Insight Magazine October 2013 Issue

October 2013

ALSO INSIDE Angels’ House by Liu Ye

• Malls Forced to Get Creative • Huawei Responds to Allegations

Bidding on China Two prestigious U.S. auction houses – Christie’s and Sotheby’s – are now able to operate in China but it doesn’t mean easy money from China’s wealthy collectors due to strict restrictions on ‘cultural relics’

INSIGHT The Journal of the American Chamber of Commerce in Shanghai

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INSIGHT OCTOBER 2013

The Journal of the American Chamber of Commerce in Shanghai

amcham shanghai President

Kenneth Jarrett VP OF PROGRAMS & Services

Scott Williams

F e at u r e s

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14 Malls Adapt to Compete REAL ESTATE

By Steven McCord

The commanding presence of online shopping is forcing retail property owners to get creative.

VP of Administration & Finance

Helen Ren Directors Business development & Marketing

Patsy Li Committees

Stefanie Myers Events

21 Huawei Responds to Allegations

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OPINION

By Scott Sykes

The Shenzhen-based company answers “groundless accusations” about espionage that derailed the company’s plans to grow in the U.S.

Jessica Wu Government Relations & CSR

Steven Chan Membership & CVP

Linda X. Wang

INSIGHT EDITOR-IN-CHIEF

Bryan Virasami

26 Bidding on China

Erika Wang senior communications associate

Ryan Balis Intern

Design

Alicia Beebe

By Angela Doland

Christie’s and Sotheby’s can now compete in China against mainland auction houses but it doesn’t mean easy money due to strict regulations.

Senior Associate Editor

Beverly Chan

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COVER STORY

34 Visa Forum Attracts Crowd

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LEGAL UPDATE

By Beverly Chan

Major changes to China’s visa rules will impact almost every foreigner seeking to work or live in China.

Printing

Mickey Zhou Snap Printing, Inc.

INSIGHT Sponsorship (86-21) 6279-7119 ext. 5667 Story ideas, questions or comments on Insight: Please contact Bryan Virasami (86-21) 6279-7119 ext. 5668 bryan.virasami@amcham-shanghai.org Insight is a free monthly publication for the members of The American Chamber of Commerce in Shanghai. Editorial content and sponsors' announcements are independent and do not necessarily reflect the views of the governors, officers, members or staff of the Chamber. No part of this publication may be reproduced without written consent of the copyright holder.

I n s igh t s ta nd a rd s

5 News Briefs

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11 Movers and Shakers

MONTH IN PICTURES

Highlights from Recent Events

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EXECUTIVE room

Favorite Thing about Shanghai

I N S I D E Am C h a m

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40 From the Chair 41 Board of Governors Meeting 46 Government Relations 49 Committee Highlights Cover art courtesy CHRISTIE’S IMAGES LTD; Design by Mickey Zhou

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Editor's note

W

e can’t say this every time, but in this month’s Insight, we have something for nearly everyone. So if you are interested in shopping, air travel in China, women, art or business, take a moment to flip through the pages. Even if you may think you’ve heard everything about e-commerce in China, you may want to see what our guest writer says about shopping malls. Malls targeting mid-range consumers are rushing to find creative ways to stay relevant to lure consumers who have embraced the Internet.

Nearly a year after a U.S. Congressman publicly accused Huawei of conducting espionage on behalf of the Chinese government, Scott Sykes, a vice president at the Shenzhenbased company, pens an opinion piece that aims to set the record straight. In his piece, Sykes talks about the success of Huawei and lays out his reasoning why the allegations are false.

In a unique survey of 64,000 people, bestselling author John Gerzema tells Insight’s Erika Wang that companies in the U.S. and elsewhere “want more feminine values brought

Bryan Virasami editor-in-chief

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into leadership,” and he shares other amazing facts outlined in his new book. We also have a candid interview with James Fallows, author of China Airborne, who discusses the challenges and problems with China’s aviation industry.

Finally, we don’t usually cover art in Insight but the arrival of Christie’s and Sotheby’s in China is a story that has significance not just for wealthy art collectors here. It is a positive sign that China is further opening up its market to competition from the outside. Angela Doland’s story points out that foreign companies are prohibited from dealing in “cultural relics” here, an effort intended to keep them from slipping out of the country. As the article points out, only domestic auction houses can sell them, but they also happen to be the most profitable items in the art business. Industry experts say this is likely to change in the future because China wants to develop into an international art center.

Finally, look out for an analysis on the proposed Shanghai Free Trade Zone in next month’s issue.

Patrick Penna

News

n ne ew ws s b br r ii e ef fs s

CHINA BUSINESS

Online shopping transactions boom China saw surging online shopping in the second quarter of 2013 with transactions totaling RMB437 billion (US$70.8 billion), according to a research report released by Shanghai-based iResearch.

The figure was a 24.2% quarter-toquarter increase and a 45.3% yearon-year increase. China’s e-commerce market is expected to surpass that of the U.S. this year to become the world’s largest, according to a recent report by consultancy firm Bain & Company.

China’s e-commerce market grew at an average rate of 71% from 2009 to 2012, versus 13% in America, and its total size is expected to reach RMB3.3 trillion (US$539 billion) by 2015. Total spending

by Chinese consumers on online shopping reached US$212.4 billion in 2012, compared to US$228.7 billion in the U.S. Taobao.com, China’s leading C2C platform, grew by a compound annual rate of 65% over the period.

China deals decline in first half of 2013 Deals in China by volume and value have declined by 5% and 6%, respectively, compared with the second half of 2012, according to a PwC report released in late August. The number of deals stood at 2,118, and the value of these deals has fell to US$119.5 billion. The report attributed dealmakers’ “wait and see” attitude to China’s leadership transition, changes in policy direction, tightening credit conditions and a slowing economy.

However, deal numbers and values increased by 13% and 60%, respectively, compared with the first half of 2012.

China mainland outbound M&As also declined in the first half of 2013, with

Eurocopter EC120 Colibri

Alibaba sells aircraft online China’s largest e-commerce group Alibaba put up six aircraft – five small planes and one helicopter – for sale on its consumer-to-consumer online auction site Taobao.com.

The bidding opened September 12 and went on for four days. The bid for cheapest plane on offer, the training aircraft Jabiru J160C, started at RMB1 (US$0.16) and the most expensive – the light helicopter Eurocopter EC120 Colibri – was listed for RMB16.8 million. The other four planes on offer included light sport aircraft Aurora SA60L and CTLS and helicopters Robinson R22 and Robinson R44.

Bidders had to put down a deposit of RMB50,000 for each plane except the Jabiru J160C, which required a deposit of RMB2,000. There are only 300 airports or landing areas for general aviation aircraft in China, but prospects for private aircraft are promising as the central government has pledged to gradually open parts of the country’s lowaltitude (below 1,000 meters) airspace for private flights to promote the general aviation sector.

only 78 transactions, compared with 95 in the previous six months.

Baidu to launch fund products Chinese Internet giant Baidu Inc. is negotiating with leading domestic fund companies to offer customized fund

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products, according to local media reports.

Baidu said it hopes the fund companies will issue attractive products offering high returns, low risk and good liquidity. Baidu has already launched its beta version of a Baidu Finance website, to help people search for financial services. Baidu already received a third-party payment license from the country’s central bank, the

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People’s Bank of China, to conduct related online payment services. With Alibaba Group Holding Ltd. actively expanding in China’s Internet finance sector, Baidu is also showing willingness to explore the online finance market.

CORPORATE NEWS

Apple gets license for China Mobile China’s Telecom Equipment Certification Center gave Apple, Inc. the final license necessary for the iPhone to run on the network of China Mobile Ltd., the world’s largest wireless operator, in time for the unveiling of its newest models, the iPhone 5S and its less expensive version, the iPhone 5C. China Mobile has more than 700 million users. But the iPhone 5C, priced at RMB4,488 (US$733) in China for the unsubsidized 16-gigabyte version, signals that the Cupertino, Calif.-based company will continue to target the top end of the Chinese market. Apple’s China market share fell to 5% in the second quarter, ranking it seventh behind domestic manufacturers such as Lenovo Group, Ltd., according to research firm Canalys.

ICBC posts 12.4% increase in H1 net profit Industrial and Commercial Bank of China (ICBC), the nation’s largest lender, said on Thursday that its net profit rose 12.4% year-on-year in the first half of 2013 to RMB138.5 billion (US$22.3 billion).

ICBC’s net interest income climbed 5.8% from a year earlier to RMB215.9 billion, while net fee and commission income grew 23% to RMB67.4 billion in the January– June period. The country’s state-owned “Big Four” banks – ICBC, Bank of China, China Construction Bank and Agricultural Bank of China – all reported more than 12% increases in their half-year net profit.

Industry-wide, combined net profits grew 13.8% to RMB753 billion in the first six months, according to the country’s top banking regulator the China Banking Regulatory Commission.

Dongfang builds massive nuclear generator Dongfang Electrical Machinery Co., Ltd. (DFEM), a major Chinese power generating equipment manufacturer, has completed construction of a 1,750-megawatt nuclear generator, currently the biggest per-unit installed capacity among nuclear generators in the world, according to the Sichuanbased company. The generator is meant for the Taishan nuclear power plant in south China’s Guangdong Province. DFEM will provide two such generators for the nuclear power plant. DFEM has produced 14 nuclear generators so far with a total installed capacity of 15,790 megawatts.

The Taishan nuclear power plant is a joint venture of China Guangdong Nuclear Power Holding Co., Ltd. and Electricite de France. The first phase of the nuclear power station cost RMB50.2 billion (US$8.13 billion).

MACROECONOMICS

China manufacturing at 16-month high China’s economy is strengthening after a two-quarter slowdown, with a manufacturing gauge rising to a 16-month high in August as new orders jumped and overseas demand rebounded. The Purchasing Managers’ Index (PMI) was at 51, according to China’s National Bureau of Statistics. A separate manufacturing PMI by HSBC Holdings Plc and Markit Economics rose to 50.1 in August from 47.7 the previous month, the biggest gain in three years and the first reading above 50 since April. China’s GDP growth slowed to 7.5% in the second quarter from a year earlier, extending the longest streak of sub-8% expansion in at least two decades.

Meanwhile, consumer inflation edged down slightly to 2.6% from July’s 2.7%.

Exports beat forecasts China’s exports rose more than expected in August to 7.2% year-on-year, according to figures by the General Administration

of Customs. The figure was up from July’s 5.1% on year rise after a 3.1% fall in June and beat the median forecast of economists polled by Dow Jones Newswires for a 6% expansion. Imports rose 7% on the year, down from the 10.9% rise in July, resulting in a trade surplus of US$28.6 billion for the month. The figures were boosted by improving demand for the country’s goods in major markets. Exports to the European Union in August fell 2% year-on-year, while exports to the U.S. rose 6%. Exports to some emerging markets also picked up, notably Brazil, where exports from China gained 14%.

China’s factory output rises Industrial production in China rose 10.4% in August, up from July’s 9.7% and the fastest rate this year in a new sign it is recovering from its deepest slump since the 2008 global crisis. Economic growth declined to a two-decade low of 7.5% in the second quarter, but trade, factory output and other indicators suggest the slowdown is leveling out. China also reported retail sales grew 13.4% year-on-year in August at a slightly higher rate than in July, while investment grew by 21.5% on last year and was up 20.3% over the first eight months of 2013. The world’s second-largest economy is attempting to move from a growth model powered by heavy investment and high saving to one based more on consumer consumption.

U.S.-CHINA

Carlyle, Townsend to invest US$200m in China warehouses U.S. buyouts firm Carlyle Group said it would invest about US$200 million with U.S. investment management firm Townsend Group to buy and build 17 warehouses as part of plans to build a nationwide logistics warehouse network with more than 1.8 million square meters of gross floor area. Warehouses will be built in strategic hubs across China, including Tier 1 cities Shanghai,

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Beijing and Guangzhou, and Tier 2 cities such as Shenyang, Tianjin, Chongqing, Zhengzhou and Hefei. Carlyle and Townsend have agreed to buy five logistics warehouses owned by Shanghai Yupei Group, a domestic warehouse developer and operator in China, and to build another 12 in a strategic partnership with Shanghai Yupei, which will also invest US$200 million as part of the deal.

GE gains China grid foothold General Electric Co. announced in late August it has formed a partnership with China XD Electric Ltd., a move that will give it a foothold in China’s electricity infrastructure market. GE took 15% of the shares of XD Electric, one of China’s biggest manufacturers of electricity transmission and distribution equipment. The U.S.-based company will also form a joint venture to offer Chinese customers its localized gridautomation equipment and services. China represents about one-quarter of the grid industry’s US$100 billion forecast global expansion. According to Bloomberg News, the deal will help double sales of power transmission products and services in GE’s digital energy business to US$4 billion annually in the next decade.

the largest online retailer in the United States, launched contract cell phones from China Unicom, one of the country’s largest telecommunications operators. More than 60 types of contract cell phones from China Unicom are available on Amazon.cn for Beijing local users. Amazon China already cooperates with China Telecom, bringing the total number of contract cell phones it now offers to more than 130. Amazon China is the sixth national online marketplace China Unicom has teamed up with to sell its contract cell phones. Amazon China’s market share shrunk to 2.8% in the first quarter of 2013, compared with 14% in late 2007, according to Beijing-based research firm Analysys International.

GOVERNMENT & POLICY

China to boost broadband industrial chain

Johnson Controls Inc.’s (JCI) auto parts unit said it plans to open 11 new manufacturing sites in China during the next few years to handle expected growth. JCI’s Plymouth, Mich.-based Automotive Experience unit, which makes seats, electronics and interiors, has 57 sites in China. The unit had sales in China of US$4.6 billion last year and employs about 25,000 people in China, including its joint ventures. The company has been in China since 1997. It also has 10 engineering sites in eight cities that employ more than 1,150 engineers.

China’s State Council has elevated broadband development as a national strategy and announced an implementation timetable for its development over the coming eight years. The government’s “Broadband China” strategy calls for boosting urban broadband penetration from 55% of households this year to 65% by 2015; more than doubling international bandwidth; and sharply raising connection speeds in the most developed cities. China’s Internet access speed ranks 98th in the world, just ahead of Uruguay, while South Korea, Japan and Hong Kong are respectively first, second and third, according to data by technology company Akamai.

To achieve this, China’s basic telecom operators China Mobile, China Unicom and China Telecom are expected to launch large-scale upgrade and restructuring of their access networks, backbone networks and metropolitan area networks. By the end of June, China’s fixed broadband access users reached 180 million.

Amazon launches China Unicom contract cell phones

China signs multilateral tax convention

The China branch of Amazon.com, Inc.,

China signed the Multilateral Convention

Johnson Controls to add 11 China factories

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on Mutual Administrative Assistance in Tax Matters, the first multilateral tax instrument ever to be signed by China, at the headquarters of the Organization for Economic Co-operation and Development (OECD) in Paris on August 27. By signing the Convention, China became the 56th signatory to the multilateral agreement designed to facilitate international cooperation among tax authorities. Developed by the OECD and the Council of Europe in 1988, the Convention is the most comprehensive multilateral instrument available for tax cooperation and exchange of information.

According to OECD, more than 60 countries have either signed or expressed interest in signing the convention.

Plan to cut pollution in a decade China’s State Council has drafted a plan to reduce coal consumption, close steel plants and control the number of cars on its roads in an effort to eliminate heavily polluted days in as soon as a decade.

Authorities said they aim to cut the concentration of PM2.5, the fine particles that pose the greatest health risk, by 25% in Beijing, Tianjin and Hebei province by 2017 from 2012 levels. They also seek to reduce concentrations by 20% in Shanghai and the Yangtze River Delta and by 15% in the Pearl River Delta. Concentrations of PM2.5 in Beijing soared to almost 40 times the World Health Organization’s recommended level in January. China also aims to cut the share of coal in total energy consumption nationwide, currently more than 70%, to below 65% by 2017. Ironmaking and steel-making capacity will also be cut by 15 million tons in 2015.

Retail fuel prices to rise China’s gasoline and diesel retail prices were raised again last month, marking the third hike in two months. The benchmark retail prices of gasoline and diesel rose by RMB0.07 (1.1 cent) per liter, the National Development and Reform Commission (NDRC) said. The new price represents

an increase of RMB90 and RMB85 per ton for gasoline and diesel prices, respectively.

Recently, the NDRC raised gasoline and diesel prices on July 20 and August 31.

Under China’s new pricing regime, which came into effect in March, domestic fuel prices are adjusted when international crude prices reflect a change of more than RMB50 per ton for gasoline and diesel over a period of 10 working days.

did not reveal when the project will be completed. BIM in the cloud will help enterprises in the construction sector improve project outcomes by moving computation-intensive tasks to the cloud, enabling more rapid visualization and simulation and optimized collaboration with access to intelligent, data-rich models.

QS Solar to build more plants SHANGHAI BUSINESS

Huawei to construct BIM cloud in Shanghai Huawei Technologies Co., Ltd., China’s biggest telecom gear vendor, said it will construct China’s first building information modeling (BIM) cloud in Shanghai Tower, slated to become Asia’s tallest building at 632 meters when its external crown structure is completed in 2014. Huawei held a launch ceremony on September 2 with Shanghai Tower Construction and Development Co., but

Shanghai-based QS Solar said it will build distributed solar plants in two or three national development zones from 2014 in a vie to achieve annual power generation of 500 million KWh. The company said it will shift its focus from module production to construction of solar plants based on the government’s encouraging incentive policy. China’s new Feed-In Tariff (FIT) policy for photovoltaic power has boosted the building of new power plants. For utility PV ground power, the new FIT has been set at RMB0.9 (US$0.14), RMB0.95 and RMB1 per KWh based on solar

radiation levels where the plant locates.

The distributed PV projects will get a subsidy of RMB0.42 per KWh generated.

The FIT, scheduled to last 20 years, will apply to all PV projects registered after September 1.

Car plate prices down for sixth month Shanghai’s average car plate prices fell for the sixth consecutive month in September to RMB73,492 (US$12,009), down RMB1,447 from August, while the lowest winning bid was down RMB1,300 to RMB73,400, said the Shanghai International Commodity Auction Co. The first-round ceiling in September was set at RMB72,600 – RMB1,500 down from last month’s ceiling. In March – before the ceiling was introduced – prices reached a record high of more than RMB90,000.

Plate supply remained at 9,000 this month. However, the number of bidders at September’s auction rose to a new record high for the year to 35,154.

SOUTH AMERICA CHINA & THE WORLD MIDDLE EAST

ASIA-PACIFIC SIA PACIFIC

KAZAKHSTAN: China buys into Kazakh oilfield for US$5b China has struck a US$5 billion deal with Kazakhstan, giving China a stake in the giant Kashagan oilfield project, the world’s largest oil discovery in five decades. Under the deal, Kazakhstan will sell 8.33% of the offshore oilfield in the Caspian Sea to China, the world’s largest energy consumer.

The sale and purchase agreement was signed by the heads of Kazakh state oil and gas company KazMunaiGas and China National Petroleum Corp (CNPC) in the presence of the two presidents.

Oil and gas deals, including on building an oil refinery in Kazakhstan, are among 22 agreements worth some US$30 billion reached during a recent tour by Xi Jinping to Central Asia.

ASIA-PACIFIC SIA PACIFIC

AFRICA

ZIMBABWE: China Africa Sunlight to invest US$2.1b in Zimbabwe power China Africa Sunlight Energy Ltd., a venture between Old Stone Investments Ltd. of Zimbabwe and Shandong Taishan Sunlight, said it plans to invest as much as US$2.1 billion developing coal mines and building a 2,100-megawatt plant powered by the fuel in Zimbabwe to help ease electricity shortages. The company said it will start with capacity to produce 300 megawatts by mid-2015 and raise this to 600 megawatts by the end of that year. Government estimates place the country’s coal resources at 10–15 billion metric tons.

EUROPE

EUROPE MIDDLE EAST

UNITED KINGDOM: Geely Group restarts London taxi production The London Taxi Company (LTC) restarted production of its TX4 model, known as the famous black cab, in September – six months after the business was bailed out by Geely Group of China.

Since Geely Group acquired the company in February 2013, the company said it has cleared the inventory of vehicles that remained following the closure of the production facilities in 2012.

Once up and running, the production line will complete around 10 new taxis a day, five days a week. Following the investment by Geely Group, LTC has created an additional 66 engineering and technical jobs in Coventry, increasing the total workforce to nearly 170 and has also expanded its London operations.

NORTH AMERICA MIDDLE EAST

AFRICA

UNITED ARAB EMIRATES: China grants new rights to Emirates Airlines China announced it will allow Emirates Airlines to operate four Dubai–Yinchuan–Zhengzhou flights every week and grant additional freedom traffic rights between Yinchuan Hedong International Airport in western China’s Ningxia Hui Autonomous Region and destinations in the United Arab Emirates. The granting also means that after flying from Dubai to Yinchuan and loading and unloading passengers and cargo, aircraft from Emirates Airlines can fly on to other countries. The first international flights to and from Ningxia – Yinchuan–Kunming–Dubai scheduled passenger and cargo flights – were launched on May 11, 2011.

NORTH AMERICA

MIDDLE EAST SOUTH AMERICA AFRICA

UNITED STATES: CFIUS clears Smithfield’s acquisition by China’s Shuanghui Shuanghui International Holdings Ltd.’s proposed US$4.7 billion acquisition of Smithfield Foods Inc. has been cleared by the Committee on Foreign Investment in the United States (CFIUS), an inter-agency executive branch panel that examines foreign investment for potential threats to national security. The deal, which would be the biggest purchase of a U.S. company by a Chinese firm, still needs shareholder approval at a special meeting scheduled for late September. Shuanghui and Smithfield said they expected the transaction, valued at US$7.1 billion including debt, to close soon after that meeting. Shuanghui’s bid stirred concern about food safety and domestic pork supplies among some U.S. politicians and faced review by CFIUS.

AFRICA NORTH AMERICA ASIA-PACIFIC SIA PACIFIC

SOUTH AMERICA

NORTH SOUTHAMERICA AMERICA EUROPE

ASIA-PACIFIC SIA PACIFIC

SOUTH ASIA-PACIFIC SIA AMERICA PACIFIC

VENEZUELA: China delivers control of satellite China has delivered full control of the Chinese-built Miranda satellite over to Venezuela. The South American country’s Ministry of Science and Technology said 54 Venezuelan professionals will be in charge of operating his country’s second satellite, VRSS-1 (Venezuelan Remote Sensing Satellite), which was launched into orbit from China on September 28, 2012, at a cost of US$140 million. Named after Venezuelan revolutionary Francisco de Miranda, the remote-controlled satellite has been operated

by Venezuelan experts since January from China. The satellite allows the study of Venezuelan territory, with information on strategic sites including mining and oil infrastructure, agriculture and the environment. Venezuela’s first satellite, Simón Bolívar, VENESAT-1, was also launched from China, on October 28, 2008, at a cost of US$180 million.

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M o ve r s a n d S h a k e r s c o m p iled b y j o y ce bia n

Movers and Shakers highlights major personnel changes within the Chinese government at various levels and senior management-level movements within multinational companies in China. imaginechina

JOHNSON & JOHNSON Johnson & Johnson appointed Jesse Wu Chairman for China in late August. Before taking this newly created role, Wu was Worldwide Chairman, Group of Consumer Companies Johnson & Johnson. Johnson & Johnson stated this position was created because China plays a critical role in the company’s future development in the region.

Jesse Wu

Private Sector HEWLETT-PACKARD Hewlett-Packard appointed Robert Yu Lang Mao as China Chairman, a newly created role at the end of August. Mao will be responsible for HP’s development strategy in China and report to HP CEO Meg Whitman. Mao joined from a Robert Mao broadband technology firm Ubee as president.

Previously, Mao was CEO at 3Com China and 3Com Corporation respectively, President and CEO for the greater

China region at Nortel and president for greater China at Alcatel.

AMERICAN AIRLINES American Airlines announced Peng Qiulin as General Manager for China, effective on October 8. Peng was a Senior Account Manager at British Airlines and she will succeed Victor Lee, who has served as Managing Director for China at the company for the past 7 years. The company said an announcement of Lee’s new role will be made within the next few weeks.

If your company has executive personnel changes, please contact Joyce Bian at joyce.bian@amcham-shanghai.org.

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deal of the month B y E r i k a Wa n g

courtesy apache corporation

Salam natural gas plant on Apache’s Khalda Concession in Egypt’s Western Desert

Sinopec, Apache Strike Egypt Oil Deal

C

hina Petrochemical Corporation (Sinopec Group) via its subsidiary Sinopec International Petroleum E x pl or at i on and Pro du c t i on Corporation has agreed to buy a 33 percent stake in the Egyptian oil and gas business of Houston-based Apache Corporation for US$3.1 billion in cash. Expected to be formally signed in the final quarter of the year, the deal is the first step in forming a global partnership to pursue oil and gas projects, said Apache.

Beijing-based Sinopec said the deal with Apache will add an additional 130,000 barrels of oil equivalent a day, or 47 million barrels annually, to its overall production. Apache’s Eg ypt operations produced an average of 100,000 barrels of oil and 354 million cubic feet of natural gas per day in 2012. Apache will retain a 67 percent stake and continue its role as the site operator.

Apache said the latest sale includes oil and gas production assets in Egypt’s Western Desert in a remote, unpopulated area that has not been affected by political developments in the country.

In a statement, G. Steven Farris, chairman and CEO of Apache, said: “We are pleased to launch a global partnership with Sinopec, and to welcome them into our business in Egypt. Their technical expertise complements our 20 years of experience operating in Egypt and creates an alliance that

w i l l c ont i nu e to e x pl ore and d el ive r t he tremendous hydrocarbon resources in the Western Desert.”

China is the world’s second-largest consumer of oil behind the U.S. China’s state-owned oil companies have been striking deals in the Middle East and elsewhere to secure long-term supplies and profit from future global demand. According to data from Dealogic, Sinopec has invested US$19 billion in the United Kingdom, the U.S., Canada, Brazil, Argentina and Australia since late 2010.

Sinopec purchased a 40 percent stake of Spanish oil company Repsol’s Brazilian arm for US$7.1 billion in October 2010. It also bought a 30 p ercent st ake in t he Brazilian unit of Portuguese energy company Galp Energia SA for US$5.2 billion in November 2011. In June, it agreed to pay US$1.5 billion to Houston-based Marathon Oil Corporation for a 10 percent stake in its Angolan oil and gas field. Also this year, it agreed to a US$2.2 billion deal with Oklahomabased Devon Energy for a one-third stake in five new shale projects in the U.S. Sinopec is Asia’s largest oil refiner by volume and China’s second-biggest producer after China National Petroleum Corp. Sinopec is listed in Hong Kong and also trades in Shanghai and New York.

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“

The deal with Apache will add an additional 130,000 barrels of oil equivalent a day…”

r e a l e s tat e

By Steven McCord

Malls Must Adapt to Compete Steven McCord

The commanding presence of online shopping is forcing retail property owners to get creative

T

he emergence of e-commerce has captured the attention of the global commercial real estate industry, and its impact is being felt especially strong in China. The world’s largest connected population is increasingly shopping online, prompting talk that China soon will surpass the U.S. as the world’s largest online retail market.

Looking ahead, we think China’s online market could exceed US$1 trillion by 2020, which would make it the equivalent of the 16th largest economy in the world today.

Viewing the sector’s ongoing growth and transformation, bricks-and-mortar retailers and property developers are concerned that online shopping will encroach on territory they have taken for granted. While shopping malls do not necessarily face an existential threat from online shopping, they must adapt to stay competitive.

Malls targeting mid-range consumers are emerging as the prime battleground in which physical retail must devise new strategies to succeed in China’s post e-commerce world.

High-end and luxury malls currently do not face serious online competition. The writing is already on the wall for many low-end malls (especially those sold by strata-title), whose offerings fatally overlap with the unbranded clothes and other products sold on dominant consumerto-consumer (C2C) sites like Taobao.com, and which lack the resources to invest in serious strategic turnarounds. Mid-range malls have fared better so far, but their challenge looks set to rise as the business-to-consumer (B2C) sites assume a

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growing share of the e-commerce market and more popular brands go online.

Much of the burden for adapting to the new demand landscape falls on retailers themselves.

Globally, we are in the early stages of a period of intense experimentation, in which brands will try to integrate online strategies into their physical store networks by opening store websites, allowing in-store pick-up and after-sale service for goods purchased online, and encouraging customers interacting with the store via mobile devices.

Some retailers may even reorient store space around handling and trying out products while directing customers to make purchases via the brand’s online storefront.

We will see these trends play out in China as wel l. Even in pro duc t c ategor ies he av i ly penetrated by e-commerce such as consumer electronics, store concepts like the Apple Store w i l l b e a d opte d by ot he rs as a me ans of acquainting customers with a brand and its product lines. Nike and Adidas are already going this route with their Niketown and Adidas experience stores. Large store networks will likely consolidate into a smaller network of large, interesting store concepts and flagship stores.

In the coming years the onus will be on mall owners in China to pick brands that are managing the transition to multi-channel strategies successfully.

The right mix As retailers experiment with new approaches,

imaginechina

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Dancers entertain shoppers at a mall in China

mall owners may give less emphasis to product categories in which online purchases account for a large share of total sales, including electronics, household products and many kinds of apparel.

Chinese mega-developer Wanda announced that its new enclosed malls will no longer have fashion specialty tenants.

In place of such retailers, Wanda and other mall owners are dedicating more space for restaurants, entertainment and services – tenants whose products are not easily purchased online, and continue to reliably attract visitors and sales revenue. Experience is the driving principle behind this tenant mix, as it is the one thing that distinguishes the shopping mall destination from buying goods with a computer or tablet at home.

To maintain their properties’ appeal to consumers, therefore, owners should ensure that their properties provide customers with exciting, diverse and convenient shopping experiences: well-run cinema and karaoke facilities, a gym or spa, al fresco dining options, exceptional service, entertaining promotional events in common

spaces and ample parking and access to transit all can help give consumers a reason to visit the mall rather than shop online.

Owners also can turn digital technologies in their favor by providing Wi-Fi access and setting up channels for guidance, marketing, service and interaction via customers’ smartphones and tablets. Promotional games played on mall-owned video screens, touch-controlled floor guides and ample opportunities to share information about the mall and shops via social media can all give the mall experience an edge over the pure online shopping experience.

Building further on the concept of experience, many malls have untapped potential as centers for social activities. Opportunities abound for owners to emphasize the community-gathering function of their centers to create quasi-public spaces in which people can linger away from their small high-rise flats – the proverbial “town squares” for urban China in the 21st century.

Some malls are taking advantage of the middle c l a s s’ g r o w i n g i n t e r e s t i n h o b b i e s l i k e

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Wanda and other mall owners are dedicating more space for restaurants, entertainment and services – tenants whose products are not easily purchased online…”

international cooking and tastings of wine, spirits and artisanal foods. Experience-led retail can include classes on blending drinks, wine and che e s e for t he a du lt s , as wel l as ma k i ng personalized toys for children. For high-end products, an on-site workshop could demonstrate how products are made, giving a bit of theater to the products on offer.

China’s on-going car craze means that auto shows are effective at drawing crowds. Combined with more traditional mall experiences like dining and karaoke, these activities can be chained together to give families an excuse to linger in the mall for several hours or even make a day trip of it. The upside should be clear given that total mall sp e nd i ng h a s b e e n show n to b e d i re c t ly proportional to dwell time.

Brand matters As more malls adopt the above strategies and go the “experience route,” branding can help a mall to stand out from the crowd. A strong brand communicates to the consumer what particular experience a mall seeks to provide and can differentiate one mall platform from another – a feature that will be critical as more and more malls imitate successful experience-building strategies.

For example, Hong Kong New World’s K11 series of malls has adopted an art theme, with e x h i b i t i o n s p a c e a n d a n at m o s p h e r e o f sophistication that imbues them with a distinctive identity. Other successful branded malls such as Joy City are becoming recognized as destinations for young adults.

These malls are a step away from the parade of undifferentiated department stores that until recently dominated organized retail, and is a trend we expect to appear more often as shopping malls assume greater prominence in Tier 2 and 3 markets and seek to build customer loyalty.

Overall, we remain optimistic for the future of physical retail in China. For an example of a bricks-and-mortar format that has thrived in the

The growth of e-commerce is forcing malls to find new ways to attract consumers

face of ruthless online competition, one need look no further than the Chinese cinema industry.

Rampant piracy and online streaming have made theaters’ sole product not just readily available online, but free. Movie theaters have fought back to establish themselves as destinations for escapist entertainment, and paying audiences have powered China’s 2012 box office to become the world’s second largest film market. Other retail formats can and will see off the e-commerce challenge as well.

While it is inevitable that e-commerce will carve out a growing niche in China’s retail market, the country’s culture of guang jie – going shopping as a leisure activity – is well entrenched in urban society, and consumers will continue to flock to and spend money in retail properties that provide appropriately targeted shopping experiences.

Steven McCord is local director, China Retail Research, Jones Lang LaSalle, based in Shanghai. See more on this topic in the recent Jones Lang LaSalle white paper E-commerce in China: Online is the New Black.

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av i at i o n

By Ian Driscoll

Which Way is Up? James Fallows, author of China Airborne, responds to questions about delays, ownership and competition

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lying in China was once a bountiful source of dinner-party tales. Today, the common complaint of many foreign air passengers in China is the frequency and length of flight delays, for which there is hard statistical evidence. FlightStats, a U.S.-based compiler of such information, recently ranked Beijing and Shanghai as having the worst delays out of 35 major international airports.

Departure tardiness looks set to worsen, given growing demand for flying in China. In July, the International Air Transport Association (IATA) reported that the number of Chinese domestic airline passengers had grown 13.4 percent from May 2012 to May 2013. That pace is not expected to slow anytime soon. In addition, international travel by Chinese citizens is booming too. In April, The Wall Street Journal reported that Air China was boosting seat numbers to the U.S. by 55 percent and China Southern by 73 percent compared to 2012.

Will the situation improve? To find out, we asked James Fallows, author of China Airborne and a former correspondent for The Atlantic in Beijing, to answer a few questions and address some commonly held beliefs about aviation in China.

Insight: How might a shortage of airspace affect flying in China in the future? Do you expect the military to eventually “surrender” control of the airspace so that China civil aviation resembles that in the West?

James Fallows: “Everything about the next stage in China’s development turns on the balance between the purely-business interests of the country, and the concerns and fears of its security agencies. The only thing that stands in the way of China having one of the fastest-growing business-jet markets in the world is the military’s continued control of a huge amount of China’s air space. Over the past half-dozen years, there have been repeated promises that airspace would be liberalized, and occasional limited steps in that direction. I hope and assume that the liberalization will go on – and the outcome of this contest is a significant, ongoing indication of the comparative strengths of business and security concerns within the Chinese government.”

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Insight: Some travelers claim that China Eastern (and other domestic carriers) receive preferential treatment from air traffic control for takeoff and landing spots at Shanghai’s Pudong airport. Is there any hard evidence to back up the theory?

JF: “I’ve heard those stories too, but I am not able to prove them. In many parts of the world, airlines from other countries suspect that ‘home’ airlines get preferential treatment. But if you listen to air traffic control tapes from big airports in the UK or the U.S., it certainly seems like first-come, first-served procedure in which all airlines are subjected to similar delays and routing. It seems different in China – but I’m not able to say more than ‘seems.’”

Insight: Does being a state-owned company give Chinese carriers a cost advantage that U.S. and European carriers do not have? Do Chinese carriers receive government subsidies for aircraft purchases?

JF: “This is a bitterly contested issue, so let me tell you the claims of both sides. From the U.S. side, where all of the airlines are 100 percent stand-alone shareholder-owned private businesses, the ownership structure of the big Chinese carriers

A China Eastern plane

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looks like a very significant cost advantage.

Obviously, it reduces pressure to generate a certain profit level, allows longer-term investment, buffers the need for layoffs and so on.

“From the Chinese side, the U.S. aviation industry in general seems to have a lot of incumbent advantages, and to have benefitted from a nearly century-long U.S. government sponsorship of the growth of aerospace. Also, the Chinese feel that the domestic U.S. market, still the biggest in the world, is beyond their ability to compete directly. Overall: yes, state ownership gives some advantages to some of the Chinese companies. But it’s complicated.”

Insight: Are there areas in which you think the interests of Western carriers and Chinese airlines are actually aligned?

JF: “My book describes two of them: safety advancements, where U.S. cooperation (at the government and private level) has played a big role

in making Chinese airlines as safe as they have become; and environmental improvements, where a variety of groups – Boeing, the U.S. and Chinese airlines and governmental institutions in both the U.S. and China – are working to buffer the environmental impact of aviation. Also, they have similar interests in working against the hypercontrol of Chinese air space by the government.”

Insight: How will the boom in Chinese air travel impact U.S. carriers flying to/from China?

JF: “Like everything about China’s growth over the past decade, the increase in air travel will create opportunities for foreign competitors – but not necessarily guaranteed results. Every year, more and more Chinese customers have the means and interest to travel overseas. U.S.-based air carriers have the route structure, the networks, the alliances and the safety reputation to attract a significant part of this business.”

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Like everything about China’s growth over the past decade, the increase in air travel will create opportunities for foreign competitors…”

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opinion B y S c ot t S y k e s

Finger Pointing is Pointless Scott Sykes is the Vice President and Head of International Media Affairs at Huawei. He lives and works in Shenzhen

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uawei was founded in 1987 in Shenzhen in a small residential apartment building, at a time w h e n t e l e c om mu n i c at i on s networks were underdeveloped, and opportunity for selling equipment was massive.

In 2012, Huawei’s annual revenue was US$35 billion, and the company recorded US$2.5 billion of profit. The company is world-proven and present in 140 countries, serving 500 telecommunications operators, connecting 2.5 billion people, or one third of the world’s population.

All this despite the fact that Huawei has never been allowed to fairly compete for supplying equipment to the major telecommunications o p e r a t o r s i n t h e U. S . , t h e l a r g e s t t e l e communications market in the world.

I am an American and only recently joined the company. In the early days of our founding, the challenges were to prove ourselves, customer by customer. We were not able to win business in the large Chinese cities such as Beijing or Shanghai because well-known Western telecommunications equipment companies were perceived to have superior offerings.

The company invested in R&D because management knew that having our own products would be important for our future. In 1990, we

created our first Huawei-branded product, private branch exchange (PBX) equipment. It w a s at t h at m om e nt t h at Hu awe i w a s transformed f rom b eing a res eller into a company with its own products.

Private company We are 100 percent employee-owned and never had Chinese state funding, and no part of Huawei is owned by the Chinese government. We are not a Chinese state-owned enterprise (SOE). We also are not traded on any stock exchange. Huawei employee-owners share in the annual profits of the company, and vote every five years for the board of directors that run Huawei’s business.

In 1995, we entered the mobile equipment business. And in 1997 we won our first overseas contract, marking the beginning of our expansion outside of China.

We first disclosed our annual financial results in 2000, producing an annual report that is similar in many ways to the kind of information disclosures you might see from a public company. We do this not because we are under any regulatory obligation to do so, but because we know it is important, that people want to know who they are doing business with. We know that being more open and transparent will help us in part to achieve our commercial objectives.

In 2005, our overseas revenue surpassed our China revenue for the first time. The next year, invented technology, which reduced the need for our telecommunications operator customers to have to rebuild mobile networks with each new generation of wireless technology, unlocked commercial opportunities for us in the developed world.

Focusing on innovation and developing intellectual property have been key drivers of our business development and international expansion.

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A Huawei executive says that despite ‘groundless accusations’ about espionage, the technology company still hopes to compete in the U.S. market

Courtesy Huawei

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We are put in a position to have to prove a negative…”

A view of Huawei’s headquarters in Shenzhen

We invested US$4.8 billion in R&D in 2012 and US$20 billion in R&D over the past 10 years. In addition, 70,000 of our 150,000 employees work in R&D, and we employ 1,500 Ph.D.s.

We began our sales operations in the U.S. in 2001. Today, Huawei employs 1,700 workers in the U.S., 70 percent of whom are locally hired, across 13 offices in Texas, California and Washington, D.C., among other locations.

Last year, we spent US$6 billion to purchase components and technology from American companies, which we use to make our equipment.

We have been selling a range of smartphones and enterprise IT equipment in the U.S. with some success.

False allegations Despite the fact that we are creating jobs in the U.S. and stimulating the U.S. economy through our business with American companies, we have never been allowed to supply equipment to the major telecommunications operators in the U.S. Among the ironic, unsubstantiated and groundless accusations that were leveled against us in October 2012 by the House Select Permanent Committee on Intelligence was that our telecommunications

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network equipment could be used by the Chinese government for espionage.

We are put in a position to have to prove a negative, and to demonstrate that Huawei is not China, that Huawei is Huawei.

Our response to the accusations has been to engage in rational, fact-based dialogue. Our senior business executives now regularly engage with international media. We host media delegations for visits to our campus in Shenzhen. We lobby, advertise, host Huawei events for customers and business partners and sponsor industry events, sports teams and musical acts.

We have an impeccable world-proven track record. It would be impossible to grow to a company of our size and scope unless governments and companies around the world trusted our people, products and technology. There are no cybersecurity or espionage issues in our past. This is an indisputable fact that no one has ever disproven.

We have promised that we will never in the future do espionage on behalf of the Chinese or any government. Why? That would be corporate suicide for our company as all of our revenue that comes from outside of China, which in 2012 was about 70 percent or US$25 billion, would be lost.

We would never jeopardize our commercial success for the Chinese, or any government.

We have communicated about the globally interconnected and transnational nature of the supply chain that Huawei and its competitors all use in the same way in the same proportion. The fact is that 70 percent of supply chain components that comprise our equipment come from outside China.

Roughly 30 percent of our components sourcing, R&D and manufacturing happens in China, as it does for all of our competitors, making every company just as vulnerable. So why does the same scrutiny not also apply to those companies?

Why is there a double standard for Huawei because our headquarters is located in China?

Singled out Huawei has an impeccable track record for security assurance. We have never in the past had any issues. So, what are Huawei’s challenges in the U.S. really about then?

In our view, primarily trade protectionism, but also including some Sinophobia.

We believe that to truly improve the state of security of f ixed and wireless broadband networks, government and the private sector need multilateral definition and agreement about rules, norms and standards for cybersecurity, that apply

to a l l c omp an i e s , no matte r w he re t he i r headquarters is located. Finger pointing solves nothing.

In fact, networks in the U.S. today are no more secure than before Huawei was prohibited from supplying equipment there, which proves it has nothing to do with Huawei, because Huawei has never sold any substantial amount of telecommunications equipment in the United States. Today, we have less than one percent market share in the U.S. because we have never been allowed to fairly compete.

And at what cost to American consumers?

The fact is American consumers pay two to three t imes more for bro adb and s er v ices t han consumers in Europe. It’s because Huawei is not allowed to compete, which means that there is less competition, and American consumers end up paying more mone y for lower quality broadband services, on networks that are no more secure.

We have accepted the commercial reality that we have no significant commercial prospects in the U.S. for the forseeable future for the reasons I have outlined. But we remain ready, willing and available to supply fixed and wireless broadband network equipment to telecommunications operators in the U.S. should a change come about, and with the hope that some day pragmatism will triumph over protectionism.

Huawei USA workers observe the company’s 10 year anniversary and Santa Clara R&D center opening in 2011 in California

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The fact is that 70 percent of supply chain components that comprise our equipment come from outside China.”

i n t e r v i ew B y E r i k a Wa n g

Weighing the Impact of Women Best-selling author John Gerzema discusses the role of women in leadership in China and the world

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ocial strategist and New York Times best-selling author John Gerzema recently visited Shanghai to talk about wom e n an d wor k . G e r z e m a , an executive at Young & Rubicam Group, was here to discuss his latest book, The Athena Doctrine: How Women (And The Men Who Think Like Them) Will Rule the Future.

In the book, he and Michael D’Antonio explore the rise of “feminine” competencies and values – traits they found to be perceived as mostly associated with women – and their impact on leadership, policy and innovation. The book analyses the findings taken from a survey of 64,000 people chosen to mirror the populations in 13 countries (Brazil, Canada, Chile, China, France, Germany, India, Indonesia, Japan, Mexico, South Korea, United Kingdom and the U.S.) that represent 65 percent of the world’s gross domestic product.

During his visit here, the New York-based author shared his views with Insight on what it takes to be a good leader in today’s increasingly interdependent world.

Insight: In The Athena Doctrine, you assign traits as either ‘masculine’ or ‘feminine.’ Why assign gender to traits?

John Gerzema: “Ironically, that’s the whole point of the book – to make the gender discussion irrelevant. That’s absolutely my goal. My hope would be that we don’t have these discussions at all. But unfortunately it’s not today. The world is very much still on one side. Around the world, leaders are traditionally men, there are very

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traditional masculine structures that guide politics and government and business. In America, the number of women who are CEOs or on boards is very low, somewhere in the range of 15 to 16 percent.

“In the process of doing research for this book, we saw that many of the most effective leaders and a lot of the most interesting trends seemed to be grounded in what people described to us as ‘feminine’ qualities and so that was the impetus for doing further research – when we started to see this phenomenon occurring. What I was trying to do [in the book] was to point out two things: what people want, which is they want more feminine values brought into leadership; and some amazing men and women that are already doing it.”

Insight: What are the top traits in leaders?

JG: “Empathy was a huge one, the idea of a leader that can really connect with people, whether is with customers or their employees – that’s increasingly important. The name of the game in business right now is ‘engagement.’

Leaders have to engage constantly and so it’s very different from a leader that sat behind a desk at an office and went to a country club.”

Insight: What findings were specific to China?

JG: “One thing that we saw in the China data on leadership is that it was far more balanced between masculine and feminine than it was in the global sample. Around the world, we started to see a higher correlation of leadership to things that people thought were more ‘feminine,’ – so,

“

…The best leaders understand that your power really comes not from controlling things but from really engaging…”

John Gerzema, co-author of The Athena Doctrine: How Women (And The Men Who Think Like Them) Will Rule the Future, talks to Insight’s Erika Wang in Shanghai

being more expressive, planning for the future, being flexible, patient. There are also more ‘masculine’ qualities that are important – being decisive, resilient.”

Insight: What is your definition of a good leader?

JG: “The notion of a leader is you have to start by having the ethos of a student, and I think it’s really hard for leaders because they tend to think that they have all the answers. And that was a very big trend that we had in the people we met: they were humble, at times vulnerable, but always curious. And we saw that around the world. Other traits are candor, being open and honest about your strengths and weaknesses, and collaboration.”

Insight: Can you give examples of good leaders today who you admire and how do they reflect ‘Athena values’? What about in China?

JG: “I got the chance to interview the president of

Israel, Shimon Peres. He had a great line, he said: ‘We’re the new world with many old minds and the task is to adapt yourself ’ – and I just love that.

And so this idea of leaders being servants I think is a very admirable quality, and that gets lost oftentimes as people accumulate power. I think the best leaders understand that your power really comes not from controlling things but from really engaging and influencing and shaping.”

Insight: What do you want readers to take away from the book?

JG: “All of us have a range of skills that we can bring to leading, and too often we tend to praise a narrow set of those skills, which tend to be more ‘masculine’ – commanding, control, aggression – and yet for a world that is more social and interdependent, more transparent, these broader set of skills that people around the world think are more ‘feminine’ are definitely huge advantages and they can be used by anyone.”

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A gilt bronze head of Sakyamuni Buddha, 17th Century, sold by International Auction Co. China for RMB598,000 in 2011

Two prestigious U.S. auction houses can now operate in China but it doesn’t mean easy money from China’s wealthy collectors due to restrictions

By Angela Doland

F

or a few days in September, Sotheby’s auction house set up shop in the ballroom of the new Jing An Shangri-La hotel. Shanghai collector Shen Wei Guang peered through a curio case at a Ming vase, pulling his glasses on and off, slipping a flashlight from his Armani satchel. Behind him, two assistants to a wealthy Shanghai businesswoman stared at an oil painting of goldfish by Chinese painter Sanyu, worth at least US$6.4 million. Their boss had dispatched them to check out works she might bid on, “because she’s very busy,” explained Sun Jin, one of the assistants.

China’s art-buying boom, coinciding with the country’s explosive economic growth over the last two decades, has transformed the international art world, leaving dealers and auctioneers chasing Chinese buyers and brushing up on traditional Eastern arts like calligraphy and porcelain.

The world’s two biggest auction houses, Christie’s and Sotheby’s, were long blocked from operating on the mainland and instead gravitated to Hong Kong, transforming a city of

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bankers into Asia’s art hub. Now, both are staking out the mainland after a green light from the government.

Sotheby’s is working with a Chinese partner in Beijing, while Christie’s, the first foreign house granted a licence to operate independently, made a splashy debut in Shanghai in September with a sale that included a Warhol and a Picasso as well as Chinese contemporary works.

Christie’s and Sotheby’s may have big names and five centuries of history between them, but that doesn’t mean doing business on the mainland will bring easy money.

China’s first mainland auction house was founded two decades ago; now, nine of the top 20 auction houses are Chinese, according to France’s auction watchdog, the Conseil des Ventes. China is now the No. 1 or No. 2 market in the world, depending on who’s counting. Chinese local auctioneers are young but powerful, and they understand Chinese tastes.

On top of that, there are big limits to what Sotheby’s and Christie’s can sell on the mainland. Auction houses with foreign investment are still not allowed to sell items deemed

International Auction Co. of China

Bidding on China

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A work by Zhang Xiaogang

“cultural relics” – which can sometimes mean any Chinese works from before 1949. That’s a vast share of the market, and for now it remains in the hands of local auctioneers. (The Chinese historical treasures at the Shangri-La in early September were merely on show in Shanghai – afterward, Sotheby’s sent them to Hong Kong for auction.)

With fears about Chinese masterpieces flowing out of the country, and with China’s auction world booming, how ready is Beijing to let outsiders grab a significant share of business from Chinese auctioneers? Christie’s and Sotheby’s paths here depend on how fast – or slowly – China loosens its grip.

contemporary art collection to decorate his karaoke club, Shanghai Night.

Like every country, China has its art lovers and its speculators. Speculation helped push China to the No. 1 world art market in 2011, before the market contracted by 24 percent to US$14 billion in 2012 and the U.S. regained the top spot, according to the TEFAF report.

China’s slowdown played a role, as did a highprofile crackdown on tax-evading collectors.

There was a sense the drop was a healthy correction in an overheated market – and many art insiders believed figures from Chinese auction houses had long been inflated anyway.

“The Chinese art market is still immature in many ways,” said Yang Yufeng, who runs a club for collectors and dealers called Zhilan Yaji.

For example, some Chinese auction buyers – low on cash after the downturn in the real estate and stock markets – delay or even default payment after winning auction bids. “This kind of debt chain is quite common and affects the market’s

A fast-evolving market To put things in perspective, consider this: Under the Mao Zedong era from 1949 to 1976, “it was illegal to own, inherit or exchange works of art,” notes the 2013 market report from the TEFAF art fair in Maastricht, Netherlands. Collecting art and antiques has become a favorite practice among Chinese with money to spend. Auctions, not galleries, are their preferred venue.

Beyond that, it’s hard to make generalizations about Chinese collectors. The biggest sellers are Chinese paintings, calligraphy and ceramics, but Chinese contemporary art is an exciting scene that has drawn worldwide attention. Billionaire investor Liu Yiqian and his wife Wang Wei put their collection of Chinese art on display at the new Long Museum in Pudong.

Anot her Shang hai col le c tor, Qi ao Zhibing , us e d his

Investor Liu Yiqan and his wife Wang Wei, founders of the Long Museum in Pudong

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China’s Homegrown Auction Houses The mainland’s auction houses are little-known outside China but have become major forces in just a few short years. Here’s a look at the top 3:

Beijing Poly International Auction Co.

A Ming Dynasty porcelain vase from Poly Auction

Beijing Poly, founded in 2005, rapidly from unlikely origins to become China’s biggest-selling auction house and the world’s No. 3 by sales after Christie’s and Sotheby’s. It’s an arm of China Poly Group Corp., a massive state-owned conglomerate that was once owned by the People’s Liberation Army. The auction company hosts sales in Hong Kong and has an office in New York. Its specialities range from Chinese calligraphy to porcelain to watches. In 2012, the Beijing-based house logged RMB6.1 billion in sales, about half of the previous year, which it attributed to China’s economic downturn.

China Guardian Auctions Co.

China Guardian was founded two decades ago, which makes it the mainland’s oldest auction house. It is also considered China’s most professional. The No. 5 auctioneer internationally by sales, the Beijing-based house specializes in Chinese paintings and calligraphy, porcelain, art, sculptures, rare books, stamps, coins and jewelry. It also operates in Hong Kong and has an office in New York. Like at China’s other auction houses, its sales suffered last year. It logged RMB5.2 billion in sales in 2012, less than half the 2011 figure.

Beijing Council International Auction Co.

Established in 2005, Beijing Council focuses on Chinese ancient calligraphy, painting, antiques and modern oil painting and sculpture. Its founder says he adheres to the principle of “less but better.” It’s much smaller than China’s two biggest houses, taking in about a third the sales of Beijing Poly.

Jinqing Cai, managing director of Christie’s in China

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operation,” Yang said.

A 2011 study by China’s Association of Auctioneers, an industry trade group, said that nearly half of big-ticket items had not been paid for six months after bidding. Some auction houses, including Christie’s and Sotheby’s, tackled the issue by requiring deposits on some items. It’s difficult to know how widespread the problem still is among Chinese auction houses.

Fakes are another problem – they’re a worldwide issue, of course, though there have been a few especially brazen cases in China. In 2011, contemporar y artist Zhang Xiaogang complained about a coming sale of a fake purported to be his work. “Poorly done,” he wrote on a microblog, according to China Daily. “How dare someone put it up for auction?”

Yang, like many in China’s art world, says he hopes the entry of Christie’s and Sotheby’s into the market “will help Chinese local entreprises correct their strategies” in terms of defaulted payments and weeding out fakes. Both auction houses say their international standards will apply in China – their history and reputation are on the line.

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UP FOR AUCTION Homme assis (seated man) by Pablo Picasso, painted in 1969 CHRISTIE’S IMAGES LTD.

An arm of China Poly Group, a state-owned conglomerate also known as a defense manufacturer, the house has had a stunning rise. It expanded to Hong Kong a year ago, and it also has a new office in New York.

Across Yan’an highway from the Sotheby’s display at the Shangri-La, Poly showed off similar treasures at the Hilton, from jewels to calligraphy to contemporary paintings. The display wasn’t as fancy; carpets were stained, the display area was cramped, and glass cases were dotted with fingerprints.

But the atmosphere was not as intimidating as at Sotheby’s, and the staff was attentive and young.

Wenhao Yu, a Poly employee who showed visitors around, estimated that 70 percent of the company’s staff are under 30.

He credits its explosion partly to its hard-working employees.

“Sometimes we have 10,000 objects being auctioned in a week in Beijing,” said Yu, the company’s department head for watches and jewelry in Hong Kong. “And the sale could have 20, 30, 40 catalogs.”

Yu, like officials at several Chinese auction houses, said he welcomed the foreign newcomers.

“The more players in the industry, the more efficient it will be, and the greater the exposure will be for Chinese art,” Yu said.

That kind of confidence comes from success. Last year, despite the downturn in the local art market, Poly sold a 1964 painting of red mountains by artist Li Keran for about US$46 million. The buyer, according to China Daily, was a Chinese entrepreneur who had begun collecting art just two years earlier.

Tough competition Christie’s held its first sale in London in 1766. Sotheby’s, the No. 2 house, is even older, dating back to 1744. In third place worldwide is Beijing Poly International Auction Co. It is just eight years old.

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CHRISTIE’S IMAGES LTD.

UP FOR AUCTION A jadeite ring set in an oval-shaped diamond and a pair of earrings mounted in 18k gold

Xing Juntao, manager of International Auction Co. of China

The painting – inspired by a Chairman Mao poem – was among the biggest sales of the year internationally, topping major works

by Monet and Warhol.

Rival strategies Christie’s and Sotheby’s have a long rivalry, and it’s playing out now in mainland China, where they have different strategies.

Sotheby’s has an 80 percent stake in a venture with a Chinese state-owned company, Beijing GeHua Art Co., and will operate in Beijing. It plans to make use of a culture freeport in the Tianzhu Free Trade Zone that GeHua is working on, which would allow for tax-free art storage.

The company is drawing partly on its experience in Hong Kong, where it is celebrating its 40th anniversary. Its first mainland sale in September 2012 was a mostly symbolic affair,

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with a single artwork sold. On Sept. 8, it held a charity auction in Beijing, with part of the proceeds going to a foundation to pay medical bills for orphans.

Christie’s, meanwhile, opened in Hong Kong more recently, in 1986. It operated on the mainland through a licensing agreement with a Chinese company called Forever until becoming the first foreign auction house granted permission to sell without a Chinese partner.

“Being able to conduct auctions in China under Christie’s own brand has been an aspiration we have worked towards for many years,” said Jinqing Cai, Christie’s managing director in China.

Christie’s is based in Shanghai – which despite a recent museum-building boom is not traditionally a major art center.

Most big auctions and influential galleries are in Beijing.

Christie’s first sale on Sept. 26 in Shanghai offered up treasures including French wines, Western watches and jewelry, Chinese contemporary art and works by Pablo Picasso, Andy Warhol and Alexander Calder. Works by Western artists are rare in mainland auctions; Sotheby’s September charity auction sold works by Chinese contemporary artists.

If there’s a common strategy point, it’s that Christie’s and Sotheby’s are being careful to show they aren’t just out for cash in China, that they’re willing to give back. Christie’s launched an art market education program through the China Europe International Business School, and Sotheby’s plans to help organize a major art fair in Beijing.

Nic Forrest, the Australia-based author of the widely read Art Market Blog, said those initiatives are meant to build trust.

“It’s certainly going to be challenging to encourage mainland Chinese buyers to buy through them at all, considering they’re used to buying from people they know well,” Forrest said. And through Christie’s and Sotheby’s can distinguish themselves from local competitors with their access to Western art and antiques, most Chinese buyers still want Chinese works.

The foreign auction houses “need to perhaps even change tastes a bit, introduce them to new arts, new styles, which they haven’t been exposed to before,” Forrest said.

Cultural sensitivities Christie’s, in particular, has had to win China’s trust after weathering a major scandal.

When late designer Yves Saint Laurent’s collection of art and antiques went on sale at Christie’s in Paris in 2009, it included two Qing dynasty bronzes depicting the heads of a

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rabbit and a rat. China demanded their return, as the treasures had been looted from the Old Summer Pa l a c e by Fre n c h a n d B r it i s h invaders in the 19th century.

Christie’s went ahead with the s a le – f ueli ng an outcr y f rom Chinese collectors and celebrities including Jackie Chan.

A C h i n e s e bu y e r m a d e t h e winning US$40 million bid, but he refused to pay, citing patriotism. It wasn’t until April 2013 that France’s billionaire Pinault family – which owns Christie’s and luxury group Kering – announced it would return the statues to China. That same m o nt h , C h r i s t i e’s s a i d i t h a d clearance to operate independently Kevin Ching, Sotheby’s CEO in Asia in China.

Aske d w he t he r t he st atu e s’ handover was a condition required by Beijing, Christie’s corporate communication manager for China, Mi Meng, said the decision originated with the Pinault family. But she added, “We’re very glad the rabbit and rat have come back to China.”

The looting of the Old Summer Palace was not the only episode of Chinese art spirited out of the mainland. When Chiang Kai-Shek’s Nationalists fled to Taiwan in 1949, they took the country’s most priceless treasures with them.

Safeguarding art is a sensitive issue here, and that’s why auction houses with foreign investment are prohibited from trading in “cultural relics,” to prevent them from slipping out of China.

In China’s homegrown auction market, such items are the big sellers. Yang Yufeng, the art club director, estimates that 60 percent of the market is traditional painting and calligraphy, followed by traditional porcelain.

In a globalized world, many think it’s inevitable that mainland China will loosen its restrictions.

“I believe, after trial and error, the Chinese government will realize that to let go will be better for the development of the auction business than to hold tight,” said Xing Juntao, manager of a mainland house, International Auction Co. of China.

CHRISTIE’S IMAGES LTD.

Looking ahead: Looser regulations?

UP FOR AUCTION A ruby and diamond ‘butterfly’ necklace by Faidee; it was designed as a series of butterfly motifs, set with 30 graduated oval-shaped rubies

The question is when.

In September, as Beijing weighed draft plans for an ambitious free trade zone in Shanghai, media reported that foreign-owned and joint-venture houses might be allowed to sell cultural relics there. It is unclear what measures will be included in the final plan, or when it will be announced.

Auction houses reacted cautiously, with Christie’s saying it was still awaiting details.

Sotheby’s chief executive officer for Asia, Kevin Ching, said he believed any easing of restrictions “will take some time.”

“I suspect that when that law changes, it will have nationwide application and will not be restricted to Shanghai, as the Beijing government is also determined to develop Beijing into an international art hub and platform for art exhibition and transactions,” Ching said.

For now, “basically, it’s not an equal playing field,” he added.

“Unless that changes, foreign houses can only concentrate on brand-building and sell non-cultural relic categories like fine wines, contemporary art, watches and jewelry.”

And for now, some of the most exciting sales will take place where they always have: Hong Kong.

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Chen Fan with a painting

Painting His Own Dream A Shanghai artist talks about realizing his lifelong wish and being independent

By Zhang Kun

C

hen Fan, 45, can never say he’s worked as a “salary man.” As an artist, it’s expected. But the internationally-exhibited Shanghai painter also has no formal training in an art school before he picked up his first paintbrush.

“I am a self-taught, self-employed, purely independent artist,” he says during a chat in a small Hongqiao restaurant followed by a second interview in his studio.

The youngest of five children, Chen was born in Jiangxi, and moved to Shanghai with his family in the 1970s. Although he loved drawing as a child, it was Irving Stone’s biographical novel Lust for Life – based on the life of Dutch artist Vincent Van Gogh – that planted the dream of becoming an artist in the young boy’s mind.

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Chen was away from school as a teenager for half a year because of acute hepatitis. He spent most of his time reading and drawing modeled on the illustrations of classic Chinese novels.

“Later I realized some of the pieces were created by great masters such as Chen Laolian (1599–1652),” he says. “People told me I started [my artistic life] from a high point.”

After three years in college, Chen attempted to put into practice what he had learned about international trade…by opening an underground cinema in Nanjing. “We showed piracy soft-porn from Hong Kong most of the nights,” he recalled, not without embarrassment. “The audiences would get noisy if we didn’t give what they wanted to see.”

Chen and his business partner also tried machine gambling.

“You could change the setting under the table so that the house

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always wins, unless you meant to drop a big bait to lure in more customers,” he says.

After a year, Chen quit the business and returned to Shanghai to live with his parents. He read extensively and painted.

Sometimes, he would spend a whole week without stepping out of his home. Yet, during this period he managed to find a girlfriend who eventually became his wife.

“It was until my daughter reached the age for kindergarten that I realized I have to make a proper living and support the family,” Chen says. He decided to open a gallery in Hongqiao. When a friend complained that the paintings in his shop were too expensive, he readily replied that his own pieces would sell cheaper.

Chen sold his first three paintings for RMB800 each. It was not much, but it was a milestone in his career and life. Soon, an American gallery owner found him, then an Australian gallery hired him to work for a year. He had a solo exhibition in Hamburg, Germany in 2006 and in Stuttgart last year. He realized his dream was a reality.

From Mao to women His early paintings often depicted women in front of flashy backgrounds, in flirtatious eye contact with the trademark face of Chairman Mao. While he was growing up in the Cultural Revolution (1966–1976), the public worship for Mao was a big issue in Chen’s early years. He used to explain to his Western friends in simple English his mentality and reflections on it: “we love him, and we hate him.”

Later, he went on to depict modern women, and dropping the Mao image, involving more relevant subjects such as identity, sexuality, desire and politics. “Chen Fan has kept safe distance from fashion, from pop art and from realism too,” wrote Chen Yufei, a critic and artist.

Chen would unapologetically paint after photography and document materials, “but after his processing, he produces a result somewhere between the image and imagism,” Chen wrote.

Chen closed his gallery in 2008, deciding that he still wanted just to be an artist. Some of his friends have had teaching jobs in local colleges, or serving as members of the artists association in Shanghai or whatever city they live in. In comparison with those artists, he felt freer.

“I don’t get assignments of ‘large historical projects’ for the government’s propaganda campaigns,” Chen said. “Neither do I have to seek the help of guanxi in order to win a position in the official national art exhibition.”

A painting by Chen Fan

But freedom comes with a price. He has no pension, nor health insurance. He has enjoyed considerable success as an internationally exhibited artist, and managed to provide for his family, with savings for his daughter’s college fund. But just in case any misfortune falls, such as serious illness, “I will probably just have to die, if the treatment costs anything beyond RMB200,000 yuan,” he said.

There are many independent artists like him, he said, and the largest group – said to be 20,000 of them – are gathered in Songzhuang, in suburban Beijing. Being an artist comes with freedom but is not always carefree. Chen has his moments. “I would panic sometimes, when I didn’t know what to paint,” Chen said. “It felt like the end of the world.”

In the past few years, he has explored new subjects and media, and picked up Chinese ink painting and ceramic art. “A change of the mindset, and new possibilities for creation,” he says.

Zhang Kun is a writer based in Shanghai.

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l e g a l u p d at e B y B e v e r ly C h a n

Huge Turnout at Visa Forum

A packed room listens to a Shanghai Exit-Entry Administration Bureau official talk about changes to China’s visa rules

Recently implemented rules will impact foreign workers and businesses

C

hina implemented a long list of changes to its visa rules and regulations on S eptember 1, changes that will impact foreign employees of multinationals, students who wish to do internships in China and almost every other foreigner wishing to visit or work here.

The new entry-and-exit laws and changes to the visa system were the topic of a forum sponsored by AmCham Shanghai last month at the Ritz-Carlton Hotel. Some 200 members and human resource professionals packed a ballroom to hear the Vice Director of the Visa and

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Residence Permit Division of the Shanghai ExitEntry Administration Bureau, discuss the new changes.

He said the new regulations will not only improve the management of visa issuance but also increase visa services to foreigners with business and work interests in China.

Changes A significant change is the introduction of several new visa categories, increasing the number of categories from 8 to 12 and adding subtypes to certain categories. The new visa classifications are

designed to ease the process for applicants to identify the type of visa needed.

F visas, formerly issued for both commercial and non-commercial visits, now only pertain to foreigners visiting China for non-commercial activities, while a new M visa is issued for business and t rade pur p os es. Z vis as for employment are now split into two subtypes: Z-1 for long-term stay and Z-2 for short-term stay. X visas apply to students and those undertaking internships, and contain two subtypes depending on length of residence.

The new system also provides opportunities for highly skilled individuals to work in China by introducing an R visa to attract high-level foreign talents. A new S and Q visa eases the process for

families to visit foreigners working and residing in the country without having to apply for a L visa, which is currently limited to tourism purposes only.

Under the new rules, foreigners applying for visas may be required to show extra do c ument at ion for s e c ur it y pur p os es . If necessary, authorities can reach out to financial, educational, medical and telecommunication institutions for further verification of the applicant’s identity. Because of the strengthened security measures under the new laws, employers are advised to take into serious account proper visa procedures for employment of overseas professionals, as violations may result in more severe penalties.

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“

The new visa classifications are designed to ease the process…”

viewpoint B Y RYAN B ALIS AND J OY C E B IAN

Keeping Up with the Chinese Consumer A new consumer market report provides insights into how MNCs are responding to a maturing Chinese consumer market

The consumer report

C

hinese consumers are increasingly embracing quality goods at higher prices and turning to online shopping and social media to gat her pro duc t infor mat ion, according to AmCham Shanghai and Booz & Company’s third annual joint report, 2013 China Consumer Market Strategies.

The report notes that the rapid rise in online shopping behavior in China is reshaping company strategies.

“The report highlights that the use of mobile devices, online shopping and social media is a disruptive business trend,” said Robert Theleen, Chair of AmCham Shanghai. “Companies must develop targeted strategies and China-specific capabilities that enable them to respond and beat out competition.”

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AmCham Shanghai and Booz & Company, a global management-consulting firm that works with many of the world’s top business es, governments and other institutions, released the report in mid-August in Shanghai.

The report is based on responses to the third annual Business Response to Trends in China’s Consumer Market Survey. The survey sought input from executives of consumer-facing companies operating in China, asking nearly 90 Chinese and MNCs to rank seven major trends by importance and the approaches they take to respond to them.

This year’s survey also included a section aimed at evaluating companies’ digital capabilities.

Below are highlights from the report. In an environment with rising uncertainties, what are company executives thinking and what actions they are taking?

Value as a differentiator For the second year, both MNCs (69 percent) and Chinese companies (55 percent) chose “value as a differentiator” as the most important consumer trend in China today. In Tier 1 and Tier 2 cities, an increasing number of consumers are seeking greater reliability, consistency and integrity in the products they purchase. This represents a significant evolution from what has been a price-driven market.

A significant majority of MNCs and Chinese companies (70 percent) expect this trend to increase brand loyalty among consumers focused on value, and 85 percent expect to see an increase in consumers’ willingness to pay higher prices for quality products and services.

“As China’s consumer market matures, Chinese consumers in developed cities and regions continue to trade up in their purchasing choices,” said Adam Xu, director for Consumer & Retail Practice at

Booz & Company. “This presents companies with opportunities to build products and brands that could deliver great value. However, to capitalize on this trend, companies will need to strengthen their capabilities in innovation and branding.”

The rise of e-commerce and increasing integration of social media into the day-to-day lives of consumers was ranked as the second key trend

by Chinese companies (58 percent) and MNCs (55 percent).

However, the majority of companies reported t h at t h e y h av e y e t t o m a k e o p e r at i o n a l improvements keyed to the Internet and take actions to integrate the digital dimension into their branding and product development that would enable them to convert growing online interactions to a sales advantage.

“Although consumer companies in China have high levels of confidence due to their long experience in the market and success relative to their peers, they still face several challenges adapting to the rising digitization trend,” added Xu.

Key digitization challenges The report identified three key challenges in digitization faced by consumer-facing companies in China, both Chinese companies and MNCs: Measurement: compared with the global benchmark, consumer companies in China find themselves equipped with limited ability to measure the results of complex online activities.

Execution of digital strategy: companies appear to encounter difficulty in making digital initiatives a priority across their organizations.

For MNCs, leveraging global capabilities of an organization to address China’s unique online environment.

While a large majority of companies rank themselves as digital novices, the report notes that leaders in this area demonstrate an ability to make strategic use of data and align digital activities to their corporate strategies. Leaders also reported two capabilities as critically important: innovation and the omni-channel brand experience.

Top Three Trends Chosen by Respondents How would you rank these seven key trends in terms of their importance for your industry? % of respondents ranked the trend as one of the top 3 trends (N=89)

Value as a Differentiator Rise of “Digitization” Increasing Exposure to Foreign Products Rising Importance of Health & Wellness Exponential Growth of Consumer Increasing Connectivity Among Different City Tiers Evolution of the Family Unit

According to the report, the success of China’s homegrown smartphone maker Xiaomi Technology is as a good example of a company capable of integrating intelligence gleaned online into its business process. For product development, it solicits suggestions for new features and improvements from an online community of brand followers. Most of its products are also sold online through preorders, giving it manufacturing and marketing edges.

“In China, consumers leapfrog their counterparts in other markets by adopting technologies to gain bargaining power,” said Theleen. “They are sophisticated in using social networking platforms to form alliances with likeminded consumers, which would be hardly possible in developed markets. Companies have to stay vigilant to the power of the online activities, with opportunities for online engagement to enhance or harm a brand.”

To download the 2013 China Consumer Market Strategies report, visit http://www.amchamshanghai.org/2013consumerreport.

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“

Companies must develop targeted strategies and China-specific capabilities that enable them to respond and beat out competition.”

– Robert Theleen

inside amcham from the chair

Dispatch from D.C.

Robert Theleen Chair of the Board of Governors

To our members, Last week Ken Jarrett and I had the honor of leading an AmCham Shanghai delegation of members to our annual Washington, D.C. Doorknock.

Our principal message this year was that American business in China was, by and large, profitable and growing, as evidenced by our annual Business Climate Survey. In fact, China has become the first success story since the end of World War II for U.S. industry in Asia. In markets such as those of Japan, South Korea and Taiwan, U.S. market penetration into those economies was marginally successful.

In contrast in China, U.S. companies have made major inroads in industries such as automotive, agricultural and food, industrials, consumer products, fast food, pharmaceuticals, farm and construction equipment, chemicals, service industries such as auditing and computer software and hardware. American companies continue to build quality of life themes for China’s burgeoning middle class. How did this message fly with our audiences? It was surprisingly well received by most of those with whom we met.

I wish to express my thanks to all of our talented delegates who represented AmCham Shanghai from a cross section of various industries and professions, as well as our invited representatives from AmCham China and AmCham Southwest.

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For our AmCham Shanghai staff, a special thanks goes out to Steven Chan, Scott Willams and their respective colleagues for providing us with a full slate of high-level meetings and important guidance during our trip.

I believe we were successful in our objectives to provide a clear notion of both the problems and successes our members have incurred in China this past year. We exchanged a full range of views with U.S. government agencies and members of Congress and their staff. We also had the pleasure of hosting a lunch for Mr. He Ning, Minister of Commercial Affairs of the Embassy of the People’s Republic of China in Washington.

We were also well briefed as to the current mood of our governmental leaders on China by our friends from the U.S. Chamber of Commerce, Brookings Institution, Peterson Institute, The Heritage Foundation and the US-China Business Council.

We made headways by signing cooperative agreements with the U.S. Department of Commerce and the U.S. Trade and Development Agency to strengthen support for U.S. SMEs through the SME Virtual Center. We also received enthusiastic receptions for the website from the Ex-Im Bank, Small Business Administration (SBA) and other agencies of relevance. Our message to both Congress and the agencies of the Executive Branch is that AmCham Shanghai is reaching out to small and medium-sized companies in the U.S. to assist them in unraveling the DNA of the growing Chinese marketplace.

Rest assured, we also left behind strong messages for our government to concentrate on market access issues for American business, especially in value-added services, such as banking, insurance, healthcare and consumer services. To my pleasant surprise, most of our meetings on the Hill were warmly received with less rancor on sensitive issues, such as currency valuation, IP protection and cyber-security. The focus seemed to be a desire to work with both the Chinese government and with the private sector of China to build a two-directional strategy of trade and investment.

Finally, the most exciting news we received on our trip was the substantial progress that was being made in the negotiations for a U.S.-China Bilateral Investment Treaty (BIT) and in discussions with China over the Trans-Pacific Partnership (TPP) especially following the announcement by the Japanese government to join the TPP. While these negotiations will be arduous and may take years to complete, they bode well alongside China’s unilateral announcement of a future Shanghai Free Trade Zone in which AmCham Shanghai is well positioned to provide assistance to all of you in the coming year.

inside amcham B OARD o f g o v e r n o r s b r i e f i n g

Highlights from the September 2013 Board of Governors Meeting Welcome Ken Jarrett Robert Theleen, AmCham Shanghai Chair, kicked off the meeting formally welcoming new president Kenneth Jarrett to his role. Ken expressed how delighted he was to assume this position. He looked forward to working with the experienced staff at AmCham Shanghai and to promoting the Chamber’s further development. Ken said he would work to conclude current initiatives like the SME Center and YRD initiative and look for ways to boost the Chamber’s profile in order to enhance its effectiveness. Ken noted an exciting milestone is on the horizon, the 100th anniversary of AmCham Shanghai in 2015.

Nomination and Elections Committee Update Andrew Au, chair of AmCham Shanghai’s 2014 Nomination & Election Committee (NEC), provided an update on the annual election this fall for 2014 Chair and the Board of Governors. The NEC would meet in early September with candidates running for Board seats for the next year. There was already a strong list of candidates. Robert Theleen, Chair, encouraged high participation for eligible voters to get out and vote.

Financial Report Helen Ren, Vice President of Finance and Administration, reported 62 new members in July and 82 new members in August.

Expenses were held in-check to allow net positive results. The

Chamber’s net revenue remains solid, and overall the Chamber is in a strong financial position.

SME Virtual Center Update Scott Williams, Vice President of Programs & Services, provided a brief report regarding Phase One for the online SME Virtual Center. Further development will involve inserting new content on the website, expanding hyper-linking, website banner and logo sharing and strategic involvement and cooperation with public-private events and workshops. Among the thousands of visitors to the site to date, 62 percent are represented by users in China and the remainder by users in the U.S. The SME Center will be expanding info sessions and workshops for both members and non-member groups.

In Attendance Governors: Andrew Au, Sherman Chu, Keith Cole, Jimmy Chen, L.J. Chen, Pilar Dieter, William Duff, Bob Theleen (Chair), Eric Zheng Apologies: Curtis Hutchins, Peter Sykes Attendees: Steven Chan, Stefanie Myers, Kenneth Jarrett (President), Helen Ren, Scott Williams

The AmCham Shanghai 2013 Board of Governors Governors

Chair

Robert Theleen ChinaVest

Andrew Au Citibank China

Jimmy Chen FedEx Express

Sherman Chu Cisco Systems

Keith N. Cole General Motors

Pilar M. Dieter Solidiance

Chen Lienjing Pratt & Whitney

Peter Sykes Dow Chemical

Eric Zheng AIG Insurance

Vice Chair

Curtis Hutchins Eaton (China) Investments

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AmCham Shanghai New Members U.S. Corporate Membership Atkins & Pearce (Shanghai) Co., Ltd. HEUCK Samvel Biometrix Clinical Testing & Technological Research Ltd. JOHN Ademola Brennan, Manna & Diamond, LLC Shanghai Rep. Office TANG John CCI China FAULKNER Graeme Chang International (Qingdao) Inc. CHANG Jianrong East West Bank (China) Limited WU Tina Gallo International Services, Inc, China Branch TISA John Haynes and Boone, LLP, Shanghai Rep. Office MARK Liza Microsoft (China) Co., Ltd. Suzhou Branch LIU Jiyang MTS Systems (China) Co., Ltd., Shanghai Branch CHEN Guoyu Orbis (Shanghai) Material Handling Co., Ltd. ZHAO Lihong Osha Liang, Hangzhou Rep. Office JIAO Yue Santa Fe Relocation Services CASTLING Oliver SIS Market Research Asia FULLER Thomas Spraying Systems (China) Co., Ltd. LEE Jinknin The Hoffman Agency Beijing, Shanghai Branch YANG Colin Veeco Instruments (Shanghai) Co., Ltd. SUN Xiaoqin Weaver Popcorn Company Inc., Beijing Rep. Office WANG Brian Wieden + Kennedy Advertising Inc. WHITE Jason Worldstrides Travel Information Consulting (Shanghai) Co., Ltd. LIN Richard U.S. Associated Corporate Membership CareFusion (Shanghai) Commercial and Trading Co., Ltd. LING Chunhua Claire’s Stores (Shanghai) Limited KANG Catherine Equinix Information Technology (Shanghai) Co., Ltd. HUI Eric Evans Materials Technology (Shanghai) Co., Ltd. XU Besty Ingersoll-Rand Security Technologies (China) Co., Ltd. YU Feng Kinetic Advertisiing (Shanghai) Co., Ltd. LAI King F MSD China Holding Co., Ltd. WANG Gary Peli Bio-Chem Technology (Shanghai) Co., Ltd YEE Charlie Chen Li Qualcomm (Shanghai) Co., Ltd. ZHAO Bin SASCO (Shanghai) Electrical Engineering Consultation Co., Ltd. BIRCH John Skechers Trading (Shanghai) Co., Ltd. HOU Xiaolin Corporate Int’l Affiliate Membership Arnold Industries Shanghai, Ltd. CHEN Lin

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Benefit One Consulting Shanghai Inc. SUZUKI Shoichiro Boardroom LSC China Limited LEE Yow Fee Cathay Pacific Airways Limited Shanghai Office GE Wendy ChinaScope Financial (Shanghai) Co., Ltd. LIU Tom Yan Eurasia International Consulting (SIP) Co., Ltd. CHANG Kevin Expand International Industry (Suzhou) Ltd. ELWORTH Storm Flupac Piping Systems (Shangha) Co., Ltd. ZHOU Kai Grifols Pharmaceutical Consulting (Shanghai) Co., Ltd. AMARANT Martinez Carrion JSM Shanghai Representative Office (Hong Kong) YEO Andy Life Solutions LAI Anita Pasona Human Resources (Shanghai) Co., Ltd. YAMAMOTO Kazunori Sara Beattie Shanghai Enterprise FLETCHER David Shanghai Fields Trading Co., Ltd. SHEN Stephen Shenyang Kunyu Wood Industry Co., Ltd. ZHENG Yi Taylor Wessing Shanghai Rep. Office (Germany) TAN Michael Value Retail (Suzhou) Co., Ltd. MARK Israel Wah Heng Glass Aluminum Products (Shanghai) Ltd. JIANG Russel Worldex Group Holdings Limited ZHANG Helen Small Business Membership ENO Information Science (Shanghai) Co., Ltd. YOU Carl Kerry Wines (Shanghai) Trading Co., Ltd. EDGAR Crystal NACE International Texas, LLC, Shanghai Rep. Office KORHONEN Bei Regent Advisors Co., Ltd. YU Sean Ruwac Industrial Vacuums (Suzhou) Co., Ltd. HUHN Jens TEAM Education Consulting Co., Ltd ROBINSON Teresa Vestian (Shanghai) Real Estate Co., Ltd JIANG Leslie Associate Membership Abbott Laboratories Trading (Shanghai) Company Limited LI Eric ZHANG Roy Accenture (China) Co., Ltd. PALMER Jerry Lee Acorn International PATTERSON Samuel DAI Eric Advent International (Shanghai) Co., Ltd. LING Ziwei Analogic Medical Equipment (Shanghai) Co., Ltd. LEI Lisi Aon-COFCO Insurance Brokers Co., Ltd. YU Hua Argosy (Shanghai) Aerospace Material Ltd. WANG Daniel

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Baxter (China) Investment Co., Ltd. BASMAJIAN David Bayer (China) Limited PAY William TZENG Huimin Benchmark Electronics (Suzhou) Co., Ltd. WEI Stacey Benefit One Consulting Shanghai Inc. HE Wenjing BHV-OPTINOVA International Limited CRAWFORD Ashley Bingham McCutchen LLP, Beijing Rep. Office WELLS Christopher Boardroom LSC China Limited YIN Sally BP (China) Holdings Limited XU Xiangmin Brennan, Manna & Diamond, LLC Shanghai Rep. Office SUN Jia WEI Yali Bryan Cave LLP, Shanghai Office LUO Frank Cabot China, Ltd. REN Jianrong Carlisle (Shanghai) Management Co., Ltd. SORRENTO Corey Austin CCI China TEY Choon Ee Changzhou Biomet Medical Devices Co., Ltd. JIA Hai Chemtura Shanghai Co., Ltd. HAN Grace Claire’s Stores (Shanghai) Limited SHI Celine CN Worldwide International Freight Forwarding (Shanghai), Ltd. GUO Xiaojia Cooley LLP, Shanghai Representative Office MOU Rong Corning China (Shanghai) Regional Headquarter MICHAELSON James Dacheng Law Offices, Chicago Office, Ltd. VELINOV Asen DAI Jianmin WU Ming YANG Yuzhou ZHANG Genwang Dell Procurement (Xiamen) Co., Ltd., Shanghai Branch HE Xiaowei Dezan Shira & Associates Shanghai Branch FIELD Mary Lauren FLEMING Christian Duke Consulting (Kunshan) Co., Ltd. LIU Qilan Eaton Electrical Ltd. NI Osking Eaton Industries (Wuxi) Co., Ltd., Shanghai Branch SUN Shirley Equinix Information Technology (Shanghai) Co., Ltd. WONG Thomas Sze Fung Ernst & Young CHIA Eric Euroscript (Suzhou) Language Technology Service Co., Ltd. SU Hui Exide Technologies (Shanghai) Company Limited BO Lin XIE Gordon Ford Motor (China), Ltd. CAI Fenglei Fredrikson & Byron. P.A Shanghai Representative Office U.S. DANIELSON Laura

AmCham Shanghai New Members FTI Consulting (China) Ltd. DELIKAT Jonathan G4S Facilities Management, Ltd. CHEN Frank General Electric (China) Co., Ltd. TIAN Steve Herbalife (China) Health Products Ltd. XU Tom Hult International Business School DE VILLENEUVE Jean HILL Peter idX (China) Display System Co., Ltd. MIAO Jianhua WANG Yanan Insurance Company of North America, Shanghai Rep. Office YAN Frank Invitrogen Trading (Shanghai) Co., Ltd. PETTITI Gianluca ITW (China) Investment Co., Ltd. PAN Frank YANG John C. Johnson Controls (China) Investment Co., Ltd YANG Shuqing Kraft Foods Corporate Management (Shanghai) Co., Ltd. CHEN Ye Levi Strauss Commerce (Shanghai) Limited LI Eleanor LG Sourcing, Inc., Shanghai Rep. Office FU Chenfan Link Transportation Testing Technology (Shanghai) Co., Ltd. LINK Adam Roy ManpowerGroup (China) Human Resources Co., Ltd. ZHANG Jinrong ZHENG Ella Mercury Marine Technology Suzhou Co., Ltd. XIE Yan Microsoft (China) Co., Ltd. Suzhou Branch WU Hongdan Mobley Group Pacific Limited (Shanghai) Co., Ltd. MOBLEY William Navistar (Shanghai) Trading Co., Ltd. LEI Ning O2 Micro (China) Co., Ltd. TANG Xiao PAC Project Advisors Shanghai Ltd. DOBSON David Pact Environmental Technology Co., Ltd. LU Lucia Paragon Partners Asia Limited MCCONNELL Brennen SCHAFFER Eric Pentair Water (Suzhou) Co., Ltd. SHEN Jonah Wai PepsiCo Foods (China) Co., Ltd. SONG Michael Perkins Eastman Architectural Design Consulting (Shanghai) Co., Ltd. CHEN Weichi Pramerica Fosun Life Insurance Co., Ltd. JIN Wei Qualcomm (Shanghai) Co., Ltd. CHU George LEE Way-Shing SASCO (Shanghai) Electrical Engineering Consultation Co., Ltd. RUSH Chon Shanghai American School HEVLAND Mark REITER Helene TORRIS Andrew Shanghai Amsino Medical Devices Co., Ltd. LAU Stanley Shanghai Ogilvy & Mather Marketing

Communications Consulting Co., Ltd. DAVIS Lisi WEIL Julia Shanghai Sunrise WATKINS Dinah Shape/NetShape China Auto Parts Co., Ltd. SHA Shan SIFE China Limited REN Cathy Taylor Wessing Shanghai Rep. Office (Germany) LIN Xu Technimark Precision Molding (Suzhou) Co., Ltd. LI Paula The Walt Disney Company (Shanghai), Ltd. DING Xiaobo Thermo Fisher Scientific (China) Co., Ltd. TAN Siqi Tishman Speyer Real Estate Consulting (Beijing) Co., Ltd., Shanghai Branch CHENG Angelina Tredegar Film Products Co. Shanghai, Ltd. TORNG Hengsheng Tyco Electronics (Shanghai) Co., Ltd. LU Jessica University of Southern California CAO Bo Veeco Instruments (Shanghai) Co., Ltd. HUANG Donna LIU Tim Webster University FAN Joyce WestPoint Home (Shanghai), Inc. CHEN Alison Wieden + Kennedy Advertising Inc. BARRERA Paula JIN Jing LEE Anita Individual U.S. Citizen Membership A-dec, Hangzhou Dental Equipment Co., Ltd. LY Nhi Apax-Point Corporate Consulting, LLC GRIGG Michael Apple Inc RICHARDSON Douglas Balanced Heart Counseling FORTE Christine Biogenex KALRA Amit Blue Wave Interiors LEITCH Stuart Bysoft China WILSON Marshall Compass Corporate Training BRAVO Roberto Easymandarin Chinese School WEINTRAUB Yis Eat Well Shanghai KEEFE Margaret Ernst & Young LIU Jia Lancaster Investment Consulting (Shanghai) Co., Ltd. CLAYPOOL Alex Lerch Bates (China) Limited POTTER William Keenan MSC Industrial Direct. Co., Inc. WHITLOW William Mitchell N/A CAMPBELL Anastasia CHEN Bill LAU Lili Maria LI Xin MCENTYRE Lois

SILVER Alexander SZEKERES Tibor Oracle (China) Software Systems Co., Ltd., Suzhou Branch Office DUBOIS Frederic Poly Marquis Yachts (Shanghai ) Co., Ltd MARCOTTE Michael RightSite.asia COLE Michael Shanghai Janus Consulting Co., Ltd. WANG Datong Shanghai SMC Capital Co., Ltd ENG Steven Siu San Targus Shanghai BARCLAY-GRUNDLER Curtis Individual Int’l Affiliate Membership Auchan China OUBUIH Gilles Bae, Kim and Lee, LLC KIM Edward Bomi Logistic Jangsu Co., Ltd. SALUTO Francesco China Envision Fund Management Co., Ltd. WONG Yuk Ho China Integrated Co., Ltd. MUSY Nicolas Feiyang Skating Centre SIMON Mark Hays Specialist Recruitment (Shanghai) Co., Ltd. TANG Alan Hutong School PAPIN Amelie Inspiring Leaders Group HERRON Mark LF Logistics, A Li & Fung Company LEI Lucy Link Design DE ROO Marc Logfret (Shanghai) Limited BIGOT Christophe Meritas, Law Firms Worldwide SMEETS-TONIES Fleur N/A QUILLINAN Mark Primewis ZAOUI Lyna Shanghai Environment Group Co., Ltd. SHI Jun Shanghai Peace Hotel Co., Ltd. WEE George Shanghai Sky Dragon Worldwide Logistics Co., Ltd. MANZOOR Ranashahid Yuanliu VAN PEER Marie Jose Non-Resident Corporate Membership Greater Phoenix Economic Council BROOME Barry Techemet LLP WARD Bryce Non-Resident Individual Membership N/A FOSTER Brenda Royal Coffee RADOSEVICH Peter Educational Membership Hult International Business School DIDION Christophe

Do you want to share more information about your company? Contact Patsy Li at (86 21) 6279-7119 ext. 8966 or patsy.li@amcham-shanghai.org for a “Standout Listing” opportunity in the New Members Section.

AmCham Shanghai

Attendee poses a question during AmCham Shanghai’s Business Council for Sustainability & Responsibility (BCSR) event on the role of social enterprises in China’s CSR development

Richard Lytle, founder and president of Solar Ear China

Panelists talk about different business models of social enterprises and their role in developing China’s CSR landscape

U.S. Consul General of Wuhan Vlad Lipschutz speaks at AmCham Shanghai’s Monthly Member Briefing

Month in Pictures

Melissa Wisner, center, acting Treasury Attaché at the U.S. Embassy in Beijing, with Government Relations Director Steven Chan, left, and AmCham Shanghai Board of Governor Pilar Dieter

Michelle Wang, right, of Capvision, and Lisa Li of Honeywell, show off their prizes at “Advertising Awards After-Party: Showcasing the World’s Best Advertising” event

AmCham Shanghai’s IT Committee members during a tour of Microsoft’s Asia-Pacific R&D Center on September 2

Michigan Governor Rick Snyder delivers remarks to Shanghai-based Michigan companies, the U.S. Consulate and members of his trade delegation Prakash Sundaresan, CTO of Microsoft’s AP R&D Group, Michael Wang, director of Microsoft China Cloud Innovation Center, discuss Microsoft’s cloud computing services with members

Government Relations U.S. Patent Official Visits Shanghai AmCham Shanghai and the US-China Business Council jointly hosted Acting Director of the U.S. Patent and Trade Office (USPTO) Teresa Rea for a discussion on new USPTO initiatives and IPR issues on September 3. Rea noted USPTO’s new training programs in compliance with the America Invents Act and other international agreements the agency is currently considering. She also discussed several issues related to regulatory challenges such as Article 26.3 for pharmaceutical inventions, inventor remuneration and trade secrets.

Rea also noted USPTO’s transparency by making all relevant documents and policies available on its website. She mentioned the U.S. has signed 26 bilateral patent agreements and are working with several countries to create a Patent Prosecuting Highway which will allow each country to see the work previous examiners have performed. USPTO is also working with the top five patent filing locations (U.S., EU, China, Japan and South Korea) to create a Global Dossier to allow examiners to get in touch with each other and access a person’s family of patent filings from around the globe.

Acting Director of the U.S. Patent and Trade Office Teresa Rea, center, discusses new USPTO initiatives and IPR issues

Workshop Focuses on Social Enterprises AmCham Shanghai’s Business Council for Sustainability & Responsibility (BCSR) held a workshop on August 28 on the different business models of social enterprises and their role in developing China’s CSR landscape. Richard Roque, managing director of SA Capital Limited, introduced various models of social enterprises, including those focused on charity/philanthropy, revenue generation, social issues and business. Social enterprises need to balance financial returns and impact maximization when considering capital investment, he said. Marie-Lucie Spoke, managing director of Community Roots China, explained that the organization’s business model is grassroots-based and seeks to maximize social improvements rather than profits. Community Roots focuses on children development and issues, and all profits generated through programs are reinvested in the community.

Richard Lytle, founder and president of Solar Ear China, said the company provides employment opportunities for deaf/ hearing impaired groups and reinvests profits to train and support their career development. Solar Ear China produces hearing aids at an affordable cost for low-income hearing impaired individuals and the company hires deaf workers.

Carol Chyau, co-founder of Shokay, said the organization reinvests 1 percent of all retail revenue to community development. Shokay sources yak fibers from Tibetan communities in the Qinghai region to ensure quality, traceability and social impact. The yak fibers are sold to fashion companies or spun by Tibetan women into finished products such as scarves, clothing and other apparel sold at Shokay’s retail stores.

TSA Administrator Visits AmCham Shanghai Transportation Safety Administration (TSA) Administrator John Pistole met with AmCham Shanghai on September 11 and took part in a discussion about his visit to China, current initiatives at the TSA and talked about some of the feedback the TSA received from American companies operating in China. Pistole noted that TSA does more than manage federal airports and will continue to evolve and adapt to the threats that the United States and its industry partners face when transiting people and cargo from the 270 airports worldwide with direct service to the United States. TSA is increasing its communication with its international counterparts and industry, and its goal is to reduce risk while also allowing the free flow of goods and people, Pistole noted.

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Carol Chyau, co-founder of Shokay, speaks during Business Council for Sustainability & Responsibility (BCSR) event

Human Resources Series Forum Highlights Leadership

A

s part of the 2013–2014 Human Resources Series, AmCham Shanghai hosted a Leadership Forum that brought business leaders, executives and senior industry professionals to Shanghai to discuss next and best practices for leadership development in China. Combined with a full-day master class training session, the forum, held on September 5 at the Four Seasons Hotel, capped off a day and half of leadership focused events that drew dozens of members in executive-level positions.

The forum identified five key insights for leadership development in China: succession planning, institutionalizing leadership development, empowering employees, growing local leaders and developing soft skills.

Succession Planning: In identifying and qualifying emerging leaders from the Asia-Pacific, speakers stressed that companies should ensure internal alignment and commitment to leadership development, with a realistic timeframe for development essential for long-term success. Mentorship was highlighted as an opportunity for companies to raise capabilities of potential leaders, particularly when linked globally or across functions.

Leadership Development: Speakers emphasized the importance of ensuring leadership development is ingrained in company culture, noting the role of top leaders to mentor, teach and role model leadership behaviors. Companies should quantify the value of leadership development to employees across the organization, with an open environment to encourage discussion of personal goals and development plans.The leadership development model of ‘self, others, organization’ was identified as a key strategy to institutionalize leadership development, as well as putting in place metrics to measure the success of leadership programs.

Empowering Employees: Employees should be encouraged to change, grow and develop self-awareness. Companies need to provide tools for personal development and provide clear, candid

A participant at the Sept. 5 Leadership Forum

and realistic feedback. C-level executives identified experience such as mistakes and failures, as well as opportunities to increase job scope, as key formative opportunities in their personal leadership development.

Developing Local Leaders: Key to international companies’ China success is developing strong local leaders who are able to lead and interact within a global environment. Although expat assignments were identified as a key development tool, there is a need to ensure projects led by expats are strategic choices, have clear success criteria and include a return plan. Cross-functional skills, working with global business lines and communication skills are key capability gaps to be addressed for local leadership development.

Developing Soft Skills: So-called “soft skills” – communication, persuasiveness, negotiation – are key requirements for leadership roles. Development of soft skills like coaching, teaching and mentoring employees will help potential leaders build and leverage networks of influence.

The next HR Series event will be held in February 2014. For more information, please contact marketing@amcham-shanghai.org.

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Event highlights

inside amcham

Suzhou American General Managers Dinner AmCham Shanghai’s Yangtze River Delta (YRD) Center and Suzhou Committee held the second annual Suzhou American General Managers Dinner at the Four Points Sheraton in Suzhou Industrial Park (SIP) on August 20. In attendance were more than 60 general managers and other executives from Jiangsu and Zhejiang provinces.

Chen Lienjing, managing director of China Scott Williams, Vice President of Programs and Operations at Pratt & Whitney and a member of Services at AmCham Shanghai, speaks at the second the AmCham Shanghai Board of Governors, spoke annual Suzhou American General Managers Dinner on the topic of macroeconomic trends for 2014 and about strategies companies are taking in the face of increasing competition in China. For instance, in the aerospace industry, Chen said many industry players are predicting very strong growth in the near future, prompting outside players like automotive companies to consider moving into the aerospace industry. Additionally, Chen said he predicted new industry opportunities ahead for private planes and helicopters.

Gerard Hei, CEO of Dale Carnegie China, presented on how smart leaders can deliver results without resorting to directly leveraging their authority. According to Hei, the best leaders are those who have self-confidence, communicate with clarity and force, gain the willing cooperation of others, have a positive attitude about solving problems and are committed to personal breakthroughs.

U.S. Consul General in Wuhan Addresses Members at Briefing AmCham Shanghai hosted U.S. Consul General of Wuhan Vlad Lipschutz at the Monthly Member Briefing on September 3.

Lipschutz spoke on U.S. diplomatic history in Wuhan and addressed challenges and opportunities for businesses in central China. The U.S. Consulate in Wuhan, first commissioned in 1861, was reopened in 2008 as part of the reciprocity agreement with the Chinese government and to better serve U.S. interests in the rapidly growing central China region. The Consulate aims to help American interests in the region, and plans are under way to expand the U.S. government presence into a full-fledged operation, he said.

Lipschutz highlighted central China’s advantages in geographic location, logistics and transportation, energy infrastructure, construction growth and double-digit GDP growth as reasons for U.S. businesses to consider investing in the region. U.S. brand penetration is still relatively modest and, as emerging industries such as tourism and healthcare continue to grow, opportunities are widespread for American business, he said.

The latest wave of development in central China, according to Lipschutz, has its roots in the “Central China Rising” policy introduced over the last decade. The implications of the policy have included massive infrastructure investment and national designation of special economic zones. In addition to the new round of development, Wuhan has a historical tradition as a center of heavy industry, and new business ventures have capitalized on that strength. High-tech businesses, too, are investing in Wuhan, with U.S. companies looking to capitalize on infrastructure development.

Wuhan is making a concerted effort to attract foreigners, aiming to provide, for example, quality education for children of expatriates working in Wuhan. In building a diverse economy and proactively encouraging foreign investment, Wuhan aims to realize its goal as becoming the “Chicago” of China, as a nationally important economic center, said Lipschutz.

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Committee highlights

inside amcham

Small Business Committee SME Success Stories Series Launches AmCham Shanghai’s Small Business Committee on August 22 kicked off a new event series on successful entrepreneurship and small business operations in China, featuring Alvin Wang Graylin, CEO and founder of mInfo, Guanxi.me and MODEL+. With more than 20 years of high-tech management experience, Graylin has founded multiple venture capital start-ups in China after leading US$100 million P&L components at three public companies (Intel, Trend Micro and WatchGuard) in the U.S. From the “tech crunch of initiation” to the “acquisition of liquidity,” Graylin described how there are various peaks and troughs that relate to different stages of corporate expansion, and how navigating the challenges of each can make the difference between success and sequestration. Among the most common characteristics of successful small business owners in China, Graylin listed: passion for your given sector and product, strong teams and collaborative partners, in-depth industry knowledge and expertise, know-how to delegate operations from finance to logistics, rainy day savings in the bank to ward off investor takeovers, being in a position to take risks on emerging opportunities, strong personal networks and a willingness to ask for help, ability to pivot in reaction to changing market conditions, staying fit/healthy during taxing physical and mental times and having supportive investors who share a strategic corporate vision.

He also noted the importance of having an “unfair advantage,” described as a legal monopoly of resources or information in a particular subsection of a sector that allows you to distinguish a brand and catapult ahead of the competition. Whether through strategic partnerships that allow for exclusive control of particular IP resources or local knowledge of administrative procedures that increase functional efficiencies, addressing these issues in an insightful manner can put your growing company on the fast track to leadership in the China market, Graylin said.

Information Technology (IT) Committee Tour of Microsoft Asia-Pacific R&D Center AmCham Shanghai’s Information Technology (IT) Committee held a half-day facility and site tour of Microsoft’s Asia-Pacific R&D Center on September 2.

Prakash Sundaresan, CTO of Microsoft’s AP R&D Group, Michael Wang, director of Microsoft China Cloud Innovation Center, and other Microsoft China R&D leaders spoke on Microsoft’s R&D projects, initiatives and global strategy, and led IT Committee members on a guided tour of the Center.

Sundaresan and Wang highlighted Microsoft’s cloud computing services, Windows Azure and Office 365, as well as initiatives including Microsoft’s Accelerator programs for supporting start-ups working in the cloud and CityNext, Microsoft’s smart city initiative. Microsoft Asia-Pacific’s efforts in cloud computing and smart devices reflect the company’s global shift in focus from software and PCs to devices and services, for both consumers and enterprises, they noted.

Members learn about Microsoft’s latest

Members also had the opportunity to try out the motion sensing device Kinect technologies during a tour of its Asiaand Microsoft Pixelsense, a touch-screen table that allows multiple people to Pacific R&D Center interact at once. Microsoft Cloud Innovation Center staff ran demonstrations, including customer live digital marketing services “in the cloud,” and introduced a prototype of a real-time voice translator software that reflects the speaker’s natural voice in another language. In the Cloud Innovation Lab, members were shown where client training on cloud services are held and given a glimpse into the server room.

For more information on AmCham Shanghai’s 22 industry-specific committees, please contact committees@amcham-shanghai.org.

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EXECUTIVE ROOM We asked executives to tell us what they think is the best thing about living and working in Shanghai. Here is what they said. imaginechina

Fuxing West Road in the Former French Concession

Tom Doctoroff, CEO, JWT Asia Pacific

Jay J. Hoenig, Group COO of Hill and Associates

Best: Walkability

Best: The variety of nearby neighborhood restaurants

Remarks: “Unlike Beijing, Shanghai is a city made for strolling, at least in the city center. Like every foreigner, I love the French concession, the way life is close to the street and the warmth and humor of the Chinese come shining through.

I also love that you can walk for miles and miles and still be surrounded by the charm and vibrancy of classic Shanghai.”

Remarks: “10–15 years ago there were very few Western restaurants, a few hotels and the American Club; then came M on the Bund. Now the city has become a mecca of fine restaurants offering international cuisine from many different parts of the world. You don’t have to ‘break the bank’ to enjoy the many fine dining experiences. In fact, some of the more unique places are the most affordable.”

Tina M. Kanagaratnam, CEO, AsiaMedia Ltd. Best: The historic architecture Remarks: “Shanghai’s pre-1949 architecture is part of what gives this city its unique cosmopolitan character. It’s a privilege to be surrounded by their beauty and their remarkable history – it makes me happy just looking at them!” imaginechina

Din Tai Fung restaurant at Shanghai Centre

George Lai, COO, AIG China Best: Opportunity to know many new friends from all over the world Remarks: “Because Shanghai is an international city, there are people from all over the world. It is fascinating to know them and their background.”

A Former French Concession villa

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