AmCham biz.hk Oct 2016

October 2016

US-HONG KONG RELATIONS:

BUILDING ON SUCCESS KURT W TONG

US CONSUL GENERAL FOR HONG KONG AND MACAU

INDUSTRY FOCUS:

BUSINESS MANAGEMENT CONSULTANTS & SUPPORT ORGANIZATIONS

JOURNAL OF THE AMERICAN CHAMBER OF COMMERCE IN HONG KONG

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October 2016

Contents

Vol 48 No 10

Publisher

Richard R Vuylsteke

Editor-in-Chief Kenny Lau

Assistant Editor Jennifer Khoo

Assistant Advertising Sales Manager Tom Chan

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COVER STORY

US Consul General for Hong Kong and Macau Kurt W Tong in his first public speech places a great emphasis on the unique arrangement under which Hong Kong has flourished and continued to prosper, reinforcing the “close and friendly” US-Hong Kong relationship built upon a shared respect for certain fundamental freedoms and core values critical to Hong Kong’s success as a global hub for international finance and trade

AMCHAM NEWS AND VIEWS 04 Can’t Open a Bank Account?

Welcome to a new Era of Red Tape

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, 2016 Library of Congress: LC 98-645652 Single copy price HK$50 Annual subscription HK$600/US$90

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With strengthened banking supervision and standards since the financial crisis, it has become almost impossible to open a bank account. Financial exclusion should not be synonymous with the city’s tradition of an open market and ease of doing business

07 New Business Contacts 27 executives join AmCham’s business network this month

60 Mark Your Calendar

COVER STORY 08 US-Hong Kong Relations: Building on Success USCG Kurt W Tong in his first public speech places a great emphasis on the unique arrangement under which Hong Kong has flourished and continued to prosper, reinforcing the “close and friendly” US-Hong Kong relationship built upon a shared respect for certain freedoms and core values

CHINA BUSINESS

14 Managing the Transition: Foreign Business in the New China Between 1949 and 1979, China was an inward and isolated; from 1979 to 2009, it became a destination for foreign direct investment and the world’s factory. The question is: how China will continue to evolve in the next 30 years?

16 The Great Unknown of China It is becoming increasingly difficult to apprehend the impact of China’s changing geopolitical landscape. Christopher Johnson, Freeman Chair in China Studies at CSIS, describes the current state of Chinese affairs in a keynote address

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14 CHINA BUSINESS Between the founding of the PRC in 1949 and the country’s re-opening in 1979, China was inward and isolated; from 1979 to 2009, it became a destination for foreign direct investment and the world’s factory. The question is: how China will continue to evolve in the next 30 years?

TRADE & INVESTMENT Remittance income from Filipino workers overseas has long been criticized as an unsustainable growth model, fueling additional concerns about a national “brain drain.”

Luckily, economic salvation can be found in the nation’s burgeoning business process outsourcing (BPO) industry

18 The New Path of China Despite a modern reputation as “The World’s Factory,” is China on a new path of economic expansion? And how will it affect foreign businesses in China amid a shift toward consumption-driven growth?

20 Collaboration & Competition in the New China The needs of Chinese customers are more sophisticated, and domestic companies are equally interested in seizing business opportunities abroad than they are in foreign direct investment

22 China’s Reforms and Hong Kong’s Role How China has fared in delivering the plans of economic, legal, market and social reform outlined in the Third Plenum in 2013 to improve the quality of life for citizens of the world’s second largest economy

24 Chinese Megacities & Regionalization Urbanization in Mainland China is becoming a form of sustainable development envisioned to create hubs for commerce, culture and education, representing a significant departure from the manufacturing model in place since the 1980s

26 The Chinese Economy Drags On China as a national economy has the potential to improve the efficiency of resource allocation, but a downward trend is likely here to stay, according to Huang Yiping, Professor of Economics at Peking University’s National School of Development

TRADE & INVESTMENT

28 Philippines: The World’s Call Center Capital Remittance income from Filipino workers overseas has long been criticized as an unsustainable growth model. Luckily, economic salvation can be found in the nation’s burgeoning business process outsourcing (BPO) industry

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28 SUSTAINABILITY

Titus Yu, Managing Director (Hong Kong, Macau, Taiwan and Guam), UTC Climate, Controls & Security, explains how technology can make cities more sustainable, people more secure and travel more efficient amid the combination of urbanization and population growth in Asia

ICT 34 Fintech: From Buzzword to New Reality More than just a buzzword, ‘FinTech’ has grown into a reality that is here to stay. AmCham discusses the role of FinTech in Hong Kong, and the city’s larger role in the global FinTech space

38 The Hong Kong-US FinTech Link What are the market opportunities in Hong Kong for offshore FinTech ventures, and what could the city be doing to improve its attractiveness as a destination for direct investment in FinTech?

40 A Homegrown FinTech Industry Before the arrival of offshore FinTech ventures, Hong Kong has to first assess the readiness of its own ecosystem and consider the practical challenges of cultivating a homegrown FinTech industry

SUSTAINABILITY

42 Green Technology for Sustainable Growth Titus Yu, Managing Director (Hong Kong, Macau, Taiwan and Guam), UTC Climate, Controls & Security, explains how technology can make cities more sustainable, people more secure and travel more efficient

INDUSTRY FOCUS

49 Inside Hong Kong’s Commercial Center A close look of a wide range of business management consultants and support organizations across Hong Kong

CHARITABLE FOUNDATION

56 In Honor of Noble Minds

AmCham raises more than HK$115,000 at the annual Charitable Foundation Dinner in an evening of fine dining, music and entertainment

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Board of Governors Chairman Vice Chairman Treasurer

Walter Dias Steve Lackey Owen Belman

Executive Committee Evan Auyang, Sean Chiao, John (Jack) E Lange, Alan Turley, Jennifer Van Dale Governors Donald Austin, Elaine Cheung, Diana David, Sean Ferguson, Robert Grieves, Matthew Hosford, Clara Ingen-Housz, Michael Klibaner, Simon Ogus, Seth Peterson, Anna-Marie Slot, Catherine Simmons, Eric Szweda, Patrick Wu, Lennard Yong Ex-Officio Governor President

Peter Levesque Richard R Vuylsteke

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

Mark Green Diana David Devin Ehrig Lili Zheng Oliver Rust Pat-Nie Woo Virginia Wilson Rick Truscott Cynthia Chow Laurie Goldberg Jim C Taylor Steven Chan Veronica Sze Mark Kemper Peter Liu Benny Lee

Rebecca Harrison Hanif Kanji Gabriela Kennedy Intellectual Property Jenny Wong Chiann Bao Law Jessica Bartlett Margaret Driscoll Pharmaceutical Edward Farrelly Real Estate Robert Johnston Terrance Philips SelectUSA Lili Zheng Philip Cheng Senior Financial Forum Bianca Wong Senior HR Forum Ivan Strunin Taxation Barrett Bingley Trade & Investment Gavin Dow Transportation & Logistics Jennifer Parks Women of Influence Jennifer Wilson Michael Harrington Young Professionals

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biz.hk Editorial

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t is not a question that the global financial system has been subjected to strengthened banking supervision and standards since the financial crisis in 2008, in addition to “strenuous” efforts made to combat money laundering and terrorist financing. At the same time, banks have also become “overly cautious” taking their duty of due diligence and compliance to the extreme following a series of government sanctions and heavy fines.

Here is the bad news: it has become almost impossible to seek such basic banking service as opening an account. Some potential customers are asked “cumbersome questions” while others are made to submit “hard-to-trace old documents.”

And Hong Kong is no exception. It is somewhat ironic given the city’s tradition of financial inclusion and ease of doing business as one of the world’s leading financial centers with a large concentration of international as well as local banks.

The business community, mostly chambers of commerce, overseas companies and start-ups, has been very vocal in voicing the concern of difficulties in opening bank accounts in Hong Kong.

Even existing bank account holders have been asked to provide a lot of information and supporting documents, and are facing the risk of having their accounts closed. Unquestionably, there are cases where it is necessary. But there is absolutely no need to do so excessively with a “one-size-fits-all” approach.

What are we talking about here? We are talking about stringent measures like asking for the physical presence of all the directors and shareholders of overseas corporates in Hong Kong as a pre-requisite for handling their account-opening applications. We are talking about bank requirements like asking their customers to provide a large volume of old information in detail on sources of assets when handling relatively low-risk accounts such as Hong Kong’s very own Mandatory Provident

biz.hk 10 • 2016

CAN’T OPEN A BANK ACCOUNT? WELCOME TO A NEW ERA OF RED TAPE Fund (MPF) and other small-balance accounts.

What’s more worrisome is the impact – a very large impact – on small- and medium-sized enterprises (SMEs) looking to do business in Hong Kong. It doesn’t matter if you are a long-time local resident or an expat because you are still subject to some very stringent requirements which may harm legal and legitimate business establishments. In fact, Hong Kong Monetary Authority (HKMA) has found “the approach adopted by banks to be disproportionate to the risk level of the customers and not in line with the spirit of financial inclusion.”

There is some good news: HKMA has approached banks to understand their processes of account opening and customer due diligence (CDD), and has issued a circular to all banks in Hong Kong noting how the HKMA’s “risk-based” supervisory principle should be applied to account-opening applications and CDD measures for existing customers. And banks are expected to “review their existing measures and adjust them where appropriate for achieving financial inclusion.”

HKMA emphasizes that “when conducting risk assessment, banks should differentiate the risk levels of individual customers in accordance with their backgrounds and circumstances, and apply risk-mitigating and CDD measures proportionately, rather than simply adopting a one-size-fits-all approach by applying a single standard of requirements and procedures to all customers.” And it has been made clear that the “risk-based” approach does not require a “zero failure” outcome.

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The key here is, as noted by HKMA, that Hong Kong as one of the world’s most important financial centers is able to implement effectively essential measures for the purpose of anti-money laundering and counter-terrorist financing in the banking system while maintaining a sufficient level of banking services that is critically important to international business and commerce. Another is to make sure that there are no material failings in those systems.

Indeed, banking services are very much “a part of daily life as the basic necessities of food, clothing, housing and transport.” While banks are business entities and have to answer to shareholders on profitability, there is also the issue of sustainability and social responsibility.

Without a flow of new and existing customers, business is bound to shrink. Banks are also entrusted with the duty of providing a place for savings, facilitating market liquidity and so forth. It is the only way an economy can move forward.

This is not so much about having to strike a delicate balance of any sort; it is about being very strategic and smart about a screening process which can prioritize different risk levels. Yes, it will require more work, and it will cost more over the short term. But it will pay for itself over the long term because it is good for business and because the regulatory environment isn’t going to change any time soon. Financial exclusion should not be synonymous with the world’s freest economy that is Hong Kong.

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20160825-Membership Ad biz.hk Sept 2016-4.pdf 1 25/08/2016 2:50:12 PM

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New

Business Contacts The following people are new AmCham members: AECOM Sylvester Wong Vice President

Eversheds LLP

Paul Moloney Consultant Kirstin McCracken Consultant

All Voice Talent David Pope Managing Director

American Express Kabir Julka VP, Human Resources, Asia

Amherst Executive Search Ltd Paul Curley Managing Director

Cornerstone International Group Sonia Vaswani Managing Partner

Deloitte Touche Tohmatsu Marco Hecker Partner

DTZ Cushman & Wakefield Ryan Balis Research Communications Manager, Research, Greater China

Alfred Hui Global Marketing Manager Jenny Fong Regional Director, Greater China Teddy Ko Managing Director

Google (Hong Kong) Limited

Daniel Gelfer Head of Strategic Relations & Telecoms, Public Policy APAC

Hill & Associates Ltd Brian Norman Managing Director

Ipsos Business Consulting

Skypoint Realty Partners Limited Brett Cameron CEO

Soap Cycling Patrick Davis General Manager

Markus Scherer Head of Consulting, Hong Kong

Cognita Pamela Cherry Admissions Manager Zita Suen Admissions Manager

Singapore Telecom Hong Kong Limited

ThrivinAsia Korn/Ferry International

Serina Wong Global Sector Leader, Wealth Management

Natera Inc

Rae Lee Regional Manager

Philip Morris Asia Limited

Kyla Bottriell Manager, Illicit Trade Strategies & Prevention

Cyrille Jegu Managing Director

Universal Electronic Inc David Chong EVP and MD Asia

Walt Disney Co (Asia Pacific) Ltd Alice Edinger Disney Institute

SGS Hong Kong Ltd Christy Chan Deputy Director Robert Parrish Managing Director

View our other members at: www.amcham.org.hk/memberlist

biz.hk 10 â&#x20AC;˘ 2016

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COVER STORY

US-Hong Kong Relations:

Building on Success In his first public speech since assuming the post of US Consul General for Hong Kong and Macau, USCG Kurt W Tong places a great emphasis on the unique arrangement under which Hong Kong has flourished and continued to prosper, reinforcing the “close and friendly” US-Hong Kong relationship built upon a shared respect for certain fundamental freedoms and core values critical to Hong Kong’s success as a global hub for international finance and trade

By Kenny Lau

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biz.hk 10 • 2016

Kurt W Tong

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S

peaking on the success story of Hong Kong and the existing US-Hong Kong relationship in his first public speech since assuming the post of US Consul General for Hong Kong and Macau in late August, USCG Kurt W Tong placed a great emphasis on the unique arrangement under which Hong Kong has flourished and continued to prosper, and how “we all can work together to build on that success.”

“You don’t have to look far to find many examples of the strength of our relationship and of the ways in which the US-Hong Kong partnership is beneficial for both our societies as well as for the other parts of China,” he says.

“Hong Kong remains the most sophisticated financial center in Asia, where important economic players from the US, China, and other nations congregate to organize, manage and finance investments all around the world.”

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US-Hong Kong links Strengths of the US-Hong Kong relationship include the close and friendly cooperation between the monetary authorities and financial regulatory authorities of the two jurisdictions, Tong notes. In addition, economic ties are supported by strong law enforcement cooperation in a wide range of areas, including drug interdiction and customs security. “This not only benefits both our economies and societies but also makes the rest of the world a safer place as well.”

The logistics capabilities of Hong Kong, with the world’s top cargo airport and one of the top five shipping ports, are big reasons why the US on the other side of the Pacific Ocean remains Hong Kong’s second largest trading partner after Mainland China, he says. “In fact,

Hong Kong is America’s 10th largest export market and a key destination for high-quality US products including US beef and wine.”

Likewise, Hong Kong is China’s primary link for investment flows to the rest of the world, and it is a conduit for over 60 percent of all outbound investment from the Mainland, he also points out. “For that reason, Hong Kong is very attractive for US service providers aiming to facilitate investment into the United States – and we are delighted to help facilitate that investment through our SelectUSA program.”

Beyond economics, Tong says, is the profound people-to-people ties that characterize the US-HK relationship, including the area of education for which Hong Kong ranks 20th in terms of the number of undergraduates studying in the US. Academic and professional exchange programs for US and Hong Kong students and working

biz.hk 10 • 2016

professionals have also had a significant impact, he believes.

“One Fulbright scholar from Hong Kong who did research in the US on prevention of domestic violence told us that her research was transformed from a local concern to a global undertaking. And one of the American scholars who came to Hong Kong in 2015 said it was the best year of his and his family’s life, praising Hong Kong’s educational institutions and international community.”

“We aim to welcome even more Hong Kong students and tourists to America.

That’s why we continue to streamline the visa appointment process,” he adds.

“During my tenure as Consul General, you will probably hear a lot from me about our efforts to expand tourism to the US because this is really important from both an economic angle and a cultural angle and because the US is actually an under-tapped tourism opportunity for people from Asia.”

biz.hk 10 • 2016

Foundation of success What makes Hong Kong so special?

It is all the things that make it a great place to live, according to Tong. “Hong Kong is known worldwide for combining all the excitement and conveniences of a modern cosmopolitan city with a rich Chinese cultural heritage. Hong Kong’s unique geography also makes it special – it boasts a stunning urban skyline, but also beautiful countryside and beaches.”

“And of course Hong Kong’s status as a food destination is well known as well. But there are other, more important things that make Hong Kong special that may not be so obvious, and these are just as critical to Hong Kong’s identity and success,” he says. “Hong Kong’s impressive human resources rival any market in the world. Its smart, motivated young people comprise a

deep pool of talented professionals, and they are a magnet for international business and investment.”

Hong Kong’s strong rule of law, transparency and openness are the basis for business and trade to succeed here, Tong emphasizes. “Everyone says it, because it is true. The independence of the Hong Kong judiciary as well as the objectivity and fair-mindedness of Hong Kong’s economic and financial regulators are critically important to the city’s success.”

The construct of “one country, two systems” is what has made Hong Kong highly successful as an open society, he says. “It is the key framework that makes all this specialness possible and sustainable over time. Not only is it a very unique and special reality, but also a construct that both China’s central government and the people of Hong Kong as well as the United States all aim to maintain.”

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“This does not mean anyone can be complacent. Hong Kong’s high degree of autonomy under the ‘one country, two systems’ construct is something that requires care and attention to maintain,” he continues. “Hong Kong is definitely part of China. But Hong Kong also exists as one of the world’s leading cities, and it would be a great loss to the global commons economically as well as culturally if Hong Kong were to somehow lose its specialness.”

And more importantly, the United States and the people of Hong Kong share an abiding respect for certain fundamental freedoms and certain core values, and these values are as much a part of Hong Kong’s success as its well-deserved reputation for efficiency as a global hub for international finance and trade, Tong stresses. “We share values like freedom of expression, of the press, and of assembly as well as academic freedom and open space for critical debate.”

The record turnout in the number of Hong Kong voters “lining up late into election night” to exercise their freedom to participate in choosing the city’s legislature is a reflection of “how much people here are committed to the idea of democratic participation in politics,” he believes. “I hope to arrange meetings with all 70 Legislative Council members. Our Consulate team is ready to talk about US-Hong Kong relations with anyone, regardless of their political views.”

Challenges ahead Similar to the United States, Hong Kong is facing the issue of remaining economically competitive, Tong points out. “Like many leading international financial centers, Hong Kong is seeking to ensure its future prosperity amid a technological revolution that is reshaping labor and capital the world over. In that context, it is clearly in our shared interest to work together to keep Hong Kong competitive as a regional hub for business, trade and finance.”

“As a highly advanced economy, we need to re-match the US workforce to the demands of recent technologies,

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and make sure that our education system and national infrastructure meet critical needs,” he explains. “One way is by working together to create an environment conducive to innovation, and an example is the Consulate’s Smart Technologies Initiative to help forge trans-Pacific business partnerships offering advanced US technologies to Hong Kong.”

Another key challenge of the 21st Century challenge is the question of inclusive growth, Tong says. “There is real value in sharing ideas and strategies for addressing income disparity and creating economic opportunities for young people. Hong Kong, like the US, is a place of diversity and contrasts, and we have a responsibility to work together to ensure all members of our society’s rights are respected and their voices heard, regardless of economic status, gender, ethnicity or sexual orientation.”

“In a time of global economic uncertainty and increasing income disparity in many countries, including my own, a top challenge for all societies is to provide economic opportunities for young people so that they can feel confident in their futures,” he notes. “And there is work to be done on both sides to combat trafficking in persons and improve the protection of intellectual property rights.”

The US, Hong Kong and other neighboring countries across the Asia Pacific region can benefit “mightily” from continued US economic and diplomatic engagement, Tong highlights. “It is largely a question for the United States, but it also impacts the entire region. One pending piece of business on the top of my mind, of course, is the Trans-Pacific Partnership.”

“Although Hong Kong is not a member of the TPP, it stands to benefit greatly from improvements to the ‘rules of the road’ in the western Pacific for trade and investment and behind-the-border economic regulation, including improved labor practices, environmental regulations, and intellectual property rights protection, as well as a wide range of other rules that require and encourage transparency and accountability.”

“I believe we are all working towards a shared goal of building upon the current success of the US-Hong Kong relationship and that of the great city of Hong Kong,” Tong reiterates. “When faced with any issue on which there is a difference of opinion, solutions are best found when we give the other party the benefit of the doubt regarding their intentions. Cooperation, communication, and listening to one another are keys to success.”

biz.hk 10 • 2016

CHINA BUSINESS

Managing the Transition:

Foreign Business in the New China Between the founding of the People’s Republic of China in 1949 and the re-opening of the Chinese market in 1979, China was an inward and isolated country; from 1979 to 2009, it became a destination for foreign direct investment and the world’s factory for consumables. The question is: how China will continue to evolve in the next 30 years?

With China’s 19th Party Congress in the fall of 2017, it is becoming increasingly difficult to apprehend the impact of a changing geopolitical landscape on MNCs. Is China on a different course of economic expansion in an era of more modest GDP growth? And how will it affect foreign enterprises in a market undergoing a shift from manufacturing to domestic consumption?

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AmCham Chairman Walter Dias

Malcolm Kay of Stamford American School - Hong Kong

Sanjeev Chatrath of Thomson Reuters

Platinum Sponsors

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know what’s going on is very small, and sometimes they don’t even know what is going on.”

On the global stage

Christopher Johnson, Senior Adviser and Freeman Chair in China Studies, Center for Strategic and International Studies (CSIS)

The Great Unknown of China

By Kenny Lau

W

ith the upcoming US elections in November and China’s 19th Party Congress slated to take place in the fall of 2017, it is becoming increasingly difficult to apprehend the impact of a changing geopolitical landscape on foreign businesses with vast commercial interest in the markets of China. That’s because the current state of Chinese affairs is relatively opaque and unpredictable today, Christopher Johnson, Freeman Chair in China Studies at CSIS and a former China analyst for the US government, said in a keynote address at AmCham’s China Conference.

“In past administrations, [including those of] Jiang Zemin and Hu Jintao, it did not require a lot of insight – and certainly not classified intelligence – to have some sense of what was going on inside the system, and things seemed to be pretty predictable on certain trajectory,” he notes. “Under President Xi Jinping, this has become much more difficult. The number of people who actually

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The recent G20 Summit held in Hangzhou, China was an opportunity for China to present President Xi’s credentials as an emerging global leader, and not much in the way of real substance, Johnson points out. “That is very much the message meant to be conveyed in the G20, and that is exactly how they wanted it. But [there are] a few areas where I think at least the potential for some progress was made.”

“The general agreement among the G20 participants to forge a comprehensive and integrated narrative for strong, sustainable, balanced and inclusive growth is clearly a sign that major world leaders understand the challenges in the global economy,” he says. “There is a sense of willingness to work cooperatively and in an integrated fashion to try to smooth out the difficulties that we are seeing in the global economy.”

The issue of the global financial architecture, however, remains a problem, especially after a year of market turbulence in China where volatility was most apparent in the summer of 2015 and again in the beginning of 2016, Johnson says. “China did a very effective job in making sure that those discussions did not focus solely on China and that China was not to be blamed for a lot of these key structural problems in the global economy.”

“While China did not succeed with their ultimate goal of keeping out all mention of the issue of overcapacity [in the global supply chain], it did manage to have language that basically blamed a significant portion of it on weak global demand, rather than China as the purveyor of all of these overcapacity,” he adds.

One of the key takeaways of the G20 meeting is the notion of guiding principles for global investment policy-making, Johnson highlights. “It does seem that we have an effort by the G20 now to create some rules for inbound investment and trying to create a level playing field among various players.” But it is a challenging environment for foreign direct investment, partly due to a shift in mindset with regard to FDI among China’s top leadership.

That is, in the past China would take as much FDI as it could get; today, foreign firms presumably need China’s markets much more than China needs FDI, Johnson explains. “It suggests that the Chinese government sees tremendous headroom to push foreign companies to make concessions, and we are seeing this across a whole range of sectors.”

“It doesn’t mean it is time to leave the Chinese market, and there is still tremendous opportunity there,” he stresses. “But it is important for firms thinking about investment in China to go in with their eyes open and to understand China’s ambitions. It is about designing a strategy whereby you seek to maximize your

biz.hk 10 • 2016

opportunity. It is also about understanding China’s domestic challenges during this transition and aligning with China’s policy direction.”

Foreign policy

Domestic politics

Contrary to keeping a low-profile internationally while focusing on domestic affairs, China has taken a more hawkish stance in recent years when it comes to foreign policy, particularly with its neighboring countries. “And now we have this greater emphasis on activism, despite some confusion with regard to how they are supposed to be active internationally,” Johnson points out. “But I do think we’ve seen a lot of changes in their behavior, and depending on how you look at it, this can be seen as having backfired.”

It is often suggested that China’s relations with its immediate neighbors are currently worse than they were in previous years, he notes. “The heavy push into the South China Sea and some of the other policies seemed to have irritated both those relationships and increased the demand for US security presence in the region. But it is a little too early to assess the effectiveness of this policy.”

“The reality is that what was controlled by the Philippines prior to 2012 is now controlled by China, and there were no consequences of any kind. They are trying to create maritime strategic depth, and they are sending a message to the region and to the US that they intend to operate in these areas with their military at times of their choosing. They have been very successful with a strategy whereby they walk right up to the line triggering some kind of formal US response, but then they know where to stop.”

“This is going to be a huge challenge for the next US president because at the end of the day senior US officials have to make decisions whether we’d go to go to war with a nuclear power over some rocks,” he adds.

“If the US wants to dissuade Chinese policy in that direction, it may have to start thinking asymmetrically about policy responses and about different areas in which we might want to signal our displeasure with China.”

China’s relationship with the US, while challenging at times, has been reasonably good in the past few years, Johnson believes. “The Obama administration deserves a lot of credit for the collaborative efforts with China on many global issues. My own concern is that the underlying tensions in the relationship are now shifting from the security issues to the economic issues. Disputes over market access are going to be a real focus and will come to the fore rather quickly.”

“The impending disaster on TPP creates real problems for US influence out here in Asia,” he cautions. “And it is not looking good. In many ways, it will be the biggest gift the US could possibly give to China in terms of the propaganda that the US is about military and stirring up trouble in the region instead of global trade and economic growth.”

Since China’s economic reform and open-door policy initiated by Deng Xiaoping in the 1970s, Chinese leaders – except in extreme circumstances where they thought the regime was threatened – had generally been guided by a sense of pragmatism with a focus on economic growth and development. It is a protocol superseded decidedly in the current era, Johnson believes. “Politics are starting to displace that traditional pragmatism.”

“President Xi is a traditional Chinese leader and is very much someone who thinks about the kind of classic axiom in Chinese politics – which is people first and then policy,” he suggests. “He has a definitive plan for what he would like to see coming out of the Party Congress, making sure he has control over the incoming Politburo, especially the 7-member Standing Committee of the Politburo.”

Recent public events have also implied a level of feud among Chinese policymakers. “What I find striking is that two major meetings – Central Financial Work Conference and Central Economic Work Conference – did not occur over the summer. And it tells us there is a lot of disagreement on policy behind the scene,” Johnson notes. “Traditionally, Chinese leaders tended to project an image of unity, no matter how much they disagree internally.”

“This plays to President Xi’s political strategy where he can push very aggressively, and it largely seems to be working,” he explains. “President Xi’s anti-corruption campaign continues to roll along, largely without slowing down. We can expect to see this continue through the next Party Congress. My sense is that if he gets his way, he will in effect rebuff a lot of the so-called norms or rules that they have been following in the past cycles of [leadership] turnover.”

“Typically, we would expect a successor to be identified at the mid-cycle Party Congress during a leader’s ten-year tenure, but it might not happen next year,” he says. “It doesn’t mean he’ll declare himself king for life; it just means that in the second half of his tenure he feels he’ll need as much power as he can get to deliver on the agenda which came out in the Third Plenum in 2013.”

Secondly, President Xi will likely take the initiative to adjust either the current size or composition of the Standing Committee of the Politburo, Johnson expects.

“We could see him make some effort to beef up other party bodies such as the secretariats and bring some new blood for the Party Congress in 2022 where he may or may not stay as General Secretary. I certainly don’t think he has made that decision, but this is putting a lot of pressure on the system.”

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From left: Kevin Sneader of McKinsey & Co, William Fung of Li & Fung Ltd, Ryan Stork of BlackRock, and Kenneth Hitchner of Goldman Sachs Asia Pacific

The New Path of China

By Kenny Lau

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etween the founding of the People’s Republic of China in 1949 and the re-opening of the Chinese market in 1979, China was an inward and isolated country which had fallen way behind the rest of the world; from 1979 to 2009, it gradually became a destination for foreign direct investment and ultimately the world’s factory for consumables.

The question is: how China will continue to evolve in the next 30 years, particularly from the perspective of foreign businesses?

“China in modern times seems to operate in cycles of 30 years: the world basically lost China until the opening in 1979; and we are all familiar with the story of incredible Chinese economic growth in the following 30 years,” says William Fung, Group Chairman, Li & Fung Limited. “In 2009, we saw another major turning point – wages of some 800,000 workers at Foxconn were doubled because it was thought to be the cause of a series of suicides among workers in the winter of 2009 and spring of 2010.”

“It was puzzling because some like that does not happen in China unless the All-China Federation of Trade Unions – which is generally more pro-employer and is there to make sure that FDI is not scared away –

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says it is ok,” he points out. “The fact that it happened signals a change of direction, and China is on a different course of economic expansion. That is, domestic consumption as an engine of growth.”

The dream of reaching Chinese consumers among foreign enterprises was never realized in the previous 30 years, Fung notes. “China never opened up its domestic market, but it is now ready to do so. It is the second promise of China that from 2009 to 2039 it will become the world’s largest consumption market. But it will take a long time because China is a US$10 trillion economy compared with the US at US$18 trillion, with per capita income of only one-seventh of the US.” “It became very clear when China formulated its 12th Five-Year Plan that it was going to kick-start the consumption market,” he says. “While China has such a big and diverse economy, its five-year plans make it easier to navigate because they often keep strictly to the plan. The general direction is very clear. The track record has been pretty good, and they’ve only missed a couple of times during high volatility.”

Despite current volatility, “I am actually optimistic about Chinese growth, but China will not make six percent growth on consumption alone; investment will make up the difference,” he adds. “And investment will take a different turn: instead of building more steel mills, China will create public good in terms of anti-pollution, clean air and water, and food safety – and these are what people want. The emphasis has shifted quite dramatically.”

Economic enablers The Chinese economic model of the past 30 years has evolved on a scale and at a speed that are largely

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unprecedented. The growing story of mergers & acquisitions (M&A) in China is simply “mind-boggling,” says Kenneth Hitchner, President of Asia Pacific ex-Japan, Goldman Sachs, highlighting the growth of M&A in China from US$73 billion to US$781 billion in just ten years.

“That is a ten-fold increase at a time when the global M&A market was basically flat. Just last year, it was a 55-percent increase over 2014,” he points out.

“Right now, China is 21 percent of the global M&A market. It matters to this ongoing shift because M&A is an enabler through sourcing new technology, management practices, market expansions, and business consolidations.”

“Although this gets characterized a lot in China’s state-owned enterprises (SOEs), I can tell you it is so much more than that,” he continues. “A robust M&A market actually allows companies to flourish on the frontend. In China’s case a circulatory system has to be there to create the shift in this path, to foster both the new economy and the cleanup of the old.”

Nevertheless, China is also facing a number of challenges, including the mounting levels of debt which are not about to fall dramatically any time in the near future, says Ryan Stork, Chairman, Asia Pacific, BlackRock. “While there is a desire to stabilize or perhaps even lower the level of debt, there will be a general trajectory of higher debt levels, and it will manifest itself in different markets.”

Another key issue along China’s new path of growth is the need for a more diversified asset profile, he points out. “Comparing the capital market relative to the investment market, we see a need for diversified capital investment opportunities in China where it is now principally cash, real estate, A shares, and domestic equity markets.” In comparison, the US is a US$65 trillion capital market, a US$40 trillion investment market, and makes up about 20 percent of global GDP; the numbers for China, respectively, are US$13-14 trillion, US$2 trillion, and 15 percent.

A key focus over the near term is about the quality of growth as opposed to the quantity, Stork says. “It will move from hard manufacturing to improving the social elements of the individual in China – whether it is healthcare, education, or similar types of investment. It is also consistent with that construct of exchange of capital flow between international markets and China.”

The current market Consumer confidence, and hence spending, in China is largely affected by the level of household disposable income and the willingness to spend, Fung notes. “Household income is certainly growing, but people are still fairly uncertain about the economy.

There is a lot of problems with state-owned enterprises,

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and they employ a lot of people.”

“But I would also say that while the willingness to spend is not that great, China has advanced significantly in e-commerce and sales on the Internet, and how it has reached consumers online,” he adds. “And MNCs are shifting from making China a base of production to the focus of selling consumer products to China, but the extent China welcomes foreign enterprises has softened in recent years. It is not unusual to have difficulty when you are trying to break into any domestic market.”

The degree of difficulty is somewhat industry-specific, Hitchner says. “Some will have better access; others won’t. It is a very natural tension in that China is trying to protect and nurture its own industries and to bring to the country the expertise and capability they don’t have. From our perspective, we’d like to have full access to the Chinese market, which is the only market in where we don’t own our entity and are only a minority shareholder.”

“We need to recognize that there are protected barriers in China to allow real interesting companies to be nurtured. We are seeing a first generation of these companies, and they will continue to thrive in what’s not a completely open market,” he says. “I know it is not big enough yet relative to the overall economy in China, but this new economy is very real and is growing very fast.”

And many of the financial services initiatives between China and Hong Kong, including the opening of the fixed income market, stock connect programs with Shanghai and Shenzhen, and exchange of funds, will have further widen access to the China market.

“This is a journey with all of these steps, which we may not agree in terms of the pace they are happening, but as a buyer of global liquidity around the world, here is another growing market,” Stork believes.

“We will see the market become more efficient as it becomes more global and more liquid,” he says. “The overall performance of the A shares market over the past 12 months, for example, declined because of deleveraging but also because the market is trading among itself.

The desire or the need for long-term diversified capital to make the market two-way is not only healthy for the local markets but also that they function properly as they grow.”

The risk, though, is a precipitous decline in growth and a “quick and decisive” reversal of financial reform, Stork cautions. “If that happens, it could set us back dozens of years, not a couple of years. If the RMB depreciates severely, for example, that’ll bad for China and the whole planet. It’s not just based on China’s actions but those of central banks across the world in the ramification of what global currencies look like and whether it ends up being a race to the bottom.”

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From left: Jeanette Chan of Paul, Weiss, Rifkind, Wharton & Garrison LLP, Stephan Kothrade of BASF, Steve Mullinjer of Heidrick & Struggles, Tom O’Reilly of Rockwell Automation, and Robert Grieves of Hamilton Advisors Ltd

Collaboration & Competition in the new China

By Jennifer Khoo

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ver since Deng Xiaoping opened China’s doors to the world in 1978, the nation’s economy has grown from strength to strength. Foreign businesses raced to take advantage of China’s cheap manufacturing costs in exchange for Western investment and technical expertise, cementing China’s modern reputation as “The World’s Factory” for decades to follow.

Today, the situation is different. China’s market has matured. The needs of Chinese customers are more sophisticated, and domestic companies are equally, if not more interested in seizing business opportunities abroad than they are in foreign direct investment (FDI).

As the Chinese carve out new roles for themselves in the global economy as suppliers, business partners, collaborators and customers, MNCs have a fresh set of opportunities and challenges to consider when doing business in, and with, the new China.

Made in China 2025 Over the last 30 years, low-cost manufacturing and capacity expansion have formed the building blocks of China’s economy. Today, though the needs and ambitions of the nation have become more sophisticated, China’s manufacturing sector will always be a pillar of its success, says Tom O’Reilly, Asia Pacific President of Rockwell Automation.

Last year, the Chinese government unveiled its Made in China 2025 strategy, which aims to propel the nation’s manufacturing sector to a world-class standard via the application of technology, by 2025. The wheels are already in motion. More Chinese companies have started to

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leverage new technologies, IoT (Internet of Things) and connectivity to boost the efficiency and transparency of production processes, particularly within the country’s ill-reputed food industry.

For example, a number of Chinese manufacturers of infant formula have already partnered with foreign companies to develop IoT-enabled track-and-trace solutions for their products – from supermarket shelf, to factory, to dairy farm. O’Reilly sees major opportunities for MNCs in this space to provide the “tech levers” and industry-based expertise that Chinese companies may currently still lack.

Where global innovation is concerned, China is still a work in progress. Although China is already a world leader in terms of cost and market driven innovation, it lags behind in terms of engineering and original technological breakthroughs, notes Steve Mullinjer, Regional Leader of Asia Pacific at executive search firm, Heidrick & Struggles.

“The question is, in the next 5-10 years, will China emerge as a global leader in tech innovation? The data suggests it will,” says Mullinjer.

China spends more than US$200 billion per year on R&D and innovation globally, second only to the US; it produces around 30,000 science and engineering PhD students each year, and is among the top three global filers of international patent applications after the US and Japan.

But perhaps most telling of China’s commitment to global tech leadership are the actions by some of its national champions, says Mullijer. In 2015, Chinese telecom device maker Huawei invested US$9.2 billion in R&D, amounting to nearly 15 percent of its annual income, more than the US$8.1 billion Apple reported spending.

The data is certainly impressive, but the reality is that China has no choice but to make innovation a national priority. According to a prediction made by IMF economists in 2013, China will hit what is called the “Lewis Turning Point” sometime between 2020 and 2025 – the point at which China “moves from having a vast supply of low-cost labor to a labor shortage economy.”

In other words, it is the point when a production-based economy like China loses its cost advantages, says Mullinjer. To avoid this scenario, the transition from a production-based to a knowledge-based economy isn’t only desirable, but necessary.

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A tilted playing field Using a football analogy to explain the market conditions in China, Mullinjer says, “China is a tilted playing field, and foreign MNCs are at the lower end of it. In the early years, foreign MNCs got early runs on the board and experienced fantastic growth, simply because the China team was inexperienced, and the rules of the game weren’t clear.

Fast forward to today – the market is mature, the Chinese are still fielding their B-team, they aren’t yet playing in A-division, and they’ve got a referee that’s biased with the rules against the MNCs,” he adds. “It’s not a game the MNCs can win, so they need to play a different game.”

Mullinjer advises MNCs trying to break into the Chinese market to align with the Made in China 2025 plan.

There will be industry sectors that come in and out of favor. Foreign companies should study these and time their market entries accordingly, to maximize chances of success. For example, traditional sectors like steel, cement and agriculture are areas which haven’t been very profitable recently. The pharmaceutical and technology sectors on the other hand, are currently booming.

Where talent is concerned, Mullinjer advises MNCs to build “globally competitive and diverse” teams on the ground in China. But this doesn’t necessarily mean localization, nor does it imply diversity in an ethnic context, contrary to many modern-day hiring trends.

Rather, it is about training western senior executives to be China-savvy, and to promote diversity in the context of thought, at an organizational and individual level, Mullinjer believes, adding that MNCs should adopt the risk taking mindset of domestic firms, which is the willingness to experiment and “make mistakes fast.”

Collaboration, not competition Stephan Kothrade, President Functions Asia Pacific, President & Chairman Greater China at chemical manufacturing company BASF, says that MNCs shouldn’t feel threatened by competition from a stronger China and that as Chinese companies become more sophisticated, they also become better partners, better collaborators and better customers.

From Kothrade’s experience, the most interesting opportunities have arisen from meeting domestic needs of sustainability. The situation in China today is that consumers are becoming more demanding and expect a better quality of life – be it fresh air, clean water, or safe food, particularly amid all the scandals and health concerns associated with food production in China.

Supported by more robust Chinese regulations and the government’s stricter approach to law enforcement, the goal of sustainable development is becoming more attainable than ever. This has created many opportunities in the chemical industry for both MNCs and local firms.

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“Sustainable development is indeed now business development in China,” says Kothrade.

For example, BASF partnered recently with Kingenta, a Chinese fertilizer company, to produce a novel type of fertilizer product for the Chinese market which significantly reduces soil pollution from nitrogen run-off.

Partnerships like this can address China’s need to produce high-quality food to feed its growing, health-conscious population, while minimizing environmental impact at the same time, says Kothrade.

Jeanette Chan, Managing Partner of China Practice at law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, spoke about opportunities for Chinese-foreign collaboration from a media perspective. “As Chinese consumers become more wealthy and the need to improve their lives increases, so does their demand for premium [media] content, to see what’s out there in the world,” she says.

Demand for premium content is a two-way street. In the new paradigm of China, “Xi Jinping also wants to ensure that Chinese culture is known outside of China.

The country now also has a need to export premium content to the rest of the world,” Chan says. However, the Chinese understand that they are not naturally good storytellers or media scriptwriters as compared with their western counterparts, and it presents MNCs with another avenue for collaboration.

Practically speaking, aside from patience and investment, O’Reilly says there has to be a definitive need in the market to make a successful case for Chinese-foreign partnership, particularly with regards to technology.

“You may have a successful product line in North America or Europe which may not really satisfy the same need in China,” he points out. “The market has matured, the companies have matured, so your technology had better be world-class. Sometimes MNCs fool themselves into thinking that Chinese companies would want their technologies which may not be world-class.”

Mullinjer recommends being open to partnership opportunities with Chinese companies in markets outside of China, as foreign firms are not structured to compete effectively in highly regulated Chinese environments, and will never have an equal footing on China’s “tilted playing field.”

As China is currently in the middle of an important transition into a more sustainable growth model, Kothrade says that the current period of sluggish economic growth it is experiencing is only temporary, and we can still expect China to grow much faster than all the other established economies in the medium-to-long term.

Regarding competition versus collaboration with the new China, Kothrade says that competition is everywhere, and all companies face the challenge of staying ahead of the curve, regardless of which market they are in. Consequently, he believes that we should instead focus on opportunities for collaboration, and advises MNCs to adopt a sanguine outlook. “There is enough room for both of us,” he says.

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From left: Tao Wang of UBS Investment Bank, Michael Falcon of JP Morgan Asset Management, Mark Austen of ASIFMA, James Quinnild of PricewaterhouseCoopers, and Lisa Jucca of Thomson Reuters

China's Reforms & Hong Kong's Role

China, whether it’s risks or not, such as capital outflows, provide additional opportunities for Hong Kong.” It is a shared optimism among her fellow panelists, although they have different visions of how opportunities and risks will play out for businesses in Hong Kong.

By Nan-Hie In

China’s financial market

hina’s Third Plenum in 2013 outlined sweeping economic, legal, market and social plans to improve the quality of life for citizens of the world’s second largest economy – a goal to be achieved through continuous restructuring of a largely state-led economic system and opening up to be a more open, market-friendly economy. How China has fared three years later in delivering these promises is the question for one of the panel discussions at AmCham’s China Conference this year.

Changes are happening, and some are taking place at a faster pace than others – from inertia on State Owned Enterprises (SOE) and fiscal reforms to significant advances in the financial sector, according to the panel of experts. For instance, China has made enormous progress in the financial sector as part of its current journey of economic reform, notes Tao Wang, Chief China Economist and Co-head of Asia Economics at UBS Investment Bank.

Those, she says, include greater access to the markets of Mainland thanks to Shanghai-Hong Kong Stock Connect and the upcoming Shenzhen-Hong Kong Stock Connect; developments in the domestic financial markets such as the liberalization of interest rates last year; the internationalization of the RMB with the currency’s inclusion in the International Monetary Fund’s basket of currencies known as Special Drawing Rights.

“I’m not saying all these things are positive as there are risks associated with the [development of] these areas as well,” Wang explains. “All these changes we are seeing in

One of the policy changes is the greater access to the domestic bond market. Earlier this year, the People’s Bank of China reduced the red tape for China’s interbank bond market (CIBM) by permitting a much broader spectrum of overseas financial institutions direct access to what has now become the third largest bond market in the world, valued at over US$7 trillion.

In the past, only selected categories of the investment community could participate in the Mainland’s domestic capital market through programs such as Qualified Foreign Institutional Investors (QFII) and its RMB equivalent (RQFII), and schemes are tangled with quota limits, approval requirements and other administrative requirements.

“I believe there is genuine desire from decisionmakers in Beijing and across the country to use capital market pressures to help drive construction [in this sector],” says Michael Falcon, CEO of Asia Pacific, Global Investment Management, JP Morgan Asset Management, calling these reforms and restructuring of the sector “impressive.”

Although it has been an encouraging development, it has not dissipated worries, particularly on the legal front with uncertainties in investor protection for scenarios such as bond default. “We need to understand the rule of law, the rule of credit, what bankruptcy means in China, and the development of structures for distressed or worse debt,” Falcon stresses, noting areas where China is less developed than other markets such as that of the US. And it will take time to make a liquid and well-functioning market. In spite of much public concern over China’s

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slowing economic growth, volatilities in the market and the over-handed measures in the Chinese stock markets, many are still undeterred because China remains too large and important of a market with a GDP still growing this year. It is “almost half a trillion dollars of wealth creation in terms of economic output,” Falcon notes.

While external and internal shocks to the Chinese economic system, including global black swan events, remain probable, the demand – and hence opportunities – for asset investment and management in China are not to be taken lightly when there are demand worth “tens of billions of US dollars” from Chinese individuals and companies for outbound investment regionally and globally.

The current financial reforms in China are a balancing act: while reforms are shaping up to lead China into the next phase of economic development, strict adherence to central policy planning is factor which has contributed to the challenges China is facing. The target of maintaining 6.5 percent annual GDP growth up until 2020 in the current environment can only be achieved through debt, explains Mark Austen, CEO of ASIFMA, hence his bearish outlook in the short term (but bullish on investment and reform).

China’s mounting debt has been grabbing more headlines lately. Financial watchdog Bank for International Settlements recently released a warning that the Chinese economy could face a calamitous banking crisis in three years, citing the credit-to-GDP gap at 30.1 percent (well above the 10 percent level that signals banking risks) and debt at 255 percent of China’s GDP. According to Morgan Stanley’s macroeconomist Ruchir Sharma, China’s “explosion of debt” is reminiscent of the peak of the US housing bubble in 2007-2008, when America generated US$3 of debt to fuel US$1 GDP growth. Today, China needs to generate US$6 of debt to create US$1 of GDP growth.

“If you look at history, any economy in this situation with this level of debt and pace of growth have all faced some kind of hard landing, the question is, what extent is that hard landing?” Austen says. He hopes China’s leader will revise the growth target to a more manageable level so that the slowdown will be a smoother transition.

Impact on Hong Kong As China’s reforms continue, Hong Kong’s prominence as the main conduit to the development of China will likely diminish as evident in the decreasing dependence on the city as an intermediary and gateway to the global economy, says Austen. He predicts the link-up such as Shenzhen-Hong Kong Stock Connect may cease to exist in a few years as investors will by-pass these inefficient models layered with additional costs.

“I’m certain that is where China is going to end up in three, five or ten years as I think these links are temporary measures,” he says, adding that the further opening

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up of China’s bond market was made easier for the global investment community to access these products without having to go through Hong Kong.

As direct investment access to China broadens, Hong Kong must redefine its future role as it did from being a fishing village more than a century ago to a top global financial center today, Austen believes, suggesting Hong Kong play a stronger asset management role for China, become a key provider of dollar or euro-financial products to fulfill China’s demand to hedge against yuan risks, or transform itself into a derivatives hub the way Chicago has pioneered for decades.

“Why can’t Hong Kong be the Chicago to Shanghai’s New York?” he asks.

Wang concurs and says that investable household savings in China is around US$15 trillion, and if 10 percent of that amount is diversified overseas, that is US$1.5 trillion of foreign investment. “Hong Kong can play a big role in keeping some of the money in Hong Kong as asset managers,” she recommends.

On the status of the city’s future role, however, Wang says it all depends on how fast China will fully open its capital and financial markets, predicting that these changes will be slow due to the nation’s soaring debt problem. “[China] does not want to fully open [the markets] yet because money could quickly rush out and because you need that liquidity to help gradually resolve the debt issue and beef-up the financial system.”

The city will also enjoy its competitive edge for some time thanks to its strong legal system and protection of property rights – areas where China still needs time to develop, Wang explains.

James Quinnild, Financial Services Consulting Leader at PwC Hong Kong, believes Hong Kong still holds key advantages through its sophisticated business practices and depth of finance talent. However, as a financial technology innovations hub, he urges Hong Kong to do more to out-compete neighboring rivals.

“It was nice to see [Hong Kong Monetary Authority’s Chief Executive] Norman Chan announced the FinTech sandbox earlier thbut Hong Kong has to be really aggressive in adopting, encouraging and enabling financial technology so it is not just a window into China but a hub for the region,” he says.

The “sandbox” scheme permits banks to experiment new technologies without the need for regulatory compliance and is a part of the city’s effort to level competition in the area of FinTech with Singapore and other markets.

Another suggestion is to reduce barriers to doing business in the territory as Quinnild cites media reports of difficulties for companies to set up a bank account.

“There’s great opportunity for Hong Kong to play a much more focal role in having a safe and secure technology-enabled financial market that has opened up from a capital market and asset management perspective.”

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rbanization is a key policy in Mainland China, and because of China’s large population and scarcity of land and water, megacities – and cities conglomerate into mega regions – are a form of sustainable development envisioned to create hubs for commerce, culture and education, representing a significant departure from the manufacturing model in place since the 1980s to advance the Chinese economy.

Identified by China’s National Development and Reform Commission, ten mega regions in the country will cover around 20 percent of China’s total area, include half of the national population, and account for 52 percent of the national GDP. The mega regions taking shape, including the Bohai Economic Rim in the north, Yangtze River Delta in central China, and Pearl River Delta in the south, are expected to be the economic engines driving the country.

The Pearl River Delta, according to a World Bank report, has already overtaken Tokyo to become the world’s largest urban area in both size and population. This megacity – covering a significant part of Mainland’s manufacturing heartland – forms a mega region where Hong Kong and Macau are included with the high-speed rail linking Hong Kong and Guangzhou as well as the Hong Kong-Zhuhai-Macau Bridge.

The development of megacities in China is here to stay, and the parameters of megacities and mega regions go beyond just physical construction but also include human and social links, notes Andrew Weir, Global Chairman of Real Estate and Construction, Regional Senior Partner (Hong Kong) and Head of Capital Markets at KPMG China.

“Southern China is one potential megalopolis,” he says.

“The more often the community in Hong Kong articulates the central benefit of integration with southern China, the more we lobby, communicate and share strategies and seek collaboration across the border, the better the chance for the development of a mega region.”

roads and bridges. We will continue to advance Hong Kong as the hub for Pearl River Delta.”

“Connectivity also encompasses telecommunication and ecosystem linkage, and we need to look at ways to develop mega regions into a healthier place to live,” he says.

“Quality of life is vital. This requires better healthcare and recreational facilities. We also need to focus on ways to make dense living environment more sustainable, and address problems of air and water quality, waste treatment and potential threats such as terrorism, and natural disasters.”

Public transport is an essential component in the infrastructure that drives the growth of cities. Lincoln Leong, CEO of MTR Corporation, says his company is active in many mainland cities, including the capital. Beijing now has over 600 kilometers of metro lines which will reach 1,000 kilometers by 2020. “We started with one line in Beijing. There are now four. This is a trend across China.”

Another trend in China, Leong notes, is the value capture through MTR’s rail and properties business model, which the company pioneered in Hong Kong in the 1980s.

In Shenzhen, MTR owns properties above the train depot, and it has property development above a metro station in Tianjin. “Our strategy is to grow together with the cities. We also look at city clusters selectively. We expand our product delivery in some cities and expand into locations adjacent to the cities we operate.”

The rise of Chinese cities presents a huge opportunity: apart from well-built infrastructure and continuously improving environment, sustainability hinges on a healthy flow of capital both domestically and from abroad. Ben Way, CEO of Macquarie Group Asia, likens China’s development of megacities to the rapid urbanization of the 1920s in the US. The process of urbanization brings along the rise of entrepreneurship and innovation that will require capital to match the scale of growth.

“The next ten years will be exciting,” Way says. “We facilitate urbanization and identify the deficit of infrastructure and capital. We look for ways to bridge the gaps, and have scanned China by province, city and sector. For instance, there was a massive deficit of water infrastructure because it failed to keep up with the rapid urbanization, and the government wanted to rectify it. It needed capital.”

One of the biggest challenges is the allocation of credit in an economic system where the government accounts for 75 percent of debts but only 25 percent of the overall economy, he adds. “We need to address the access to credits and capital within different groups to enable cities to grow quicker.”

A holistic approach

The human side

The World Bank has indicated that by 2030, 70 percent of China’s population will be in cities. The challenge is to make megacities sustainable and resilient, believes Sean Chiao, President for Asia Pacific at AECOM. “The connectivity needs further improvement, and it means more than

In China, around 600 million people currently live in cities and towns, and another 200 million will be urbanized in the next 20 years. This is all by design: it is a government policy, Yan Xuan, President for Greater China, Nielsen, points out. “By our forecast, 75 percent of urban households

Chinese Megacities & Regionalization

By Wilson Lau

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From left: Sean Chiao of AECOM, Lincoln Leong of MTR Corp, Ben Way of Macquarie Group Asia, Yan Xuan of Nielsen, and Andrew Weir of KPMG

will become middle-class by 2025. There is huge demand for consumer goods, but not all branded consumer goods are accessible. It is an opportunity, but producers of consumer goods need to develop ways to reach consumers amid the urbanization.”

“Our data shows that over 150 products are called ‘cola’ in China but Coca-Cola and Pepsi are not included,” he says. “It tells us that a majority of consumers in China do not have access to branded goods. While e-commerce is going over the roof in the country, brick-and-mortar shops are still important. In 2015, over 10,000 shops of convenient store chains were opened, registering an 11-percent growth.”

Property developers should think of building destinations for families and creating “experiences” to draw crowds into malls because e-commerce is serving a growing chunk of the market, Yan suggests. In addition, “premium” is a growing trend among the rising urban middle class in China where personal income growth was around eight percent in 2015 and companies’ salary budget growth was between six and eight percent.

“Chinese consumers want finer things that domestic producers do not make. Mercedes Benz is a successful example of capturing China’s premium market, within a 13 percent increase in sales so far this year compared with the same period in 2015,” he highlights. “The average age of buyers in China is 36, compared with 56 in the US. And consumers in China do not need to leave the Internet platform to do many things, so companies need to participate in that.”

Urban redevelopment is another trend driven by the urban dwellers. “Many buildings built 15 years ago look horrible, and they are looking at ‘brown-field’ development, redeveloping what they have done before,” Chiao says.

“China is looking at better quality, from lifestyle to environment, and long-term value for things in cities.”

As more Chinese return from their visit overseas, they want to see improvement where they live, Way believes. In tier-one cities, people push for better quality in schools,

biz.hk 10 • 2016

healthcare, jobs and living environment. In tier-3 or 4 cities, people may want different things, such as better connected roads and public transport. “When looking at the opportunities, companies need to identify the differences in different cities, even though they may be close to each other.”

Specialization of cities In the conglomeration of cities into mega regions, complementary traits and differentiators of cities develop and flourish. For instance, in the Bohai Economic Rim of northern China, sustainable development has long been a key in Beijing and cities in Hebei Province. “There will be specialization in these cities,” Leong of MTR says.

“Beijing will be the political and cultural center; Tianjin will focus on manufacturing and shipping; and Hebei will be an environmental center and hub of low-tech manufacturing.”

“The connectivity among these cities is vital,” he points out. “In the next decade, thousands of kilometers of railways will be built to connect the cities. This connectivity is also happening in the Pearl River Delta, including the high speed rail under construction.”

Here in Hong Kong, “we have the high-speed rail, the Hong Kong-Zhuhai-Macau Bridge, the airport’s third runway, the Shanghai-Hong Kong and soon Shenzhen-Hong Kong Stock Connect schemes,” Weir notes. “When all these add up, it is a compelling story about connectivity in the Pearl River Delta.”

And “we need to recognize that it will be a big place in the future,” says Chiao. “Cohesive collaboration requires leadership, a change of culture and mindset about how the places can work together. Cities need to identify their distinctness and uniqueness. Regional leaders need to reach across the region for overall coordination to boost competitiveness.”

“With different jurisdictions in different provinces, there is a need for coordination among cities,” he adds.

“The development of mega regions needs cohesion.”

25

Huang Yiping, Professor of Economics, Peking University’s National School of Development, and a member of the Monetary Policy Committee of People’s Bank of China

The Chinese Economy Drags On

By Kenny Lau

T

he Chinese economy has been slowing down for the past several years in terms of annual GDP growth, but it has also been getting bigger in size. In the new “normal” of more modest economic growth, there is great potential that China as a national economy could further improve the efficiency of resource allocation which could lift growth to some extent, but a downward trend is likely here to stay, according to Huang Yiping, Professor of Economics at Peking University’s National School of Development, who is also a member of the Monetary Policy Committee of People’s Bank of China.

Economic growth In the five years prior to 2010 with the exception of the period during the global financial crisis in 2008/2009, China had consistently experienced an annual GDP growth of 10 percent or more; during the first half of this year it was 6.7 percent. “It is still a remarkable performance,” says Huang. “But how long will this growth moderation continue? And where will be the bottom? This appears to be an L-shape trajectory, but are we on the vertical or horizontal line?”

26

“The question is whether this is cyclical…or structural,” he points out. “If cyclical, then we shouldn’t worry too much because economies have cycles, and we could engage more through macroeconomic, fiscal and monetary policies. If structural, then we should focus on reform – including supply-side economic reform – in order to improve efficiency of resource allocation so that growth can continue more sustainably.”

“The challenge is how much we should focus on macroeconomic policy and how much we should focus on supply-side reform,” he adds. “We always say we shouldn’t really stimulate growth again because we don’t want to repeat the mistake of the RMB4 trillion stimulus package. That was a little bit too much. So we now want to focus on reform.”

The government response to China’s slowing economy can be a tricky proposition – a policy challenge of juggling economic growth and reform simultaneously.

“Growth and reform can go hand in hand together, but they could also be in opposite directions,” Huang notes.

“When economic conditions are stable, you have a more favorable environment for introducing reform. But when growth is stabilized, what is the incentive to push forward tough reform?”

“This is also a battle between the new and old economy,” he says. “We have to realize that the industries which have supported China for the last 10, 20 or even 30 years are no longer able to support Chinese economic growth in the next phase. In China, only two of the three growth engines – export and investment – have worked; the third engine, namely consumption, has been relatively weak.”

Behind China’s world of export and investment was a “gigantic” global factory comprising the labor-intensive manufacturing industries located in the Pearl River Delta and the Yangtze River Delta as well as resourcesbased heavy industries concentrated mainly in the northwestern and northeastern parts of China. They were largely the drivers of China’s export and investment expansion onto the global stage in the last couple of decades, and reasons for China’s economic miracle.

The problem is that these industries are vastly losing their competitiveness because of labor shortage and rising wages in the manufacturing sector and because of overcapacity in the heavy industry, and they are no longer able to support Chinese growth. The question is, then, which industry will take over to carry on the responsibility of driving the economy.

“It is not easy to move up, but we are seeing some new activities such as e-commerce,” Huang says.

“Older industries are also rapidly re-inventing themselves; in telecom equipment, larger machinery, and especially the internet economy, it is a very dynamic place. This will be an ongoing process, and it will take quite a while. That’s why we are seeing slowing growth.”

biz.hk 10 • 2016

Key challenges The key to bringing about successful supply-side reform in China is to rapidly develop new, competitive industries and to somehow find a way to eradicate the old, low-productivity industries smoothly, Huang believes. “We are seeing massive efforts by the government to encourage innovation and even for individuals to create their own jobs. The more difficult task today is how we can get rid of the unprofitable institutions.”

“We saw these so-called zombie firms in the US throughout the 1980s, then in Japan throughout the 1990s; today it is becoming an official term in China,” he points out. “Many of these zombie firms are associated with the problem of overcapacity, and getting rid of them will not be easy, largely because of two factors: people and money.”

“When you have a company employing 30 percent of the local workers in one city, there is the question of where they can go if the company is shut down,” he explains. “Secondly, many of these zombie firms have heavy debt. If you close them down, who will shoulder the burden of debt or nonperforming loans? While it is undoubtedly difficult, you need to find a way and you can transform. The story of Detroit vs Pittsburg tells me it is possible.”

At the beginning of 2013, Huang predicted that there would be a massive overcapacity problem in China and was particularly focused on two sectors: restaurants and steelmakers. “It is easier to understand why I thought it would be a problem in the steel industry, but restaurants across China were also about to lose business when the anti-corruption campaign started because we knew the government would not spend as much money on dining.”

“Looking at the economy three years later, I was right on one and wrong on the other: while the steel industry has the problem of overcapacity, restaurants do not because they have quickly transformed themselves. If you own a restaurant and lose money in just one month, I am sure you will try everything you can to improve your business. If you are state-owned, you are probably less worried.”

“It means we need market discipline to get rid of these zombie firms in order to support the economy,” he adds. “A reason why even an active financial sector is less effective in supporting the real economy is because zombie firms take up a lot of financing including loans and bank credit which could otherwise be used elsewhere. In 2007, it took 3.5 units of capital input to produce a unit of new GDP; today, you would need 5.9 units of capital input – almost double the amount in order to generate the same result.”

The high level of leverage is another problem for the Chinese economy, Huang emphasizes. “Leverage

biz.hk 10 • 2016

is the only word you would hear at any investment conference because the Chinese corporate sector has borrowed too much. And the real worry is the divergence of leverage between the public and private sectors. The private sector does so much better in terms of productivity and profitability. In other words, the bad leverage is rising, and the good leverage is falling.”

“While some people say reform has not been as aggressive as we previously expected, I would argue that the Chinese government has done a lot in terms of macro policy reform including those on the household registration system, the one-child policy, and the financial sector,” he believes. “How we can close down unprofitable companies is something we still need to work out.

It looks like the government is picking up pace in pushing ahead with reform.”

Business outlook The outlook for the Chinese economy should be one of cautious optimism, Huang suggests. “It will continue to grow, but growth rate will continue to go down in the next year or two even as the government steps up its efforts trying to boost the economic growth.

The real turning point will come when the new economy becomes big enough to carry the responsibility of supporting growth. I think we’ll be ok if we continue to experience five or six percent GDP growth.”

There also appears to be some “positive” changes at the macro level, he says. “Consumption is up and is becoming the most dynamic component of the Chinese economy; the services sector is very dynamic and will continue to drive us forward. In general, you still find wages on the rise, except in the mining industry. It means the labor market condition is robust. We are indeed seeing a transformation, but no one is sure what China’s new ‘normal’ will mean exactly, except that it will be very different.”

“What you can see is an economy in a historic turning point shifting from a something very small to one of the world’s largest,” he adds. “It used to be very poor but income is rising. It used to be a relatively closed economy but it is much more open in terms of trade and capital markets. China used to only export goods and import capital but a more liberal capital account is changing that trend. Chinese companies and individuals are spending more money overseas.”

The next big story for China is one about the consumer, Huang highlights. “I’m not talking about the luxury goods because it has already happened; I’m talking about the consumer market in the areas of household appliances, telecommunication, transportation, tourism, culture, education, healthcare and financial services when the income of 1.4 billion people doubles. This is a plethora of business opportunities.”

27

TRADE & INVESTMENT

Call Center Capital of the World

Remittance income from Filipino workers overseas – a historical mainstay of the Philippine economy – has long been criticized as an unsustainable growth model, fueling additional concerns about a national “brain drain.” Luckily, economic salvation can be found in the nation’s burgeoning business process outsourcing (BPO) industry

By Jennifer Khoo

28

T

ravelling abroad for better earnings prospects and then sending money home is hardly a new economic concept. But getting workers to stay in their homeland has always been a challenge for the Philippines, a country with the 15th largest labor force in the world, and not nearly enough domestic employment opportunities available.

In 2015, nearly three million Filipinos left home to find work abroad and sent around US$28 billion back to the Philippines, an amount equal to one tenth of the country’s GDP that year.

biz.hk 10 • 2016

This stream of revenue, known as remittance income, has watered the country’s economy for over two decades, carrying it delicately through two global recessions.

A slowing remittance economy According to figures published by money transfer operator TransferWise, the Philippines was the third largest recipient of remittance money globally in 2015, after India and China.

But compared with previous years, remittances from OFWs (overseas

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Filipino workers) have been growing at a much slower rate since 2012, exacerbated by last year’s drop in global oil prices and the subsequent tightening of labor markets among oil-exporting, remittance-source countries in the Gulf region, where a significant number of OFWs are based.

The sensitivity of remittance income to external economic variables has led to its criticism as an unsustainable economic model. Furthermore, the Philippine government has become concerned that long-term, continued export of the nation’s best and brightest could result in a “brain drain” within various industry sectors and professions.

Although the ingrained practice of travelling abroad for better earnings prospects isn’t likely to disappear from the Philippines anytime soon, a promising solution to its talent export problem is revealing itself in the nation’s thriving Business Process Outsourcing (BPO) industry.

The booming BPO sector The Philippine BPO sector, which consists of outsourced “back office” services (largely call centers and IT outsourcing services), has been on the rise in recent years.

According to the IT and Business Process Management (IT-BPM) Roadmap for 2012-16 published by the industry group IT and BPO Association of the Philippines (IBPAP), the

Photos: Thinkstock

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country’s BPO industry accounted for just 0.075 percent of GDP in 2000, rising swiftly to reach 2.4 percent in 2005, 4.9 percent in 2011, and 5.4 percent in 2012.

In 2015, the industry breached its target revenue by US$1 billion, registering revenues of almost US$22 billion, and is expected to generate an estimated US$25 billion by the end of 2016.

The growth potential is staggering, and is slowly drawing the attention of multinationals. In September this year, global payments technology firm Visa, chose the Philippines as one of its four 24/7 service centers around the world.

Jose Mari Mercado, president of the IBPAP, told local media that if the projected growth rate of BPO remains consistent, then the revenue generated by the BPO industry will eventually surpass OFW remittances in 2017.

Solution to the talent export problem?

Employing 101,000 workers in 2004 and 900,000 in 2013, the growth of the BPO industry has had the knock-on

effect of creating more jobs annually within the country, especially for those with good English language communication skills and IT skills.

The government hopes that the increasing number of job opportunities will help to address the country’s talent export problem.

But the mere prospect of available jobs isn’t always enough to entice some of the more skilled Filipinos to stay put and find work on native soil. Often times the decision to stay or leave boils down to a trade-off between occupational prestige and earnings potential.

For example, many Filipinos who are highly-skilled college degree-holders, accept positions abroad as domestic workers, simply due the fact that they can earn up to three times more than what they would earn working in a professional role at home, let alone in a BPO call center.

English-language advantage Ranked as the number two global sourcing destination in 2016 behind India, according to the latest Tholons’ Top 100 Outsourcing Destinations

report, the Philippines continues to show serious promise in the global BPO industry.

The country’s BPO success story can be largely attributed to the high English-language proficiency of its workforce.

Equipped with a youthful, 95 percent-literate population which have good communication skills in American-accented English due to a strong history of US influence in the country, it is no wonder that the nation is known as the “call center capital of the world,” outperforming even India in the realm of voice-centric services.

“Americans prefer the Filipino English accent over the hard Indian accent that’s why American, British, New Zealand, and Australian companies prefer Philippines as the place to process business,” British Sky Broadband Manager John Wells told local media late last year.

Rising costs and the ‘Next Wave Cities’ Another contributor to the Philippines’ success in BPO is its global cost advantage. But this is being threatened

The Philippines BPO and Overseas Remittances Should Each Grow to $25 Billion

In billions of dollars

30 25 20

BPO revenues Overseas remittances

15 10 5 0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F Source – CLSA Asia-Pacific Markets, BSP, Business Processing Association of the Philippines (BPAP)

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biz.hk 10 • 2016

by rising office rental prices in prime business areas in Manila, like Makati city and Cebu City, where almost 70 percent of BPO service providers are located.

Because the outsourcing industry is so price-sensitive, any increase in rental prices has the potential to adversely affect the industry’s critical need to provide a prime location for outsourcing based on a positive ratio of cost (such as office rents) to quality (availability of a skilled labor pool), according to global research company The Oxford Business Group.

In addition, the various natural disasters regularly experienced by the Philippines have put many BPO operators under pressure to distribute operations across the country, so that if there are power cuts due to flooding in Manila, for example, Davao is unlikely to be affected, and business can carry on as usual.

Given these considerations, the government is laying the groundwork to expand BPO operations from Manila into alternative, less-developed, lower-cost locations across the Philippine archipelago, collectively dubbed the “Next Wave Cities.” Operators who are willing to relocate can continue taking advantage of the country’s low rental costs.

Buffering, please wait As far as challenges are concerned, the biggest is arguably that internet access speeds in the Philippines aren’t fast enough to sustain the growth in its BPO industry.

Currently, Philippine connectivity speed ranks 21st among 22 Asian countries, and 176th out of 202 countries as of May 2015, according to the Net Index report, an index of web connectivity published by internet metrics company Ookla.

In addition, the report showed that the Philippines recorded an average download speed of 3.64mbps, which was far below the world average of 23.3mbps.

While the government has since introduced minimum connectivity

biz.hk 10 • 2016

Top Outsourcing Destinations 2016 Rank 2016

Movement from 2015

1

-

Asia Pacific

India

Bangalore

2

-

Asia Pacific

Philippines

Manila (NCR)

3

-

Asia Pacific

India

Mumbai

4

-

Asia Pacific

India

Delhi (NCR)

5

-

Asia Pacific

India

Chennai

6

-

Asia Pacific

India

Hyderabad

7

+1

Asia Pacific

Philippines

Cebu City

8

-1

Asia Pacific

India

Pune

9

-

Europe

Poland

Kraków

10

+2

Europe

Ireland

Dublin

11

-

Americas

Costa Rica

San José

12

-2

Asia Pacific

China

Shanghai

13

-

Asia Pacific

China

Beijing

14

+1

Europe

Czech Republic

Prague

15

-1

Asia Pacific

China

Dalian

16

-

Asia Pacific

Sri Lanka

Colombo

17

+2

Asia Pacific

Malaysia

Kuala Lumpur

18

-

Asia Pacific

Vietnam

Ho Chi Minh City

19

+1

Asia Pacific

Vietnam

Hanoi

20

+1

Middle East and Africa

South Africa

Johannesburg

21

-4

Asia Pacific

China

Shenzhen

22

-

Asia Pacific

India

Chandigarh

23

-

Asia Pacific

India

Kolkata

24

+1

Europe

Hungary

Budapest

25

+5

Europe

Poland

Warsaw

26

-

Americas

Brazil

Curitiba

27

-3

Americas

Brazil

São Paulo

28

-1

Asia Pacific

Singapore

Singapore

29

-1

Americas

Chile

Santiago

30

+1

Asia Pacific

India

Coimbatore

31

-2

Europe

Czech Republic

Brno

32

-

Asia Pacific

China

Chengdu

33

-

Americas

Argentina

Buenos Aires

34

+1

Americas

Uruguay

Montevideo

35

+1

North America

Canada

Toronto

36

+1

Asia Pacific

India

Jaipur

37

-3

Europe

Russia

St. Petersburg

38

+5

Europe

U.K.

Belfast

Region

Country

City

39

-1

Asia Pacific

China

Guangzhou

40

+2

Middle East and Africa

Ghana

Accra

Source – Tholons Top 100 Outsourcing Destinations 2016

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Makati city: Manila's vibrant financial district

speed requirements for telecoms firms and internet service providers, the Philippines’ fractured geographical layout of over 7,000 islands, all susceptible to weather-induced power outages, makes it difficult (and expensive) to build fixed networks across the country.

Impact of PhilippineUS relations In light of recent political events involving the exchange of heated rhetoric between Philippine and American officials, there is concern over the future of both countries’ long-standing and historically amicable relationship, and how this might impact FDI and the growth of Philippines’ BPO industry.

Rick Santos, Chairman of CBRE Philippines, told local press in October last year that he believes the BPO sector will continue to thrive and that the country will not lose its attractiveness to foreign investors.

“The country provides a conducive environment for foreign investors – an excellent pool and low cost of skilled labor, outstanding customer service, a quality destination and one of the cheapest rental rates and highest yields in Asia,” says Santos.

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KPO: the next level What will be interesting to observe is the country’s expansion into what has been dubbed the “next level of outsourcing,” i.e. Knowledge Process Outsourcing (KPO). Involving the outsourcing of knowledge-based, “back office” services like data analytics, software development and financial research, the skillsets required for employment in KPO will be much more specialized.

In contrast with the existing BPO industry, specifically in call-centers, where job opportunities are open to English-speaking degree holders of all disciplines, the KPO industry will place a higher value on professional degrees like medicine, IT, business, and engineering, and workers with these skillsets will be matched with relevant opportunities.

Where many college degree holders in the Philippines view call-center work as an undesirable last resort, the nation’s expansion towards knowledge-based process outsourcing may incentivize the 40 percent of Filipino graduates with degrees in the aforementioned fields to think twice before going overseas.

There may be hope for the Philippines’ slowing remittance economy after all.

Country Overview • Named after King Philip II of Spain in the 16th century, the Philippines is a large archipelago of over 7,000 volcanic-formed islands surrounded by the South China Sea and the Pacific Ocean.

Although a fully independent state since 1949, Spanish and American influences remain strong in the former colony, particularly where religion, language and government are concerned.

• Out of the nation’s population of 96.5 million, over 90 percent identify with some branch of Christianity, making the Philippines the largest Christian nation in Asia, and one of the largest in the world • English has been adopted alongside Tagalog as one of the country’s two official spoken languages, and the government operates under a democratic US-style constitution.

• To this day, the Philippines remains a close ally of the US, which backs it unequivocally, particularly in matters of international defense and security.

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PROGRAM * Opening and Luncheon Keynote Addresses * Three Concurrent Breakout Sessions (each session is run twice): WĂŶĞů ϭ Ͳ KƵƌƐĞůǀĞƐ͗ /ŶĐƌĞĂƐŝŶŐ ŽƵƌ ƐĞůĨͲĂǁĂƌĞŶĞƐƐ ĂŶĚ ůĞĂĚĞƌƐŚŝƉ ĞīĞĐƟǀĞŶĞƐƐ WĂŶĞů Ϯ Ͳ KƵƌ KƌŐĂŶŝnjĂƟŽŶƐ͗ >ĞĂĚŝŶŐ ƚŚƌŽƵŐŚ ĐŽŵƉůĞdžŝƚLJ WĂŶĞů ϯ Ͳ KƵƌ ^ŽĐŝĞƚLJ͗ /ŶŇƵĞŶĐŝŶŐ ǁŝĚĞƌ ƐŽĐŝĞƚĂů ĐŚĂŶŐĞ ƚŽ ĞŶĂďůĞ ŽƉƉŽƌƚƵŶŝƟĞƐ ĨŽƌ women and others Ύ WƌĞƐĞŶƚĂƟŽŶ ŽĨ ƚŚĞ ϮϬϭϲ tŽŵĞŶ ŽĨ /ŶŇƵĞŶĐĞ ǁĂƌĚƐ͗ WƌŽĨĞƐƐŝŽŶĂů ŽĨ ƚŚĞ zĞĂƌ͕ zŽƵŶŐ ĐŚŝĞǀĞƌ ŽĨ ƚŚĞ zĞĂƌ͕ ŶƚƌĞƉƌĞŶĞƵƌ ŽĨ ƚŚĞ zĞĂƌ͕ EŽŶͲƉƌŽĮƚ >ĞĂĚĞƌ ŽĨ ƚŚĞ zĞĂƌ͕ DĂƐƚĞƌ ŽĨ dŚĞ ƌƚƐ͕ >ĞĂĚŝŶŐ tŽŵĂŶ ŽŶ ŽĂƌĚƐ͕ ŚĂŵƉŝŽŶ ĨŽƌ ƚŚĞ ĚǀĂŶĐĞŵĞŶƚ ŽĨ tŽŵĞŶ͕ ĞƐƚ ŽŵƉĂŶLJ ĨŽƌ tŽŵĞŶ ĂŶĚ >ŝĨĞƟŵĞ ĐŚŝĞǀĞŵĞŶƚ ;E tͿ͘

Speakers

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INFORMATION & COMMUNICATIONS TECHNOLOGY

FinTech:

From Buzzword to New Reality Financial technology has been a hot topic in Hong Kong ever since it crept onto the scene some two years ago, disrupting the nature of business as we know it. More than just a buzzword, “FinTech” has grown into a reality that is here to stay. At AmCham’s 2016 FinTech Forum in early September, Hong Kong government officials, business leaders and other industry experts gathered to discuss the role of FinTech in Hong Kong, and the city’s larger role in the global FinTech space

By Jennifer Khoo

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henever the word “FinTech” was mentioned in 2014, it was rarely outside of the tech start-up sphere.

Short for financial technology, FinTech refers to the application of technology within the financial services industry to improve the efficiency of business transactions and processes such as payments, investments, financing and banking infrastructure.

Back then, what was considered as little more than a niche industry is today igniting a global revolution, forcing governments and business institutions alike to adapt and innovate, or else run the risk of becoming irrelevant.

While there is evidence of technological progress in the growing number of technology-enabled payment transaction platforms like PayPal and crowdfunding websites like Kickstarter, the global financial services industry as we know it is still largely in need of an overhaul – both in its practices and its mindset. Nowhere is this more the case than in Hong Kong.

gradual shift in the financial services industry’s attitude as a whole, from one of indifference into a willingness to collaborate with FinTech startups.

This shift was born out of necessity, as banks soon realized that if they didn’t innovate, it would only be a matter of time before they lost customers to FinTech ventures that could meet their needs more effectively than the banks could.

McKeough says that this transition will undoubtedly take some time, as most financial institutions (FIs) are still reluctant to commit extensive time and resources towards new, unfamiliar FinTech projects at the expense of disrupting other projects. FIs might also be dissuaded by their lack of technological infrastructure perceived as necessary for immediate success on a global scale.

But, on the contrary, the issue of scale isn’t an immediate priority in the FinTech world. Rather, continuous experimentation to ensure that the final product is something that meets customer needs is key, even if that means making mistakes. The sooner FIs adopt this mindset, the sooner they can start being innovative.

The fourth industrial revolution

Government support

FinTech is just one aspect of the technological movement described frequently as the “fourth industrial revolution,” which encompasses other cyber-systems such as the Internet of Things (IoT) and cloud computing, and already has a significant and irreversible impact on our everyday lives.

It is a sentiment Steve Lackey, Asia-Pacific Chairman of financial giant BNY Mellon and Vice Chairman of AmCham Hong Kong echoes, saying that even in today’s business world, it has become difficult not to talk about FinTech, a term now synonymous with innovation in his line of work.

The evidence is in the numbers. Global investment in FinTech in the first half of 2016 reached nearly US$10 billion in the APAC region alone – almost double the amount invested in APAC for the whole of 2015 – according to the latest report by global professional services firm Accenture. Of that figure, investment in China and Hong Kong accounted for 90 percent, an amount valued at US$8.75 billion.

While Hong Kong still has a long way to go in the global FinTech space, the city is fortunate to have an environment conducive to development in the local context, thanks to its world-renowned success as a financial services hub and, more recently, active support from the local government.

Changing attitudes Since the appearance of FinTech in 2014, James McKeough, Partner at KPMG China, has witnessed a

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Less than a year ago, the Hong Kong government formed the Innovation and Technology Bureau, a landmark response driven by its recognition of FinTech’s role in the city’s future.

Special guest speaker Nicholas Yang, Secretary for Innovation and Technology of the Government of the Hong Kong Special Administrative Region (HKSAR), shared his insights on local FinTech development. From his perspective, Hong Kong already has a vibrant local FinTech sector, thanks to government funding and facilitation of innovation and technology ventures over the years.

Cyberport in Pokfulam is just one of the many examples of this, says Yang. A 700-strong, governmentmanaged community of digital and technology startups, Cyberport was built to boost Hong Kong’s visibility as a hub for entrepreneurship, innovation and technology.

The initiative has been a success, attracting not just local startups but also global players to establish a presence within its premises. In 2014, Accenture collaborated with Cyberport to establish its first Fintech Innovation Lab in APAC, and its third in the world after New York and London.

In March this year, Cyberport also announced that it would increase its existing FinTech co-working space facility by over 50 percent, and is rolling out a designated program to provide support to around 150 FinTech startups over the next five years. In addition, the government has recently launched a HK$200 million Cyberport Macro Fund for investment in its ICT startups, which Yang believes will help to attract additional funding from other investors as well.

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From left: Steve Lackey, Asia-Pacific Chairman, BNY Mellon and AmCham Vice Chairman; Nicholas W Yang, JP, Secretary for Innovation and Technology (HKSAR); James McKeogh, Partner and Head of Fintech, KPMG China; and Steven Xavier Chan, Managing Director & Regional Head of Regulatory, Industry and Government Affairs, Asia Pacific, State Street Asia Ltd

Elsewhere, approval has been secured for the establishment of a HK$2 billion Innovation and Technology Venture Fund, through which the government will co-invest with private venture capital funds in local startups on a matching basis. Yang hopes that this initiative will bring in the expertise and business networks of venture capitalists, which will also help to improve the startup ecosystem in Hong Kong.

Trust factor In addition to government funding and support, Yang believes that Hong Kong has a conducive investment environment, especially due to the stringent regulatory and independent legal environment, which gives the city its high level of trustworthiness in the global market.

In Hong Kong, the stock exchange is modelled after all the other stock exchanges around the world, i.e. it uses the B2B (business-to-business) model, in which the stock exchange deals with members, and members deal with consumers in turn. But in Mainland China, says Yang, the stock exchange operates on a B2C model, because customers do not trust Chinese intermediaries with their investments.

Specifically where FinTech is concerned, financial investment is secondary; trust is the most important factor. Blockchain, for example, the data structure that forms the backbone of all FinTech transactions, is essentially a digital ledger of transactions which is effective only on a premise of trust, as it operates on the sharing of extremely sensitive user information.

Other conditions that make Hong Kong attractive to outside investment include its free flow of information, its world class ICT infrastructure, and its pro-business environment.

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Macro challenges While those impatient with governmental efforts to nurture FinTech in Hong Kong may be tempted to look to Singapore as a shining example of what could be done better, Yang argues that there are many fundamental differences between the Lion City and Hong Kong.

But perhaps most crucially is that Hong Kong is not a sovereignty, and therefore has no defense budget like Singapore does. As so much of modern-day warfare relies on technology, more government money is spent on improving and innovating technology within a country’s military. This inevitably influences a national mindset that technological development is crucial elsewhere also, and that funding to do so must be accessible and sufficient.

In Hong Kong currently, there is only one source of funding for innovation and technology related projects – the Innovation and Technology Commission of the HKSAR Government – and competition among startup talent is tough.

From a governmental perspective, however, the biggest hurdle to accelerated FinTech growth in Hong Kong has more to do with the city’s overachieving culture than anything. Yang believes that it will take some time before local would-be entrepreneurs and their families are convinced that failure is okay.

He attributes the success of Silicon Valley in the United States to two key elements: firstly, to the never-ending stream of hopeful entrepreneurs who travel to the home of Apple, Facebook and Google to try their hand at start-up success, and secondly, to the ability of said entrepreneurs to regenerate from failure and maintain the will to keep trying.

“Success comes from the ability to accept failure and the resilience to keep trying until something hits,” says Yang.

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The Hong Kong – US FinTech link

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hile Hong Kong still has a long journey ahead on the road to FinTech leadership, it could improve its pace significantly by learning from a country that started the journey much earlier – the United States.

The US, more specifically Silicon Valley in the San Francisco Bay Area, is home to many of the world’s largest technology companies and promising startups, attracting billions of dollars of venture capital each year.

Using the success of Silicon Valley as a point of comparison, the questions to be addressed are: what are the market opportunities in Hong Kong for offshore FinTech ventures, and what could the city be doing to improve its attractiveness as a destination for direct investment in FinTech?

Market opportunities for offshore companies in Hong Kong

Tim Hwang, Founder and CEO of legal and regulatory analytics company FiscalNote, believes that Hong Kong is an attractive FinTech investment destination for several reasons.

Firstly, Hong Kong is similar to Silicon Valley in that it has a large pool of technical talent, and an abundance of capital available for entrepreneurs who want to find Chinese partners quickly.

Secondly, many foreign companies view Hong Kong as a launch pad to the rest of the Asia-Pacific region, leveraging the similarities in languages and cultures for business expansion. For this purpose, Hong Kong’s political situation remains critical for its prospects in FinTech, i.e. maintaining open channels with the US and the rest of the world.

Finally, Hwang thinks that Hong Kong has real potential to become a market leader in areas that companies in Silicon Valley haven’t mastered yet, i.e. the RegTech (regulatory technology) and Legal Tech (legal technology) industries.

Hwang believes that this presents a major opportunity for technology ventures in Hong Kong to fill the gap, by working with regulators in the international context to build software which would enable FIs and other institutions to navigate the increasingly regulated global business environment.

Benedicte Nolens, Head of Risk and Strategy at the

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Hong Kong Securities and Futures Commission (HKSFC) concurs, saying that FIs in Hong Kong (and elsewhere) have an enormous need for streamlining in their back offices, particularly in departments like regulatory and compliance, which could benefit greatly from an integrated RegTech service.

Speaking from a regulator’s perspective, Nolens encourages more offshore startup firms to come to Hong Kong and Asia, and to view it as an opportunity of ideas exchange with regards to business models.

Mismatched supply and demand Aspiring FinTech entrepreneurs looking to break into the local market will be glad – if not somewhat surprised – to hear that FI demand for tech innovations and solutions is greater in Asia than in the US, despite a greater prevalence of FinTech ventures in the latter.

Henri Arslanian, Adjunct Assistant Professor at Hong Kong University who teaches graduate courses on FinTech and Entrepreneurship, believes that the reason for this is because customers in Asia are much more demanding than those in the US. They are accustomed to greater technological accessibility and convenience of services, and will simply go elsewhere if their needs aren’t met.

WeChat, for instance, is being used increasingly as a mobile banking platform by customers in China. As a result, a growing number of FIs and wealth managers have started to adopt the popular Chinese mobile messaging app within the last year as a modern means of communication with their Chinese clients. Those that have yet to adapt are learning to do so the hard way.

Despite greater demand for FinTech solutions in Asia than in the US, the quality of FinTech startups in Asia compared to those in Silicon Valley is not what it could be, resulting in a “mismatch” of supply and demand in both regions, says Arslanian.

This presents an opportunity for FinTech firms and entrepreneurs in the States to target the Asian markets, something all parties stand to benefit from.

Consulting firms in particular, are in the perfect position to capitalize on bridging the gap between the two markets, says Arslanian.

Harnessing private investment While all panelists agreed that the greatest opportunities for FinTech in Asia lie in the region’s B2B (business-to-business) market, Nolens believes that there are also prospects in Hong Kong’s B2C market, linked specifically to raising of startup capital.

In addition to utilizing government funding and venture capital funding, Nolens feels that the FinTech

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industry should be harnessing Hong Kong’s abundance of private investment (PI) to expand, but not before a FinTech company creates the technology to make such a thing possible.

Currently, no technology exists in the city that facilitates the automated pairing of PI money with the needs of local startups, presenting another gap in the market ready to be filled.

“Raising PI is a huge business, especially in Hong Kong,” says Nolens. “There is a lot of PI money in Hong Kong which can be tech-enabled, to carry investment not just locally but globally.”

Practical challenges for offshore companies For all the opportunities that Hong Kong presents for FinTech ventures, there are an equal number of practical challenges.

Melissa Guzy, Founder and Managing Partner of venture capital firm Arbor Ventures, believes that one of Hong Kong’s biggest deterrents for offshore startups is a problem shared by many of the city’s inhabitants – the cost of real estate.

“With space in Cyberport costing more than in Silicon Valley, it is just not feasible for offshore startups [especially] to have their headquarters in Hong Kong,” says Guzy.

Other practical challenges include Hong Kong’s “PR problem,” including the city’s underwhelming efforts to market itself globally as a FinTech destination, compared with other Asian cities like Singapore, for example.

But perhaps even more crucially is the difficulty in hiring local talent, due to the cultural attitude towards failure nearly everywhere in Asia, compared with the United States. As the nature of FinTech in these early stages is still largely experimental, failure is part and parcel of the industry.

“Failure is a badge of honor in Silicon Valley. It

means you’re more backable today than you were the day before,” says Guzy.

Guzy believes that attitudes across the region will shift gradually. This is already evident among many millennials in Hong Kong who are willing to explore less traditional career paths, to the initial dismay of their families.

From a venture capitalist’s perspective, Guzy’s first consideration is investment cost versus likelihood of success in the market. This involves asking questions like whether a VC-backed company will have a better chance of success in Asia than a global giant like PayPal did.

Despite having nearly 200 million active users globally, PayPal has less than 10 percent market share in every single Asian market, having found it difficult to compete with “national champions” like Alipay, Tencent and WeChat.

Statistics like this give offshore ventures and VCs alike a more balanced perspective on the likelihood of FinTech success in Asia.

Thinking about the future Perhaps if FinTech innovation was viewed as a matter of survival for Hong Kong’s financial industry, the challenges associated with its adoption wouldn’t be so deciding.

Nolens predicts that the brick-and-mortar financial institutions of today are at risk of being replaced by FinTech companies like PayPal and WeChat – those that can provide customers with direct, individual, mobile access to banking functions, i.e. borrowing, lending and saving, without the need for a traditional bank account.

In reality, however, the likelihood of this occurring will depend on whether FIs welcome collaboration with FinTech startups in the coming years, or whether they continue to resist.

As Guzy says, “Our world will be changed by technology, tomorrow will be different. We just have to adopt it now or we’ll be left behind.”

From left: Henri Arslanian, Adjunct Assistant Professor, Hong Kong University; Benedicte Nolens, Senior Director, Head of Risk and Strategy, Hong Kong Securities and Futures Commission; Melissa Guzy, Founder and Managing Partner, Arbor Ventures; and Jyoti Vazirani, Partner, KPMG China

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A Homegrown FinTech Industry

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efore Hong Kong can accommodate the arrival of offshore FinTech ventures, the city has to first assess the readiness of its own ecosystem and consider the practical challenges of cultivating a homegrown FinTech industry.

Opportunities for local B2C players Renu Bhatia, Founding Partner of Hong Kong-based FinTech accelerator program SuperCharger, has observed a lot of B2B and B2C local startup talent in Hong Kong looking for opportunities.

However, she feels it is much more difficult for B2C players as there isn’t a large enough local market, and those that start in Hong Kong typically have plans to expand regionally.

But even regional expansion from Hong Kong to other Asian countries like Singapore or Malaysia isn’t as simple as it sounds, Bhatia points out. With over 20 different regulatory regimes within the Asia region, startups need to bear in mind that they aren’t dealing with a single market.

Particularly for early-stage B2C startups expanding out of Hong Kong, compared with those expanding out of China or other countries like Indonesia and India where the B2C market is more developed, access to talent and capital is crucial if they are to have any chance at survival, let alone success, says Bhatia.

And unfortunately in Hong Kong’s FinTech industry, talent and capital aren’t that readily available.

Talent and ‘tiger moms’ Hugh Madden, Chief Technology Officer at FinTech company ANX International, says that where talent is concerned, people in Hong Kong generally prefer to work for larger organizations, and it can be difficult to find experienced people who have the “risk appetite” to work for a smaller organization, let alone a startup.

Though this may be the case, a shortage of tech-skilled talent will never be an issue for local FinTech startups, due to the growing number of native Chinese-speaking, strongly skilled tech professionals and engineers just across the border in Mainland China.

As Benedicte Nolens, a panelist of the forum, puts it, “If the tech-minded offspring of Hong Kong’s ‘tiger moms’ do not get the chance to work in FinTech startups, there will always be others willing and able to take their opportunities instead. The transience of this city means that there will always be a healthy supply of skilled professionals from around the world who would love to spend at least some part of their careers in Hong Kong.”

If Hong Kong people’s entrenched mindset towards risk doesn’t change, the city could lose its chance of becoming a hub for homegrown FinTech talent.

But Bhatia feels optimistic, having observed that local students and young adults with some startup internship exposure “fight harder” to be part of one in the future, and are less enticed by a more traditional career path going forward.

A question of capital Securing capital for high-risk startups is likewise no easy task in Hong Kong. Most FIs require a lengthy process of around 18 months to draw up a loan contract, a timeframe which most startups don’t have the luxury of sparing.

Local VCs, on the other hand, focus heavily on cash flows and bank balance, rather than on a holistic

From left: Renu Bhatia, Founding Partner, SuperCharger; Serina Wong, Regional Sector Leader of Asset Management, APAC, and Global Sector Leader of Wealth Management, Korn Ferry International; Hugh Madden, CTO, ANX International; Gavin Leo-Rhynie, Regional Head of Technology, Asia-Pacific, Goldman Sachs; and Fangfang Chen, Senior Vice President for Strategy, Asia-Pacific, State Street Asia Ltd

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consideration of all factors such as IP valuation and NPV (net present value), says Madden. While this approach can sometimes provide a healthy “push” for new startups, most of the time it is what makes the difference between survival and early-stage failure.

The solution?

“What Hong Kong needs is a homegrown success story which will provide the necessary psychological push on the funding front, the human capital front, and in schools,” says Madden.

But perhaps more crucially, is the need for large financial institutions to instigate change on a greater scale.

Role of the financial services industry A couple of years back when the FinTech ecosystem was in its infancy, startups had somewhat of a “fear” relationship with banks and regulators, who back then were only concerned with how secure a product was, and not about user experience, says Henri Arslanian, also a panelist of the forum.

Today, regulators along with the wider ecosystem are encouraging FIs to engage with startups, as they too have begun to appreciate Hong Kong’s growing role in the global FinTech movement.

But a shift in industry actions has to start with a shift in industry mindset. On a societal level, this requires greater cross-fertilization between sectors, and the creation of more opportunities for large institutions to work with startups.

On an organizational level, this requires instilling the values of innovation across the entire company, rather than confining them to specific departments like R&D or technology, as may have been the case previously.

Serina Wong, Global Sector Leader at executive search firm Korn Ferry International, says that internal compensation structures which reward actions driven by creativity and innovation can help to create an associated work culture.

Signs of change Signs of change are already apparent in Hong Kong’s financial services industry, from internal work culture to hiring policy.

Gavin Leo-Rhynie, Regional Head of Technology at Goldman Sachs Asia-Pacific, has witnessed the benefits of some of the changes at his firm, and urges the wider industry not to lose momentum in the pursuit of technological progression.

“Three or four years ago, GS was reluctant to speak to the press about what it was doing from an engineering perspective, even though there were some incredibly

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well-respected engineers on staff. This really hurt them in terms of attracting new talent,” says Leo-Rhynie.

Since then, the firm has undergone a remarkable internal cultural change to attract more engineers and tech-minded individuals.

Company initiatives like internal hackathons and greater participation in tech conferences have helped GS to push out the message that experimentation, a risk-taking mindset, and a willingness to fail are factors crucial for the advancement of the financial services industry.

In practical terms, it is about “giving people time to work on things that might fail, and the opportunity to innovate on different ways of meeting the deadline,” says Leo-Rhynie.

“Many engineers in financial institutions spend their time doing very repetitive work, so by pushing these institutions to automate internally, engineers can use more of their time to innovate,” he adds.

Finally, Leo-Rhynie advises organizations to accept the reality that investment for the sake of long-term innovation might bring about underwhelming results in the short-term.

The next generation Looking ahead, the biggest challenge that Hong Kong’s ecosystem faces is about fostering the next generation, so that they are well equipped with the skills necessary for survival and success in the technologically advanced society of tomorrow.

Where the financial services industry is concerned, the global FinTech movement will undoubtedly result in a change of the nature of bankers as well, for these “new banks” may no longer require MBA graduates but instead designers, creative thinkers, and computer programmers.

Leo-Rhynie suggests more collaboration among educational institutions, the government, and the private sector to nurture the city’s existing tech talent.

Starting today, financial education courses should include compulsory programming, design and creative thinking classes, while schools should promote and encourage technological literacy among children – boys and girls – from an early age, according to the panel.

The FinTech world is still so predominantly male, due perhaps to fewer numbers of girls taking STEM (Science, Technology, Engineering, Mathematics) subjects in schools. This is certainly one area in which Hong Kong’s government can directly help out, by introducing compulsory programming or coding classes into the educational curriculum, for example.

While a complete technological paradigm shift is unlikely to happen anytime soon, it certainly isn’t too far off. Leo-Rhynie hazards a guess that sometime in the next 15-20 years, whether or not we are ready for it, “coding will become the new literacy.”

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SUTAINABILITY

Green Technology for Sustainable Growth

The combination of urbanization and population growth has given rise to a different level of smart city development in Asia-Pacific. It is a key area where intelligent solutions can increase productivity, reduce inefficiency, and revolutionize the way people live. Titus Yu, Managing Director (Hong Kong, Macau, Taiwan and Guam), UTC Climate, Controls & Security, explains how technology can make cities more sustainable, people more secure and travel more efficient

By Kenny Lau

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Titus Yu

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ne of the most significant demographic shifts in the past century has been the historic urbanization of the global population – a continuing trend signified not only by the sheer number of people living in the city but also the remarkable development of infrastructure fueled by growing demand. Of the world’s population in 1950, only 30 percent lived in urban areas; today, it is 54 percent; and by 2050, it will be 66 percent, according to UN data and projections.

The fact that urbanization is poised to continue, however, is only part of the story; whether urbanization can continue sustainably remains a challenge – it is a global issue which will require innovative solutions.

What underlies the current model of urbanization is the growing demand for the adoption of technology in driving sustainable development. Residential, commercial and industrial buildings alike are a key area where intelligent solutions can increase productivity, reduce inefficiency, and revolutionize the way people live.

“The combination of urbanization and population growth has given rise to a different level of smart city development in Asia-Pacific, which presents opportunities for sustainable urbanization through innovative building technologies,” notes Titus Yu, Managing Director (Hong Kong, Macau, Taiwan and Guam), UTC Climate, Controls & Security, which creates “smart” solutions to “make cities more sustainable, people more secure and travel more efficient.”

“Climate, Controls & Security” covers technology in heating, ventilating, air-conditioning and refrigeration (HVACR) systems, fire safety and security systems, intelligent building management systems and services – all under a combination of brands focusing on specific areas of expertise. The idea is to create an environment conducive to higher efficiency in a building, Yu points out.

“For instance, we combine cutting-edge HVAC products with intuitive software,” he explains. “We merge entry control solutions with building automation systems, all to minimize energy consumption, maximize comfort and enhance productivity.”

The business case In Asia, UTC Climate, Controls & Security has played a critical role in facilitating urbanization, implementing intelligent and integrated solutions in many iconic buildings, and providing energy-saving retrofits across the region. The company has 39 research and development centers worldwide, four of which are located in Asia where it also has nine manufacturing

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facilities to meet domestic demand and to serve customers around the world.

Here in Hong Kong, an integrated solution for a single data center of a financial institution by combining 3,000 Edwards’ fire detectors and 400 Chubb’s CCTV cameras for a surveillance system based on Automated Logic’s platform is a capability few can match. “The live camera feed is provided to the facility managers within eight seconds of a fire alarm being triggered. It significantly enhances the response and protection levels of a critical facility,” Yu explains.

In many of Asia’s developed cities including Hong Kong, there are tremendous opportunities for modernization and energy-efficient retrofits following decades of rapid development and urbanization, Yu believes. “We see growing demand from building owners or facility managers for a single platform to manage multiple building systems – in order to keep occupants comfortable, manage energy conservation measures, identify key operational problems, and validate the results.”

“There is a strong synergy when seamlessly combining products and technologies under the UTC family that enable all critical building systems talk to each other and work together,” he says. “It creates added value to building performance and tenant/visitor experience; it redefines what’s possible with a new level of integration on a larger scale; and it’s driving the future of the intelligent building movement.” iSQUARE, a 31-story shopping mall centrally located in one of Hong Kong’s busiest districts, is indicative of an integrated building management solution to optimize performance and to realize operational cost savings through reduction in energy utilization.

A control system is in place to define chiller plant algorithm to match varying cooling demand, create video analytics for optimized dispatch of lifts by synchronizing CCTV and lift systems, and provide customized energy management report and early diagnoses of potential issues.

“In general, the average energy savings achieved for similar type of improvement projects like the above is around 15 – 20 percent,” Yu says of the optimization

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efforts. “This project was a milestone for us in that it illustrates the synergies available among different UTC building systems and technologies and how our customers can be better served with more integrated and sustainable solutions.”

“Generally speaking, we have seen growing demand for intelligent solutions from both the public and private sectors,” he adds. “The Hong Kong government’s commitment to infrastructure investment and commercial land supply has given rise to a strong need for new, efficient equipment, while landlords are increasingly looking for energy-efficient solutions to reduce their operating costs and enhance value throughout the building lifecycle.”

Cognitive benefits In addition to the long-term environmental benefits as a result of improved energy efficiency, “green” buildings have been scientifically proven to have a direct effect on human cognitive function and behavior. A recent study conducted by Harvard University T.H. Chan School of Public Health, SUNY Upstate Medical University and Syracuse University finds a profound impact of the indoor environment on human decision-making, which is a known indicator of worker performance and productivity.

“First, the result suggested that the levels of carbon dioxide and volatile organic compounds that we

biz.hk 10 • 2016

commonly encounter in conventional office buildings are associated with decreases in worker performance compared to when those same workers are in green building environments,” explains Dr. Joseph Allen, Assistant Professor of Exposure Assessment Science and Director of Healthy Buildings Program at Harvard’s Center for Health and the Global Environment.

“Second, when we enhance ventilation and optimize indoor environmental conditions, we see improvements in the cognitive function of workers,” says Dr. Allen who served as Principal Investigator for the study, The Impact of Green Buildings on Cognitive Function (The COGfx Study), which was also supported by UTC. “And third, these results fill important knowledge gaps in existing research about the relationship between green buildings and occupant health.”

The research was based on a six-day study at the Total Indoor Environmental Quality Laboratory of Syracuse Center of Excellence in Environmental and Energy Systems in Syracuse, New York, examining the impact of green buildings on cognitive function and decision-making performance among 24 professional employees who conducted their normal work activities in conditions designed to simulate those found in 1) conventional buildings, 2) green buildings, and 3) green buildings with enhanced ventilation, also known as “enhanced green.”

Participants completed a daily, 1.5-hour cognitive

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assessment of nine key cognitive domains using a validated, computer-based test known as the Strategic Management Simulation in a controlled environment where levels of carbon dioxide, volatile organic compound (VOC) and ventilation rates were adjusted in a double-blind study put in place to avoid biased results. The findings show a staggering impact of air quality within an indoor environment on human cognitive function.

The results: overall cognitive performance scores in green buildings with enhanced ventilation averaged 101 percent higher compared to those in conventional buildings; crisis response scores in green and enhanced green environments were 97 percent and 131 percent higher, respectively, than in conventional buildings; information usage scores were 172 percent and 299 percent higher; and scores of strategy were 183 percent and 288 percent higher.

It was also found in a follow-up study that doubling the ventilation rate in typical office buildings can be reached at an energy cost of between US$14 and US$40 per person per year, with a result of US$6,500 equivalent in improved productivity per person per year – a return on investment exceeding 150 times. And the cost of additional ventilation is only between US$1 and US$18 per person per year when energy-efficient technologies are applied.

“The results of this study have tremendous implications for major cities such as Hong Kong, where workers spend an average of 50 hours per week in their offices,” says Yu. “Building owners and employers should evaluate the quality of the indoor environment they provide to their staff, primarily related to indoor ventilation, as this study proves there are measurable benefits to worker productivity from optimized air quality.”

Demand for sustainability Decades ago, there was limited awareness and understanding of the benefits of investing in green buildings. The world, however, is changing, Yu stresses. “Trends in urbanization and population growth continue to require more sustainable products and

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behaviors. For this, sustainability means we need to do good for the planet, while we also do good for our employees, communities, customers and stakeholders.

Sustainability is not an option – it’s an imperative.”

“Today, building owners and tenants are demanding sustainability. They want to live and work in spaces that offer natural lighting, use fewer resources and provide better air quality. Green buildings are no longer a luxury and have become a necessity,” he says, noting the World Green Building Trends 2016 report in which green building-related activity is projected to double every three years. “Real, tangible economic value is a key driver for investment decisions in buildings, and decision makers are seeing the economic value in green buildings.”

For nearly 200 years, UTC Climate, Controls & Security and its brands have redefined what’s possible by developing innovative control systems, Yu emphasizes.

“Innovation and service excellence is in our DNA. Here in Hong Kong, we have built a legacy of industry and company milestones, including Hong Kong’s first centrifugal chiller at the Hyatt Regency Hotel in 1962, a social alarm monitoring service in 1994 and a mobile social alarm service in 2009.”

“We are also a sustainability leader, and we don’t just talk about sustainability, we walk the talk,” he says.

“We have been reducing our environmental impact and improving sustainability in our operations, products and engaging environmental stakeholders for nearly 30 years. We are among the early leaders to launch factory energy reduction goals in 1988, and to expand to broader global environment, health and safety metrics in 1997, in addition to the world’s first HVAC factory certified as LEED® Gold.”

In Hong Kong, 90 percent of the energy is consumed by buildings, Yu further notes. “Making our buildings greener will go a long way to create a better and more sustainable environment. That’s why we are committed to investing in our technical capabilities as well as talent and providing technology and environmentally responsible products to accelerate the sustainable development and implementation of new energy-efficient building system solutions.”

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CCWM 210x285mm Sep 2016.pdf 1 9/14/2016 3:34:05 PM

INDUSTRY FOCUS

Bain & Company

Inside Hong Kong’s Commercial Center:

Business Management Consultants & Support Organizations

By Jennifer Khoo

Accenture Accenture has been recently named to Thomson Reuters’ inaugural Diversity & Inclusion Index, which ranks the 100 most diverse and inclusive companies in the world. Accenture ranked No. 18 on the list, and it reflects a commitment to going beyond current industry workplace best practices to create new standards for learning and development, inclusion and diversity.

“Accenture named Some recent initiatives one of world’s most include an investment of US$841 million in employee diverse and inclusive learning and development in the fiscal year of 2015, and companies.” expanding parental benefits in markets around the world, including India, Philippines and the United States, to help its people navigate the challenges of raising a family while continuing to pursue their careers.

To compile the Index, Thomson Reuters assessed publicly available data of more than 5,000 publicly traded companies around the world. The companies were measured on 24 separate metrics across four key categories.

The Index was then calculated by weighing each metric based on importance in the market and how each company compared with its peers.

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Bain & Company earned the number one spot on Vault.com’s 2017 “Consulting 50” ranking of the best consulting firms in North America. The “Consultant 50” rankings are based on the results of Vault’s annual Management and Strategy Consulting Survey.

Bain’s industry expertise and focus on results are factors driving its business success; its revenue once again grew at double-digit rates in 2015, creating remarkable learning and growth opportunities for employees.

Consultants laud the firm as a great place “Bain & Company to work and tout the potential for unparaltops the list of best leled career advanceconsulting firms.” ment, including gaining extensive international experience through cross-office teaming, overseas transfers and global trainings. More than half of Bain employees worked internationally last year.

Employees noted Bain’s steep learning curve and high bar for success. They also praised the firm for its highly supportive culture and deep investment in training and on-the-job coaching, which ensures that employees have the tools and opportunities to realize their career aspirations.

Cartus Cartus Corporation, a provider of global relocation services, has been named Relocation Management Company of the Year in Asia for the fifth consecutive year.

In addition, Cartus also received the Best Vendor Partnership award with their client, Statoil, a multinational oil and gas company.

The awards were presented to Cartus executives in September at the Asia Pacific Expatriate Management and Mobility Awards (EMMAs), in Singapore.

“Cartus named The award program was Relocation Manageorganized by the Forum for Expatriate Management Company of the ment (FEM), a leading Year.” community for global mobility professionals.

The Relocation Management Company of the Year award recognizes the investment that Cartus has made in their in-house Learning & Development program. The second accolade, the Best Vendor Partnership award, recognizes Cartus’ partnership with Statoil, particularly the successful delivery of group moves in emerging locations.

The EMMAs are independently judged by a panel of some of the most experienced and respected global mobility professionals from various industries and leading companies.

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CEB The global labor market is warming up, and active job seeking is on the rise, according to CEB, a technology company specializing best practices and insights. To keep top talent in place, companies will need to better promote internal job opportunities and benefits, rather than letting employees think they must go elsewhere to find the jobs they want.

Employees have long believed that the job oppor“CEB reports on tunities they were seeking 2016 labor did not exist in the labor market.

However, as movement trends.” companies increasingly turn to mass media to promote appealing employment brands and job opportunities, they are being convinced otherwise. Data from CEB’s Global Talent Monitor suggests that employees may finally be ready to make a move.

While this is good news for companies looking to attract new talent, employers looking to retain their best people must also take notice. In fact, employees’ intent to stay with their current employers continues to decline globally. Latin America and North America experienced the sharpest declines at 3 percent and 2 percent, respectively.

Compass Offices In June this year, Compass Offices, a serviced office network specialist, and HKBN Group Limited, a Hong Kong fiber broadband service provider, jointly announced a new strategic partnership which would benefit both of their customer bases in Hong Kong.

The partnership ensures customers in Compass Offices centers in Hong Kong can enjoy world class connectivity through HKBN’s fiber network, and in return, HKBN will receive office space at one of the Compass centers for its Enterprise Solutions business.

Many of Compass’ customers are financial companies and technology companies, for whom “Compass Offices good connectivity is and HKBN enter crucial. For example, a quick and reliable data into strategic connection allows partnership.” access to real-time data on trading floors, uninterrupted data transmission, and flexibility in various interfaces.

Compass Offices opened its first office in 2009 in Hong Kong and is now the largest serviced office provider in the city with an expanding network reaching the wider APAC region.

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Equiom Wealth protection company Equiom has announced its acquisition of Links Group – which is a provider of commercial facilitation and advisory services based in United Arab Emirates and Qatar. The partnership will expand the geographic reach of both companies and broaden their respective service offerings. It will also increase the number of staff to more than 420.

LDC, Equiom’s private “Equiom announces equity partner, has provided additional funding to support expansion into the transaction, which was United Arab also supported by Equiom’s committed acquisition Emirates and finance facility. The deal Qatar.” represents Equiom’s eighth acquisition since LDC invested in the business in 2013 to support its product line and international presence.

Established more than 30 years ago, Equiom has developed a global approach towards the delivery of wealth protection and offers a comprehensive range of high quality services including: family office, corporate management, trusts and foundations, yachting and aviation services, tax solutions, eBusiness services, and property structuring.

FTI Consulting Global business advisory firm FTI Consulting announced in September that its Corporate Finance & Restructuring segment received the Turnaround Management Association’s Mega Company Turnaround of the Year award for its role in the reorganization of automotive supplier Chassix Holdings.

FTI Consulting was engaged to lead a team on “FTI Consulting wins performance improvements, Mega Company benchmarking and impleTurnaround of the menting working capital initiatives for Chassix, and Year Award.” was appointed shortly afterwards to lead the company through its restructuring process.

FTI assisted in the negotiations for the long-term solution with various stakeholders, including the sponsors, customers and lenders and their legal and financial advisors.

This resulted in a pre-arranged Plan of Reorganization to secure employment for the vast majority of Chassix’s workforce, and to convert nearly US$550 million of its debt to equity.

With guidance from the FTI team, Chassix filed for Chapter 11 bankruptcy protection in March 2015 and emerged at the end of July 2015 with a sustainable business model and brighter future.

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GP Strategies Global performance improvement solutions provider GP Strategies Corporation said that it has signed a definitive agreement, subject to closing conditions, to acquire Maverick Solutions, a provider of Enterprise Resource Planning (ERP) product training services.

This acquisition will extend GP Strategies’ ability to deliver ERP systems training and user adoption services to its healthcare customer base and expand into the higher education sector. The transaction is expected to close on October 3rd. Completion of the acquisition is subject to customary conditions, “GP Strategies to including obtaining certain acquire Maverick consents and agreements.

GP Strategies CorporaSolutions.” tion is a global performance improvement solutions provider of training, eLearning solutions, management consulting and engineering services. Clients include Fortune 500 companies, manufacturing, process and energy industries, and other commercial and government customers.

GP Strategies’ solutions improve the effectiveness of organizations by delivering innovative and superior training, consulting and business improvement services, customized to meet the specific needs of its clients.

HKTDC According to an August report by the Hong Kong Trade Development Council (HKTDC), Asia is currently witnessing a boom in e-commerce.

Affluent Chinese middle-class consumers in particular are taking advantage of the benefits that online shopping has to offer. This has also led to increased demand for overseas products. Consumer goods, luxury brands and sustainable western products are in high demand among Asian consumers. companies “German companies wereGerman among the first to benefit from booming identify this trend and have seized the sales opportunie-commerce in Asia, ties from the large and heavily populated region of according to robust consumer demand.

HKTDC.” New and established German companies are cooperating with local service providers in order to facilitate their entry into new markets and to promote sales of their products.

Invest Hong Kong has indicated that the potential for regional expansion is a major consideration for around 79 per cent of companies based in Hong Kong – including a number of German companies and start-ups.

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Insigniam Insigniam, an international management consulting firm which specializes in breakthrough performance, transformation, innovation, and corporate culture, announced in August this year that one of its co-founding partners, Shideh Sedgh Bina, has been named to the PharmaVOICE 100 Most Inspiring People: an annual list of the 100 most innovative, influential, and inspirational people in the life-sciences industry.

Dissatisfied with the “Insigniam status quo of the consulting industry, Shideh co-founded Co-Founder named Insigniam from the ground up in 1990, dedicated to to PharmaVOICE developing an entirely new 100 Most Inspiring model for management consulting. She moved away People.” from traditional advisory consulting model whereby work is done on behalf of clients, and instead developed a unique and proprietary method that provokes the client to think newly about their business and their work, thereby producing new and unprecedented results.

To date, Insigniam clients include one-third of the Fortune 50, more than 80 of the FT Global 500, and over 110 companies of the Forbes Global 1000, as well as all 15 of the largest pharmaceutical companies in the world.

Ipsos Business Consulting Market research Agency Ipsos won Gold at this year’s Agency of the Year Awards, in the Market research category. Ipsos is an independent market research company controlled and managed by research professionals. Founded in France in 1975, Ipsos has grown into a worldwide research group with a strong presence in all key markets, and is ranked third in the global research industry.

“Ipsos wins Gold at Ipsos researchers assess market potential Agency of the Year and interpret market Awards 2016.” trends to develop and build brands, helping clients build long-term relationships with their customers. In addition, the company tests advertising and studies audience responses to various media in order to measure public opinion around the globe.

Ipsos has been listed on the Paris Stock Exchange since 1999 and generated global revenues of €1,785.3 million (UD$1,981 million) in 2015. With offices in 87 countries, Ipsos delivers insightful expertise across five research specializations: brand, advertising and media, customer loyalty, marketing, public affairs research, and survey management.

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Kenneth Chau & Co (a MGI member firm) MGI Worldwide, an independent global accountancy and consultancy association, retains its position in the Top 20 global accounting networks, securing 16th place in the world according to Accountancy Age’s latest annual rankings.

Overall, Accountancy Age reported that the top 20 networks, which include the big four firms, aggregated US$160.3 billion in fees, up 1.6 per cent from the previous year.

With some 5,000 professionals and representation “MGI Worldwide across 76 countries around the world, including accountaccountancy ancy firm Kenneth Chau & network listed in Co, MGI Worldwide maintained a healthy position global Top 20.” among the top 20 international accounting networks with a combined annual total income of US$489 million.

Delighted to have retained a position among the top 20 accountancy networks, MGI Worldwide’s CEO, Clive Bennett, comments, “With a history spanning nearly 70 years, we are very proud to be one of the longest standing networks of our kind. We are continually committed to strengthening connections among member firms and improving quality.”

KPMG With Hong Kong’s banking sector feeling the pressure on revenue growth as a result of global economic uncertainty, innovation and effective cost management are key priorities, KPMG’s latest annual survey finds.

KPMG’s 28th annual Hong Kong Banking Survey reveals that the surveyed banks’ total assets overall grew by only 2 percent in 2015, down from 8 percent in the last two years. Continual investment in more regulatory and compliance initiatives, rising wage and “Profits fall for Hong infrastructure costs have pushed up the Kong banks, average cost-to-income innovation a key focus, ratio by 1.6 percentage points to 48.7 percent.

KPMG survey finds.”

The survey also notes that some banks are focusing on enhancing their customer experience offering, as well as their mobile and other payment service channels to improve top-line growth.

Meanwhile, as financial institutions are increasingly viewing FinTech as complementary rather than direct competition to their business, and with the Hong Kong government actively promoting and encouraging entrepreneurship in the industry, banks are looking at FinTech solutions to improve their profitability, the survey says.

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Progress U An increasing number of organizations in Asia are getting their C-level executives certified as talent coaches, according to a report published by Progress U, an executive coaching company. This is because a growing number of C-suite executives consider developing top talent in their organizations as an important part of their role, according to the report.

Over the past four to five “Progress U years in Asia, many execureports talent tives have begun seeking talent coaching certifications coaching trend in to improve their training skills. Talent coaching can the C-suite.”” be defined as focused professional training that leads and supports key talent in their career development.

Evidence for this recent trend in Asia is available in Progress-U’s latest report entitled The State of Corporate Coaching Culture in Asia, which was based on answers from 236 companies.

The report shows that companies, particularly larger organizations with over US$1 billion annual sales, are increasingly investing in getting their senior executives trained and certified to become talent coaches, with 60 percent of senior executives receiving coach training and certification.

RealFoundations Asia Limited Managing Director of real estate professional services firm RealFoundations Andrew Carey has been appointed to the board of directors of the United Kingdom Apartment Association (UKAA), which was founded earlier this year to focus on the “build to rent” sector in the UK. UKAA is the first membership organization that brings together all stakeholders of the professional “Andrew Carey rental market and helps joins Board of UK share best practices for this fast evolving sector. It will Apartment lead educational training, customer service delivery, Association study tours and provide a (UKAA).” suppliers’ forum, market data and a range of resources to help deliver better services for residents. It will also share qualitative research and represent the sector’s voice in Westminster.

With offices on four continents, 350+ client-serving professionals and off-shore delivery capabilities in China and India, RealFoundations provides management consulting, managed services and energy solutions to business partners within the real estate industry.

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Resources Global Professionals Resources Global Professionals (RGP), a multinational provider of professional services announced Herb Mueller, Managing Director of RGP’s Atlanta practice, as its new Chief Financial Officer in August this year.

Prior to joining RGP, Mueller was Chief Financial Officer, Vice President, Accounting & Administration, and Treasurer of Delta Apparel, Inc, a publicly-traded apparel manufacturer and distributor. He has also served as Senior Vice President & Chief Financial Officer of TTA Partners, Inc, a holding company focused on investments in the advertising industry.

Mueller has served in a leadership position with RGP over the past “Resources Global four years in the Professionals appoints company’s Atlanta, Georgia practice.

He new CFO.” has led significant growth in the region, focusing on consulting opportunities in finance and accounting, information management and internal audit. He holds a BA degree in Accounting from Columbus State University. He is a certified public accountant (inactive).

Strategic Decisions Group (SDG) Strategic Decisions Group has been named one of America’s Best Management Consulting Firms, according to Forbes. The list is based on ratings of more than 250 firms in 15 industries and 16 functional areas, such as strategy, HR consulting, and supply chain management.

SDG was recognized in eight industry categories and three functional areas. Industry categories were: chemicals & pharmaceuticals, oil & gas, financial institutions, insurance, energy & “SCG named one environment, consumer of America’s Best goods & retail, travel transport & logistics, and Management other industrial goods.

Consulting Firms.”

Functional areas were strategy, organization, and finance & risk management. In each category where it was included, SDG was mentioned in a “disproportionately high number of client recommendations.”

For the list of accolades, Forbes collaborated with the research team Statista. Firms considered included not only “classic” management consultancies but also IT consultancies, advisory branches of auditing firms, and consulting branches of agencies.

biz.hk 10 • 2016

The Executive Center The Executive Centre, Asia Pacific’s leading premium serviced office provider, was once again a sponsor for The British Chamber of Commerce Annual Charity Ball held on 2nd September 2016 at Grand Hyatt Hong Kong. The event was attended by hundreds of high profile individuals and representatives from the international business community in Hong Kong.

With the theme of “Swinging 60s London,” the charity ball transported all guests to 1960s London, and was filled “The Executive with fabulous food, flamboyant fancy dress, Centre sponsors unforgivable dance BritCham Annual moves and amazing performance by The Ball 2016.”

Beijing Beatles.

Over HK$360,000 (US$46,000) was raised on the night through the live auction, cash donations and charity pledge forms. All proceeds went to Feeding Hong Kong, a local food bank which aims to fight hunger and to reduce food wastage, and MINSET, a charity which aims to change attitudes concerning mental health issues and offers help to individuals, families and organizations in need.

The MIGroup The MIGroup has opened its new business earlier this year in China, which will operate as a Wholly Foreign Owned Enterprise (WFOE), in the heart of downtown Shanghai. The Group’s Shanghai office, which opened on June 1st, will support, advise, and consult with TheMIGroup’s existing and future clients who have activity in any part of China.

Founded in 1978, The MIGroup is a provider of global relocation management solutions, offering a full range of relocation solutions including domestic and international services, compensation and consulting services – “The MIGroup from total assignment management to individuopens office in al services for transferees, Shanghai.” expatriates or individuals on the move.

With full service business units strategically located throughout The Americas, Europe and Asia, and with TheMIGroup Worldwide Partner Network located in over 175 countries, the Group has the capacity and capability to provide professional services across all time zones.

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TMF Hong Kong Limited In the rapidly growing, competitive multi-country payroll market, TMF Group – a provider of global business services – has been recognized for its quickly expanding global technology by Everest Group’s Multi-Country Payroll Platform (MCPP) Assessment.

The report finds that TMF Group is one of the largest multi-country payroll providers with the widest geographic coverage. TMF Group is also acknowledged for its distinguishing factor of global self-execution of payroll through end-to-end processing, in-country local expert knowledge and strong language proficiencies.

“TMF group The research report includes analysis of 11 global recognized for its payroll service providers that technology are “increasingly investing in MCPP platforms” and solutions.” expanding their reporting and analytical capabilities, interactive mobile support and other advanced employee support features.

This is the second year TMF Group participated in an Everest survey. Last year, TMF Group was named a “Major Contender” in the annual Multi-Country Payroll Outsourcing (MCPO) Service Provider Landscape with PEAK Matrix Assessment (2015).

Tricor Tricor Group, a member of The Bank of East Asia Group and a global provider of integrated outsourced business, corporate and investor services, is expanding into Australia, with the setting up of Tricor Chew Pty Limited, effective from May 2016.

Tricor Chew is a joint venture between Tricor and Chew Investment Partners Pty Limited in Australia, and is positioned to be a professional business “Tricor Group enters advisor which will provide a range of corpoJV with Australian rate services which professional services include business set-up, accounting, payroll, tax, firm.” company secretarial, among others.

Chew Investment Partners Pty Limited, managed and staffed by experienced and well-trained professionals, will focus on providing Australian in-bound and out-bound business advisory, management consulting, transaction and corporate services.

Its partners have all had significant prior experience in large public accounting firms and possess specialist expertise in the accounting, tax and business advisory fields.

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Vistra Following an acquisition earlier this year by Vistra, IL&FS Trust Company Limited (ITCL), which is the largest independent corporate trust services provider in India, has launched a campaign promoting a new corporate brand identity, as it transitions into a global brand and a Vistra company.

The transition to becoming an internationally recognized entity includes the renaming of IL&FS Trust Company Limited (ITCL) to Vistra ITCL (India) Limited, “Vistra ITCL and the unveiling of a new logo, which will take the shape unveils new brand of Vistra’s arrow symbol, identity.” conveying forward momentum and trust.

By becoming part of the Vistra network, Vistra ITCL broadens its reach into an extensive network of 64 offices in 41 jurisdictions around the world, therefore allowing the company and its clients an opportunity to explore and harness international relationships. In the midst of the new branding campaign, it will be business as usual for all of Vistra ITCL’s employees and clients.

Willis Towers Watson Findings from Willis Towers Watson’s Hong Kong and Macau Severance Practices Survey indicate that the majority of surveyed companies in Hong Kong and Macau remain optimistic about their performance over the next 12-18 months, while few companies have plans for redundancies or headcount reductions.

The new survey shows that 83 percent of Hong Kong businesses expect their performance in 2016 and 2017 to be either in line with or even better than their 2015 results, despite the poor global economic outlook and slowdown in Mainland China. But given the current economic uncertainty, almost a quarter of “Willis Towers surveyed Hong Kong companies (23 percent) Watson survey plan to implement some reveals new insights kind of HR-related cost saving measures other on employee than employee redundancies or layoffs. severance.”

The four most common cost saving alternatives revealed in the study are: 1) hiring freeze for some or all positions; 2) a reduction or freeze in bonus or incentive funding; 3) limits on overtime work and travel expenses; and 4) encouraging job-sharing and retraining of existing employees.

biz.hk 10 • 2016

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6/5/16 8:20 pm

CHARITABLE FOUNDATION

Thanks to the generosity of business leaders and friends of AmCham, more than HK$115,000 was raised at the annual Charitable Foundation Dinner in an evening of fine dining, music and entertainment at a UNESCO Asia Pacific Heritage Site in Hong Kong

By Queenie Tsui 56

biz.hk 10 â&#x20AC;˘ 2016

What a Wonderful World – Louis Armstrong I see trees of green, red roses too I see them bloom for me and you And I think to myself what a wonderful world.

I see skies of blue and clouds of white The bright blessed day, the dark sacred night And I think to myself what a wonderful world.

The colors of the rainbow so pretty in the sky Are also on the faces of people going by I see friends shaking hands saying how do you do But they’re really saying I love you.

I hear baby’s cry, and I watched them grow They’ll learn much more than I’ll ever know And I think to myself what a wonderful world.

Yes, I think to myself what a wonderful world.

biz.hk 10 • 2016

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onsidered one of AmCham’s favorite events of the year, the annual Charitable Foundation Dinner was successfully held on September 23rd at The Crown Wine Cellars where business leaders and friends of the Chamber gathered for an evening of fine dining, music and entertainment.

Before the dinner started, distinguished guests were greeted with glasses of Stellenbosch’s premium bubbly in the glass-housed conservatory at the UNESCO Asia Pacific Heritage Site. As in past years, local musicians Jerry Sun and Manting Chan, who beautifully performed Louis Armstrong’s What a Wonderful World, exceptionally rendered the sacred sense of thanksgiving on this occasion.

AmCham Charitable Foundation Chairman Peter Levesque expressed his heartfelt gratitude to James E. Thompson, Chairman of Crown Worldwide Group and a Charitable Foundation trustee, who for the fifth year hosted the dinner by sponsoring the extravagant venue, four-course dinner with wine pairings, as well as selected wines for a fundraising auction.

Levesque also acknowledged the support of AmCham Vice Chairman Steve Lackey, Governors Diana David, Elaine Cheung, Seth Peterson and Patrick Wu, who were in attendance, as well as all other

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supporters, for their generosity in supporting the Foundation at the dinner.

Levesque took the occasion to announce the recipient of this year’s Ira Dan Kaye Community Services Award, Dr. Thomas Chan Sze Tong, JP, who has been Chairperson of World Vision Hong Kong for 14 years, in recognition of his life-long commitment to public service and dedication to the community of Hong Kong.

The evening came to a close with a lucky draw and wine auction conducted by Gregory De’Eb, and raised over HK$115,000 in support of AmCham’s charitable causes and various engagements throughout the year, including Prize Book Awards, Lyn Edinger US Scholarship, Scholar Awards for local university students, as well as financial assistance for local, lesser-known charities serving the under-privileged every year.

Special acknowledgements go to the evening’s lucky draw sponsors United Airlines for two round-trip tickets in United Business Class to Guam or Singapore, Hong Kong’s Four Seasons Hotel for a two-person dinner at Caprice with a bottle of wine, The Peninsula Bangkok for a two-night stay in a Deluxe Room including breakfast and round-trip airport transfer for two persons, The Peninsula Boutique for its luxurious Peninsula Hamper, as well as praline confectionaries as table prizes.

biz.hk 10 • 2016

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MARK YOUR CALENDAR Oct Economics and Finance in a Two-Percent Economy

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John E. Silvia, Ph. D., Managing Director, Chief Economist, Wells Fargo Securities, LLC, Wells Fargo & Company Dr. Silvia will discuss recent developments in the U.S. economy including the labor market, inflation, corporate profits, monetary policy and the interest rate outlook. In addition, he will also talk about recent developments in the international economy regarding exchange rates, interest rates, international trade and global growth.

Prior to his current position, John worked on Capitol Hill as senior economist for the U.S. Senate Joint Economic Committee and chief economist for the U.S. Senate Banking, Housing and Urban Affairs Committee. Before that, he was chief economist of Kemper Funds and managing director of Scudder Kemper Investments, Inc. John served as the president of the National Association for Business Economics (NABE) in 2015 and was awarded a NABE Fellow Certificate of Recognition in 2011 for Outstanding Contributions to the Business Economics Profession and Leadership Among Business Economists to the Nation.

John Silvia holds B.A. and Ph.D. degrees in economics from Northeastern University in Boston and has a master’s degree in economics from Brown University. John’s first book, Dynamic Economic Decision Making, was published by Wiley in August 2011. His second book, Economic & Business Forecasting, was published in 2014, also by Wiley. John is a Certified Business Economist (CBE).

Oct Smart City Vision

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Ir Allen Yeung Tak-bun, Government Chief Information Officer, The Government of the Hong Kong Special Administrative Region The concept of a smart city is gaining increasing interest in advanced countries. It presents opportunities to improve cities and quality of living, and to foster technology development and business growth.

Ir Allen Yeung, Government Chief Information Officer (GCIO), will outline the vision of smart city development in Hong Kong. AmCham members are encouraged to participate in this lunch meeting and exchange their views on this strategic development.

Ir Allen Yeung has extensive experience in the ICT field. He holds a BSEE from the University of Texas at Austin, an MSEE from Purdue University and an Executive MBA from HKUST-Kellogg Northwestern University.

As GCIO, his responsibilities include formulating ICT policies and strategies; leading the E-government programmes; promoting and developing the ICT industry as a key business and economy driver; and bridging the digital divide.

Prior to joining the Government in July 2015, Ir Yeung was the Chief Corporate Development Officer of the Hong Kong Science and Technology Parks Corporation. Ir Yeung started his career in 1987 in the Silicon Valley, working for many hi-tech companies. In 1995, he relocated to Hong Kong to further his career development, and served in several senior management positions for multinational enterprises and Hong Kong listed companies.

Oct Strategic Imperatives for 2016 and Beyond:

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Insights from AAFA

Rick Helfenbein, President and Chief Executive Officer, American Apparel & Footwear Association The American Apparel & Footwear Association (AAFA) sits at the crossroads of all the regulatory and legislative challenges that face the apparel and footwear industry. New demands are being made of our supply chains. Rampant intellectual property theft is on the rise. The U.S. government challenges brands to make more products in the United States, yet competes against us with prison labor. Trade is facing perhaps the biggest challenge it has seen in decades, and election uncertainty has everyone spinning.

With a strategic focus on trade, supply chain management, and brand protection, AAFA has been helping the industry chart a course through these challenges in Washington, in the United States, and around the world.

What are the industry’s top concerns and what can we do collectively and individually to manage them? What opportunities exist and how we can best seize them?

Rick Helfenbein is president and CEO of the American Apparel & Footwear Association, the national trade association representing more than 1,000 brands in the apparel, footwear, and accessories industry. Rick became president and CEO on February 15, 2016 and leads the association and its operations.

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

Tel: (852) 2530 6900

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

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Venue: The American Chamber of Commerce in Hong Kong 1904 Bank of America Tower 12 Harcourt Road Central, Hong Kong Time: 12:00pm - 01:45pm Fee(s): Member: HK$280 Non-member: HK$400

Fax: (852) 2810 1289

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Email: byau@amcham.org.hk

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Find out more about how we can help you: www.tr.com

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JOURNAL OF THE AMERICAN CHAMBER OF COMMERCE IN HONG KONG

www.amcham.org.hk

October 2016 â&#x20AC;¢ VOLUME 48 NUMBER 10