Insight Magazine December 2012

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

The Journal of the American Chamber of Commerce in Shanghai December 2012

ALSO INSIDE •

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Special 2012 Top Ten Lists Year in Review Pictures

A New Chapter Xi Jinping will lead China for the next 10 years and our in-depth analysis looks at the significance of this unique power transition and what it means for the country, the economy and the world

INsIGht DECEMBER 2012

the Journal of the american Chamber of Commerce in shanghai

AMChAM ShANghAI PreSident

Brenda Foster VP OF PrOGrAMS & SerViceS

scott Williams

VP OF AdMiniStrAtiOn & FinAnce

F e at u r e s

12 Kelly’s New COO

DIRECTORS BUSineSS deVelOPMent & MArketinG

Patsy Li

stefanie myers inSiGht editOr-in-chieF/ cOMMUnicAtiOnS & PUBlicAtiOnS

David Basmajian

By Bryan Virasami

Meet the new COO at Kelly Services and see what she says about the ongoing war for talent and Shanghai’s plan to become an international financial center.

helen ren

COMMITTEES

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INterVIeW

16 SME Center Opens

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smaLL BusINess

By Ryan Balis

The ribbon is cut and AmCham Shanghai’s SME Center in our Nanjing West Road office is officially open for business.

EvENTS

Jessica Wu GOVernMent relAtiOnS & cSr

steven Chan MeMBerShiP & cVP

SME CENTER

Kirt Greenburg

INSIghT

26 A New Chapter

MANAgINg EDITOR

SENIOR ASSOCIATE EDITOR

erika Wang

SENIOR COMMUNICATIONS ASSOCIATE DESIgN

alicia Beebe LAyOUT

tina tian

By Ken Jarrett and Peter Martin

As China’s new leaders prepare to take the reins of power, we look at what this once in a decade transition mean for the country, the business climate and the world at large. Plus: a look at post-election U.S. politics.

Bryan Virasami

ryan Balis

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COVer stOrY

42 Members Pick 2013 Chair

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BOG

By Erika Wang

Several new governors were elected to AmCham Shanghai’s 2013 Board.

PrintinG

mickey Zhou Snap Printing, inc.

inSiGht SPOnSOrShiP (86-21) 6279-7119 ext. 5667 Story ideas, questions or comments on Insight: Please contact David Basmajian (86-21) 6279-7119 ext. 8066 david.basmajian@amcham-shanghai.org Insight is a free monthly publication for the members of The American Chamber of commerce in Shanghai. editorial content and sponsors' announcements are independent and do not necessarily reflect the views of the governors, officers, members or staff of the chamber. no part of this publication may be reproduced without written consent of the copyright holder.

I N s I G h t s ta N D a r D s

5 News Briefs

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11 Movers & Shakers

2012 IN reVIeW

Year in Pictures

50 Giving to Those in Need eXeCutIVe CharItIes

INsIDe amCham 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

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From the Chair Board of Governors meeting amCham shanghai in Pictures Government relations COvER ILLUSTRATION By MICKEy ZhOU

XINhUA

Linda X. Wang

Editor's note

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David Basmajian editor-in-chief/ Director Communications & Publications

ho will lead? That was the big question for 2012 in both the United States and in China.

The PRC’s leadership transition went mostly as predicted. We now know that Xi Jinping will lead China for the next 10 years.

America’s election was as raucous as any we’ve ever had, yet the result maintained the status quo. The real impact of both political exercises won’t be known for some time but we do know that sustaining their domestic economies is priority number one for leaders in each country. As Xi considers economic reform and Obama grapples with the “fiscal cliff,” what should we expect moving forward? Kenneth Jarrett and Peter Martin from APCO Worldwide attempt to answer that question in this month’s cover story beginning on page 26.

The year 2012 has seen big changes at AmCham Shanghai as well! In March, we opened the YRD Center in Suzhou, underlining the Chamber’s commitment to supporting American business in the Yangtze

River Delta, still one of the fastest-growing regions in China. And on November 6, we formally opened the long-awaited SME Center. Dedicated to enhancing the competitiveness of U.S. small businesses operating in China, the SME Center was celebrated by both U.S. and Chinese government officials for its potential to contribute to healthy economies on both sides of the Pacific.

Last month, AmCham Shanghai had its own leadership transition. On November 8, the membership elected a new Board of Governors and Bob Theleen will begin his term as Board Chair in January 2013. While Ken Jarrett decided not to run for Chair, he will remain on the Board. Read more about the new Board on page 42.

The holiday season is upon us, and for many it is a time for philanthropy. On page 50, see what top U.S. executives in Shanghai are doing to help those in need. And finally, from all of us at Insight, we wish you a joyous holiday season and we thank you for your support in 2012!

News

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CHINA BUSINESS

Chinese outbound investment accelerates The number and volume of Chinese enterprises’ overseas mergers and acquisitions (M&A) transactions increased from 107 and US$13.58 billion in 2007 to 208 and US$93.09 billion in 2012, respectively, according to research and consulting institute ChinaVenture Group. Energy and mining topped the list for the country’s outbound M&As during the first three quarters of the year, but there were also signs that China is diversifying its outbound direct investment (ODI) to other sectors such as agriculture.

According to Ernst & Young, 82% of China’s ODI went to energy industries in 2009, but the proportion fell to 60% in the first half of 2012. Official data showed that China’s ODI in nonfinancial sectors rose 28.9% year-onyear to US$52.52 billion in the first nine months.

Developers sell more in first 10 months Performance reports for China’s top property developers for the first 10 months showed rising sales revenues, indicating a market warm-up. The developers, including China Vanke Co., the nation’s biggest property developer, and Poly Real Estate Group Co., the second-largest by market value, sold about RMB436.9 billion (US$69.2 billion) worth of property in the past 10 months, up 14.5% from the same period last year. Poly Real Estate reported contract sales of about RMB25 billion in the January–October period, up 16% from the same period last year, according to its report filed with the Shanghai Stock Exchange.

PepsiCo opens huge R&D center PepsiCo, Inc. will open a new food and beverage innovation center in Shanghai – its largest research and development center outside of North America. The 16,000-square meter center is intended to serve as a hub for new product, packaging and equipment innovation to accelerate the pace of PepsiCo’s R&D efforts in China and other growing Asian markets. PepsiCo nearly tripled its business in emerging and developing markets from US$8 billion in annual revenue in 2006 to US$22 billion in 2011. China is projected to become the world’s largest beverage market by 2015.

The R&D center is part of PepsiCo’s plan to invest US$2.5 billion in China over the 2010–2013 period and expand product offerings. The move is also considered an effort to narrow its gap with market leader Coca-Cola Co. PepsiCo’s soft-drink products accounted for 4.9% market share in China in 2011, while Coca-Cola led with 15.8% and Tingyi (Cayman Islands) Holding Corp. held 13.1%. Earlier this year, Tingyi and PepsiCo formed an alliance and recently opened their first beverage manufacturing plant in central Zhengzhou, Henan province.

Glass futures trading The China Securities Regulatory Commission said the State Council has approved the launch of glass futures trading and will soon be introduced at Zhengzhou Commodity Exchange.

Trading of coking coal, vegetable seeds, potato and egg futures are due to follow, according to the commission. Glass

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futures trading will be the second newly listed futures in China this year after silver futures trading was introduced at the Shanghai Futures Exchange in May. In the first 10 months this year, China’s futures market saw the total number of transactions increase 32.5% year-on-year to1.15 billion, with a turnover of RMB135 trillion (US$21.6 trillion) at an 18.4% increase year-on-year.

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Publishing sector gets boost China’s Bank of Communications signed a cooperative agreement with the General Administration of Press and Publication to pump RMB50 billion (US$8 billion) into the country’s publishing industry.

The agreement will help develop the publishing industry, which includes books, magazines, audio visual products, network media, print and publications.

Bank of Communications branches also signed contracts with local publishing groups to promote strategic cooperation.

The bank will provide the finance in three years. The country’s publishing industry income in 2011 surpassed RMB1.4 trillion. Bank of Communications’ total assets at the end of September of this year amounted to RMB5.17 trillion.

CORPORATE NEWS

Rovio and Madhouse partner Finland-based Rovio Entertainment Ltd., creator of mobile game and franchise Angry Birds, and Chinese mobile advertising network Madhouse announced a partnership in mobile marketing for the new game “Angry Birds Star Wars” in China. Star Wars characters, including Luke Skywalker, R2D2 and Princess Leia, are birds in the latest release.

Angry Birds games have been downloaded more than a billion times, with more than 250 million active users per month. Rovio said it hopes to achieve one billion active users with the new franchise. Rovio has two stores, in Shanghai and Beijing, and an Angry Birds theme park in Shanghai’s Tongji University. More than 30% of profits linked to the game come from consumer products.

Nestlé’s US$11.9b Pfizer deal cleared Nestlé SA’s US$11.9 billion purchase of Pfizer Inc.’s infant nutrition unit has been approved in China. The Swiss food and beverage giant is acquiring the unit to combine it with its existing

infant formula business. Analysts say the approval process may still take months of bargaining with antitrust authorities, and the company may have to sell up to 30% of the Pfizer businesses, including those in Latin America, the Middle East and Asia.

In October, Nestlé announced two new R&D centers in China, one in the coastal city of Xiamen and another in Dongguan, southern Guangdong, to support its Chinese-focused food companies, peanut milk and rice porridge maker Yinlu Foods Group and confectionery Hsu Fu Chi.

Mercedes-Benz China recall Mercedes-Benz China will recall 1,525 of its imported B180 and B200 models produced between Feb. 28 and Oct. 8 this year due to faulty fuel tank vent valves, according to the country’s consumer quality watchdog, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). It is possible that vent valves in the fuel tank could loosen if the vehicle is operated with gasoline blended with 15% methanol-gasoline for a certain amount of time. This could result in slight fuel leakage via the valves, which could be a safety concern. AQSIQ said the recall will begin Dec. 26 and the company will offer free vehicle checks and install new fuel tanks if necessary.

Guangzhou Auto and Chery sign agreement China’s state-owned carmakers Guangzhou Automobile Group Co. and Chery Automobile Co. said they will cooperate on R&D, key component development, new-energy technology, parts sourcing, international business and the operation of their manufacturing facilities. Guangzhou Automobile, which is partnered with Japan’s Honda and Toyota, began vehicle production under its own brand, the Trumpchi, two years ago. Guangzhou Auto’s net income dipped by 58% in the third quarter, partly as a result of a sales drop at its joint ventures with the two Japanese carmakers due to strained

Sino-Japanese relations over the disputed Diaoyu Islands. China’s ninth-biggest carmaker, Anhui-based Chery, will transfer its small-sized vehicle platforms and engine and transmission technology to Guangzhou Auto.

MACROECONOMICS

Consumer confidence rises Chinese consumers’ confidence stabilized in the third quarter due to lower inflation and double-digit disposable income growth, Nielsen research showed. The quarterly consumer confidence index rose by one percentage point to 106 in the third quarter – 14 points ahead of the global average. Less concern over inflation in the last quarter drove up confidence among consumers in first-tier cities. Rural Chinese consumers remained the most confident segment of the population in the last quarter at 113 points, the same level as the previous quarter and a three-point year-onyear increase. Personal digital appliances such as tablets and digital cameras ranked high on shopping lists for the year ahead, with 31% of respondents saying they were planning to purchase these items.

October trade surplus widens China’s trade surplus widened in October as export growth accelerated and import growth remained steady, according to data by the General Administration of Customs. Exports rose 11.6% in October year-on-year, higher than the 9.9% increase registered in September and the strongest since May, while imports climbed 2.4% year-on-year, remaining unchanged from the month-on-month growth. The result was a widening trade surplus of US$32 billion in October, compared with US$27.7 billion in September and US$26.7 billion in August.

China’s trade volume with the European Union, its largest trade partner, fell 3% to US$452.8 billion in the first 10 months, while trade with the U.S., China’s secondlargest trade partner, climbed 9.1% to US$396.1 billion.

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China’s growth gains momentum China’s GDP grew 7.4% in the third quarter from a year earlier, the slowest pace in three years, but economists predict the fourth quarter will see more robust growth as October showed signs of recovery.

Industrial production grew 9.6% year-onyear, the best performance in five months.

Investments in fixed assets increased 20.7% in the first 10 months, compared with 20.5% in the first nine months. Retail sales of consumer goods grew 14.5% compared to September’s 14.2%. October’s consumer price index, a key measure of inflation, was 1.7% year-on-year, the lowest in 33 months. Meanwhile, the official purchasing managers’ index rose to 50.2 in October, the first reading above 50 since July, indicating an expansion in manufacturing.

U.S.-CHINA

China tops in FDI For the first time since 2003, China has surpassed the U.S. as the world’s largest recipient of global foreign direct investment (FDI). During the first six months of 2012, FDI flows to China totaled US$59 billion, down from US$61 billion year-on-year.

FDI to the U.S. reached US$57.4 billion, a decline of 39.2% from a year earlier, according to the Global Investment Trends Monitor released by the United Nations Conference on Trade and Development.

China’s economy, although declining due to a slowing growth rate in infrastructure spending and relatively strict monetary policies, is undergoing a fundamental shift where domestic consumption is becoming a key driver.

U.S. to levy duties on Chinese solar products The U.S. International Trade Commission cleared the way for the Commerce Department to levy anti-dumping and countervailing duties on imports of crystalline silicon photovoltaic cells and

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modules from China, after ruling that the U.S. solar industry was materially injured by the imports. The Commerce Department determined in October that these products were sold in the U.S. market at dumping margins ranging from 18.3% to 250% and received countervailable subsidies of about 14.8% to 16%. The duties apply to goods that entered the U.S. after March 20 and May 17, when the Commerce Department made preliminary determinations on countervailing and antidumping investigations, respectively.

China to help in Eastern Air Lines revival China promised to assist in the rebirth of defunct U.S. carrier Eastern Air Lines after unveiling 50 new orders of COMAC C919 passenger jets at the China Airshow, the country’s main air show held biannually in the southern city of Zhuhai. The state manufacturer announced tentative purchase plans by investors said to be planning to resurrect U.S.-based Eastern Air Lines, which went bankrupt in 1991.

The orders for the C919 150-seat jet, due to make its maiden flight in 2014, boosted the official tally to 380. COMAC’s only foreign customer GECAS, a unit of General Electric Co., which co-produces the engines, agreed to purchase 10 more, bringing its total to 20 C919 planes.

GOVERNMENT & POLICY

Futures trading regulations revised China’s State Council unveiled revisions to the Administrative Regulations on Futures Trading that allow overseas institutions to enter the market. The revised regulations, which will take effect from Dec. 1, 2012, allow qualified overseas institutions to conduct trading of certain products in futures exchanges, leaving room for overseas investors to directly participate in futures trading of crude oil, which the government is currently planning to roll out. The revision also specified the definition and characteristics of futures

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trading to provide a clear legal basis for futures supervision and the rectification of illegal trading activities. The council said the revisions were made to keep up with new situations and resolve new problems in futures trading.

Shale gas subsidies offered China’s Ministry of Finance announced that a subsidy of RMB0.4 (6.3 cents) will be offered for every cubic meter of shale gas developed by enterprises during the 2012–2015 period. Local governments may introduce separate incentives according to regional needs. Shale gas, an unconventional source of natural gas, has gathered steam in China amid the government’s efforts to promote the use of clean energy and optimize energy structure. China has rich reserves of shale gas, but expensive exploration costs and sophisticated technological requirements have substantially restrained the sector’s growth. Media reports said China aims to pump 6.5 billion cubic meters of shale gas by 2015, with the commercialization of shale gas production expected to occur during the 13th Five-Year Plan period (2016–2020).

Land reclamation rules outlined China’s State Council has approved a plan to guide water use in a scientific and sustainable way, expanding the permitted area for land reclamation in Shanghai, Guangdong and Hainan before 2020. By the end of 2020, Guangdong can reclaim 23,000 hectares of land from the sea, Hainan can reclaim 11,150 hectares and Shanghai 2,300 hectares. The plan also calls for local authorities to regulate and strictly control their land reclamation projects to guarantee the fishery industry and the sustainability of marine development. Land reclamation has become a common way for local authorities to solve land shortages caused by rapid urbanization across China, posing a threat to marine environments and people living in coastal areas.

SHANGHAI BUSINESS

Shanghai tops as MNC HQ About 60 multinational corporations have set up their Asia Pacific or Asian headquarters in Shanghai as of September, more than in any other city in the Chinese mainland, according to the city’s commerce commission. The data also show that about 77% of Shanghai’s 393 regional multinational headquarters were involved in manufacturing, while 22.9% of them were in the services sector. Enterprises from the U.S. represent 32.6% of the MNCs with regional headquarters in Shanghai, while companies from Europe and Japan take up 25.4% and 23.7%, respectively. As a way to encourage more MNCs to set up corporate headquarters and R&D centers in Shanghai, new regional multinational headquarters will be able to receive a launch subsidy of RMB8 million (US$1.27 million) in three years, while

foreign R&D centers will enjoy duty-free imports of facilities and equipment for their own use.

million year to date, compared to US$1.6 billion for the whole of 2011.

FedEx to open US$100m hub Advent opens Shanghai office Boston-based private equity investor Advent International has opened a branch in Shanghai, its first in China, increasing its global reach to 17 countries.

Advent recently announced it has raised a US$10.8 billion buyout fund, the largest of its kind launched since the 2008 financial crisis. Industry experts say that China is in the midst of a private equity shakeup. China’s securities regulator has so far maintained a tightened grip on approvals for mainland listings, greatly limiting exit options for private equity investors. The number of foreign private equity funds launched this year to invest in China has dropped to four this year, compared with nine in 2011. These private equity funds have raised US$600

Memphis-based FedEx Corp. signed an agreement with Shanghai Airport Group Co. Ltd. to set up a US$100 million international express and cargo hub at Shanghai’s Pudong International Airport.

Slated for completion in early 2017, the new FedEx hub will more than triple the capacity of its current facility to process up to 36,000 items per hour. FedEx now serves Shanghai with 68 flights a week.

The company said in a statement that the move is aimed at enhancing its capability to handle expected increasing demand for shipping services to and from China, with the Pudong airport expected to become the world’s top air cargo hub by 2015. The hub will also help service trade between eastern China and the United States and Europe.

CHINA & THE WORLD

SOUTH AMERICA ASIA-PACIFIC SIA PACIFIC

MIDDLE EAST

JAPAN: Economy shrinks as China dispute takes toll Japan’s economy contracted 3.5% in the latest quarter year-on-year, with the country’s exports – already falling on weak global demand – taking a further dive after its territorial dispute with China over the Diaoyu Islands significantly affected top automakers’ performance. Consumer spending fell 0.5% in the third quarter as subsidies for auto purchases expired, and corporate capital spending fell 3.2%. Toyota Motor Corp.’s sales plunged 41% in September. Nissan Motor Co., the biggest Japanese automaker in China by sales, cut its sales forecast for China and said the reduction would wipe about RMB4.6 billion off annual operating income.

ASIA-PACIFIC SIA PACIFIC EUROPE

AFRICA

COTE D’IVOIRE: Huawei launches data center Chinese telecommunication company Huawei Technologies Co., Ltd. launched a data center in Cote d’Ivoire’s southern town of Grand-Bassam to help government ministries in the information and communication technologies fields. The project is funded by the Chinese firm at a cost of US$30 million. Dubbed Cote d’Ivoire’s “e-government project,” the center will store crucial government information. It is connected to 52 websites of Cote d’Ivoire ministries and will help the government to manage employee numbers.

FRANCE: Airbus teams up with ENN to make green fuel Toulouse, France-based Airbus, with its parent company EADS Innovation Works, signed a memorandum of understanding (MOU) with leading Chinese biofuel producer ENN to jointly explore and develop an alternative fuel made from algae oil, regarded as one of the most promising sources for the production of biofuels in the aviation industry. According to the MOU, a test flight with the biofuel is scheduled for 2013 in China. Airbus also announced that its A320neo passenger jet is expected to be built in China, where the company already assembles the A320 in Tianjin.

MIDDLE EAST EUROPE

NORTH AMERICA MIDDLE EAST

SAUDI ARABIA: Aramco opens head office in Beijing State owned Saudi Arabian Oil Co., or Aramco, opened a new Chinese head office in Beijing, strengthening its presence in one of the world’s largest energy-consuming countries. Aramco Asia, a solely-owned subsidiary of Aramco, will provide crude oil and chemicals marketing services, joint venture coordination, procurement, inspection, research and development, project management, human resources development and communications in the region. The new head office in Beijing has two supporting branches in Shanghai and Xiamen. Aramco already has two joint ventures in China with China Petroleum & Chemical Corp., or Sinopec Group, and ExxonMobil Corp.

AFRICA

MIDDLE EAST SOUTH AMERICA AFRICA

UNITED STATES: Huntsman forms JV with Sinopec Huntsman Corp. and Sinopec Jinling Company, a subsidiary of leading Chinese petroleum giant Sinopec, have formed a joint venture to build and operate a US$750 million facility in Nanjing, eastern Jiangsu province. The Nanjing Jinling Huntsman New Materials Co., Ltd. facility will manufacture propylene oxide (PO) – used in energy efficient home insulation, building materials, comfort foams for automobiles and furniture – and methyl tertiary butyl ether (MBTE), a clean-burning fuel additive that improves gasoline engine performance and reduces air pollution. The facility is expected to be completed by the end of 2014 and it will use Huntsman’s proprietary PO/MTBE manufacturing technology. The Woodlands, Texas-based company said it will own 49% of the project.

AFRICA ASIA-PACIFIC SIA PACIFIC NORTH AMERICA

NORTH AMERICA

SOUTH AMERICA

NORTH AMERICA ARGENTINA: ICBC gets approval for bank takeover EUROPE SOUTH AMERICA Argentina has given approval for the Industrial and Commercial Bank of China (ICBC), the world’s biggest bank by market value, to take control of commercial lender Standard Bank Argentina and its two affiliates, asset manager Standard Investments and Inversora Diagnol, a commercial service provider. ICBC will take an 80% share, while Johannesburg-based Standard Bank will reduce its stake in all three firms to 20%. The move makes ICBC the first Chinese lender to enter Latin America’s thirdlargest economy. ICBC signed the RMB1.83 billion (US$600 million) deal last year.

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SOUTH AMERICA ASIA-PACIFIC SIA PACIFIC

Movers and shakers co M p i l e d b y j oyc e b i a n

Movers and shakers highlights major personnel changes within the chinese government at various levels and senior management-level movements within multinational companies in china.

Ford Motor Company Ford Motor Company has aggressive growth plans in the Asia-Pacific region and China.

It has invested more than US$4.9 billion in China, aiming to introduce 15 new vehicles by 2015 and double production capacity. In November, john lawler, CFO for Asia Pacific Africa, was named chairman and CEO of Ford Motor China. Lawler has worked with the company’s leadership to develop and implement its growth plan in the AsiaPacific region. In his new role, Lawler will focus on the expansion of Ford’s presence in China. david schoch, who has been leading Ford’s growth in China as chairman and CEO of Ford China, will step up as group vice president and president of Asia Pacific.

Both appointments are effective on December 1, 2012.

John Lawler

PRIVATE SECTOR General Motors In October, General Motors appointed raymond Bierzynski executive vice president of SAIC-GM-Wuling, GM’s manufacturing joint venture with SAIC and Wuling Motors in China. Bierzynski has served as executive director of Electrification Strategy for GM China since June 1, 2011.

Bank of aMerica Merrill lynch Bank of America Merrill Lynch appointed veteran China banker Margaret ren chairman for China in October, as the company looks to drive its business in China and broaden its client relationships. Ren joined from BNP Paribas as chairman for corporate finance for Greater China. She was chairman of China Investment Banking at Merrill Lynch from 2007 to 2009.

Ren has more than 20 years of industry experience in China’s banking industry. citi china Citi China appointed yigen Pei head of Transaction Services for China in September. Based in Shanghai, Pei will be responsible for driving transaction services’ growth and creating new services for Citi’s customers. Pei was most recently product Yigen Pei head for the Treasury and Trade Solutions business at Citi China and has more than 20 years of experience in the financial services sector.

edelMan china GrouP Edelman announced several appointments in October after it restructured its China business in anticipation of continued high growth. steven cao was appointed CEO of Edelman China. Wang Zhe and tao yumin were both named co-president of Steven Cao Edelman PR for China. Jeffrey yu will oversee Pegasus, Edelman’s subsidiary company in China. first solar First Solar, Inc. appointed Bruce yung as managing director and vice president of business development for China at the end of September, as the largest U.S. solar-panel maker looks to expand in China. Yung has 25 years of experience in the energy Bruce Yung industry throughout Asia and Europe, covering oil, gas, coal, power and renewable energy.

GOVERNMENT Shanghai Mayor han Zheng was appointed Party chief of the CPC Shanghai Municipal Committee by the CPC Central Committee in November. Han has served as mayor of Shanghai since 2003 and is a member of the Political Bureau of the 18th CPC Central Committee.

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

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INT E RVI E W B y b r ya n v i r a s a m i

Developing a Competitive Edge Kelly Services’ new COO of North Asia says the competition for skilled workers isn’t slowing and voices skepticism on Shanghai’s plans to become an international financial center

St. Petersburg University of Economics and Finance, Russia, with a B.Sc. in finance.

She recently sat down with Insight to discuss current trends in the recruitment industry and what multinationals are doing to recruit and retain skilled workers. Here is the interview.

Natalia Shuman of Kelly Services

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atalia Shuman is the new chief operating officer for North Asia and vice president of Global Strategy Customer Relationships at Kelly Services. She has held various senior positions at Kelly and has worked in Russia, New York and Singapore, among other places. Her new role puts her in charge of South Korea, Hong Kong and China. She attended the Global Executive MBA program and holds dual master’s of business administration degrees from Columbia University and the London Business School. She also graduated with distinction from

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Insight: You’re new to China. What are your top priorities and goals as COO? Natalia Shuman: “I have several priorities. The first priority is to continue to develop talent – that is my number one priority. I think in order for us to be successful in North Asia, and China in particular, we must focus more on our internal resources. So far, we have done quite a bit in building our talent bench, but I don’t think we have done enough. We have to do more. Our current leadership development program is called ‘Leading Leaders.’ It’s basically a mini-MBA type of program that we run across all Asia-Pacific.

We currently have a few top performers from China participating in this program and we are not going to stop at this.

“We plan to invest more in learning and development and bring the best programs here from across the globe. The number two priority is to grow in China. We will continue to build additional capabilities, to make sure we’re capable of meeting the emerging needs of our clients.

Many know us as a successful ‘headhunting’ and recruiting firm in China and now it’s time we advance our ser vices and offer additional workforce solutions.

“My third priority is to focus on our global customers in China. It’s very clear that for many companies, China is a very important market and for some it’s becoming the largest market. We have been asked by those customers to help them i mp l e m e nt l o c a l s t a f f i n g p l at f o r m s a n d technologies. It is critical for us to include China

in their global staffing programs. We need to be ready and ensure we can provide the same levels of services in China as we do in the U.S. and Europe.”

Insight: What’s your top challenge in China for 2013?

NS: “I think retention and hiring talent are still going to be challenging. More multinational c omp an i e s a re e x p an d i n g t h e i r C h i n e s e operations. And the war for talent continues.

From the staffing and recruitment industry prospective, the operating environment here in China is tough: the competition is strong, limited collaboration between players, not enough regulations from the staffing associations, quality issues, cost pressures and price wars. So, I think all of it brings a significant challenge. At Kelly, we must continue developing sustainable competitive advantage and be different. So for

me, to create those differentiators or to sustain those differentiators is going to be important.”

Insight: You said it’s hard to find skilled workers in China. Some say universities don’t do enough to prepare students for the world. Do you agree?

NS: “It’s a combination. It is true that universities do not prepare the talent that can step in and be productive from day one. What is happening is that graduates have great technical knowledge but they don’t have soft skills or necessary industry knowledge. The future workforce needs to be trained on soft skills and understand the complexities of the business world. I’ve heard that in the past, Chinese SOEs did not put enough emphasis on training, but now many large Chinese companies and, of course, MNCs, introduced multiple training programs, and are investing in people’s skills. “ The L&D (learning and development)

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“

People are getting the same salary, maybe even higher, particularly in Shanghai and Beijing, compared to New York or London nowadays.”

specialist is one of the toughest positions to fill in China. There are plenty of them in the U.K. and in the U.S. but not in China. There is a deficit of some specialty-skill workers in China such as experienced brand managers, strategic general managers, some other positions in strategic corporate functions like HR, marketing and finance. It reminds me of my job at our first recruiting firm in Russia back in 1994. I had a Western multinational client at the time that requested a local marketing manager with five years of marketing experience. Of course, it was a normal request from the Western point of view, but for Russia it was very odd as the market was just forming and there were no experienced marketers. The same is going on in China now where certain professions and skills have never existed.”

Insight: Is it true a financial analyst in China makes as much as one in the U.S.?

NS: “Yes, very true. In general, it’s very hard to f ind p eople for the f inance industr y. S o, obviously, the lack of supply and high demand is ref lected in compensation. If you look at Shanghai’s market today it’s not only financial analysts. There are multiple positions and multiple functions where salaries are ver y competitive compared with global. People are getting the same salary, maybe even higher, particularly in Shanghai and Beijing, compared to New York or London nowadays. Not in every category in the finance area but in some like asset management, wealth management and private banking.”

Insight: This is for local talent also?

NS: “Yes, mostly overseas Chinese or Chinese with Western experience who are coming back here. They could easily get more money here than they would get in New York or London.”

Insight: Shanghai wants to become an international financial center by 2020. Since you have experience on Wall Street, do you think Shanghai has what it takes to become an IFC? NS: “I am still quite new in Shanghai and China

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but my understanding is that the Shanghai Stock Exchange is still miles apart from Wall Street. It suffers from poor credibility caused by a lack of corporate transparency and financial statement account abi lity. There is limited range of sophisticated investment instruments and the currency isn’t fully convertible. And, I don’t think investors are getting the appropriate return. From the beginning of 2001 to the end of 2011, returns were negligible in spite of significant inter-period volatility. Right now, most investment returns are primarily from real estate. China needs to make the Shanghai Stock Exchange more competitive and manage it in a better way to become an IFC and compete with London and Wall Street.

“In terms of what we see from the business perspective, there is a huge movement of financial institutions and investment banks from Singapore and Hong Kong into China and that’s another reason why there’s such a high shortage of talent.

We also noticed that many individuals in finance and banking industries, mostly expats, are being relocating to Shanghai from Singapore. In fact, at Kelly, we have a whole team responsible for banking and finance. We feel that there is a huge potential for Shanghai to be an international financial center. But, from a financial instruments perspective and based on the way financial markets work, Shanghai is not a significant player yet. But here in China, it takes one year to do what other countries do in 10 years, so it’s quite possible for Shanghai to become an IFC in the next eight years. I wouldn’t be surprised to see that. But I think there are a lot of things that China could do better, such as greater investor protection and more comprehensive financial regulations.”

Insight: Kelly produces many reports. Were there any findings that surprised you?

NS: “The surprise probably for many is that there is not a real slowdown. You often hear that China is slowing down but if you look at the employment numbers and the hiring rates, there is no evidence of a slowdown. At least we don’t see it; we feel actually there is more demand for talent. This is the place to be.”

SMALL B U SIN E SS B y R ya n B a l i s

SME Center Now in Business

U.S. Consul General in Shanghai Robert Griffiths speaks at the inauguration of the SME Center

AmCham Shanghai officially opens new SME Center to boost support to U.S. SMEs and those looking to do business in China

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he number of U.S. SMEs targeting China as a destination for i nve st me nt , e x p or t s a l e s and business expansion continues to climb. Though China offers a compelling destination for American small business, many SMEs lack the res ources, knowledge and expertise readily available to larger firms, yet necessary to compete and win in international markets.

It’s why AmCham Shanghai recently launched the SME Center (sme.amcham-shanghai.org): to help increase the competitiveness of U.S. SMEs, which are defined as businesses with fewer than 500 employees. Housed in the newly renovated AmCham Shanghai office, the SME Center provides targeted resources and referral services to help small businesses export to and compete in the China market.

To mark the center’s launch, a ribbon-cutting ceremony was held on November 6 at the AmCham Shanghai Conference Center. More than 150 members and guests attended the ceremony, including President Brenda Foster, 2012 Chair Kenneth Jarrett, U.S. Consul General

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Robert Griffiths and Chinese officials from Shanghai and neighboring cities.

“The opening of the SME Center and new conference space begin an exciting new chapter for AmCham Shanghai,” said Jarrett at the launch event. “Working with the Chamber’s SME Center staff and leveraging our over 3,700-strong member network, U.S. SMEs will now be able to take advantage of a range of offerings.”

Griffiths congratulated AmCham Shanghai on opening the SME Center and expressed his h o p e f or i t t o h e lp prov i d e c om m e rc i a l opp or tunities for American and Chines e companies. “Encouraging more American SMEs to enter the Chinese market will deepen our two countries’ trade and commercial ties, and contribute to job creation in the United States.

Our SMEs are innovative and well-positioned to compete in China, and this center will help them do so,” he said.

In the months before the launch, AmCham Shanghai published a Viewpoint targeted to U.S. SMEs and distributed it on the fall 2012 Doorknock in Washington, D.C., garnering enthusiasm for the Chamber among federal,

“

state and local government officials. Titled Oppor tunities for U.S. Small and Medium Business in the China Market, the study looks indepth at how U.S. SMEs increasingly are looking to China for export, investment and business opportunities – and are finding success. Below are highlights from the Viewpoint.

Boosting competitiveness According to U.S. Commerce Department data, SMEs registered US$30.4 billion in export sales in 2010 – more than a third of all U.S. goods exports to China that same year. China is the third largest export market for U.S. SMEs. Those exports translate into supporting jobs – approximately 150,000 American jobs in 2010, according to U.S. Commerce Department data.

Despite playing a critical role in powering U.S. economic growth and supporting job creation, U.S. SMEs are relatively inactive internationally, focusing instead on serving the U. S . d o m e s t i c m a r k e t . U. S . C o m m e r c e Department data show that only 1 percent of the nation’s approximately 28 million SMEs export.

Among those that do export, only 10 percent – or roughly 30,000 small companies – export to China.

The result is SMEs are losing out on selling their world-class products and services to 96 percent of the world’s customers who combined hold two-thirds of the world’s purchasing power.

The opportunity in China is so great that simply doubling the number of U.S. SMEs that export to 2 percent worldwide would result in approximately US$400 billion in additional e x p o r t s a n d ap p r o x i m at e l y t w o m i l l i o n American jobs, the report said.

U.S. SMEs are well-positioned to compete in China, leading the world as sources of technological innovation and development of new goods and services in high demand in overseas markets, including China. But many SMEs are reluctant to do business overseas, often for the first time, because of a variety of challenges.

As observed in AmCham Shanghai’s 2012

SME Challenges Survey conducted in August, these range from day-to-day challenges like an unclear regulator y environment, cultural challenges and human resource constraints, to more fundamental hindrances such as market access limitations and a legal system tilted in favor of local Chinese companies.

Targeted support from the U.S. government, along with public-private partnerships, is critical in helping a larger number of SMEs address the challenges of doing business in international markets as well as increasing overseas competition that is taking advantage of wellfunded home government programs. The need is great considering that 85 percent of SME survey respondents said they have never used a U.S. government ser vice to support their competitiveness in China.

Ryan Balis is Senior Communications Associate at AmCham Shanghai. Visit www.amcham-shanghai. org to download Opportunities for U.S. Small and Medium Business in the China Market. For more information about the AmCham Shanghai SME Center, visit sme.amcham-shanghai.org.

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[D]oubling the number of U.S. SMEs that export to 2 percent worldwide would result in approximately US$400 billion in additional exports and approximately two million American jobs...”

AmCham Shanghai AmCham Shanghai Charity Ball

This was an especially busy year as AmCham Shanghai not only inaugurated the SME Center and the YRD Center, but also saw major political events in both the United States and China.

Here are some highlights.

Roundtable discussion in May with John Bryson, right, then U.S. Commerce Secretary

Nebraska Governor Dave Heineman meets AmCham Shanghai Vice Chair Robert Theleen

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AmCham Shanghai Board member Chen Lienjing speaks during the Chengdu Business Delegation event

Shanghai Calling event

AmCham Shangh Chase Corporate

2012 in Pictures

U.S. Ambassador Gary Locke speaks during this year’s Barnett Oksenberg Lecture on Sino-American Relations

AmCham Shanghai hosts former U.S. Ambassador Stapleton Roy (third from left)

hai participates in the J. P. Morgan e Challenge

Independence Day celebration

Suzhou Government Appreciation Dinner NOVEMBER 2012

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2012 sPECiAL

tOP tEn CHINA STORIES Here is a list of China-related stories that our readers may have missed in 2012 compiled by the staff at Insight.

No.1

sPACEgiRL: Liu Yang, 33, an air force major, became the first female astronaut in China to go to space as part of a three-member crew that was also the first manned space mission to dock a spacecraft with space lab Tiangong 1. Liu spent 13 days aboard the Shenzhou 9 doing experiments. Liu, a Henan native, joined the military in 1997 and her fans know her as “Little Flying Knight� on QQ, reports say.

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singLEs sALE: Some 10 million people spent more than RMB2 billion in the first 70 minutes of a 24-hour, 50-percent-off sale on the retail website taobao.com. At least 10 million shoppers bought items on November 11, which is known as Singles' Day in China.

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gEtting tOUgh: China unveiled a new exit and entr y law with harsher punishments for foreigners who illegally enter, live or work in the country. Employers will be fined RMB10,000 for each foreigner they illegally employ, while foreigners who illegally stay in the country may receive penalties of up to RMB10,000 or be deported with a 10-year ban in severe cases.

The new law was announced in June and will take effect July 1, 2013.

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MiLEstOnE: U.S. automaker General Motors and its joint ventures sold their 2-millionth vehicle in China by September 21, the earliest in the year they reached this milestone and only the third time for GM in China.

i-hAngZhOU: Hangzhou is said to be first city in China to offer citywide WiFi, effective in October. There will be some 2,000 access points covering 220 square kilometers.

The “i-hangzhou” signal is accessible via mobiles and tablets, and will be available for laptops by next year.

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sign hERE: Citibank became the first international bank to issue a solebranded credit card in China after unveiling in October its set of five Citi China UnionPay, Visa and MasterCard credit cards, which are offered across two categories depending on different spending needs and feature preferences. They are issued either as renminbidenominated or U.S. dollar-denominated cards.

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tEEn MAstER: Guan Tianlang, 14, of China will become the youngest golfer in U.S. Masters history when he tees off in Augusta, Ga., next April. A former J u n i o r Wo r l d G o l f champion in the 11–12 category, Guan qualified for The Masters after winning the Asia-Pacific Amateur Championship in Thailand in November.

He will be more than two years younger than the next youngest participant, Italy’s Matteo Manassero.

COAL QUOtA: Tianjin said this past summer it will keep its total coal consumption within 15 million tons by 2015, using 2010 as baseline, and it further intends to cap coal consumption at under 40 percent by 2020. No new coalfired power plants will be constructed during the 12th Five Year Plan period, while natural gas and renewable energy will be increased during the 13th Five Year Plan period.

MOViE DEAL: Vice President Xi Jinping inked a deal with U.S. officials that will expand the number of Hollywood movies shown each year on Chinese screens from 20 to 34, provided the 14 are IMAX of 3-D formats such as The Adventures of Tintin. The February pact ends a 20-year-old quota and it made many U.S. studio executives happy.

high sEAs: China joined a small group of nations with aircraft carriers when it officially handed Liaoning to the PLA Navy in September. This makes China the 10th country and the last of the five permanent UN Security Council members to have an aircraft carrier in active service. The ship was refitted from the Soviet ship Varyag.

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2012 sPECiAL

tOP tEn SHANGHAI STORIES This is a list of Shanghai-related articles over the last year that we feel are worth remembering.

No.1

AiR tEst: In May, the U.S. Consulate in Shanghai began monitoring air quality in the city and providing the readings on its website. The air quality monitor measures PM 2.5 particulates (“fine”) on the Consulate compound located on Huaihai Road. During the first two weeks of November, readings showed that the local air quality was mostly “very unhealthy” or “unhealthy.” The small particulates can enter the lungs and bloodstream and may pose a higher risk for people with certain diseases.

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BLOWn AWAY: Typhoon Haikui forced authorities to evacuate 374,000 people along the outskirts of Shanghai and 250,000 residents from Zhejiang province in August.

In the city, authorities banned all outdoor events and issued an order to close schools and offices.

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PUFF stUDY: Upwards of 80 percent of Shanghai residents back a total ban on indoor smoking, according to a Shanghai Health Promotion Commission survey of 15,000 residents in May. Two years

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ago, the city enacted an anti-smoking law to set aside no smoking areas in bars, hospitals and restaurants. China’s Ministry of Health said three million Chinese may die of smoking-related illnesses each year without new laws to curb the habit.

REFREshing: PepsiCo, Inc. launched a new state-of-the-art food and beverage innovation center in Shanghai, the company said in November. It will be the company’s largest research and development center outside of North America. In addition to research, it will serve as a hub of new product, packaging and equipment innovation for the company’s Asia operations.

year, representing half of the annual emissions in the city. The pilot program, announced in July, also covers six other cities and will go national if the National Reform and Development Commission deems it a success.

sUBWAY sAX: Musicians who pull out their fiddles and drums in the subway or other spots can now do so without fear of being harassed by police, according to a new regulation unveiled in August that will identify specific public areas of the city where musicians can perform.

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4

COOL MOVE: A move to cool Shanghai’s housing market in August ended up barring unmarried non-local men and women from buying a home in the city. Previously, the city restricted local residents from owning more than two homes while out-of-towners living there could own just one.

WhEEL DEAL: Drivers in Shanghai will enjoy more than half off the price tag of the Roewe E50, the nation’s first homegrown electric car that retails for about RMB220,000 to RMB240,000, it was announced in November. It can be bought for RMB100,000 after government incentives to encourage green energy vehicles. The tiny four-seater was developed by the Shanghai Automotive Industry Corp. and has a top speed of 130 kph.

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WAtER WORLD: Shanghai skyscrapers are among the world’s tallest, but among large major cities, it’s most vulnerable to a “once in 100 years” flood, according to a study by scientists in the UK and the Netherlands that looked at infrastructure, economics and administrative issues.

The August report said Shanghai faces a greater risk than Dhaka, Bangladesh, which regularly experiences typhoons.

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OnLY YOU: The super rich who prefer to browse with privacy can now do so at a new Louis Vuitton luxury store in Shanghai’s Plaza 66 that opened in July. It’s decked out in a gilded spiral staircase and has an “invitation-only” floor that will offer custom-made shoes and bags. China is expected to become the world’s top luxury market within three years.

PAY tO PLAY: Companies in Shanghai with large carbon footprints will be expected to fork over more cash next year in a bid to control the amount of emissions produced by some 200 companies. They represent steel, petrochemicals, airlines, hotels and more. These companies spout 110 million tons of carbon dioxide a

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2012 sPECiAL

tOP tEn QUOTES Our Top 10 quotes from 2012 are from notable personalities in the U.S. and China.

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expressw ay, “Som etime s I feel like I am drivin g down an the reason t forgo I but er, speeding from one place to anoth .” and I do not know the final destination stress of balancing Rebecca Jiang, 29, from Beijing, on the 16 nov. ek, essWe Busin berg Bloom , work life and

“This is a huge bet for the future for us.

If we succeed, this opportunity is greater than anything else we could be doing. It’s a long -term bet, but it is in what unqu estio nably will be the large st entertainment market in the world.”

on of this “Yet it is rather ironic that a considerable porti actually was h China-battering politician's [Mitt Romney] wealt e he befor anies obtained by doing business with Chinese comp entered politics.”

Xinhua editorial via China Daily, sept.

“We want to work with China to make sure that everybody is working by the same rules of the road when it comes to the world econ omic syste m, and that includes ensuring that there is a balanced trade flow.”

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Pres ident Bara ck Obam a durin g an even t with Xi Jinpi ng at the Whit e house, Reuters, Feb. 14

forget those “As the saying goes, when you drink water, don’t China-U.S. of fruit the who dug the well. Today, when we enjoy Chinese of s ation gener relations, we should be grateful to the n to the ibutio contr and American leaders for their outstanding ons.” new chapter in the annals of China-U.S. relati

4 5

with Joe Biden in Vice President Xi Jinping during lunch 14 Feb. n, ingto Wash

been increasing “The number of foreigners entering China has ities and goals ident Their . by 10 percent annually since 2000 are wide ties activi their are more diver se than ever, and ranging and complicated.”

c security, Xinhua, Yang huanning, vice minister of Publi June 30

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U.s. secretar y of stat e hilla ry 15 nov. raph, Clinton, The Teleg

Jef frey Katz enbe rg, Drea mWo rks Anim ation ’s chief exec utive offic er, Bloomberg News, Feb. 18

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"We support Australia having strong, multifaceted ties with every nation in the Asia- Pacif ic, indee d in the world , inclu ding Chin a, just as we seek the same . And I have said repeatedly, the Pacific is big enough for all of us."

DECEMBER 2012

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rules at the “China doesn’t get a free pass to violate the tain these main to need We expe nse of Ame rican jobs. laws to trade our ce enfor gly countervailing duties and stron ers.” work and esses level the playing field for U.S. busin

ittee Chairman, after Jeff Bingaman, senate Finance Comm imports, U.S. Senate a bill to continue duties on certa in 5 h Marc ent, statem

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"I unde rstan d it beca use the Chin ese alway s win, and mayb e some people think this is not good for table tennis. I don't think so.We always win because we work much harder than the others."

s coach, after new shi Zhihao, Chinese women's table tenni ’s dominance in Olympic rules some say could curb China 1 Aug. rs, Reute , the sport

international "America has worked to bring China into the of America's one system, including on trade, and China is now inment. conta of largest trading partners. That's hardly evidence mely supre a If America is trying to contain China, it is doing for d expan lousy job. China has done nothing but grow and the last 40 years.”

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Prog ress, Reuters, nina hachigian, Center for American nov. 7

Š 2012 United Air Lines, Inc. All rights reserved.

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And then some.

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Carve out some time on your calendar. With the most comprehensive route network, you’ll run out of days before we run out of places to take you. For more information, go to united.com.

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XINHUA

TRANSITION: China’s incoming President Xi Jinping with current President Hu Jintao

A NEW CHAPTER

Xi Jinping will lead China for the next 10 years and our in-depth analysis looks at the significance of this unique power transition and what it means for the country, the economy and the world

By KEn JARREtt AnD PEtER MARtin

T

he 18th Party Congress was China’s most significant political event of the last decade and certainly one of the most highly anticipated events in the world of politics. Just a day after Americans went to the polls to elect a president, 2,270 Communist Party delegates gathered at the Great Hall to name Xi Jinping as their new Party secretary and other leaders who will lead the world’s second largest economy.

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Xi will take over as president in March 2013, and this is significant not just for 1.3 billion Chinese but for most of the world including executives at American companies who are eager to understand the business impact these new leaders will have on their companies and the country they operate in.

The delegates also elected the 25-member Politburo and the seven members of the Politburo Standing Committee, China’s most powerful political institution.

c o v E R s to R y

This year’s leadership transition was in fact unprecedented. It marked the first time in the Communist Party of China’s (CPC) history that it conducted a leadership transition that was not orchestrated by Mao Zedong or Deng Xiaoping.

New CPC Party Secretary Xi Jinping’s most recent predecessors, Jiang Zemin and Hu Jintao, were picked by Deng Xiaoping in the aftermath of the events of June 4, 1989. Both were selected because Deng believed they could ensure stable Party rule after social discontent threatened to spell an end to the regime. Today, at a time when China’s economic growth model is under strain, social unrest is on the rise and the global economy is shaky, the question is whether China’s new generation of leaders can deliver the changes necessary to maintain Party rule until the next leadership transition and beyond.

hu Jintao’s legacy Hailed as “reformist technocrats,” the Hu-Wen administration entered office amid high expectations for reform. Their decade in office featured some real achievements, but did not deliver the kind of economic or political reform many had hoped to see.

They leave office among a growing sense of anxiety about China’s future, caused in part by missed opportunities to reform over the last decade.

“

Shrinking the Standing Committee to seven members should make it easier to make decisions…”

The Hu era saw some significant successes. A decade of doubledigit growth boosted living standards for hundreds of millions and turned China into the world’s second largest economy.

Taking office at a time of rising domestic inequality, Hu and Wen vowed to create a “harmonious society,” emphasizing the need to redistribute the proceeds of economic growth more equitably.

XINHUA

Xi Jinping and other newly-elected members of the Standing Committee of the 18th CPC Central Committee Political Bureau in the Great Hall

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Meet the Leaders Xi Jinping, 59, president

Li Keqiang,

57, premier

Xi Jinping is Party Secretary General and Chairman of the Central Military Commission. Born into Communist aristocracy, Xi has also lived amid the poverty of the countryside. His father, Xi Zhongxun, was a vice premier and a revolutionary hero. From 1962–1978, the elder Xi was held under house arrest, while Xi was sent to work on a farm in Shaanxi, one of China's poorest provinces at the time. Xi studied chemical engineering at Tsinghua University in Beijing.

The best educated leader in modern Chinese history, Li has a PhD in economics and a master's in law from Peking University, and speaks fluent English. He was born in Dingyuan county, Anhui province. After college, Li turned down the chance to study in the United States, staying in Beijing to join the Communist Party Youth League, which he eventually headed under the mentorship of Hu Jintao.

Known to have a personable, confident character, he built a reputation for attracting investment, being open to private business and for being an effective leader as he moved up through the Communist ranks, from deputy mayor of Xiamen, to deputy governor of Fujian province, to party chief in Zhejiang province. Xi also briefly ran Shanghai before being put in charge of the 2008 Beijing Olympics, whose success further cemented his reputation.

Zhang DeJiang,

Yu Zhengsheng,

66, npC Chairman

67, CppCC Chairman

Zhang Dejiang has a reputation as the sort of man that China’s leaders trust to take care of a crisis. Born in the northeastern province of Liaoning, Zhang spent two years studying in Pyongyang, North Korea and was Communist Party secretary in three provinces.

As Shanghai party chief since 2007, Yu has earned a reputation as a man who avoids rocking the boat by pushing radical ideas.

Born in Zhejiang province, Yu was raised by his journalist mother from the age of 12 after his father, the first mayor of Tianjin, died.

Liu Yunshan,

Wang qishan, 64, Discipline Chief

66, executive Vice premier

Liu is a former PR specialist and reporter for Xinhua, the state news agency. Liu is thought to be the man responsible for creating the Great Firewall as well as the campaign that eventually saw Google pull out of China in 2010.

A Qingdao native and history graduate with an extensive background in finance, Wang is popularly known in China as “the fire chief” for managing a number of crises over the course of his career, most notably when he stepped in as Beijing’s mayor in 2003 to clear up the SARS crisis.

Born in Fujian, he graduated from Xiamen University after studying statistics and economics and spent a number of years working for state-owned oil companies while rising up through the Communist party.

65, head of CCp secretariat

Zhang gaoLi,

NOTE: All goverment titles will be formally announced by March 2013 28

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c o v E R s to R y

XINHUA

They expanded social insurance coverage and focused attention on China’s poorer central and western provinces. China became a global player economically and politically, as symbolized by the 2008 Beijing Olympics and 2010 Shanghai World Expo. Hu and Wen also orchestrated China’s swift and decisive response to the global financial crisis which averted an economic meltdown in China. That was no small feat and helped to avert an even more severe global economic crisis. As Hu and Wen step down, however, they leave their successors with a host of problems: l strains in china’s economic model: Many point to the resurgence of the state-owned sector and protectionist industrial policies as a hallmark of the Hu-Wen era. These trends XINHUA

“

…China’s new leadership includes graduates of law, economics, and even a former journalist.”

Xi Jinping

were intensified by the 2009 stimulus package which boosted the state-owned sector while leaving many of China’s private enterprises struggling for life. The financial crisis also made the administration’s aim of rebalancing China’s economy towards domestic consumption more difficult: domestic consumption currently accounts for only 35 percent of GDP, down from just over 40 percent in 2002. Even Hu Jintao himself in his work report echoed Wen Jiabao’s previous statements that China’s economic model is “unbalanced, uncoordinated and unsustainable.” l Rising social tensions: The last decade has seen increasing numbers of “mass incidents” or large-scale protests (estimated to have numbered 180,000 in 2010 alone) and even uprisings of whole villages such as the 2011 “Wukan uprising.”

The Hu-Wen administration’s response was an unimaginative combination of coercion, propaganda and policy fads such as “social management.” Indeed, Hu’s work report conceded that “social contradictions have clearly increased.” l growing international mistrust: China has entered the world stage in the form of increasing numbers of Chinese

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multinationals, a growing blue water navy and Confucian Institutes aimed at promoting the country’s soft power. This has led foreign governments and businesses to worry about their newfound dependence on China’s economy, as well as concerns about China’s increasingly assertive international conduct.

Indeed, China’s image abroad suffered a series of blows as its foreign policy drove its neighbors further towards the safety of the U.S. security umbrella.

No one knows whether Hu Jintao was a reformer weighed down by circumstance or a conservative who never intended to reform. Regardless, this list of complex problems will be at the top of the in-tray of Xi Jinping and China’s new leaders.

china’s new leaders Political systems like China’s have a remarkable capacity to produce leaders who never reveal their true intentions. In fact, Leninist party systems like China’s almost require that individuals go their entire careers without ever revealing their true beliefs. No one could have predicted, for instance, that Deng Xiaoping would unleash the kind of economic reforms that he enacted before he took office. The section below provides a cautious analysis of China’s incoming leadership. On average, the group is slightly older than the previous Standing Committee,

inhEREnt RisK

• The nature of Bo Xilai’s fall from power and the mysterious and unexplained nature of Xi Jinping's two-week absence in the run-up to the Congress are indicative of the secretive and unpredictable nature of Chinese leadership transitions. This uncertainty is unsettling to markets and underlines the fact that, despite 30 years of continued economic growth, China’s political environment continues to generate risk for companies with operations in the country.

slow At fiRst

• While the streamlining of decision-making at the top of the CPC should make policy change easier to engender, the new administration will require a period of time to unify the Chinese bureaucracy behind its policy agenda and

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but has a more diverse combination of backgrounds. In contrast to China’s previous generations of technocratic engineers, China’s new leadership includes graduates of law, economics, and even a former journalist. Many of them were sent down to the countryside during the Cultural Revolution, an important formative experience. The new Standing Committee is also transitional in nature. Five of the seven PSC members must retire in 2017 due to age limitations.

The composition of the Standing Committee bears the indelible influence of former President Jiang Zemin, a man rumored to have been on the brink of death just one year ago. In recent years, China’s political factions have centered on Jiang and Hu Jintao. In a rivalry lasting more than a decade, Jiang seems to have had the last laugh – of the seven Standing Committee members, five are strongly associated with Jiang Zemin, namely Xi Jinping, Zhang Dejiang, Wang Qishan, Yu Zhengsheng and Zhang Gaoli.

Reformers?

The months preceding the Xi administration’s assumption of power has seen a build-up of expectations for reform, similar to the expectations before Hu Jintao took office. While it would be foolish to make rash predictions based on limited

will need to navigate vested interests as it does so. Policy change will therefore be slow in the first year or two of the administration.

nEw thEMEs

• Just as the Hu-Wen regime began to publicize its themes of “scientific development” and “harmonious society” shortly after taking office, Xi's new regime is likely to devise a theme or set of themes which summarize its policy priorities for its term in office. MNCs are advised to take careful note of the key themes emphasized by the incoming leadership and adjust their key messaging for government outreach appropriately.

outREAch EffoRts

• Foreign companies should prepare outreach campaigns with

c o v E R s to R y

XINHUA

President Hu Jintao and Xi Jinping greet military leaders

IMAGINE CHINA

the aim of enhancing their reputation among newly appointed government officials. There will be a lame-duck period of several months until new government officials are in place.

oPPoRtunitiEs

• The drafting process for the 13th Five-Year Plan will commence around the fall of 2013. This document will represent a major chance for Xi to fully align China’s bureaucratic machine around his policy agenda, just as Hu and Wen used the 11th Five-Year Plan to impose their own policy agenda early on in their administration. Preparations for the 13th Five-Year Plan will involve wide consultations and presents an opportunity for MNCs to engage with government organizations in order to present themselves as partners of China and to advocate their preferred policy outcomes.

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WHITE HOUSE PHOTO

Xi Jinping chats with President Obama during his visit to the White House earlier this year

information, there are reasons to be cautiously optimistic about the prospects for market-oriented economic reform in a Xi Jinping administration. Meaningful political reform, despite the perennial hopes of pundits in China and abroad, is not likely.

Pressures for political change in China will continue, particularly as the leadership feels the need to respond to popular opinion. For the immediate future, however, political reform will only mean modest initiatives within the CPC to further institutionalize how power is transferred and the role of the Party elite in that process. l Economic reformers: A number of incoming leaders – including Xi Jinping himself – have reasonable credentials suggesting they will be in favor of pro-market reforms. Yu Zhengsheng and Wang Qishan have all been closely associated with pro-business policy stances in the past, as was Zhang Gaoli during his time in Shenzhen (although his record in Tianjin is

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more mixed). Li Keqiang’s reform credentials are less certain. He is a political protégé of Hu Jintao and Wen Jiabao, suggesting an affinity for the status quo. But Li was reportedly a key driving force behind the World Bank’s China 2030 report, which called for market reforms in China. On balance, the new PSC seems more inclined towards economic reform than the outgoing PSC. l Political conservatives: On the other hand, those hoping for political reform from the incoming leadership are likely to be disappointed by the new line-up. Neither Li Yuanchao nor Wang Yang, both of whom have publicly supported calls for political reform, made the final line-up. And the Standing Committee now has Liu Yunshan, a key architect of the Hu-Wen administration’s tight restrictions on the media, Internet and political discourse.

Moreover, there is no reason to expect that the new leadership will be any less preoccupied with maintaining stability than the outgoing leaders, creating a barrier to substantial political reform

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XINHUA

not easily overcome.

can reforms be implemented?

Even if the new PSC is reform-minded, will China’s current political system allow major economic or political reform?

While decision-making at the very top of China’s political establishment will be somewhat streamlined following the Party Congress, a plethora of vested interests will make change difficult to implement.

A throng of cameras at the 18th Congress in Beijing

streamlined decision-making at the top: l from nine to seven: Shrinking the Standing Committee to seven members should make it easier to make decisions in a system which has often found itself paralyzed by the need for top leaders to operate by consensus. l Factional affinity: The new Standing Committee members have more similar factional and policy backgrounds than the previous members, which should facilitate decision-making. l Xi as cMc chairman: Xi Jinping’s assumption of the chairmanship of the Central Military Commission should accelerate his consolidation of power and make it easier for him to engender policy change. It also suggests that Hu Jintao is less likely to meddle in politics than Jiang Zemin has been, leaving Xi’s administration greater room to shape its own policy agenda.

But broad vested interests below will resist change: l Xi’s commitment to the hu-wen agenda: Xi Jinping has made repeated public commitments to the policy agenda of the outgoing regime, including economic rebalancing and the key initiatives of the 12th Five-Year Plan. Both Xi and Li played a leading role in the development of that plan. This will reduce somewhat his freedom to shape a new policy agenda in the near term. But Chinese leaders are masters of doublespeak, and Xi should know how to begin shaping his agenda in the name of his predecessors’ policies. l Bureaucratic resistance: A more pressing challenge will be aligning the interests of China’s massive bureaucratic machine behind any planned substantive policy change, especially since ministries – like NDRC, MIIT, MOST and SASAC – are particularly committed to China’s current industrial policy

agenda. Preparations for drafting the 13th Five-Year Plan, which should begin in the fall of 2013, should help align the bureaucracy behind the Xi administration’s priorities. l vested interests: The Chinese economic miracle has lifted hundreds of millions out of poverty, but has also created large constituencies of people who have benefited from the current system and will resist change. This includes vested interests in the form of conservatives inside the Party itself, in China’s state-owned enterprises, and among provincial politicians and property developers, all of whom have benefited enormously from the current system.

These challenges will make substantial reform difficult, but not impossible. One striking feature of previous generations of Chinese reformers has been their ability to engender economic change through political strategies that weakened resistance to their policies. Deng Xiaoping created new constituents for reform in the 1980s by allowing “some to grow rich first” and then played the provinces against the center when economic reform stalled in the early 1990s. Jiang Zemin and Zhu Rongji built domestic support for their reforms by tying them to the promise of WTO membership. The question for reformers in this new generation is whether or not they have enough political acumen to create the conditions for the change they desire.

Ken Jarrett is chairman for Greater China of APCO Worldwide, a Washington, D.C.-based public affairs consultancy, and Peter Martin is a consultant in the firm’s Beijing office. This analysis was excerpted from APCO’s report Reform in the Balance: China’s New Leaders Take Power.

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WHITE HOUSE PHOTO

In Second Term, Economy Takes Center Stage ‘Fiscal cliff’ first on a list of challenges President Obama and Vice President Joe Biden on election night in Chicago

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ith President Obama’s election to a second term, the United States is moving into a period of intense focus on budget, taxation and economic matters at home that will take place as the country considers further how to deal with Iranian nuclear issues and Syrian civil war abroad, and how to calibrate relations with major economic trading partners and competitors, particularly China.

One critically important component of the president’s outline for his second-term agenda includes helping businesses navigate globalization by assisting them in increasing exports into emerging markets especially in Asia, given the rebalance of his foreign policy toward the region. This policy is especially targeted at such countries as China, India, Indonesia and Vietnam, and the National Export Initiative and the Trans-Pacific Partnership (TPP) are its primary vehicles. Another important component is immigration reform. Addressing it will provide an opportunity for businesses to improve travel, visa and trade issues. This should be a high priority and bipartisan opportunity.

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However, President Obama faces a Congressional partisan makeup that is little changed from the gridlocked past two years, with a House of Representatives not merely controlled by the opposition party, but by a number of Republican members who disagree with most of his agenda. In the Senate, he has an increased Democratic majority, which gives him and Majority Leader Harry Reid (D-NV) a greater cushion for votes on key issues – but Senate rules can continue to be used by Republicans, led by Minority Leader Mitch McConnell (R-KY), to stall action on controversial items.

fiscal cliff That said, the impasse that prevailed over most of the past two years will be challenged almost immediately.

The United States faces a “fiscal cliff ” arising from a Congressionally-mandated sequestration of federal spending required by Congressional Republicans in August 2011 as a condition for raising the federal debt ceiling, and also the

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expiration of a host of laws that have lowered taxes for a wide range of businesses, as well as for most individual taxpayers.

Taken together, these automatic spending cuts and tax increases would give a massive shock to the current modest recovery. Hence the term “fiscal cliff ” for the sudden reduction in spending and its potential impact. Trying to avoid automatic sequestration will be the major goal of this year’s “lame-duck” session of Congress, in which the outgoing members of Congress will convene briefly in November and then into December to complete their work for this year.

taxes and spending Regardless of which option prevails, Washington is entering a period that will involve intense jousting over an extraordinarily wide range of issues.

These include the possibility of changes to many longstanding provisions of the U.S. tax code over the course of efforts to address the U.S. budget deficit while attempting to accelerate economic growth beyond the current weak recovery. The range of tax provisions subject to challenge is extraordinary and includes such provisions as the current treatment of capital gains, popular deductions for home ownership and health care benefits, various forms of investment tax credits, and a host of other measures.

At the same time, the administration and the Congress will be considering cuts to a variety of defense and military programs; the balance of federal support for different types of energy, including its handling of liquid natural gas exports and continued subsidies for ethanol; the implementation of financial regulations under Dodd-Frank; and implementation of numerous elements of the Affordable Care Act referred to by Republicans as “Obamacare.”

Efforts to mitigate some elements of the health care law by at least the Republican House of Representatives will also be ongoing.

foreign policy The United States will remain deeply concerned about economic developments in Europe and the risks of a collapse of Greek commitments to remain within the Eurozone, which could set off further reverberations in other countries in Europe, especially in the Southern tier. U.S. policymakers will continue to be open to initiatives to strengthen international economic stability.

Caution over the economy is likely also to translate into

caution over foreign policy and to a reduction in the Chinabashing that was featured during the presidential campaign.

The reality is that the U.S.-China relationship is in the end too vital to allow political rhetoric to be transformed into any severe economic sanctions or limits, even as difficult issues will play out relating to Chinese investments in the United States.

Overall, the United States will work to maintain strong trade and good relations in Asia as a counter to European risk. U.S. security professionals are anxious about the risks of hostilities

“

The reality is that the U.S.-China relationship is in the end too vital to allow political rhetoric to be transformed into any severe economic sanctions or limits…”

in the South China Sea, and for that reason, will be especially interested in any initiatives that can lower the temperature there and promote stability.

Beyond China, the Asia-Pacific rebalancing of priorities for the U.S. government is likely to continue and may gather speed in light of the Eurozone crisis. As a market, the United States will continue to provide a complex set of opportunities for foreign investment and foreign companies, as even with the uncertainties, the U.S. market is likely to continue its recovery and growth over the next two years.

In the final weeks of the presidential campaign, rhetoric about Iran and Syria was toned down. But in 2013, U.S. policy toward both countries could devolve into one or more military options.

This is unlikely to happen suddenly, without visible consultations being undertaken first with both Europe and relevant Middle Eastern capitals.

In summary, 2013 is setting up as a year for intensive legislative and administrative activity, in contrast to the deferral of movement thus far in 2012.

This analysis was excerpted from a report by the government relations team at APCO Worldwide, a public affairs consultancy based in Washington, D.C.

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c h i n a ta l e n t B y H e l e n Ta n ta u a n d R i c h a r d Z h u

The Talent Question Helen Tantau

A seasoned human resource professional outlines what companies need to think about when searching for skilled workers in China

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it h a p opu lat ion of 1.3 billion people, many mu lt i nat i ona l bus i ne ss leaders marvel at the notion of a scarcity of talent in China. Yet, despite extensive localization and substantial growth in the country’s candidate pool over the past 10 years, there remains an ongoing shortage of skilled senior executives with experience working for foreign companies. Why is there such a tight market for senior talent in China? How successful has localization of senior roles been? Is there a talent strategy that will prepare firms to effectively tackle and win the war for talent in China? From talent drivers to leadership traits, global organizations need to

understand the many factors affecting China’s talent market so that they can fully realize the potential of the country’s greatest resource.

Many international companies come to China expecting an abundance of affordable, skilled labor.

Although China is no longer an emerging economy, it is still emerging in terms of human capital. Even with an ever-growing pool of people with solid multinational working experience, key leadership and management roles are often challenging to fill.

Here are some characteristics of the Chinese talent market today: A number of factors contribute to the shortage of qualified executive talent in China. As China rapidly grows in strategic importance across industries, the sheer number of multinational organizations

The AmCham Shanghai HR Fair and Workshop attracted a big turnout earlier this year

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entering and expanding into the country and the substantial increase in the number of companies localizing senior management teams are combining to deplete the existing talent pool. In addition, a growing number of Chinese state-owned enterprises and private companies (e.g., Geely/Volvo, Haier, Huawei, and Li Ning) have joined the battle for internationally minded local talent.

A high bar A complex operating environment further complicates talent issues. For instance, an established multinational may have multiple teams on the ground: one that runs the domestic business and requires expertise in Chinese commercial issues, and an Asia-Pacific leadership team running activities across a broader geography, demanding people with a deep understanding of China and greater Asia. In addition, for many established players, China is becoming a central hub for the

global business, particularly in areas such as manufacturing, research and development, product development and supply chain/procurement. As such, employees need both global skills and familiarity with operations in China. Furthermore, as operations in China mature and transition to value-added activities from “Made in China” to “Designed in China,” leaders must have a broader set of skills, including the ability to operate amid much greater complexity.

Despite the growing pool of experienced Chinese national, returnee, Asian expatriate and Western expatriate executives, the pool of qualified talent is not large enough. The growth and expansion of multinational business activities in China have contributed to a high demand for China-savvy local and expat senior executives, board members and advisers that outstrips supply.

Experienced local Chinese executives are especially sought-after — and in short supply. As a result, many candidates can be quite selective and specific

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“

Although China is no longer an emerging economy, it is still emerging in terms of human capital.”

Experienced senior local candidates will likely have at least two offers on the table when they decide to make a career move.”

Istockphoto

“

Many companies complain about lack of skilled workers in China

about what it will take to convince them to make a move.

In this environment, many companies are competing fiercely to win talent. Experienced senior local candidates will likely have at least two offers on the table when they decide to make a career move. Candidates’ expectations are high for future roles; career development plans are valued almost as highly as compensation packages. Salary increases traditionally reach 20–30 percent and are even higher in some cases.

The ideal candidate on paper may not be a good match for the organization in practice. Companies must take the time to evaluate their talent needs and hiring managers must possess a realistic understanding of the sources of talent and competencies available in the market to avoid overor under-hiring. Firms that have a more rigorous recruiting process and “hire right” have better longterm success with retention.

Beyond identifying the critical hard skill-sets needed for a role, ensuring that the candidate has the necessary soft skills is an important step toward improving the odds the candidate will assimilate into the culture and stay with the company. For instance, one common challenge for local talent is effectively engaging with global headquarters.

Therefore, for positions that will work closely with headquarters, companies should look for candidates with the finesse and cultural understanding to manage relationships with the corporate office.

A common question among many multinational firms revolves around the best mix of nationalities for their teams in China. In truth, much depends on the specific markets the business serves, whether it is local, regional or global. Often, the optimal team comprises a combination of international and local

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talent. This approach ensures that global cultural traits are not lost, yet local preferences and styles are taken into consideration. Finding this right balance of global and local perspectives and approaches is never easy, but ensuring a multicultural employee population can mean the difference between failure and success.

Employee expectations Recruiting is only the beginning of the employee life cycle. Retention is vital in a talent market as competitive as China’s. The key to retaining talent is to ensure that people are engaged, feel valued, are empowered and are being challenged to grow.

Many lo ca l candidates have ver y hig h expectations in terms of the speed with which their careers will develop. Titles are a key issue for senior local leaders, as the external title projects their success and progression. However, in many cases, the speed of career advancement outpaces skill development. It is very important to actively engage high-potential employees, assess development needs and set expectations.

It is also important to note that many candidates

The AMERICAN CHAMBER of COMMERCE in SHANGHAI

Orientation China

Guidebook

Leading You to Business Success

This article is a shortened version of a story that will appear in AmCham Shanghai’s new Orientation China Guidebook that will be published early next year. Look for details later at www.Amcham-Shanghai.org.

in China initially join for the boss, rather than the company. Therefore, it is critical that the executive is able to build a bond in which he/she is recognized and has sufficient “face time” with his/ her direct boss, yet also connects with the broader team and culture. An environment in which employees can openly share their aspirations and discuss a clear path for their careers is also highly prized by talent in China.

To address t hes e my r i ad issues, many multinational firms find that they need a more robust HR process in China than originally expected, one that runs the full gamut of training to develop hard skills, personal development to promote soft skills and people management capabilities, performance management, career planning and succession planning. Candidates must be offered a path for growth through active engagement, empowerment 121113and AmCham Half Page copy.pdf 1 11/14/12 6:27 PM intellectual challenge.

Finding and retaining talent may be more challenging in China than in other markets, but it

is clear that having the right people will make all the difference to your business. Success in the battle for qualified executives in China requires that multinational firms be clear on their stage of development in the country and spend time building the talent strategy that will enable them to hire executives who fit the roles and the company culture. When the stakes of hiring the best talent are so high, retention becomes increasingly important and hinges upon engaging, challenging and rewarding talent. When the right talent is hired, the rewards tend to far outweigh the challenges of China’s recruitment process.

Helen Tantau and Richard Zhu work at Spencer Stuart & Associates. Tantau is a core member of the Consumer Practice and Zhu is member of the global Supply Chain and Industrial practices, and leads the firm’s Transportation and Logistics Practice in Asia and the Supply Chain Practice in China.

inside amcham from the chair

New Faces, New Challenges

A

fter months of anticipation, both the United States and China have identified their leaders for the years ahead.

The Obama administration remains in office for four more years and China’s Xi Jinping has embarked on what should be 10 years as China’s most senior leader. For those who felt overwhelmed by the political punditry that surrounded the confluence of these two events, don’t worry – it won’t happen again for 20 years.

We now move from speculation about personalities to speculation about what policies those senior leaders will pursue.

On this score, there is reason to believe that policy continuity will prevail on both sides of the Pacific. Let’s start with Washington, D.C. We should expect the Obama administration to continue a China policy that looks to maximize areas of cooperation. This reflects recognition of the growing economic interdependence of our two countries and the fact that resolution of many global challenges requires close collaboration between the United States and China. At the same time, U.S.-China ties contain an element of competition, an unavoidable dynamic given the leadership role that each country wants to play in the Asia-Pacific region. Hence, China looks askance at the U.S. “pivot” to Asia and was no doubt suspicious that President Obama’s first overseas trip after the election was to Southeast Asia.

What about Beijing? For Xi Jinping and his senior colleagues, their top priority is addressing China’s economic and social challenges. Xi’s focus is his domestic agenda, just as Obama must address America’s looming “fiscal cliff.” Xi is not looking for foreign policy headaches, although he will certainly be forceful in

Kenneth Jarrett Chair of the Board of Governors

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defending China’s core interests, regardless of whether challenges come from the United States, Japan or elsewhere. In terms of trade policy, with the U.S. election behind us, we should now see some cooling of the rhetoric, but trade tensions remain and could even intensify – this is a measure of the slow recovery in the United States and our extensive bilateral trade ties. There are simply more opportunities for disputes to develop. For AmCham Shanghai, that means our role becomes more important than ever. We must ensure that the U.S. government is focused on the right issues and pursues strategies that hold the most promise of producing results for U.S. business.

Your newly elected Board of Governors assumes office at this important juncture in U.S.-China relations. Allow me first to thank all those who participated in t h e C h amb e r’s e l e c t i on an d e x pre s s congratulations to those elected to serve on the Board in 2013 and incoming Chair Bob Theleen. Since this will be my last monthly column as 2012 Chair, please indulge some additional words of appreciation.

First, thanks to all AmCham Shanghai members for your support this past year as we rolled out important initiatives – the SME Center and the YRD Expansion Plan. Second, thanks to my fellow Board members for their unstinting dedication to the work of the Chamber. I could not have had a better group of colleagues to guide the Chamber through a banner year.

Third, thanks to Brenda Foster, AmCham Shanghai president, and her superb team.

The Chamber’s professional staff is simply outstanding. It has been an honor to serve as the Chamber’s 2012 Chair and I look forward to continued service on the Board next year.

inside amcham B OA R D o f g o v e r n o r s br i e f i n g

Highlights from the November 2012 Board of Governors Meeting

Establishment of a Non-profit Entity in the U.S. AmCham Shanghai president, Brenda Foster, and John Leary, partner at the White & Case law firm, provided an update on progress toward setting up a 501(c)(3) or 501(c)(6) in the U.S. to give the Chamber the ability to more easily conduct activities in the U.S. YRD Program Update The President reported that the 2012 Regional Manufacturing Conference was a success and attracted more than 120 paying guests. Revenue from the conference was strong and expenses were less due to it being held in Suzhou. About 60 percent of attendees were from Shanghai.

CCPIT Roundtable in Jiangsu Province The Chamber also had a productive roundtable with the China Council for the Promotion of International Trade (CCPIT) in Jiangsu province. The roundtable was focused on the healthcare

industry in Jiangsu province. Participants included members of the AmCham Shanghai healthcare committee, AmCham Shanghai staff, CCPIT Jiangsu staff and officials from Jiangsu province. Board Vice Chair Bob Theleen moderated the event.

As part of the event, a letter of cooperation was signed between Jiangsu CCPIT and AmCham Shanghai.

In Attendance Governors: Andrew Au, William Brekke, Eddy Chan, Ted Hornbein, Kenneth Jarrett (Chair), Dan Krassenstein, Eric Zheng Apologies: Chen Lienjing, Jim Mullinax, Marie Kissel, Jim Rice, Robert Theleen, Peter Sykes Attendees: Brenda Foster (President), David Basmajian, Steven Chan, Kirt Greenberg, Patsy Li, Helen Ren, Jonathan Shyu, Scott Williams, Jessica Wu

The AmCham Shanghai 2012 Board of Governors

Governors

Chair

Andrew Au Citibank China

Eddy Chan FedEx Express

Chen Lienjing Pratt & Whitney

Ted Hornbein Richco

Marie Kissel Baxter Asia-Pacific

Daniel M. Krassenstein Procon Pacific

James Rice CSM nv China

Peter Sykes Dow Chemical

Eric Zheng AIG Insurance

Kenneth Jarrett APCO Worldwide

Vice Chair

Robert Theleen ChinaVest

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amcham shanghai elections B y e r i k a wa n g

AmCham Shanghai Members Elect 2013 Board

AmCham Shanghai President Brenda Foster with some members of the 2013 Board of Governors

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mCham Shanghai announced the results of the 2013 Chair and Board of Governors at its Annual General Business Meeting held on Nove mb e r 8 at t he Fou r Seasons Hotel. Newly elected Board members will take office January 1, 2013.

Out of nearly 350 votes that were cast, Robert A. Theleen, founder and CEO of ChinaVest Ltd.

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and current AmCham Shanghai Vice Chair, was elected Chair for 2013, replacing Kenneth Jarrett, who decided not to run for a second term as Chair.

“The honor of being elected to Chair the 2013 Board of Governors is based on the strength of our members and the quality of leadership at AmCham Shanghai,” said Theleen. “The new Board reflects the diversity of our members and the growing

influence that the American business community has in this time of economic transition in China. I am also excited about working with Brenda Foster, our president, and our current Chair Ken Jarrett to build on their past success for the benefit of our growing membership.�

Governors that were re-elected for the 2013 Board are Andrew Au, CEO of Citi China; Kenneth Jarrett, chairman for Greater China of APCO Worldwide and current AmCham Chair; Marie G. Kissel, vice president of government affairs and public policy (Asia Pacific) for Baxter Asia Pacific; Chen Lienjing, managing director of China operations for Pratt & Whitney; Peter Sykes, president of The Dow Chemical Company; and Eric Y. Zheng, general manager of AIG Insurance Company China Limited Shanghai Branch and current Board Treasurer.

Newly elected governors for 2013 are Jimmy Chen, regional vice president of domestic service in China for FedEx Express; Sherman Chu, group general counsel for Cisco Systems, Inc.; Keith N. Cole, vice president of government relations at General Motors International Operations Shanghai; and Curtis Hutchins, president of Asia Pacific for Eaton (China) Investments Co., Ltd. Also during the meeting, Jarrett noted the recently inaugurated Conference and SME Center and the new Yangtze River Delta Center among the highlights for AmCham Shanghai this year, while Zheng reported a good position financially so far this fiscal year, describing membership services such as the Corporate Visa Program and Spotlight Sessions as successful programs that have helped generate revenue.

Robert Theleen ChinaVest

The AmCham Shanghai 2013 Board of Governors

Andrew Au Citibank China

Chen Lienjing Pratt & Whitney

Curtis Hutchins Eaton (China) Investments

Eric Zheng AIG Insurance

Jimmy Chen FedEx Express

Keith N. Cole General Motors

Kenneth Jarrett APCO Worldwide

Marie Kissel Baxter Asia-Pacific

Peter Sykes Dow Chemical

Sherman Chu Cisco Systems

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AmCham Shanghai AmCham Shanghai U.S. Election Party

AmCham Shanghai staff retreat in Suzhou Annual General Meeting featuring keynote speaker Vijay V. Vaitheeswaran

Here is a selection of snapshots captured in the past month during AmCham Shanghai events.

Panelists at the Asia Society FDI Conference 44

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Month in Pictures Participants at the 2012 AmCham Shanghai Regional Manufacturing Conference in Suzhou, Jiangsu Province

AmCham Shanghai SME Center ribbon-cutting ceremony

AmCham Shanghai President Brenda Foster with some 2013 BOG members

Annual General Meeting Q&A session

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AmCham Shanghai New Members U.S. Corporate Membership Brennan Industries of Shanghai CARR Joseph ELCA Cosmetics (Shanghai) Co., Ltd. FAN Jiayu Weston Environmental Consulting (Shanghai) Co., Ltd. FANG Wenjie

CLS Communication (Shanghai) Co., Ltd. YANG Dillon

Valmont Industries (China), Ltd. BU Shaomin

Dow Chemical (China) Investment Co., Ltd. TAN Stevenson

Goodyear Tire Management Co. (Shanghai), Ltd. DENG Daniel Graco H.K., Ltd., Shanghai Rep. Office TAY Beng Kwang

Haimen Tyson Poultry Development Co., Ltd.

ZHAO Lingyu U.S. Associated Corporate HSBC Bank (China) Co., Ltd. Membership WANG-LAURENT Adele Best Buy Shanghai, Ltd. HSBC Bank (China) Co., Ltd. LI Ally YU Victor Nike Commercial (China) Co., Ltd. InterChina, Shanghai Office HEISER Aaron WANG Xin Pepsico Asia Research & Development Center J.C. Steele & Sons, Asia (Changzhou) Co., Ltd. Machinery, LLC HU Shank CHHOUR Virak Shanghai Bi Ke Clean Energy Technology Co., Ltd. Johns Hopkins University WANG Wendy SHIELDS Robert Shanghai Hospira Distribution Co., Ltd. Johnson & Johnson (Medical) Suzhou Limited ANG Khai Meng GU Yi Sweetmart Development Limited MAO Hongjiang YIN Sean ZHU James

Lear Corporation (Shanghai), Ltd. Corporate Int’l Affiliate Membership WANG Fei MSH China Enterprise Services Co., Ltd. CAO Joanne

Mercer Consulting (China), Ltd. PIKER Michael

Roll Foods Trading (Shanghai) Company Limited LAM Kin Hung Anita

Miller, Canfield, Paddock and Stone, P.L.C. WANG Yanping

Morgan Stanley Management Service (Shanghai) Ltd. Non-Resident Individual ZHAO Jessica Membership MulvannyG2 Architecture (Shanghai) Consulting N/A Co., Ltd. HUNT Simon FAN Jeffery

Nature Food Shanghai Limited Small Business Membership MA Michelle Gusto Fine Foods NSF Shanghai Co., Ltd. GELBER Richard WU Sarah The JLJ Group Praxair (China) Investment Co., Ltd. RAY Mark AZUMA Brenda TSC Fashion Trading (Shanghai) Co., Ltd. RAE Systems (Shanghai), Inc. OSTENDORF Martin NI Jing

Rockwell Automation (China) Company Limited ZHENG Leiming Associate Membership

Individual U.S. Citizen Membership Globaldata Ltd. HOGAN Michael Grassroots Productions BECK Stewart HanSho Composites Corporation HOGAN Shaun Campbell Harbor Freight Tools (Central Purchasing Inc.) EVANS Christopher Jiangsu Eastman Heavy Machinery Co., Ltd. ZHOU Michael Matrix Science & Technology Shanghai Limited CUI Hantao MKT & Associates, LLC CROTTY Michael N/A HICKMAN Randy N/A WANG Nicole Mia Pacific Greetings (China) Co., Ltd. JORDAN James Binsfield Shanghai Jiaotong University, School of International and Public Affairs BLANCHARD Jean-Marc Sigma International Group LIU Iris Liya Sinclair Group EX Barbara

Individual Int’l Affiliate Membership EMZ+(Shanghai) Limited ZHANG Erming Market Access Partners Ltd. VLAS Arnold Maxx Tech Limited PORRA Alex Norwex (China) Co., Ltd. PEETERS David Prax Capital XU Michael RTG Communications CIACCIA Iride

Ryerson Global Trading Co., Ltd. GREEN JR Robert Leroy

SwissnexChina MARMIER Pascal

Best Buy Shanghai, Ltd. YU Janice

Shanghai International Theme Park and Resorts Management Company Ltd. CRAWFORD Michael

Vantasia Finance AU-YEUNG Gregory

Best Buy Shanghai, Ltd. ZHANG Lily

TRW Asia Pacific Co., Ltd. CROSNIER Laurent

Educational Membership

Bureau Veritas Consulting (Shanghai) Co., Ltd. GRAZIANO Jonathan

U.S.A. Keller and Heckman LLP, Shanghai Rep. Office ETTINGER David

APCO (Beijing) Consulting Company Ltd. Shanghai Branch SUN Frances

Caterpillar Logistics (Shanghai) Co., Ltd. MUKESH Tiwari

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Johns Hopkins University PATENT Jason

Do you want to share more information about your company? Contact Sophia Chen at (86 21) 6279-7119 ext. 5667 or sophia.chen@amcham-shanghai.org for a “Standout Listing” opportunity in the New Members Section.

GoverNment Relations Customs Taskforce, Pudong Trade Reps Meet AmCham Shanghai’s Customs Liaison Taskforce held a discussion on trade facilitation with members of the Pudong International Airport Bonded Zone on November 1. Representatives from the Pudong Free Trade Zone as well as Pudong Airport Customs and Pudong Airport Quarantine and Inspection discussed policies and incentives for companies within the zone.

He Jianmin, division chief of the Shanghai Free Trade Zones Administration, Pudong International Airport, highlighted Pudong’s strategic location and the importance of developing China’s air freight systems. With 3 million tons handled in 2011, Pudong International Airport is the world’s third busiest airport by cargo traffic. In the two years since its inception, the zone has posted RMB200 million (US$32 million) in customs revenues and experienced ten-fold growth.

Panelists discuss trade facilitation with members of Pudong International Airport Bonded Zone

BSCR Contributes to Global Research on Sustainability

be fed into The Regeneration Roadmap’s global research, which aims to address the world’s most pressing sustainability challenges. Roundtable discussions have taken place in Mumbai, Washington, D.C., Beijing and Shanghai.

AmCham Shanghai’s BCSR promotes corporate social responsibility, sustainability awareness and best practices; and advances public policies to ensure long-term social and economic well-being in China by creating a platform for member companies to work together to develop and provide input in AmCham Shanghai’s CSR and sustainable development agenda.

Shanghai Finance Chief Underscores City’s Growing Importance AmCham Shanghai hosted a meeting on November 16 with Fang Xinghai, director-general of the Financial Services Office of the Shanghai Municipal Government, to discuss the report Achieving 2020: An Assessment of Shanghai’s Plan to Become an International Financial Center by 2020, a Chamber collaboration with the Brookings Institution. Fang participated in a panel discussion with AmCham Shanghai’s Financial Services Committee members in which he underscored Shanghai’s growing importance as a financial center and its competitive edge vis-à-vis other cities in China and the region.

Other panelists included Ben Kinnas, senior vice president and general manager of Wells Fargo Bank; Tim Huang, chief operating officer of Bank of America Merrill Lynch China; Julien Martin, deputy head of Fixed Income China and managing director of BNP Paribas; Dr. Wing Wu, CFA and Beijing-based venture capitalist; and Eric Zheng, general manager of AIG Insurance Company China Limited Shanghai Branch.

AmCham Shanghai’s Business Council on Sustainability and Responsibility (BCSR) on November 10 participated in the executive roundtable “A Signal of Hope,” aimed at promoting discussion and collaboration among senior business and NGO leaders and entrepreneurs. During the event, AmCham Shanghai Government Relations and CSR Director Steven Chan underscored the role of state and government actors, including state-owned enterprises, in driving China’s sustainability efforts.

Sponsored by China-based Broad Group, Canadian GlobeScan and U.S. NGO SustainAbility, input gathered will

Fang Xinghai discusses Shanghai’s progress towards becoming an IFC

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Event highlights

inside amcham

2012 Regional Manufacturing Conference: The YRD Manufacturing Challenge: Transition More than 100 top business leaders of U.S. manufacturers in China attended the AmCham Shanghai 2012 Regional Manufacturing Conference on October 23. Held for the first time in Suzhou, the heart of the Yangtze River Delta (YRD) manufacturing belt, the conference focused on transitions occurring in manufacturing globally, throughout the Asia-Pacific, China and the YRD region, and what actions leading companies are taking to respond.

As costs of production and labor increase in China, companies are increasingly transitioning their manufacturing operations to take advantage of opportunities arising from expanding demand within the Chinese domestic market, according to top U.S. executives at the event.

Keynote speaker Curtis Hutchins, president of Asia Pacific operations at Eaton Corporation, underscored the increasing importance of the Chinese market in the company’s global growth strategy. “We think it’s critical that our product development and design engineering are close to the customer,” said Hutchins. “You’ve got to be in China to serve the China market.”

Russell Scoular, Asia Pacific Regional Director of Government Affairs at Ford Motor Company echoed Hutchins’ remarks. “Automakers need to win in China to win globally,” he said.

“Exports played a significant role in our early years but the Chinese consumer is driving our change in manufacturing focus,” said Ken Whitaker, vice president of sales, marketing and research & engineering at KimberlyClark China.

With almost 1,600 of AmCham Shanghai’s members engaged in manufacturing, the Chamber’s annual manufacturing conference remains a signature event for AmCham Shanghai and is a must-attend event for U.S. manufacturers in the Yangtze River Delta.

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Event highlights

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Potential Game-Changers in U.S.-China Relations The U.S. and China have much more in common and much more to gain from cooperation and free flows of trade, people and ideas than of sources of friction, according to award-winning journalist and author Vijay V. Vaitheeswaran, who delivered the keynote speech at this year’s Annual General Business Meeting on November 8 at the Four Seasons Hotel in Shanghai.

Vijay V. Vaitheeswaran urges companies to harness “disruptive innovation” in his book Need, Speed, and Greed

The China business and finance editor for The Economist magazine discussed potential game-changers in U.S.-China relations at the heels of both countries’ recent political transitions. He identified as a near-term potential game-changer in Sino-U.S. relations the shale-based energy revolution that is taking place in the United States and has revitalized the American economy in recent years.

Vaitheeswaran said that those lessons learned by the United States as it develops this new and cheap, plentiful resource in an environmentally responsible manner will provide a pattern for the rest of the world to follow, but only if America is willing to share them and China – which arguably has the greatest potential after the United States in this area – is willing to learn from them. “Chinese companies can benefit from investing and learning from American know-how, and America can benefit from mutual trade and open relations,” he said.

In the longer-term, Vaitheeswaran noted two global trends, aging population and rapid urbanization, as other potential game-changers that offer room for U.S.-China cooperation rather than conflict. To address these issues, which he calls “wicked problems,” he urged companies to harness the power of “disruptive innovation,” such as that of the user-generated, open, collaborative sort. “Business as usual is probably not going to cut it. How we innovate itself is going to be radically changing,” he said. “Innovation, fundamentally, is about fresh thinking that creates value.”

Freshness More Important to Chinese Consumer than Traceability: Survey When it comes to food safety perceptions of produce in China, freshness is more important to the average consumer than traceability, according to a survey by Rabobank, a Netherlands-based financial services provider focused on food and agribusiness and sustainability-oriented banking.

Survey findings were shared by Daron Hoffman, director of F&B research for Rabobank, during a roundtable discussion Daron Hoffman speaks about China’s role in the global food economy at the AmCham Shanghai Conference Center on China’s role in the global food economy hosted by AmCham Shanghai’s Food, Agriculture & Beverage (FAB) Committee on November 13. The discussion focused on Chinese agricultural production, consumption and supply trends.

Hoffman identified three socio-economic factors affecting change in the Chinese agricultural sector: rise in meat consumption, larger incomes and investments in rural development. Among the challenges that the sector faces, he mentioned slow modernization and financing and logistics bottlenecks.

Reporting by Julia Bakutis, Michael Frank, Matthew Garner, Erika Wang and Jeremy Whelan

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EXECUTIVE CHARITIES What’s your favorite charity? ’Tis the season for giving! This month, we asked executives about their favorite charities in China and abroad. Here are their top picks.

Courtesy APSA

Rober t Roche, Executive Chairman, Acorn International, Inc. Charity: Americ ans

Promoting Study Abroad (www.apsaglobal.org)

Remarks: “I would like to nominate Americans APSA scholar with Promoting Study Abroad local student (APSA). APSA is a ver y interesting organization because it brings students from the U.S. to China and it is a oncein-a-lifetime opportunity. Coming to China has a huge impact on the kids and I can speak from personal experience as well.

Almost 30 years ago, I studied in Japan and it was life changing.”

Alex Claypool, Managing Director, Lancaster Holdings International, L.L.C., Lancaster Investment Consulting (Shanghai) Co., Ltd. Charity: Seeds of Hope (www.ycis-sh.com/en/enrichment-

programmes/special-charity-seeds-of-hope)

Remarks: “Our children attend Yew Chung International School (YCIS), and we take every opportunity to support the YCIS charity called Seeds of Hope. Every year, YCIS students raise money through a variety of activities to support the construction of local Chinese schools.”

Courtesy Seeds of Hope

Edward Holroyd Pearce, Director, CRCC Asia Ltd. Charity: Shuanglin School in Pudong, run by New

Remarks: “Shanghai Huaxin Therapy and Rehabilitation Centre for Disabled Children is a charity providing support to families with disabled children. Support is provided both to the children as well as to their parents, the latter via self-help groups. Hopeful Hearts in Nanjing is a charity that helps orphaned children as well as children from poor families with heart defects.”

Citizen Life Center (www.newcitizen.info)

Remarks: “CRCC Asia are proud supporters of Shuanglin School in Pudong, run by New Citizen Life Center, which is a migrant children’s school that promotes the health and development of underprivileged children in Shanghai. Every month, 20 to 30 of CRCC Asia staff and student interns volunteer at the migrant school to provide our support for their local community.”

Tony Noto, Financial Advisor at Noto Financial Planning Charities: Baobei (www.baobeifoundation.org), Doctors

Seeds of Hope classroom painting event

without Borders (www.doctorswithoutborders.org)

Remarks: “I am a supporter of Baobei, a Shanghai-based group that provides life-saving surgeries for Chinese orphans. I also really like Doctors without Borders, which provides medical care and humanitarian aid around the world, and is very highly rated for accountability and transparency.”

Wilfried M. Brouwer, Senior Vice President for Asia and President of A.O. Smith (China) Investment Co., Ltd. Charities: Shanghai Huaxin Therapy and Rehabilitation

Centre for Disabled Children (www.cprecovery.org), Hopeful Hearts (www.hopefulhearts.info)

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Constantino Flores, VP Operations, Asia, Mission Foods Charity: The Nature Conservancy (www.nature.org) Remarks: “As an animal lover and an enthusiast for the great outdoors, I personally encourage people to donate to The Nature Conser vancy. I consider their approach to the protection of biodiversity and the great places on earth, based on environmental stewardship which necessarily involves both the aspects of human development and the preservation of critical core ecosystems, a very successful one and, in the long run, sustainable and compatible with the economic realities in the planet.”

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