing consumers in real-time. Secondly, on the city’s fuel diversity to shift away from coal to natural gas, O’Rourke recommends further gas development. In space-starved Hong Kong, one possibility is a storage scheme delivered offshore from a floating platform called FSRU or floating storage re-gasification unit. “This is a viable alternative for geographies that do not have sufficient land area.” Plus: explore wind farms offshore. Thirdly, regulators can consider renewable energy incentives to encourage utilities to achieve certain public policy environmental goals. For example, make it explicit in the calculation of the rate of return so providers could earn more if they meet environmental goals, advises O’Rourke. According to the energy expert, the big and growing renewable energy business in America was mainly driven by federal tax incentives for wind and solar energy. So government policies are the engine behind renewable energy growth including the nation’s objective to generate 25 percent of renewable energy by 2025. O’Rourke says this would have happened with or without competition. Likewise, Hong Kong’s government can tell Hong Kong Electric and CLP Holdings to generate x amount of total kilowatt sales from renewable sources over x number of years. “That is a more direct and easier mandate than trying to create a competitive wholesale market,” says O’Rourke.

biz.hk 5 • 2015

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ENTREPRENEURSHIP

A New Pathway for Chinese Entrepreneurs Known as the land of opportunity, US has long been one of the most popular places among immigrants from all over the world, especially China. With multiple non-immigrant visa options, experts from law firm Withersworldwide provides the best solutions for the new startups searching for new opportunities

By Christina Choi

biz.hk 5 â&#x20AC;˘ 2015

mbassy of the United States in Beijing says the US and PRC agreed on extending short-term visas for business, travel and study purposes, starting from November 12, 2014. Business and tourism visas know as B1 and B2 have been extended to ten years multipleentry program and five years for student visa program, respectively. The two largest economies look forward to growing business opportunities and economic development upon this new adjustment. This is good news for Chinese national entrepreneurs and start-up to explore Silicon Valley, one of the hottest places for foreign businessmen. It is the center of leading technology of the United States that attracts numbers of investors, venture capitalists and engineers.

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A 20-year-old Chinese student went to seek help from Reaz Jafri, head of immigration at the law firm Withers. With his Masters degree in hand, the young man was in the middle of PhD program in the United States. Yet, he chose to drop out and decided to push forward his American dream – starting a business in the US. However, he was in a difficult position with F1 student visa. Having realized his extraordinary ability in the business field, Jafri filed an O-1 visa with the U.S. government. Initially the U.S. government denied the application because the applicant lacked a strong track record. But with an additional appeal, Jafri was able to receive an approval. Today, the young Chinese man is selling robots to US companies for US$150,000 each, with huge interest from private equity funds and strategic buyers to buy his company. He made a great transition from a drop out student to a CEO with 100 million dollars in a matter of nine months. Likewise, both Jafri and Mark Lanning, Director of Immigration at Withers, have been providing information on business opportunities. Y Combinator is one of the start-up incubators in Silicon Valley that has been supporting startups since 2005. With more than 1,600 founders, it provides financial support and additional resources for entrepreneurs to develop their ideas into practices. However, most people have never heard of this organization. “The government is catching up to it but it’s really cutting edge. The type of solutions for the entrepreneurs is unique. That’s what Reaz and I are trying to provide,” said Lanning.

Mark Lanning

“There is a culture out there of breaking all the rules in business and a sense that anything is possible,” said Jafri. By embracing innovative ideas and cultures to make its environment more mature and conducive, Silicon Valley provides multiple resources particular to technology and strong patent protection, Jafri added. “There is a certain combination of the world’s biggest market size of technology and the ability to monetize and commercialize technology,” said Lanning. With this great nexus funded by big corporations such as Airbnb and Linkedin, Silicon Valley is an influential bootcamp for the next major entrepreneurs to grow.

Why Invest in the US? Lanning says most of the Chinese entrepreneurs are coming to the US for further business opportunities but not for gaining permanent residency. Along with the globalization, people expand their business opportunities in different areas without staying in one specific place. “It’s not that they are leaving China. A lot of them do go back and invest in China, maintaining property and connection with China. The world is just becoming smaller for them,” said Jafri.

Type O Visas

Reaz Jafri

When both Jafri and Lanning spoke at the HKUST few weeks ago, they said there was eagerness amongst students who want to organize and build their own companies. But the resources given in Hong Kong are not as much as compared to what California or New York to offer, said Jafri and Lanning. “In the long run, places like Shanghai, Shenzhen and Hong Kong will be incredible centers for innovation,” said Jafri. “But chances of success, finding a partner are just much higher in the United Sates.” US has been the largest beneficiaries of foreign direct investment since 2006. With the inflow of foreign direct investment, the country has seen growing competitiveness in market and creation of high paid jobs. According to a survey conducted by the Organization for International Investment (OFIT) and PricewaterhouseCoopers LLP in 2014, more than half of the global enterprises showed their interest in expanding its US operations and employment. “There are tremendous benefits,” said Jafri. “If you look at the biggest companies in Silicon Valley, they are founded by entrepreneurs from other countries. The companies create lots of jobs and values with the shareholders.”

Once people figure out how to launch their companies after touring US, the next question becomes how they stay in US. The Chinese applicants seek for green cards most of the time, but because of the limited US immigration quotas and long process, Withers sometimes suggests nonimmigrant visas, especially Type O visas. Type O Visas are applicable to the people with extraordinary ability in various fields. As long as the individual can prove one’s ability and file to the department, he or she can receive O visa and head to US immediately. But because the US government has been dealing with big enterprises, individual inquiries for type O visas are still under the radar. “The whole landscape is changing so fast that I don’t think a lot of governments have caught up to it including the way the visa officers might look at the case,” said Lanning. What’s more striking about the O-1 visa is, it is approved for the first three years and can be extended indefinitely. Besides, there is no limited annual quota that can be issued for O-1 visa. Around 10,000 people have received O-1 visa in 2014. For people who come to US solely for the business purposes, O-1 visa is highly recommended as getting green cards means paying taxes on their worldwide income. If the company grows to a certain scale outside of the US, it can even transfer people if they have enough subsidiaries in the US. The process takes a couple of months and it is possible from that visa to apply for green card within a year.

EB-5 Visa EB-5 is one of the most popular visas among the Chinese applicants. First introduced in 1992, the visa was created with the purpose of increasing foreign direct investment. Today, applicants can receive green cards by investing at least $500,000 to projects in rural areas and creating 10 jobs. According to the State Department,

EB-5 Visa hit its maximum quota of 10,000 last summer. They expect this year’s quota will be reached even earlier, around May. As soon as quota is reached, the US government issues the EB-5 visa based on the applicants’ nationality, which is called retrogression. To elaborate, once the Chinese applicants exceed their quota, the opportunities are given to other nations which have not exceeded their own quota. Jafri says waiting for two to three years is optimistic while waiting for another four to five years is more of a realistic view. Finally, EB-5 is not a preferable option for some start-up founders, because a green card can create U.S. tax obligations sometime as high as 55 percent. Yet, a number of Chinese citizens are not aware of the alternative options like type O visas because agents and attorneys are not talking about them. Jafri says it’s because people are making more money without extra referral fees with EB-5. They can easily pitch their business ideas in a conference and start making revenue. But when a lot of people get green cards through EB-5, they often forget about the high taxation rules. Both Jafri and Lanning have encountered

biz.hk 5 • 2015

clients, who got green cards via EB-5 visas, seeking advice on their wealth planning. “For international investors that are interested in big infrastructure types of opportunities, China is a better option. In the case of technology and bio engineering, US has been doing them longer and there is a certain amount of predictability and strong US legal system to protect the patent. It’s just a different ecosystem and culture that’s embracing it,” said Jafri.

biz.hk 5 • 2015

HUMAN CAPITAL

Hard Talk Executive Consultant Katie O’Hara from Connect Communication offers insight on how to approach difficult conversations and people

By Virginia Lau

t’s never easy dealing with upset clients and difficult staff. At a recent lunch workshop, AmCham invited Executive Consultant Katie O’Hara from Connect Communication to discuss and offer advice on how to handle difficult people and deliver bad news such as letting an employee go. “Communication is like a phone number,” says O’Hara, who has been in human resources management and training for more than 20 years. “If you get the wrong number, you can’t get through.”

Basic considerations Before getting into how to deal with difficult situations, O’Hara notes that

while every case is different, there are some very basic considerations that apply to everybody. Firstly, accept that we all leave our comfort zone from time to time. When we are having difficult conversations, we are dealing with behavior, which can be switched on and off within a short amount of time. “We can go from being calm and rational to being irrational within seconds if something or someone does something to us,” explains O’Hara. “So when you see it happening in front of you, it’s what we all do. Realize that.” “United we stand, divided we can’t stand each other,” she continues. No one cooperates with anyone who appears to be against them. Therefore, body language is key. If your arms are

crossed or you’re backing away, it can signal that you don’t understand the person and are not prepared to help them. The main focus is communication and finding common ground. Somehow, we need to draw out the similarities rather than highlight the differences because differences cause conflict. Strategically picking the time and place of confrontation is important too. “I know it probably sounds like common sense but it’s amazing how many times we don’t do that,” says O’Hara. And finally, always give people the benefit of doubt. Keep an open mind. Instead of judging someone immediately, expect more from them and they might surprise you. “If you’re managing

biz.hk 5 • 2015

Katie O’Hara

The seven step approach

people and you know you’re having difficult conversations with them, instead of saying, ‘You shouldn’t have done that. This is so typical of you’, go in there and say, ‘I know you can do better than this. I know and expect that you can do better things’.”

Golden rules Never tell someone to calm down. “In many ways, what you’re saying when you’re asking someone to calm down is ‘I’m not listening to you’,” says O’Hara. It’s a common reaction to tell an angry person to calm down, but they are not ready to listen and respond positively at that moment. Instead, try to find out the source of the anger in a calm voice yourself.

biz.hk 5 • 2015

Don’t take it personally. It’s hard to do when someone suggests that you are not doing your job properly or don’t understand them. “They might emotionally attack you,” says O’Hara. “Don’t take it personally. They are attacking the corporate organization.” This can be especially useful in the service industry. Listen and be genuine about it. You can pretend to listen, but people can often sense it. Being genuinely curious about what someone is thinking paves the way for smooth communication. Keep emotions out. “This is the hardest one,” says O’Hara. If you aren’t able to do this, the communication won’t work as well. Handling difficult conversations and people requires you to keep those emotions detached.

O’Hara offers seven steps to approaching a difficult conversation. It’s important to follow them in order, she advises. Otherwise, like dialing the wrong phone number, you can’t get through. 1. Prepare what you would like to say. If you know you’re going to have a difficult conversation, prepare. The easier difficult conversations are the ones you know that are coming, notes O’Hara. However, you can only prepare so much as human behavior is unpredictable. “You simply don’t know what kind of response you’re going to get back,” admits O’Hara. “So we can think about some of those golden rules when we’re not prepared.” 2. State the reason for the discussion and keep it short. If it’s about performance, start the meeting by saying, “We’ve come to meet today to talk about how you’re doing performance-wise.” Make sure there are no sandwiches, says O’Hara. It means do not try and make some nice positives for amends just to sandwich the bad news.” Delivering bad news is hard and it’s even harder receiving it. People generally want to hear the bad news first and they will appreciate having it said to them upfront. Do not confuse them by giving them good messages because the value will be lost, advises O’Hara. “But you don’t have to be Donald Trump and say, ‘You’re fired!’ Let’s offer some empathy, dignity, respect and tactfulness when you’re doing this.”

3. Ask the person how they feel or think. Some people might think they’re doing a brilliant job even though you think otherwise. Others might admit they’re not doing a good job. Their response will help you figure out where to start and how to offer your feedback. But make sure not to react with your opinion. “I once had someone working for me whose behavior was very erratic,” says O’Hara. “I called the meeting and said to her, ‘I’m sensing something is bothering you.’ It was like I lit a match. The attack was on me and I wasn’t expecting it.” O’Hara says she became defensive and was unable to move on to the next stage as a result. 4. Probe and listen. Ask and seek to understand why employees don't think you’re managing them well. You need to genuinely want to know the answer because if you don’t, then you can’t help and the conversation will fall apart, says O’Hara. It requires emotions to be kept aside.

5. Acknowledge and say what you feel or think and why. There is an opportunity for you to speak too as a manager. Once the person has had the chance to express one's thoughts, he or she will be more receptive to listening to you. “If you’ve got a difficult person to deal with and they don’t feel like they have been heard yet, they will not be listening to you. I guarantee it,” says O’Hara. “Listen first; your time will come.” 6. Suggest and/or ask for ideas. When approaching a difficult conversation you can prepare for, let the other person lead to a degree. Allowing them lead will empower them, which will make them feel that you are listening to them, explains O’Hara. But then come in at some point to control that. 7. Make small agreements. It doesn’t matter how small the agreement is in the end, assures O’Hara. One small agreement can lead to another.

When faced with objection

A basic technique O’Hara suggests we use when faced with objection is CAP (concern, action/ask, perspective/position). Begin with offering concern that is genuine. This can include empathy, sympathy, apology or acknowledgement depending on what is appropriate at this stage. If you say you understand, make sure you truly have been in the same situation and be prepared for someone to challenge that. After, bring in action or ask if the objection is unknown. Tell the person what you can and cannot do for them. “Most people want to know what you can do for them rather than what you can’t,” says O’Hara. Lastly, offer your perspective or position. Sometimes we bring in our perspectives too soon because we’re trying to justify ourselves. “It has to come in at the end,” says O’Hara. “It will be better heard and better received when it comes at the end.”

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CHINA?

tŝƚŚ ŽǀĞƌ ϰϬ ǇĞĂƌƐ ŽĨ ĞǆƉĞƌŝĞŶĐĞ͕ KƌĂŶŐĞĮĞůĚ ŝƐ ĐŽŵŵŝƩĞĚ ƚŽ ŚĞůƉŝŶŐ ĐŽŵƉĂŶŝĞƐ ƐƵĐĐĞƐƐĨƵůůǇ ĞƐƚĂďůŝƐŚ ĂŶĚ ŐƌŽǁ ƚŚĞŝƌ ďƵƐŝŶĞƐƐ ŝŶ ŚŝŶĂ͘ &ƌŽŵ ĐŽŵƉƌĞŚĞŶƐŝǀĞ ůĞŐĂů ĂŶĚ ƐƚƌĂƚĞŐŝĐ ĐŽŶƐƵůƟŶŐ͕ ƚŽ ďĂĐŬ ŽĸĐĞ ďƵƐŝŶĞƐƐ ƐƵƉƉŽƌƚ ;ƐĞĐƌĞƚĂƌŝĂů ƐĞƌǀŝĐĞƐ͕ ďĂŶŬŝŶŐ͕ ĂĐĐŽƵŶƟŶŐ͕ ƚĂǆ ĂŶĚ ƚƌĂĚĞͿ ĂŶĚ ŽŶͲƚŚĞͲŐƌŽƵŶĚ ǁŽƌŬ ;ŽĸĐĞ ůŽĐĂƟŽŶ͕ ƐƚĂī ŚŝƌŝŶŐ͕ ƚƌĂĚĞ ĨĂŝƌƐ͕ ƉƌŽĚƵĐƚ ƚĞƐƟŶŐ͕ ĂŶĚ ĨĂĐƚŽƌǇ ĂƵĚŝƚƐͿ͕ ǁĞ ŽīĞƌ Ă ĨƵůůǇ ŝŶƚĞŐƌĂƚĞĚ ƐŽůƵƟŽŶ ƚĂŝůŽƌĞĚ ƚŽ ǇŽƵƌ ƐƉĞĐŝĮĐ ŶĞĞĚƐ͘ Ɛ ǇŽƵƌ ƉĂƌƚŶĞƌ͕ KƌĂŶŐĞĮĞůĚ ǁŝůů ĂƐƐŝƐƚ ǇŽƵ ǁŝƚŚ ƚŚĞ ĚĞǀĞůŽƉŵĞŶƚ ŽĨ ǇŽƵƌ ďƵƐŝŶĞƐƐ ŝŶ ŚŝŶĂ͕ ĂůŽŶŐ ǁŝƚŚ ŽǀĞƌĐŽŵŝŶŐ ŵĂŶǇ ŽĨ ƚŚĞ ĐŚĂůůĞŶŐĞƐ ĂƐƐŽĐŝĂƚĞĚ ǁŝƚŚ ĞƐƚĂďůŝƐŚŝŶŐ ĂŶĚ ŵĂŝŶƚĂŝŶŝŶŐ Ă ĐŽŵƉůŝĂŶƚ͕ ĨŽƌĞŝŐŶͲŽǁŶĞĚ ĞŶƚĞƌƉƌŝƐĞ ŝŶ ŚŝŶĂ͘

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TRADE AND INVESTMENT

Interview with Consumer Product Safety Commission Chairman Elliot F. Kaye

biz.hk: Can you tell us about the background of US exports? Kaye: Historically, the United States has been an underperformer when it comes to exports. 97 percent of the Western companies do not export at all. Of those companies that do, only 58 percent export to one market, which tend to be one of our border nations – Canada or Mexico. It was very understandable because we had a dynamic market historically. After the financial crisis, however, I think there was a recognition that we are going to get our economy back. If we were going to create jobs and do it purely by focusing on domestic market alone, it was not going to be sufficient. Our president realized that and launched the National Export Initiative, with the goal of doubling exports in five years. Since then, we’ve had five record years of export growth. In fact, US had the highest level of exports in over 20 years. Those exports created or

sponsored more than 13 million jobs in the United States. Companies that export actually pay better than companies that don’t export. They often pay in excess of 18 percent on average of their wages. So exporting is central to American companies’ growth prospects. biz.hk: How does CPSC do in promoting more US exports? Kaye: We work with other countries in a number of ways. We have representatives in Foreign Commerce at over 75 embassies around the world. We also have Congress Department officials at our US Exported Assistant Centers in over a hundred cities in the United States. Both of those are meant to connect us to both the American companies and to foreign markets to help them better export as well as increase foreign direct investment in the United States. They are our sales force, connecting the Commerce

Department with the clients and opportunities. biz.hk: How is foreign direct investment? Kaye: The United States government never had a whole of government effort to attract foreign direct investment. The president realized that there was an important opportunity to attract investment into the United States and this is why he launched the Select USA Program in 2013. The first summit had around 650 participants. Our second summit [was held] this year on March 23rd and 24th in the DC Area. [There were] 2,500 participants from different markets and every state in the United States. biz.hk: Why do you think the United States represents the best investment destination in the world? Kaye: It is the transparency of doing business in our system: rule of law. We have many of the broadest and deepest

biz.hk 5 • 2015

dollars per year on average. That’s the money that the American consumers can spend and grow our economy. Also, given the diverse strengths in our economy versus the economies in other countries, we expect our economy to grow roughly three percent a year whereas a number of economies are shrinking because of their dependence on oil. That’s going to have an impact on the ability for American companies to export because a lot of markets that have historically grown more quickly are now suffering some real contraction.

financial markets. We have now an increasing attractive cost of energy globally, and have perhaps the best university system that trains people around the world. We have all the pieces in the puzzle. As a former banker, I saw how there were hot emerging market investments over the years. But what we have seen over the past five years is that many of those markets have become more difficult and more problematic. So if you are looking into investment, one of the things you want is stability. You will find that in the United States more than perhaps any other markets in the world. Also, we believe that we have the best and most talented workforce in the world. The combination of all those things makes US the preeminent investment destination. biz.hk: What is your view on the lower cost advantage and the influence of fluctuation in US dollar?

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Kaye: It’s going to have an impact on exports. In the case of strengthening dollars, it for sure will make our products and services expensive to international consumers. However, we continue to see demand in US products and services remain strong. In 2014, we exceeded 2.3 trillion dollars in exports when dollars were strong by then. That is a record. But we need to focus on making trade agreements. Frankly, we are going to have a little bit of wind in our face, as it relates to exports given the strengthening dollars. So that’s why we do everything we can to help our American companies export more effectively around the world by making trade agreements. The decreasing price of oil has a profound impact on economies around the world. With respect to our economy, the decreasing cost of gasoline is putting real money to the American consumers’ pockets in estimates of six or seven hundred

biz.hk: What is the current state of US manufacturing? Kaye: We are going through a bit of manufacturing Renaissance in the United States. So the competitive advantages are: we have the best products and services made by the best workers. One of the things you are seeing is how technology is playing such an important part that manufacturing revival and obviously being a leader in technology globally. So I'm very bullish on manufacturing in the United States. It has been a strong component of the recovery we've seen. biz.hk: Do you have any core message to the business communities in Hong Kong? Kaye: I do want to underscore the importance of Hong Kong as a trade partner in our deep appreciation for the economic relationship we have with Hong Kong. There are roughly 1,400 US businesses with physical presence here in Hong Kong so it’s extraordinary important. Our economies are so interrelated. I recently read that Hong Kong was rated by the Heritage Foundation as the number one in the world for economic freedom and press freedom. It is a dynamic hub that is not just a gateway to China, but a gateway to Asia and to the rest of the world. I am pleased to recognize the important economic relationship and friendship we have with Hong Kong.

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ABOUT ACE IN HONG KONG

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. 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. Its general insurance operation in Hong Kong (ACE Insurance Limited) is a niche and specialist general insurer offering products such as Property, Casualty, Marine, as well as Accident & Health programs for large corporates, midsized commercial and small business customers. For ACE in Hong Kong, 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, the company has built strong client relationships by offering responsive service, developing innovative products and providing market leadership built on financial strength.

Year Established 1919

Staff Size Over 160 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 and ACE Insurance are registered trademarks of ACE Limited.

ACE Life Insurance Company Ltd. (Incorporated in Bermuda with Limited Liability)

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

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 (ACE Life Insurance Company Ltd.) offers a comprehensive array of quality life and medical insurance products and services.

Year Established 1988

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

www.acelife.com.hk 34

biz.hk 5 • 2015

Professional Wills Limited 5/F, 657 King's Road, Quarry Bay, Hong Kong

Key Personnel

Company Activities / History

Matthew Lloyd Director

Professional Wills Limited is a specialist Will writing company in Hong Kong dealing not only with Wills but associated issues relating to estate and succession planning, domicile and inheritance and estate tax. We have many US clients and we well understand the issues relating to US clients resident in Hong Kong.

Year Established

Guardianship

Jessica Park Managing Director

We take care of the appointment of permanent guardians for children which is a major concern for parents who have no family members in Hong Kong. Until the guardians arrive in Hong Kong the appointment of friends or neighbours as temporary guardians provides peace of mind.

Products / Services

Tax / Estate Planning

2007

Staff Size

Will Writing and Estate Planning Tel: (852) 2561 9031 Fax: (852) 2561 0526 Email: enquiry@profwills.com

www.profwills.com

biz.hk 5 â&#x20AC;˘ 2015

Worldwide tax applies to Americans in the event of death but understanding ways to mitigate this and plan effectively is important and we make clients aware of the issues involved. This is all the more complex when there is a US person with a non US spouse. Making a Will brings great peace of mind knowing that everything is organised properly. You will not leave a trail of problems behind you if you take off suddenly and do not come back!

MARK YOUR CALENDAR May Lunch & Learn Workshop: Enhancing Your Organization’s

Leadership Capabilities in the New Century

Mr. Terence Yeung, Managing Director of TACSEN, The Only Authorised Partner of The Leadership Challenge in HK Mr. Terence Yeung will share the wisdom of his own and from world-famous leadership gurus Jim Kouzes and Barry Posner on how to develop and enhance your organization leadership capabilities using ”The Five Practices of Exemplary Leadership”. By the end, you will be able to get four things: -The essence of 30-year research findings on leadership best practices -Understand why many organizations fail to lead by shared values -Key strategies to create a vision that is compelling and motivating to your people -Practical tools to enhance leadership that can be applied immediately Mr. Terence Yeung, has established and managed TACSEN Management Consultants Limited, a corporate training and management consulting firm since 2002, now with presence in Hong Kong, Beijing, Shanghai and Guangzhou Under Terence’s leadership, TACSEN was awarded “Hong Kong’s Most Valuable Companies”, “Most Reliable Corporate Training Services”, “The Best Management Training Company in Southern China”, and “Most Potential Award for HR Service in Greater China” by various prominent media in the Greater China Region. Terence is a frequent speaker in large conferences. With over 20 years of experience in consulting and leadership development, Terence has worked with over 200 leading companies to grow their leaders across Asia.

May Trust Sinks to All-time Low in Hong Kong

Adrian Warr, Senior Director of Edelman’s corporate office in Hong Kong Join us for the 2015 Edelman Trust Barometer breakfast session jointly hosted by the American Chamber of Commerce and the British Chamber of Commerce, assessing the state of trust in Hong Kong among businesses, government, media and NGOs. Following a presentation on the state of trust globally and in Hong Kong, there will be a Q&A session around the findings. Adrian Warr is the Senior Director in charge of Edelman’s corporate office in Hong Kong. He is a corporate communications specialist whose work in some of the world’s best PR agencies has also given him experience in marcomms, internal communications, public affairs and digital marketing. He brings a thorough understanding of integrated reputation management in a digital age. He joined Edelman in 2013 from Portland which won PR Week’s Best Mid-sized Agency award in 2012. Prior to that he worked at freuds where he managed the reputations of some of the world’s best known brands and celebrities. He also spent six years at Hill & Knowlton working with globally renowned professional and financial services clients.

May US Tax Compliance and Planning Issues

for Americans and Others

Peter Guang Chen, Partner, Zhong Lun Law Firm Natalie Fan, Tax Executive, Zhong Lun Law Firm Please join us, as Peter Guang Chen and Natalie Fan from Zhong Lun Law Firm will discuss and provide clarity on the topics of: • Understanding and navigating the complex web of US international tax compliance. • The options available for those who are now delinquent on their US tax compliance obligations, such as the current “Offshore Voluntary Disclosure Program” (OVDP), the substantially revised “Streamlined Foreign Offshore Procedures” program, and the strategy in using these programs. • Tax planning concepts, especially in the international cross-border concepts, from the perspectives of both Americans and non-US persons (examples in both the income tax area and gift & estate tax area will be used). Peter Guang Chen is both a certified public accountant and an attorney with more than 20 years of experience, who is practicing in Hong Kong. Peter has advised multinational companies on their investment structuring, regulatory, and business issues; mergers , acquisitions, reorganizations in U.S., China and the Asia Pacific region. He has represented both companies and individuals to resolve tax disputes with tax authorities in the US and China. Natalie Fan is a certified public accountant with significant experience in US, China and Hong Kong taxation. She advises multinational companies on how to improve tax efficiency in their business operations, and is experienced in preparing US, China and HK tax returns. Previously, Natalie worked with PwC Hong Kong’s tax department for four years. Natalie is admitted to practice as a CPA in Hong Kong. She is a member of the Hong Kong Institute of Certified Public Accountant.

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 Time: 12:00 - 01:45pm (Sandwiches & beverages included) Fee(s): Member: HK$280 Non-member: HK$400

Venue: Hong Kong Club The Harcourt Suite (1/F) 1 Jackson Road, Central Time: 08:00 – 09:30am Fee(s): Member: HK$380 Non-member: HK$450

Email: byau@amcham.org.hk

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Connect ¿ Collaborate ¿ Catalyse

APAC Innovation Summit 2015 Series

24-25 June 2015

Grand Hall Hong Kong Science Park www.apacinnosummit.net

FEATURED SPEAKERS

Gordon Cheng

Dario Floreano

Technische Universität München

École Polytechnique Fédérale de Lausanne

Homayoon Kazerooni University of California, Berkeley

Kay Matzner

Marc Papageorge Robert Riener

Fraunhofer Gesellschaft (IFF)

Spec Sensors

A perfect platform for you to be inspired and to network with industry partners for collaboration opportunities!

Register now for a 20% early bird* discount. * Early bird offer until 31 May 2015 Note: Information is subject to change without prior notice.

Eidgenössische Technische Hochschule Zürich