Insight Magazine September 2009 by The American Chamber of Commerce in Shanghai

w w w. a m c h a m - s h a n g h a i . o r g

INSIGHT The Journal of the American Chamber of Commerce in Shanghai September 2009

EXPO 2010

USA Pavilion Update INTERVIEW

Dow CEO Andrew Liveris SNAPSHOT

Green Entrepreneurs

The Era of Greentech Green technology has emerged as the solution to maintaining development while sustaining the environment

INSIGHT September 2009

The Journal of the American Chamber of Commerce in Shanghai

AMCHAM SHANGHAI

David Turchetti DIRECTORS

BUSINESS DEVELOPMENT & MARKETING

Karen Yuen COMMITTEES

Siobhan M. Das David Basmajian

23 It’s Ofﬁcial

By David Basmajian

U.S. Commissioner General to the World Expo 2010 Jose Villarreal shares his vision on the direction of the USA Pavilion and the role the U.S. will play at the Expo.

EVENTS

Jessica Wu FINANCE & ADMINISTRATION

Helen Ren

27 Reviewing the Process ERP SERIES

MEMBERSHIP & CVP

Linda X. Wang

By Tony Cotterell

The ﬁfth and ﬁnal article in Insight’s series on implementing a global enterprise resource planning (ERP) system recaps the entire implementation process.

INSIGHT EDITOR-IN-CHIEF

Justin Chan

EDITORIAL ASSOCIATE

29 Thinking Green

Elaine Wu

SNAPSHOT

COMMUNICATIONS ASSOCIATE

Weina Yang

By Charlene Ruan

A new breed of entrepreneur is ﬂocking to China to start up sustainable businesses. Concerned with both making a proﬁt and aiding the environment, they are looking to make a difference in China.

DESIGN

Alicia Beebe LAYOUT & PRINTING

Ella Shan Snap Printing, Inc.

INSIGHT SPONSORSHIP MARKETING ASSISTANT MANAGER

Sophia Chen

(86-21) 6279-7119 ext. 5667 Story ideas, questions or comments on Insight: Please contact Justin Chan (86-21) 6279-7119 ext. 5668 justin.chan@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.

32 The Era of Greentech COVER STORY

By Katie Howe

The growth of green technologies is seen as a method to enable sustainable development. China is becoming a leader of green technology, and its collaboration with the U.S. will shape the global application of greentech.

I N S I G H T S TA N DA R D S

3 News Briefs

10 Manager's Notebook

13 China’s Automotive Components Sector

52 Deal of the Month

15 New Favorable Visa Regulations ANALYSIS

MARKET PROFILE

China’s automotive parts sector is set to emerge from the global economic downturn even stronger than before.

Shanghai Centre Suite 568 1376 Nanjing West Road Shanghai, 200040 China tel: (86-21) 6279-7119 fax: (86-21) 6279-7643 www.amcham-shanghai.org

By David Basmajian

Andrew N. Liveris, Chairman and CEO of The Dow Chemical Company, sits down with Insight to talk about Dow’s presence in China and their focus on sustainability and corporate social responsibility. EXPO 2010 UPDATE

COMMUNICATIONS & PUBLICATIONS

ISTOCKPHOTO

V I C E P R E S I D E N T, P RO G R A M S

ISTOCKPHOTO

17 The Dow Strategy INTERVEW

U.S. DEPT. OF STATE

F E AT U R E S

DOW CHEMICAL

PRESIDENT

Brenda Foster

Shanghai launches a pilot program that could ease visa requirements for qualiﬁed foreign nationals.

INSIDE AMCHAM

39 From the Chairman: A Call to Action 42 2009 AmCham Shanghai Human Resources Conference and Fair 44 2009 Independence Day Party

46 Events in Review 49 Introducing: David Turchetti, Vice President, Programs 50 Committee Highlights

Special thanks to the 2009-2010 AmCham Shanghai President’s Circle Sponsors

MARCH 2009

INSIGHT

INSIDE INSIGHT

JUSTIN CHAN EDITOR-IN-CHIEF

he Greentech: A Call to Action conference is scheduled for Sept. 7-8. A platform for policymakers, leading technology companies, entrepreneurs, investors and NGOs to collaborate on greentech opportunities in China and the U.S., this groundbreaking conference is built upon market analysis provided by the China Greentech Initiative and its ﬁrst publication, the China Greentech Report. This month’s cover story sets the stage to look at the development of green technologies in China and the opportunities for partnership between China and the U.S. to be frontrunners in the global application of greentech.

China’s push towards environmental conservation has opened the door for entrepreneurs who are combining a commitment to the environment with savvy business ideas. This month’s snapshot looks at the idea of investing in socially responsible businesses and the challenges that come with balancing higher costs in the short term with cost savings over the long term. This issue also features the last installment of our series on enterprise resource planning (ERP). A special thank you goes to Tony Cotterell at Deloitte for giving us such an in-depth look at implementing a global ERP system over ﬁve articles.

Continuing the theme of sustainable development, Dow Chemical recently opened a global business and innovation hub in Shanghai, where it will focus on the research and development of sustainable solutions that can beneﬁt the China market and the Asia-Paciﬁc region as a whole. Insight sat down with Andrew N. Liveris, Dow chairman and CEO, to discuss Dow’s China strategy as well as hot topics such as energy and the U.S.-China relationship.

In July, the United States ﬁnally conﬁrmed participation at next year’s World Expo and construction is now moving fast. The steel structure of the USA Pavilion building has been erected and Insight will be following the progress of the Pavilion closely in the coming months. Turn to our Expo 2010 Update for an interview with U.S. Commissioner General to the World Expo Jose Villarreal.

CHINA BUSINESS

China’s FDI slumps 35.7% Foreign direct investment (FDI) in China fell 35.7% in July from a year earlier to US$5.36 billion, the sharpest reduction in growth in nine months, said the Ministry of Commerce. July’s slump was signiﬁcantly higher than in June, when FDI fell 6.8% to US$8.96 billion. It decreased 17.8% in May to US$6.37 billion and fell 22.5% in April to US$5.89 billion. In July 2008, FDI hit US$6.07 billion, up 44.5% on an annual basis. However, some analysts cautioned against reading too much bad news into the drop, attributing it to a limited phenomenon caused by foreign investors who are holding back because of limited funding or general risk aversion. China’s FDI was still healthy compared with the investment in other countries, said Ministry of Commerce oﬃcials.

Trade between China and Hong Kong drops The trade volume between the Chinese mainland and Hong Kong dropped by 23.6% year-on-year during the ﬁrst seven months of the year, according to the Ministry of Commerce. From January to July, trade volume between China and Hong Kong was US$88.68 billion, and the Chinese mainland approved 5,431 projects funded by Hong Kong businesses during the period, down 31.4% year-on-year. The Chinese mainland received US$22.6 billion of direct investment from Hong Kong in the ﬁrst seven months, down 15.3% year-on-year.

China to launch consumer ﬁnance companies In a move to stimulate consumption, China will set up consumer ﬁnance

THE OFFICIAL WHITE HOUSE PHOTOSTREAM

News

N NE EW WS S B BR R II E EF FS S

First round of China-U.S. Strategic and Economic Dialogue ends The first round of China-U.S. Strategic and Economic Dialogue (S&ED) was held in Washington, D.C. from July 27-28. Co-chaired by Chinese Vice Premier Wang Qishan, Chinese State Councilor Dai Bingguo, U.S. Secretary of State Hillary Clinton, and U.S. Treasury Secretary Timothy Geithner, the two-day dialogue provided an in-depth exchange of views on strategic, long-term and overarching issues concerning the development of bilateral relations. During the S&ED, the U.S. and China reached broad consensus on issues of cooperation in economic, financial and other global issues.The dialogue also addressed shared challenges such as the global financial crisis, regional security concerns, global sustainable development and climate change. U.S. President Barack Obama opened the talks, and welcomed the Chinese envoy in the Oval Office.The second round of the S&ED will be held in Beijing next year. companies in Beijing, Shanghai, Tianjin and Chengdu, announced the China Banking Regulatory Commission (CBRC). These companies are expected to finance purchases of consumer goods with more flexible small loans that require no mortgage and fewer procedures. At the trial stage, the firms are only allowed to provide loans to finance the purchase of durable goods and other consumer

expenditures excluding home and auto purchases, said the CBRC. The amount of each loan offered by a consumer finance company is usually capped under RMB100,000. In comparison to applying for loans at banks, clients of consumer finance companies can expect to receive a loan within an hour after application and services are available after business hours and on weekends.

SEPTEMBER 2009

INSIGHT

CORPORATE NEWS

CCB offers US$70 million for AIG unit China Construction Bank (CCB), the second largest bank in China, announced that it would buy a unit of American International Group, Inc. for US$70 million. In its first overseas acquisition in three years, China Construction Bank (Asia), CCB’s Hong Kong subsidiary, will buy all of AIG Finance (Hong Kong), one of the largest credit card issuers in Hong Kong. After its purchase of AIG Finance, China Construction Bank (Asia) will possess nearly HK$200 billion of business fixed assets in Hong Kong and Macau and have about 2,000 staff.

Air China increases stake in Cathay Pacific China’s flagship airline Air China will buy 491.9 million shares of Hong-Kong based Cathay Pacific Airways for US$817.4 million, increasing its stake in Cathay to nearly 30%. Air China will buy shares at HK$12.88 apiece from CITIC Pacific. The deal will make Air China the Hong Kong carrier’s second largest shareholder after British conglomerate Swire Pacific. Swire will also buy 78.7 million shares of Cathay from CITIC Pacific to increase its stake to 41.97%, while CITIC’s stake in Cathay will fall from 17.5% to just 2%.

China Mobile opens ﬁrst online store In a major move by the world’s largest mobile phone operator to create new areas for revenue and to boost its 3G business, China Mobile launched its online application store in August, the ﬁrst such store to be run by a telecom carrier. The Mobile Market store (www.mmarket.com), considered to be modeled after Apple’s online store, provides a platform where developers can create games and other applications for existing China Mobile subscribers to download. The Mobile Market store is targeting China Mobile’s nearly 500 million users. Developers could get 70% of the revenues from their applications sold through the online store,

INSIGHT

said China Mobile. The applications and services available on the online store will be provided free to users until the end of September.

Citi approved as interbank bond market maker Citibank China has received regulatory approval to act as an interbank bond market maker, where it will be able to broaden its access to RMB ﬁxed income products while also expanding on its commitment to develop innovative products and professional trading practices. Market makers are institutions that agree to act as both a buyer and seller on trades. In 2008, Citi achieved a top ranking for interbank bond market trading volume among foreign banks. “Citi is delighted to be in a position to actively contribute to the market’s continued development,” said Andrew Au, CEO of Citi China. MACROECONOMICS

China’s July retail sales up 15.2% China’s retail sales, considered the main indicator of consumer spending, rose 15.2% in July to RMB993.7 billion from a year earlier, according to the National Bureau of Statistics. The growth rate was 8.1% lower than last July, but 0.2% higher than that of June. In the ﬁrst seven months of this year, China’s retail sales rose 15% to RMB6.86 trillion from the same period a year earlier. In July, urban retail sales were up 5.1% to RMB679.4 billion, while sales in rural areas rose 15.4% to RMB314.3 billion.

China’s fiscal revenue up 10.2% in July China’s July fiscal revenue rose 10.2% yearon-year to RMB669.59 billion, bringing the total fiscal revenue in the first seven months of the year to RMB4.07 trillion. This figure for the first seven months is down 0.5% from a year earlier. China’s fiscal revenue has been on the rebound since May due to an improvement in the nation’s economy, rising business taxes and an increased cigarette tax. Fiscal revenue includes taxes, administrative fees, and other government income such as fines and

SEPTEMBER 2009

income from state-owned assets. China’s ﬁscal expenditure in July rose 9.3% from last year to RMB498.57 billion. Fiscal expenditures in the ﬁrst seven months of the year were up 23.5% to RMB3.39 trillion as a result of spending from the RMB4 trillion stimulus package passed last November.

Double-digit GDP growth in 13 Chinese provinces Thirteen provincial-level regions have reported more than 10% growth in gross domestic product (GDP) year-on-year in the first half of the year, beating analyst predictions, said the Shanghai Securities News. The northern municipality of Tianjin and Inner Mongolia Autonomous Region reported the highest levels of GDP growth, but five other areas including Shanghai and Zhejiang Province failed to reach the national GDP growth level of 7.1% in the first half of the year. China has set a goal of 8% growth for the year. Analysts attributed the growth levels to the country’s massive economic stimulus measures, including expanding investment and record lending. U.S. - CHINA

China cuts holdings of U.S. Treasury bonds China sold off US$25.1 billion worth of U.S. Treasury bills in June to bring its holdings to US$776.4 billion, down from US$801.5 billion in May, the largest selloff in a year, according to the U.S. Treasury Department. Despite the cut, China remains the largest holder of U.S. Treasury bills in the world, followed by Japan and the UK. China had been accumulating U.S. T-bills for 10 consecutive months starting in June 2008 until it cut its holdings for the first time in 11 months in April 2009. Recently, China has shown concerns over the safety of its growing U.S. assets and called for diversification and the possible creation of a new global currency. China’s foreign-exchange reserves increased by 18% year-on-year to US$2.13 trillion at the end of June, making it the country with the highest amount of forex reserves.

SEPTEMBER 2009

INSIGHT

New U.S. Ambassador to China sworn in Former Utah Governor Jon Huntsman was sworn in as the new U.S. Ambassador to China on Aug. 11 in Salt Lake City, Utah, shortly after his resignation as the state’s governor. Huntsman, a moderate Republican, was appointed by President Barack Obama in May and conﬁrmed by the U.S. Senate in early August. Huntsman was elected governor of Utah in 2004 and reelected in 2008. He served as U.S. Ambassador to Singapore during the administration of President George Bush and as Deputy U.S. Trade Representative during the administration of President George W. Bush. Huntsman will be replacing former U.S. Ambassador to China Clark Randt, who resigned on Jan. 20 when the new administration was sworn in.

CIC plans to invest in U.S. mortgages China Investment Corp. (CIC), the country’s US$200 billion sovereign wealth fund, plans to invest up to US$2 billion in U.S. mortgages, eyeing a property market rebound. CIC will invest in U.S. taxpayersubsidized investment funds that will acquire “toxic” mortgage-backed securities from U.S. banks. CIC believes these assets are a safer bet than buying into the U.S. Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF), said CIC sources. CIC’s decision comes after the U.S. and China ended their ﬁrst annual Strategic and Economic Dialogue in July, during which the two countries agreed to lead the global economy out of recession, with China seeking safer investments in the U.S. CHINA OVERSEAS

China increases FDI in Africa by 81% China’s direct investment in Africa rose 81% in the ﬁrst half of the year from the same period last year to US$552 million, according to the Ministry of Commerce. However, trade between China and Africa

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fell 30.5% to US$37.07 billion in the first six months of the year because of the global economic downturn. In the first half of the year, Chinese enterprises signed US$22.5 billion of new labor service contracts in Africa, up 25% year-on-year, and completed US$11.5 billion of business volume, up 61.1% year-on-year. China trades with 53 African countries and has been providing zero-tariff treatment for the poorest African nations since 2005. About 1,000 Chinese companies have been approved or registered to do business in Africa.

Sinopec buys Addax in largest overseas takeover China Petrochemical Corp. (Sinopec Group) has completed its US$7.5 billion acquisition of Geneva-based Addax Petroleum Corp. through its whollyowned Sinopec International Petroleum Exploration and Production Corp. (SIPC). The deal, China’s biggest foreign corporate takeover ever, adds new oil and gas reserves in Nigeria, Gabon and Iraq to Sinopec and will accelerate Sinopec’s international growth strategy and optimize its oﬀshore oil and gas asset portfolio, said Sinopec. Addax has 25 oil and gas blocks, with reserves of 537 million barrels. Average crude oil output is 143,000 barrels a day, and annual oil output is expected to rise from 7 million tons to 10 million tons.

China and Australia sign record energy deal Australia signed a US$41.3 billion deal to supply Chinese energy giant PetroChina with liquefied natural gas (LNG) in the biggest trade deal ever between the two countries. The agreement, also representing the largest foreign investment in Australia, calls for PetroChina to buy 2.25 million tons of natural gas a year over the next two decades from ExxonMobil’s Gorgon gas field. The Gorgon LNG project is located off Western Australia and has a proposed annual output of 15 million tons. Chevron Corp. is the operator of the project with a 50% stake, while Exxon and Royal Dutch Shell Plc each own a 25% stake. The deal with China follows just weeks after Exxon’s

SEPTEMBER 2009

US$8.26 billion Gorgon sales deal with India’s Petronet. GOVERNMENT & POLICY

China to build express railway network Passengers will be able to travel between Beijing and most major cities in China within eight hours by 2012 through a nationwide express railway network, said China’s Ministry of Railways. The network will consist of four north-south and four east-west lines of railways throughout the country, which would connect most major cities in China including Shanghai, Guangzhou, Taiyuan and Nanjing. By 2012, railway passengers departing from Beijing could reach Tianjin within one hour and Guangzhou in seven hours. China plans to invest at least RMB700 billion per year in railway construction over the next three years. A total of 13,000 kilometers of track will be put into operation in 2012. By the end of this year, China will have a total of 86,000 kilometers of rail lines, second only to the U.S.

China ends tax breaks on tobacco advertising A joint circular issued by the Ministry of Finance and the State Administration of Taxation declared an end to tax breaks on advertising, promotional and sponsorship spending for tobacco companies, effective until December 31, 2010. Starting from 2011, a comprehensive ban on all forms of tobacco promotion will be in effect. According to the circular, cosmetic, medical and beverage companies (excluding alcohol producers) can deduct advertising expenses equivalent to 30% of their total sales income. Prior to the law on enterprise income tax that went into effect in January 2008, Chinese firms could claim 2 to 8% of their taxable income. Under the new law, the rate was standardized at 15% for all industries except the tobacco industry. This means that tobacco companies will have to pay more tax and after-tax profits will drop, indicating a tougher government stance on curbing smoking, said analysts.

Construction industry corruption curtailed China has begun a two-year inspection campaign of construction businesses in an attempt to curb serious corruption and malpractice in the industry, said oﬃcials from the Central Commission for Discipline Inspection (CCDI).The campaign would enable regions to improve management and supervision in the construction industry and try to close loopholes that might lead to corrupt deals and abuses of power. By cracking down on monopolization, the CCDI would implement the open and fair competition principle, said oﬃcials. In June, a nearly completed 13-story building in Shanghai collapsed, killing one worker. The incident generated controversy and concern about the quality of construction work nationwide. SHANGHAI BUSINESS

Shanghai’s CPI down nearly 2% Shanghai’s Consumer Price Index (CPI), the main gauge of inﬂation, dropped

1.9% in July from a year earlier, down further from the decrease of 1.5% in June. Meanwhile, fixed-asset investment in the first seven months of the year increased 14.4% on an annual basis, an increase from the growth of 9.6% in the first half of the year, said the Shanghai Statistics Bureau. The monthly year-on-year comparisons of the city’s CPI have been negative for six months in a row. Shanghai’s exports, the hardest hit sector by the global financial crisis, were down 24.1% in July year-onyear to US$12.2 billion, while foreign direct investment in the city fell 34.4% in July from a year earlier to US$1 billion.

Shanghai issues 5-year reform plan for financial firms Shanghai released a five-year plan to reform its local state-owned financial companies into leading nationwide enterprises as part of the city’s efforts to transform into a global financial center by 2020. The reform process will cover 16 local state-owned financial companies with total assets of RMB2.45 trillion. Under the reforms, the Shanghai government will ensure that the financial

institutions under its supervision have ample capital, strict internal risk controls, are strong innovators and are highly eﬃcient. Other measures include reforming recruitment processes and aligning salary packages with market standards.

City prepared to meet GDP goal Shanghai’s economy performed better in the second quarter than it did in the first three months of the year and is poised to meet its goal of 9% GDP growth for the year, said Shanghai Mayor Han Zheng. The city’s GDP rose to 7.9% in the second quarter after only a 3.1% rise in the first three months. Shanghai’s service sector posted 14.2% growth in the first half from a year ago, and the benchmark economic indexes for industrial output and fiscal income have also been revived in recent months, said Han. For the rest of the year, the city will focus on efforts to encourage the development of cutting-edge technologies, cooling its rapidly rising real estate prices, recruiting domestic and overseas business investment, and streamlining government structure and management of Pudong New Area.

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NORTH AMERICA CHINA & THE WORLD AUSTRALIA Australian iron ore mining company Fortescue Metals Group agreed to a reduction in the price of iron ore delivered to Chinese steelmakers effective until the end of the year. The agreement with China’s Baosteel and the China Iron and Steel Association holds them to purchase about 200 million wet metric tons from Fortescue by December 31. Chinese steelmakers will pay US$0.94 per dry metric ton unit (dmtu) for the Australian miner’s Rocket Fines, which is about 3% under the price agreed by other Australian producers with non-Chinese steel mills. INDIA China and India held their 13th Boundary Talks in New Delhi in August. Chinese State Councilor Dai Bingguo and Indian National Security Advisor to the Prime Minister M.K. Narayanan exchanged in-depth views about the further development of the China-India Strategic Cooperative Partnership and pledged to work together to maintain peace in border areas. Both sides emphasized that friendly coexistence, mutual beneﬁcial cooperation and shared progress between the two largest developing nations will contribute not only to the people of both countries but also Asia and the world.

ASIA-PACIFIC

MIDDLE EAST

SOUTH AMERICA

EUROPE

AFRICA

LIBERIA China’s ninth peacekeeping team has been sent to Liberia for an eight-month United Nations peacekeeping operation. The 275-member team is made up of transportation troops, engineers and medical staff. China joined the peacekeeping mission in Liberia in December 2003 under a UN Security Council resolution. A total of 4,464 Chinese peacekeepers have been sent to Liberia so far on rotation, with each mission lasting eight months. KENYA The Kenyan government appealed to the Chinese government to assist in the construction of dams in harsh climate areas. Kenyan Vice President Kalonzo Musyoka met with new Chinese Ambassador to Kenya Deng Hongbo and further urged China to help Kenya in the ﬁeld of infrastructure and energy generation. Musyoka said that it was only through the development of agriculture that poverty and hunger could be contained. Kenya also pledged to continue to cooperate with China to improve bilateral trade.

ASIA-PACIFIC

MIDDLE EAST

NORTH AMERICA MIDDLE EAST

EUROPE

SERBIA Serbian President Boris Tadic completed a week-long state visit to Beijing, the first official visit by a Serbian head of state since the country announced its independence in 2006. Tadic met with Chinese leaders including President Hu Jintao, Premier Wen Jiabao and top legislator Wu Bangguo. Tadic also attended investment forums in both Beijing and Shanghai in a bid to boost economic and trade ties between Serbia and China. Trade between the two countries reached US$125 million in the first five months of this year, down 33.1% year-on-year as a result of the global economic downturn.

AFRICA

JORDAN The Prime Minister of Jordan Nader al-Dahabi announced that Jordan would cooperate with China to resume the stalled Palestinian-Israeli peace talks. Jordan hoped to work together with China to achieve lasting peace in the Middle East and greatly appreciated China’s contributions to the peace process, said al-Dahabi to Chinese Foreign Minister Yang Jiechi during Yang’s recent visit to Jordan. Yang said that China was ready to enhance political mutual trust, expand cooperation and boost multilateral coordination with Jordan.

NORTH AMERICA

SOUTH AMERICA AFRICA MIDDLE EAST

UNITED STATES China is preparing to ofﬁcially appeal a recent World Trade Organization ruling in August that found China had violated international rules by limiting imports of U.S. books, movies and music, said the Ministry of Commerce. The WTO called on China to come into compliance with its obligations to allow U.S. companies to import copyright-intensive products into China and to eliminate discriminatory requirements faced by imported products and their U.S. distributors in China.

AFRICA ASIA-PACIFIC NORTH AMERICA

BRAZIL China and Brazil recently marked the 35th anniversary of the establishment of diplomatic ties between the two countries. Chinese President Hu Jintao and Brazilian President Luiz Inacio Lula da Silva exchanged congratulatory messages and pledged to enhance bilateral cooperation. President Hu said that China was willing to work with Brazil to further their strategic partnership and to open a brighter future for diplomatic ties between the two countries. President Lula reiterated that deepening the cooperation between Brazil and China would further beneﬁt the two countries’ economic growth. ARGENTINA Argentine Vice Commercial Policy and Management Minister Eduardo Bianchi stressed the importance of trade with China and expressed hope for an increase of industrial exports to China during a recent meeting with Chinese Vice Commerce Minister Zhong Shan. During the meeting, both sides signed commercial agreements worth US$118.5 million. Trade between Argentina and China grew an average of 34% between 2003 and 2008 annually, reaching US$13.5 billion last year. Argentina is aiming to increase exports, especially of industrial products, to China.

SOUTH AMERICA

SOUTHAMERICA AMERICA NORTH EUROPE

ASIA-PACIFIC 8

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SEPTEMBER 2009

SOUTH AMERICA ASIA-PACIFIC

SEPTEMBER 2009

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M A N A G E R ’ S N OT E B O O K

“Oh no! Not another brainstorming sion!”

rainstorming is often seen as the panacea for bosses looking for creative solutions or team involvement during the thinking process. That’s when the dreaded words are heard: “let’s brainstorm this issue.” What usually happens is the team gets stuck swirling around the same weatherbeaten ideas, the same people are the only ones contributing (or not contributing), and the boss gets upset because no one took ownership of the problem. Despite this rather gloomy picture, brainstorming is a very useful and relevant business tool today, especially when two myth-busting truths are revealed first. Myth 1: Brainstorming is the best way to involve everyone in the solution-finding process. The truth: This is true only when the boss understands and respects the unique personalities of his team, and uses different ways to encourage participation. In any meeting, the different personality characteristics of the team will be evident and some will always speak up and some will not. It is the silent group that should be of more concern to the boss. These people are usually reflective and reticent and need time to understand the issue, have a gut feel or look for specific evidence, engage in a private decision-making process, and only respond when they feel comfortable.

Jeff Tan is owner and chief trainer of REV Tra ining and Coaching. He can be contac ted at jeff@revtc .com or www.revtc .com.

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The solution: The onus is on the boss to understand how each team member will respond when put in a room full of very different personalities. Instead of saying that everyone should be open and responsive, far better results are reached when the team is encouraged to respond in a way that is aligned with ability and preference. If the quiet achievers need personal time and space, then so be it. If the spontaneous ones dominate the session, then so be it. It is more important to engage everyone in a way that matches and respects their personality types. Bottom line for the boss: Discover each team member’s personality preferences. New truth 1: Brainstorming is the best way to involve everyone in the solution-finding process and everyone responds differently in such a setting. Some come up with an idea a minute, others need the time and space to reflect and respond later, perhaps in private and with a written summary. Myth 2: Brainstorming will always provide creative and “out of the box” solutions. The truth: This only happens with good framing and formulating of the issue. Avoid framing the issue with typical questions like, “how do we generate more sales?” or “how do we win this contract?” or “how will this help us?” One of the worst questions that can be asked is “what are we looking for today?” Such death knell questions only give rise to conventional, boring and predictable solutions. Creative, useful and innovative solutions are reached when brainstorming sessions start with unusually framed questions such as: • What if our main customer walked out on us? What would we do to win him back? • If we could start our business again, what

SEPTEMBER 2009

would we do differently with the benefit of hindsight? • What would Steve Jobs (or someone related to the industry) do if he were here? The solution: Go crazy and release the creative juices. As we all know, using creativity to approach a challenge from a completely different perspective can result in unexpected solutions. Bonus creative solution: For even more creative brainstorming, hold a short prebrainstorming session a week before the actual one. During this pre-brainstorm, frame the challenge or issue with as many questions as possible. Formulate and re-formulate the issue, and then re-formulate again and again and again. No solutions are allowed at this point. Stop and do nothing during the week and new ideas, new perspectives and new solutions will slowly bubble up from the unconscious mind. During traditional brainstorming, it is the conscious mind that does all the work and only answers that we already know spring up. Creativity, a product of our imagination, comes from the unconscious mind and the pre-brainstorm brings out the best from our unconscious mind. Bottom line for the boss: To get unconventional and better results, do something different by asking very different brainstorming questions. Myth-busting truth 2: Brainstorming will always provide creative and “out of the box” solutions when used with different and unusually framed questions, giving time for the unconscious mind to work its magic. Brainstorming is about action, and instead of reading and nodding in agreement with this article, remember the wise words of Friedrich Engels, who once said, “An ounce of action is worth a ton of theory.” Got an article idea for “Manager’s Notebook”? Contact Insight Editor-in-Chief Justin Chan at justin.chan@amcham-shanghai.org.

A N A LY S I S

BY RON CAI, ERICA LI AND KEVIN MOORE

New Favorable Visa Regulations

Qualifying designations Foreign nationals who have been recognized as Honorary Citizens of Shanghai may apply for ﬁve-year residence permits. Likewise, foreigners

who have been conferred a Magnolia Award by the city government may apply for five-year residence permits. This policy exclusively targets foreign nationals who have contributed significantly to Shanghai’s economic and social development. Foreign academic leaders employed by national, ministerial or Shanghai city-level research institutes or universities may apply for residence permits with validity of between three and five years. In the past, permits for such individuals were only available with four years’ validity. Foreign legal representatives, general managers, deputy general managers and finance directors in high-tech companies, foreign-invested companies that utilize advanced technology or those that export products may apply for residence permits with validity of between three and five years. Previously, such professionals could only apply for permits with one to two years’ validity. Foreign legal representatives, senior managers and scientific research personnel at multinational companies’ local headquarters, R&D centers or investment companies may apply for residence permits with validity of between three and five years. In the past, such professionals could only apply for permits with one to three years’ validity. Foreign legal representatives, general managers, deputy general managers, finance directors, senior managers and individual investors in enterprises (foreign or domestic) with registered capital of more than US$3 million may apply for residence permits with validity of between three and five years. Previously, permits were only available to foreign professionals of enterprises with registered capital of more than US$30 million. If a foreign national is qualified under any of the above categories but does not need to work or reside in Shanghai long-term, and he is also qualified for an F visa, he may apply for a multiple-entry F visa with validity of two to five years. Normally, if a foreign national is qualified for an F visa, he may only apply for a one-year, multiple-entry F visa.

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s China competes to attract fresh foreign investment, Shanghai launched a pilot program in July that could ease visa requirements for some foreign nationals. Under the program, qualified foreign executives and professionals whose employers are invested or registered in the city’s Pudong District will be able to receive residence and work permits with validity of up to five years, along with their dependants. Residence applicability and duration depend upon the status of a foreign executive or professional’s employer and the long-term need to reside in Shanghai. Like a visa, the Shanghai residence permit is valid for entry and exit purposes and travel in China. In addition, an “F” visa (business visitor visa) of extended length is available for those who do not need to reside in Shanghai long-term. “Highly qualified foreign talents, special talents and renowned individuals” may apply for residence permits with validity of between three and five years. The Shanghai Municipal Government’s Foreign Affairs Office is drafting detailed guidelines on who can qualify. Similarly, favorable measures are available for foreign academic leaders, high-tech foreign professionals, and foreign professionals at multinational regional headquarters, research and development (R&D) centers and investment companies. Foreign executives and professionals of enterprises with registered capital exceeding US$3 million also qualify. There is a possibility that these measures could be extended beyond Pudong to the entire city of Shanghai by 2010. Separately, authorities have also announced a special policy to facilitate the entry of expatriates seeking employment related to World Expo 2010.

Shanghai launches a pilot visa program that eases visa requirements for qualiﬁed expats.

Online application for extension It is also now possible to apply online for an extension of a residence permit. After online filing is accepted, the applicant can check his approval status. Notice of approval is posted online and the applicant or a designated representative may visit the Shanghai Exit-Entry Administration to have the new residence permit affixed to his passport after the specified date.

Policy on Expo-related employment Separately, as World Expo 2010 approaches, Shanghai’s authorities have announced a special policy to assist expatriates seeking Expo-related employment. A new Expo 2010-speciﬁc registration form will be used for foreign employees. The form and a regular work visa/permit application will need to be endorsed and stamped

by the Bureau of the Shanghai World Expo Coordination (BSWEC). As such, work visa applications can be simpliﬁed into two applications: a work permit application and a residence permit application. (Regular work visas involve four applications.) That means expatriates who are endorsed and receive a stamp from BSWEC can enter China on a business or tourist visa and they will not need to exit the country to obtain a work visa. While in China, they can then directly apply for a work permit or residence permit in Shanghai without exiting China to convert the visa status. Detailed rules and regulations are expected in the near future. Ron Cai is partner-in-charge and chief representative of Davis Wright Tremaine LLP, Shanghai. Erica Li is a legal translator and Kevin Moore is a legal intern at Davis Wright Tremaine.

Nestled within a 588,500sq.m landscape of lush greeneries and a stunning central lake, Shanghai Pudong Software Park (SPSP) is in the forefront of the newly touted Silicon Valley of Shanghai situated within a 5-minute stroll from Metro Line 2. SPSP is well recognized as the national software industry base, as well as the nation’s premier software outsourcing base. Equipped with affluent IT talent pool and IT training classes, it is no surprise that many renowned global IT companies are already calling the prestigious SPSP their home. Furthermore, SPSP offers an extensive range of offices, conference centers and hotels for your business requirements. It also offers a diverse collection of modern residential spaces, restaurants, cafes and sports facilities.

LEASING HOTLINE

86-21-61821816 Email: info@spsp.com.cn www.spsp.com.cn

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Come and embrace the holistic vision of Work, Live and Play that will appeal to both your talented employees as well as raising the profile of your Corporation among your peers and competitors.

MARKET PROFILE ISTOCKPHOTO

China’s Automotive Components Sector

he global automotive industry is experiencing one of the toughest periods in its history, and China has not been spared in the fallout. The government’s measures to stimulate the industry, however, are already having an eﬀect and should allow the country’s automotive parts sector in particular to emerge from the global economic crisis stronger than before. In January 2009, China became the world’s biggest auto market by volume for the ﬁrst time. However, this rise to the top came in the midst of a global slump. China’s total vehicle sales for the month, 735,500 units, actually fell by 14 percent year-onyear; while those of the United States dropped by an even more dramatic 37 percent, to 657,000 units. At the time, it seemed likely that China’s rise to the number one position would be short-lived, with the U.S. regaining its leadership at some point during the year. However, as the months have passed, such an outcome has started to look less likely. In the U.S., vehicle demand has remained extremely weak, but in China, a major stimulus program aimed at supporting the automotive sector has the government talking of growth averaging 10 percent a year for the next three years.

Even if it only manages half this rate of growth, China is set to be one of the main engines of automotive growth worldwide. Given prior heavy investment in factories and assembly lines, the 2008 drop in automobile output growth to 5.2 percent, compared to more than 20 percent per year in the preceding six years, was an unexpected shock.

The components sector For China’s auto parts industry, the coming years are likely to prove even more significant. Despite the breakneck growth of China’s automotive industry in the last 15 years, the country’s parts sector remains relatively small. Although China now produces around oneseventh of the world’s vehicles – with its passenger car production ranking second only to Japan and its commercial vehicle output second only to the U.S. – by value, its parts sector equals just one-fifth of the U.S. total and one-twentieth of the global total. This low share reflects the fact that while China has established itself as a global automotive giant in terms of output by unit, many of the goods produced by its parts industry are at a relatively low

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Government efforts to stimulate the auto sector should allow it to emerge stronger from the global economic crisis. Market Proﬁle provided by

Andrew Thomson Partner, Deputy Chief Operation Ofﬁcer KPMG Asia Paciﬁc Co-Head of Automotive, China (86 21) 2212-2877 andrew.thomson@kpmg.com.cn

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As foreign companies come to China, Chinese companies are looking to extend their reach internationally, particularly through acquisitions.”

position on the value chain. Consequently, there are still opportunities for joint-venture car makers to increase the proportion of their components coming from Chinese sources, which in turn increases the incentives for international component makers to relocate production to China. Honda, for example, increased the local content of its Jazz, produced in Guangzhou for export, from 60 percent to 90 percent in the second half of 2008. Honda is not alone and over the next few years, components production will continue to migrate to China. Some analysts expect the industry to reach about US$350 billion in value by 2015, with 30 percent of parts being exported, up from 25 percent. Difficult times for the automotive industry in the U.S., Europe and elsewhere may accelerate this change in the manufacturing footprint of global auto parts makers. As foreign companies come to China, Chinese companies are looking to extend their reach internationally, particularly through acquisitions. In recent years, Hangzhou-based Wanxiang Group has been China’s biggest purchaser of overseas component companies, acquiring more than 30 companies in North America, Europe and Australia. In April 2009, U.S. parts maker Delphi confirmed the sale of its brake and suspension divisions to BeijingWest Industries for US$100 million. The previous month, Geely Auto acquired Australian transmission maker Drivetrain Systems International (DSI), a supplier to Ford, Chrysler and Ssangyong. With many entities facing financial distress, more such purchases can be expected.

Domestic challenges For Chinese companies, the biggest challenges remain how to increase product standards to extend their reach into new markets both at home and overseas, and to increase returns on the products they make, the vast majority of which are lowerend, commoditized parts. While it is likely that some Chinese companies will look to take advantage of the problems in the global auto industry by buying up companies overseas, a lot will depend on how willing the

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Chinese government is to oversee a consolidation of what is still a highly fragmented sector, ﬁlled with at least 20,000 smaller businesses. In the short term, the signs are that the government prefers to support the sector rather than run the risk of seeing a large number of companies be forced to merge or close, though this could change once demand for vehicles picks up again. The combination of fast growth, fragmentation and a high reliance on foreign companies underlines just how early a stage the Chinese auto components industry is still at – despite the huge volume of vehicles ﬂowing from its production lines. The growth has also served to mask some of the industry’s shortcomings, in particular the low-end, commoditized nature of most domestic products, the lack of scale created by fragmentation, and low amounts of spending on research. Consequently, margins remain low, although they have improved to the point where they now outstrip those of vehicle makers. Moreover, after peaking in 2003 at nearly 10 percent, margins have since fallen back, and will inevitably remain under pressure due to falling demand through 2009, especially for exports.

Future outlook While the outlook for China’s automotive industry has weakened over the past 12 months, there are signs that growth could recover strongly over the remainder of 2009 in the components sector, particularly the vehicle assembly segment, which is set to fare better than the industry as a whole. Supporting this segment are three trends. Firstly, continuing growth in demand for vehicles, especially passenger cars, is likely to accelerate again, helped in large part by the government’s stimulus plan. Secondly, the migration of production to China to supply both the domestic market and other markets around the world will likely continue. Thirdly, investments in components facilities will continue to grow due to the fact that past investments have lagged behind those in the assembly segment. Until recently, it had looked as if consolidation would be a slow process, possibly delayed for at least half a decade. While government support for

the industry may delay consolidation in the short term, it remains possible that it could happen sooner than previously envisioned, particularly if the effects of the government’s stimulus plan are short-lived. In such a market, companies with cash or access to ﬁnancing should be in a strong position to buy up competitors. However, even those with large cash reserves will be under strong pressure to make savings wherever they can. Prices, particularly for steel and other raw materials, have dropped sharply, but wage inﬂation is unlikely to decrease, particularly for engineers, technicians and managers. Still, consolidation may not necessarily help the domestic industry confront its biggest challenge – raising technical levels and encouraging further innovation. Both call for investment at a time when companies will be focusing more on cash management and other short term issues. The government announced in March that it would

be spending RMB10 billion on research subsidies as part of its stimulus measures to support the automotive industry. The government sees the automotive sector as one of its economic pillars and is striving to build a globally competitive industry by trying to balance diverse elements: environmental impacts with the need for reform, the security of its oil supply, and the support it gives to domestic producers. Further restructuring is needed to reduce the number of companies and take full advantage of the economies of scale offered within China’s domestic market, and technical standards and investment in research and development will also have to rise. Change is sure to come to the industry during 2009 and the years ahead. This article is adapted from a July 2009 KPMG study entitled Momentum: China’s automotive components sector emerging from the crisis.

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Even those with large cash reserves will be under strong pressure to make savings wherever they can.”

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I N T E RV I E W

B Y DAV I D B A S M A J I A N

DOW CHEMICAL

The Dow Strategy

he Dow Chemical Company is a diversified chemical company that delivers a broad range of products and services to customers in 160 countries, combining science and technology with the principals of sustainability to provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products. Having first entered China as early as the 1930s, today Dow operates five business centers and 10 manufacturing sites across Greater China with 2,000 employees. With 2008 revenues of US$3.3 billion in China, China has become Dow’s third largest market in terms of sales, after the U.S. and Germany. As a globally respected leader in sustainability, Dow has been an active contributor to sustainable development in China by pushing for high

standards in health, safety and environmental protection, as well as providing sustainable and innovative products. Dow is also committed to corporate social responsibility in China. The company contributed significantly to relief efforts following the Sichuan earthquake in 2008 and has partnered with various nonprofit organizations to start programs focused environmental sustainability. Recently, Insight sat down with Andrew N. Liveris, chairman and CEO of Dow Chemical, to talk about its new research center in Shanghai, the company’s position and future in China, and its commitment to sustainability and corporate citizenship. Liveris has spent most of his 32-year Dow career in Asia, where he was previously general manager of the company’s operations in Thailand and later head of Asia-Pacific operations. He has been a member of Dow’s Board of Directors

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Insight talks

to Andrew N. Liveris, Chairman and CEO of The Dow Chemical Company.

“

Our objective is to address world challenges and is based on the belief that we as a company should be part of the solution, not the problem.”

since 2004 and was elected as Chairman of the Board in 2006. What is the Dow Center and what does it mean for Dow’s China strategy? Andrew Liveris: Innovation and creativity is all about human interactions. This is evident throughout the Center but probably the landmark piece that best speaks to the importance of human interactions is the Customer Innovation Center in the Research and Development Center which is where customers and Dow scientists talk about issues and problems and then brainstorm answers. At Dow, we have set sustainability goals for ourselves to be met by 2015. Our objective is to address world challenges and is based on the belief that we as a company should be part of the solution, not the problem. So as a consequence of that we spent an awful lot of time on what sort of challenges we should take on. We decided we wanted innovative breakthroughs in things like clean water, affordable housing, medicines for humankind and alternative energy. The Dow Center brings together human architecture and human creativity under one roof which is unique and futuristic. This is the way science will be created moving forward. Is the Shanghai Dow Center a good example of the direction Dow Chemical is headed? AL: Absolutely. I’ve often thought of Dow as a company that reinvents itself over generations. In the 1960s we were the Google of the chemical industry. We were the creative chemical engineers and scientists that created many unique and modern attributes for humankind. At that time plastics were a huge breakthrough. This era is about creating sustainable solutions so our fragile planet can support humankind’s expansion. Here in China, with its rapid urbanization, the great demographic changes taking place, and where the youth of China have different expectations and consumption habits, it is that takeoff time again. China should be part of the solution, not the problem. It should not take the

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West and incrementalize; it took us decades to get to this point. China should look at where we are and where we can be, and jump over. The Shanghai Dow Center is an innovative grouping of marketing, business, R&D, IT and other functions with the customer at the center of it. Dow Chemical moved its Asia-Pacific headquarters to Shanghai in 2004. Why did you choose Shanghai for Dow’s Asia-Pacific headquarters and for a Dow Center? AL: By the time I was named president of Asia Pacific, my predecessor to that job had already been working to determine the “center of gravity” in Asia. There was some thought to establishing a headquarters in Malaysia or Thailand. When I first came on board in the mid-90s in Hong Kong, it became clear the “center of gravity” wouldn’t be down there, it would be up in China. But China’s open policy was still in its very early stages. In the ‘80s and ‘90s they were still trying to find their way, they were still protecting industries and trade. It wasn’t until I got the Dow Chemical CEO job about five years ago that I sent Jim McIlvenny, the current senior vice president of emerging economies, out here and told him to move us from Hong Kong to where the market was going be made. We wanted to be a market maker. China was just at the point of trying to discover how it would “make the market”: what would a Chinese automobile market look like; what would a Chinese consumer buy; what would a Chinese housing development look like? Shanghai was chosen because of what I would consider the entrepreneurial “DNA” of Shanghai. The Chinese have always been entrepreneurial but Shanghai has always been at the center of it. As an innovation-driven company, how has Dow dealt with IPR challenges in China? Do you think there has been any progress on protection and enforcement? AL: It isn’t where it needs to be but China is definitely making progress. For Dow, it took us

DOW CHEMICAL

about five years to finally come to the conclusion that IPR is a reason not to do something, but it’s not a knock-out punch. We would suffer the consequences if we lost some of our IP, but at the end of the day we determined that the risk of not bringing our IP to China was greater than not coming. We had a lot of Dow scientists who were very nervous, but that is what I would call legacy thinking. I had to make a decision. I brought my board out here in 2006 and put them in front of a lot of people who had been doing business here for a long time and we saw the negative of the IP issue but we also saw the positives of being here. The evolution will be quite dramatic. The Chinese are beginning to invent things themselves and IP protection will improve as you get more Chinese patents in research. So yes, it’s a barrier. As chairman of the U.S.China Business Council, this is one of the things our members raise all the time. Copyright infringement has come a long way from simply copying video tapes. For basic research, whether you’re a pharmaceutical or a chemical company, you must be vigilant. Human resources, including attracting and retaining talent, is another issue for companies in China. How has Dow Chemical addressed that challenge? AL: Our human infrastructure is one way we guard against IP infringement. We train our people and we have very low turnover rates. One thing we have learned from our many decades of operating overseas is that when you come into a new country, you immediately focus on HR. You put in place the practices, the training, the teaching of ethics and you screen people out pretty quickly. So when people join us they don’t often leave us. Our turnover rate is 1-2 percent because we concentrate on creating a good work environment. I’ve been here 35 years; I only planned on staying five. When I became CEO, I rebranded the company. When we brought in the advertising agencies, they told us that Dow Chemical does human talent recruiting and retention better than anyone they’d

The Shanghai Dow Center In June 2009, the new Dow Center opened in the Zhangjiang High-Tech Park in Shanghai. The Center, which houses 1,800 employees, is comprised of a state-of-the-art research and development facility, a global information technology center, as well as administrative and support facilities. The R&D facility will include over 60 laboratories dedicated to developing innovative solutions for a wide range of industries including building and construction, automotive, human health, and personal care. The Center aims to be the business and innovation hub for Dow in Asia Pacific and is a key investment for Dow’s long-term growth and commitment to China. The Center in Shanghai is focused on realizing energy efficiency with scientific innovation and sustainable operating principles. The entire site is designed with sustainable concepts, using materials and mechanical systems that meet the standards of energy efficiency, environmental sustainability and social responsibility. For instance, the entire Center is wheelchair accessible. Rainwater is reused for irrigation and in restrooms, and low-flow water fixtures are selected to reduce water use. Other Dow materials and technologies are also widely used in building construction.

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IMAGINECHINA

HIGH-TECH HUB: Dow's Research and Development Center in Shanghai's Zhangjiang High-tech Park was opened in June 2009.

ever seen, which is where the “Human Element” campaign came from. What we know about ourselves is that Dow is a company that invests in people – that is the way we do things. Here in Shanghai, 95 percent of our employees are Chinese. We’re very good at the human systems. How does corporate social responsibility factor into Dow’s strategy in China? AL: It is absolutely central. Sustainability is an innovation driver for all of our businesses and it is one of our business screens. Many of Dow’s current projects have a sustainability theme, such as clean water and alternative energy. The Dow of tomorrow will be geared towards an outsidein, market driven approach to solving challenges. We’ll focus on solving problems that have to do with protecting the planet. Earlier this spring, the Obama administration proposed a number of international tax reforms including a limit on the ability to defer proﬁts from foreign subsidiaries and changes in the way foreign taxes paid by U.S. companies are recognized. What are your thoughts on how these changes could impact competitiveness abroad? AL: The elimination of the beneﬁt is understandable considering what the administration is trying to do. However, keep in mind that 40 percent of Dow is based in the U.S., while 60 percent is located outside the U.S. It will force us to do one of two things: bring Dow Chemical 100 percent inside the U.S. or force us to relocate outside the U.S.

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Dow would not be the company it is and would not be able to benefit the U.S. economy the way it does without the benefits of managing itself internationally. So it’s becoming restrictive. We’re working very hard with the Obama administration. Of all the policies they have introduced, this is one I think they have not done good work on to understand the direct effect on U.S. jobs. In the administration’s defense, they have inherited more problems than any other administration in recent history. You’ve got to say that government intervention right now is necessary. The private sector has to work with the Obama administration, whether it’s on the tax program or whether it’s on climate change. These dialogues are ones that we as a company have to be a part of. We won’t like all the things we get but we might like some other things. That’s the way we’re approaching it. We have a seat at the table, and hopefully we’ll be able to help find the right policy. You are active in the energy debate and you have said that the U.S. needs a comprehensive energy policy. Do you believe that China has a comprehensive energy policy and if so, what do you think of it? AL: An economy like China’s has the advantage of making corporate-like business decisions, and they have done that. I think China has a more comprehensive energy policy than the U.S. does mostly because it addresses its need for fossil fuels. For anyone to think that we can do without fossil fuels is ludicrous. It doesn’t have anything to do with an oil lobby; I’m not in oil, I’m just letting people know that we have to manage our fossil fuels. China is addressing some very key parts of the equation: how to manage its fossil fuels, how to develop coal, how to use nuclear energy. These are all very important parts of a comprehensive energy policy. They are also working to manage themselves more efficiently on the consumption end. China has yet to focus on the emission side of the equation but it is now beginning to and efficiency will help on that.

How should the West engage China, and what are your thoughts on the Obama administration’s China policy so far? AL: I really like the fact that they have broken the Strategic Economic Dialogue (SED) into a Strategic and Economic Dialogue (S&ED). I think the twin approach will work very well. It is going to set the agenda around tangibles rather than start at the 30,000 foot level. I think the SED was a great initiative to start under [then Treasury Secretary] Paulson but now the Obama administration is very agenda oriented. The focus for Dow is energy eﬃciency and environmental sustainability, so these are dialogues we can be a part of. Tangible interactions between these two massive economies are hugely important. Of course you have geopolitical cooperation and that’s one dimension, but some of the best

geopolitical cooperation comes because your economies are interwoven and you have mutual interdependency. There is no question this ﬁnancial crisis has rocked everyone, including China. For Secretary Geithner to assure the Chinese that their money is safe in the safest of countries may seem a little idiosyncratic, but it’s very important because the Chinese were quite worried about their hardearned money sitting in bonds. So taking this mutually interwoven trust down to ground level and putting an agenda together will help these two economic giants understand each other better.

David Basmajian is Director of Communications & Publications at AmCham Shanghai. He can be contacted at david.basmajian@amcham-shanghai.org.

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Sustainability is an innovation driver for all our businesses and it is one of our business screens.”

As No. 8 worldwide (MBA ranking by Financial Times 2009) and No.1 in Asia for six consecutive years, the China Europe International Business School (CEIBS) would like to invite you to attend the two prestigious events during our 15th Anniversary celebration.

Day I: The 2nd Annual Global Management Forum 2009 Invited Speakers Chen Deming Liu He Wu Jinglian Li Yang Yu Yongding Li Daokui

Liu Chuanzhi Jack Ma Yu Yu Wu Xiaobo A. Michael Spence

John Quelch Gerard J. Kleisterlee Cynthia Muller

Minister of Commerce of PRC Vice Minister of the Office for China's Central Leading Group on Finance and Economy Work Baosteel Chair Professor of Economics of CEIBS Senior Research Fellow of the Development Research Centre of the State Council of PRC Director of the Institute of Finance & Banking, Chinese Academy of Social Sciences Academician of the Chinese Academy of Social Sciences Mansfield Freeman Professor of Economics and Director of Finance Department, School of Economics and Management of Tsinghua University Director of Centre for China in the World Economy, Tsinghua University Founder and Chairman of Lenovo Group Chairman and CEO of Alibaba Group Co-President of Dangdang.com Renowned Financial Writer, Blue Lion Financial Books Publisher 2001 Nobel Laureate in Economics Chairman of the Commission on Growth and Development Professor of Economics and Former Dean of the Stanford Graduate School of Business Lincoln Filene Professor of Business Administration of Harvard Business School La Caixa Visiting Professor of International Management & Chairman of the Academic Advisory Council of CEIBS President & Chief Executive Office of Royal Philips Electronics Private Wealth Manager of Morgan Stanley London

Day II: The First Annual China Innovation & Entrepreneurship Forum 2009 Invited Speakers Huang Mengfu Zhang Ruimin Shi Yuzhu Hugo Shong Rong Xiuli Cai Dabiao Niu Wenwen Liu Xiaolong Zhang Jie Roman Shaw Shane Tedjarati Marc Chapman Alberto Forchielli Pedro Nueno Kwaku Atuahene-Gima

Vice Chairman of the National Committee of the Chinese People's Political Consultative Conference Chairman of All-China Federation of Industry and Commerce Chairman and Chief Executive Ofﬁcer of Haier Group Chairman and CEO of Giant Interactive Group Inc. Executive Vice President of International Data Group Inc. President of International Data Group Asia and China General Manager of Beijing Tianyu Communication Equipment Co., Ltd. Chairman and President of KUNGFU Catering Management Co., Ltd. President and Editor-in-Chief of The Founder Deputy Director of the Management Committee of Shanghai Zhangjiang Hi-tech Park President of Shanghai Zhangjiang ( Group ) Co., Ltd. Senior Vice President of Microport Medical ( Shanghai ) Co., Ltd. Managing Partner of DT Capital Chief Executive Ofﬁcer of Honeywell China and India General Manager of IBM Global Business Service, Greater China Group Managing Partner of Mandarin Capital Executive President and Chengwei Ventures Chair Professor of Entrepreneurship, CEIBS Professor of Marketing and Innovation Management, Department Chair (Marketing) and Director of Marketing and Innovation Centre, CEIBS

October 31st ~ November 1st, 2009 (Saturday ~ Sunday) China Europe International Business School (699 Hongfeng Road,Pudong,Shanghai,PRC) Tel: 86-21-28905260 28905504 Website: www.ceibs.edu/IEforum S E P T E M B E R 2www.ceibs.edu/gmforum 009 Date: Address:

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IMAGINECHINA

It’s Ofﬁcial

he month of July was an extremely productive month for the USA Pavilion team. On July 1, Jose H. Villarreal was appointed U.S. Commissioner General to the World Expo 2010 by Secretary of State Hillary Clinton. On July 10, Commissioner General Villarreal ended months of speculation that the U.S. might not participate when he signed the oﬃcial World Expo Shanghai 2010 Participation Agreement at the Shanghai Expo Bureau. On July 17, the USA Pavilion team held a formal groundbreaking ceremony at the Pavilion site in Pudong. Joining Commissioner General Villarreal and other members of the USA Pavilion team at the ceremony were U.S. Commerce Secretary Gary Locke, Chinese Vice Minister of Commerce Ma Xiuhong, Shanghai Vice Mayor Yang Xiong, U.S. Consul General Beatrice Camp, and Deputy Chief of Shanghai World Expo Coordination Bureau Huang Jianzhi. As Commissioner General, Villarreal is responsible for oversight of the USA Pavilion at

Expo 2010 and he will also serve as the official U.S. government representative to the Chinese government on issues relating to the World Expo. As a senior advisor to the law firm Akin Gump Strauss Hauer & Feld, Villarreal has a distinguished background in law, business and non-governmental sectors. Insight recently sat down with the Commissioner General to get his thoughts on the USA Pavilion and the World Expo. First, the most important question: Will we have a completed USA Pavilion in time for the opening of the Expo on May 1, 2010? Jose Villarreal: It is going to take a lot of work by a lot of different people, but I am completely confident that we will have a USA Pavilion in time for the May 1 opening. Tell us about the vision and mission of the USA Pavilion. What is the most significant message the USA Pavilion wants to convey to its visitors, in particular the Chinese?

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INSIGHT

U.S. Commissioner General to the World Expo 2010 Jose Villarreal shares his view on the progress of the USA Pavilion and the U.S. role at the Expo.

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The Shanghai Expo is an opportunity to foster stronger friendships between the American and Chinese peoples.”

We really see this as an opportunity to introduce a large Chinese audience to some of the best things about America. This includes America’s technological know-how, its creativity and openness. The Pavilion will also highlight the role that immigrants have played in contributing to American society – in particular the role of Chinese Americans. We think we will have a pavilion that will be an enormous draw for the audiences that come to the Expo and will be particularly popular with Chinese visitors. How does the USA Pavilion fit into the theme of “Better City, Better Life”? JV: The four core themes of the Pavilion are sustainable development, health, teamwork, and the Chinese community in America. I think each of those pillars contributes to the goal of positive urban development. Clearly, protecting the natural environment in which our cities are located is paramount. The U.S. has a great deal to offer in this area, and frankly much of it has been discovered through trial and error. Our air and water had tremendous problems in the second half of the 20th century, but the environmental movement succeeded in making environmental protection a top priority that everyone now buys into, including the corporate sector, the government, the media, and the education system so that American kids start becoming environmentally aware very early. Our Pavilion will communicate the value that Americans place on the environment, and it will share our world-class, cutting-edge technology related to energy efficiency and pollution reduction. Our diverse culture exemplified by the ChineseAmerican community is also an important element to a vibrant city life, and that’s also an area where we’ll have something attractive to offer. With any luck, we’ll feature a bit of the large Latino community in America also! No matter whether you call us the “melting pot” or the “salad bowl,” America remains one of the most diverse countries on earth, and it is only becoming more so. Our global mix within our own urban populations has naturally created outstanding contributions to world culture that we

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plan to feature at the Pavilion – from blues to jazz to hip-hop and much more. Why is having a U.S. presence at the Shanghai Expo 2010 so critical? What does having a U.S. presence mean for U.S.-China relations and for U.S. businesses in China? JV: As Secretary Clinton has said, the Shanghai Expo is an opportunity to foster stronger friendships between the American and Chinese peoples and demonstrates our commitment to a forward-looking, positive relationship with China. In particular, I see it as a great opportunity to build on people-to-people ties, and to tell the story of today’s America through our own words, visuals, performances, and exhibits. Having the chance to speak directly to the estimated 60 million Chinese visitors and to the millions coming from elsewhere around the world is a tremendous opportunity and a chance to introduce the U.S. to them in a way that they might not otherwise have. In terms of business, I’m also a firm believer that what is good for ties between our two countries is good for business as well. The USA Pavilion will be an outstanding platform for six months next year – that’s 10 times longer than the Beijing Olympics – to promote U.S. exports and brands to visitors from all over this massive country. Why should U.S. companies sponsor the USA Pavilion at a time when many companies are facing serious economic challenges at home and abroad? JV: I think many U.S. companies recognize the importance of having a strong and attractive USA Pavilion – so that by itself has been a motivating factor for many companies. Additionally, I think many companies have realized that we are going to have a pavilion, it’s going to be a very successful one, and it’s the kind of endeavor that people want to be associated with. And, obviously, there are some benefits to having your name as a sponsor on something that will have 70 million visitors. How are fundraising efforts currently going? What challenges have you had? JV: Fundraising has been going very well

USA Pavilion Ofﬁcial Partners and Sponsors

lately, but we’re not done yet. We are now a little over halfway to our US$61 million target, but that leaves us with some more room for new corporate sponsors to join this winning team that we are forming. I attribute our recent successes to Secretary Clinton’s leadership, the persistent efforts of our determined USA Pavilion team led by Nick Winslow and Ellen Eliasoph, and a growing awareness among major U.S. corporations that the USA Pavilion is indeed a fantastic platform for their World Expo participation. No doubt about it, fundraising was rocky at times in the past, but we really have seen a sea change recently. We are now in the middle of very serious discussions with a significant number of additional sponsors. We’ve had a series of announcements of new sponsors recently, and I have every reason to expect that to continue. The USA Pavilion broke ground on July 17. There were some that thought it wouldn’t happen. How did you do it and what comes next? JV: I was appointed Commissioner General on July 1, so while I am aware of some of the natural anxiety about whether we would have a Pavilion, I have been fortunate enough to join the effort just as the train finally picked up speed. This is a big project and whenever you take on a big project, you have people who say it can’t be done or it could be done better in a different way. I recognize that there were many people who generally had the best of intentions in their hearts and, as Americans, were worried about whether America would have a presence. That doubt is now gone. Going forward, I want to look at ways of recruiting the efforts and positive energies of all these people to make our Pavilion a success. When Secretary Clinton asked me to serve as Commissioner General, I could see that she was very serious about participating. I never had any doubt that we would take part. At the time that she asked me to take this on, our fundraising was also really taking off, and we had reached a point where the time was right to sign the participation agreement and proceed with the groundbreaking. We held our groundbreaking 288 days before the Expo was due to start. We didn’t plan that to

Pepsico, Inc. General Electric Wal-Mart Stores, Inc. Golden Eagle International Group Yum! Brands, Inc. Dell (China) Co., Ltd. Microsoft Corp. The Boeing Co. Committee of 100 Intel Semiconductor, Ltd. Panasonic Corp. of North America 3M China Co., Ltd. Cargill Corning, Inc. NYSE Euronext The Executive Centre Hong Kong, Ltd. USA-China Education Science & Culture Association

happen, but I don’t mind at all if this does indeed turn out to be a lucky omen. The next steps are to continue with the fundraising and to roll up our sleeves and put together a really outstanding USA Pavilion that will make the American people proud. What are your primary responsibilities as Commissioner General to the 2010 Expo and what is the most important part of your job? JV: I will head the United States’ participation in the Expo and I am responsible for government oversight of the USA Pavilion. In addition, I am the U.S. Government representative to the Government of China on issues relating to World Expo Shanghai 2010. I realize that the USA Pavilion at the largest World Expo in history has many stakeholders. Acting on behalf of Secretary Clinton, I will try my best to be responsive to all at the same time that I provide guidance and support, as necessary, to the entire USA Pavilion team. My mission is clear: lead the team down the stretch to mount an excellent USA National Pavilion. Why did you decide to accept the position as Commissioner General? JV: I accepted because the Secretary of State thinks the American national presence at the Expo is very important and because she asked me to do it. I see it as a real honor and as an opportunity to

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U.S. DEPARTMENT OF STATE

Secretary Clinton and Commissioner General Villarreal pose with Haibao in Washington, D.C.

work on something that is interesting, fun and is also good for my country and good for our bilateral relationship with China. The fact that Secretary Clinton is an old friend of mine also made it an easy call for me. On a personal note, my daughter has been living and working in China for a year and a half. She is thriving in Shanghai, a city that she has quickly come to love, and I am delighted to be able to share the Shanghai experience with her.

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What role has Secretary Clinton played in establishing a U.S. presence at the 2010 Expo? What kind of role will she continue to play? JV: Well, first of all, Secretary Clinton is personally committed to the project – she understands the significance of our participation in the Expo, which is very important. I’d say that her involvement has brought the effort a lot of attention. Just one small point to illustrate this is the photo of her holding “Haibao” in her State Department office. She keeps it in her office suite, and she wrote me a letter saying that she and Haibao “are awaiting regular reports of my progress.” She sees the USA Pavilion as a major project that we should all have some fun with at the same time that we work toward achieving our goal to represent America well for 184 days to 70 million people next year. In terms of her future role, I think that still remains to be seen, but I can tell you that she’ll remain active in our effort.

ERP SERIES

B Y TO N Y C OT T E R E L L

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Reviewing the Process

he decision to implement a global enterprise resource planning (ERP) system should be viewed as a strategic decision on the same level as every other major business investment. Missteps with a global ERP implementation are not only costly from a pure financial perspective but also in terms of the time and resources required to correct mistakes and ensure that maximum value can be gained from the investment. As the fifth and final installment of Insight’s series on ERP, this article will review some of the key aspects of a global undertaking and offer advice on getting the most out of a global system. It is impossible to fully guarantee a successful implementation, but there are several steps that can be taken to minimize common risks. Any global implementation should begin with defining the goals of the project and understanding how success will be measured. Developing a solid business case that quantifies the value to be

returned upon completion of the project and over the coming years is also vital to ensuring support and buy-in from employees. Another major factor of a project’s success is the selection of the implementation partner. Global capability is not an organization structure, but comes from a genuine knowledge of local conditions in markets around the world. Often too much of the selection process is spent verifying the ERP capabilities of individual vendors and nowhere near enough time is spent on actually understanding whether an implementation partner can be eﬀective across worldwide markets. As the implementation partner that is selected will play a major role in determining the success of the project, the selected partner should be able to demonstrate their knowledge and understanding of challenges in the global markets where implementation will take place. A governance structure that is inclusive of all markets should detail the design approach for a template that will

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INSIGHT

The ﬁfth and ﬁnal installment of Insight’s ERP series recaps the implementation process.

be appropriate for and representative of all markets. Deploying that template into the different markets requires an understanding of the local culture associated with each market, ranging from employee culture and customs to knowledge of the local business and regulatory environment and how these factors may impact an implementation. No implementation can be successful without strong efforts in training and supporting the staff who will take on the new tasks. Training needs to be measured for effectiveness and additional training should be provided if needed. In nonnative English markets such as China, an element of ongoing support should be provided in the local language. It may seem like a tough decision to delay a costly project, but if there are questions about a team’s readiness to implement a system, the decision is quite simple. Any type of delay at the late stages of a project is clearly unwelcome, but it should be considered an opportunity to properly align and fully prepare a project for launch. Any additional costs represent only a small fraction of the overall implementation cost and should be looked at more in the nature of an insurance policy. Finally, to safeguard the major investment that you have just made, in terms of people as well as cash, it is imperative that key members of the project team understand where their future lies within the company. The team members involved in the project have become some of the company’s best resources and with their knowledge of the ERP system, are much more important to the company’s operations than they were before the project began. Returning to regular day-to-day tasks could seem like a step down to some of the high performers. Look after them or they will leave – usually within the first 12 months.

Tony Cotterell is a partner with Deloitte Consulting in Shanghai. He can be contacted at tcotterell@deloitte.com.cn.

For a detailed look at implementing a global enterprise resource planning (ERP) system, review the entire series in Insight magazine: April 2009 – A Successful Implementation May 2009 – Choosing an Implementation Partner June 2009 – Implementation Design and Testing July / August 2009 – Knowledge Transfer and Launch September 2009 – Reviewing the Process

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S N A P S H OT

B Y C H A R L E N E RUA N

The environmental crisis In 2006, China surpassed the United States to become the global leader in carbon emissions. Topping out with 16 of the 20 most polluted cities in the world, China’s ﬂourishing economy

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n unexpected new business trend is emerging within the nation pegged as the world’s largest contributor to global warming. China, known for its big factories and even bigger competition to be the lowest in costs, seems an unlikely contender to be the next vanguard in sustainable businesses. However, with the global environmental crisis colliding quickly with the global economic crisis, it was only natural for one side to give, and China’s entrepreneurs are keen on the idea of both doing good and doing well. “It’s a highly underrated opportunity for businesses,” says Dr. Karel J. Samsom, a professor of entrepreneurship and ecological economics at Nyenrode University in the Netherlands and author of Sustainable Venturing. “Not only is it a great marketing concept, but more importantly the economy is growing faster than what the ecology can absorb, and eventually we will reach the limit of what the earth can handle.” Unlike traditional non-profit environmental groups, the new breed of green entrepreneurs is interested in both making money and sustainability. “Entrepreneurship is the positive pull that will be able to bring the economy and the ecology together,” says Samsom, who also runs an ecocottage venture near Venice Beach, California. According to Samsom, this new tide in the economy will in turn not only bring more awareness to environmental issues but also drive a new financial system based on businesses that project less negative effects on society. “Sustainability is about our relationship with the world around us and how we contribute to solving its many challenges,” says Dr. Theresa Kotanchek, chief technology officer of Dow Chemical China.

Thinking Green unquestionably came with overwhelming consequences. The World Health Organization estimates that there are over 750,000 premature deaths a year in China caused from respiratory and heart diseases related to air pollution. With heavy industry and urbanization at the center of the nation’s growth, coal is the main resource used for providing colossal inputs of energy. Coal burning, however, is the leading producer of sulfur dioxide, a gas that contributes signiﬁcantly to acid rain, which in turn causes health problems, damages soil and crops, and ultimately contaminates water resources. More than 600 million people live in provinces that lack access to safe drinking water. According to China’s Ministry of Health, cancer is rising quickly to become China’s leading cause of death. Only 1 percent of the country’s 560 million city dwellers breathe air considered safe by the European Union. Ambient air pollution alone is blamed for hundreds of thousands of deaths each year in the country. Despite economic growth being the driving force behind so many pollutants, ironically, the Ministry of Environmental Protection estimates that the damages from these pollutants cost the

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China is leading the charge for sustainable businesses.

“

It is the entrepreneurs who are combining their ideas with commitments to the environment and society that are garnering the most attention.”

Chinese economy the equivalent of 10 percent of its annual gross domestic product. The devastating statistics are not going unnoticed and are quickly gaining the attention needed from Chinese oﬃcials. Beginning with its bid for the 2008 Beijing Olympics, the government kicked oﬀ an initiative promising to clean up its dirty industries and clear the air for bluer skies.

Green investments The central government has passed a RMB4 trillion economic stimulus package, which includes RMB350 billion for environmental projects, such as wastewater treatment and renewable energy facilities. “China’s environmental and renewable energy industries are poised for strong growth,” says Ray Cheung, a senior associate at the World Resources Institute (WRI). “As a result, cleantech sectors are emerging as one of the top investment destinations with the amount of international and domestic funds going into such enterprises hitting record levels.” The WRI runs as an organization focused on going beyond research to find practical ways to protect the earth and improve people’s lives. It was launched initially in 1982 as a center for policy research and analysis addressing global resource and environmental issues. The group, headquartered in Washington, D.C., now runs an office in China aimed at accelerating investments in the country’s sustainable enterprises, especially in organic agriculture, renewable energy and clean technology. Deutsche Bank projects that average environmental investments in China will grow at an annual rate of 16 percent and will reach a cumulative US$230 billion by 2010. In other words, sustainable enterprises and green-minded entrepreneurs are in the right industry and not just as a trend, but as a long-term investment. “Returns for Chinese environmental firms have been impressive with top performers earning profit margins as high as 30 percent,” says Cheung. Sustainable businesses may be a sector that holds many extreme challenges, but it is also one that promises great rewards if successful.

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Green ideas Though China hasn’t always been known for its nurturing nature towards budding entrepreneurs with new ideas, it is known as a marketplace with a potential consumer base of more than 1 billion people. As more and more people take advantage of this fact, it is the entrepreneurs who are combining their ideas with commitments to the environment and society that are garnering the most attention. Carol Chyau and Marie So founded the lifestyle collection company Shokay and based their idea on the traditional model of a social enterprise. The aim for their company is to earn profits while making decisions that will help solve social problems. “Rather than focusing on being green, our number one priority is economic development and poverty alleviation,” says Chyau. Using handcombed yak down sourced directly from Tibetan herders and employing local women to hand-knit the soft fibers into clothing and other home items, Shokay helps to not only ensure employment for over 40 local Tibetans but also aims to help preserve the traditional lifestyle of a region. Shokay’s products are currently exported around the world including to the U.S., and they recently opened their second storefront in Shanghai. Though the general Chinese public is still hesitant to buy into the green idea, it is an initiative that is undeniably catching fire across the world and spreading slowly but surely into the Chinese marketplace, particularly as well established and recognized multinational firms begin to incorporate the concept into their business structures. The Dow Chemical Company, prominent in the science and technology field and a leader in providing chemical, plastic and agricultural products and services to many essential consumer markets, has committed to significantly improving the sustainability of their products. They have made promises to reduce green house emissions by reinventing the way they apply chemistry. As a world leader in this industry, they are uniquely positioned to deliver solutions to energy alternatives and other solutions not yet imagined. “Sustainability factors into everything we do

at Dow. In research and development, before the conceptualization of a product, we already have sustainability as a key consideration. This life-cycle approach ensures we design products and processes with the future in mind,” says Kotanchek.

Green challenges “Starting a business is hard enough. Starting a social enterprise is even harder,” says Chyau. “Your costs will inevitably be higher, but [it’s not impossible]; green and social enterprises are definitely viable.” Naturally, the most prominent consideration of conventional businesses is cost efficiency, which is why China, with its cheap labor and access to raw materials, soars above the competition in lowcost goods. The entrepreneurs behind sustainable enterprises, however, need to be concerned with more than just the economics of resources. “In addition to profit, companies [need to] look at the long-term cost of things, not just in terms

of money, but in terms of the cost to society,” says Samsom. Since start-up costs and resources for sustainable products are more expensive, green entrepreneurs need to start by thinking laterally. For example, by saving energy, green companies are saving money. According to industry experts, eventually the longterm cost beneﬁts will outweigh the short-term costs. As it goes in nature, the eﬀects of what people do is not immediately evident – but things are happening. “The two values, [economy and ecology] are melting together,” says Samson. “A company can only solely be concerned with money for a certain period before they step forward and recognize a problem.” Perhaps it’s not yet ideal, nor easy, but green entrepreneurs are trying to revive the earth one business at a time. Charlene Ruan is a Shanghai-based freelance writer. She can be contacted at charleneruan@gmail.com.

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“

In addition to proﬁt, companies need to look at the long-term cost of things, not just in terms of money, but in terms of cost to society.”

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C OV E R S TO RY

B Y K AT I E H OW E

The Era

Greentech

Green technology is poised to transform the way we consume the earth’s diminishing supply of natural resources and how we develop our businesses. China is set to become a global market leader in the growth of “greentech,” and its collaboration with the U.S. will set the direction for the way greentech is applied around the world.

he sustainability of human development, especially how the growth and development of one generation impacts the next, has emerged as a major question as the world continues to industrialize. Of particular concern is the state of the natural resources that determine quality of life – land, water, vegetation and the air we breathe – and how they are being left to the next generation. The current pace and form of development cannot continue indefinitely into the future without decimating natural resources and jeopardizing the ability of future generations to fulfill their needs. Consequently, finding a way for sustainable development becomes crucial to continuing the current pace of progress. Green technology, or greentech, is one of the sectors that has emerged as an increasingly accepted solution. Greentech is considered to be innovative technology and practices that are used for the

sustainable production of energy, manufacturing, transportation, agriculture and construction. It also encompasses the responsible use of renewable resources and related products and services, such as water treatment, recycling and waste management. All greentech practices aim to reduce the use of non-renewable resources and minimize environmental impact. The environmental impact of development becomes more apparent every day, and even as the world economy recovers from a major economic crisis, there is a shift towards greentech happening throughout the world. On a global level, the European region outranks all others for its development and application of greentech solutions, particularly in recycling, solar energy and wind power. In 2005, the Environmental Sustainability Index (ESI) was launched at the annual meeting of the World Economic Forum in Davos, Switzerland. Developed by Yale University’s Center for Environmental Law and Policy and Columbia University’s Center for

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International Earth Science Information Network, this “environmental scorecard” is used to evaluate the environmental sustainability of 146 countries. The 2008 results of the index, since rebranded the Environmental Protection Index (EPI), revealed that Switzerland, Sweden, Norway and Finland are the top four environmentally sustainable nations. The United States ranked 39 while China came in at 105. China and the U.S. face a number of common challenges such as pollution control, including combating sulfur dioxide emissions, and natural resource management, including stress on water resources due to agricultural requirements. According to the EPI, the U.S. and China rank one and two in terms of sulfur dioxide emissions. “This EPI ranking points out that while China has been making great strides in developing its green energy market, its progress in the pollution control sector still lags somewhat,” says Charlie McElwee, counsel at Squire, Sanders & Dempsey in Shanghai. “It reveals the paradox that is becoming commonly referred to as ‘green energy and black skies.’”

Unique opportunity

POLLUTION PROBLEM: China and the U.S. face a number of similar challenges such as pollution control and natural resource management.

China and the U.S. both have a unique role to play in the development of green technology and its applications. Despite diﬀering economic and political systems and a large disparity in the level of development, each country has a signiﬁcant impact on the global environment and the health of its inhabitants. China is second only to the U.S. in energy and electricity consumption, and its electricity consumption is expected to nearly triple

IMAGINECHINA

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SEPTEMBER 2009

over the next two decades, growing by an average of 4.3 percent per year. As the leading consumers of energy, both countries have a national and international responsibility to further develop their capacity for sustainable growth. The rapid development of China’s economy has resulted in significant environmental impacts. While this is not dissimilar to other countries which have undergone industrialization, the scale and pace of China’s development has attracted international attention. At a time when global attention is focused on meeting “green” standards, China has the unenviable task of balancing the increased welfare and living standards of its people with the need to protect and nurture the natural environment. “China’s industrialization comes at a time where sustainability has been recognized as a critical factor in development strategy,” says Jonathan Woetzel, a director in McKinsey and Company’s Shanghai office. “China has the opportunity to learn from the mistakes of others in their historical industrialization and establish sustainable cities and industries from the beginning, as opposed to building without regard to sustainability and then retrofitting.” The environmental issues now facing China are similar to those experienced by developed nations as they progressed towards mass industrialization. Many European countries in the 18th and 19th centuries found themselves faced with mounting environmental concerns such as increased air pollution, water shortages and the exhaustion of natural resources. Countries such as the UK and U.S. are now well placed to support the sustainable development of China. Last year the Worldwatch Institute, an environmental research group, reported that clean technology is actually the third-largest sector for venture-capital investment in both China and the United States. Both the risks and the rewards are high for potential investors. “The Greentech sector is so vast that it will represent the greatest investment opportunity of the 21st century,” says Gary Rieschel, founder and managing director of Shanghai-based Qiming Venture Partners. “But investors need to be aware of the technology and market risks.” Because the greentech market is still in its early stages of development, it is important for participants to understand the landscape. The China Greentech Report 2009, initiated by the newly formed China Greentech Initiative (CGTI), has outlined seven key areas for investment

JULIUS MAK

and development: renewable energy, cleaner conventional energy, electric power infrastructure, green building, alternative transportation, cleaner water and cleaner industry. China’s unique capacity for catering to the production needs of the global market has positioned it as an important production base for the alternative energy technologies that other nations will be implementing over the coming years. Government support, in the form of subsidies and regulations, is expected to encourage the local application of such technologies.

Development in the United States Fossil fuels were the key energy source that enabled the U.S. to develop as a world power in the industrial era. However, in the last five to ten years, there has been international recognition that this form of energy is simply not sustainable. Energy use in the U.S. amounts to US$2 trillion a year one trillion spent on acquiring an energy supply in the form of oil, coal, natural gas, nuclear power and renewable energy, and another trillion spent on the consumption and harnessing of that energy. Economic growth and environmental concerns have both resulted in the development and implementation of cleaner energy sources. The U.S. auto industry, in both consumer demand and manufacturing systems, is one sector that is beginning to reflect this change. The U.S. government launched a US$25 billion program to provide affordable loans to car manufacturers who develop electric cars and other fuel-efficient vehicles. American businesses are also taking the initiative. General Electric, for example, invests six percent of its industrial revenue each year into the research and development of more efficient and cleaner wind turbines, jet engines, locomotives, power turbines and appliances. U.S. President Barack Obama has already committed the U.S. to becoming “the world’s leading exporter of renewable energy.” A crucial component of this approach will be China and how the two countries work together to ensure sustainable development. China is just one of many overseas markets that could stand to benefit from U.S. clean-energy products.

Development in China The number one energy source in China is coal, which has fueled the country’s power plants since the late 19th century. Coal accounts for 70 percent

The China Greentech Initiative The China Greentech Initiatve (CGTI) is an open source, commercial collaboration of 80 of the world’s leading technology and service companies, entrepreneurs, investors, NGOs, and policy advisors. Through the Initiative, these organizations have come together to define greentech market opportunities and solutions which will contribute to a sustainable China and world. CGTI was co-founded by Ellen G. Carberry and Randall S. Hancock. The Initiative’s Founding Partners are AmCham Shanghai and PricewaterhouseCoopers. “The vision of the Initiative is to address the most pressing sustainability issues that both China and the globe faces, while uncovering commercial opportunities which provide workable solutions,” says Carberry. The China Greentech Report 2009, the first deliverable of the Initiative, provides cross-sectoral analysis of the market and environmental issues facing China, the country’s regulatory response, the available technical solutions that can be used to address these issues and key development challenges and opportunities to accelerate greentech market growth. The Report focuses on 7 key sectors: renewable energy, cleaner conventional energy, electric power, infrastructure, alternative transportation, cleaner industry, green buildings, and clean water. “One of the most interesting findings is that China will not just be one of the world’s largest consumers of greentech, but also a key exporter and potentially innovator of these solutions,” says Hancock. The China Greentech Report will officially be released at the World Economic Forum China Talks in Dalian on September 10, 2009. A simultaneous launch will be held by AmCham Shanghai and PricewaterhouseCoopers in Shanghai. The Report will be published online and will be available free of charge.

of China’s energy supply, compared to the global average of 28 percent in 2006. While it is a cheap and abundant natural resource, coal creates enormous environmental challenges for China. Burning coal to generate power produces signiﬁcantly more emissions than most other energy sources. In fact, over 80 percent of China’s carbon dioxide emissions from energy use come from burning coal. China is also continuing to increase its energy generation capacity by an equivalent of two 500 megawatt (MW) coal-ﬁred plants per week. While this heavy reliance on coal-based energy is concerning, China actually leads the world in the production of two alternative energy technologies – solar and wind power. The nation’s capacity for solar photovoltaic (PV) power has been increasing steadily, reaching 100 MW in 2007. The introduction of government subsidies for the construction of building-integrated photovoltaic and utility-scale solar power projects is expected to increase this capacity further.

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IMAGINECHINA

SOLAR SOLUTION: China is leading the world in the usage and manufacturing of solar water heaters.

While China’s capacity for photovoltaic power is currently 1 percent of the world’s total, it is a leader in the manufacturing of photovoltaic cells. In 2007, China accounted for nearly 30 percent of all PV cells manufactured worldwide, due to the success of large domestic companies such as Suntech Power Holdings, Yingli Green Energy Holdings and Trina Solar. Over 95 percent of the cells manufactured in 2009 have been exported overseas. China also leads the world in the use of solar water heaters. Currently, China boasts the world’s largest installed base of solar water heaters, with panels powering water heaters covering over 125 million square meters, and one in ten families having adopted the technology. Chinese companies such as Himin Solar Energy Group produce over 95 percent of the world’s core solar water heating technology, according to the China Greentech Report 2009. China’s annual production of panels to power solar water heaters in 2007 reached 40 million square meters, accounting for two-thirds of global output. China’s wind power market has also experienced rapid development. Installed capacity has doubled over the last four years to reach 12 gigawatts (GW) in 2008. In fact, China reached its original target of 5 GW for 2010 three years ahead of schedule. Accordingly, the National Development and Reform Commission upgraded the 2010 target to 10 GW, which has already been surpassed. Today, China produces 10 percent of the world’s total wind power capacity, ranking fourth in the world behind the U.S., Germany and Spain. This ﬁgure does not include China’s oﬀshore

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wind resource potential, which is currently being developed and is estimated to be three times greater than its onshore resources. In the automotive sector, China is clearly establishing itself as a world leader in the production and adoption of new energy vehicles. “In terms of local application, China has made impressive progress in fostering the growth of green technologies,” says McElwee, who has also worked closely with the China Greentech Initiative. “It has quickly emerged as a leader in renewable energy and cleaner modes of transportation, and continues to improve its efficiency of resource use.” China has continued to reduce pollution stemming from transportation by implementing stricter fuel economy standards for pollution emission. “China’s national standards for pollution emission and fuel efficiency are actually stricter than those set in countries like the U.S., Australia and Canada,” says Ruth Dobson, a partner in advisory services at PricewaterhouseCoopers. “This step alone will significantly reduce the pollution that results from road transportation.” China has increased its fuel economy standards for automobiles several times in the last nine years, bringing the overall average up to 32 miles per gallon in 2008. By 2015, it will be further upgraded to nearly 40 miles per gallon. In order to ensure that fuel economy standards are met, the Chinese government has strongly supported the development of electric vehicles that have the ability to alleviate local pollution, mitigate the demand for oil, and potentially reduce carbon dioxide and other gasoline and diesel engine emissions. Pilot programs focusing on clean transportation have already been announced in a number of major cities and there are widespread plans to subsidize the adoption of electric vehicles. In December 2008, Shenzhen-based BYD Auto launched the world’s first mass-produced plug-in hybrid, the F3DM sedan. Other domestic manufacturers, including Chery, Geely and Foton, are developing their own models and have announced plans to enter the market. By 2011, China aims to increase its annual production of hybrid and electric vehicles to 500,000, roughly 5 percent of annual new vehicle sales. Meanwhile, the China State Grid has announced plans to build networks of charging stations for electric vehicles in major cities like Beijing and Shanghai.

Areas of collaborative growth Although both countries have very diﬀerent economic and manufacturing systems, China and the U.S. are well suited to support each other’s development and application of greentech solutions. Financially, China is well placed to develop its greentech markets, having allocated 38 percent of its economic-stimulus programs to green programs. As both countries have been early adopters of green technology, there is enormous potential for cooperation. “It’s exciting to see the expanding cooperation of the U.S. and China in this area and the ‘original mind’ that both sides are bringing to the discussion,” says Rieschel. Many U.S. companies have begun to work closely with Chinese companies in developing sustainable technologies. Duke Energy, one of the largest coal-burning power companies in the U.S., recently signed an agreement with China Huaneng Group to share information on renewable energy and clean energy technology, with the goal of reducing carbon dioxide emissions. “If our two companies can come up with technical solutions and work together, ultimately we can each agree on the best way forward to address climate change,” says Jim Rogers, chairman and CEO of Duke Energy. “Working together, the U.S. and China can commercialize and drive down the cost of these technologies for the beneﬁt of the entire world.”

Growth areas “In almost every greentech sector – from energy conservation and renewable energy to pollution control and clean water, China will be one of the world’s leading consumers of greentech investment and one of the prime end markets for greentech products and services,” says Paula Beroza, cofounder and managing director of Sierra Asia partners, an investment advisory ﬁrm. “You can’t be a serious player in the global greentech arena without a signiﬁcant interest in China.” The American Chamber of Commerce in Shanghai has been quick to identify greentech as a key growth area in China in terms of bilateral trade, local business development, investment and corporate social responsibility. CGTI was established in 2008, with AmCham Shanghai and PricewaterhouseCoopers as founding partners, as a collaborative project to uncover, create

and promote business opportunities in China’s greentech markets. “As greentech represents one of the world’s newest markets for development, it’s obviously a key focus for many of our members,” says Brenda Foster, president of AmCham Shanghai. “The value of the China Greentech Initiative is that it recognizes the complexity of this market and the need to approach it collaboratively by bringing together business leaders and policy advisors to understand the commercial potential of greentech solutions in China.” The Chinese government has continued to adopt policies that support this goal. Government planning for cleaner transportation and industry will result in the more sustainable development of public transport systems and industrial activities. A top priority is the expansion of the country’s national railway capacity. By increasing the number of trains that run on electricity from 32 percent to more than 45 percent by 2010 and more than 60 percent by 2020, China hopes to promote transportation efficiency and reduce dependence on oil imports. Regarding primary and secondary industries, the central government has launched a top-1000 Energy Consuming Enterprises Program, which aims to reduce overall energy intensity by 20 percent. In addition to CGTI, a number of bilateral and multilateral initiatives focused on developing sustainable solutions have been developed in China, including the China Environmental Law Exchange, the United Nations Shanghai City Development Program, the U.S. China Green Business Exchange and the Clean Energy Forum. As China’s greentech market continues to develop, many industry players believe it will soon lead the global market and provide solutions for other countries. “As the world’s largest developing nation, China is the only country which has the scale to independently achieve commercial economies of scale in many developing technologies such as concentrated solar and electric vehicles,” says Woetzel. “It is also one of the few with a sufficiently large scientific establishment and capital resources to independently invest in technology development on a large scale.”

Katie Howe is an Editorial Manager at AmCham Shanghai. She can be contacted at katie.howe@amcham-shanghai.org.

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China and the U.S. are well suited to support each other’s development and application of greentech solutions.”

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INSIDE AMCHAM FROM THE CHAIRMAN

A Call to Action

n eventful and busy summer is behind us and AmCham Shanghai is gearing up for an even busier fall season. From September 7-8, we will be hosting “Greentech: A Call to Action” at the Shanghai World Financial Center. Coorganized with the Asia Society, this collaborative conference will engage over 100 global thought leaders and senior government oﬃcials from the U.S. and China. AmCham Shanghai is also a founding partner of the China Greentech Initiative (CGTI), which is providing the market analysis that will form the basis for the discussions to advance greentech opportunities in China. Immediately following the conference, CGTI will release the China Greentech Report, a deﬁnitive and actionable roadmap for commercializing greentech in China, at the World Economic Forum in Dalian. AmCham Shanghai is establishing itself as a leader in this important area and we will continue to provide a platform for our member companies to make positive contributions to society while continuing to develop their businesses.

J. Norwell Coquillard Chairman AmCham Shanghai

After an eventful summer, AmCham Shanghai is gearing up for an even busier fall season.

Throughout the summer, we had several opportunities to meet with U.S. government officials visiting Shanghai and were pleased to find out they were all interested in learning more about the experience of U.S. companies on the ground in China. In July, we were pleased to host Secretary of Commerce Gary Locke, while in August, we welcomed U.S. Senator Bill Nelson and a delegation led by House Minority Leader John Boehner. Later this month, we will continue our ongoing dialogue with the U.S. Government when we head to Washington, D.C. for a weeklong Doorknock. President Obama has identified the U.S-China relationship as a major foreign policy priority and we will reinforce the message to the Administration and on Capitol Hill that continued trade with China has many benefits for the American economy. Last month saw the long-awaited confirmation of U.S. Ambassador Jon Huntsman. Ambassador Huntsman has consistently been a strong supporter of U.S. companies in China and made several visits to Shanghai as Governor of Utah. We eagerly await his first visit to Shanghai as Ambassador and look forward to working with him as we continue to engage China on issues that are critical to our businesses. Finally, AmCham Shanghai was extremely proud to be a part of the USA Pavilion’s official groundbreaking ceremony on July 17. After some dark days when the future of the Pavilion was in doubt, we were excited to be standing at the actual location of the USA Pavilion for the groundbreaking, joined by senior Chinese officials as well as U.S. Secretary of Commerce Gary Locke and U.S. Commissioner General to the World Expo 2010. Jose Villarreal. AmCham Shanghai expects to participate actively in Expo 2010 and will continue to support the efforts of the USA Pavilion team.

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INSIDE AMCHAM B O A R D O F G OV E R N O R S B R I E F I N G

Board of Governors Meeting Highlights July 2009 Vice President, Programs

The Chairman introduced David Turchetti, AmCham Shanghai’s new Vice President of Programs, who started on July 1, 2009.

Advocacy Policy Council (APC)

Finance Report

Board Treasurer Matthew Targett reviewed the Chamber’s ﬁnancial report, noting that performance is on track with budget projections.

CSR Practitioner Award

The Board expressed its desire to continue The Chairman reported on a recent recognizing corporate social responsibility meeting of the APC in advance of (CSR) in China through the annual U.S. Secretary of Commerce Gary CSR Awards and approved a new CSR Locke’s visit. Permanent members Practitioner Award that will recognize the for the group will be selected and efforts of an individual to advance CSR in regular meetings will be held in the workplace and community. order to develop the Chamber’s advocacy positions.

Washington, D.C. Doorknock

The Board agreed that a Doorknock should be conducted during the week of September 21 and discussed engaging a government relations ﬁrm to help achieve advocacy goals in Washington. The Board discussed responses to RFP and selected a ﬁrm to begin discussions.

IN ATTENDANCE Governors: Chris Beede, Pierre Cohade, Norwell Coquillard (Chairman), David Gossack, John Grobowski, Minda Ho, Ted Hornbein, Diane Long, James Rice and Matthew Targett. Attendees: David Basmajian, Siobhan Das, Helen Ren, David Turchetti, Jessica Wu, Linda X. Wang, Oliver Yang and John Leary. REGRETS Eddy Chan, Brenda Foster, Murray King and Warren Wisnewski.

August 2009 Advocacy Policy Council (APC)

Following an ad hoc meeting of the APC in July, a formal list of proposed APC members has been compiled comprising of members with expertise in areas such as legal and government relations. A rapid response team will also be formed to evaluate and address issues that require immediate attention.

Washington, D.C. Doorknock The Chairman reported on the upcoming AmCham Shanghailed Doorknock in September. A communications consultancy has been retained to assist with meeting coordination and messaging. A call for delegates has also been issued and applications will be reviewed in August.

Government Appreciation Dinner

Tentative dates in late-October have been calendared for the 2009

Government Appreciation Dinner, which will serve as an opportunity for U.S. Ambassador-nominee Jon Huntsman to meet both the U.S. business community and Shanghai government ofﬁcials.

July 4th Event Review

The Board discussed the 2009 Independence Day Event, including feedback received from members and possible improvements for the 2010 event, such as forming a steering committee to lead preparation efforts. IN ATTENDANCE Governors: Chris Beede, Eddy Chan, Norwell Coquillard (Chairman), John Grobowski, Ted Hornbein and Diane Long. Attendees: David Basmajian, Justin Chan, Siobhan Das, Brenda Foster (President), Helen Ren, David Turchetti, Jessica Wu and Karen Yuen. REGRETS Pierre Cohade, David Gossack, Minda Ho, Murray King, James Rice, Matthew Targett and Warren Wisnewski.

AmCham Shanghai members can enjoy up to 3 FREE standard job postings every month.

In addition, we also provide 20 Candidate Invitations at RMB500: full access to our resume database and send up to 20 invitations to your target candidates.

J U LY / A U G U S T 2 0 0 9

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For more information, please contact Ms. Elaine Yang at (86 21) 6279-7119 ext. 5664 or elaine.yang@amcham-shanghai.org

2009 AmCham Shanghai Human Resources Conference and Fair Changing Times, Changing HR – Solutions Leading to Opportunities AmCham Shanghai and the AmCham Shanghai Human Resources Committee hosted the 11th annual Human Resources Conference on June 17 and 18 at the Pudong Shangri-La Hotel. The 2009 AmCham Shanghai HR Conference focused on how HR is playing an increasing role in guiding businesses through today’s challenging economic landscape and how HR challenges are being met and balanced against the demands of building the foundations to realize future opportunities. This year’s conference featured China heads of leading multinational companies and an impressive array of senior HR professionals from companies such as General Motors, Ingersoll Rand, TNT and Dow Chemical. Speakers addressed their own perspectives and experiences with HR in China and led interactive workshops with conference attendees on topics such as how to bring businesses forward despite ongoing market uncertainties and what reinforcing or corrective actions should be considered. The conference’s ﬁrst keynote speaker Jeff Song, president of Ingersoll Rand China, spoke on leadership challenges in an age of globalization. Song explained how globalization was here to stay and would not be stopped by the current economic crisis; therefore, global leadership needs to have the resources in place and be ﬂexible enough to compete in a global marketplace. The HR function needs to rise and play a bigger role, and a company’s talent needs to be developed, not just plucked from other companies, said Song. He also emphasized the necessity of

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grooming local talent in China for top-level positions and the importance of ﬁrst being a good role model before becoming an effective leader. Other prominent speakers at the conference included Kevin Wale, president and managing director of GM China Group and GM China’s HR Director Shannon DiPietro. In his keynote speech, Wale addressed the importance of the HR function in building the right team and environment to achieve results and win. The HR leaders need to act as the “conscience” of an organization by making sure a company has the right organizational structure in place to support its business objectives, ensuring a company has the best leadership team to drive the organization, attracting and retaining the best people, and driving a performance culture throughout the organization, said Wale. He added that one of the biggest challenges companies like GM face in China is to integrate local leaders as quickly as possible. Given the country’s rapid development in the last 30 years, companies in China tend to fast-track people with relatively little experience into leadership positions, compared to their counterparts in the West. In her speech, DiPietro discussed how the key success factors for HR include having a seat at the table, thoroughly understanding the business and the business environment, and approaching objectives and strategies from a business angle. In order to help employees, HR needs to ﬁnd “open windows” in the face of closed doors, said DiPietro. – Elaine Wu

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2009 AmCham Shanghai Independence Day Party A special thank you to all of the attendees, volunteers and the numerous sponsors and partners who came out to Sheshan for the 2009 AmCham Shanghai Independence Day Party to celebrate Americaâ&#x20AC;&#x2122;s 233rd birthday. We hope you enjoyed the day of fun in the sun and we look forward to seeing you at next yearâ&#x20AC;&#x2122;s event!

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Event Highlights

INSIDE AMCHAM

RECENT AMCHAM HAPPENINGS

AmCham Shanghai and the U.S.-China Business Council were pleased to host United States Secretary of Commerce Gary Locke at a breakfast event during his four-day trip to China alongside U.S. Energy Secretary Steven Chu. The development and production of clean energy may be the greatest economic opportunity of the 21st century, said Secretary Locke. His remarks focused on the importance of bilateral cooperation in the development of energy efficient technologies and the shared responsibility between the U.S. and China in nurturing the clean energy sector. According to Secretary Locke, the U.S. and China are uniquely positioned to create the energy the world needs, and furthermore, the only way both economies will achieve sustainable growth while preventing the catastrophic effects of global warming is if both countries tackle the problem of climate change together. Because U.S. companies employ hundreds of thousands of Chinese workers, the development of clean technology at home and the application of it abroad would present a win-win situation for workers in China and in the U.S., the Secretary emphasized. However, he added that along with our dependency on fossil fuels, the U.S.-China trade relationship has to evolve as well. The trade imbalance between the two countries cannot be sustained and China should allow a free-floating RMB. Secretary Locke expressed confidence that the U.S. and China would be able to bridge their differences and focus on their common interests and “intertwined fates.” (Jul 17)

July U.S. Consulate Briefing In the wake of the Fourth of July holiday, U.S. Consul General Beatrice Camp thanked those whose made contributions to the Consulate’s diplomatic receptions in Shanghai and Nanjing. The CG reported on her recent consultations in Washington, including a meeting with Ambassador-designate Jon Huntsman and a series of Expo-related discussions. On the Expo front, Jose Villarreal has been named as the U.S. Commissioner General to head U.S. participation, with signing of the Participation Contract the next step and Secretary of Commerce Gary Locke’s upcoming visit should focus additional attention on the USA Pavilion. At the Consulate, Political and Economic Chief Chris Beede takes over as Deputy Principal Officer with the departure of Simon Schuchat. In consular issues, the Consul General noted that quarantine-related issues have taken a large part of our American Citizen Services officers’ resources, with a total of more than 500 AmCits having been confined to hospitals or hotels in Shanghai since the government began implementing its quarantine policy. In other news, the Consul General reported that the lengthy delays experienced by visa applicants with scientific and technical backgrounds have gotten much shorter, thanks in part to groups such as AmCham Shanghai that prompted Washington to implement streamlined procedures. (Jul 7)

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August U.S. Consulate Briefing U.S. Consul General Beatrice Camp opened the August 4 briefing by describing Commerce Secretary Locke’s role as “Expo envoy” during his July 17 visit to Shanghai, including meeting with USA Pavilion corporate sponsors, remarks to AmCham Shanghai members, a call on Mayor Han Zheng, and the groundbreaking ceremony at the Shanghai Expo 2010 site. She noted that Treasury Secretary Geithner and Secretary of State Clinton held the first meeting of the U.S.-China Strategic and Economic Dialogue in Washington July 27-28, creating an over-arching framework with which to engage China on long-term challenges and cross-cutting issues such as climate change. Secretary Clinton also took advantage of the S&ED to unveil a model of the USA Pavilion. The CG reported that while Ambassador-designate Jon Huntsman was still awaiting confirmation, the Embassy expected him to arrive in China before the end of August, with a likely visit to Shanghai soon after. The CG recapped Expo milestones in July and described Secretary Clinton’s indispensable role in pushing the effort to success, adding that USA Pavilion team leaders Nick Winslow and Ellen Eliasoph deserve credit for keeping the dream alive through the dark days of 2008 and early 2009. (Aug 4) U.S. Consul General Beatrice Camp (center)

AMCHAM SHANGHAI

U.S. Government Delegation Secretary of Commerce Gary Locke

U.S. Secretary of Commerce Gary Locke

INSIDE AMCHAM

AMCHAM SHANGHAI

U.S. Government Delegation U.S. Senator Bill Nelson

AMCHAM SHANGHAI

U.S. Government Delegation House Minority Leader John Boehner

AmCham Shanghai was pleased to host U.S. Senator Bill Nelson (D-FL) for a private roundtable with Chamber leaders during his visit to Shanghai. Participants expressed the importance of the U.S.-China commercial relationship to both countries and emphasized the need for additional U.S. government support to help American small- and medium-sized enterprises compete and win in the China market. Other issues discussed included product safety and quality, the protection of intellectual property rights and Chinaâ&#x20AC;&#x2122;s growing market for clean technology. Nelson, now in his second term in the Senate, serves on the inďŹ&#x201A;uential Senate Finance Committee, which has jurisdiction over healthcare, climate change and international trade. (Aug 10)

AmCham Shanghai and the U.S.-China Business Council jointly hosted a congressional delegation led by Minority Leader of the House of Representatives John Boehner (ROH). Other members of the delegation included Jo Bonner (R-AL), Dan Boren (D-OK), Dave Camp (R-MI), Tom Latham (R-IA) and Greg Walden (R-OR). Members from the delegation met with Chamber members to discuss current economic conditions in China and to learn more about the business climate for U.S. companies including the level of market access for U.S. goods and services. (Aug 11)

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Introducing:

David Turchetti

Vice President, Programs

n July, David Turchetti joined AmCham Shanghai as its ﬁrst Vice President, Programs. David joins AmCham Shanghai with 15 years of experience in government, media and advertising. He has been an active member and strong advocate of AmCham Shanghai since 2001, twice serving on the Board of Governors in addition to chairing the Marketing Committee. As Vice President, Programs, David is responsible for the day-to-day management and supervision of AmCham Shanghai’s membership engagement activities, overseeing the Business Development & Marketing, Committees, and Events departments. How are you planning to serve AmCham Shanghai members in your new role? In recent years, the Chamber has seen hyperbolic growth in its membership. With the World Expo in Shanghai next year, we have a unique opportunity to launch AmCham Shanghai onto the world stage. First and foremost, I want to put the necessary foundation pieces in place for the Chamber to sustain growth and seize new opportunities. We need to establish organizational processes for greater efﬁciency, and we need to better integrate our teams to unlock their enormous potential. How does your addition to the AmCham Shanghai team impact how members interact with the Chamber? All three of my direct reports are truly outstanding individuals. Members will continue to look to them for access to most services. Our 21 industry committees work with Siobhan Das, who has an infectious passion for the Chamber. Members attending functions are in excellent hands with Jessica Wu, who manages over 300 functions per year. Her competence sets an example for all of us. Karen Yuen provides tangible value to members

through sponsorships and advertising, and is leveraging her creativity to better market the Chamber and promote members. My role is to manage certain crossdepartmental projects, to push our programs to a worldclass level of quality, and to innovate. Talk about how you think AmCham Shanghai needs to innovate. Most crucially, in technology. Online social networking platforms – like Facebook and LinkedIn – pose an existential threat to membership organizations like AmCham Shanghai because they help businesspeople to meet, communicate and form interest groups. We need to reinvent the Chamber for the future – just like newspapers had to reinvent themselves for the internet – or our model will be eclipsed by technology. The Chamber will need to offer new digital services for our members, whose businesses are increasingly globalized, and open multimedia channels to distribute our content. Our members will always look to AmCham Shanghai to provide a platform for executives to break bread and make deals, but the Chamber will need to do more, much more, to keep our lead in a technology-driven economy. Please tell us a bit about your background. I am originally from Providence, Rhode Island. I have three brothers and am thrilled that one of them now lives here in Shanghai. I graduated from the University of California, Berkeley and started my career at the U.S. State Department during the second Clinton administration. I have also lived in Italy and Japan but have spent the past 11 years in Shanghai. I love Shanghai. I have worked at Shanghai Media Group and at a digital advertising agency based here. I met my wife in Shanghai, and our son was born here just last month. We consider Shanghai our home.

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Committee Highlights

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NEW IN COMMITTEES

AMCHAM SHANGHAI

Tan Hong, Access Analytical Systems

Education & Training Committee The ROI of an MBA or EMBA

AmCham Shanghai’s Education & Training Committee recently hosted speakers Tan Hong, CEO of Access Analytical Systems and a current EMBA student at the Cheung Kong Graduate School of Business in China, and Kathy Zhang, Shanghai human resources manager of Air Products and an EMBA graduate of Cornell University, at the ELS American Education Center to discuss the value of MBA and EMBA programs and what companies can do to make sure they receive the desired return on investment (ROI) from an MBA/EMBA education. Deciding to enroll in an MBA or EMBA program is a significant commitment in terms of money, time and lifestyle, said Hong. Before making a decision, you need to ask yourself why you want to go back to school and what you can gain from doing so. From a corporate perspective, Zhang explained how sponsoring the business educations of employees aids a company in building a talent pool for future success, implementing a succession plan and retaining valuable employees. In order to measure the ROI, hard measures such as revenue and profitability increments, shareholder return, productivity increases, and the salary of trainees can be examined. However, “soft” returns on employees can also be measured, such as employees being able to think more strategically, obtaining a broader understanding of a diverse range of disciplines, being able to contribute in new areas within a company where they may not previously have had the knowledge or experience to do so, or boosting the morale, confidence and satisfaction of other employees. (Jul 13)

Leading HR During Unprecedented Times – Suzhou To help shed light on changing HR trends in China, speciﬁcally in Suzhou, AmCham Shanghai’s Suzhou Committee was pleased to welcome Jill Malila, Asia market leader at Mercer Human Resource Consulting at a recent event. One of the biggest challenges facing Chinese HR functions in foreign companies is the intense cost-cutting pressures coming from corporate headquarters, often in the form of salary freezes, said Malila. Chinese employees have been accustomed to relatively large yearly increases, but this year’s salary increases have decreased substantially, she said. In Suzhou, the estimated average base salary increase this year dropped to 5.2 percent. Malila also noted the importance of distinguishing between China’s skilled and non-skilled employment when examining the country’s labor market. In the skilled employment sector, there continues to be a talent shortage, despite the economic downturn, while an increasing number of non-skilled workers have been laid-off as a result of worsening economic conditions. (Jul 21)

AMCHAM SHANGHAI

Suzhou Committee

Travel & Tourism Committee

The Global Airline Industry: Threats and Opportunities in the 21st Century

Craig Kreeger, American Airlines

AmCham Shanghai’s Travel & Tourism Committee recently hosted Craig Kreeger, international senior vice president of American Airlines, to share how the airline is taking firm actions to rise above the challenges currently facing the airline industry and how it is taking advantage of opportunities presented by deregulation, consolidation and new markets. Despite facing many challenges in the last decade, American Airlines remains focused on maintaining a financially healthy global company with a strong international fleet, said Kreeger.The airline has taken many steps to build a sound company that could withstand financial shocks, including reducing and refinancing debt, matching capacity with supply, building a strong presence in international locations, creating better alliance networks, investing in more fuel-efficient and environmentally friendly planes, and focusing more on customer needs. American Airlines is also planning on expanding its services in Asia Pacific and in China, and to further develop its network in China to augment existing flight services. American Airlines views China as a key strategic location and one of the most important growth opportunities worldwide, said Kreeger. (Jul 30) Event and Committee Highlights are reported by Teresa Dong, Patrick McNally, Brian Seifert and Elaine Wu.

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AMCHAM SHANGHAI

Vasu Swami of GE Infrastructure Energy addresses the Logistics & Transportation Committee.

Logistics & Transportation Committee A Look at China’s Logistics Industry Rejuvenation Plan

AmCham Shanghai’s Logistics & Transportation Committee recently hosted a panel discussion to help American businesses understand and benefit from the new Logistics Industry Rejuvenation Plan. Speakers Mark Millar, managing director of M Power Associates; Lee Perkins, CEO of China Intel Group; Robert Jiang, general manager of Shanghai Dajin Logistics; and Vasu Swami, logistics manager for General Electric Infrastructure Energy Asia Pacific and Middle East, spoke on the details of the plan and its impact on domestic supply chains for distribution and logistics in the Chinese market. Logistics is fundamental to the prosperity and growth of a nation, but China is behind the curve on where it needs to be, said Millar. The State Council has outlined key objectives in four specific areas that need improvement: outsourcing, consolidation, systems and skills development. Improvements in these key areas are intended to create a “modern logistics enterprise,” said Perkins. The panel of speakers explained how short-term developments such as the restructuring of the logistics industry through consolidation with small- and medium-sized enterprises to resemble the logistics structure of more developed nations would be a likely outcome in China. Central and regional government incentives and the desire for market access will make China’s hinterland the centerpiece of future corporate logistics development strategy, concluded the panel. (Jul 28)

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DEAL OF THE MONTH IMAGINECHINA

A New Era of Cooperation

The United States signs a treaty with the Association of Southeast Asian Nations that forges new ties with the region.

shering in a new era of U.S.-Asia relations, U.S. Secretary of State Hillary Clinton signed the Treaty of Amity and Cooperation (TAC) at the Association of Southeast Asian Nations (ASEAN) Regional Forum on July 22, a move she summed up by proclaiming, “The United States is back in Southeast Asia.” President Obama’s decision to join the league of TAC countries marks a stark departure from the position of the Bush administration, which had declined to sign the peace treaty promoting regional stability and cooperation on economic and political issues. Previous Secretary of State Condoleezza Rice also missed several other ASEAN conferences. “President Obama and I are giving great importance to this region,” said Secretary Clinton during the two-day forum in Phuket. She also penned an opinion piece for the Bangkok Post in which she called on ASEAN and the U.S. to "expand trade and investment” to spur economic recovery and generate greater prosperity. Last year, trade between the U.S. and ASEAN surpassed US$178 billion. The July trip was Secretary Clinton’s second visit to the region. Her decision to travel to Asia in February for her maiden voyage overseas as Secretary of State, bypassing the more traditional destination of Europe, prompted ASEAN Secretary General Surin Pitsuwan to tell her, “Your visit shows the seriousness of the United States [in ending] its

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diplomatic absenteeism in the region.” The U.S. joins 25 other nations that have already signed the TAC. Besides members of ASEAN, a 10-nation bloc that forms the sixth biggest U.S. export market, other parties include China, the European Union, North Korea and Russia. While the treaty affirms U.S. commitment in Southeast Asia, the effect of U.S. involvement will be felt in the Asia-Pacific region and beyond. Already, Secretary Clinton has expressed her desire for member state Myanmar to free pro-democracy leader Aung San Suu Kyi, stating that such an action could lead to U.S. investment in the country. She also discussed North Korea’s nuclear ambitions with the foreign ministers of China, Russia, South Korea and Japan in a bid to stir up support. Accession to the TAC has sparked speculation that the U.S. will soon seek to join the East Asia Summit (EAS), a forum dedicated to political and economic issues in the region. In addition to signing the TAC, the U.S. will need to demonstrate active dialogue and economic relations with ASEAN before becoming part of the organization, which counts China, India, and Japan as members, say analysts. While the U.S. has remained relatively tight-lipped on the issue, President Obama is scheduled to attend the AsiaPacific Economic Cooperation (APEC) conference in Singapore on November 14-15, during which he will be expected to tour other countries in the region. – Linda Witters

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