March 2014
ALSO INSIDE • Panama Canal Expansion • Work, Women and Family
Taking Shelter from Risks Trade secrets, human capital and corruption remain top concerns for U.S. companies in China but it’s possible to keep the edge
INSIGHT MARCH 2014
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 When Family Comes First WOMEN IN FOCUS
By Erika Wang
Executive women open up about the challenges of haggling work and family in China.
VP of Administration & Finance
Helen Ren Directors Business development & Marketing
Patsy Li Committees
Stefanie Myers COMMUNICATIONs & PUBLICATIONs
18 Panama Canal: Is Bigger Better?
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INDUSTRY UPDATE
By Christopher Beddor
Michael Cole
Why are U.S. port operators excited about the expansion plan?
Events
Jessica Wu Membership & CVP
Linda X. Wang
INSIGHT EDITOR-IN-CHIEF
Bryan Virasami
23 Looking Like a Developed Market
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BUSINESS CLIMATE
By Ryan Balis
Services Expansion
The Chamber’s annual China Business Report compiles the results of our business climate survey.
Senior Associate Editor
Erika Wang
Rising
Costs
Competitive
Responses
senior communications associate
Ryan Balis Design
Alicia Beebe Printing
Mickey Zhou Snap Printing, Inc.
26 Shelter from Risks
Protecting trade secrets, tackling corruption, finance industry talent and HR challenges are key themes facing U.S. companies in China that often rank high in the annual China Business Report. See our special report.
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.
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COVER STORY
I n s ig h t s ta nd a r d s
5 News Briefs
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2013-2014
11 Movers & Shakers
MONTH IN PICTURES
Highlights from Recent Events
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EXECUTIVE traveler
Favorite Way to Fight Jet Lag
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Editor's note
D
Bryan Virasami editor-in-chief
uring the past few weeks, it was common to see Shanghai residents posting screenshots of weather reports on WeChat and other social media platforms. But when the mercury dips below zero, some people actually talk to each other about the cold. Some colleagues who spent the Chinese New Year holiday in Southeast Asia, where the mercury hovered around 27 degrees, couldn’t resist but to compare the weather extremes between the two. Here at AmCham Shanghai, however, all the talk about numbers have been shifting from the outside temperature to numbers that involve multiple layers of data: the China Business Report. Depending on how you see things, many of the pages in our report might make you feel warm and fuzzy if you look at data on profit or optimism; on the other hand, if you look at questions about HR or corruption, you might feel a chill. This month’s Insight includes analyses from five experienced professionals who write about HR, corruption, intellectual
protection and innovation, and we try to explain the differences between personal income taxes in Shanghai and Hong Kong. This is one topic finance industry professionals might care about given the mainland’s effort to develop Shanghai into a global financial center. Also in this edition, we zero in on a topic that’s taking place 9,000 miles away, and there’s an onbvius China business connection. The expansion of the Panama Canal is a hot topic among port cities in the eastern United States and they are anxious to tap into the growth expected after the larger canal opens – by welcoming many ships traveling to or from China. In our next issue, we will focus on another type of project closer to home. The folks behind the Shanghai Tower and other mega projects in China will talk about why the country is full of construction projects that seem to be based on the premise that breaking a world record is important. We will also be delving in deeper into what the Free Trade Zone means to U.S. companies as well as the APEC agenda this year. Stay tuned.
imaginechina
News
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CHINA BUSINESS
Huawei releases China game console Chinese telecommunications giant Huawei announced that it has created China’s first videogame console. Called “Tron,” the micro-console runs on Android and costs about US$120. The announcement was made on the heels of China’s the State Council decision to lift a 14-year-old ban on selling videogame consoles that would allow foreign-invested enterprises to manufacture game consoles within Shanghai’s free trade zone and sell them in China after inspection by cultural departments. China banned games consoles in 2000 on the grounds that they have an adverse effect on young people’s mental health.
Academy unveils mobile operating system The Chinese Academy of Sciences (CAS) announced it has developed its own mobile phone operating system, the China Operating System (COS), which is also compatible with PCs, tablets and TV set-top boxes. CAS and its partner Shanghai-based Liantong Network Communication Technology said the system can be used on touch-screen phones and serves as a platform for various apps, similar to the interface on Google’s Android and Apple’s iOS. As a security measure, COS is designed to only allow a single app store, unlike open-source systems like Android, according to CAS. In response to comparisons with other operating systems, developers said the underlying code to the COS user interface is all original work, although it absorbed the merits of other opensource systems.
China Construction Bank opens overseas ATM China Construction Bank (CCB), the world’s second-largest bank, has launched its first ATM outside mainland China and Hong Kong in Melbourne, Australia’s second largest city. CCB is one of the biggest banks in China with more than 13,000 branches in the mainland and focuses on wholesale, retail and investment banking. As well as paving the way to sell retail banking services, the move also indicates CCB’s ambition to deploy business in Western markets. CCB already has 17 branches or subsidiaries in 15 countries and regions, with assets totaling US$120 billion. The bank opened its Sydney branch in 2010 and Melbourne branch in 2012. According to Australian Prudential Regulatory Authority data, CCB’s loans in Australia grew to US$1 billion from US$365 million a year ago. By comparison, Bank of China has nearly US$8 billion worth of loans in Australia, and Industrial and Commercial Bank of China has US$2.4 billion.
China loses 27.8m microblog users in 2013 The number of online microblog users in China last year dropped by 9% to 281 million, according to the China Internet Network Information Center. The drop marks the first major decline in popularity of the social media genre amid a crackdown on microblogs
MARCH 2014
deemed sensitive by authorities and new censorship controls. Meanwhile, users are migrating to mobile phone-based instant messaging services such as WeChat, a mobile instant-messaging service. Mobile instant-messaging services welcomed 78.6 million users at a 22.3% annual increase in 2013, threatening the dominance of microblogging sites such as Sina Weibo.
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CORPORATE NEWS
Alibaba bans bitcoin amid crackdown Alibaba Group, China’s top Internet retailer, has banned the use of bitcoin on its shopping platforms amid a regulatory crackdown targeting the digital currency. The company said on its website that it would also ban the use of other digital currencies including Litecoins. The People’s Bank of China (PBoC), the country’s central bank, prohibited financial institutions from trading, underwriting or offering insurance in the digital currency. And while PBoC did not prohibit individuals from owning bitcoin, it issued guidelines specifying that it is not considered a currency. Regulators also directed third-party payment services to stop working with bitcoin exchanges.
China Telecom rolls out 4G network China Telecom Corp., the third-largest telecom carrier of the country, began the commercial rollout of its fourthgeneration mobile network in the domestic market last month, moving ahead of China Unicom to become the nation’s second telecom operator to offer 4G services. The company said it plans to start 4G businesses in nearly 100 cities across the country, but only for wireless network cards rather than handsets. It said all 4G data cards it will promote support the homegrown Time Division-Long Term Evolution (TDLTE) 4G technology. The service rates, which are in line with those that China Mobile introduced a month earlier, comprise seven pricing plans from RMB70 (USUS$11.54) for 1 gigabyte of data traffic per month to RMB280 for 10 gigabytes of data monthly.
GM to invest US$11b in China General Motors (GM) CEO Mary Barra said during a recent trip to Shanghai that the automaker’s joint ventures in China plan to invest a further USUS$11
billion by 2016 in the areas of products, production capacity and recruitment. She added that GM will launch 19 new models and redesigns in China this year, and focus on sales of local consumers’ favorite brands such as Buick, Chevrolet and Cadillac. China, the world’s largest auto market, has been the largest consumer market for GM in the past five years. Volkswagen AG last year surpassed GM in China for the first time in nine years to recapture the top spot among foreign automakers, with a total of 3.27 million vehicles sold compared with GM’s 3.16 million.
MACROECONOMICS
China claims top spot in world trade China said it passed the U.S. to become the top trading nation in 2013. According to the customs administration, exports increased 7.9% to US$2.21 trillion and imports rose 7.3% to US$1.95 trillion for the full year. The full-year trade surplus was US$259.75 billion, the widest since 2008 and the thirdlargest on record. Fake invoices inflated 2013 export gains by about two percentage points, local media reported. China already ranked No. 1 in goods exports in 2012 and was the second-biggest importer behind the U.S., according to figures by the World Trade Organization.
China’s inflation up 2.5% in January China’s consumer price index (CPI), a main gauge of inflation, rose 2.5% year-on-year in January and remained unchanged from the previous month, according to the National Bureau of Statistics (NBS). Comprising a third of the CPI, food prices rose 3.7% year-on-year in January, down from a 4.1% increase in December. The data included a higherthan-expected rise in non-food inflation, reflecting strong demand during Chinese New Year for recreation and household services. Prices of non-food products edged up 1.9% in January, the bureau said.
Meanwhile, China’s producer price index (PPI), a main gauge of wholesale inflation, contracted 1.6% year-on-year in January, compared with a 1.4% fall in December, according to the NBS.
China’s FDI rises 16.1% in January China’s foreign direct investment (FDI) rose 16.1% year-on-year in January to US$10.76 billion, the Ministry of Commerce said. FDI in China’s service sector gained 57% to reach US$6.3 billion, or 58.8% of the total, while manufacturing sector inflows dropped 21.7% to US$3.47 billion. FDI from the United States climbed 34.9% year-on-year to US$369 million in January, while that from the European Union fell 41% to US$482 million. China’s outward direct investment in non-financial sectors surged 47% yearon-year to US$7.23 billion. FDI from 10 Asian economies increased by 22% to US$9.55 billion, with that of South Korea’s jumping 197.92% to US$261 million.
China to top in 2014 salary growth Asia would be the region with the highest salary hikes globally in 2014, with China topping the regional list with the steepest salary growth, according to international recruitment agency Hays. According to the agency’s Asia Salary Guide 2014, which surveyed 2,600 Asian employers, 67% of Chinese employers said that they would raise their employees’ salary in 2014, compared with 29% of employers in other Asian states. Salaries of domestic workers were expected to grow by 6% on average this year. The financial sector is expected to see hikes of 10% to 15% and high-tech workers may even see their wages go up by 15% to 20%, the survey said.
U.S.-CHINA
Chinese gold retailer to buy Texas energy firm Goldleaf Jewelry Co., a Chinese jeweler with gold mining investments, plans to
MARCH 2014
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acquire Houston, Texas-based oil and gas operator ERG Resources for at least US$665 million, the company said in a statement to the Shenzhen stock exchange last month. Goldleaf said it will finance the deal through a private share placement that is expected to raise as much as RMB5.7 billion (US$940 million). The company would hold 95% of ERG Resources after the purchase. ERG’s assets include oil-producing leases in Santa Barbara County, Calif. The deal includes some offshore oil-fields in shallow waters of the Gulf of Mexico. Goldleaf said the move is part of a strategy to diversify away from producing gold jewelry.
U.S. developer pays US$2.2b for Shenzhen FTZ site U.S. real estate developer Silverstein Properties paid a record RMB13.4 billion (USUS$2.21 billion) for a site in the Qianhai special economic zone in southern China’s Shenzhen. The move marks the first purchase in the zone by a foreign real estate firm. The company, which is the developer of the World Trade Center in New York, bid jointly with Chinese partner Qianhai International Energy Financial Center. The sale was the most expensive plot of land ever sold in Shenzhen, where housing prices have been rising in double-digits for much of the last year. According to media reports, the finished project will have a gross floor area of 477,000 square meters, including 303,310 square meters of office space.
American Airlines to offer Shanghai–Dallas route American Airlines has received approval from the Civil Aviation Administration of China to start a daily nonstop route between Shanghai and Dallas, Texas, this summer, according to airline officials last month. The carrier will offer the new service from June 12 on its Boeing 777-200 aircraft. The new route is the first nonstop service connecting China with the Dallas/ Fort Worth metro area. It departs from the Shanghai Pudong International Airport at 16:50 and arrives at the Dallas/Fort Worth
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International Airport at 18:10 the same day. American Airlines already has routes to Chicago and Los Angeles from Shanghai. The airline will also open a daily nonstop service from Hong Kong to Dallas this summer.
GOVERNMENT & POLICY
China to approve more FTZs China’s central government reportedly approved 12 more free trade zones (FTZs) following the one in Shanghai. A source with knowledge on the matter told staterun Economic Information Daily in late January that Tianjin Municipality and Guangdong Province have been green-lit to set up FTZs. After consent from the cabinet, a group of central government departments will conduct a joint survey of the proposed zones, and hammer out specific establishment plans in a process that may last more than a year, the daily reported. Provincial regions including Zhejiang, Shandong, Liaoning, Henan, Fujian, Sichuan, Guangxi and Yunnan, and cities including Suzhou, Wuxi and Hefei have all said that filing FTZ applications is among their top priorities this year.
China to extend electric car subsidies China, the world’s second-largest energy user, will give more subsidies for electric vehicles than previously announced and extend the incentive program beyond 2015 to help tackle pollution. Subsidies for 2014 will be cut by 5% instead of the 10% announced previously, and decreased by 10% in 2015 instead of 20%, according to a statement released by the Ministry of Finance. China has also vowed to extend the subsidy program beyond 2015, when it was originally planned to end. China faces mounting pressure to combat air pollution amid heavy smog enveloping several cities in recent months. Last September, the country announced subsidies of as much as RMB60,000 (US$9,906) for each purchase of an all-electric passenger vehicle and RMB35,000 for plug-in hybrid cars.
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China unveils e-commerce law China’s State Administration for Industry and Commerce unveiled an e-commerce regulation to better protect online consumers and further clarify the obligations of online marketplaces. The new measures offer online consumers a seven-day period to return goods for refunds, with the exclusion of customized products, fresh and perishable products, digital products such as software and online downloadable products, and newspapers and magazines. The regulation also prohibits online business owners or service providers from using unfair competitive practices such as using similar domain names, titles or logos of well-known companies. The regulation will go into effect on March 15.
China to survey art collections China’s Ministry of Culture has announced the country’s first inventory of collections in government art galleries since 1949, when the People’s Republic of China was established. Slated for completion by the end of 2016, the census will cover all art works preserved by art galleries on the Chinese mainland under the administration of cultural departments. Information to be collected will include artist, date for creation, image and preservation status. China’s collections of art works have been marred with inadequate input and poor preservation. The move will enable China to have better grasp and scientifically evaluate the situation of its art works and support their preservation and promotion.
SHANGHAI BUSINESS
Uber officially launches in Shanghai U.S.-based car-and-driver mobile rental service Uber officially launched in Shanghai in on February 13 following a six-month trial operation. The company unveiled its new Chinese name: “Youbu,” or “graceful pace.” The service allows Uber
mobile app users to request a car and Uber will in turn direct a driver at a nearby location to pick up the passengers. The service is available in English and Chinese and users can pay with a U.S. credit card in U.S. dollars or their Alipay account. An Uber ride usually costs about twice the price of a taxi ride for the same distance. Uber was launched in San Francisco four years ago and now operates in 70 cities, including Guangzhou and Shenzhen.
PBoC launches cross-border RMB services People’s Bank of China’s (PBoC) Shanghai head office launched cross-border renminbi payment services in the Shanghai pilot free trade zone (FTZ). Five payment services providers signed contracts with Shanghai branches of five commercial banks, with ChinaPay initiating a cross-border renminbi payment transaction on site. The Shanghai office had previously issued guidelines for financial institutions to realize cross-border renminbi payment services. Some foreign
banks operating in the zone, including Citi and Deutsche Bank, have already launched automated renminbi cross-border pooling services for their clients in the FTZ to help them optimize cash management and enhance capital efficiency.
owned enterprise with real estate as its core business, is involved in construction projects in more than 80 cities in China as well as in seven countries.
Greenland unveils US$1b project
The first of two Disney-themed hotels located inside the 3.9-square-kilometer Shanghai Disney Resort topped out in late January. The seven-floor, 800-room hotel will feature key views including the resort’s central lake. Set to open at the end of 2015, the Shanghai Disney Resort in the city’s Pudong New Disctrict will be the U.S. entertainment giant’s first on the Chinese mainland. The resort is set to blend classic Disney storytelling and characters with new attractions and experiences tailored for Chinese people. Earlier in the month, installation of the first vertical steel for Shanghai Disneyland’s “mountain” was completed. The structure will be the secondhighest at Shanghai Disney Resort after the Enchanted Storybook Castle.
Shanghai-based Greenland Group unveiled new details of its US$1 billion Metropolis Los Angeles project in mid-February. Located on Francisco Street between 8th and 9th Streets, the 6.33-acre project is the largest undeveloped site in downtown Los Angeles’s Central Business District and one of the largest mixed-use developments on the West Coast. The project will include a four-star luxury hotel and a residential tower with units ranging from studio to two bedrooms. Phase 1 is expected to be completed by 2016. Metropolis is Greenland Group’s first real estate investment in the United States. Greenland, a diversified state-
First hotel in Shanghai Disney Resort tops out
CHINA & THE WORLD
SOUTH AMERICA ASIA-PACIFIC SIA PACIFIC
MALAYSIA: Fosun to invest in Malaysia restaurant chain Chinese investment company Fosun International Ltd. said it will invest about RMB200 million (US$33 million) in Malaysian restaurant chain Secret Recipe and will become its second-largest shareholder. The investment will be made through a U.S. dollar-denominated fund via Hong Kong-listed Fosun International. Secret Recipe operates more than 300 restaurants in 10 countries, including Malaysia, China, Singapore and Thailand. In China, the company already has more than 50 restaurants. A Secret Recipe company spokesperson said 100 more restaurants in China are planned to be opened after Fosun becomes a shareholder.
MIDDLE EAST
ASIA-PACIFIC SIA PACIFIC EUROPE
ZIMBABWE: US$23m grant for infrastructure construction Zimbabwe received a US$23 million grant from China to finance infrastructure construction in rural areas. The southern African nation’s Finance and Economic Development Ministry said the grant will be used towards the construction of clinics, primary and secondary schools in resettled areas acquired under the land reform program, as well as boreholes drilling and acquiring meteorological equipment. Zimbabwe has adopted a “Look East” policy since 2005 and it relies on emerging Asian economies, particularly China, to offset sanctions from Western countries.
AFRICA
UNITED KINGDOM: Bank of China offers RMB2.5b bond in London The Bank of China (BOC) has launched a record RMB2.5 billion (US$413 million) bond in London as part of its attempts to internationalize the Chinese currency. The Chinese bonds would be listed on the London Stock Exchange and funds raised would be retained in London and used to further develop offshore Chinese currency market and trade between China and the UK, said the BOC. Forty percent of the buyers were European investors – the highest proportion on record. This is the fourth dim sum bond to be issued in London. HSBC in 2012 raised RMB2 billion in London in the first RMB bond issue outside of China and Hong Kong.
EUROPE MIDDLE EAST
NORTH AMERICA MIDDLE EAST
UNITED ARAB EMIRATES: Dubai developer sells assets to Hong Kong investor Real estate developer Dubai Pearl said it sold property assets worth US$1.9 billion to a Hong Kongbased investor Chow Tai Fook Endowment Industry Investment Development (Group) Ltd., a partner of China’s Civil Affairs Ministry. The assets include serviced apartments, high-end residences and two five-star hotels that are part of the 20 million square foot Dubai Pearl complex slated for completion in 2017. Chinese investment in the United Arab Emirates’ real estate sector was expected to increase because of growing trade and other business cooperation between the countries, said property consultancy Jones Lang LaSalle in a report last year.
AFRICA
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UNITED STATES: Texas energy company sells Chinese unit Texas-based oil and gas company, Anadarko Petroleum Corp., said it has inked a stock purchase agreement with Hong Kong-listed subsidiary of Brightoil Petroleum to sell Anadarko’s Chinese subsidiary for nearly US$1.1 billion. The subsidiary to be divested owns the U.S. company’s nonoperating interest in China’s Bohai Bayfield. China National Offshore Oil Company (CNOOC) has been Anadarko’s partner and the majority stakeholder in the Bohai project. The transaction is expected to close later this year, according to the company. As of the end of 2013, Anadarko had approximately 2.79 billion barrels-equivalent of proved reserves. Brightoil is the third-largest marine fuel supplier by volume in Singapore.
SOUTH AMERICA
NORTH AMERICA SOUTH AMERICA EUROPE
ECUADOR: ICBC to finance US$10b oil refinery China will finance most of the costs associated with building a US$10 billion refinery in Ecuador, and become a partner in the megaproject, Ecuador’s government has announced. The Industrial and Commercial Bank of China (ICBC) is due to fund 70% of the refinery and state oil giant China National Petroleum Corporation is set to partner in the deal with Petroecuador, the national oil company, and Venezuela’s PDVSA. The deal is due to be completed in late March. The facility already under construction in the province of Manabi in central coastal Ecuador and is expected to open in 2017. Petroecuador currently has a 51% stake in the refinery while 49% is held by PDVSA.
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M o ve r s a n d S h a ke r s co m p i l e d b y j oyc e b i a 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. © General Motors.
GENERAL MOTORS General Motors named Matthew Tsien China president, effective January 2014. Tsien, a 37-year veteran of GM, has held many leadership roles at GM both globally and locally. Tsien, an AmCham Shanghai member, was most recently vice president of Planning and Program for GM China and GM Consolidated International Operations and Strategic Alliances for China. In the past, Tsien helped GM negotiate the early joint ventures with Shanghai Automotive Industry Corporation, including Shanghai GM and Pan Asia Technical Automotive Center. Tsien succeeded Bob Socia, who retired after nearly four decades at the company. Matthew Tsien
Private Sector Also at GM, Albert Xie was appointed China Vice President of Public Policy and Government Relations, effective February 2014. Xie leads the company’s government relations initiatives in China to support management decisions. Xie joined GM Albert Xie after a 17-year career with General Electric in China. He most recently served as General Manager of China Government Affairs at GE Aviation. Xie is based in Beijing.
STATE STREET AmCham Shanghai Government Relations and CSR Director Steven Chan stepped down in February to join State Street as Vice President and Head of Regulatory, Industry and Government Affairs for Asia Steven Chan Pacific. In his new role, Chan will work with teams across the region on regulatory issues, represent the firm in industry and government engagements, and advise the global headquarters in Boston on strategy, client engagements and advocacy. The position is based in Hong Kong.
BOEING CHINA Ian Thomas was appointed president of Boeing China in midJanuary. Thomas was formerly president of Boeing Australia and South Pacific. He leads the company’s activities in productivity and growth plans and initiatives in China. Thomas is responsible for government relations, execution of development strategy and new business development, industry cooperation, corporate citizenship activities to strengthen Boeing’s position in the market and its relationships with clients and key stakeholders. Thomas is based in Beijing. LINKEDIN LinkedIn named Derek Shen its first president for China in midJanuary. Shen was formerly the founder and CEO of Nuomi, a Chinese group-buying site. The appointment was viewed as LinkedIn’s intention to formally launch in China. While LinkedIn is yet to launch a Chinese website, it has a mobile app in Chinese that has more than four million users according to media reports.
government Former Director General Xu Jianguang of the Shanghai Municipal Health Bureau was appointed president of the Shanghai Chinese Medicine University in February.
If your company has executive personnel changes, please contact Joyce Bian at joyce.bian@amcham-shanghai.org.
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Xu Jianguang
FTZ DIGEST
China relaxes foreign investment in Shanghai FTZ
China’s Ministry of Industry and Information Technology announced new regulations designed to open the domestic services sector to foreign capital in the Shanghai pilot free trade zone (FTZ). As well as allowing foreign video game console makers to operate in the FTZ, the new regulations will also permit greater foreign investment in value-added telecom services. Foreign investors will be allowed to increase their stake to more than 50 percent in sectors including calling center, Internet access, multi-side voice and video communications services and virtual private network. The ministry also said that all FTZ-registered telecom business, except Internet access business, will be allowed to offer services nationwide. The move is among China’s latest to open the state-controlled industry.
Negative list to shrink by June
An updated negative list for the pilot free trade zone (FTZ) in Shanghai may be released by June, according to FTZ administration officials. The negative list names those sectors that are either off-limits to foreign investment or that require advance approval. The introduction of the list was a major step taken by the administration in its attempt to bridge international investment management standards. With the list, foreign investment is in effect only regulated in prohibited sectors, while foreign investors are treated in the same manner as their domestic counterparts in all other sectors. Further innovations in customs and the legal system are also on the way to encourage foreign investment, the administration said.
Copyright infringements to be closely policed
China will keep a close eye on the Shanghai pilot free trade zone (FTZ) to combat cross-border crimes on intellectual property right (IPR) infringements and production of counterfeit goods, officials said. The Chinese police will pay close attention to new
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changes regarding the production and sale of counterfeit and inferior goods in the FTZ, even though no obvious sign of such crimes has emerged yet, said officials of the Economic Crime Investigation Department of the Ministry of Public Security. Last year, Chinese police solved 55,180 cases amounting to RMB172.9 billion (US$28.6 billion) and apprehended 59,222 suspects.
Citi offers RMB cross-border pooling
Citi said it has set up an automated cross-border service that enables its clients in the Shanghai FTZ to sweep RMB between their onshore and offshore entities without having to provide supporting documents or applying for approvals on a deal basis for its clients in the Shanghai pilot free trade zone. The solution, aimed at helping multinational companies optimize cash management and enhance capital efficiency, was pioneered for European pharmaceutical company Roche, said Citi. HSBC, which has also received approval to operate in the zone, offers cross-border RMB sweeping service for diversified industrial products manufacturer Dover to help it deploy funds more efficiently between its overseas and domestic affiliates. According to data from global transaction services organization SWIFT, China’s currency has already overtaken the euro to become the second-most used currency in trade finance.
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women in focus B Y E R I K A WA NG
A panel of women executives at an AmCham Shanghai event last year. At right is Sarah Butler, managing director of Greater China at Booz & Co.
When Family Comes First Balancing work with family responsibilities can pose a burden to the most successful executive women in China
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ingbo native Lisa Sun spent two decades at several multinationals in China, climbing the ranks in the human resources sector. Three years ago, however, she was forced to make a tough call. Her son, who was in primary school at the time, was diagnosed with a medical condition that required her full attention. For her, it was not one of those decisions made in corporate boardrooms but a personal one. She got out of the regular workforce to become a freelancer for a year so she could care for the boy. “Because I have a husband, I’m a mother, I’m a daughter-in-law and a daughter, when my parents or parents-in-law get sick or my son needs my attention while my husband is busy, I have to ma ke a choice to give up
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something and take care of them first,” Sun said. While working women throughout the world face decisions like this every day, in China deeply seated cultural norms and traditions place greater pressure on women to care for parents or in-laws, forcing successful women to shorten their career or come up with innovative solutions to balance work, life and family. At the same time, issues of childcare, hiring a babysitter or a finding a suitable childcare facility are less critical. Sarah Butler, managing director of Greater China at management consulting firm Booz & Co., notes that when Chinese women first have a child they enjoy support from extended family, but later over the next five to 10 years, they have the responsibility of looking after their parents. A 2 0 1 2 g l o b a l s t u d y b y B o o z & C o. ,
Empowering the Third Billion, finds that 95 percent of Chinese women have eldercare responsibilities and 58 percent help support their parents financially. The report, which looked at the state of women’s empowerment in the workplace based on existing data of 128 countries, moreover identifies eldercare pressure among the major factors that hold women back at senior levels in China. The challenge Sun faced is a familiar one for Nancy Hasi, China country manager of U.S. integrated supply ser vices provider Wesco Distribution. A native of Beijing, Hasi headed back from Pennsylvania in 2008 to establish the China office of Wesco, in Suzhou. When her mother was diagnosed with cancer, Hasi, an only child, shouldered the responsibilities to ensure her mother was looked after. But caring for her mother and serving as general manager of a Fortune 500 outfit in China proved a difficult balancing act, she says. “I had a conversation with my mom when she was sick and I asked her: ‘Would you like me to support you more to get you the best medical care or to spend more time here with you and put my career on hold?’” she recalls. “My mother’s wishes in her final days were my No. 1 priority. In the end, her wishes were for me to keep my career on track. I, of course, tried my best to do both. I am sure these are the types of challenges that career women face regularly. Managing a career and family life is truly a never-ending balancing act.” Sally Hasler of The Women’s Foundation, a nonprofit dedicated to improving the lives of women and girls in Hong Kong, says that research shows that “more women drop out of the workforce to take on the burden of elderly care.” Fifteen percent of China’s population, or 200 million people, are elderly. This figure is projected to triple by 2040, according to some estimates. To reduce the stress on working women looking after elderly parents, Hasler says that the government could consider expanding medical care for parents, multi-generational housing and adding medical services in housing estates and residential districts.
Amy Sommers, Shanghai-based partner at international law firm K&L Gates and an American who has worked in China for more than a decade, says that as well as pursuing systemic change, a grassroots approach is needed to shift cultural expectations. “I am hearing from Chines e women t hat t he y feel a s ens e of obligation and responsibility for care towards both children and parents,” she says, “and that this constrains the pursuit of their professional ambitions.” Noting that 30 or 35 years ago in China, family and household duties were often shared by both spouses, Sommers adds that “the trend away from this model is not written in stone and acknowledging that one’s parents or husband might prefer that one be the primary caregiver doesn’t mean women have to acquiesce in accepting that role.” She adds: “While it can be intimidating to challenge and risk disappointing those we care about in our personal lives, this
Nancy Hasi, China country manager at Wesco Distribution
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‘A Company Full of Love’ CEO Joanne Cao talks about running a firm in China Women in China today enjoy opportunities and rights in the workplace that were unimaginable just a few decades ago. According to the 2013 Grant Thornton International Business Report, 51 percent of senior management positions in listed and private companies in China are held by women, compared to 25 percent last year and more than double the global average of 24 percent. Globally, the proportion of businesses employing women as CEOs has risen from 9 percent to 14 percent, and 21 of the Fortune 500 CEOs are women. In China, one such company led by a female CEO, health insurance services provider MSH China, shows why the country continues to make headlines for women in business. Women comprise 85 percent of the employees at MSH
Sally Hasler
Marjorie Woo
China, notes CEO Joanne Cao. A Xi’an native, Cao joined the multinational in 2003, shortly after obtaining her master’s in the United Kingdom. She became CEO less than a decade after, at the age of 32. During her time with the company, she has seen it grow from five people to almost 300, with 200 staff in Shanghai and others in major cities including Beijing and Guangzhou. Soft-spoken and composed, Cao’s unequivocally feminine style permeates through the company culture. “Women can be elegant and still be a leader, you don’t have to look very strong, you can look very gentle but still do things well,” says Cao. “In our company, we don’t need to be harsh and aggressive.” In fact, Cao notes that among the company’s core values is
may be an area where each woman has to decide what she wishes to accept and then negotiate and strategize to pursue it.” While most women learn to haggle the responsibilities of family and career, they must also deal with another issue: age. The mandatory statutory retirement age for women in nonmanagerial positions is 50 or 55 for managerial roles while the ceiling is 60 for men. This simple difference gives men an added edge in the minds of employers. “What we’re picking up is some discrimination against appointing a woman to a senior management role because they may not be around,” notes Booz & Co.’s Butler. A 2010 survey by Chinese recruitment firm Zhaopin. com found that 76.4 percent of male managers and 63.3 percent of female managers prefer to promote male staff. Faced with the prospect of being made redundant before reaching one’s career goals or being stuck in middle management, many women have used this obstacle as an
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opportunity: they become entrepreneurs. In fact, China has among the highest rates of women entrepreneurs in the world: 29 million, or a quarter of the national total, according to figures from the All-China Women’s Federation. And according to Shanghai-based magazine Hurun Report, half of the world’s richest self-made female entrepreneurs hail from China. This feat is even more impressive given that it was just in 1949 when the Communist Party took power under the helm of Mao Zedong that women officially attained equal rights and opportunities. At the time, women made up 7 p ercent of t he work force. To day, women comprise 49 percent of the population and 46 percent of the labor force. For those career-minded women who are able to manage family and work expectations, the rewards can be satisfying and meaningful, says M a r j o r i e Wo o , f o u n d e r o f L e a d e r s h i p Management International (LMI China) and CEO of Keystone Group. Woo and her firms have trained more than 10,000 executives in
love. “I’m very happy that we built this company full of love,” she says. “A few years ago, our staff got together to vote for core values, and love came up as No. 1 … I don’t think any other company has such a core value but I’m very happy about that because it’s coming from them.” Walking through the Shanghai office, which takes up two floors of a modern building, we stumble upon the lactation room, a reminder that women rule at MSH China. The staff is young and smiley, and lining the walls are photos of various company trips, runs and other activities, including weekly yoga and belly dancing classes and biweekly book club meetings. A special section of the walls is reserved to recognize top performing “company stars.” So what is it like for a man to work at a company with
leadership development over the past three decades, and coach 2,000 managers annually. “Very often a female role is perceived to be more of a supporting role, putting other people’s interest ahead of her own and being more nurturing, so that taking on a leadership role … takes adjusting one’s self-image as well as time in getting used to or internalizing that,” the Shanghai native points out. Maureen Hurley, executive vice president and chief administrative officer of Buffalo, N.Y.-based food products supplier Rich Products Corporation, knows the feeling all too well. She recalls her climb up the ladder: “In the early 90s I was asked to take on responsibility of our communications and PR area, in 2001 take on responsibility of our global HR area, and then in 2005 I was responsible for our corporate services … With each role I took on, my ver y first reaction was: ‘I can’t do that, I don’t know anything about it!’” For her, what made all the difference was the support she received from her boss. “It was really
mostly women? Thomas Hsu, business development senior manager, says: “Working in a company with a predominant female staff creates a more family-oriented atmosphere. At the same time, as a male, you need to be more careful when you communicate and build good relationships and respect everyone’s emotions and feelings. However, you feel special as your female colleagues show you more care and want to hear your opinions.”
more because of his encouragement that I’d say, ‘Ok, I’ll try.’ And each time I took on a new role I’d say, ‘You know, he’s right, I can do this.’” Despite cultural expectations and family obligations, at the end of the day there is always room for a career for those women who are willing to make it work. Sun, who took time off for her son, rejoined the workforce as HR director at MSH China, and she attributes much of her return to the company culture [see sidebar], which allows her a flexible schedule (she works from home two days a week) so she can balance her time with her family. For her, it’s a good compromise. Amid the ongoing debate on equality and contributions from women, Hasi perhaps sums it up best: “When I look at a report saying a cer t ain p ercent age ( of women) do es not contribute to the economy, I say: ‘No, they contributed indirectly to economic growth – they support their family, they support their husband’s career.’ Is that not a successful woman? It’s a successful woman!”
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Maureen Hurley
i n d u s t ry u pd at e B Y C H R ISTO P H E R B E D D O R
Panama Canal: Is Bigger Better? shutterstock
Work is under way to expand the Panama Canal
The impact of the Panama Canal expansion on U.S.China trade gets mixed reactions but some American ports expect a boom in business
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he Panama Canal may be 9,300 miles from Shanghai but when it comes to U.S.-China trade, it remains a critical passage. Consider that a third of all cargo passing through the waterway moves between the U.S. and East Asia, and much of that China. The canal, which first went into use in 1914, now handles about 5 to 6 percent of global trade. It is undergoing a major expansion to be completed in mid-2015. Advocates say it should have a transformative impact on U.S.-China trade and shipping routes. It could be, according to an assessment by the U.S. Army Corps of Engineers, a “game changer.” However, independent experts and shipping industry insiders take a more cautious approach. The canal’s impact on U.S.-China trade, they say, is likely to be modest for the foreseeable future.
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In the longer term, its benefits may be spread unevenly across sectors, and could take decades to fully materialize. “Overall, the impact of the expansion [on U.S.-China trade] is overblown,” says Jean-Paul Rodrigue, a professor at Hofstra University who specializes in logistics and global freight. “I don’t think it will change the nature of U.S.-China trade, and I don’t think there will be more trade because of it.” The waterway can currently accommodate ships holding up to about 5,000 twenty-foot equivalent unit (TEU) containers, dubbed “Panamax” ships. Yet, for more than two decades, maritime shippers have been in a race to acquire ever-larger “post-Panamax” ships, driven by cost savings from economies of scale. Analysts think that by next year, about half of all cargo will travel on ships too big to fit through
the existing canal. The expanded canal will be able to accommodate 12,000–15,000 TEU vessels, depending on ship design. Moreover, a new third lane will increase the volume of ships transiting the canal by 50 percent. Currently, the canal can only handle around 40 vessels per day, leading to waiting lines more than 115 ships long. “ The expanded canal will facilitate trade by helping t ransp or t c omp ani e s achi e ve economies of scale through the d e p l o y m e n t o f l a r g e r, m o r e efficient ships,” says Robbert Jan van Trooijen, chief executive for Latin America and the Caribbean at Maersk Line, the world’s biggest container ship operator. Those lower costs should be a boon to companies moving goods between the U.S. and China in particular. Currently, around 20 percent of all U.S. imports from China arrive through the canal. Many U.S. ports seem to think it will: they are preparing for the expansion by investing about US$6 to US$8 billion per year on landside infrastructure (such as taller cranes, better rail and road access) and US$1.5 billion on waterside infrastructure (dredging to accommodate bigger ships), according a 2012 study by the U.S. Army Corps of Engineers. Even so, just four East Coast ports in the U.S. will be prepared to receive post-Panamax ships by 2015, many of which are expected to come from China: New York, Baltimore, Norfolk and Miami. Many in the industry grumble that efforts to modernize have been frustrated by bureaucracy and budgetcutting in Washington, D.C. Ports are often “snarled by lengthy and
inefficient study requirements and lack of funding for freight-related infrastructure,” says Kurt Nagle, president and CEO of the American Association of Port Authorities. If these projects were allowed to go forward, he adds, they would g r e at l y “r a i s e o u r n at i o n’s competitive advantage.” Some see the canal expansion as so critical that they have chos en to pro ce e d w it hout federal funding. The state of Florida is behind US$2 billion in infrastructure upgrades to the Port of Miami, specifically to prepare for the expanded canal. Trade from China is a critical factor. Bill Johnson, the Miami Po r t’s d i r e c t o r, n o t e s t h at around 18 to 20 percent of the p o r t’s v o l u m e c o m e s f r o m China, making it the port’s largest single trading partner. Last January, he led a delegation from Miami to major Chinese and other East Asian ports, lo oking to cement ties and discuss post-expansion shipping practices. Johnson is confident the project will pay dividends once the Panama expansion is complete. “We’re not investing US$2 billion on a whim,” he says. “You can’t just go borrow money unless there’s a strong likelihood that you’ll be able to pay it back.”
Routing and re-routing However, others strike a more cautious note. “In itself, the expansion of the canal does not increase trade,” notes Jan van Trooijen. Rodrigue of Hofstra University explains that while the impact of the expansion will be a slight positive, the canal will likely be only a third-
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“
Analysts think that by next year, about half of all cargo will travel on ships too big to fit through the existing canal.”
Nicaragua Eyes its Own Canal shutterstock
While Panama is busy with its expansion project, nearby Nicaragua is working with a Chinese company to explore if they can build their own canal. Last year, Nicaragua’s National Assembly with support from President Daniel Ortega, granted a concession to build and operate a canal to HKND Group, a Hong Kong-based company owned by Wang Jing, a Chinese billionaire that made his fortune in telecoms. The project is so far in the feasibility studies stage, which Wang said he is funding out of pocket. The proposed canal should be around 180 miles long and seeks to accommodate “post-post-Panamax ships” – vessels too large even for the expanded Panama Canal. The Nicaragua Canal could generate revenue by charging a premium on these ultra-large ships. Yet the challenges are formidable. Costs are forecast to be US$40 billion, though experts think the true figure will be closer to US$80 billion. China’s state development banks could bankroll the project with ultra-cheap loans. But Wang Jing is a private individual, and the Chinese government – and its banks – has so far kept mum on the issue. Big-name Western consulting firms are currently assessing the proj e c t’s e conomics and environment a l imp ac t. In t he or y, construction could begin as early as 2015. If feasibility studies are positive and Wang can secure financing, the canal may actually be built. For all the publicity, however, that remains a distant prospect. – CHRISTOPHER BEDDOR
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order factor in the supply chains that run between the U.S. and China, ranking well behind the value of the renminbi and the price of Chinese labor. The logic of logistics at Chinese and U.S. companies has “a life of its own,” and d e c i s i o n s a r e m o s t l y m a d e “c o mp l e t e l y irrespective of the expansion of the Panama Canal.” Another hotly debated issue is just how much the expansion will shift trade that currently goes to West Coast ports in the U.S. through the Panama Canal. The expansion will probably result in some t rade re-rout ing, but its impac t is e asily exaggerated, says Peter Keller, executive vice president of TOTE, a shipping conglomerate that operates trade routes through the Caribbean. “You can’t just say, ‘Well, the canal will take bigger ships, so that’s where they’re all going to go.’ That’s just not how it works.” For starters, it’s not clear how much the expanded canal will reduce costs, because the new tolling formula has yet to be announced. Construction on the canal is well over budget, and the toll will likely be revised upwards to recoup costs. Even a modest rise could deter the lowest-cost shippers. At the other end of the spectrum, companies looking to get their goods quickly to market will skip the Panama Canal, regardless of its size. Shipping goods from China to the East Coast through the canal takes an average of 21.6 days, according to the U.S. Department of Agriculture. Shipping to a West Coast port then transporting cargo via train to the East Coast takes 18.3 days – though this option is more expensive.
Revolution or evolution? There is one area that may feel an immediate impact from the expansion: commodities. Even today, container ships are only a minority of all ships transiting the canal. They accounted for 26 percent of all vessels transiting the waterway in fiscal year 2013, according to canal statistics. By contrast, dry bulk ships and tankers accounted for 45 percent.
Liquid natural gas (LNG) will probably be the biggest beneficiary of the expanded canal, says Keller. America’s fracking boom has pushed the price of natural gas well below levels in China. The expanded canal could lower the cost of transporting LNG to East Asia to a level on par with Middle Eastern gas exporters, forecasts Sanford C. Bernstein. The bank estimates East Asian demand could pump U.S. exports from five million metric tons today to 20 million by 2020. Grain should also get a boost. Bulk shipments from the Gulf (where agricultural products from the Midwest are loaded onto ships) could drop by US$14 per metric ton after the expansion, according to a study by Informa Economics. Rodrigue says officials in Panama are well
aware that the initial surge of demand will come from LNG and other commodities. As for other goods shipped between China and the U.S., the impact will play out over the course of years, perhaps decades. The expansion could ultimately have a “major impact” on shipping and trade between the two countries, says Keller of TOTE. “But it’s going to be a transition. You’re not going to wake up in 2015 when the new canal opens and suddenly everybody’s deluged with large, post-Panamax ships.”
Christopher Beddor is a freelance writer based in Beijing.
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U
.S. companies in China continue to report growing profits and general optimism regarding their business prospects in China although they continue to face various challenges, according to results from AmCham Shanghai’s 2013–2014 China Business Report. In 2013, U.S. companies said they recorded excellent top-line performance indicators, demonstrating their overall health and resilience amid a slowing Chinese economy. For example, 67 percent reported revenue growth over the previous year, and 74 percent of companies said their China operations were profitable. Three out of four companies reported positive cash flow in
their China operations, up three percentage points from one year ago. But those companies that experienced flat growth in revenues increased six percentage points from the previous year to 19 percent, representing a change from the days of annual growth of more than 15 percent. Companies seem to widely recognize this change in the business environment and are bringing their forecasts in line with expected single-digit GDP growth forecasts. The results also illustrate the experiences and activities of U.S. companies in China are more than ever resembling developed markets. More companies are involved in the service sector, and there is a continuing shift from the pursuit of manufacturing for export, towards producing and distributing goods for the domestic market, as well as rapid growth of the services sector. The report is based off responses to the annual China Business Climate Survey. The online survey was conducted from mid-November to early December 2013 and was sent to AmCham Shanghai corporate members – all of whom are U.S.-based companies with operations in China – SMEs and individual company owners. A total of 399 companies participated – a response rate of 22 percent. The report is perhaps the most important publication the Chamber produces and the results are widely seen as a gauge of the performance of American companies in China.
Services expansion As Shanghai increasingly shifts to higher value-added activities, U.S. companies are tapping into a rapidly growing market for services. In 2013, companies reported that services accounted for more than 52 percent of their
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AmCham Shanghai’s China Business Report shows more U.S. companies are profiting amid a maturing China market
2013 Financial Performance 100% 90% 80% 70%
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20% 10% 0% Profitable
Revenue Up
Operating Margins Up
Panelists analyze the report last year
revenue – an 11 point jump from the year before. The growing importance of services to the bottom line is in contrast to manufacturing, which dropped 10 percentage points in 2013 to make up only 37 percent of companies’ revenue. The growing importance of services also is captured in terms of top-line GDP growth. While Shanghai’s economy grew 7.7 percent over the first three quarters of 2013, the expansion of the services sector was much greater, coming in at 9.1 percent over the same period, according to figures published by the Shanghai Municipal Statistics Bureau. By contrast, the manufacturing sector expanded only 5.3 percent. Rapid service economy growth is a key feature of the broader economic direction of China’s and Shanghai’s economy, and can be expected to continue as the market develops and Shanghai moves towards its stated goals of becoming an International Financial Center by 2020.
Persistent challenges Despite optimism and growth, challenges in the business and regulatory environment in China continue to hinder business [see cover story package].
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For the third consecutive year, rising costs remained the top business challenge, with 89 percent of companies reporting that a number of increasing costs in China hinders their business. Human resource constraints and local competition ranked No. 2 and No. 3, respectively. Generally consistent with previous years, 80 percent of respondents cited bureaucracy as the No. 1 legal and regulatory challenge. A strong majority of companies cited difficulties from an unclear regulatory environment and problems with tax administration as other leading legal and regulatory challenges that hindered their business. In response, U.S. companies are implementing a number of key initiatives amid an ongoing transitional phase in China’s business environment – one led less by export- and investment-led growth to one sustained by consumption and services. These include: • Focusing on key operational issues to make operations more efficient and compliant to provide a platform for further investment and growth; • Finding creative ways to change growth strategies, stay ahead of the competition and increase market share; and • Inte g r at i ng C h i na f u r t he r i nto g l ob a l
operations and focusing on China as a unique and distinct business operation.
In China for China U.S. companies remain committed to the China market. Continuing a trend from previous years, 59 percent of companies said they primarily are in China to compete in the growing domestic market. What had been a typical strategy of many companies – using China as a platform for lowcost, export-targeted production – is becoming less common. In 2013, 23 percent of companies said their primary strategy was to export to the U.S. or other markets outside of China, pulling even with results recorded in 2012 but sharply down from 31 percent in 2011. As a global investment priority, China ranks No. 1 among 20 percent of companies surveyed, edging down 1 percentage point from one year
ago. As a top-three priority, China decreased eight percentage points among respondents to 46 p e rc e nt . Wh i l e C h i na re mai ns a c r it i c a l destination for companies’ global investments, the percentage of companies that reported making additional investment in their China operations decreased from 74 percent one year ago to 65 percent in 2013. Despite facing challenges found in any developing market, companies’ optimism remains high with 86 percent of survey respondents reporting an optimistic or slightly optimistic outlook for their five-year business prospects in China, down five percentage points from a banner year in 2012 but similar to 85 percent seen in 2011. To download a PDF of the 2013–2014 China Business Report and a report infographic, go to www. amcham-shanghai.org/ChinaBusinessReport.
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Editor’s Note: Our special cover story package highlights key issues — intellectual property, HR challenges, corruption and attracting financial talent to Shanghai — topics that concern executives in China and which rank high in AmCham Shanghai’s annual China Business Report.
A TRICKY PRO For multinationals in China, protecting trade secrets requires an extra dose of caution
Michael Mangelson is chair of the China practice at U.S. law firm Stoel Rives and leads a multi-disciplinary team of attorneys assisting U.S.-based companies doing business in China and Chinese companies seeking to establish and expand their presence in the U.S. Mike counsels clients on IP, including trademarks, copyrights and trade secrets, and in commercializing their IP through licensing and other IP transactions.
BY MICHAEL MANGELSON
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he world is witnessing China’s changing role in the global economy as it transforms from world factory to world innovator. China’s most recent Five-Year Plan maps the course for this change in the country’s economic development. China’s R&D investment is expected to surpass the U.S. within eight years. Multinational companies and foreign-invested enterprises are also investing in R&D in China, where they can take advantage of attractive tax treatment, a less expensive talent pool, and close proximity to the world’s fastest growing market. Increased investment brings with it increased risk. U.S. companies must protect their investments in China by adopting an effective IP protection system. China has made considerable progress lately in protecting IP and much of this progress has been spurred by innovative domestic companies demanding protection and enforcement of their own IP. But challenges still remain. One challenge is appreciating the differences between America’s and China’s systems for protecting and enforcing IPR. Other challenges, including the three discussed below, require an extra dose of caution.
Protecting brands Very few China IP issues are as challenging to foreign
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companies as those associated with protecting their brand. If a firm is not proactive in protecting its company and product names, it will likely find that someone else has claimed rights to those names to the exclusion of the rightful owner. Premium electric carmaker Tesla experienced this when it launched its Model S sedans in China in 2013, but found itself unable to secure the phonetically similar Chinese name “Te Si La,” which had been previously registered by a Chinese businessman who refused to give up the trademark for anything less than US$30 million. The problem of trademark squatters is more difficult to address in China. Unlike the U.S., which is a “first to use” jurisdiction, China follows the “first to file” system. This means an individual or company that first files a trademark in China will have rights to prevent others from registering or using that mark in China regardless of who used the mark first. This can prevent a rightful owner from using its brand in China. The 2013 amendment of Trademark Law, effective on May 1, 2014, has added a “good faith” requirement to China’s trademark law, which may provide some recourse in addressing the issue of trademark squatting. Under the requirement of good faith, an unregistered trademark may be afforded protection if the registrant knew about the existence of the unregistered trademark due to a prior relationship with the user.
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POSITION This is helpful if the squatter is a former distributor, manufacturer or business partner. However, it is not helpful absent a prior relationship. Therefore, the best solution is still to register your trademark in China as soon as possible, which many companies unfortunately fail to do.
Safeguarding secrets Last year was the year of promoting trade secret protection in China. No other form of IP received as much media coverage
as corporate espionage in China and the U.S. call for China to do more to safeguard U.S. trade secrets. Trade secret protection has become more important than ever in light of China’s growing market and increasing work force mobility. Loss of trade secrets may result in serious financial repercussions or loss of competitive edge to U.S. and Chinese companies alike, and enforcement of trade secret protection in China can be tricky. Administrative and criminal enforcement of trade secrets are often infeasible because of the heavy evidential burden and the
imaginechina
A Model S Tesla showroom in Beijing. The car’s Chinese name was registered by a local businessman who demanded US$30 million to give up the trademark.
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“ Trade secret protection has become more important than ever in light of China’s growing market and increasing work force mobility.”
difficulty in receiving cooperation from local authorities. That leaves civil enforcement the most viable option for redress. But to be successful, the plaintiff must prove that the infringed information was a trade secret and the defendant illegally obtained and used the trade secret. This is clearly a big challenge for the plaintiff, considering that it is very difficult to collect this evidence under Chinese law. Moreover, if the plaintiff did not take adequate steps to protect its trade secret, Chinese courts will not uphold the trade secret. For example, New York-based SI Group experienced enforcement issues in its long-running trade secret dispute with China’s Sino Legend. Sino Legend hired SI Group’s former Shanghai plant manager, who allegedly misappropriated and used SI Group’s trade secrets in his new job. SI Group filed actions in both the U.S. and China to stop the infringement. Although the U.S. International Trade Commission in January upheld an administrative law judge’s determination of misappropriation, a Chinese court reached the opposite conclusion. The best trade secret protection strategy is prevention. First, control access to trade secrets, which includes both physical access and digital access; make sure only core employees who must know the trade secrets to perform their duties have the access. Second, adopt a comprehensive human resource policy to protect trade secrets, such as confidentiality agreements and non-disclosure agreements, and employee training and education. Third, use contractual protections and practice precautions in dealing with outside business partners.
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Fourth, build a good relationship with Chinese government regulators, especially those in charge of trade secrets protection, such as local administrations of industry and commerce. When implementing the above measures, documentation is of great importance. Companies must show that reasonable efforts have been taken to protect the information to claim protection, and documentation can also help to prove misappropriation.
Patenting innovations As with other areas of IP protection, patenting innovations also has its fair share of challenges in China. Patenting innovations in China’s pharmaceutical sector has received much attention lately. While this challenge may affect a smaller industry segment, it provides some valuable insights into some of the challenges U.S. companies face when attempting to patent their technology in China. The standard of patentability for therapeutic drugs is much higher in China. The recent examination guidelines that China’s Patent Office adopted provide that the patent disclosure should include “qualitative or quantitative laboratory test data (including animal testing) or clinical testing sufficient to prove that the technical solution can achieve the forecasted technical solution or effect.” This is a much higher requirement than in the U.S., which does not require evidence that the drug is safe and effective. This higher bar has made it much more difficult for U.S. pharmaceutical companies to secure patents in China as human trials can be extremely expensive and time-consuming. Moreover, supplemental data, which is the information provided to the patent office after the filing date of the application, is not allowed under recent Chinese examination guidelines. This ban adds an additional burden to an already difficult patentability standard by requiring applicants to submit all required information upon filing. A resolution of this issue is still up in the air. During the 24th U.S.-China Joint Commission on Commerce and Trade in December, China affirmed that, contrary to practice, the examination guidelines permit supplemental data. This might make it easier for pharmaceutical companies to secure patents in China. However, this affirmation is not yet reflected in the law. These changes should be implemented to encourage innovation in the pharmaceutical sector, which is mutually beneficial to both the U.S. and China. Every rewarding journey must endure bumpy roads. Every successful China venture will face legal challenges. U.S. companies venturing into China can best protect their investments and innovations by understanding and addressing China’s system of registering, protecting and enforcing IP.
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Finding Value in Risks Managing China’s human capital challenges Chris Traub, co-founder and chairman of Strategic Executive Search (SES) Group, has been a pioneer in the Asia Pacific executive search marketplace for the past 25 years. Chris leads the group’s telecommunications, media and technology and private equity practices. SES partners with MNCs, investors and globalizing Chinese enterprises to recruit critical leadership talent.
BY CHRIS TRAUB
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ne of the most well-worn phrases among conference and forum presenters in Greater China – the Chinese phrase for danger combines the characters for both threat (wei) and opportunity (ji) – is almost as worn out as the standard lunch speaker opening line: “There’s no such thing as a free lunch.” Just as “no free lunch” is based upon eons of pragmatic experience, there is abundant truth to the concept that threats and dangers always hold the seed of opportunity for those who are able to see clearly and act decisively. As we move into the Year of the Horse, companies in China continue to confront human capital challenges. Of the many related challenges that are regularly highlighted by leaders of businesses operating in China, three fundamental issues come to the fore: Acute shortage of executive management across virtually all industries due to imbalances between supply and demand; Retention challenges, and among them, lack of company loyalty; and Lack of creativity and problem-solving skills among the Chinese talent pool. Let’s take a brief, high-level look at these three threats,
and consider how to reframe them and treat them as opportunities.
Supply & demand Scarcity of leadership talent has consistently been one of the most significant challenges for virtually all participants in China’s dynamic commercial marketplace for the 32 years since Deng Xiaoping “went south,” and accelerated the opening of the Chinese marketplace to global businesses. Despite China’s enormous population, the scarcity of both experience and leadership concepts, which resulted from China’s being closed to international businesses prior to the early 1980s – combined with the immense scale of investment from the international community, domestic players and new start-ups – has created a chronically constrained talent pool. While the experience, maturity and scope of China’s talent pool has grown remarkably over the past 30 years, markets and organizational needs have evolved and matured, and economic influences and trends have changed, leading to the need for continuous acquisition of new skill sets and minds ets among the leaders of China organizations, regardless of whether they are locally or internationally owned. Amidst a slowdown of the Chinese economy (which
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…Through creative talent acquisition, remuneration, education and career development strategies, companies can turn this scarcity to their advantage.” China uses a Confucian-derived education system that emphasizes rote learning, the author says
would intuitively suggest that pressure on the leadership talent pool would ease at least temporarily, as there should be lessening demand for talent), the need for new leadership approaches and skill sets to do business amidst slowing conditions, will continue to keep a scarcity premium on those leaders who can effectively navigate through a slowdown.
‘Full court press’ No company can escape the dynamics of talent pool scarcity ; however, through creative talent acquisition, remuneration, education and career development strategies, companies can turn this scarcity to their advantage. For example, to the extent that companies are able to attract and secure “A” players in their sector, their human capital team strength may become their competitor’s weakness. Companies can consider putting a “full court press” (a defensive basketball strategy) on their top competitors’ best talent, as these leaders frequently know the specific marketplace related to their business, and often hold the right relationships and skills to be successful. They also offer direct benchmarks against a company’s talent and remuneration. A leadership acquisition “full court press” involves a combination of regular and proactive market monitoring of competitors’ talent by sourcing information from clients, one’s own team and social media, among and other sources; as well as using specific leadership recruitment exercises as opportunities to target, benchmark and develop direct relationships with leaders employed by the competition.
High turnover & low loyalty Across C hina, t here is a long-st anding c u lture of entitlement permeating the management talent pool as a result of the chronic imbalance of supply and demand. Middle and senior management are generally able to change
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jobs frequently (even though frankly, the best-in-class Chinese managers generally avoid this trend), simply because t he y know t hat t he y are p erceived as b eing a s carce commodity. There will often be multiple companies prepared to overlook frequent and short-lived career changes, and still frequently pay a 30 percent increase, in their desperation to recruit leaders – even those who they may not feel are up to their ideal expectations. At the same time, historically, Chinese tend to develop stronger loyalties and affiliations with individuals – specifically well-regarded bosses and peers – than they do with organizations; hence when a cherished boss changes jobs, they quite often bring subordinates with them, capitalizing on the fact that the subordinates’ loyalties are stronger to their boss than their employers.
Low turnover, high loyalty Factors that can lead to low management turnover in a high-turnover environment include: Creation and utilization of effective and comprehensive job descriptions that fulfill organizational needs, while providing progressive career and advancement pathways for incumbents. Offering mid- to long-term career planning opportunities for both local and expatriate management; Planning and implementation of effective onboarding programs for new recruits, rather than letting them simply find their way into new organizations and “sink or swim,” which frequently occurs; Providing competitive (not just top of the market) and creative remuneration programs that align company values and objectives, with employee actions – including golden handcuffs and long-term retention incentives for various levels of management; and C o m b i n i n g m e a n i n g f u l a n d c o mp e l l i n g t r a i n i n g
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opportunities with financial incentives for employees to remain with the company for a reasonable p erio d following training; and disincentives for leaving prior to completion of this period. When your company effectively uses the above tools, retention rates should be significantly above market averages, employee satisfaction is nearly certain to be higher, and the resulting low turnover will be a draw to top talent in your industry.
Educational constraints China’s Confucian-derived education system, with its emphasis on rote memorization and testing, is well-known for developing strong left brain skills that are well-suited to mathematics, science and engineering – but relatively less wellsuited to creative thinking and “out of the box” problem solving compared to many Socratic, liberal arts-based education systems practiced in many Western countries. This has led to frustration by leaders of Chinese organizations of many Western multinationals, who have struggled with inspiring creative problem-solving and lateral thinking in their organizations.
Problem-solving culture Creating a culture of innovation and breakthrough can be achieved by providing pragmatic, creative and inspirational training programs that develop creative thinking, individually an d org an i z at i on a l ly ( bu i l d i ng l oy a lt y an d c u ltu r a l identification, while lowering turnover); integrating the resulting behaviors directly into in-country management culture through including these desired behaviors in annual management appraisals; and where possible, aggressively incentivizing creativity by, for example, designing a way for intellectual property developers to personally benefit from residuals on the creation of valuable IP that they create – hence rewarding delivery of breakthrough value and ideas. The above three examples (there are many others) of taking serious human capital challenges and turning them into competitive advantages, if planned and executed effectively, can take companies a long way down the path of working towards having optimal organizational outcomes in a marketplace, which has never been easy, and is unlikely to get more so for the foreseeable future.
A guest poses a question during an AmCham Shanghai’s human resources event last year
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The New Corruption Kent Kedl is managing director of Control Risks Greater China and North Asia region. He is based in Shanghai and oversees the commercial and business operations for the company in mainland China, Hong Kong, Macau, Taiwan, the Koreas and Mongolia.
A high number of executives see fraud as an ongoing challenge to their company and a majority see no change for the better
BY KENT KEDL
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orruption remains a leading challenge for businesses in China. That’s probably not a surprise. But declaring that fraud is a problem in China is like saying February winters are cold in Shanghai. And so it’s safe to say that the very definition of China as a developing market means that business practices, laws and enforcement structures are also “developing.” To be clear, it’s not just the mere existence of corruption in China that is so surprising but the scale, scope and its place in the market that may intrigue and worry you. The recently released 2013–2014 AmCham Shanghai China Business Report confirmed that these challenges remain a serious concern among American businesses here. The first thing one notices about corruption in China is the sheer scale of the problem: according to the report, 70 percent of companies surveyed said that corruption “hindered” their business. In essence, nearly three quarters of Chamber member companies have to be concerned about corruption in their business, which means that nearly three quarters of companies have their commercial, operational and legal people all spending time thinking about, and dealing with, the problem. As one Control Risks client said in describing his fraud-riddled operation, “This isn’t a factory, it’s a crime scene.” Weeding out fraud in a company demands resources – time, people and money – resources that might otherwise be spent on expanding into new China markets, developing new products or training staff instead of teaching them about compliance issues. And the prospects for positive change are not that good – 74
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In essence, nearly three quarters of Chamber member companies have to be concerned about corruption in their daily businesses”
percent say that nothing is changing and 8 percent say it is getting worse. We are (or should be) spending a lot of resources on dealing with fraud and corruption in our China businesses, and we’ll need to plan on continuing to do the same for the future. Another client in the healthcare space in China – considered a challenging sector – estimates that spending on compliance increased its total operational costs at least 10 percent. It’s clear that corruption and fraud are problems in China, but what is the scope of the challenge – where is this impacting our businesses the most? It’s no surprise that we need to look both outside and inside our companies – from worries about corrupt sales and bidding practices to employees defrauding the company, there is plenty to keep a China manager awake at night. And the survey data reflect these concerns: 55 percent said that giving
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large scale anti-corruption efforts are more than just lip service. The one aspect of corruption that is a surprise this year – and it’s a big one – is the increasing importance that AmCham Shanghai member companies place on complying with local anticorruption laws, increasing 15 percentage points from a year ago to 47 percent. In past years, companies have been very concerned about complying with international laws such as the Foreign Corruption Practices Act (FCPA) and the UK Bribery Act kickbacks to customers was a concern and 53 percent said that (UKBA). However, a number of high profile cases such as those they were concerned about employees defrauding the company. involving foreign companies in the pharmaceutical and baby In our investigations practice, those are the first two areas that nutrition sectors have brought Chinese legal compliance to the we are called in to look at. What might be more interesting – and fore with concern over foreign compliance actually dropping maybe slightly encouraging – is that “official corruption,” though five percentage points. still somewhat of an issue, appears to be less of a concern for These concerns are certainly warranted, and not just because companies. Corruption in government tenders, pressure to give there is an overall increase in the attention Chinese regulators are kickbacks to customs and corruption in business registration all paying to business in China, both foreign and domestic. Of dropped at a statistically significant level. greater concern is that the legal code and enforcement structures The recent moves from the Xi Jinping administration against are still in the “developing” stage, making it difficult for companies corrupt behavior both inside the Party and in the broader to identify just what regulations they need to abide by, how to stay business environment may be having an impact here. Many of our in compliance and which Chinese regulatory bodies will be clients are cautiously optimistic that the Chinese government’s involved. The PSB, NDRC, CFDA, AIC … it’s an alphabet soup of regulatory bodies that could rock up at any moment and start asking questions. This is the greatest concern we see in the Please comment on these business challenges. How do they affect your business? “new” corruption environment in China – that what was always present has now become 100% increasingly and utterly complex. No longer 90% can companies look at the challenge as simply 80% an issue of internal fraud or giving kickbacks 70% to customers; rather, every case, every visit by 46.4% 60% authorities, every whistleblower or internal 50.9% 45.7% 47.3% 50% rumor needs to be treated as something that 50.3% 52.6% could rapidly grow into a much larger issue. 40% 38.2% 42.4% The solutions are never purely legal because 30% 35.7% 32.4% 33.3% 42.7% 30.3% the laws in China are never completely clear; 20% 31.3% 25.9% 26.4% in addition to a crack legal team, it takes a 19.0% 10% 16.9% 13.9% 13.8% 10.4% 7.4% 5.9% 6.1% nu ance d underst anding of t he web of 0% st a kehol d e rs and c are f u l rel at i onsh ip management to unravel the problem and get the company back on solid ground. The traditional definition of a successful company in China – great products at attractive prices to loyal customers – is expanding to include n Seriously hinders n Somewhat hinders those who can manage the complexities of fraud and corruption on a daily basis; a tall A chart from the China Business Report order for challenging times!
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Shanghai or Hong David Yen is a tax advisor at U.S. Abroad Tax in Shanghai. Arthur Loh is a managing director at Resources Global Professionals in Shanghai.
A
Finance industry professionals may find it is not just about taxes and math when it comes to deciding between the two cities
BY DAVID YEN AND ARTHUR LOH
ccording to the 2013 Mercer Cost of Living City Rankings, Hong Kong is the sixth most expensive city in the world, while Shanghai leapfrogged to No. 14 from No. 27 in 2007. One of the key factors behind Shanghai’s jump is in the city’s push to become a global financial center by 2020. Higher talent costs in the financial services industry will contribute to Shanghai’s move up the Mercer list in upcoming years. The corporate tax rate between Hong Kong (16.5 percent) and Shanghai (25 percent) is still a significant cost gap that foreign financial institutions may consider when bringing their trading operations on shore, notwithstanding the free trade zone’s anticipated business flexibility. The FTZ is not another preferential tax zone and expatriates will not gain any tax benefit working in the FTZ. Shanghai is making effort to build its infrastructure and develop and attract the right talent to reach its stated goals, including the FTZ initiative. Another promising factor is that the Shanghai government’s aggressive business initiatives will inevitably create more senior executive positions within MNCs currently operating in Shanghai. Resources Global Professionals (RGP) feels that many MNCs continue to move their headquarter and regional back office functions, such as finance and HR shared services center, to Shanghai due to the ease of talent sourcing. Talent costs in Shanghai are typically 10 percent to 15 percent higher than comparable cities within China, and hence Shanghai remains a top contender for MNCs. If you are currently working in the financial services industry, would you move from Hong Kong to Shanghai?
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Consider Cynthia, who works for RGP on a U.S. banking client project. Cynthia has worked in the Hong Kong fund management industry in Hong Kong & New York for over 13 years. But last year Cynthia decided to give Shanghai a try given the enormous potential Shanghai offers for her career development. Cynthia worked in the financial services division of one of the Big Four accounting firms in Hong Kong and with a two-year secondment in New York, and due to the immense needs for professional accountants and her family attachment in Shanghai, she is a key supporting member in the Shanghai operations of a U.S.-based bank’s finance department. Her choice was much easier to make than most expatriates as her spouse also works in the financial services sector in Shanghai. Will I pay more taxes? If you are an American executive who works for a U.S.-based multinational employer on a foreign assignment, chances are your employer will provide you with living and housing allowances to make the assignment more attractive. Most U.S. MNCs have compensation policies to ensure employees on international assignments receive a total compensation that is comparable to what they would have earned if they were in the U.S. These employees would typically receive a cost of living adjustment, housing, relocation allowance and reimbursement of foreign taxes under a tax equalization policy. Tax equalization is designed to make taxes a neutral factor in an expatriate’s compensation package. In theory, the overall tax burden would be the same whether the employee is working in the U.S., China or anywhere in the world. In most cases, the expatriate’s U.S. income tax will increase due to all the additional allowances and
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Kong? benefits paid during the foreign assignment. Most employers alleviate this negative effect by paying the employee an additional amount to help with the tax liability, usually referred to as income gross-up. It is important to note that the gross-up payment is taxable to the employee for U.S. tax purposes. As more and more companies are reducing their costs, international assignment compensation packages are becoming things of the past as most positions are filled locally without the aforementioned benefits.
Taxes: China or Hong Kong Given that mainland China has a top marginal tax rate of 45 percent for individual income compared to Hong Kong’s top effective rate of 15 percent, it would seem the choice is straightforward from a tax perspective. However, the China Individual Income Tax (IIT) Law allows certain employment benefits for foreign individuals to be treated as not taxable if the benefits are properly listed in the employment contract and with supporting invoices. The benefits or so-called tax allowances may include housing costs, reasonable meals, laundry, moving expenses, home leave, language training costs and tuition fees for children. Depending on the individual’s circumstances and your company’s HR policies, generally, it is acceptable to allow a reasonable portion of the employee’s 30 to 35 percent of gross income to be treated as deductible allowances to be exempted from China IIT. Although Hong Kong is at a lower tax rate, the deductions for the salary tax are much more limited for expats. Albeit a place of residence is provided to the employee, the Rental Value (range from 4 to 10 percent depending on the type of accommodation) will be calculated and included in the income for salary tax computation. Another factor to keep in mind is China’s tax rates are assessed on a monthly basis, whereas Hong Kong salary tax is assessed on a tax calendar basis. To avoid the top marginal tax rate of 45 percent, companies should consider the tax impact on any large payment spikes in salaries paid to employees in China. Ideally, the additional
Income tax in Hong Kong is lower than the mainland but there’s more to the story
stipend such as signing bonus and post differential should be allocated over the calendar year. Since a U.S. expatriate is also taxed and required to file a U.S. Individual Income Tax Return to report his or her worldwide income, the overall tax effect should be considered. To avoid double taxation, special income tax benefits may be claimed for foreign earned income (up to US$97,600 for 2013) and housing exclusions provided he or she meets either the bona fide residence or the physical presence test. In addition, her or she may be able to take a credit for foreign taxes paid to reduce U.S. tax liability on a dollar-for-dollar basis. He or she cannot take a credit for foreign taxes paid or accrued on the amount excluded from U.S. gross income such as foreign earned income and housing exclusions. Although the actual tax outcome greatly depends on an individual’s facts and circumstances, in most scenarios, working in Hong Kong will result in a lower overall tax liability.
Other cost factors? Other factors to consider when accepting an executive offer may include cost of living and international schools for children – and the environment. Shanghai remains one of the cleanest cities to live in China and plays host to major social and sporting events at entertainment venues that should keep expatriates with plenty of options on the weekends. Given the higher overall costs to live in Hong Kong, the tax savings seem to lose its appeal. Hong Kong is more expensive to live in than Shanghai, and the comparable rental accommodation could cost more than twice to triple the rent in Shanghai. As the wise old saying goes: “It is not how much you make, it is how much you get to keep.”
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i n t e r v i ew B y E r i k a Wa n g
The Accessible Auction The founder of a U.S.based auction company talks about doing business in China
Deb Weidenhamer
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eb Weidenhamer is the CEO of Arizona-based Auction Systems Au c t i on e e r s & Appr ai s e r s , which she founded in 1995 and has since grown to a US$140 million multinational auction firm selling business overstock, assets and real estate across the U.S. and abroad. A former business analyst, Weidenhamer went on to establish iPai Auction Co., the first wholly foreign-owned auction house in China, to help Western business gain access to the Chinese market. In the following excerpts from an interview, she shares her views on the auction business in China and what it takes to succeed in this fastgrowing market. Insight: iPai’s affiliate company, Auction Systems Auctioneers & Appraisers, has been operating in the U.S. since 1995. Why did you decide to enter China? Deb Weidenhamer: “Auctions returned to the Chinese marketplace 20 years ago following the Cultural Revolution. They were privately held and guests could only attend by invitation. However, in the past five years, auctions have been opened to the public. We decided to enter China because we were doing business with Chinese customers as part of our auction business in the States. With our good relationships in China, we were invited to open an auction business whereby we would be the first wholly foreign-owned enterprise auction firm in China. There were opportunities to introduce a new business model to China with our unique style of offering auctions that are selling items everyone can enjoy and not just the very wealthy. “Since iPai Auction opened for business in China we’ve helped a variety of companies, both multinational and Chinese, auction inventory
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and excess stock of consumer products and introduced many Chinese and expat consumers to auctions. Our auctions are simulcast with live and online bidders competing against each other and generally bring in at least 120,000 online views and as many as 500 people attending the live auctions. This competitive form of bidding creates a fun and exciting environment in which we set the market price for the sale of auction goods. “iPai auctions sell everything from furniture, to high-end jewelry, handbags, fashion accessories and consumer goods such as watches electronics, fashion jewelry, home decor and everything in between. We also sell business assets for companies who are moving out of China.” Insight: Are there other ways you can help these companies? DW: “For many small- and medium-sized American companies that can’t afford to have a full-blown, multinational presence in China but want to see if there is a good fit for their products, we offer our Market Entry Program where we introduce their products at auction. We import their goods into China, create a Chinese video of the highlights of their company, auction the goods, conduct market research from our buyers, and quickly compile results into a report. Our goal in creating the Market Entry Program is to help Western businesses more easily gain access into the ever-growing Chinese marketplace and have real and accurate information as to market acceptance and price acceptance. Our system provides this information quickly while generating sales in China for our clients.” Insight: How does the Chinese market compare with that of the U.S.? DW: “Auction is commonly utilized to sell used
Insight: What is your business model in China and how has it evolved through the years? DW: “Of the US$5 million we expect to do in China this year, around 45 percent is selling Western goods and the remainder is from China. We developed our own software technology that supports our Simulcast auctions. Our proprietary system is now industry-leading and eases auction operations for our customers.”
courtesy ipai auction
goods in the U.S. across all categories – from real estate, autos, commercial equipment, consumer goods, collectibles, antiques, fine art and many intangible sales such as air time licenses. Auctions are a part of everyday life in America, but in China auctions are generally for fine wine and artwork and aren’t accessible to all people. iPai brings items that aren’t just for the extremely rich but consumer goods of exceptional quality that appeal to many buyers.”
Potential bidders examine an item up for auction last October
Improve your Chinese Impress your friends Invest in your future
021-5306 0968 021-5306 2960
Enjoy your Shanghai life! Add: No 40, Lane 56 Yandang Road (Close to Middle Huaihai Road) E-mail: info@mandarincity.cn Sites:www.mandarincity.cn march 2014
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“
Auctions are a part of everyday life in America, but in China auctions are generally for fine wine and artwork and aren’t accessible to all people.”
Insight: Who are your main customers in China and what are the biggest challenges you face in winning more customers here? DW: “Auction Systems Auctioneers & Appraisers and iPai Auction sell business overstock, assets and real estate for corporations, government and the private sector in the U.S. and abroad. We work with a variety of individuals and businesses alike, but business owners continue to be our f o c u s . Au c t i o n s s e a m l e s s l y c r e a t e n e w distribution channels for these corporations and offer opportunities to test new products while taking the guesswork out of setting the price point and eliminating the middle man. “Auctions provide the ultimate transparency. That said, the Chinese marketplace operates a little differently. In the past, Chinese auction companies relied on China’s government to
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obtain product. Now, the market-oriented economic reform in China is changing the country’s auction industry, and as a result, Chinese auction companies need to find new business models.” Insight: In your opinion, what does it take to succeed in China? DW: “As we all know, no matter what business you are in or where you are located, it’s great employees that make a great company. We invest in our employees through training, including English, Western business practices and life skills that we adapt to the culture, to help ensure our employees are successful and in turn our company will also thrive. Equally important, building strong personal relationships is critical in doing business in China.”
deal of the month B y E r i k a Wa n g
imaginechina
imaginechina
Lenovo Snaps Up Google’s Mobile Unit
C
hinese technology company Lenovo Group, the largest PC maker in the world, announced that it will pay US$2.91 billion for the Motorola Mobility smartphone business division of U.S. web technology giant Google Inc. According to Lenovo, the purchase price includes US$1.41 billion paid at close, comprising US$660 million in cash and US$750 million in the Hong Kong-listed company’s shares, while the remaining US$1.5 billion will be paid as a three-year promissory note. Motorola is the biggest holder of mobile communication patents, according to research firm IDC. As part of the deal, Lenovo will receive more than 2,000 patent assets and the Motorola Mobility brand and trademark. Google will retain ownership of the majority of the Motorola Mobility patent portfolio of about 17,000. “The acquisition of such an iconic brand, innovative product portfolio and incredibly talented global team will immediately make Lenovo a strong global competitor in smartphones,” said Yang Yuanqing, chairman and CEO of Lenovo, in a company press release. “Lenovo has a proven track record of successfully embracing and strengthening great brands – as we did with IBM’s Think brand – and smoothly and efficiently integrating companies
around the world.” In 2005, Lenovo bought IBM’s personal computer business for US$1.25 billion, which eventually helped the Beijing-based company dethrone Hewlett-Packard in 2013 as the world’s top producer of PCs. “This move will enable Google to devote our energy to driving innovation across the Android ecosystem, for the benefit of smartphone users everywhere,” said Google CEO Larry Page. Google, which owns the smartphone operating system Android, purchased Motorola Mobility in 2011 for US$12.5 billion, but the division has incurred operating losses of roughly US$1 billion since then. According to Hong Kong-listed Lenovo, Motorola Mobility is currently the No. 3 Android smartphone manufacturer in the United States and No. 3 manufacturer overall in Latin America. With this move, Lenovo is expanding into tablets and smartphones to tap into rising consumer demand for mobile devices. In China, Lenovo is already the second-largest smartphone brand after Samsung. It has announced plans for a push into the United States smartphone market this year. Earlier this year, Lenovo announced it would purchase IBM Corporation’s low-end server business for US$2.3 billion.
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inside amcham from the chair
Zoning In In Februar y, AmCham Shanghai hosted another event dealing with a very hot topic: the Shanghai Free Trade Zone (FTZ). Ken Jarrett led a panel of senior Shanghai officials and introduced the FTZ’s deputy director general, Mr. Jian Danian, for a keynote address to an audience of more than 300 guests. From Mr. Jian’s remarks, two things became quite clear: the importance attached to this project by not just the Shanghai government, but for the central government’s entire economic reform program. Second, Mr. Jian’s re c o g n it i on of t he i mp or t anc e of AmC ham Shang hai as a for um to solicit our ideas and our members’ views on the FTZ. Mr. Jian spoke of the experimental nature of the zone and that it is very early in determining the full scope of business permissible to those companies that register there. He acknowledged that the first list of forbidden industries (the “negative list”) was disappointing to those of us who expected the zone to open up the ser vice sector, especially in financial services. He counseled us to be patient as he expects the restricted areas of business to improve as time goes on. However, it is also clear from his remarks that all major changes will come from the central government and not from Shanghai. On our part, AmCham Shanghai will continue to be a source of knowledge and insight for the FTZ as we will make every effort to hold events, such as this one, often and with
Robert Theleen Chair of the Board of Governors
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a variety of relevant decision makers. I would welcome your comments and questions pertaining to the FTZ in the weeks and months ahead.
Mr. Jian spoke of the experimental nature of the zone and that it is very early in determining the full scope of business permissible to those companies that register there.” If I had to choose one word to describe to the outside world what has changed the most in recent years i n C h i na , it wou l d b e “mobi l it y.” Recently, I was asked to deliver a speech on AmCham Shanghai at the annual Jiangsu China C ouncil for the Promotion of International Trade (CCPIT)’s investment conference in Nanjing, some 300 km. from Shanghai, and return the same day for an AmCham Shanghai Board meeting by 4 p.m. I did it, with ease, and I cannot think of anywhere in the world where that could be done without flying. That event reinforced my view of the importance of AmCham Shanghai’s efforts to provide greater access to our members throughout the YRD.
inside amcham B OARD o f g o v e r n o r s b r i e f i n g
AmCham Governors Make Plans for Charity Gala and Committee Outreach AmCham Shanghai’s Board of Governors met on February 13 to review plans for some of the Chamber’s major upcoming events and to discuss the budget for the upcoming 2014–2015 fiscal year. Reaching Out to Committee Chairs Board Chair Robert Theleen began the session by outlining plans to enhance cooperation between the Board and the Chamber’s committees by holding periodic and informal get-togethers for all committee chairs and board members. Plans for the Charity Gala During the session the Board approved a plan for the Chamber’s upcoming 2014 Charity Gala to work with three non-governmental organizations on ensuring that the proceeds of this year’s gala get directed to those most in need. Outgoing Director of Government Relations and CSR Steven Chan presented a proposal reviewing eligible charities who had applied to work with the Chamber, and the Board unanimously decided to cooperate with Chi Heng Foundation, Teach for China and Roots & Shoots.
2014–2015 Budget Another major topic for discussion was AmCham Shanghai’s plans and budget for ensuring the effective implementation of activities during the upcoming financial year, which begins April 1. The Chamber’s Vice President of Finance and Administration Helen Ren made a presentation on the Chamber’s financial performance so far in the 2013–2014 fiscal year, and made a proposal for the coming year. The Board will vote on the budget at the March Board meeting.
In Attendance Governors: Jimmy Chen, Michael Crotty, Keith Cole, William Duff, Jun Ge, Ker Gibbs, Cecilia Ho, Curtis Hutchins, Robert Theleen (Chair), Eric Zheng Apologies: Jeremy Burks, Sherman Chu, Joel Fischl Attendees: Kenneth Jarrett (President), Steven Chan, L.J. Chen, Michael Cole, Jonathan Shyu, Helen Ren, Scott Williams
The AmCham Shanghai 2014 Board of Governors Governors
Chair
Jeremy Burks Dow Corning
Jimmy Chen FedEx Express
Keith Cole General Motors
Michael Crotty MKT & Associates
Jun Ge Intel China
Ker Gibbs BW Ventures
Cecilia Ho International Paper Asia
Curtis Hutchins Eaton (China) Investments
Eric Zheng AIG Insurance
Robert Theleen ChinaVest
Vice Chair
Sherman Chu Cisco Systems
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AmCham Shanghai
Jarrett and Wong after signing a partnership agreement between AmCham Shanghai and Alibaba.com
AmCham Shanghai President Kenneth Jarrett, left, and Vincent Wong of Alibaba.com, during an interview on January 24
Roundtable on privatization of healthcare in the YRD AmCham Shanghai President Kenneth Jarrett during a briefing on January 17 with lead negotiators for the Bilateral Investment Treaty (BIT)
Ji Jianjun, vice chair of Nanjing Chamber of Commerce, speaks during a meeting on January 21 at AmCham Shanghai 42
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From left: Scott Williams of AmCham Shanghai, Charlotte Gallogly, president of the World Trade Center Miami, and Port of Miami Director Bill Johnson at a recent briefing
Month in Pictures
Robert Theleen, chair of AmCham Shanghai, speaks during a Monthly Member Briefing with representatives from the U.S. Consulate General in Shanghai on February 11
Michael Antonovich, right, Los Angeles County Supervisor, and local business chamber members at the Los Angeles City Hall in January
An attendee poses a question during the Monthly Member Briefing
Sherman Chu, general counsel of Cisco Systems (China) Networking Technology, greets Jian Danian, deputy director general of the China (Shanghai) Pilot Free Trade Zone Administration
Perspectives on the China (Shanghai) Pilot Free Trade Zone event on February 18
AmCham Shanghai New Members U.S. Corporate Membership Franklin Electric (Suzhou) Co., Ltd. YANG Kelle Addison-Clifton Business Consulting (Ningbo) FTI Consulting (China) Ltd. Co., Ltd. WORTH Russell James SHEN Liuhui General Motors (China) Investment Company Hawaiian Islands Regional Center LLC Limited WILSON David LAKE David Wayne General Motors (China) Investment Company U.S. Associated Corporate Limited Membership MA Joie CRAY Computing Equipment (Beijing) Co., Ltd. Halma International, Ltd., Shanghai Rep. Office LIU Ying HOU Jonathan Franklin Electric (Suzhou) Co., Ltd. XU Kevin HOU Junjie ZOU Thomas IDEX Trading (Shanghai) Co., Ltd. Corporate Int’l Affiliate JONES William John Membership INVISTA Management (Shanghai) Company Angst+Pfister Limited JIN Jenny KROMER Steve Ascendas Shanghai Co., Ltd. Invitrogen Trading (Shanghai) Co., Ltd. WU Jean PATTERSON Dale Consulate General of Brazil in Shanghai Las Vegas Economic Impact Regional Center, LLC MARTINS Andre ZHU Benjamin Etteplan Consulting (Shanghai) Co., Ltd. Lifestyle Logistics (Shanghai) Co., Ltd. RAUNIO Lauri DAVISON Miles Isobar Digital Co., Ltd. Mattel Asia Pacific Sourcing Limited LINBADEN Jane WU Jing King Sea International Limited Micro Benefits Financial Consulting (Suzhou) YANG Jingxin Co., Ltd. CHANG Lixia Lifestyle Logistics (Shanghai) Co., Ltd. SUGUIURA Andre Novus International Trading (Shanghai) Co., Ltd. YANG Fuling Younger Niche Logistics (China) Ltd. MOORE Virginia Pratt & Whitney Management (Shanghai) Co., Ltd LU Krista XIE Li Ping Associate Membership XIE Grace Abbott Medical Devices Trading (Shanghai) Regus Business & Conference Centre Co., Ltd. (Shanghai) Co., Ltd. XU Jia JIN Albert Acorn International XING Andy GAO Tong Saatori, Ltd. AIG Insurance Company China Limited GOOD Sarah MCPHEE John Shanghai Hewlett-Packard Co., Ltd. Anheuser-Busch InBev China Co., Ltd. GAO Ginger QIAN Hongsun Shanghai New York University Carlyle Investment Consulting (Shanghai) Co., Ltd. PIERCE Lucia Buchanan ZHANG Chi Stryker (Suzhou) Medical Technology Co., Ltd. Caterpillar (China) Investment Co., Ltd., LI Hong Shanghai Branch The Executive Centre (Shanghai) LIU Yan TONG Vivi Coach Shanghai Limited U.S.A. Keller and Heckman LLP, Shanghai Rep. ZHOU Guanghua Office Colliers International Property Consultants DAI Yin (Shanghai) Co., Ltd. White & Case LLP, Shanghai Office (USA) XIE Jingyu ZHANG Ning Columbia Information Consulting Company (Shanghai) Limited Individual U.S. Citizen Membership AWAD Hossam Asia Clean Capital Dow AgroSciences (China) Co., Ltd., Shanghai LAPHAM Thomas Alexander Branch Center of American States HSU Cecilia Chia Ling STEWART Michael Duke Consulting (Kunshan) Co., Ltd. Deloitte FENG Cheng HMIMDA Rick SHEN Jie Goprofessional Inc. Flextronics Electronics Technology (Suzhou) CHEN Yue Co., Ltd. CHEN Ivy Grace Trading (Shanghai) Ltd. YANG Steven STRUNK Tara Marie ZHOU Nadia K12 International Academy Foley & Lardner LLP, Shanghai Rep. Office U.S. MCCLINTIC Margare TU Joleen 44
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N/A GAUDETTE Michael Gerald SEDIE Adam Oriental Dreamworks LIU Sherry Regal International East Asia Hotel O’MALLEY Peter Sanofi FENG Gigi Qi SCIS-HIS Schools PAULSON Jonathan Scott Suzhou Jingpin Optical -Electronical Technology Co., Ltd. GAO Ju TEK- Shanghai WINTERS Benjamin Lee Individual Int’l Affiliate Membership Joanna Real Estate Consulting Co., Ltd. SCHWENCKE Caldeira N/A CAMPE Markus DZUBA Oliver Lars LIU Charlotte WAREING Stacey Shanghai SCOCC Warehousing Services Pty., Ltd. WANG Zheng Non-Resident Corporate Membership American Marketing Association MCCARREN Marisa GTC Commerce, Inc. JIANG Zhaokang Las Vegas Economic Impact Regional Center, LLC WANG Danni PRC Macro Advisors Limited HESS William Non-Resident Individual Membership Saint Martin’s University MOORE Riley Small Business Membership Chapin House HASSAN Chip Lanco Systems (Shanghai) Limited LO Brutus Ningbo Royal Dragon International Trading Co., Ltd. RAMEZANIFARD Alireza REV Business Consulting (Shanghai) Co., Ltd. TAN Jeff Stonebridge Advisors (Beijing) Co., Ltd. ZHU Xiaobei SXL Group CHAN Anna Educational Membership Shanghai New York University LEHMAN Jeffrey University of San Diego DIMON Dennis CASIC Corporate Membership California-China Office of Trade and Investment LONG Diane
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.
Government Relations Delegation Offers Update on BIT Talks AmCham Shanghai on January 17 hosted a U.S. government delegation that included the lead negotiators for the Bilateral Investment Treaty (BIT) between the U.S. and China. The delegation included officials from the U.S. departments of State, Commerce and Treasury, and the Office of the U.S. Trade Representative (USTR). The delegation recently completed its 12th round of BIT negotiations with the Chinese government in Beijing and Shanghai. Lead negotiators Daniel Bahar, deputy assistant U.S. trade representative for Investment, and Michael Tracton, director of the State Department’s Office of Investment Affairs, discussed the current state of the BIT negotiation, how talks are proceeding and next steps in the negotiating process.
Daniel Bahar, far right, deputy assistant U.S. trade representative for Investment, updates members on BIT negotiations
Miami Port Officials Brief Chamber on Panama Canal Expansion AmCham Shanghai hosted Port of Miami Director Bill Johnson and President of the World Trade Center Miami Charlotte Gallogly on January 9 for a briefing on the latest developments of the Panama Canal expansion. Johnson said the Port of Miami has invested US$2 billion with new development expected to be completed on or before the same time as the Panama Canal improvements in 2015. Johnson noted that 20 percent of the Port of Miami’s business is conducted with China or companies based in China – the largest of any single country the Port serves. The Port of Miami has a sister-port relationship with the Port of Shanghai. Johnson added that Miami receives 100 million visitors per year and is the busiest cruise ship port in the world. It is also home to 450 MNCs’ Latin American headquarters, with 55 percent of its container trade going to South America or the Caribbean. Miami is the third largest financial center in the United States, with 70 percent of Miami’s residents being foreign-born and 13 different languages of instruction offered in area schools.
Trade Satisfaction Report Available AmCham Shanghai has released the 2013–2014 AmCham Shanghai Trade Environment Satisfaction Survey report, which focuses on e-clearance customs declaration, trade facilitation considerations, e-commerce, consignment and 2014 expectations. The report is part of the Chamber’s Trade Facilitation Taskforce (formerly Customs Taskforce) initiative, aimed at providing Shanghai Customs and Shanghai Customs Inspection and Quarantine feedback from American businesses on trade-related issues. It is intended to highlight the current issues facing AmCham Shanghai members and indentify specific areas requiring attention relating to customs and import/export policies, inspection and quarantine, bonded logistics and foreign exchange for Shanghai Customs and Shanghai Customs Inspection and Quarantine (CIQ). The 2013–2014 report marks the sixth year of the survey and the Taskforce’s ongoing dialogue with trade-related stakeholders. To download a copy of the report, visit www. amcham-shanghai.org/tss2013.
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Event highlights
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New Communications Director at AmCham Shanghai Michael Cole, a veteran digital content expert, recently joined AmCham Shanghai as Director of Communications and Publications. Before his arrival at the Chamber, Cole served as managing director of RightSite.asia, an online marketplace for industrial real estate that helps bridge the gap between China’s industrial developers and the manufacturers and logistics companies that use their space. Prior to RightSite, the Minnesota native founded China’s first Englishlanguage weekly magazine, 8 Days, and served as general manager of That’s Shanghai. Before coming to China, Cole worked at the U.S. Embassy in Bangkok and managed companies in the Philippines and Vietnam. “I see my new role as the Chamber’s Director of Communications and Publications as a continuation of my career leading media organizations in Asia for more than 20 years,” said Cole. “I look forward to contributing to the Chamber as Director of Communications and Publications, and I’m excited about helping to build our organization.”
Michael Cole is AmCham Shanghai Director of Communications and Publications
SME Center Signs MOA with Nanjing Chamber As part of the mission of the AmCham Shanghai SME Center to promote trade for SMEs throughout China and the U.S., a Memorandum of Agreement (MOA) was signed on January 21 with the Nanjing Chamber of Commerce. The partnership is intended to bring the U.S. and Chinese business communities closer. AmCham Shanghai VP of Programs and Services Scott Williams with Ji Jianjun, vice chair of the Nanjing Chamber of Commerce, show the MOA signed between the two parties
According to the MOA, AmCham Shanghai and the Nanjing Chamber of Commerce agreed to share information on each other’s platforms through banners, newsletters, graphics, and various other promotional materials; engage in collaborative networking events, trade missions and site visits to benefit the member companies of both organizations; and facilitate more business opportunities between the member companies of both organizations. The Nanjing Chamber of Commerce is the oldest and largest Chamber in Nanjing and has over 32,000 members and 389 branches. It is already working with various other countries and plans to further promote its organization by opening various offices within the U.S. and conducting trade missions with its member companies.
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Chamber, Alibaba.com Collaborate for New Online Trade Resource AmCham Shanghai announced a partnership with Alibaba.com (www. alibaba.com), the leading global e-commerce platform for small businesses, to provide Alibaba.com’s tens of millions of registered users with access to market information and business resources from AmCham Shanghai. The two parties signed an official partnership agreement in a ceremony at AmCham Shanghai’s office on Friday, January 24, with the goal of facilitating trade between the U.S. and China, as well as enhancing access to AmCham Shanghai’s information resources for small- and medium-sized businesses that rely on Alibaba.com’s platform.
AmCham Shanghai President Kenneth Jarrett, left, and Vincent Wong, senior director of buyer service & development at Alibaba.com, sign a partnership agreement at AmCham Shanghai’s office on January 24
Under the terms of the agreement, Alibaba.com has created a special section on its website (http://news.alibaba.com/specials/partnerAmChamSH.html?tracelog=AmchamSH-BC) to provide access to resources from AmCham Shanghai, including exclusive market research, white papers and articles from the Chamber’s monthly business magazine Insight. Economic research reports, white papers and trade guides from AmCham Shanghai’s virtual SME Center will also be made available directly to Alibaba.com’s global audience. In return, AmCham Shanghai’s members and qualified subscribers will receive priority access to Alibaba.com programs such as its Verified Member service, and Alibaba.com will leverage its extensive online SME database to help build awareness of AmCham Shanghai’s SME Center (http://sme.amcham-shanghai.org). Presiding at the signing ceremony were AmCham Shanghai President Kenneth Jarrett and Vincent Wong, senior director of buyer service & development at Alibaba.com. Jarrett and Wong were joined by Scott Williams, vice president of programs and services at AmCham Shanghai, Webber Wang, business development manager from Alibaba.com’s international community buyer unit, and Patil Bhushan Arun, director of site operations at Alibaba.com’s global supplier development unit. Commenting on the cooperation with Alibaba.com, Jarrett said: “With this new cooperation we are combining and leveraging the strengths of the respective organizations. Alibaba.com is a powerful engine that can help millions of people gain access to the information and tools available at AmCham Shanghai’s SME Center through this new web resource.” Wong noted that AmCham Shanghai members will receive substantial benefits under the terms of the new agreement. “Alibaba.com is the largest business-to-business e-commerce platform in the world focused on SMEs. We have a strong network around the world, especially in China. AmCham Shanghai members can make use of our platform to obtain information on China and gain a very big market exposure from our platform to get more business opportunities,” Wong said. Williams commented: “The SME Center and Alibaba.com are fueled to efficiently support SME growth and help enterprises succeed in these markets. The Alibaba.com relationship further expands the value of joining AmCham Shanghai and subscribing to the SME Center. We highly value the arrangement with Alibaba.com which supports small- and medium-sized businesses, as well as large organizations looking to streamline right buyer and seller search efforts.”
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Committee highlights
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Healthcare Committee Privatization of Healthcare in the YRD AmCham Shanghai’s Healthcare Committee held a roundtable meeting on January 22 at the AmCham Shanghai Conference Center. Sarah Fox-Shin and Kelley Lawson of the U.S. Consulate General in Shanghai presented findings from their recent market research report, Privatization of Healthcare in Yangtze River Delta: Hospital and Elder Care Submarkets. The report was compiled through interviews of various Chinese officials, hospital and elder care administrators, venture capital fund managers and physicians. The analysis of healthcare trends, opportunities and market challenges in this region are anticipated to benefit the U.S. government and American companies operating in the YRD. Fox-Shin and Lawson shared many nationally known trends in healthcare as compared to the trends in the YRD. This included pointing out national chronic disease statistics, cancer rates and the growing prevalence of dementia patients. Also discussed was the rising influence of the middle-class on China’s healthcare sector. Regarding eldercare, the presenters noted that Shanghai’s vision for elder care consists of a “90-7-3” system whereby 90 percent of care would be home-based, 7 percent in senior day care facilities and only 3 percent in private senior facilities. Major industry challenges for private hospital and eldercare center formation include land availability and use, decentralization of policies and licensing issues, they said.
Sourcing & Procurement Committee Approaches to New Year Production and Labor Strategies AmCham Shanghai’s Sourcing & Procurement Committee along with the Human Resources Committee and Manufacturers’ Business Council, welcomed Anson Tang, Director of Global Sourcing of Cardinal Health, to present on practical Chinese New Year (CNY) production and labor strategies. Tang shared the practices of Cardinal Health to address CNY supplier and production scheduling, managing and forecasting factory labor. Cardinal Health, which manufactures most of their products in China for export to the U.S., has several thousand employees – the majority of whom work in factories. Looking to past experience, Tang noted that companies should always plan several months in advance of CNY and provided information on how companies can work proactively with key suppliers to ensure sufficient inventory during the holiday. Tang also suggested providing incentives to workers, such as bonus payments, and hiring agencies to recruit additional labor.
Anson Tang, director of Global Sourcing of Cardinal Health, presents on Chinese New Year (CNY) production and labor strategies
Attendees shared their practices on mitigating the impact of labor shortages around the CNY holiday. Many raised questions and proposed moving factories to other countries including Mexico, Cambodia, Myanmar and Bangladesh.
For more information on AmCham Shanghai’s 22 industry-specific committees, please contact committees@amcham-shanghai.org.
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Marketing & Media Committee Industry Roundtable on Crisis Management in China AmCham Shanghai’s Marketing & Media Committee on January 16 held a roundtable on crisis management in China featuring Sean Fitzgerald, executive vice president for China and director for Shanghai at Ketchum. Fitzgerald shared Ketchum’s approach to crisis management, namely that issues are not logical, linear or completely predictable. Highlighting the intricate and constantly changing nature of the Chinese media environment, Fitzgerald said that China today has more than 1,918 newspapers, 9,867 magazines and journals, 183 TV stations and 2.94 million websites. Within regional hubs in Beijing, Shanghai and Hong Kong and 600 million Internet users in China today, accounting for 43 percent of the population (spending on average 20 hours a week online), the potential for social media driven scandals is continuing to increase. Within this context, Fitzgerald focused on two growing “-isms” he sees driving many recent challenges for MNCs in China: consumerism and nationalism. Consumerism and a growing media focus on consumer rights centered on the May 15th’s Consumer Day phenomenon, which has close ties to the Chinese Consumer Association that results in investigative exposes and editorialized reports in influential media like Caijing and National Business Daily. Growing nationalism, on display in the shutdown of imported Norwegian salmon owing to a controversial Chinese Nobel Peace Prize and attacks on foreign milk producers following quality scares with Fonterra, have also left some companies skittish, he added.
SME Tax Sub-Committee Members Discuss Rep. Office to WFOE Transfers AmCham Shanghai’s Tax Sub-Committee on January 21 hosted a seminar presented by Timothy Lamb, managing director of JLJ, a sovereign group company, and Taylor Price, general manager of ICON Health & Fitness. The speakers provided a comprehensive introduction and application procedures for how companies can change from a Representative Office (RO) to a Whollyowned Foreign Enterprise (WFOE) in China, as well as the advantages and disadvantages of each structure.
Timothy Lamb, managing director at The JLJ Group, shares insights on representative office to WFOE transfers
Lamb compared the pros and cons between two of the most frequently adopted structures: a parent company overseas with a WFOE established in China, and a parent company overseas with an offshore holding company and a WFOE established in China. Generally speaking, while ROs are easier to establish and operate in some respects, their limitations, including being unable to perform domestic distribution and service activities, make them an unattractive option in many cases. WFOEs normally provide greater flexibility for future operations in many fields such as domestic distribution and import/export rights. Price shared hands-on experience regarding how his company completed the procedures from an RO to a WFOE. He highlighted that it was a complicated and time-consuming process, and patience was needed, especially when unforeseen complications arise.
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EXECUTIVE TRAVELER We asked executives who travel often across different time zones about their favorite and fastest way to recover from jet lag so they’re ready for a business meeting. Here’s what they said. John Carey, Chairman, AIG China Jet Lag Cure: Water and exercise Remarks: “I drink plenty of water and try to exercise when I reach my destination, which is usually riding a stationary bike. Sometimes it works and sometimes it is a struggle. I also try to schedule my most important meetings in the morning, limit the number of dinners if possible and avoid alcohol.” Jerry Palmer, Managing Director – Chemicals Lead, APAC, Accenture Jet Lag Cure: Exercise Remarks: “My hobby is competing in Ironman distance triathlons and I maintain a fairly strict training schedule whether I’m traveling or at home. The schedule itself helps me adjust my mental clock to local time and the fatigue and dehydration can be a good race day simulation, so it’s a bit of an unanticipated benefit from jet lag.”
Wittko Zschacke, Managing Director, QUESTIMPACT Jet Lag Cure: Adequate preparation and a relaxed
mind-set
Remarks: “Frequent travel across different time zones can be draining, but there are a few points I usually like to pay attention to that I find especially effective for reducing or overcoming tiredness and jet lag. I choose overnight flights when it is more quiet, wear a sleeping mask and comfortable clothes, and try to keep a relaxed mind-set to avoid unnecessary stress. (Being able to sit in business or first class, if privileged, certainly helps too.) Also, engaging in sports and regular exercise keeps me on a healthy sleep p atter n w hich helps replenish energy levels quickly.” Sandeep Bahl, Regional General Manager Asia, Air New Zealand Jet Lag Cure: Combination of
actions
Robert L. Youill, Managing Director, Global Risk & Investigations, Asia Pacific, FTI Consulting Jet Lag Cure: Melatonin Remarks: “Over the years I have tried numerous remedies, however I found that taking a good quality melatonin supplement was the best for helping me cope with the dreaded jet lag scourge.”
Linda Du, Managing Director, Shanghai Office, APCO Worldwide Jet Lag Cure: Match sleeping and eating schedule to
the destination while on the plane
Remarks: “Changing your meal times to the destination meal times is especially helpful. I also prefer night flights, because you can sleep and then wake up at the new destination refreshed. If I’m taking a night flight, I always bring a pair of fuzzy socks to keep my feet warm, an eye mask and ear plugs. If I need to stay awake during the flight in order to adjust to the destination time zone, then I always bring a gripping book, like an adventure story or mystery, so I won’t want to stop reading. Movies are also a good way to pass the time and stay awake.”
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Remarks: “If you know in advance your destination, then a good way to cure or prevent jet lag is to adjust your body’s clock to the destination’s time zone, say, a week in advance. On long flights, get ample rest (e.g., by sleeping onboard especially in business class or flat beds), make yourself comfortable and relaxed and avoid alcohol/caffeine. After arriving at your destination, take frequent power naps and/or indulge in outdoor physical activities like walking and stretching.” Chester Yang, CEO China, Bunge Limited Jet Lag Cure: Staying up throughout the flight Remarks: “I am unable to sleep on airplanes for various reasons, and although the first day of meeting(s) may be painful, I have found by staying up throughout the flight to be the quickest and the most efficient way to adapt to the destination time zone. Hitting the gym after the first day of meetings and work also benefits sleep going forward. In addition, the first night of sleep is usually a good one that further helps to acclimate to the new time zone.”