Insight Magazine May 2010 by The American Chamber of Commerce in Shanghai

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

INSIGHT The Journal of the American Chamber of Commerce in Shanghai May 2010

SHANGHAI 2010 WORLD EXPO EDITION

Vision for the Future In addition to fostering cultural exchange, the 2010 World Expo hopes to offer a glimpse of a sustainable urban future.

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INSIGHT May 2010

The Journal of the American Chamber of Commerce in Shanghai

David Turchetti DIRECTORS

BUSINESS DEVELOPMENT & MARKETING

Karen Yuen COMMITTEES

Siobhan M. Das COMMUNICATIONS & PUBLICATIONS

David Basmajian EVENTS

Jessica Wu FINANCE & ADMINISTRATION

Helen Ren

MEMBERSHIP & CVP

Linda X. Wang

INSIGHT EDITOR-IN-CHIEF

Justin Chan

ASSOCIATE EDITOR

Tiffany Yajima

COMMUNICATIONS ASSOCIATE

Weina Yang DESIGN

Alicia Beebe LAYOUT & PRINTING

Ella Shan Snap Printing, Inc.

INSIGHT SPONSORSHIP MARKETING ASSISTANT MANAGER

Sophia Chen

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

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

Special thanks to the 2010-2011 AmCham Shanghai President’s Circle Sponsors

16 The Expo Effect

JUSTIN CHAN

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

SHANGHAI FEATURE

TIFFANY YAJIMA

Brenda Foster

S H A N G H A I 2 0 1 0 WO R L D E X P O E D I T I O N

ZEDFACTORY

PRESIDENT

IMAGINECHINA

AMCHAM SHANGHAI

By Weina Yang

The 2010 World Expo will profoundly affect Shanghai by giving the economy a signiﬁcant boost and improving the lives of residents while also advancing the city’s international image.

19 Outside the Expo

INFRASTRUCTURE FEATURE

By Lauren Hilgers

In preparation for hosting the 2010 World Expo, Shanghai has invested US$95 billion to enhance the city’s infrastructure. All the construction around the city will set a foundation for Shanghai to grow even further in the future.

22 The Expo Footprint SUSTAINABILITY FEATURE

By Elaine Wu

Under the “Better City, Better Life” theme, the 2010 World Expo will bring together best practices in sustainable urban development from around the world, creating opportunities to learn and cooperate.

26 Unveiling the USA Pavilion INTERVIEW

By Tiffany Yajima

Just ahead of opening day, Insight sat down with USA Pavilion Commissioner General Jose Villarreal and Director of Communications Martin Alintuck to discuss ﬁnal preparations.

30 Vision for the Future COVER STORY

By Justin Chan

The Shanghai 2010 World Expo will be the largest in history, bringing over 240 countries and organizations together with 70 million visitors. But the legacy of the Expo will be the start of a dialogue on developing a sustainable future for the world’s cities.

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

3 News Briefs

12 Analysis

48 Deal of the Month

9 When Leaders Resist Change 11 An Oasis in a Desert of Material MANAGER’S NOTEBOOK

BUSINESS BOOKSHELF

Certiﬁed Professional Coach Sherry L. Read discusses how to inﬂuence behavior when there is resistance to change.

Lesli Ligorner reviews Ronald C. Brown’s “Understanding Labor and Employment Law in China.”

INSIDE AMCHAM

35 From the Chairman: A Once in a Lifetime Business Opportunity 37 AmCham Shanghai 2010 World Expo Business Series

MARCH 2009

39 40 44 46

New Member Listing 2010 Charity Gala Events in Review Committee Highlights

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INSIDE INSIGHT

fter years of construction around the city, it is ﬁnally time for the opening of the Shanghai 2010 World Expo. Over 240 countries and international organizations are slated to participate in the largest World Expo ever, situated on a 5.3-square-kilometer site. Anywhere from 70 to 100 million visitors are expected between May and October, creating an incredible opportunity to reach new consumers, visitors and partners.

JUSTIN CHAN EDITOR-IN-CHIEF

Under the “Better City, Better Life” theme, the Expo is designed to bring people together to share their experiences and ideas on urbanization and development. Through these dialogues, we hope that a new framework for sustainable urban development can be developed. In this special Shanghai 2010 World Expo Edition of Insight, we examine the impact of the Expo on the city of Shanghai, through the expected economic boon, the raising of the city’s international image, and policies that should improve the day-to-day life of Shanghai residents. In preparing for the Expo, Shanghai has invested an estimated US$95 billion on citywide infrastructure projects. The infrastructure feature looks at how these investments will shape the

city in the years to come. With sustainability such a central theme of the Expo, the sustainability feature reviews some of Shanghai’s achievements in greening the city and looks at some of the innovations that will be on display at the Expo. Insight once again talked to USA Pavilion Commissioner General Jose Villarreal for a ﬁnal preview of the USA Pavilion. He was joined by new Communications Director Martin Alintuck, who shared more insight on the pavilion’s theme and messages. Don’t forget that AmCham Shanghai is the Oﬃcial Business Chamber of the USA Pavilion and will host an engaging speaker series featuring global CEOs and forums with senior provincial government leaders. For more on the AmCham Shanghai 2010 World Expo Business Series, visit expo.amcham-shanghai.org. Finally, for those readers in Shanghai, we hope to see you at the Expo! For those who may not be in Shanghai, you’ve got six months to come and see the Expo for yourself! If you truly can’t make it, stayed tuned for more Expo news and features in the upcoming issues of Insight.

IMAGINECHINA

News

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

CHINA BUSINESS

Emissions targets may cost US$86 billion per year China will need to spend up to US$86 billion each year to meet its ambitious goals to reduce greenhouse gas emissions, according to a U.N. China Human Development Report. Prior to December’s climate talks in Copenhagen, China committed to decrease its economy’s “carbon intensity” by 40-45% of 2005 levels by 2020. To reach its targets, the report recommends that China adopt such measures as ensuring better heating and energy-eﬃcient building technology. Meeting its climate commitments will not be easy for the world’s top greenhouse gas emitter and will become even more challenging. Over the next two decades, a projected 350 million rural residents will relocate to China’s cities, adding further need for energy.

Draft rules relax indigenous innovation requirements Three Chinese agencies – the Ministry of Science and Technology, the National Development and Reform Commission and the Ministry of Finance – revised the draft “indigenous innovation” guidelines that were ﬁrst issued in November 2009. The previous draft would have severely restricted many foreign enterprises’ opportunities to compete for government procurement contracts. Circulated on April 10, the revised draft rules appear to remove requirements concerning domestic ownership of intellectual property, original trademark registration in China and technology mandates for meeting or exceeding international standards. The following six product categories will be eligible for indigenous innovation accreditation: computing and application hardware, telecom hardware, modern oﬃce equipment, software,

Beijing takes aim at rising home prices China’s central government announced a series of measures in April to rein in the accelerating housing market.The State Council set rules permitting local governments to limit the number of home purchases by an individual within a certain time period. Banks may also refuse credit to investors with two or more properties.The State Council further squeezed housing investments by requiring first-time homebuyers to make a 30% down payment on homes larger than 90 square meters. For second home purchases, the minimum down payment is 50% – up from 40% and the second increase in 2010. Finally, the Ministry of Housing and Urban-Rural Development established rules requiring property firms to obtain government approval before receiving a down payment on unfinished properties. If approved, developers must publish the price of each unit within 10 days.The new rules target what the ministry found were firms holding properties illegally to push up their value. Home prices in China’s medium-sized and large cities surged 11.7% in March from one year ago – the largest jump since data became publicly available in July 2005.

new-energy products and highly eﬃcient energy-reducing products. However, trade organizations remain concerned about whether administration of the draft rules will extend to provincial and local levels.

Stocks plummet in Q1 Over the ﬁrst quarter of 2010, the Shanghai Composite Index experienced

its sharpest quarterly decline since the beginning of the bear market last August. The index fell 5.1% from January to March on concerns that inﬂation may dampen corporate earnings growth and on news that China’s central bank, the People’s Bank of China, twice ordered banks to increase reserves. “We’re not very bullish for this year because there are still risks,”

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said Nicholas Yeo of Aberdeen Asset Management. Stocks continued to drop in April as the index fell 4.8% in just one day of trading (April 19) following regulations tightening property investments in China and fraud charges against Goldman Sachs in the U.S. Looking forward, investors are concerned that China’s government will need to take further action to avert inﬂation, possibly increasing borrowing costs for companies. CORPORATE NEWS

Amex to issue yuan travelers checks Visitors to China soon will be able to purchase yuan-denominated travelers checks from American Express under a strategic partnership with the Bank of China. Checks will be made available for purchase beginning May 10 – soon after the May 1 opening of the Shanghai World Expo – in Canada, India, Japan, South Korea, Malaysia, Singapore, the UK and the U.S. The partnership creates the world’s ﬁrst yuan-denominated travelers checks. When visitors arrive in China, they may go to more than 2,000 Bank of China branches and 1,600 partner hotels to cash their checks. According to the U.N. World Tourism Organization, China is expected to grow from the world’s fourth to ﬁrst travel destination by 2015.

Youku fights online piracy The popular Chinese video sharing website Youku.com is stepping up its use of antipiracy “fingerprinting” technology to shore up its reputation among advertisers. The technology codes videos by graphical characteristics and will make it easier for Youku, which generated US$29.3 million in revenue in 2009, to identify and to remove unlicensed content from its site. The software will be available to content providers, such as the Motion Picture Association, to embed a fingerprint in copyrighted works and then to search Youku’s database for unlicensed copies. Although Youku says only a “very small” percentage of its content is unlicensed, advertisers are concerned about being

associated with piracy. The eﬀort mirrors that of Google Inc.’s YouTube, which began using similar technology in 2007 to avoid a legal showdown with copyright owners.

Microsoft contractor under ﬁre Microsoft Corp. is investigating claims of worker abuse at a Dongguan factory, where its supplier, Taiwan-based KYE Systems, employs between 3,600 and 4,500 Chinese workers. The investigation follows an April report by the U.S.-based National Labor Committee, accusing KYE of overworking young employees, paying workers US$0.65 cents an hour before food deductions and housing them in cramped factory dormitories. Charles Kernaghan, director of the National Labor Committee, claimed the factory is “really run like a minimum security prison.” In response, Microsoft dispatched a team of independent auditors to investigate the report’s claims. KYE’s Dongguan factory produces computer mice, cameras and other computer devices for Microsoft, as well as for other companies. MACROECONOMICS

Report foreshadows China’s trade goals A Chinese government research report released on April 18 provides what some are calling a “roadmap” for reforms to China’s foreign trade sector. The report comes on the heels of China recording a US$7.24 billion trade deficit in March, its first monthly trade deficit in six years. Researchers at the Ministry of Commerce, Ministry of Finance and the Chinese Academy of Social Sciences compiled the report. They advise policymakers to lower import tariffs and to shore up the quality of the country’s trade sector. China should also focus on increasing exports in hightech equipment, energy and resource products, as well as certain agricultural and consumption goods. The report predicts that China’s trade volume will more than double to US$5.3 trillion by 2020.

China’s GDP growth causes worry China’s GDP rose 11.9% in the ﬁrst quarter of 2010 compared to the same period last year,

rising on strong retail demand and ﬁxedasset investments. The US$1.19 trillion of GDP in Q1 exceeds expectations but causes concerns of an overheating economy. Worrying signs include a 2.2% rise, though modest, in China’s consumer price index in Q1 and surging home prices fueling concerns of a property bubble. However, Li Xiaochao, spokesman for China’s National Bureau of Statistics, points out that the reason for the larger than expected growth “is largely a result of last year’s low comparison base and the government’s stimulus.” China forecasts GDP growth of 8% in 2010, but rising commodity prices and severe drought in southwest China remain challenges in what Li describes as a “very complicated” economy.

China’s port activity booming The volume of shipping activity at China’s ports exploded in the first quarter, indicating that China’s strong economic recovery continues. According to Ministry of Transport data, first quarter port cargo throughput and foreign trade cargo throughput were more than 20% above first quarter activity in 2009. The throughput of commodities such as iron ore, coal and crude oil all increased in response to strong domestic demand. In March, China’s exports increased 24.3% from one year ago to US$112.1 billion. Similarly, imports rose 66% to US$119.3 billion. China’s total foreign trade increased 44.1% to US$617.85 billion in the first quarter. U.S. - CHINA

U.S. respects China’s currency regime In a meeting with Chinese President Hu Jintao last month, U.S. President Barack Obama said the U.S. respects China’s sovereignty on the thorny issue of currency exchange rate policy. Obama emphasized that the U.S. wants to build a stronger relationship with a prosperous China and to increase bilateral and multilateral cooperation on pressing global issues. The meeting follows a U.S. Treasury Department decision earlier in the month to delay releasing a report to

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the U.S. Congress on whether China is manipulating its currency. On China’s side, Hu stated that his country will follow its own path of exchange rate reform, keeping in mind domestic economic and social development conditions. China posted a rare US$7.24 billion trade deficit in March, its first monthly deficit in six years, providing the central government leverage to resist calls to appreciate the yuan.

U.S. aids China’s development of clean coal China’s development of clean coal technology received a significant boost in April, thanks to U.S. assistance. On April 16, the U.S. Trade and Development Agency (USTDA) awarded a US$832,877 grant to the China Power Engineering Consulting Group Corp. In partnership with General Electric, the grant will fund a feasibility study of commercial scale integrated gasification combined cycle (IGCC) technology in China. The study’s initial phase will evaluate the cost and performance of the clean energy technology designed by GE to produce fewer harmful emissions. “Coal is an abundant and low cost resource in China and the U.S. gasification technology allows us to use it in a much cleaner way,” said Steve Bolze, president and CEO of GE Power & Water.

U.S. judge faults Chinese drywall in judgment A U.S. federal judge in New Orleans ruled against Chinese drywall manufacturer Taishan Gypsum Co. in a class action lawsuit brought by seven Virginia homeowners. The judgment awards a combined US$2.6 million in property and other damages because of the sulfuremitting drywall linked to corrosion and adverse health effects. The case is significant because state-owned Beijing New Building Material holds a controlling stake in Taishan Gypsum, which was not represented in court and has no obligation under international law to acknowledge U.S. civil judgments. The case opens the potential for thousands of additional lawsuits to be filed in other U.S. states and may prompt action by the

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U.S. and Chinese governments to resolve the dispute because of the magnitude of damages involved. CHINA OVERSEAS

China lends Venezuela US$20 billion Venezuelan President Hugo Chávez announced that China agreed to lend his country US$20 billion for infrastructure projects in exchange for securing rights to future oil exports. The deal furthers China’s push to develop closer ties with oil-rich developing nations and helps Venezuela reverse an economic slide that saw its economy shrink 3.3% in 2009. China imported no fewer than 132,000 barrels of crude oil per day from Venezuela during January and February, though Venezuela claims it ships 460,000 barrels per day to China. China and Venezuela also agreed to form a joint venture to develop an oil ﬁeld in eastern Venezuela. As the deal matures, another possible beneﬁt is the possibility of increased contracts for Chinese oil service companies.

BRIC leaders pledge further cooperation Chinese President Hu Jintao met with the leaders of Brazil, Russia and India in Brasilia, Brazil on April 15 to discuss how to overcome the global economic downturn. In his address to the summit, Mr. Hu called on all parties to promote liberal trade policies, including properly resolving trade disputes and resisting trade protectionism. “A prosperous and growing China dedicated to peace and cooperation,” Hu said, “is willing and able to make new and even greater contributions to the mankind’s pursuit of peace and development.” At the summit’s conclusion, leaders of the BRIC nations stated their commitment “to resist all forms of trade protectionism and ﬁght disguised restrictions on trade.” The leaders also stressed that reform of the global ﬁnancial system was needed urgently.

President Hu attends nuclear summit

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Chinese President Hu Jintao joined world leaders from 47 countries to discuss safeguarding nuclear materials. “The potential threat of nuclear terrorism cannot be neglected and the risk of nuclear material diversion and illicit traﬃcking is on the rise,” Hu told leaders at the Nuclear Security Summit held April 12–13 in Washington, D.C. Hu shared China’s eﬀorts to increase nuclear security capacity, while the country honors its international obligations and provides other countries with nuclear security assistance and technology training. “Nuclear security measures should help foster an enabling environment for peaceful use of nuclear energy by all countries and facilitate related international cooperation,” Hu added. At the summit’s conclusion, a communiqué was issued committing countries “to secure all vulnerable nuclear material in four years.” GOVERNMENT & POLICY

Interest rates held constant Chinese authorities remain unwilling to increase interest rates to cool down the country’s growing economy. A rate increase may be called for to manage a list of growing challenges facing China, including double-digit GDP growth, fear of a housing bubble and inﬂation concerns. One reason China’s leaders do not favor raising rates now is doing so may encourage an inﬂow of foreign currency, resulting in undesired liquidity and additional pressure on the yuan to appreciate. A second reason is China’s leaders “see rising risks from the external global environment and worry about the sustainability of the recovery,” according to Standard Chartered economist Jinny Yan. Instead, China’s preference remains administrative controls, such as tightening regulations on property investing.

China continues U.S. treasuries sell-off China was a net seller of U.S. treasuries for the fourth consecutive month in February, according to recent U.S. Treasury Department data. China sold US$11.5

billion of treasuries in February, dropping its holdings to US$877.5 billion. Since November, China’s holdings have fallen US$60.8 billion. Despite the recent selloﬀ, China maintains a strong presence in the U.S. treasury market and continues to hold the top position as the largest foreign holder of U.S. government debt. Data for March, when released, may show that China boosted its holdings because of its eﬀort to rebuild reserves in March. The exact amount that China sold in February is uncertain because China increasingly uses third-parties to trade treasuries, obscuring the origin. SHANGHAI BUSINESS

Shanghai brings on the bull A replica of the eminent bull sculpture outside the New York Stock Exchange will soon stand on Shanghai’s historic Bund. The bull, which will be unveiled around the May 1 opening of the Shanghai World Expo, represents China’s ambition for Shanghai to be an

international ﬁnancial center by 2020. Italian-American Arturo Di Modica designed both “brother bulls” to be the same length, height and weight. But Shanghai’s bull comes with Chinese variations. For example, instead of bronze, Shanghai’s bull is reddish in color to represent China. The bull also leans right and appears more intimidating – head lowered and tail upright, ready to charge. “It must be strong. It’s about a strong nation,” said Di Modica.

Grand prix displays “Made with China” ad Among the hundreds of race vehicle advertisements on display at the FIA Formula One World Championship in Shanghai was a large banner that read “Made with China.” The banner was courtesy of China’s Ministry of Commerce, which chose the popular grand prix race held April 16-18 to promote Chinese goods and to build long-term brand identity. Oﬃcials estimated that the banner, which was worded in English and included a

Chinese translation below it, would reach 600 million race fans worldwide. The banner was stretched prominently across the stands where television cameras fully captured it an estimated 60 times over the three days.

Pudong celebrates 20 years April 18 marked 20 years since the Central Committee of the Communist Party of China and the State Council announced an economic pilot program to open up and develop Pudong. To mark the occasion, the Pudong district government set an aggressive annual GDP target of 12 percent over 2010–2015. The government expects to expand growth to RMB500 billion (US$73.2 billion) in 2011. Over the past 20 years, the Pudong New Area, as the district is now called, has witnessed a stunning transformation from farmland into an international ﬁnancial and economic center. Pudong’s GDP has jumped 67-fold since 1991, attracting multinational corporations, banks, ﬁnancial and futures markets and even an upcoming Disneyland.

Nestled within a 588,500sq.m landscape of lush greeneries and a stunning central lake, Shanghai Pudong Software Park (SPSP) is in the forefront of the newly touted Silicon Valley of Shanghai situated within a 5-minute stroll from Metro Line 2. SPSP is well recognized as the national software industry base, as well as the nation’s premier software outsourcing base. Equipped with affluent IT talent pool and IT training classes, it is no surprise that many renowned global IT companies are already calling the prestigious SPSP their home.

LEASING HOTLINE

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

Furthermore, SPSP offers an extensive range of offices, conference centers and hotels for your business requirements. It also offers a diverse collection of modern residential spaces, restaurants, cafes and sports facilities. Come and embrace the holistic vision of Work, Live and Play that will appeal to both your talented employees as well as raising the profile of your Corporation M AY 2 0 1 0 I N S I G H T 7 among your peers and competitors.

CHINA & THE WORLD SOUTH AMERICA

MIDDLE EAST

JAPAN: Toyota Motor Corp. announced it would halt the launch of a new Lexus sport-utility vehicle in China. Toyota’s decision follows concerns raised in the U.S. about the 2010 Lexus GX460’s rollover risk. Toyota temporarily suspended U.S. sales of the vehicle in April following a rare “don’t buy” recommendation by inﬂuential U.S.-based Consumer Reports magazine – its ﬁrst vehicle rejection since 2001. Toyota spokesman Hitoshi Yokoyama said the automaker has “no idea” when the vehicle’s China launch will be possible. On April 19, Toyota announced the recall of all 2010 GX460 models built since November 16, affecting 9,400 vehicles in North America and a further 1,000 in other countries.

ASIA-PACIFIC

AFRICA

ZIMBABWE: Government ofﬁcials from China and Zimbabwe celebrated the completion of a refurbished national sports stadium. Chinese Ambassador to Zimbabwe Xin Shunkang formally returned the stadium to the Zimbabwean government while hailing the friendship and cooperation between the two countries. The 60,000-seat stadium, which China helped to build in 1987, was closed for three years while a Chinese contracting ﬁrm, China Jiangsu, conducted renovations. China Jiangsu added a new scoreboard, refurbished VIP and washroom facilities and installed state-of-the-art electrical equipment at a cost of US$10 million.

EUROPE

BELGIUM: Chinese outbound flights to Europe began returning to normal one week after Eurocontrol, the Brussels-based agency that coordinates aviation safety in Europe, decided to ground planes across Europe. The ash cloud formed by an ongoing volcanic eruption in Iceland forced Chinese airlines such as China Eastern Airlines to cancel 17 flights to European destinations from April 15-20, interrupting travel plans for 8,000 passengers. Worldwide, the disruption caused over 100,000 flight cancellations and stranded hundreds of thousands of passengers, including more than 3,000 Chinese citizens, according to China’s Ministry of Foreign Affairs. Asia-Pacific carriers lost an estimated US$40 million each day European airspace was restricted, according to the Association of Asia Pacific Airlines (AAPA).

NORTH AMERICA

MIDDLE EAST

RUSSIA: Russia’s Transaero Airlines announced the launch of non-stop air service from Beijing to Moscow beginning June 4. Chinese Ambassador to Russia Li Hui attended the media announcement and praised the development of Chinese-Russian bilateral ties. Transaero joins Aeroﬂot Airlines as Russia’s other carrier connecting the capital cities. Flights from Domodedovo International Airport, Russia’s largest airport, are planned for Tuesdays and Fridays; return ﬂights will operate on Wednesdays and Saturdays.

SOUTH AMERICA

AFRICA

SAUDI ARABIA: Oil exports from Saudi Arabia remain stable, despite prices rising above US$80 a barrel and growing demand in China. Data released on April 10 by China’s General Administration of Customs showed that China increased total oil imports 29% from one year ago to 4.98 million barrels a day. Saudi Arabia sends China about one million barrels a day, accounting for roughly 20% of China’s crude imports.

AFRICA MIDDLE EAST

ASIA-PACIFIC NORTH AMERICA

UNITED STATES: The U.S. Department of Commerce announced an investigation on alleged dumping of Chinese aluminum extrusion. The investigation will examine whether the exports were sold at improperly low prices because of possible government subsidies. The independent U.S. International Trade Commission (ITC) and the Commerce Department will conduct the investigation and are expected to make an initial determination on May 17. Following the launch of the U.S. investigation, China’s Ministry of Commerce announced import duties on certain nylon imports from the U.S., as well as from the EU, Russia and Taiwan. Tariffs on U.S. nylon no. 6 are effective for ﬁve years and range from 29.3% to 96.5%, the strictest of the new tariffs imposed.

NORTH AMERICA AFRICA

EUROPE SOUTH AMERICA BRAZIL: Chinese President Hu Jintao and Brazilian president Luiz Inacio Lula da Silva pledged to SOUTH AMERICA promote the Sino-Brazilian strategic partnership conceived in 1993 and to advance bilateral NORTH AMERICA cooperation. During Mr. Hu’s mid-April visit to Brazil, the two governments signed a 2010–2014 Joint Action Plan and cooperation documents covering space technology, aviation, food safety, culture, education, infrastructure, energy, statistics, and military and law enforcement. The two leaders also pledged to accelerate growth of Sino-Brazilian trade and investment.

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M A N A G E R ’ S N OT E B O O K

When Leaders Riﬆ Change

Strategies to influence behavior in order to effect organizational change.

t a recent workshop on creating a lean culture, the focus of discussion was Toyota’s culture of continuous improvement in its operations. Despite the recent spate of automobile recalls, the Toyota Way is a very effective and unique management culture that can sometimes be difficult to translate into other organizational contexts. This is particularly true for the companies that are implementing lean or Six Sigma concepts in existing, reasonably successful companies or operating units. Yet the question among the workshop attendees was often not “What should we be doing?” but rather, “What do you do when a leader resists change?” Conventional wisdom says that whether there is a change such as lean, Six Sigma, a new IT system, or a benefits adjustment, some leaders and managers will resist. When it is the successful, seasoned, midlevel leaders, it can be extraordinarily difficult to bring them around. This article provides a few strategies that can prove useful in breaking down the resistance and inviting these leaders to join in and support making changes. While the example here is a lean implementation, I encourage you to rewrite this story with the change that is underway in your organization. Meet Larry. Larry is a plant manager who has been at a facility for 15 years, the last seven as plant manager. He has successfully managed and led the plant through capital projects, labor negotiations, environmental incidents, seasons of sold-out production and full line shutdowns. Larry is well respected at his plant, within his community, by his peers and by the business head. Having outlasted several corporate change initiatives, he is expecting to do it again with this change. Larry is smart, stays up to date with Got an article idea for “Manager’s Notebook”? Contact Insight Editor-in-Chief Justin Chan at justin.chan@amcham-shanghai.org.

industry developments and participates in “best practice” facilities tours. He has listened to the successes, challenges and failures of his colleagues who have moved forward with similar changes. He doesn’t argue that it won’t work and doesn’t block the consultants from running their workshops. He even gives one of his people the role of project lead, and dutifully reports at the quarterly reviews the work that is going on at the plant. Yet everyone knows that little change is actually happening. Larry may be someone you know, or you may need to influence people like Larry. Organizations typically rely on evidence or management persuasion to bring about change. Consider how ineffective solid evidence is in changing behaviors such as flossing, exercise, smoking or speeding. While evidence of the value of a change is critically important, the most compelling evidence to a person is what they experience. Larry’s evidence is that he has been and is successful. He also believes that he knows how to continue being successful. Furthermore, Larry knows that his past success has involved avoiding these “passing fads”. Before considering useful strategies, we want to begin with recasting the resistance. Experts have argued that accepting the conventional wisdom that people naturally resist change leads to counter-productive behaviors. Instead of looking at ways to overcome resistance, we’ll explore ways to influence behavior. 1. It’s too big, too much or unclear. Look to the success stories to identify “vital behaviors” – the smallest set of behaviors that will have the greatest impact. These are not thoughts, values, or qualities, but the very few “must do’s” that, if done consistently and persistently, will lead to change.

2. People resist loss, not change. According to the SCARF model, resistance may come from feared changes in status, control, autonomy, relatedness, or fairness. Explore and acknowledge what people may lose. Once fears are identified, make sure to address them and minimize the impact. 3. Unclear alignment with personal goals. Support people in uncovering their goals and how the change fits in with them. Spend time looking for the places where the value brought by change aligns with employee goals and values. 4. “You’re not listening.” Look at resistance as feedback. Focus on the purpose of the change and invite discussion, engagement, involvement and even refusal as you refine the change effort. 5. Plan for a marathon, not a sprint. New behaviors are often not easy and take time to become comfortable. Unexpected roadblocks will arise so build support teams, provide regular communications, celebrate what’s working, and add fun into the change. It often seems like most people are not wired for change; yet the reality is that we are marvelously equipped to accept, adapt to and adopt change. It is a reality of all elements of our lives. We may not always respond rationally to change, but that in itself give us clues on what strategies may begin to influence behavior.

a Sherry L. Read is nal sio es of Pr Certified l ipa inc Pr d an Coach of Read Solutions w. Group. Visit ww up. ro sg ion readsolut re mo r fo com information.

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BUSINESS BOOKSHELF BY LESLI LIGORNER

An Oasis in a Desert of Material

he employment landscape in China has changed dramatically over the last few years. Not only have myriad laws and regulations changed, but enforcement has become a greater issue for more multinational companies than ever before. As multinational companies begin to adjust to the new laws, Ronald Brown’s “Understanding Labor and Employment Law in China” (Cambridge University Press, 2009), could not come at a more opportune time. The book is a fresh stream of valuable, clear guidance on the employment laws in the middle of a desert of materials that are thorough and in English. Brown writes in a neutral manner and provides examples where feasible to illustrate the applicable interpretations of the provisions. The book is well organized and easy to read. Anyone with an interest in the development of the current employment law regime will appreciate Professor Brown’s straightforward style. The book begins by providing the cultural and economic background behind the legal developments of the past two decades. With this background, the reader gains a deeper understanding of why the laws are written the way they are in addition to the concerns and motivations behind certain provisions. The book progresses in a very logical manner to cover basic employment concepts such as an “employment relationship” under PRC law and general hiring and recruitment issues to more complex issues such as the social insurance system. Brown explains in depth the laws regarding antidiscrimination and the uncertainties with respect to what qualiﬁes as discrimination under some of the regulations. The book also provides answers to questions about work safety rules and the equivalent of the worker’s compensation scheme, which can be quite complex. Before this book, such information was not easily found in a reliable format or in

English. He further explains the overall wage and hour structure, about which little has been written accurately in English. The book also discusses in detail the termination procedures for employment contracts and provides a fresh look on how labor disputes, mediations and arbitrations are handled in China. In-house counsel and human resources executives who do not speak or read Chinese now have a valuable resource in English covering when summary termination is available, and if severance is owed, how much and the amount of potential damages if a labor arbitration commission does not uphold the termination. The book also includes a template employment contract, complete with suggested provisions to provide greater clarity to both the employee and the employer regarding their respective rights and obligations, in addition to English translations of the foundation of the employment law landscape, namely, the Labor Law, the Labor Contract Law and its Implementing Regulations, the Employment Promotion Law and the Law on Labor Disputes Mediation and Arbitration. “Understanding Labor and Employment Law in China” should be a new and highly welcomed addition on the shelf of anyone who wants – and needs – a comprehensive, user friendly overview of the employment law landscape in China.

Lesli Ligorner is a partner of Paul, Hastings, Janofsky & Walker LLP. She is resident in the firm’s Shanghai office and chairs the firm’s employment law practice in Mainland China.

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A N A LY S I S ISTOCKPHOTO

New Landscape for Representative Ofﬁces Foreign enterprises should be aware of the new rules regarding taxation of representative ofﬁces in China.

Analysis provided by

For more information, please contact, Matthew Mui +86 (10) 6533 3028 matthew.mui@cn.pwc.com

epresentative Offices (RO) have been a popular business structure adopted by foreign investors to enter the China market for its simple registration process, no capital lockup requirement, less stringent business regulatory requirements, relatively low tax costs, non-complex tax compliance requirements and straight-forward exit procedures. RO taxation was previously governed by various tax rules under the former Foreign Enterprise Income Tax (FEIT) regime. Since the new Corporate Income Tax (CIT) Law took effect on January 1, 2008, China’s State Administration of Taxation (SAT) has not issued any new tax rules related to the taxation of ROs under the new CIT regime. Therefore, both ROs and local-level tax bureaus have been following former FEIT tax rules to report and administer the taxation of ROs and, in practice, the taxation of ROs in large part has remained unchanged. On February 20, the SAT released the“Provisional Measures for Tax Collection and Administration of Representative Offices of Foreign Enterprises” (the Measures) covering the taxation of ROs under the new CIT regime. The Measures differ significantly from previous tax rules and take retroactive effect on January 1, 2010. In this article, we highlight the salient points of the Measures and share our observations on the new rules covering RO taxation.

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Salient points of the measures Scope of ROs: Virtually all ROs are covered by the Measures, including all ROs established in China by foreign enterprises (including enterprises in Hong Kong, Macao and Taiwan) and other organizations. Tax registration/de-registration: ROs need to perform tax registration within 30 days after the relevant business registration and approval is obtained. Detailed documentation requirements for tax registration are provided in the Measures. Amendment and tax de-registration is required when the contents of the tax registration have changed or the RO ceases operations. ROs are required to report CIT on their liquidation income to the incharge tax bureau before tax de-registration. Tax liabilities and filing requirements: RO taxable income is subject to CIT. Where ROs carry out activities subject to Business Tax (BT) or Value Added Tax (VAT), the relevant taxes shall be calculated and filed in accordance with BT or VAT regulations. ROs are required to report CIT and BT on a quarterly basis; while the reporting of VAT should follow the relevant tax filing periods in the VAT regulations. Taxation methods: Generally, ROs are required to keep proper accounting records to ascertain actual revenue and profit and file taxes on the same. The Chinese tax authorities shall adopt the “deeming

method” for ROs that cannot accurately ascertain their revenue and costs, or shall calculate and file their tax liabilities on an actual basis. These “deeming methods” include the “expense-plus method” (also known as “cost-plus method”) and “actual revenue deemed profit method.” Detailed rules on determining expenses under the expenseplus method are generally in line with those under the former FEIT regime, with minor changes. In addition, an RO which files tax under the “deeming method” may, after filing with the relevant tax authority, switch to the “actual basis method” provided that it can maintain complete accounting books, ascertain its taxable revenue and profit and calculate tax liabilities accurately. Tax exemption: The Measures invalidate previous tax circulars governing various taxation treatments for ROs under the FEIT regime beginning from January 1, 2010. Specifically, ROs are no longer allowed to be tax exempt and local-level tax bureaus must re-examine previously approved exemptions. However, ROs may still enjoy treaty treatments but must undergo the relevant administrative procedures set forth in SAT Circular 124, which addresses the procedures for claiming treaty benefits by non-residents.

PwC observations The Measures are significantly different from previous tax rules under the former FEIT regime and we set out our observations on the critical changes below: Rationale and motivation of the changes RO taxation in China has been an interesting topic for more than a decade. On one hand, ROs of foreign enterprises are not allowed to conduct income-generating business as restricted by Chinese business registration regulations and can only carry out coordination and liaison activities for their overseas head offices or affiliates. On the other hand, Chinese tax authorities take the view that ROs in China are contributing to the generation of income for overseas head offices and should therefore pay taxes in China. However, determining the values (income and profits) attributable to ROs in China is a difficult,

technical issue because ROs usually argue they are only allowed to conduct coordination and liaison activities in China without generating income. As a compromise, in most cases under the former FEIT regime, ROs were allowed to report taxes according to deeming methods, in particular the Expense-plus Method. The SAT has realized that some ROs have a very large number of staff or a single foreign enterprise has many ROs across China. The SAT has formed the view that these ROs are set up to carry on profitable business activities in China, and the adoption of the deeming methods, in particular the expense-plus method, presents a tax loophole for foreign enterprises to use ROs by creating inequities as compared to incorporated companies in China that are subject to tax on an actual basis. Change of tax filing basis The new Measures emphasize “actual basis” for tax filing of ROs. It appears that the SAT has a presumption that ROs are set up for the objective of carrying out taxable activities in China and therefore should have kept accounting books and records to determine their actual revenue and profits for their own business purposes. Consequently, they should be able to report tax on an actual basis. Only when the in-charge tax bureau examines and agrees that an RO has failed to keep complete and accurate books or is unable to calculate and file their tax liabilities on an actual basis, is the RO allowed to file on a deemed basis. In that case, the relevant tax bureau, and not the RO, may choose the deeming method to be used. In addition, the Measures now require ROs to ascertain revenue and profits using the principle of returns commensurate with the functions and risks. This change is a positive move toward OECD guidelines and widely accepted international tax practices for determining the attributable profits of the permanent establishment of non-residents in another jurisdiction. However, in the China context, it could translate into difficulties and challenges to both ROs and the Chinese local-level tax bureaus in terms of compliance burdens and technical controversies. Because the existing tax filing basis for ROs has been used for over a decade and the expense-plus method was generally the preferred method of

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The Measures now require ROs to ascertain revenue and proﬁts using the principle of returns commensurate with the functions and risks.”..”

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ROs currently enjoying tax exemptions should review current activities and operations and assess their qualiﬁcation of noCIT status.”.”

the local-level tax bureaus, it remains to be seen whether the previous tax rules will prevail. Furthermore, although it is unclear whether the existing filing basis of ROs will be re-examined, ROs using the “actual revenue deemed profit” method and performing “nil-tax” filings should review their current status to ensure their “zero” revenue claim is supported. Raising the deemed profit rate Deeming methods, in particular the expense-plus method, were widely adopted as the tax filing method for existing ROs. Under the Measures, the deemed profit rate is raised from 10 percent to a minimum of 15 percent. To some extent, the change could be brought about by the reduced CIT rate (from 33 percent to 25 percent in most locations), and could serve as a deterrent to ROs continuing to use the deeming methods by pushing them to report their actual revenue and profits. It is important to note that the deemed profit rate of 15 percent is the minimum and local tax bureaus could adopt a higher profit rate. Cancellation of tax exemption for ROs Another notable change is the cancellation of tax exempt status for ROs. In addition to the belief that ROs are mostly carrying on income-generating activities, the SAT has also realized that there is no legal basis under the CIT tax regime to grant tax exemption to ROs. Technically, ROs may only achieve no-CIT status by invoking treaty protection under a relevant double tax agreement (DTA). If the RO only carries on exempted activities (namely providing auxiliary and preparatory activities for its overseas head office), the foreign enterprise setting up an RO is not considered to have a permanent establishment in China and should not be subject to CIT in respect of the activities of the RO. The Measures require ROs to follow the relevant procedures under Circular 124 in claiming treaty benefits. It is worth noting that, under Circular 124, treaty protection is only subject to recordfiling procedures instead of approval-application procedures. However, it is unlikely that, in practice, a RO could automatically enjoy treaty protection upon filing of the required documents. Rather, the local-level tax bureaus will verify the documents

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before treaty protection is granted. Obtaining tax exemption for ROs from the Chinese tax authorities has never been easy. The impact of cancellation of tax exemption might not affect many ROs. Rather, the change to securing treaty protection under the relevant DTA may present a better chance for some ROs to achieve no-CIT status. The Measures state clearly that all previously approved tax exemption cases should be invalidated according to the rules prescribed in the Measures. Therefore, ROs that are currently enjoying tax exemption should review current activities and operations and assess their qualification of noCIT status by virtue of treaty protection under the relevant DTAs. Tax exemption for ROs set up by foreign governments, international organizations, nonprofit organizations and other civil groups is not specifically addressed in the Measures. These special ROs should rely on the relevant treaty protection to enjoy no-CIT status. Since DTAs only cover CIT and not turnover taxes such as BT and VAT, ROs that enjoy CIT treaty protection under a DTA may still be responsible for BT- or VAT-related activities. Turnover tax It has been a consistent tax view and practice that BT should apply to ROs as they are involved in providing services, namely coordination and liaison activities. The Measures now stipulate that ROs may also be subject to VAT, which previously only applied to the sale of tangible goods. It may imply that the Chinese tax authorities are ready to challenge whether some ROs are carrying on the business of trading tangible goods within China and hence should be subject to VAT. However, the Measures currently do not provide clarity on this issue. Timing Because the Measures are in effect retroactively from January 1, 2010, the first filing period under the Measures was the first quarter of 2010, with the filing due in mid-April. Both ROs and local-level tax bureaus may need additional time to prepare for the changes brought about by the Measures. In addition, the Measures allow provincial-level tax

bureaus to formulate their own implementation procedures within the scope of the Measures. Due to the short timeframe, ROs should watch for updated developments and new requirements in their localities.

Conclusion Without a doubt, the new Measures have shaped a new landscape for the taxation of most foreign ROs in China and will signiﬁcantly impact all ROs in China. The Measures put ROs in a very difﬁcult position from a tax administration and legal standing perspective. While Chinese business registration regulations only allow foreign enterprises to set up ROs in China for coordination and liaison activities, Chinese taxation rules treat ROs as income-generating businesses and tax them accordingly. ROs should be prepared for the new tax developments and new requirements in their

own localities. They should review their existing tax profile, review their functions and risks, and prepare to maintain accounting books and records that accurately ascertain their revenue and profits. ROs should also inform their overseas head offices about the changes and solicit support to improve their accounting books and records. Where practically viable, the overseas head office may even carefully consider converting their business structure from an RO to an incorporated company. At the same time, ROs should actively and timely communicate with their local-level tax bureaus to seek clarification on their tax treatments. As the title of Circular 18 suggests, it is merely a set of provisional tax measures. The SAT may issue further guidelines or clarification as necessary. Printed with the permission of PricewaterhouseCoopers Consultants (Shenzhen) Ltd. (“PricewaterhouseCoopers SZ”, a PRC incorporated entity). Copyright 2010 PricewaterhouseCoopers SZ. All rights reserved. The information in this article is of a general nature only and readers should obtain advice specific to their circumstances from their professional advisors.

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While Chinese regulations only allow foreign enterprises to set up ROs in China for coordination and liaison activities, Chinese taxation rules treat ROs as income-generating businesses.”.”

S H A N G H A I F E AT U R E

B Y W E I N A YA N G

IMAGINECHINA

The Expo Effect

With the Expo’s theme of “Better City, Better Life,” the city of Shanghai will not only be looking to put on a good show for visitors, but to improve overall quality of life.

ccording to former Shanghai Mayor Wang Daohan, who initiated the city’s interest in hosting the 2010 World Expo, there are long-term implications to hosting such an event. “The Guangzhou Trade Fair is tactical, and looks one year ahead. The World Expo is strategic, and looks 50 years ahead,” said Wang. Shanghai city leaders were certainly thinking long term when they submitted a bid to the Bureau of International Expositions in 2001 to host the 2010 World Expo. Since 2002, when Shanghai won the bid to host this year’s World Expo, an enormous amount of investment has been made to ensure the six-month event will be a success. According to a recent white paper by Jones Lang LaSalle, total investment for the Expo and supporting infrastructure in Shanghai was a staggering US$95 billion. But as Wang noted, much of the investment on the 2010 World Expo will last beyond October 31, when the Expo is slated to close and the last of the expected 70 million visitors return home. The Shanghai Expo will no doubt the biggest

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Expo in history, with over 240 participating countries and organizations, at least 70 million expected attendees and a 5.3-square-kilometer site. With the Expo’s theme of “Better City, Better Life,” the city of Shanghai will not only be looking to put on a good show for the visitors, but to improve the overall quality of life for its nearly 19-million strong population.

A clear economic boost Some suspect that given Shanghai’s strong focus on business, hosting the Expo was a simple economic calculation. Officially, 70 million visitors are expected although more recent reports estimate up to 100 million people will flood the city for the Expo, giving Shanghai’s tourism, retail and hospitality industries a significant boost. In comparison to China’s last major global event, the 2008 Beijing Summer Olympics, the Expo is expected to have a much greater economic impact. Aside from the disparity in duration, 17 days for the Olympics versus 184 for the Expo, the investment input-output ratio of the Expo is 3.7

times higher than the Beijing Olympics, according to a study by the Shanghai Academy of Social Sciences. A different study by the Expo Economy Institute at the Shanghai University of Finance and Economics (SUFE) estimates that the Expo will bring approximately RMB80 billion to Shanghai, based on the same model used to calculate the economic output of the Beijing Olympics. Leo Zhang, a Hangzhou Municipal Development and Reform Commission official who has already secured his tickets to the Expo believes that Shanghai will benefit greatly from the World Expo. “Just like how the 1933 Chicago Expo helped drag the U.S. from its deepest recession, the 2010 World Expo will get Shanghai’s economy back on the fast track,” says Zhang. However, “economic considerations are the least important,” says Professor Chen Xinkang, head of the Expo Economy Institute at SUFE, when asked about the costs and benefits of hosting the 2010 World Expo. Despite China’s penchant for GDP growth figures and Shanghai’s shrewd business culture, the city’s leadership seems to echo Chen. “What Shanghai stands to gain from the Expo cannot be measured simply in financial terms,” said Shanghai Vice Mayor and Expo Deputy Director Yang Xiong in a recent interview with the Beijing News. “Expo will have a deep influence on Shanghai and will have an impact on several generations.” Following the Shanghai People’s Congress in February, Shanghai Mayor Han Zheng noted that the “Better City, Better Life” theme is not just for the Expo, but applies to Shanghai’s overall development goals as well. In the spirit of the Expo theme, Han announced the implementation of an affordable housing scheme and an increase in the city’s minimum wage. Fiscal proceeds will also be spent on infrastructure and development projects to further improve the living conditions of Shanghai residents, Han said.

Bolstering the city image Aside from boosting Shanghai’s economy and improving the quality of life for city residents, promoting Shanghai on an international platform is also high on the government’s agenda. “Shanghai

needs the World Expo to boost its hard strength and especially its soft strength,” says Chen. “[The Expo] is an excellent opportunity to promote the global image for both China and Shanghai.” Though the city aspires to be a world financial and commercial center on par with New York or London, the global perception of Shanghai’s image and attractiveness lags behind New York by 40 percent, according to a study commissioned by the Shanghai Municipal Government. Shanghai’s efforts to promote the Expo and educate the Chinese public about all things the Expo are clear. Images of Shanghai World Expo mascot Haibao can be found across the country on billboards, public transportation networks, national television and other media. Expo brochures and guidebooks are also easily found in bookstores in every city. According to a recent report jointly released by Ogilvy and Millward Brown-ACSR that surveyed over 14,000 respondents across China, the number of people who have a clear idea of what Expo 2010 is about has doubled over the past year. Expo publicity has been driven through many channels, among which word of mouth and the Internet are helping to fan excitement and anticipation, says the report. In Shanghai, an incredible 90 percent of city residents plan to attend the Expo, while 30 percent of Chinese citizens surveyed outside of Shanghai expect to travel to Shanghai to visit the Expo grounds. But in order to improve the city’s international image outside of China, Shanghai will need to boost international awareness of the Expo. For its preparation of information materials, documentaries and promotional materials, the Shanghai Expo Bureau was awarded the Silver Dove, Shanghai’s top award for foreign publicity campaigns. Still, a massive promotional billboard in New York’s famed Times Square does little to convey the excitement and anticipation that has gripped Shanghai. A traveling Fox news crew from New York confirms the outlook. “Only when we arrived in Shanghai, did we start to realize how big this Shanghai Expo really is,” says Connell McShane, an anchor and correspondent on the Fox Business Network based in New York.

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What Shanghai stands to gain from the Expo cannot be measured simply in ﬁnancial terms. Expo will have a deep inﬂuence on Shanghai and will impact several generations.”.”

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Over the last few years the scale and pace of infrastructure development in Shanghai surpasses anything the world has ever seen.”.”

While the Expo’s message could be better tailored for the international audience, the eﬀort is deﬁnitely clear and there is growing international interest. According to the Shanghai Expo Bureau, of the 10,000 journalists registered to cover the Expo, 2,000 represent overseas publications.

Better life in the city According to the Jones Lang LaSalle report, “over the last few years the scale and pace of infrastructure development in Shanghai surpasses anything the world has ever seen.” Indeed, Shanghai has integrated Expo infrastructure projects into its overall city development. An extensive transportation network has been put into place to unleash the city’s potential. Expanding from its existing two metro lines built over a decade ago, by the Expo’s opening day the city will boast a system of 12 running metro lines with a total network length of 420 kilometers.

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“The build out of the Shanghai Metro over the last five years will ultimately be the most important legacy of the Expo,” reports Michael Klibaner, national director and head of research of Jones Lang LaSalle China. “The Shanghai Metro is improving quality of life by enabling free movement throughout the city, thus solidifying Shanghai’s position within China as a favorable place to live, work and play.” Shanghai Expo is the first World Expo to take a “city” theme. As the pilot city leading China’s ambitious urbanization initiatives, Shanghai is testing a sustainable city expansion model for the rest of China and will be an excellent opportunity for other city governments to learn from Shanghai’s experience. With the number of cities in China now exceeding 660, China’s billion of city residents can certainly benefit from that wisdom. Weina Yang is a communications associate at AmCham Shanghai. She can be contacted at weina.yang@amcham-shanghai.org.

I N F R A S T R U C T U R E F E AT U R E

BY LAUREN HILGERS

IMAGINECHINA

Outside the Expo

n their heyday, World’s Fairs had a reputation for changing their host cities. They not only brought international exhibitors and architectural oddities, but encouraged infrastructure projects, the beautification of cities and offered an opportunity for the host country to engage in a rare bout of self-reflection. Their star may have faded in the West, but Shanghai’s World Expo has all the ambition of a Paris or London at the turn of the last century, and the mud and dust of construction that has covered the city during the past few years is a testament to the city’s dedication. With the Shanghai World Expo opening its gates under the banner of “Better City, Better Life,” development projects undertaken outside the fairgrounds will be putting the slogan to the test. For those living in Shanghai, the dust of construction has cleared just in time for the Expo. Shanghai undertook the construction of eight new metro lines; it entirely rebuilt the historic Bund promenade and sent teams of workers into the nooks and crannies of the city, replacing water mains, repaving roads and, in some cases, even entering apartment buildings to update old wiring. The price tag of the Expo, while not officially disclosed, is estimated to be around US$95 billion, twice that

of the 2008 Beijing Summer Olympics, with the majority of that money going into new infrastructure and municipal construction projects. “The total amount of investment is staggering,” says Michael Klibaner, national director and head of China research at Jones Lang LaSalle. “It’s unclear whether this money would have been spent anyway, but having a deadline like the Expo certainly sped things up.”

Expanded transportation One of the most influential projects has been the expansion of the city’s metro system. Ten years ago, Shanghai was just opening up its second metro line. Today, the city boasts a metro system that covers more than 400 kilometers and is still growing. “This we see as being the most lasting impact of the Expo,” Klibaner says. Metro lines now extend to both of Shanghai’s airports and dense suburbs of the city, like Changning and Minhang districts, are now within easy reach of the city center. “It’s directly affecting every sector of the real estate industry,” says Klibaner. In China today, approximately 80 percent of residential property sales are occurring in city suburbs. In addition, high-end office developments

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Shanghai is updating its image in preparation for the Expo with new infrastructure and municipal construction projects.

IMAGINECHINA

INFRASTRUCTURE INVESTMENTS: Shanghai's metro system now covers 420 kilometers and is still growing.

and retail stores are opening up in decentralized areas of the city. Klibaner uses Shanghai’s Zhongshan Park as an example - an area where retail has grown around a series of metro stops, extending their reach to potential buyers. The “suburbs” that Klibaner speaks of, however, are not traditional in the Western sense because they are still areas of dense population. This arrives at another convenient feature of the Shanghai metro system. The system encourages population density around transportation hubs, even as car sales skyrocket throughout China. The extensive metro network offers a sustainable and convenient way to travel, answering one the more pressing questions of the Expo slogan “Better City, Better Life” – how to grow sustainably. “I think the slogan calls for new visions of a future lifestyle for all global cities,” says Sean Chiao, executive vice president at AECOM, a design, engineering and program management company with over 45,000 employees around the world. As urbanization rapidly expands the size and scope of cities in China and worldwide, the way that Shanghai has transformed itself not only enhances its own reputation, but offers an example to other developing cities. By 2025, two-thirds of China’s population is expected to reside in cities. “How does everyone work together and provide a better urban area that will make people’s lives better?” asks Chiao. “With all this urbanization, these are questions that everyone should think about.” The creation of parks and public space is also high on Shanghai’s urbanization agenda. A few years ago, cars dominated the main stretch along the Huangpu River in front of the historic Bund, with only a small, elevated walkway for pedestrians to view the Pudong skyline on the opposite bank. To prepare for the Expo, Shanghai tunneled under the row of venerable 1920s buildings and now directs the majority of traffic below the iconic waterfront. What is left is a scant four lanes of traffic (down

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from eleven) and a two-kilometer-long promenade. In addition to providing a large outdoor space to the public, the Bund is important to the self-image of the city, says Chiao. It’s a symbol of Shanghai’s place as an international metropolis. Expo development, in general, has not been short on symbolic development. The China Pavilion, for example, is signiﬁcant in its mix of Chinese culture and modernity. “I think the China pavilion will give the city a new landmark,” Chiao says. “In the early 90s, their concept of modernization meant Westernized architecture. Now, after 20 years, the question is, ‘What does Chinese culture mean to the modern world?’”

City roots In some ways, the transformation that Shanghai has undertaken mirrors the frenzy of construction that took place in Beijing before the 2008 Olympics. Both events offered the opportunity for their host cities to speed up infrastructure development and a chance to polish the cities’ rough edges. Worn buildings received a new coat of paint, sidewalks a clean set of tiles and green spaces were filled with fresh flowers. Beijing, famously, even got blue skies made to order for the Olympics. “In every city, the basic idea is the same; they use infrastructure, architecture and municipal projects to accelerate the city development,” says Chiao. “In Beijing, there were the Olympics. In Guangzhou, they hosted the Asian Games and now Shanghai is leveraging the Expo to speed up urbanization.” While these projects have similar characteristics, the end result has not been the same. It is the nature of the cities themselves that helps shape the direction that these municipal projects will take. In Beijing, for example, much of the development was focused on creating impressive pieces of architecture – iconic stadiums so large that their use following the games is still to be determined. “Beijing is probably more monumental, because that’s the nature of the city,” Chiao says. “It's a national statement.” Shanghai, on the other hand, has largely maintained a human scale, keeping the winding two-lane streets that have long defined the city's

foreign concessions. The Expo grounds are expected to be re-incorporated into the city after the event is over, leaving behind a few distinct buildings and a large patch of real estate primed for development, both residential and commercial. “It will be a boon to the luxury housing sector,” Klibaner says. The scale of the streets is not the only characteristic Shanghai has preserved. While no small number of historical buildings have been cleared for the Expo, the city has marked a number of areas and structures for preservation and refurbishment. In addition to the Bund and the famous Peace Hotel, the former Holy Trinity Cathedral, built just oﬀ of the city's bustling Nanjing West Road, has been restored just in time for the opening of the Expo. Peter Hibbard, a Shanghai historian, says he is sorry to see some of the old buildings go. But, he says, it is in the city's nature to re-invent itself. “If you look at it one way, this is nothing new,” says Hibbard. “In the 1920s and 30s most of the city was knocked down and rebuilt in a modern way. There wasn’t an Expo then, but the city itself was an expo.”

International standards Shanghai’s unique history has long tied the city to the West and many of its new developments are intended to do the same. By the year 2020, Shanghai aims to become one of the world’s great financial centers. According to Michel St. Pierre, the director of urban planning at Gensler, a global architecture, design, planning and consulting firm headquartered in San Francisco, an international center will require not just world-class financial institutions, but a world-class, attractive and livable city. “Shanghai is really distinct in that it has a lot of history that links East to West,” St. Pierre says. “I think Shanghai is really the perfect city to really be the door to the rest of the world.” Pre-Expo changes are steering the city largely in the right direction but will require other changes as well. “If Shanghai wants to be as attractive as London or New York or Hong Kong, there are a lot of things that need to be done. The overall quality of life and availability of international cultural institutions is part of the equation,” says St. Pierre. To attract the right talent, Shanghai needs to offer

the right bargain – a combination of business opportunity and living standards. “The city needs to be vital and attractive and diverse to be competitive,” adds St. Pierre. Green space, walkability and convenient public transport – all part of the Expo preparations – are all part of the package. A piece of the puzzle that may not be obvious is the quality of construction being done before the Expo. Dan Winey, managing principal, and Callum MacBean, managing director, at Gensler, say they have seen a steady improvement in the work being done in the city. “When we arrived, we thought that the market was not really ready for us,” says Winey. “But in ten years, they’ve gone from very poor [quality of construction] to very close to international standards.” One of Gensler’s latest projects, the 50story 21st Century Tower in Shanghai’s Pudong District, is using sustainable technology to keep its carbon footprint low. Many of the construction techniques would have been diﬃcult to execute in Shanghai a decade ago. The advance in the quality of construction shows how fast developers in China are able to learn. For second- and third-tier cities in China still working to improve standards, Shanghai’s sharp learning curve will set the pace. Shanghai is also leading the way in its interest in sustainability, Winey says. “People think of sustainability in terms of building one project,” he says. “More important is the idea of sustainable planning – the idea of urban density and maintaining the fabric of a city as it continues to grow.” Shanghai is sustainable not only in its support of environmentally friendly architecture, but its walkability and small scale. Even if it has its missteps, these qualities will help build Shanghai as an international city. It will position Shanghai to set the example for other Chinese cities as they continue to grow and may even help guide cities internationally. “Any time a city is on the international stage, I think it’s a good thing,” says MacBean. “The city always tries to put its best foot forward.” Lauren Hilgers is a Shanghai-based freelance writer. She can be contacted lauren.hilgers@gmail.com.

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Shanghai is sustainable not only in its support of environmentally friendly architecture, but its walkability and small scale.”.”

S U S TA I N A B I L I T Y F E AT U R E

BY ELAINE WU

ZEDFACTORY

The Expo Footprint The 2010 World Expo provides an opportunity to experience and learn about sustainable development and innovations.

early ten long years of planning have finally come to fruition. The 2010 Shanghai World Expo, opening this May for a six-month run to the theme of “Better City, Better Life,” aims to be an international platform for sustainable development and urban planning. “Expo 2010 will create blueprints for future cities and harmonious urban life styles,” states the official Expo website. Throughout history, World Expositions have attempted to reflect how human societies relate to nature. The Expos in the 19th century celebrated achievements during the industrial revolution, while those in the 20th century displayed economic prosperity and technological progress. In the new millennium, Expos began to put more weight on the environment. The Shanghai Expo follows this trend by focusing on the relationship between cities and nature. With 192 countries and 50 organizations participating, the Expo will showcase cutting edge environmental design and conservation technologies. These “eco-innovations” will “help people understand environmental issues and how

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eco-innovations can support sustainable urban development around the world, not just in China,” says Lynn King, founder and managing director of SageVision, a network of professional consultants who work with government, business and community organizations to build sustainable cities. Groups like SageVision are using the Expo to teach people about sustainable concepts and technologies and how to harness them in their own communities. SageVision is hosting a program called Moving Eco Forum that will highlight the best and most relevant Expo eco-innovations firsthand and teach their practical applications. “The brilliant thing about the Expo is that it’s the first time in history where so many high-tech, eco-innovations are all going to be concentrated in one place at the same time. If you were to go see these things by yourself, you’d have to go all over the world because each city only has a few,” says King. “This is a precious opportunity and we need to leverage it as much as we can by educating our leaders and the public.” However, concerns have been raised over exactly how much of a green legacy the Expo and associated city-wide measures will leave behind. Billed as a global exhibition for urban best practices, some experts question the environmental impact and sustainability of the Expo itself. “From a physical point of view, Expos themselves aren’t sustainable,” says Stephen Protz, principal of Arc8X Design, a design and construction firm that focuses on sustainable design and architecture. “Spending so much time, energy and effort in a few years to build the Expo up and then to eventually take it all down in a shorter amount of time is simply poor resource practice.”

A greener city In preparation for the Expo, the city of Shanghai has undertaken extensive environmental initiatives that involve upgrading urban infrastructure, toughening pollution control measures, utilizing cleaner and more energy-eﬃcient technologies, and developing renewable energies. Since 2000, Shanghai’s municipal government has implemented a series of three-year Environmental Action Plans

under which hundreds of projects have been carried out to improve the city’s environment. The fourth Environmental Action Plan from 2009 to 2011 will involve 260 projects with a total investment of RMB82 billion. From 2000 to 2008, Shanghai has spent more than 3 percent of the city’s GDP on environmental investments annually. Last August, the United Nations Environment Program (UNEP) issued a report that examined the city’s environmental efforts to organize a green Expo. The UNEP Environmental Assessment evaluates Shanghai’s efforts in key areas including air quality, transportation, energy, water and solid waste. Under the Action Plans, Shanghai has made upgrades to its industrial sector to reduce dependence on fossil fuels, tightened emission standards for factories and automobiles, constructed a world-class rapid transit network and is experimenting with new energyefficient vehicles such as electric buses and hybrid and hydrogen fuel-cell vehicles. All official Expo cars are either zero- or low-emission vehicles and a public transportation network has been designed to carry visitors directly to the Expo. To manage the 400,000 to 700,000 visitors expected daily, a direct subway line to the site, four bus lines and five ferry lines will transport the bulk of traffic. In its construction sector, Shanghai has implemented stringent green building measures. All new buildings have to meet a national standard of 50 percent energy savings and energy consumption standards have also been set for restaurants, shopping malls and other large-scale commercial venues. According to UNEP’s report, Shanghai will have three million square meters of green building space by the end of this year. In addition, Shanghai has constructed Asia’s first offshore wind farm near the Donghai Bridge, which has the potential to power 200,000 homes. Offshore wind farms offer huge benefits because they don’t require large tracts of land and can fully utilize wind resources at sea. Shanghai plans to build four more offshore wind farms by 2020. All these measures are working towards the city’s goal of having a 20 percent reduction in energy this year compared to 2005 levels. But despite Shanghai’s remarkable achievements, more work still needs to be done. The UNEP report

makes several recommendations for further improvement, proposing the city continue to scaleup its development of renewable energies because it remains challenged by a high dependency on coal for electricity; persist in developing a more comprehensive waste reduction strategy; and increase the nitriﬁcation of river systems. “The old paradigm of doing things has got to change. Most people think of cities as a dead thing – blocks of concrete, a pile of nonliving materials. But what if we start to see cities as living and evolving systems just like the earth itself? If we think of cities as evolving organisms that can grow, change and adapt, we can create cities that co-evolve with humans,” says King. “Sustainability is a global problem, and China not only can, but must play a big role in leading the creation of sustainable cities.”

Leading by example The Expo itself will spotlight state-of-theart renewable technology and energy saving applications in many of its pavilions. Solar energy and light-emitting diode (LED) lighting are used extensively throughout the site. Solar photovoltaic (PV) panels are installed on many of the roofs and walls of various pavilions, and solar-powered lamps and solar thermal heating systems are also widely used. The Expo’s Theme Pavilion has the largest building-integrated solar power PV plant in all of China. LED lighting, which is up to 80 percent more eﬃcient than normal incandescent light bulbs, is used for indoor and outdoor illumination and is featured prominently in the Urban Best Practices Area (UBPA). All the permanent buildings in the Expo site are outﬁtted with building-integrated rainwater collection and reuse systems. Even bathrooms on the site are equipped with recycled toilet paper and paper towels. “There is not one solution that is going to make everything green, but millions of solutions that all add up in small ways,” says Protz. Numerous country pavilions have invested in eco-designs and used recyclable building materials that can be disassembled, collected and reused. Among many examples, the UK Pavilion

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Sustainability is a global problem, and China not only can, but must play a big role in leading the creation of sustainable cities.”.”

GREEN GIANTS: National Pavilions like the Japan Pavilion feature a number of sustainable building solutions.

is a zero-carbon emissions structure covered by 60,000 slender transparent rods that act like fiber optic filaments, drawing in sunlight to illuminate the interior. The Finland Pavilion is constructed from environmentally friendly materials such as recycled plastics and paper and utilizes solar panels, natural ventilation and rainwater collection systems. The Italy Pavilion is constructed with a new transparent cement that works to conserve energy and play with light and atmosphere. The exterior of the Japan Pavilion is made of an ultralight membrane that generates electricity from solar power, filters sunshine for natural lighting and is “breathable” for better ventilation. In the UBPA, several pavilions aim to showcase programs and practices in urban construction and development. ZEDfactory, an architecture firm based in London known for its zero-carbon building designs, has constructed the ZEDpavilion, a zero-carbon building that uses only energy from renewable sources generated onsite and incorporates solar PV panels, solar thermal water heating, wind turbines, thermal insulation and waste-recycling. The ZEDpavilion has sourced all of its materials and components from China, explains Bill Dunster, founder and principal of ZEDfactory. “[ZEDpavilion] is an example of a low-cost, mixeduse medium that can be used in most Chinese towns and cities. In an Expo populated by remarkable structures, our structure is unusual because it represents a contemporary vision of ordinary living and working areas,” says Dunster.

The sustainability question

JUSTIN CHAN

Despite the extraordinary green measures that have been put in place for the Expo, aspects of the event have some people questioning whether the Expo itself is sustainable. Most of the Expo pavilions are temporary structures that will be torn down after the event is over, although a portion of the site will be maintained as an exhibition and conference area. Only four pavilions will be kept permanently: the China National Pavilion, Theme Pavilion, Performance Center and Expo Center. While some countries have used recyclable materials in their pavilions that can be broken down and rebuilt elsewhere, dismantling the pavilions will still produce a substantial amount of debris. So far, no country has announced concrete plans on what it will do with its leftover materials. More signiﬁcantly, the 70 million expected visitors to the Expo will leave a considerable footprint and the city will expend massive amounts of resources to accommodate them all over the six-month period. The visitors will travel to and from Shanghai on unsustainable modes of transport, and stay and eat in hundreds of new hotels and restaurants that have been built. At the Expo site, the use of bottled beverages, packaged food and promotional materials will increase waste exponentially. But the “full environmental impact of the Expo won’t be tallied until we see what happens to the site in its post-Expo phase,” says Charlie McElwee, an environmental lawyer in Shanghai and chair of AmCham Shanghai’s Environmental Committee. How Shanghai chooses to clean up after the event will be a testament to its commitment to maintaining a “better city.”

Impetus for action The true impact of the Expo may not be immediately felt. A real eco-city has yet to be developed and other cities may be slower to adopt the same changes as Shanghai. “We are far from having a true eco-city because there is a lack of knowledge among enough people with the resources to create one,” says King. “At the same time, China can be a huge leader in the development of eco-cities around the world.”

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Rather than serve as an example of what a sustainable city should look like, Shanghai’s Expo should act as a catalyst for education, say experts. The mission for the Expo should be “to teach this generation of people about the fact that we are all connected to something bigger than ourselves. People need to realize that every action, decision and purchase they make is aﬀecting the future right now,” says Protz. The biggest challenge for program organizers at the Expo is to ensure their programs or pavilions leave an impression upon visitors that will inspire action, King believes. “Without educational focus, people will just look at [the Expo] like Disneyland. They won’t take away any knowledge that will change their lifestyle, habits or decisions,” she says Although the Expo will likely have an inﬂuence on policymakers and foreign visitors who come to Shanghai, the main impact will be on Chinese consumers. “Many of the Expo visitors will come from less developed provinces where the sustainability message may not be as well known.

If they learn about the benefits of purchasing energy-efficient appliances, for instance, then the Expo will have had some impact,” says McElwee. The job that falls to these Chinese visitors is to demand change. “If 20 million Chinese visitors come away excited by a low-carbon future and demand this product from property developers, then amazing change will happen very fast,” says Dunster. At the very least, the Expo provides a glimpse into what a sustainable future might look like and offers some answers to one of the most pressing issues facing China and the rest of the world today. “China is in the middle of an unprecedented migration of population from the countryside to the city. There are tremendous challenges to make sure that life for people will be better and more sustainable,” adds McElwee. “I think everyone hopes China will be able to deliver on the promise of the Expo.” Elaine Wu is a Shanghai-based freelance writer. She can be contacted wu.elaine@gmail.com.

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If 20 million Chinese visitors come away excited by a lowcarbon future and demand this product from property developers, then amazing change will happen very fast.”.”

I N T E RV I E W

B Y T I F FA N Y YA J I M A

TIFFANY YAJIMA

Unveiling the USA Pavilion

With the Expo set to open this month, Insight spoke with Jose Villarreal, commissioner general, and Martin Alintuck, director of communications, about the the USA Pavilion.

ﬃcial U.S. participation in World’s Fairs dates back to London’s 1851 Great Exhibition in Hyde Park. At that time, World Expositions or Expos, then known as World’s Fairs, brought together countries from around the world to showcase their industrial might in an international exhibition of manufactured goods. The American display at the Great Exhibition featured new inventions, improvements in agricultural machinery and a variety of industrial goods. The Great Exhibition was so popular that, by the beginning of the 20th century, World’s Fairs focusing alternately on industry, arts, architecture, science and culture were held regularly around the world. Since then, U.S. participation in World’s Fairs abroad has varied. In 1994, the U.S. Congress passed a law disallowing the now-defunct United States Information Agency, an independent organization supporting U.S. foreign policy and national interests abroad, from spending money on USA Pavilions without congressional approval. Management of U.S. participation at World Expos abroad now falls under the State Department,

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with funding for USA Pavilions coming from the private sector. This is in contrast to most other countries, where participation in World Expos is publically funded. As preparations for the 2010 World Expo ramped up in Shanghai toward the end of 2006, the State Department issued a request for proposals to design, build and fund the USA Pavilion at the Expo. Ultimately reaching its US$61 million fundraising target on April 7 of this year with Citigroup’s US$5 million sponsorship pledge, the USA Pavilion was completed with the help of corporate sponsors including Chevron, Pepsico, General Electric, and Johnson & Johnson, and stands ready to welcome Expo visitors on May 1. With the groundbreaking ceremony held just last July 17, the USA Pavilion was completed in a mere eight months and surpassed a number of Pavilions along the way. By any measure, having the USA Pavilion ready in time for the Shanghai 2010 World Expo’s opening day was a huge accomplishment. As the USA Pavilion entered its ﬁnal stages of preparation, AmCham Shanghai sat down with Jose Villarreal, commissioner general, and Martin

Alintuck, director of communications, of the USA Pavilion, to discuss the pavilion and the message it will convey to the expected six million visitors. How does the USA Pavilion’s “Rising to the Challenge” theme fit in with the Expo’s overarching theme of “Better City, Better Life”? Jose Villarreal: The first point is that both themes are aspirational. There is much in the American spirit that one can say is about rising to challenges. The Shanghai Expo and China challenged us all to make the world better, city by city, life by life. Martin Alintuck: I like the idea that Shanghai and China are ‘rising to the challenge’ of bringing 200 countries and 70 million people together over the next six months. This is a massive effort and it will bring people from around the world the opportunity to meet each other, exchange ideas and share the spirit of their countries. The design and architecture of the USA Pavilion is said to be inspired by an American eagle spreading its wings. Why was this concept and design selected? JV: As it is commonly known, the American eagle is an iconic American symbol. While the USA Pavilion was not designed with that idea in mind, it was a serendipitous result. There has been a lot of discussion about our building design. I appreciate the design of our building because of its functionality. We had a choice between designing something more whimsical or building a structure that is practical and has utility that would serve our purposes at this Expo, in terms of accommodating the number of people expected to visit the USA Pavilion and being capable of accommodating our content. The building was designed with that in mind. Moreover, we firmly believe that in order to be consistent with the theme ‘Better City, Better Life,’ which is a sustainability theme, it would be wise to figure out a way to save the building for future use. Unlike other pavilions that will be relegated to a short span of history and placed in landfills, it is our expectation that our building will continue to be used. I’m quite happy with the design of our building.

The USA Pavilion is an opportunity to present American values on a Chinese stage. What core American values are being presented and how are these values conveyed to visitors at the USA Pavilion? JV: Sustainability, teamwork, health, technology, innovation and diversity. We are going to try to present these core ideas through our various presentations, including the show, which is the central element of our presentation. This show will attempt to give our Chinese visitors, many of whom have had very little interaction with Americans, a glimpse of who we are as a people, and talk about our places and values. The Garden, one of the acts, unfolds in multiple parts. The overture shows ordinary Americans welcoming Chinese visitors to our Pavilion. There will be famous faces and not-so-famous faces welcoming the Chinese in a very warm way. The core element of our presentation is a fairy tale that will be told in a multimedia format through the eyes of a young child who encounters a dilapidated space. Through vision, courage, imagination, creativity, initiative and other core American values, she rallies her community to do something about it. It is a powerful story, without words, using just imagery, which touches on the audience’s diverse senses in a profound way. This

Jose Villarreal Commissioner General USA Pavilion

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Martin Alintuck Director of Communications USA Pavilion

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FEATURE PRESENTATION: Through vision, courage, imagination, creativity, initiative, and other core American values, a young child rallies her community to take action.

is the grand feature of the presentation and it is aimed at people of all age groups: children, parents and grandparents. We tried to develop something that would be entertaining for all age groups and that would be easily understandable. Another area is focused on technological innovations related to sustainability. One of our subthemes is diversity and there is a presentation on the Chinese in America. We have a strategic partnership with the Committee of 100, an organization of prominent Americans of Chinese descent, which developed the presentation. It is through the Chinese-American experience that we are aiming to tell the story of our country, which is a story of immigrants and contributions made by immigrants to America.

creative ways of projecting things about American culture and values. They have talked about talent shows that might be shown on our outdoor stage. They will be involved in every aspect of this pavilion and they are a very critical resource. There is one thing we have made clear to the ambassadors: just like me as U.S. Commissioner General, we are one way or another all representatives of our country. We want them to clearly understand that and recognize the importance of their role as representatives of the United States. This is the main feature of our presentation at the Expo that we ﬁnd most meaningful. There are only a handful of other countries, if any, who are doing something similar. We have people in the ﬂesh that will be there on a daily basis adding a unique dimension.

What role do student ambassadors play in conveying that message? JV: This will be the first time for a lot of Chinese to interact with Americans. One of the requirements is that our student ambassadors be fluent in Chinese. It’s a diverse group, people from all parts of the U.S. We have terrific geographic distribution and diversity in terms of gender and ethnicity. Many student ambassadors are also Chinese-American. They will have many different roles, including personably welcoming and greeting the visitors. There will be a great deal of interaction between visitors and the ambassadors at that very basic level. They also have been charged with coming up with

As we countdown to opening day, what ﬁnal preparations exist for the USA Pavilion? MA: We are now in a ‘test and adjust’ period where we are looking at everything – from audiovisual systems, to electronics to how we greet our guests – all to ensure we provide an extraordinary experience for visitors to the Pavilion.

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What other activities and events are planned for the duration of the Expo from May to October? JV: This is going to be bigger than anyone ever envisioned. We already have ﬁve cabinet members coming in the month of May and early June. We also have corporate VIPs, mayors and governors

attending. The number of senior government people and business leaders is quite astonishing. There will also be a continuous flow of entertainment and celebrities throughout the Expo. We have confirmed entertainers coming through like Herbie Hancock and Ozomotli, a high-energy multi-ethnic group out of Los Angeles. What are your plans for the USA Pavilion after the Expo? Will the building be demolished? Will the exhibits be moved to another location? MA: Already, we have received calls from people who are interested in how we can keep the USA Pavilion in China after the Expo. In the spirit of the Expo, we plan to have our Pavilion be ‘sustainable’ and we want to keep it in China so that the Chinese people and visitors to China can enjoy it for years to come. JV: We have had expressions of interest from different parties in China who would like to acquire our Pavilion and relocate and use it for various

interesting uses. Our hope is to be able to bridge an agreement with one of the interested parties. Our building is made for durability. It was important that we come up with a building that ﬁlled a use; otherwise we might not have been able to do this. Are there lessons to be learned building the USA Pavilion for the Shanghai 2010 World Expo that can be applied to future Expos? MA: Given the Expo has not yet formally opened, it is a little early to decide exactly what are the lessons learned and how we can use them in the future. The Commissioner General, after the Expo, will be providing a comprehensive report to Congress on U.S. participation and I am sure we will have an excellent list of what we did well and what lessons we can learn for future Expos. Tiffany Yajima is an Associate Editor of Insight. She can be contacted at tiffany.yajima@amcham-shanghai.org.

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In the spirit of the Expo, we plan to have our Pavilion be ‘sustainable’ and we want to keep it in China so that the Chinese people and visitors to China can enjoy it for years to come.”.”

Vision for

the Future

ver the next six months, at least 70 million visitors will descend on the banks of the Huangpu River for the Shanghai 2010 World Expo. Spread out over 5.3 square kilometers on the north and south banks of the river, the Expo grounds are the largest in history, and almost 20 times larger than the site of the last Expo held in Zaragoza, Spain in 2008. It is here where more than 240 countries and organizations will showcase the best of their culture, history and innovation for the entire world to see.

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Shanghai’s journey to host this year’s World Expo oﬃcially began on December 3, 2002 when it beat out Yeosu, Korea for the right to host the 2010 Expo. Construction on the Expo site began in August 2006 and continued in earnest in the run up to opening day on May 1. While coping with daily crowds of up to 600,000 will certainly be a challenge, the Expo is sure to oﬀer each and every visitor a memorable experience. Keeping with the Expo’s “Better City, Better Life” theme, the entire Expo site and nearly all pavilions have been designed with a sustainable

C OV E R S TO RY

B Y JUSTIN CHAN

The Shanghai 2010 World Expo is ﬁnally here and the city stands ready to welcome the 70 million expected visitors over the six-month duration of the event. While the Expo will certainly highlight cultural diversity and promote international exchange, the primary focus will be on the Expo’s “Better City, Better Life” theme that seeks to devise better ways to develop and grow the world’s cities. It is this wealth of information shared by the Expo attendees and the dialogue on sustainable urban development that will be the legacy of the 2010 World Expo.

TIFFANY YAJIMA

approach that is intended to feature some of the latest in green concepts and technology. Officially, the theme represents “the common wish of the entire humankind for better living in future urban environments” and the Expo is intended to be a forum for the international community to come together and share strategies on sustainable urban development. Still, the Expo will mean different things for many different people. Up to 95 percent of visitors to the Expo are expected to be Chinese citizens, many of whom have not had the opportunity to

travel extensively around the world. For these attendees, visiting each national pavilion will be an opportunity to experience new cultures and learn about diﬀerent parts of the world. For the countries and organizations operating the pavilions, there is an incredible opportunity to reach a new segment of potential visitors. Outbound tourism in China is growing steadily and is expected to eclipse 51 million this year, according to the World Tourism Organization. In the same vein, the Expo also represents an unparalleled business opportunity for companies

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JUSTIN CHAN

PERMANENT FIXTURE: The China National Pavilion is one of the few structures that will remain after the Expo closes.

looking to leverage China’s growing consumer base, with so many potential consumers in one place at the same time. But the long duration of the Expo means that companies will have to devise a unique brand experience for visitors to learn about their company and products while also ensuring that they stand out from competitors who are trying to reach the same audience. But given that nearly all the pavilions at the Expo site will be torn down after six months, the legacy of the Expo is intended to extend far beyond the October 31 closing day. The city of Shanghai has undergone an extensive infrastructure upgrade and beautiﬁcation campaign in preparation for the Expo, the results of which will carry on for years to come. Beyond Shanghai, and even China, the Expo could bring about a new mindset for how cities are developed and the model for urbanization.

Shanghai’s time Many see the Shanghai 2010 World Expo as the other bookend to the Beijing Summer Olympics in 2008. Even though a vast majority of visitors to the Expo will be Chinese, countries and organizations

EXPO PHOTO GALLERY:

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from all over the world are coming to Shanghai and will bring their experience at the Expo home with them. Shanghai has been planning and preparing to host the Expo for nearly ten years and the city is ready to put its best foot forward. Standing on the Expo grounds today, it is hard to imagine that the sprawling site used to be an industrial zone and shipping yard. But Shanghai’s Expo makeover extends far beyond the Expo site, through the city center and even into the outskirts. With just two main metro lines just a few years ago, Shanghai now has 12 lines that stretch over 400 kilometers crisscrossing the city, including a dedicated Expo line that will drop visitors oﬀ at the heart of the Expo site. Conservative estimates place total spending on the Expo and Shanghai’s infrastructure upgrade at US$40 billion. A recent report by real estate services ﬁrm Jones Lang LaSalle estimates Shanghai’s cumulative infrastructure spending at US$95 billion. “The construction projects themselves have boosted employment and economic growth in the short term while laying the foundation for the city’s future in the decades to come,” says the report.

In addition to the new metro lines, freshly paved roads and highways, and the new Hongqiao transportation hub, a beautification campaign has been carried out across the city, installing parks and green spaces, new sidewalks and revitalizing older parts of town. But there are more than physical changes taking place across Shanghai. The municipal government has also taken the opportunity to implement a number of policies aimed at improving the quality of life for Shanghai residents. These include affordable housing measures and an increase in the city’s minimum wage policy, as well as a smoking ban inside all eating establishments. All these actions and policies together have set up the city of Shanghai for its turn in the spotlight. For the next six months and beyond, everything that makes Shanghai so distinct, its old-meets-new skyline, the contrast of history and technology, and the international influence together with distinct Chinese culture, will be on display for the world to see.

Green machine As the host city, Shanghai is trying hard to live up to the Expo’s “Better City, Better Life” theme that has driven much of the change in and around the city. When considering urban development and how to make it more sustainable, one of the first considerations is always technology. There have been incredible advances in recent years in green building and energy efficiency technology and the market for clean solutions in China is expected to top US$1 trillion by 2013. Nearly every pavilion at the Expo features some sort of green building or energy efficiency technology: from the now seemingly basic solar panels and rainwater collection systems to more advanced innovations like transparent concrete and breathable membrane exteriors. Zero-emission electric vehicles will provide transportation within the Expo and lighting systems throughout the Expo

site make use of energy-efficient LED fixtures. In addition, there are strict “green guidelines” in place that regulate waste disposal, energy usage and even the temperature inside the pavilions. The broad encompassing display of the latest green innovations and sustainable development policies will provide attendees with an opportunity to see and experience how a city must blend economic development together with environmental conservation and healthy living. By bringing together best practices from around the world in one place, it is both inside and outside the remarkable array of pavilions where Expo visitors will have a chance to share their own experiences of urban development and explore new frameworks for city growth that emphasize quality of life. The Shanghai 2010 World Expo will clearly be an exciting event that showcases each participating country and organization and invites the exchange of cultural and educational insights. But most importantly, it should jumpstart a conversation on the importance of sustainable urban development. Creating a framework for urban growth in a sustainable manner will not be easy. Different cities may choose to highlight different aspects, such as history and culture, while others may choose to exhibit economic and industrial might. Shanghai is a unique and distinct city that has the opportunity to showcase itself and set an example for a better city development model. As it hosts this year’s Expo, Shanghai can also learn about the strategies adopted by other cities around the world. It is this wealth of experience and information on sustainable urban living that will begin to set a vision for the future. There is no clear path to building better cities and better lives, but the Shanghai 2010 World Expo should serve as an excellent starting point.

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Expo visitors will have a chance to share their own experiences of urban development and explore new frameworks for city growth that emphasize quality of life.”

Justin Chan is Editor-in-Chief of Insight. He can be contacted at justin.chan@amcham-shanghai.org. PHOTOS BY JUSTIN CHAN & TIFFANY YAJIMA

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INSIDE AMCHAM FROM THE CHAIRMAN

A Once in a Lifetime Business Opportunity

s the commercial, industrial and ﬁnancial capital of the world’s fastest growing economy, it’s not unusual for Shanghai to be in the global spotlight. However, with this month’s opening of the Shanghai 2010 World Expo, Shanghai will be the focus of the world’s attention like never before.

We’ve all heard the numbers before: 70 million visitors, 200 country participants, and more than US$50 billion spent on preparations for what will be the biggest expo ever and, perhaps, the greatest event in human history. Expo 2010 will most certainly be a fantastic event, but I’m often asked, what does the Expo really mean to the U.S. and American businesses? A good indicator of the importance of the Shanghai World Expo is the record number of senior Administration ofﬁcials with visits to Shanghai planned during the ﬁrst month of the Expo. Add to that the parade of congressional delegations being organized and you start to get a good sense of how the U.S. plans on leveraging the Expo to advance America’s most important bilateral relationship.

Robert Roche Chairman AmCham Shanghai

While AmCham Shanghai has always viewed the Expo as a critical opportunity to demonstrate America’s commitment to U.S.-China relations, we also see this historic event as a once in a lifetime business opportunity for both our membership and American companies wishing to explore the China market.

AmCham Shanghai is committed to bringing once in a lifetime business opportunities to our members while facilitating the entry of new businesses to the China market.

With many companies looking to China to play a major role in their future growth, the six-month-long Expo is too good of an opportunity to pass up. Of the projected 70 million visitors, 95 percent of them are expected to be Chinese, marking an unprecedented opportunity to connect with domestic consumers. The ever-growing list of top CEOs and distinguished individuals who will participate in AmCham Shanghai’s Expo Business Series over the next six months is evidence of this. Jeffrey Immelt, Chairman of the Board and CEO, General Electric; Thomas J. Donahue, President & CEO, U.S. Chamber of Commerce; and George W. Buckley, Chairman, CEO and President, 3M Company, are among those confirmed to speak to the AmCham Shanghai membership while visiting Shanghai over the next six months. We have also confirmed many Chinese provincial and city governments as participants in AmCham Shanghai’s Provincial Government Forum. Their goal? Attracting American companies to invest and do business. Add to that our Expo Business Series partners, the China Council for the Promotion of International Trade and the Shanghai Foreign Investment Development Board, and it is clear that there is interest in leveraging the Expo as a business opportunity on both sides of the Pacific. As an official sponsor of the USA Pavilion and the Pavilion’s Official Business Chamber Partner, AmCham Shanghai is committed to bringing these once in a lifetime business opportunities to our members while also facilitating the entry of new businesses to the China market. In a March 2009 letter to AmCham Shanghai President Brenda Foster, U.S. Secretary of State Hillary Clinton stated, “The Shanghai Expo offers an unprecedented opportunity for companies and organizations to hoist their flags in one of the most important centers of world commerce and cultural exchange.” Madame Secretary, we couldn’t agree more! While Expo 2010 is an important event for both U.S.-China relations and the American business community in China, it will also be a memorable experience for all of us who have made Shanghai our adopted home. I hope you all have a chance to enjoy the Expo and the USA Pavilion! I’ve been out to the Expo site and it is truly spectacular. My only advice? Wear comfortable shoes!

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

Highlights from the April 2010 Board of Governors Meeting 2010-2011 Committee Chairs The Chairman appointed the Committee chairs for 2010-2011 and noted that open slots will be filled on an ongoing basis. 2010 Washington, D.C. Doorknock A Doorknock Committee has been selected from the Chamber’s committee leadership to organize a doorknock tentatively scheduled for the end of September. One of the primary issues will be improving market access for U.S. companies in China. Financial Report Board Treasurer Matthew Targett presented the financial report for the 2009-2010 Fiscal Year, noting that the Chamber’s finances were in good standing. Expo 2010 David Turchetti, Vice President, Programs, reviewed the latest updates for the AmCham Shanghai 2010 World Expo Business Series. A dedicated website as been launched at expo.amcham-shanghai.org and a number of CEO speakers from U.S. companies such as General Electric and 3M have been confirmed. Cooperation programs with Chinese organizations such as the China Council for the Promotion of International Trade (CCPIT) and Shanghai Foreign Investment Development Board (FID) have also been confirmed.

IN ATTENDANCE Governors: Andrew Au, Eddy Chan, John Grobowski, Diane Long, James Rice, Robert Roche (Chairman), Matthew Targett and Kevin Wale. Attendees: David Basmajian, Justin Chan, Norwell Coquillard, Siobhan Das, Angie Eagan, Ye Fang, Brenda Foster (President), Helen Ren, David Turchetti, Linda X. Wang, Jessica Wu, Karen Yuen and Silas Zhu. REGRETS Pierre Cohade, David Gossack, Murray King, Eric Musser and Chris Wurzel.

AMCHAM SHANGHAI: WHERE BUSINESS HAPPENS AT OFFICIAL SPONSOR & BUSINESS CHAMBER OF THE USA PAVILION

EXPO 2010

p o s it e a t m S h an gh ai E x a h C m A e h t t i Vis hai.org m cha m -s h an g h t t p :// e x p o . a

AmCham Shanghai is pleased to announce The AmCham Shanghai 2010 World Expo Business Series, bringing Expo business opportunities to our members while facilitating the entry of new businesses to China. The AmCham Shanghai 2010 World Expo Business Series is supported by the U.S. Foreign Commercial Service, the China Council for the Promotion of International Trade and the Shanghai Foreign Investment Development Board. Speaker Series • CEO Speaker Series: a forum for top CEOs from around the world to address the Shanghai business community in China • Distinguished Speaker Series: a platform for government leaders, best-selling authors and other notable individuals • Urban Planning Series: workshops that bring together industry experts and showcase companies which highlight the Shanghai 2010 World Expo theme, “Better City, Better Life” Conferences • Innovation Conference: to be held on August 19, highlighting how leading companies use innovation to stay ahead of the competition • Sustainability Conference: co-sponsored with the Asia Society, to be held from September 16-17, discussing how to accelerate green business opportunities in China and the United States • China Trends Conference: to be held on October 19, bringing together top China experts to identify future trends that will shape the China market beyond the Shanghai 2010 World Expo Provincial Government Forums Meet face-to-face with provincial and city governments and gain valuable insights on opportunities available to foreign-invested companies

Visit the AmCham Shanghai Expo site at http://expo.amcham-shanghai.org for more information on: Exclusive Opportunites for AmCham Shanghai Members

Expo Business Visitor Information

• Provide brieﬁngs to Expo business visitors and delegations

• Request an Orientation China Brieﬁng to learn about the China market

• Serve as a trade show liaison for incoming delegations

• Connect with Amcham Shanghai members to make your Expo visit a success

• Participate in an Expo CSR program with AmCham Shanghai

• Get Expo visitor information before you depart

Sponsorship Opportunities

Expo Resource Center

The AmCham Shanghai 2010 World Expo Business Series is the best way to reach international and Chinese business people for the Expo

Access AmCham Shanghai member companies who provide business and city services to make your Expo experience a success

Renew now & stay a part of the largest and most active AmCham in the Asia-Pacific Region: AmCham Shanghai! How to renew: Simply log onto www.amcham-shanghai.org/renew and enter your details in the online renewal form. It takes less than 5 minutes to complete and you will be INSTANTLY notified if you have won one of the terrific lucky draw prizes on offer. Renew your AmCham Shanghai Membership now and have chance to win one of the below prizes. Round-trip air ticket from Shanghai to the U.S. provided by United Airlines RMB 500 gift voucher provided by American-Sino OB/Gyn/Pediatric Services RMB 1560 Body check voucher provided by Essential Healthcare Network RMB 800 Dental care card provided by Kowa Dental One-night accommodation in a studio at Pudi Boutique Hotel RMB 500 SPA voucher provided by QUAN SPA Half a case of Santa Digna Merlot wine provided by Santa Fe Relocation Services One-night weekend stay in a Deluxe Room at the St. Regis Shanghai One-night stay in a one bedroom apartment at Union Square, Shanghai Pudong Marriott Executive Apartments * Three-month free subscription of the Wall Street Journal newspaper (PDF) * * * * * * * * *

For further information, please contact the AmCham Shanghai membership department: Tel: (86 21) 6279-7119 ext. 5676, 5659, 5677, or 7124 Fax: (86 21) 6279-7643 Email: renew@amcham-shanghai.org Special thanks to the prize sponsors

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AmCham Shanghai New Members – March/April 2010 U.S. Corporate Membership America Future Trends International (Group) Corporation, Shanghai Rep. Ofﬁce KAMALABADI Faram IDEXX Laboratories (Shanghai) Co., Ltd, NGAN Cleveland Ken Clark International, Inc., Shanghai Rep. Ofﬁce ZHU Jonathan Lucent Technologies Information & Communications of Shanghai, Ltd. YANG Xiaolin Rain Bird Irrigation Equipment (Shanghai) Co., Ltd. CHIU Eliseo Staples Commerce & Trade Co., Ltd. HICKEY Patrick Steinberg Architects STEINBERG Robert Tishman Speyer Real Estate Consulting (Beijing) Co., Ltd., Shanghai Branch BOTJER Ryan

U.S. Associated Corporate Membership Acxiom Asia Global Services Center, Ltd. HO Lucas Anheuser-Busch InBev China Co., Ltd. WANG Frank Caterpillar Remaufacturing Services (Shanghai) Co., Ltd. BANERJEE Bappaditya GST Autoleather, China SENG Weili Laureate Investment Consulting (Shanghai) Co., Ltd. SHEN Zhongwei LotusWorks Asia Holdings Limited SOUSA DA SILVA Manuel Savills Property Services (Shanghai) Co., Ltd. LAU Albert SunGard Kingstar Data System (China) Co., Ltd. BATEMAN Andrew Suzhou YangCheng Software Co., Ltd. ZHANG Gang Verint Systems (Zhuhai), Ltd. LAURENCE Erik Jonathan

Small Business Membership China Centric Associates Industrial Shanghai Ltd., WONG Kwan Ming Michael

Corporate International Afﬁliate Membership Park Hyatt Shanghai CHRISTOPHE Sadones

Non-Resident Corporate Membership Asia Society, The KILACHAND Judi Lord, Aeck & Sargent, Inc. AECK Antonin

Associate Membership Air Products & Chemicals (Shanghai) Gases Co., Ltd. HAYES Douglas James YU Yi

Anheuser-Busch InBev China Co., Ltd. GUO Yanhong LU Chris Junping SHEN Shunhui YU Longtao Corning China (Shanghai) Regional Headquarter KELLY Luke Cushman & Wakefield (Shanghai) Co., Ltd. SUCHY Mark Executive Centre (Shanghai), The CROWE Kevin General Electric (China) Co., Ltd. XIAO Aoshuang General Motors (China) Investment Company Limited CHEN David Shi Goodhealth Worldwide Administrators, Inc. HONG Chris H.B. Fuller (Shanghai) Consulting, Ltd. GARDUNO Juan Pablo Intel China Ltd. COULOMBE David Intralox Conveyor Belts (Shanghai), Ltd. CARIS Joel Anthony Johnson Matthey (Shanghai) Catalyst Co., Ltd. ZHOU Yan Jones Lang LaSalle Surveyors (Shanghai) Co., Ltd. MCCORD Steven KPMG GAWRON Anthony Leggett & Platt (Shanghai) Consulting Co., Ltd. MALTBIE James WU Rong Mobley Group Pacific Limited (Shanghai) Co., Ltd. CHAN Tak ZHANG Nancy Nantong Reilly Chemical Co., Ltd. SHI Stone North Highland, Shanghai Representative Office ADICK Michael Perkins Coie LLP, Shanghai Rep. Office. US MARTIN Ananda WININGER Aaron Rain Bird Irrigation Equipment (Shanghai) Co., Ltd. SANCHEZ Arturo Savills Property Services (Shanghai) Co., Ltd. BUTLER Ryan G CARR Craig Shanghai NI Instruments, Ltd. SUMNER Joel Shanghai Tohkin Beverage Co., Ltd. ZENG Bing Jenny Shearman & Sterling LLP Shanghai Representative Office, U.S. KWOK Fei Solutia International Trading (Shanghai) Co., Ltd. HU Laura IVEY Allen Craig Steinberg Architects CUISINOT Albert ZENG Hong Strategic Analysis Asia Ltd., Beijing Rep. Office CHI Anne

SunGard Kingstar Data System (China) Co., Ltd. GORDON Alan Tektronix (China) Co., Ltd. WONG Chung Yuen Felix Thompson Market Services (Shanghai), Ltd. LIAO Allen Tianma Country Club COURT Allan Trane Air Conditioning Systems (China) Co., Ltd. LIU Ping Tyco Flow Control (Beijing) Co., Ltd. Shanghai Branch YU Shurong Walt Disney Company (Shanghai), Ltd., The ADAM Timothy

Individual U.S. Citizen Membership ?What If ! Innovation, Ltd. KOCHLING Sarah Elizabeth Alexandria Precision Products (Suzhou) Co., Ltd. FLEMMING Christopher Century 21 SH-USA Realty KABAKLIAN Kirk Cormark Store Fixturing & Display Co., Ltd. OUYANG Jeff GlaxoSmithKline KLEPCYK Patrick JunZeJun Law Ofﬁces ANN Jessica KL-Asia Ltd. KENNEDY Kerry Muraya DCE CHANG Albert Tandus Floorcoverings (Suzhou) Co., Ltd. STEEL Irving Transtech Consulting Group CHAN Billy TTV-Asia BARRY Daniel Wal-Mart GEORGE Lloyd D. BROWN Shirley CHOO Kevin LAPRESTA Xiaobo MILLER Russell R SIDWELL Brady

Non-Resident Individual Membership LURE Management (Shanghai) Group HO Julianne Yun-Tzu JOHN Lewis

Individual International Afﬁliate Membership eMotive Communication, Ltd. BAKHTIARI Shervin Liu Chong Hing Investment Limited YAN Kit Ming Neumann Management Consulting (Shanghai) Co., Ltd. STREMME Hans Wolfgang Optimal Consulting Limited TAN Wee Ping LEROY Jean Charles

Do you want to share more information about your company? M AY 2 0 1 0 I N S I G H T 3 9 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.

AmCham Shanghai was pleased to roll out the red carpet for its eighth annual Charity Gala, themed “Hollywood Lights,” on April 10 at the Pudong Shangri-La Hotel. This year's Charity Gala celebrated the excitement and glamour of America's long cinematic tradition, highlighting movie favorites from past and present. Co-sponsored by the American Women’s Club of Shanghai, the 2010 Charity Gala raised funds for a number of worthy charities. Proceeds from the 2010 Charity Gala will continue to support the Soong Ching Ling Foundation’s Mother and Infant Care Program which funds medical facilities and programs that improve care for women and children in Yunnan Province. The Charity Gala also supported three new projects this year.The first is a program to fund sustainable rural development in Sichuan Province organized by the Heifer International China Program.The second project, "A Dream Day at the Zoo," will host a group of chronically ill and disabled children for a memorable trip to visit the Shanghai Zoo.The third project to be supported by this year’s Gala is the Million Tree Project led by Roots and Shoots Shanghai, which will plant thousands of trees in the Eleshun Desert in Inner Mongolia. The popular Rolf Becker Band entertained guests with an array of classic American movie theme songs, setting the scene for the glamour and sophistication of Hollywood. Guests posed for photos with Marilyn Monroe and Elvis Presley wax figurines provided by Madame Tussauds and tried their luck at popular casino games like Blackjack, Roulette, Big and Small and Texas Hold’em. This year’s silent and live auctions featured luxurious spa and personal care treatments, jewelry, luxury hotel stays, Chinese paintings, race car driving lessons and a Westin Heavenly Bed. The raffle draw featured round-trip BusinessFirst tickets to the United States from Continental Airlines. The annual Charity Gala is an important part of AmCham Shanghai’s ongoing corporate social responsibility program. Last year’s 2009 Charity Gala was a tremendous success, raising more than RMB340,000 to establish a senior citizens activity center in the earthquake-stricken Minle Village in Sichuan Province. AmCham Shanghai would like to thank the donors and sponsors whose generous contributions to the 2010 Charity Gala will ensure the success of this year’s charitable programs.

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Patron’s Circle Sponsors

Platinum Sponsors

Corporate Table Sponsors

Cash Donor Sponsor

Exclusive English Newspaper Media Partner

Printing Sponsor

Shopping Bag Sponsor

Exclusive Magazine Media Partner

Wine Sponsor

Exclusive Magazine Media Partner

In-Kind Sponsors

Adams French Vineyards Air Aroma China Alpha Dental Clinic American Airlines American-Sino OB/GYN/Pediatrics Services Apsara Spa Art+Shanghai Gallery ASR Banyan Tree Hotels and Resorts Banyan Tree Private Collection Children’s Technology Workshop D & R Design DanNie Studio DDS Dental Care 42 INSIGHT

Ferrari Shanghai Grand Hyatt Shanghai Great West Travel Habitat For Humanity China Haworth Furniture (Shanghai) Co., Ltd. Hershey Foods International Trade (Shanghai) Co., Ltd. Hilton Shanghai Hotel iLoft Kohler China Investment Co., Ltd. Kong and Allan (Shanghai) Consulting Co., Ltd. Lanson Place Jin Qiao Residences Lawry’s The Prime Rib Shanghai Nancy Pon M AY Nestle 2 0 1 0 Nespresso Beijing Ltd.

Paul & Shark Qin Yi Shanghai Quan Spa Ray Art Center Shanghai Centre Shanghai Expat Shanghai Leedon Gifted Consulting Co., Ltd Shanghai Lytone Biochemicals Ltd. SPA Wash Super Valet Touch Reiki Twocities Gallery Union Square Shanghai Pudong - Marriott Executive Apartments United Airlines Yvonne Jewelry Studio

Yushu Earthquake Relief IMAGINECHINA

t 7:49 am on April 14, a powerful magnitude 7.1 earthquake struck Yushu County in Qinghai Province. Preliminary reports placed loss of life at more than 2,200 people with over 12,100 injured. More than 15,000 homes have collapsed and over 100,000 residents are homeless and in urgent need of relocation.

Through the Public-Private Partnerships for Disaster Management in China Program established in 2007 by China’s Ministry of Civil Affairs, the Asia Foundation and AmCham Shanghai, China’s Ministry of Civil Affairs has provided a list of 15 charitable organizations authorized to provide relief and rebuilding services in Yushu County. AmCham Shanghai’s Corporate Social Responsibility (CSR) program has worked with a number of these charities on CSR-related projects. Should you or your company wish to make a donation, we have included detailed information on how contribute to these organizations on the AmCham Shanghai website (www.amcham-shanghai.org). We hope you consider joining AmCham Shanghai in supporting relief efforts for victims of this tragedy.

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Event Highlights

INSIDE AMCHAM

RECENT AMCHAM HAPPENINGS

April U.S. Consulate General Briefing U.S. Consul General Beatrice Camp began the briefing by introducing Deputy Assistant Secretary for East Asian and Pacific Affairs David Shear and Deputy Director of the Office of Policy Planning Derek Chollet, who were in China preparing for the Strategic and Economic Dialogue. In the Consular Section, CG Camp explained that skyrocketing demand, connectivity problems and space constraints are leading to extended visa wait times. As of the April 6 briefing, CG Camp said the next available interview dates for business travelers and U.S. Consul General Beatrice Camp (second from left), tourists was in June. CG Camp noted that AmCham Shanghai’s USA Pavilion Commissioner General Jose Villarreal (second Corporate Visa Program helps members avoid long delays, but from right) encouraged early submission of visa applications. She reported that the Consular Section processes over 1,000 visa applications each workday, with the number increasing steadily. According to her, the only long-term solution is a new, larger Consular facility, for which the city has yet to designate possible sites. The Consulate will remain open on Shanghai’s April 30 and May 4 “Expo Holidays” and will maintain the full schedule of visa interview appointments on those days. USA Pavilion Commissioner General Jose Villarreal spoke as a special guest to the briefing, reporting that the USA Pavilion will open on time and will provide a unique experience for Expo visitors. The USA Pavilion has three main objectives: advancing U.S. public diplomacy interests, advancing U.S. commercial interests, and giving ordinary Chinese a glimpse of who Americans are as a people, he said. The Commissioner General expressed thanks to AmCham Shanghai and its members for their longstanding support of the USA Pavilion. (Apr 6)

Expo CEO Speaker Series: CEO of Eastman Chemical James Rogers, President and CEO of Eastman Chemical Co., premiered AmCham Shanghai’s 2010 Expo CEO Speaker Series with a presentation on how mega trends like sustainability are driving growth in Eastman Chemical and the global chemical industry and why sustainability can beneﬁt the Chinese economy. According to Rogers, a large amount of the company’s growth comes from emerging economies. Today, Eastman’s China operations account for 10 percent of the company’s revenues and they expect more than 25 percent growth in China in the next few years. No new chemical plants are planned to be built in the U.S., he said, but will be built abroad to take advantage of emerging markets like China, Brazil and the Middle East. According to Rogers, chemical companies like Eastman can lead the environmental movement in China through good corporate citizenship. Eastman hopes that by setting an example of how to be environmentally responsible while still generating growth, it can help address pollution and other environmental problems in China. Eastman Chemical was recently named as one of only two industrial companies on Newsweek’s top 100 list of green companies in 2009. (Apr 14)

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James Rogers, Eastman Chemical Co.

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Entry-Exit Inspection and Quarantine Service during Expo On April 16, Ms. Hongtao Gu, deputy chief director of the Expo Area Ofﬁce of the Shanghai Entry-Exit Inspection and Quarantine Bureau, provided a brieﬁng to AmCham Shanghai members on inspection and quarantine procedures for imported goods during the Shanghai World Expo. In her presentation, Gu discussed service promises to companies and measures that the bureau will take to facilitate inspection and quarantine of goods during the World Expo. The bureau maintains port security and handles food, animal, plant and special equipment safety.

Hongtao Gu, Shanghai Entry-Exit Inspection and Quarantine Bureau

Members raised concerns about special limitations placed on importing nonExpo related goods, such as chemical products, Class 6.2 infectious substances, and dry ice. Since there was insufficient time at the event to address all member questions, AmCham Shanghai confirmed with Gu that during the Expo, all import procedures for non-Expo related goods will remain the same. While the Expo will not affect general trade importation, certain Expo goods, such as official wines (with 8-14 percent alcohol) for the country pavilions, may need a certification letter provided by the Shanghai Expo Coordination Bureau, she said. (Apr 16)

Expo Urban Planning Series:

Expo’s Impact on the Property Sector

AmCham Shanghai recently held its first Expo Urban Planning Series program, hosting Michael Klibaner, Head of Research at Jones Lang LaSalle, who shared the key findings from a new white paper entitled Opening a New Chapter in Shanghai’s History. The legacy of 2010 World Expo is the government’s massive infrastructure investment which will fuel a decade of growth, said Klibaner. With over US$95 billion spent on metro lines, a high-speed railway and roadways, peripheral parts of the city are opening up for development, he said, evidenced by the fact that 80 percent of current residential transactions are occurring Michael Klibaner, Jones Lang LaSalle outside of Shanghai’s outer ring. According to Klibaner, future development will primarily be clustered around new metro stations. In 2005, Shanghai had three metro lines; by Expo opening, the metro system will boast 12 lines spread over 420 kilometers. Future expansion of the system will take it to 960 kilometers over 20 lines by 2020, leading to office market decentralization as suburban offices become cost-effective and convenient, he said. Direct subway access will be a key building differentiator. Moreover, the huge investment in inter-city railways is fueling regional growth and improving connections throughout the Yangtze River Delta. In terms of the Expo site itself, Klibaner explained that it will be one of the largest developable plots of land in Shanghai’s urban core, with an attractive riverfront location for high-end residential apartments. (Apr 22)

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Committee Highlights

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NEW IN COMMITTEES

Manufacturers’ Business Council

Lean Six Sigma Process Methodology

Dr. Shree Nanguneri

Lean Six Sigma (LSS) process methodology helps businesses run better, said Dr. Shree Nanguneri at an AmCham Shanghai Manufacturers’ Business Council event on April 13. According to Nanguneri, LSS is an initiative to project and increase customer benefits, a universal method to improve process management, a process that enables long-term business change, and a success strategy independent of the state of the economy. It can be used in any sector in any field, from products, services and compliance to government, law, tax, logistics and manufacturing. LSS always focuses on the customer, said Nanguneri, and the methodology should be applied to every aspect of the organization, from marketing and sales to design and supply chain processes. Employees in each department must gain LSS skills not just to meet customer expectations but to exceed them. “Grow your people organically from within your company,” suggested Nanguneri. By creating speed via simplicity in processes, products and documentation, LSS can save valuable resources for a company, but to sustain gains in the long-run, Nanguneri suggested companies shift corporate culture, change ways of thinking, link changes to profits and move toward permanent institutionalization of LSS processes until they become automatic. (Apr 13)

Marketing Committee

Branding China’s Youth AmCham Shanghai’s Marketing Committee recently hosted an event entitled Branding China’s Youth: Uncovering Vital Trends Among Emerging Chinese Consumers. John Solomon of Enovate, a consumer insights and design ﬁrm, presented on China’s emerging youth demographic, aged 18-25, and discussed current consumer trends in China. Solomon addressed how companies can add value to their marketing campaigns and strategize to capture the attention of China’s youth demographic. The one-child-policy generation wants individuality within a safety zone of numbers, Solomon said. They make decisions based on a sense of belonging and social acceptance while seeking individuality from their peers. By understanding these traits, companies can engage young consumers by integrating newer technological media strategies into traditional marketing tools. According to Solomon, the youth demographics’ increasing reliance on the Internet as a source of consumer information and communication should be a key factor in a company’s marketing campaign in China. There are 256 million youth online with 80 percent of them using the Internet as their primary source of entertainment. Solomon suggested branding through online social networking sites, letting the Chinese consumer market for the company. “Give [Chinese youth] consumers social currency by marketing products for you,” said Solomon. (Apr 1)

John Solomon, Enovate

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Corporate Social Responsibility Committee

Using Social Entrepreneurship to Revolutionize Education Ramji Raghavan, Ashoka fellow and chairman of the Agastya International Foundation, recently spoke to AmCham Shanghai’s Corporate Social Responsibility (CSR) Committee and CSR practitioners about Agastya’s success in revolutionizing education methods in India. Raghavan shared how Agastya, an international hands-on Ramji Raghavan, Agastya International Foundation science education foundation, aims to spark curiosity in children and teachers in rural India. Agastya has brought 50 mobile educational labs and 30 stationary microscience centers to the countryside, beneﬁting 1.5 million children, he said. It also runs workshops for teachers and trains students to teach other children. Raghavan explained that social entrepreneurship emerges when people ﬁll in the gaps that government and business entrepreneurs do not. Social entrepreneurship involves the heart and the head and requires sound business planning and strategies and compassion, he said. Raghavan stressed that a similar program could operate successfully in China because of the country’s huge entrepreneurial potential, but a positive government response is critical for the program’s implementation. (Apr 8)

Tax Committee

Circular 698: The Bell Tolls the End of Traditional Deal and Holding Structures in China

Brendan T. Kelly, Baker & McKenzie, Chris J. Finnerty, Ernst & Young

On April 22, AmCham Shanghai’s Tax Committee hosted a seminar co-presented by Brendan T. Kelly of Baker & McKenzie and Chris J. Finnerty of Ernst & Young on China’s State Administration of Taxation’s (SAT) Circular 698 pertaining to anti-tax avoidance and special purpose vehicles. The seminar opened with an overview of the evolving Chinese tax landscape where authorities are changing their fundamental view on non-residential offshore tax-motivated structures. The speakers then focused on new guidance from the SAT which emphasized the concept of “substance over form” and physical presence in the jurisdiction of all business entities including holding companies. Kelly and Finnerty presented a chronology of past tax laws and a Chongqing tax case study which ultimately led SAT to “go after abusive transactions” through the passing of Circular 698. For Circular 698, there is limited guidance at present on the interpretation of certain language in the new tax code, though more industry-speciﬁc guidance on anti-avoidance is expected soon. The speakers raised concerns that tax ofﬁcials are strengthening the tax code very rapidly without any formal mechanism for individual tax rulings and communication among different levels and jurisdictions of government. (Apr 22) Event and Committee Highlights are reported by Anna Bartram, Sylvia Cheung, Patrick McNally, Kate Ryge Jonathan Shyu and Tiffany Yajima.

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DEAL OF THE MONTH IMAGINECHINA

China Automotive Acquisition

Geely helps Volvo tap the Chinese auto market.

n 2009, China surpassed the United States as the world’s largest automobile market. Capitalizing on Chinese consumers’ growing appetite for cars and taking advantage of a weakened worldwide auto industry, Chinese carmakers are acquiring foreign brands and technology to expand their capabilities and oﬀerings. Zhejiang Geely Holding Group’s US$1.8 billion cash purchase of Ford Motor’s Volvo car unit in March was one of the largest acquisitions of a foreign brand by a Chinese automaker, and provides a case study for overseas acquisitions by Chinese companies. The two companies entered into discussions in mid-2008 when Geely first approached Ford about buying Volvo. In October 2009, Ford named Geely as its preferred bidder and on December 23 that same year, they agreed on the major terms of the transaction. Under the agreement, Geely will purchase 100 percent of Volvo stock, including Volvo’s intellectual property rights and other physical assets. Because Volvo shares components with other Ford models, Ford has at least temporarily agreed to supply Geely with powertrains, stampings and other technology used in Volvo vehicles. If U.S. and Chinese regulators approve Geely’s purchase of Volvo, the deal will stand out as one of the most successful foreign acquisitions by a Chinese automaker, in stark contrast to other high-proﬁle acquisitions that failed recently: most notably, Sichuan Tengzhong’s recent attempt to purchase General Motors’ Hummer brand, which reportedly failed regulatory approval in late February because Hummer’s gas-guzzling engines

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are not in line with national plans to promote smaller, fuel-efficient cars. In this case, Volvo has technical know-how in producing fuel-efficient cars, an area where China’s research and development currently lags. Geely specializes in small, cheap cars for the domestic market and has plans to unveil a midsized car. Acquiring Volvo would help Geely develop more fuel-efficient vehicles, reduce production costs and expand in the high-end Chinese automobile market with a brand that is known for safety, technology, service and quality. Although privately held, Geely has strong government support in its attempt to acquire Volvo. In addition to a US$200 million note presented by Ford, Geely’s US$1.8 billion offer includes US$1.6 billion in government-backed loans from the Bank of China, China Construction Bank and the Export-Import Bank of China. Closing the sale to Geely would bring Dearborn, Michigan-based Ford valuable cash at a time when it aims to repay debt and return to profitability by 2011. Geely has assured Volvo that its headquarters will remain in Sweden, along with research and development. The production base will also stay in Europe, not only preserving jobs but also upholding the Volvo brand’s image as a high-quality European-made automobile. Geely’s chairman and founder, Li Shufu, plans to establish Volvo’s Chinese headquarters in Shanghai along with a factory capable of manufacturing 300,000 cars a year. Li’s aggressive expansion plans for Volvo include selling at least 200,000 Volvo cars in China each year. – Tiffany Yajima

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Quality Assurance