Insight Magazine May 2013 Issue

INSIGHT The Journal of the American Chamber of Commerce in Shanghai

THE APP IS HERE The Insight magazine iPad app is now available in the App Store. The brand-new app from AmCham Shanghai includes the same in-depth articles and news plus special content found only on the app.

Visit the App Store and download the Insight app today.

INsIGht MAY 2013

the Journal of the american Chamber of Commerce in shanghai

AMCHAM SHANgHAI PreSIdeNT

Brenda Foster vP oF ProgrAMS & ServICeS

scott Williams

vP oF AdMINISTrATIoN & FINANCe

F e at u r e s

15 New Rules for Dispatched Workers

By Tony Mou and Willow Wei

helen ren

Changes to China’s Labor Contract Law could impact foreign enterprises and their relationship with a certain category of workers.

dIreCTorS bUSINeSS deveLoPMeNT & MArkeTINg

Patsy Li

CoMMITTeeS

stefanie myers INSIgHT edITor-IN-CHIeF/ CoMMUNICATIoNS & PUbLICATIoNS

David Basmajian

15

LeGaL uPDate

18 Beijing Foie Gras, Anyone?

18

INDustrY INsIGht

By Erika Wang

A large number of high-end restaurants and popular retailers in Shanghai are touting the goodness of local veggies, meats and other foods over more expensive imports.

eveNTS

Jessica Wu goverNMeNT reLATIoNS & CSr

steven Chan

MeMberSHIP & CvP

Linda X. Wang

INSIgHT MANAgINg edITor

Bryan Virasami SeNIor ASSoCIATe edITor

26 Food Anxiety

26

34 Consider an H7N9 Business Plan

34

COVer stOrY

By Susie Gordon U.S. food executives say China’s plan to centralize the oversight of food safety is positive but express concerns about enforcement.

erika Wang

SeNIor CoMMUNICATIoNS ASSoCIATe

ryan Balis INTerNS

James miller michelle tong deSIgN

alicia Beebe LAYoUT

tina tian

BusINess aND heaLth

By Kevin Biggs

A risk management consultant advises companies to take a proactive approach to preparing for any potential escalation in the influenza situation.

PrINTINg

mickey Zhou Snap Printing, Inc.

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

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

5 News Briefs

12

11 Movers and Shakers

CharItY GaLa PICtures

Highlights from the Dinner

50

eXeCutIVe traVeLer

What’s Your Favorite Regional Airline?

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

40 41 46 47

From the Chair Board of Governors meeting Government relations Committee highlights Cover ILLUSTrATIoN bY TIAN CHI

Editor's note

T

he food we eat, along with the air we breathe and water we drink is about as fundamental an issue as it gets for everyone living in China. To some expats I’ve spoken to, these concerns are factors in determining where they choose to live in China, or whether they want to live in China at all. At the 18th National People’s Congress in March, the Chinese government took a swipe at addressing this issue by streamlining the bureaucracy charged with ensuring food safety.

As with many new laws, the question isn’t the quality of the regulation, it’s the enforcement.

In this month’s Insight cover story, we talk to food industry leaders to get their take and we interview leaders of the “slow food” movement to learn how eating local in China can mean eating healthy.

The Insight app and 2012–2013 China Business Report ebook are now available! (Think of it as business intelligence on-the-go.) The new Insight app currently includes the January/ February, March, April and May issues. The free app allows you to subscribe to the digital version

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

4

insight

m ay 2 0 1 3

of the magazine and features the full print edition plus bonus videos, photos and other content.

The CBR ebook is a digital version of the print report and is available as a free download on Apple’s iBooks and Barnes & Noble’s Nook.

The CBR ebook makes the 80+ page report user friendly by including a search feature, bookmarks, dictionary definitions, copy and paste and the ability to modify font size and presentation of the page itself.

We know our readers are busy, globetrotting individuals. The primary goal of AmCham Shanghai’s growing digital publication program is to make our publications more easily accessible. As always, please let us know what you think. Look for the third edition of our Orientation China Guidebook ebook later this spring.

As many of you know, AmCham Shanghai’s president, Brenda Foster, will step down at the end of June. I hope you all have a chance to read Bob Theleen’s column “From the Chair” as he highlights some of the Chamber’s many significant achievements during her eight-year tenure.

imaginechina

News

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

CHINA BUSINESS

Chinese developers expand abroad Chinese property deals abroad rose to US$1.86 billion last year from US$547 million in 2011 and US$90 million in 2010, according to data from Dealogic.

Companies like SOE Greenland, China Vanke Co. – the world’s largest developer by revenue – and Xinyuan Real Estate Co. are all expanding into foreign markets as they follow Chinese emigrants. Greenland is developing residential and hotel buildings in Sydney, Vanke signed deals in February for the development of a luxury condominium building in San Francisco and Xinyuan’s first U.S. development will be a 216-unit condominium building in Williamsburg, Brooklyn. Last year, the largest recipient of Chinese developers was the UK, which saw US$447 million in investment, according to Bloomberg News.

Chinese oil imports grow China is due to surpass the U.S. as the world’s top importer of crude oil by 2014, according to an April report from the Organization of Petroleum Exporting Countries (OPEC). China’s crude oil imports may even surpass 6 million barrels a day by the end of the year, while U.S. imports continue to drop, according to OPEC. Last December, China’s crude oil imports rose 1.3% to 5.57 million barrels a day, OPEC said. The country may meet 60% of its oil needs with foreign crude this year, while the U.S. continues to work toward increased selfsufficiency – last year the U.S. produced 84% of its own energy.

Vehicle sales record new highs China’s passenger vehicle sales jumped

Chinese now top spending travelers Chinese tourists have overtaken their German counterparts as the world’s biggest-spending travelers, according to the United Nations World Tourism Organization (UNWTO). Chinese tourists spent US$102 billion on foreign trips last year, an increase of 41% compared with the year before and beating the US$83.8 billion German travelers spent last year. U.S. travelers came in a close third at US$83.7 billion, while UK travelers trailed behind with US$52.3 billion and those from the Russian Federation rounded out the top five with US$42.8 billion.

Chinese tourists made 83 million foreign trips in 2012, a sharp increase compared with 10 million in 2000, making it the world’s fastest-growing tourist-source market, according to the UNWTO. The UNWTO says the volume of international trips by Chinese travelers grew from 10 million in 2000 to 83 million in 2012, making it the world’s fastest-growing market.

It credited China’s rise of foreign travel spending to rapid urbanization, rising disposable incomes and the relaxation of government restrictions on foreign travel. By 2015, 100 million Chinese will travel abroad, a benchmark originally forecast for 2020, according to the UNWTO.

15% year-on-year to 1.5 million units in March, the third-highest monthly growth in the past year, according to data from the China Passenger Car Association.

Sales rebounded after a 4.7% year-onyear drop in February, fueled by surging demand for entry-level cars and an influx

MAY 2 0 1 3

of new models of vehicles. The strong performance in March boosted firstquarter domestic passenger vehicle sales to 4.21 million units, up 19.2% year-onyear. U.S. car companies Ford and GM both saw 65% and 12.6% increased yearon-year sales, respectively. GM’s total

insight

5

AmCham Shanghai’s 2012–2013

Now Available as an iBook and on the Nook AmCham Shanghai 2012–2013 China Business Report is now available on Apple’s iBooks and Barnes & Noble’s Nook.Visit AmCham Shanghai’s website at www.amcham-shanghai.org/cbr

March sales were the second-largest in the company’s history in China, according to a press release from the company.

Poultry sector hit with RMB10b loss Poultry-related enterprises in China reported losses of more than RMB10 billion (US$1.6 billion) since the first human case of H7N9 bird flu was discovered, according to the National Poultry Industry Association. The govern-ment ordered all live poultry stands to be shut down in regions with H7N9 cases since early April. Association members said that the price of Huangyu chicken, a high-quality chicken, has dropped from RMB16 per kilogram to RMB4 per kilogram, while supplies of pigeons from Guangdong province have stopped. Very few people are daring to buy pigeons, which have been found to carry the H7N9 virus.

CORPORATE NEWS

Xiaomi extends reach to Taiwan and Hong Kong Beijing-based smartphone maker Xiaomi Corp. said it is selling its newly launched Mi 2S model in Hong Kong and Taiwan in a bid to extend its reach in those regions.

Consumers on the Chinese mainland were able to buy the phone online as of April 9, with prices starting at RMB1,999 (US$318). Buyers in Hong Kong and Taiwan had to wait two more weeks for the phone’s release. The 16-gigabyte handset retailed at HK$2,499 (US$322) in Hong Kong and for NT$9,499 (US$316) in Taiwan. Founded in 2010, Xiaomi launched its first smartphones in August 2011. It posted RMB12.7 billion in revenue in 2012 and sold 7.19 million smartphones last year.

Synutra to build dairy plant in France Qingdao-based dairy company, Synutra International Inc., received approval from Chinese authorities for a planned

investment of US$130 million towards the construction of a milk factory in France.

The plant, Synutra’s first European factory, is expected to start production in the first half of 2015 in France’s western Brittany region. Synutra, China’s largest infant formula company, plans to use the new plant to supply France and Europe with cheese and other dairy products, and to import whey powder into China for the growing baby formula market. In 2011, Synutra signed a cooperative agreement with French dairy company, Sodiaal.

Christie’s to open auction house in Shanghai Christie’s International PLC said it will become the first international auction company to operate on the Chinese mainland without a local partner. The company, one of the world’s largest fine arts auction houses, said it won a license to hold auctions in Shanghai starting this fall. China has become one of the largest and fastest-growing art markets in the world. The company said that the number of clients from the Chinese mainland bidding at Christie’s global auctions has doubled since 2008. But China’s law on the Protection of Cultural Relics forbids foreign auction houses or joint ventures to sell cultural relics, which are a major revenue driver in the art market.

Microsoft to set up Hainan R&D center Microsoft Corp. said it plans to establish an innovation center in south China’s Hainan province that will function essentially as an R&D center – the first of its kind on the Chinese mainland – according to an agreement signed between Microsoft and the Hainan Provincial Government at the Boao Forum for Asia held in early April. Microsoft also plans to construct a “Microsoft IT Academy” in Hainan to boost the training of IT experts. Neither the innovation center nor the Microsoft IT Academy have been given a construction date. The Hainan Provincial Government said it expects Microsoft’s presence to be

a boon to an already renowned tourism market.

Yihaodian launches fruit business Yihaodian.com, the online retail unit of U.S.-based Wal-Mart in China, launched a fruit business on April 7, in a bid to enter the emerging online fresh food sector. The business is directly managed by Yihaodian rather than by independent suppliers, the company said. While Shanghai is the first city to have access to the new business, the company said it would also launch the service in other major cities such as Beijing and Guangzhou. In the future, Yihaodian said it plans to enter the vegetables and chilled food trading business as well.

Other online traders including JD.com (formerly 360buy.com) and Amazon China already entered the fresh food sector in 2012 by inviting suppliers to sell fruit on their platforms.

MACROECONOMICS

Inflation up, prices down amid food safety fears China’s consumer price index (CPI), a main gauge of inflation, slowed to 2.1% in March, following February’s 10-month high of 3.2%, according to the National Bureau of Statistics. Food prices steadily declined in March amid fears of pork and chicken contamination. Pork prices fell 5.5% from a year ago, while overall food prices rose 2.7% in March on a year-on-year basis. Meanwhile, producer price index (PPI) in China, a measure of wholesale inflation, fell 1.9% in March year-on-year, marking the 13th straight month of decline after February’s 1.6% annual fall. The Chinese government has set this year’s inflation at 3.5%.

Manufacturing expands at 11-month high March saw China’s manufacturing expand at its fastest pace in the past 11 months with a purchasing managers’ index reading of 50.9, up from 50.1 in February, according

MAY 2 0 1 3

insight

7

to the National Bureau of Statistics and the China Federation of Logistics and Purchasing. A reading above 50 indicates expansion. A separate measure from HSBC Holdings, weighted more toward small companies, and Markit Economics rose to 51.6 from 50.4. The improvement follows the weakest January–February growth for factory output since 2009. New export orders climbed to 50.9 in March from 47.3 in February while input prices, a measure of inflation, dropped to 50.6 from 55.5.

Exports miss expectations Chinese exports in March increased 10% year-on-year, missing the expected 11.7% rise and much lower than February’s 21.8% increase. Exports missed their forecast for the first time in four months.

Imports, however, rose 14.1% year-onyear in March owing to a growing demand for raw materials. Increasing imports and slowing exports left a trade deficit of US$880 million in March. Previously, a trade surplus of US$15.15 billion and an import rise of 6% were projected after imports fell 15.2% in February year-onyear. Chinese exports are expected to continue to decline as U.S. and European demand remains weak and the Japanese yen continues to depreciate, which has in turn weakened the competitiveness of Chinese products in Japan, analysts said.

U.S.-CHINA

TP-Link to increase U.S. investment Shenzhen-based TP-Link Technologies, the world’s top manufacturer of products used in wireless local-area networking (WLAN), said it plans to invest in developing more relationships with American SMEs. Last year, the company controlled 37% of the global market in WLAN technologies and saw 46% of US$1.4 billion total revenues come from abroad, specifically from SMEs. Since entering the U.S. in 2009, TP-Link has signed deals with retail industry giants like Wal-Mart and Amazon and

8

insight

participated in yearly trade shows. WalMart will offer TP-Link products at 790 stores starting in May of 2013. TP-Link said it plans to attract new customers through a combination of low prices and new technologies.

Windows Live Messenger now available only in China Although Microsoft in April removed services worldwide for Windows Live Messenger, formerly known as MSN, Chinese users will still be able to use the service on China’s mainland thanks to a joint venture between Tom.com and Skype. The JV, in which Skype owns 51%, has been running MSN in China since 2007, according to local media. Existing users worldwide will be incorporated into Skype, which Microsoft bought in 2011 for US$8.5 million. Competition from domestic rivals such as Tencent’s WeChat and Sina Weibo have caused the number of MSN users in China, who are mostly white-collar workers, to drop from 20 million to 15 million.

Wal-Mart closing three China stores Wal-Mart Stores Inc., the world’s largest retailer by revenue, shut down three of its superstores in China in April, the company told local media ahead of the closings. The store closings were in Shanghai, Wuxi and Shenzhen. Analysts said the move was designed to cope with increasing labor costs and high rents in China, given that a Wal-Mart superstore in China usually covers around 20,000 square meters.

Rents of stores rose by 10% year-on-year, and the figure is likely to continue to climb in 2013, according to analysts. Shopping cards registered at any one of these stores will still be honored at other Wal-Marts, the company said.

GOVERNMENT & POLICY

Major cities move to cool property market Stricter property controls have been

m ay 2 0 1 3

implemented in Beijing and Shanghai in efforts to stabilize rapidly rising home prices. Beijing implemented a new law allowing single residents to purchase only one home and requiring a 70% down-payment for buyers who apply for loans from the housing provident fund, a government-run program which combines subsidized mortgage rates with a 401(k)-like retirement account. Shanghai has forbidden banks to give loans to individuals interested in purchasing a third home. Both cities are enacting a 20% capital gains tax on income earned in property sales. Other cities including Chongqing, Hefei, Guangzhou, Tianjin and Shenzhen have also implemented stricter property measures.

China scraps import duties for major technical equipment Import duties and import-related valueadded taxes on a range of technical equipment were scrapped starting April 1, according to China’s Ministry of Finance.

Eligible domestic enterprises are exempt from import duties and import-related value-added taxes on items including direct-current equipment, high-speed railway signaling systems, dyeing machines, new agricultural machines, solar cell equipment, lithium-ion battery equipment, lifting fire engines and key equipment for integrated circuits. But duties on some goods, such as materials for hydraulic supporting equipment, were reinstated.

Tax exemptions for solar panel equipment have attracted particular attention in light of recent Chinese-European dispute negotiations.

NDRC plans to revitalize aging industrial cities China will increase state funding and reveal preferential fiscal and land polices in order to revitalize aging industrial cities from 2013 to 2022, the National Development and Reform Commission (NDRC) announced in April. Designed to help the industrial cities upgrade

technology and relocate plants, the plan covers 95 prefecture-level cities and 25 areas under municipalities and provincial capitals, such as Shanghai’s Minhang District, according to the NDRC. The government has also pledged to transfer additional fiscal revenue to help pay for pension fund shortages and redeployment costs of former employees of bankrupt state-owned enterprises.

day in the first quarter. The company attributed the slight decline in rents in Puxi due to landlords’ decisions to keep rents flat because of weak demand and new supply. But Puxi rents are expected to turn positive in the second quarter, the company added.

SHANGHAI BUSINESS

Sales of existing homes hit a record high in Shanghai in March as sellers and buyers hurried to close deals before the implementation of a 20% capital gains tax on earnings from property sales.

Stricter property regulation measures were announced on March 1 in efforts to rein in increasing property speculation.

More than 67,500 units of previously occupied homes were sold in March – representing an increase of 365% in home sales from February, according to Shanghai Deovolente Realty Co. The city’s inventory of pre-owned homes for sales dropped from 140,000 to 127,000 as of

Pudong grade-A office rents beat Puxi’s For the first time in more than two years, grade-A office rents in Pudong New Area surpassed those in Puxi, according to real estate services provider Jones Lang Lasalle. During the first three months of the year, rents in Pudong rose at a rate of 1.3% quarter-on-quarter to RMB9 (US$1.43) per square meter per day, beating Puxi’s RMB8.9 per square meter per day – a 0.3% dip. Overall rents rose 0.4% to RMB8.9 per square meter per

Used home sales reach record high

April 7. The average cost of homes dropped 0.6% month-on-month to RMB17,013 (US$2,709) per square meter.

Shanghai’s minimum wage now highest in China Effective April 1, the minimum wage in Shanghai increased from RMB1,450 to RMB1,620, according to the city’s Human Resource and Social Security Bureau. The move makes Shanghai’s minimum wage level the highest in China, overtaking Shenzhen. Shanghai’s hourly minimum wage levels were also increased from RMB12.5 to RMB14 – the fifth highest in the country. The bureau also listed other benefits and wages that would not be counted as part of the minimum wage, including social insurance fees and housing fund contributions paid by individuals, overtime working payments, as well as allowances for working middle or night shifts, working under harmful environments and those for meals, commuting and housing.

NORTH AMERICA

CHINA & THE WORLD

ASIA-PACIFIC SIA PACIFIC SOUTH AMERICA

NEW ZEALAND: Huawei wins 4G contract from Telecom Corp.

As part of its overseas expansion plans, China’s Huawei Technologies Co. has won a contract to construct a 4G mobile network infrastructure in New Zealand. Telecom Corp. of New Zealand said it selected Shenzhen-based Huawei because of its capabilities and credentials in equipment manufacturing and network development and its leading position in providing LTE (long-term evolution) and 4G technology. The 4G LTE network is expected to go live in Auckland by October and coverage will be extended to two other cities by Christmas, Telecom said. So far, Huawei has built 73 LTE networks across 42 countries and recently completed the world’s first advanced LTE active antenna system on trial for Deutsche Telekom in Germany.

MIDDLE EAST

ZIMBABWE: Chinese construction group starts overhaul of airport China’s Jiangsu International Economic and Technical Cooperation Group has started a massive overhaul of Victoria Falls Airport, located near the famous Zimbabwean tourist spot. The two-year project, estimated to cost RMB1.25 billion (US$202 million), is financed with a loan from the Export-Import Bank of China. It includes a runway extension and building a second 4,000-meterlong runway, a 100,000-square-meter tarmac, a 20,000-square-meter new terminal, as well as car parks, according to the Chinese construction group. The airport’s passenger handling capacity will surge from 500,000 to 1.5 million annually and airlines like KLM and Emirates both expressed intention to launch long-haul international flights to Victoria Falls instead of commuting via Harare, according to the Civil Aviation Authority of Zimbabwe.

AFRICA

EUROPE ASIA-PACIFIC SIA PACIFIC

MIDDLE EAST EUROPE

NORTH AMERICA MIDDLE EAST

NETHERLANDS: Shell Corp. gets approval to drill in Sichuan China has approved Royal Dutch Shell’s production-sharing contract to begin developing and drilling the Fushun shale gas block in the southwestern province of Sichuan. Shell has committed to spend at least US$1 billion a year exploring China’s potentially vast shale gas resource, according to a Shell spokesperson. Shell said it plans to begin drilling later this year and continue into 2014. China committed itself to 6.5 billion cubic meters of annual shale output by 2015 at the National People’s Congress this past March. The production-sharing contract comes a year after the China National Petroleum Corporation agreed to allow Shell to begin initial development of the area.

AFRICA

OMAN: China boosts oil imports from Oman China boosted its oil imports from Oman by nearly 26% in the first two months of 2013, the Omani Ministry of National Economy said. The world’s largest customer for Oman crude, China increased its imports to nearly 28.6 million barrels (477,000 barrels per day) during January – February 2013, up from 22.7 million barrels during the same period last year. China’s oil imports from Oman in the first two months of 2013 accounted for more than half the Sultanate’s total oil exports of 49 million barrels (816,000 bpd), up from the 41.6 million barrels (693,000 bpd) recorded in the first two months of 2012.

NORTH AMERICA

SOUTH AMERICA AFRICA MIDDLE EAST

UNITED STATES: Lockheed Martin to build power plant in southern China U.S. security and aerospace company Lockheed Martin has signed plans with Reignwood Group, a Beijing-based investment firm, to develop an Ocean Thermal Energy Conversion (OTEC) power plant off the coast of southern China. The 10-megawatt power plant will provide energy for a new luxury resort on Hainan island. OTEC power is completely sustainable and able to operate constantly using the temperature difference in tropical ocean water to create power, according to Lockheed. Construction of the plant would create at least 1,000 jobs, mainly in the U.S., added the company.

ASIA-PACIFIC SIA PACIFIC NORTH AMERICA AFRICA

BRAZIL: China, Brazil sign US$30b currency swap agreement China’s Finance Minister Lou Jiwei and his Brazilian counterpart Guido Mantega signed agreements on bilateral cooperation in macroeconomic, fiscal and financial policies during the Fifth BRICS Summit held in Durban, South Africa, in late March. The two sides also signed a currency swap agreement involving RMB190 billion (US$30 billion) and 60 billion reais (US$30 billion) to broaden access to financial resources. The currency swap will be independent of the financial conditions of the international markets. Mantega said the currency swap agreement would result in a stronger partnership between the two countries in various areas, including customs, which could be expanded to cover infrastructure development.

SOUTH AMERICA

ASIA-PACIFIC SIA PACIFIC

10

insight

SOUTH AMERICA EUROPE NORTH AMERICA

m ay 2 0 1 3

ASIA-PACIFIC SIA PACIFIC SOUTH AMERICA

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

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

Rockwell Automation Rockwell Automation appointed ken kofsky the new regional director for the Greater China region in mid-April. Kofsky, based in Shanghai, will be responsible for driving the company’s growth and performance strategy in the region. Kofsky was previously regional director for Japan at the company. He first joined Rockwell Automation 26 years ago and had previously served as director of industry teams for the company’s Greater China region.

GOVERNMENT The State Council appointed Liu He as vice chairman of the National Development and Reform Commission, China’s top economic planning body, and minister at the central government’s Office of the Central Leading Group on Financial and Economic Affairs in late March. Liu had served as vice minister at Liu He the Office since 2003 and as deputy director of the State Council’s Development Research Center.

Ken Kofsky

Xiao Gang was appointed as chairman of China’s Securities Regulatory Commission in March. A veteran at Bank of China, Xiao served in key management positions since first joining the bank in 1981, including most recently as chairman of Bank of China, a position he held for 10 years.

Xiao Gang

amCham Shanghai

AmCham Shanghai Chair Robert Theleen, second right, at the 2013 Charity Gala with Peter Sykes, left, president of Dow China, and other guests

C.Y. Yeung, third left, CSR Director for Intel China, with colleagues

insight

Guests from GM, a corporate table sponsor

Phil Branham, president of B&L Group, bids on an item during the auction

Rolf Becker Big Band performance

12

Guests take to the dance floor

M ay 2 0 1 3

Charity Gala More than 400 people attended AmCham Shanghai’s 2013 Charity Gala, themed “USO Club,” on April 13 at The Kerry Hotel Pudong. Funds from the event, an important part of the Chamber’s Corporate Social Responsibility Program, will go to support the East China Normal University Education Development Foundation “I-Fly Fund,” the Shanghai Enrichment Community Service Center and the Xintu Center for Community Health Promotion.

Guests try their luck at the blackjack table

AmCham Shanghai President Brenda Foster, sixth left, with VIP guests

AmCham Shanghai staff pose for a group photo M ay 2 0 1 3

insight

13

Guests strike a candid pose in the photo area

A group of gentlemen show off their new shades

Platinum Sponsors

Exclusive Silent Auction Networking Sponsor

Exclusive Naming Rights for Gift Shop Sponsor

Exclusive Shopping Bag Sponsor

Corporate Table Sponsors

PANTONE 288U

PANTONE 431U

Sound Partners

Supporting Organization

PANTONE 288U

PANTONE 431U

14

insight

M ay 2 0 1 3

l e g a l u P d at e B y to n y M o u a n d W i l lo W W e i

The National People’s Congress meeting in the Great Hall in Beijing

Tony Mou

New Protections for Dispatched Workers

C

hina’s National Congress unveiled an amendment to the 2007 Labor Contract Law that will formalize labor contracts as a standard practice for the most part. These changes will take effect on July 1, 2013.

In China, employers typically hire workers by entering into formal labor contracts. However, employers are increasingly turning to dispatched workers from agencies that allow a more flexible, cost-saving staffing method.

These new changes will provide protections to dispatched workers by setting operating standards on labor dispatching agencies and clarifying the circumstances under which dispatched workers may be hired by employers, which were the two areas left largely unaddressed under t he 2007 L ab or C ont rac t L aw, yet recognizes worker dispatch arrangements as a

permissible supplement.

Under the new amendment, dispatched workers can only be used for staffing temporary, auxiliary or substitute positions. In addition, the amendment reiterates that dispatched workers shall be entitled to equal pay if performing the same work as the regular hires. The employer shall, under the “equal pay for same work” principle, employ same or similar compensation measures to the dispatched workers as those applicable to the regular staffers holding similar positions.

the impact Many companies use dispatched workers instead of formal employees. However, under the dispatch arrangements, dispatched employees are often underpaid and can be terminated more

M ay 2 0 1 3 i n s i g h t

15

Willow Wei

An amendment to China’s Labor Contract Law could impact foreign enterprises and their relationship with a certain category of workers

“

While the amendment limits labor dispatch arrangements to only certain enumerated types of positions, some exceptions exist for foreign invested companies.”

easily than those who entered into labor contracts with employers. In addition, health benefits and safety protections for dispatched workers are frequently discounted or scaled back. The amendment aims to rectify such conditions.

Under the “equal pay for same work” principle, employers would not be able to lower payroll costs either by hiring employees through a dispatch arrangement or by terminating a formal employee and re-hiring him or her as a dispatched worker. Because the amendment sets tighter guidelines for using dispatch arrangements, some companies that are using dispatched workers outside the permissible scope in the new guidelines may see an increase of operating costs if they find themselves having to convert the positions previously filled by dispatched workers into permanent hires. Similarly, employee termination costs for certain companies could increase, too, since they won’t be able to shift the employment termination related liabilities to dispatching agencies once dispatched workers become formal employees.

While the amendment limits labor dispatch arrangements to only certain enumerated types of positions, some exceptions exist for foreign invested companies. For example, representative offices of foreign companies are required to recr uit their Chines e employees through dispatching agencies; additionally, dispatched workers can be used by a foreign invested company during its pre-incorporation phase because such entity is without a legal existence and would have no standing to enter into formal labor contracts or service contracts with its employees before receiving its business license.

Under the amendment, dispatching agencies shall have “a registered capital of no less than RMB2 million; permanent business premises and facilities suitable for its business; and labor dispatching management systems in compliance with laws and administrative regulations.”

Employers shall work only with qualified dispatching agencies going forward to avoid any legal ramification.

non-compliance If a company fails to implement the new policies in accordance with the amendment, the labor dispatching agency or the employer will be

16

insight

M ay 2 0 1 3

ordered to rectify within a period of time prescribed by the relevant labor administration authority. Also, if unlawful practices are not rectified by the prescribed deadline, the labor dispatching agency or the employer will be imposed a fine of not less than RMB5,000 and no more than RMB10,000 per dispatched worker involved, and the business license of the dispatching agency will be revoked. In addition, if any dispatched worker suffers damages from such noncompliance, the employer and the dispatching entity shall assume joint and several liabilities for such damages.

However, existing labor dispatch contracts e nt e r e d i nt o b e f o r e t h e i s s u a n c e o f t h e amendment (December 28, 2012) are grandfathered under the amendment which may continue to be performed until such contracts expire. Nonetheless, the “equal pay for s a m e w o r k” r u l e s h a l l b e i m m e d i a t e l y implemented for new dispatched workers when the amendment takes effect on July 1, 2013.

Recommendations A representative office of a foreign company or a foreign investor who is in the process of setting up an entity in China may engage a qualified labor dispatching agency to fill positions of a type enumerated in the amendment as opposed to direct hiring. Care should be taken to ensure that t h e l a b or d i s p at c h i n g a g e n c y m e e t s t h e qualifications required by the amendment.

In addition, for those foreign invested companies that continue to use dispatched employees, they should work with their labor dispatching agencies regarding the following: l Review the existing labor dispatching contracts and prepare new labor contracts for those dispatched workers who need to be converted into regular hires when their dispatching contracts expire. l Compare the compensation structures of the dispatched workers and the formal employees and adjust any discrepancies in compensations and benefits, if necessary, to meet the “equal pay for same work” rule. Ensure that management or employees performing essential functions for the company are not hired through a dispatching agency. l In essence, within the next two months, foreign

invested companies currently not compliant with or that may be concerned about compliance with the amendment should coordinate with their agencies to make the changes or conver t dispatched employees into formal employees under normal labor or service contracts.

To summarize, the amendment filled the void in the area of labor dispatch. Particularly, the amendment codifies the “equal pay for same work� principle, and foreign invested companies are now required to adjust or set up an equal payroll system for dispatched workers. The amendment also sets forth the standards and requirements of an enumerated list of types of positions in which dispatched workers may be hired. Finally, the amendment imposes tangible penalties for labor dispatch practices that are noncompliant. Foreign invested companies are encouraged to work with a qualified dispatching agency to review existing dispatch contracts and make conforming changes in compliance with the new requirements under the amendment.

dispatched Workers Dispatched worker means a worker hired by a labor dispatching agency that generally hires workers at the requests of employers but remains as the employer of record under a labor contract. Those workers will then be seconded to the companies who are in need of their services. The term of dispatchment is relatively shorter, usually no more than six months, while the term of a labor contract between a dispatching agency and a dispatched worker is usually two years. The dispatching agency, on record, pays for salary of such dispatched worker while dispatches/seconds such worker to an actual employer. Functionally speaking, a dispatched worker is similar to that of a temporary worker in the U.S.

Tony Mou is a partner in the Corporate and Securities Practice Group and Willow Wei is an associate in the Corporate Practice Group at Sheppard Mullin Richter & Hampton LLP’s Shanghai office. Mou advises multinational companies operating in China and Wei specializes in corporate finance and governance for the law firm.

M ay 2 0 1 3 i n s i g h t

17

industRy insight B y e R i k a Wa n g

COURTESY BIOFARM

Beijing Foie Gras,

anyone?

A large number of high-end restaurants and popular retailers in Shanghai are touting the goodness of local veggies, meats and other foods over more expensive imports

C

hilean blueberries, Florida oranges and Australian milk with cartons that show cows on rolling green hills are among the imported items that enjoy a solid reputation in China. But some of Shanghai’s most well-known chefs are boldly challenging the notion that imported meats, vegetables and other foods are always better than those found in China.

In fact, they’re arguing that domestically grown products are just as good – and some high-end

18

insight

M ay 2 0 1 3

eateries even prefer to serve local products to their discerning diners.

Chefs and business owners who favor “locally sourced foods” say they are higher in freshness and nutritional value than the imported variety that has to be shipped from afar. They also maintain that purchasing local food not only supports local economies but also helps the environment because of the reduced impact of transportation. And in a time when food safety is on most people’s mind, proponents like to point

out that their personal relationships with suppliers give them confidence the products are safe. “ The challenge of course is finding the product,” says Austin Hu, chef and owner of Madison restaurant in Shanghai, when asked about his biggest challenge. “Because China has a lot of products and unfortunately the stuff that China gets a bad rep for, there’s a lot of that kind of garbage on the market.”

Whi le t here is no cons ensus on w hat constitutes “locally sourced,” the term generally refers to food produced near its point of consumption. Some adherents of the local food movement in the United States define locally sourced food as grown or produced within a 1 0 0 - m i l e r a d i u s . Ac c o r d i n g t o t h e U. S .

Department of Agriculture (USDA), distances can vary from 25 miles up to 350 miles. Others use the term to refer to food grown within different geographic divisions such as a city, province, region or even national borders.

the local option Madison’s menu features items that are about 97 percent locally sourced, which Hu defines as

anywhere in mainland China. “I’m giving myself enough leeway to maneuver because in China, Western food is not the native cuisine,” he explains.

Among the local ingredients on his changing menu, Hu gets his beef from a Dalian supplier – one of only two producers in China of the reputable Wagyu variety. The restaurant also carries a beer from Inner Mongolia that is not available any w here els e in Shanghai, says the Wisconsin native. Madison is also the exclusive distributor in the Yangtze River Delta of “Palatable,” a sparkling mineral water sourced from one of three major cold mineral springs in the world located in northeastern Heilongjiang province.

In addition, Chinese caviar from Hangzhou’s Qiandao Lake, foie gras from Beijing-raised ducks, Himalayan black truffles and mushrooms from Yunnan are often on his menu, which is popular among Shanghai expats and Chinese.

“Yunnan is a phenomenal growing area, great culinary history, great culture.”

Steve Liang, CEO of Fields China, a Shanghaibased gourmet online grocer, agrees with Hu: “If you want some good Matsutake or porcini or

“

… Half of Fields’ food products are sourced within China, with fresh items mainly from around Shanghai …”

COURTESY MADISOn

Austin Hu, chef and owner of Madison restaurant, in the kitchen

M ay 2 0 1 3 i n s i g h t

19

Jane Tsao, BD director of BIOFarm

morels, you have to go to Yunnan.” In fact, the southwest province ranks among the world’s most abundant resources of wild edible mushrooms, with more than 800 varieties.

Of the 1,000 food products that Fields carries, 90 percent of fruits and vegetables are locally sourced. Overall, half of Fields’ food products are sourced within China, with fresh items mainly from around Shanghai, Liang says.

For example, strawberries and grapes are grown in Shanghai and other parts of China.

“Blueberries from Shandong when they’re in season are better than the stuff you get from Chile or from Australia. Local peaches in the summer time – nothing better than this farm we found in Chongming,” Liang says.

For meats, Fields focuses on local free-range, organic black pig from eastern Anhui province and duck from Rougié, a French brand with operations in Beijing. Liang points out that locally sourced organic products such as strawberries, milk, free-range eggs, vegetables and black pig are among Fields’ top sellers.

Also defying the less-than-favorable stereotype of locally sourced food in China is BIOFarm in Shanghai. Nestled in a 32-acre plot in Pudong just 15 minutes by car from Chuansha metro station, BIOFarm was star ted by Taiwanes e-b or n American Sherrie Tian nearly a decade ago.

BIOFarm offers more than 300 varieties of organic products throughout the year, according to Jane Tsao, BIOFarm’s business development director. Among its specialties are organic sprouts

20

insight

M ay 2 0 1 3

and edible flowers, popular among five-star and fine-dining restaurants in Shanghai. One bite into a borage flower – a delicate variety of purple petals – and a burst of intense cucumber aroma awakens the taste buds. “Chefs like to use them in salads,” says Tsao.

BIOFarm also organizes various activities such as farmers’ markets, farm tours, organic farming training courses and cooking lessons, and actively encourages people to start their own edible gardens in a bid to promote their principles of “grow local, buy local.”

“In Shanghai, so many people still don’t appreciate local food,” Tsao says. Part of the problem, she adds, is that Shanghai is “a very international city with too much imported products and too much choice,” so people don’t know whom to trust, especially when it comes to local products.

Food safety Rich Rothman, partner at Kush Vegetarian Restaurants, says more consumers are questioning and distrustful of local products, so imported products or foreign ones are considered safer in their view.

Margaret Keefe, a U.S.-trained registered dietitian and nutrition consultant at Shanghai United Family Hospital, says there is some truth to this thinking.

“From a food safety point, the imported food has probably been more thoroughly inspected because it is imported, which gives it an advantage in safety,” Keefe says.

Exacerbating the problems of food safety is China’s fragmented agriculture industry, which comprises some 200 million farming households with average land holdings of one to two acres per farm and at least 400,000 food processing enterprises, most with 10 or fewer employees, according to USDA figures.

Against these odds, and given the potentially millions of people and businesses involved in the handling and transportation of food beyond the farm, food businesses in China know all too well that the bulk of the work to ensure the

quality and safety of their food rests heavily on their shoulders.

In the case of Fields, Liang says the first step is to identify the farms to work with and leave the office and get his hands dirty by visiting the farms to see how they operate. “If you start on the frontend and you start getting these guys to do the right things, that’s the first part of improving food quality,” Liang says.

Fields also conducts extensive internal testing to ensure that the products meet standards and suppliers hold proper licenses, following up with regular visits on a monthly or quarterly basis.

Forging strong relationships with suppliers is also a priority for Madison’s Hu. “I know the history of almost all my suppliers in China …

There are a lot of guys that are doing things with integrity and still supporting themselves and their families, and those are the guys I want to work with,” he says.

For him, there is no shortcut when it comes to ensuring the quality and safety of his food. “I taste the product every single time,” he emphasizes.

“When I see a product come in, I take a look, and if it’s not fresh I have no qualms at all about returning it.”

‘slow food’ Indeed, Madison, Fields, BIOFarm and Kush are among a growing number of food businesses that aim to highlight seasonal, locally sourced products as the superior alternatives to imported, mass-produced food.

In China, people have a mentality to go low cost and high volume, says Hu, who instead calls for “small quantity, high quality artisanal workmanship, boutique production.”

He is not alone in his quest. Since December 2011, the “slow food movement” has caught on in Shanghai, encouraging the return to local culinary traditions and a move away from Westerninfluenced fast food culture.

“People want to know where their food comes from, that it is safe,” says Kimberly Ashton, Slow Food Shanghai chapter leader. “Most people in Shanghai don’t think about where their broccoli comes from. They don’t think about this whole process of how they got it on their plate.”

A nonprofit member-supported association, Slow Food was founded in 1989 in Italy by Carlo Petrini, who started the organization to counter the rise of fast food, the disappearance of local

Kimberly Ashton, left, Slow Food Shanghai chapter leader, hosts a ‘slow’ meal

M ay 2 0 1 3 i n s i g h t

21

“

People want to know where their food comes from, that it is safe.”

Steve Liang, CEO of Fields China

22

insight

M ay 2 0 1 3

COURTESY KUSH VEGETARIAn RESTAURAnTS

food traditions and people’s dwindling interest in the food they eat and where it comes from.

Slow Food is about “being opposed to eating junk food, processed food and preserving food culture, eating sustainably and around 100 miles within your city,” she explains.

Ashton says the movement is still in its early d ays, w it h s ome 300 memb ers including consumers, restaurants and farms and local producers. As such, most of her time is dedicated to educating and building awareness of the movement, which is present in some 150 countries worldwide.

To this end, the Shanghai chapter organizes events including tours to local farms and hosted meals, such as a recent “100-Mile Lunch,” which was held at Celadon Restaurant in the Renaissance Shanghai Zhongshan Park Hotel. The five-course set featured traditional Asian dishes such as Cantonese shredded chicken and glass noodle soup, made with ingredients sourced from within 100 miles from Shanghai.

“We try to do seasonal menus and use locally sourced food as much as possible,” explains Hector Pliego, director of Food and Beverage at the Renaissance Shanghai Zhongshan Park, noting that about 80 percent of the hotel’s food is local. “By using local products and seasonal products, you ensure that you get the best quality possible, you get a great price because it’s from a readily available source … and then it keeps

Rich Rothman, partner at Kush Vegetarian Restaurants

things interesting both for our customers and our staff.”

For these food businesses in China working to change the perception of locally sourced products, education continues to pose the greatest challenge.

As Pliego explains: “We do a lot of work in talking to our clients and explaining to them that the fact that it comes from halfway around the world doesn’t necessarily mean it’s better.”

But not everyone buys this argument.

“It’s an uphill battle – I’ve had customers walk out when they find out the beef is from China, that everything is from China,” notes Madison’s Hu. Still, there are glimmers of hope. Says Hu: “I think China is moving in the right direction. In these three years that we’ve been open, I feel like I have seen my customer base mature. People are more open-minded, more understanding, more aware of food.”

Erika Wang is Senior Associate Editor at AmCham Shanghai.

B y R ya n B a l i s

Insight Goes Digital

AmCham Shanghai has launched an Insight app, offering the magazine’s busy, on-the-move readers a new way to enjoy Insight on their iPad while keeping up-to-date with the latest business trends in China. The app is available free of charge to all readers.

Designed with the business reader in mind, the app is packed with a number of features to bring each issue of Insight to life. These include audio and video content such as exclusive interviews, a handy bookmark function, easy-to-use quick links from the table of contents page, as well as interactive tools to share articles by email or on social media platforms.

“As business readers increasingly use mobile devices to access content on-the-go, we created the Insight app to provide an exciting, highly engaging and fun new way to read Insight,” said David Basmajian, Insight editor-in-chief and director of Communications & Publications at AmCham Shanghai. “We think readers will get a lot out of using the app on top of the print edition of Insight, which we will continue to publish and mail to all AmCham Shanghai members as usual.”

The Insight app is part of AmCham Shanghai’s focus over the coming year to enhance the presentation and delivery of a number of digital communications products. That effort includes an ebook version of the 2012-2013 China Business Report (available on Apple’s iBook and Barnes &

New app delivers Insight magazine straight to your iPad

Noble’s Nook), a redesigned corporate website to be unveiled later in 2013 and other improvements to offer members and those looking to do business in China the support they need to navigate a challenging and rapidly changing China market.

“AmCham Shanghai continues to explore new ways to engage our stakeholders in China, the United States and the greater Asia-Pacific region,” said AmCham Shanghai Chair Bob Theleen. “The Insight app is pivotal in our drive to expand the reach of our publications and thought leadership on a global scale, and I’m excited about the opportunities that lie ahead to grow our audience and deepen AmCham Shanghai’s impact.”

To download the Insight app, visit www. amcham-shanghai.org/insightapp or the Apple iTunes store. From your iPad, go to the App Store.

There is no cost to download the app or to read Insight using the app.

Once installed, the app will automatically download each issue of Insight published on Apple’s iPad Newsstand. All issues from 2013 are available through the app, with past issues from 2012 soon to be ready for download. The Insight app was developed by Fugumobile (http:// fugumobile.mobi/) and designed specifically for the iPad and iPad Mini.

Ryan Balis is Senior Communications Associate at AmCham Shanghai.

M ay 2 0 1 3 i n s i g h t

23

“

The Insight app is part of AmCham Shanghai’s focus over the coming year to enhance the presentation and delivery of a number of digital communications products.”

What Do You Think?

We asked randomly selected people their opinions on recent issues related to food safety and health in China. Here’s what we learned.

Q: recently, some people are only buying foreign products, including bottled water. what’s your opinion of this?

Olivia 23, sales Shanghai “My mother called me and said just to ‘be careful when you eat out, eat fruit and drink water. When you go out, eat lots of vegetables and stay away from meat.’ This is very useful advice.”

Carl 26, hotel café barista Shanghai “If I had the income to support buying foreign products, I would definitely opt for those products. I don’t eat chicken or pork if I can avoid it, because of the pigs in the river.”

24

insight

J UAY M LY /2A0U1 G 3 UST 2012

Q: have you stopped eating any food or stopped going to any restaurants as a result of the food safety developments?

sean rosen 24, student San Jose, CA (Nanjing) “I’m not eating chicken, pork or eggs. I’m probably ruling these foods out for the time being, not permanently, just until we learn more about what’s actually happening.”

Cao Jianpin 36, fire prevention products installer Shaanxi province “Yes, it has definitely had an impact. I eat fast-food chicken much less now. But, the government’s policies are effective.”

BY James miller and matthew garner

Q: given the recent food safety developments, are you taking any special precautions?

Q: is the government doing enough? emmy 25, retail sales Jiangsu province

Yolanda Yu 32, tour guide Huzhou “Right now meat products aren’t as healthy … It’s not as bad as people think. If you cook food fully it shouldn’t be a problem.

Everybody now, even in the villages, are more cautious of their food’s security.”

Katy Pearl 23, au pair Swampscott, MA “While I do recognize the severity of the recent developments, I haven’t changed my routine too much. I don’t eat at hole-in-the-wall restaurants or from street food vendors, but I still do shop at Chinese markets.”

“I don’t really pay attention to government activities; I just listen to what they tell us to do on the news.They [the government] might talk about specific bacteria, but it might not really impact us.”

Q: do you often think about food safety? wang Yulong 25, game developer Xi’an “I pay a lot of attention to food safety because it relates to personal health.

It’s an inspection issue. If it’s done well then we won’t have any problems.”

J U LY / A U GM U AY S T 2 0 1 23

insight

25

Officials at a farm in March

RECIPE FOR REFORM

China’s plan to centralize food safety regulations is a positive move, American food executives say, but effective enforcement and prevention remain key concerns

By susie gordon

W

hen the Chinese government announced plans to restructure its food regulatory bodies at the National People’s Congress in March, it seemed like the timing was just right. The new legislation came as thousands of diseased pig carcasses were being dredged from the Huangpu River and its tributaries, which provide much of Shanghai’s water supply. Barely a month has gone by in

26

insight

M AY 2 0 1 3

recent years without another scandal breaking: recycled cooking oil harvested from sewers, glowing pork and melamine in milk powder.

The new structure is intended to drive comprehensive changes to the government agencies that regulate food and food packaging in China, and one of the main aims is to streamline the industry itself – in essence removing what some may see as too many cooks in the kitchen in favor of a top chef to watch over things.

imaginechina

c o v e r s to r y

the plan

imaginechina

According to the new plan, a ministry-level board called the China Food and Drug Administration (CFDA) will be established to oversee food safety during the production process through to distribution, and then consumption. It Norwell Coquillard will also encompass food ingredients, food-contact substances, additives, fooduse disinfectants and health food.

The creation of a General Administration of Food and Drugs, a new ministerial-level organization, represents the government’s determination to centralize and improve management of an issue that has aroused strong public indignation: an unsafe food supply. The new General Administration replaces the old vice ministerial-level State Food and Drug Administration (SFDA) and takes on food safety functions from the Ministry of Agriculture (MOA), General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and State Administration for Industry and Commerce (SAIC).

China’s Ministry of Health (MOH) will become part of the new National Health and Family Planning Commission (NHFPC), which will continue to assess food safety risks and establish national Food Safety Standards (currently the duty of the MOH). The Food Safety Law will also be revised in accordance with the restructuring plan, with interim rules expected for the transition period.

was conflicting regulations, different types of enforcement, and buck-passing and corruption among the many governing entities.

At least now there will be one body. As with all legal matters in China, the issue here will be enforcement as it is across many industries. China has very good laws; that isn’t the problem. It is how they are upheld. In this case, the new ministry will make laws, and the agencies will enforce them. It remains to be seen how successful this will be.”

Swen Neufeldt, vice president of Hormel Foods International and general manager of Hormel Foods China, also believes that the consolidation will be good for the nation and in the industry.

“When you take something as complex as the food chain from farm to fork, every time you take some degree of complexity out of the system, you’re improving the integrity of that system.

regulations in practice So what do industry insiders think about the new legislations?

Norwell Coquillard is head of the Food, Agriculture and Beverage Committee of AmCham Shanghai and formerly head of agribusiness giant McCargill. Coquillard now runs Enactus, a nonprofit organization made up of entrepreneurs and business leaders who push for sustainable development.

“Members of the committee are wildly optimistic that this is a step in the right direction,” Coquillard says. “The issue before

A sign outside the offices of the General Administration of Food and Drugs, a new ministerial-level organization that replaces the old vice ministerial-level State Food and Drug Administration

M AY 2 0 1 3

insight

27

It’s a very good move by the Chinese government to continue to improve and create focus around food and consumer safety,” says Neufeldt.

By moving from several independent bureaus to three touchpoints, Neufeldt says, the government is “creating less overlap and less complexity,” which may address the problems associated with the existing regulations that many say are fragmented. That can only help manufacturers and operators, and at the end of the day, it’s about making sure that the Chinese consumer has confidence in the food they eat.”

Another industry insider who also views the changes positively is Constantino Flores, vice president of Asian operations for Mission Foods, which provides tortillas to major chains like KFC in China. “Enabling and improving the networking between the Chinese FDA and other bureaus is a good step in the right direction. For matters concerning improving food hygiene and tampering issues at the food service end of the business (small restaurants and food shops), this measure will definitely raise the accountability of all players involved,” Flores says.

Flores also believes that the new regulation will enable more effective food recalls and other similar actions in which coordinating the combined efforts of FDA with the other stake

“

Food safety in China is not a single silver bullet – it’s a cooperation within the whole supply chain, the government and the regulatory authorities.”

– Swen Neufeldt,VP, Hormel Foods International

holders on the government side is important.

“In my opinion this regulation comes a little short concerning issues farther up in the food supply chain or far removed geographically-speaking (i.e., across different provinces), where

Food saFety in china: a BrieF review

1949 - 1979

1984 - 2000

1979 - 1984

2001 - present

The first decades of the People’s Republic saw a shortage of staple food supplies due to poor public policy.

Widespread use of fertilizer improved agricultural yields, but also threatened food safety. Processing was mainly unmonitored.

28

insight

M AY 2 0 1 3

The concept of food safety was developed, a n d t h e Fo o d H y g i e n e L aw p a sse d.

Standards were set for organic food.

In early 2007, the State Food and Drug Administration conducted a sur vey about food safety, in which 65 percent of respondents expressed concern over

c o v e r s to r y

early detection – and even better – effective enforcement and prevention, are paramount to reduce the possibility of serious risks to the general public. It remains to be seen what actions will be taken by the government to further address these issues as well,” he says.

Food scandals As for whether the new regulations will put an end to the frequent scandals that dog China’s reputation on the world stage and worry consumers across the country, insiders have varying degrees of confidence.

Hormel’s Neufeldt believes it is a step in the right direction.

“No single action can stop scandals like the melamine crisis from happening,” Neufeldt says. “The key is to evolve regulatory and enforcement process to continue to move towards better food safety. Food safety in China is not a single silver bullet – it’s a cooperation within the whole supply chain, the government and the regulatory authorities. When you take complexity out of the system, you improve how to manage risk.”

But as long as China’s economy and population continue to grow, it is unlikely that food scandals will disappear completely.

Swen Neufeldt

imaginechina

standards. In July that year, Zheng Xiaoyu the former head of the State FDA, was executed for taking bribes over food safety licenses. In 2009, the State Council passed the Food Safety Law.

As has been in the case in the West (such as the recent discovery of horse meat in frozen meals across the United Kingdom), it is a balancing act between the ethical production of safe, nonharmful foodstuffs and the appeasement of food company shareholders whose main concern is often profit at the expense of hygiene and good practice.

David McLain, general manager of Suzhou-based food packaging company PrintPack, warns against ambitious expectation.

“With issues like this, progress is always slower than people want. There will be another scandal, like the recent pig carcass incident, and people will most probably take to social media to claim that the new regulations have not worked,” McLain says.

“The proliferation of misinformation will need to be dealt with.

After the Wenzhou train crash, 98 percent of people surveyed said that they didn’t believe the government story, so there are many levels to consider.”

Experts seem unanimous in the belief that food scandals will never be completely wiped out.

Mary Leong, a food scientist by training who has been in the industry for more than 20 years, is currently in R&D Innovation for the largest organic food company in United States. She said the process will get better with time.

“It will be a progression. As long as there is potential to

M AY 2 0 1 3

insight

29

cut corners and make money in an emerging market, underhand practices will happen,” she says.

“Countries in the developed world went through the same process, such as the David McLain canned food deaths from botulism in the 70s. Regulations are updated continuously as needed, even today. There is a lot of ‘China bashing’ these days. It is unrealistic to expect immediate change, but it’s what the world will expect. This means that China is in a tough position.”

Mission Foods’ Flores points out that China is not alone. “To

be fair, food scandals do happen in other countries as well, even in highly developed economies, and they will continue to happen, regardless of this regulation. In my opinion, what is different in China is that the level of trust up the food supply chain (from the consumer towards retailers/restaurants, from the retailer/ restaurant towards manufacturers, from the manufacturer towards its suppliers) is very low, and this will not improve in the short- to mid-term.”

Is the new regulatory plan simply an effort to save face by the Chinese government?

Flores believes this is one possibility but like many, he feels the outcry from the population over food scares have created a need for meaningful reform.

“I believe that the government is realizing that a big change is truly needed, and this measure is one of many more that have to happen further down the road to increase the accountability and facilitate the enforcement of food-related risk prevention,” says Flores.

A chef who cooks meals served to dining car passengers on commuter trains displays a frozen fish he plans to prepare for passengers at a facility in Yingchuan, Gansu province in April. The company wanted to solicit feedback from potential passengers about food safety concerns.

30

insight

M AY 2 0 1 3

c o v e r s to r y

The newly formed state Food and drug general administration will combine the functions of these four bodies to oversee food and drug safety in China.

Food safety Commission Office of the state council

state Food and drug administration

general administration of Quality supervision, inspection and Quarantine (Food Production)

state administration for industry and commerce (Food distribution)

Coquillard also feels the government is heeding the people’s wish.

“It is not about face saving. The government clearly recognizes that food safety is a very important concern to the average Chinese person,” he says. “They also know that if they don’t address it, it will become an even greater concern. I’ve visited second- and third-tier cities recently, where people were growing their own vegetables on the street because they are so

Constantino Flores

skeptical about safety standards in the food they buy in the shops and at markets.”

“

… It is unrealistic to expect immediate change, but it’s what the world will expect.This means that China is in a tough position.”

– Mary Leong, U.S. food scientist

Business impact The new regulations have led many in the industry to question whether they will affect how they operate their businesses. The general consensus among foreign firms is that they will not, as they already adhere to international standards.

“I don’t anticipate that this will impact us at all – we already meet international standards,” says McLain from PrintPack.

“The business that brought us here was exports. I think that, if anything, it will push people who have a brand to protect to seek out companies they can trust.”

Neufeldt agrees: “It won’t essentially impact how we operate.

One of the ingrained parts of how we work is a dedication to

M AY 2 0 1 3

insight

31

a decade oF scandaLs A litany of food safety breaches over the years has given rise to calls for reform.

2003:

Zhejiang province’s Jinhua ham farmers were found to be treating meat with harmful Dichlorvos insecticide so they could continue production into the warm season.

2010:

Green beans contaminated with the illegal pesticide isocarbophos were found in Wuhan, Hubei province, in the same year that the recycled cooking oil scandal broke. It was estimated that one in every 10 meals served in China was prepared using oil salvaged from sewers.

2011:

2004:

Fake baby formula in Fuyang, Anhui province, was responsible for the deaths of at least 12 babies, and the malnourishment of up to 200.The formula contained only 1–6 percent protein, as opposed to the normal 10 percent.

2005:

Food companies in Beijing, Guangdong, Zhejiang and Hunan were discovered to be using carcinogenic Sudan I red dye, despite a nationwide ban in 1996.

More milk-related issues as leather-hydrolyzed protein was used to increase the protein percentage, as well as the “glow -in-the-dark” pork affair in Shanghai.

2013:

The latest scandal to erupt involved the discovery of 16,000 diseased pig carcasses in the Huangpu River and its tributaries, originating in Jiaxing, Zhejiang province. Regulations banning the sale of dead pigs meant that corpses were thrown into local water sources for cheap disposal.

2006:

Banned drugs were used to boost the immune systems of turbot fish in Shanghai and Beijing in order to maintain stock and boost output.

2007:

Guangdong province was the focus of attention once again, as sewage, slop and iron 2 sulfate were discovered in stinky tofu, apparently added to improve the appearance of the street snack.

2008:

One of China’s most infamous scandals involved the use of melamine in baby milk formula from Sanlu Group. It caused the death of six babies, and kidney disease in 294,000.

2009:

Duck meat marinated in goat urine was sold as lamb to customers in restaurants across Qingdao, Shandong province.

32

insight

M AY 2 0 1 3

imaginechina

Farmers spray pesticide on crops

c o v e r s to r y

imaginechina

Zong Qinghou, second left, chairman of Wahaha Group and National People’s Congress deputy, holds up water that turned black after deputy Zhu Zhangjin, second right, dropped some polluted peanuts into the glass during a panel discussion at the 12th National Committee of the NPC in Beijing in March

food safety. That’s why we’ve been in business for over 120 years.

However, the changes will alter how we interact with individual bureaus. The FDA will become a single point of contact for regulatory management, but how we operate day to day probably won’t change.”

Looking ahead Most people, both inside and outside the industry, feel that the announcement promises positive results for China’s food safety standards, but some warn that the results will not be immediate.

“I believe the road ahead presents many challenges, and complacency has no place in this sector,” says Flores.

AmCham Shanghai will hold its annual china Food safety and sustainability conference on May 30 at the Mandarin Oriental Pudong. Now in its third year, the conference has been expanded to a fullday event and is designed to connect business leaders, food science professionals, government officials and key opinion leaders in a discussion of major trends in food safety and sustainability in China. This year’s keynote speaker is Dr. Chen Junshi, academician at the Chinese Academy of Engineering, and senior researcher at the National Institute of Nutrition and Food Safety. Other speakers include senior representatives from The Nielsen Company, PepsiCo and China Cuisine Association. For more information, please go to www.amchamshanghai.org/foodsafety.

Susie Gordon is a freelance writer based in Shanghai.

M AY 2 0 1 3

insight

33

A farmer sprays his chickens

A risk management firm advises companies to take a proactive approach to preparing for any potential escalation in the influenza situation

By Kevin Biggs

A

s of April 24, official reports indicate that there have been a total of 110 confirmed H7N9 cases with 23 fatalities including 12 in Shanghai. Out of the 110 cases, 14 patients have been discharged from the Kevin Biggs hospital. Earlier this week, the World Health Organization (WHO) said that there is no indication of sustained human-to-human transfer of the virus. However, health authorities continue to investigate the transmission of the virus in “family� clusters, where more than one member of a family has become infected. According to state media, more than 40 percent of those infected with H7N9 did not handle poultry. Poultry has been suspected as a source of the disease after H7N9 has been reported in a number of live poultry markets in the Shanghai area. There are a number of details about the origin, spread and effective treatment of the virus that are still unknown due to the evolving situation. Although health authorities have said that the outbreak is containable, the evolving situation warrants that foreign companies engage in proactive contingency planning and business continuity preparedness as a precautionary measure.

In early April, the South China Morning Post reported that a recent study by a group of scientists at Shenzhen’s South University of Science and Technology found that the H7N9 virus could mutate

34

insight

M AY 2 0 1 3

eight times faster than normal influenza. Meanwhile, in April the WHO said during a press conference that the possibility of the strain mutating into a human transmissible form cannot be ruled out. The mutation of the virus into a readily human-to-human transmissible form could result in a major escalation in the outbreak.

For comparison, concerns about the avian influenza H5N1 strain mutating into an easily human-to-human transmission form have been top of mind for health authorities for a number of years.

However, since human cases of H5N1 began in 2003, there have been 622 cases with 371 deaths according to the WHO. According to a Reuters report in April, only a very small number of these cases involved transmission during close human contact, typically between a patient and a health worker. The current mortality rate for H7N9, which mostly involves older adults, is just over 20 percent.

The sporadic and little known information about the newly discovered H7N9 bares some similarity to the initial reports of the SARS outbreak in March 2003. SARS, which reportedly affected roughly 8,000 people worldwide and claimed around 800 lives, began sporadically and then later witnessed a spike in cases. This may have been due to initial attempts to suppress the spread of the news in China. Reporting of the H7N9 virus has been much more transparent, highlighting that the spread of the virus is occurring sporadically with a small number of human cases reported outside of the Yangtze River Delta region.

Ongoing investigations into the source and transmission of the disease, including the results of investigations into recent

imaginechina

Consider an H7N9 Business Plan

c o v e r s to r y

“family” clusters are critical to controlling the spread of the virus.

Potential impact to business Even if there is only a minor escalation in the H7N9 situation, this could result in a substantial impact to business. Indications of a major escalation could include a dramatic spike in the rate of transmission, significant geographical spread of the virus or findings that indicate a genetic mutation into a more easily transmissible form. For companies, an initial scenario to consider would be if an employee(s) or one of their family members falls ill with the virus. The impact of such an incident will depend on the level of preparedness. The location and level of employee could have different implications to a company’s operations. Two possible scenarios are below.

First scenario: infection of a factory worker living in a company dormitory In this scenario, local health authorities may require that other workers who were living in close proximity to the worker to be quarantined and undergo monitoring for any symptoms. Under these circumstances, this could potentially require that some or all of the affected workers not be able to work for a period of time. This type of scenario would have the greatest impact on just-in-time manufacturers, requiring them to either hire temporary workers to fill the gap, shift production to another factory or temporarily halt production. Just-in-time manufacturers could also face major production challenges if this scenario occurred at one of their critical suppliers.

second scenario: Member of senior leadership becomes ill Another major scenario to consider would be the infection of a senior member of the leadership team or one of their family members. In either situation the senior member would be away from the office and likely not be able to work at full capacity for a significant period of time. This scenario can create significant challenges for the running of operations, as it may require the second in charge to essentially take over two roles or require another senior manager to temporarily take over the role from outside of China. If the H7N9 outbreak were to escalate or expand to other areas of the country/region, the potential for external staff to refuse to relocate to China will increase. It is also possible that an escalation in the situation will prompt some expatriate staff to request to be relocated outside of the affected region.

Prevention and preparedness While the current situation appears to be under control, the lack of information regarding the source of transmission, effective treatments and the severity of symptoms underscores the need for companies to proactively prepare their operations in the event of an escalation in the situation. Firstly, there are measures that companies can take individually to prevent the spread of the virus.

Although the source of transmission is still not confirmed, strong suspicion is focused on live poultry due to the confirmation of the virus in live poultry markets.

Additionally, HR managers should emphasize that individual employees with severe flu or pneumonia-like symptoms, especially high fever or difficulty breathing, should stay at home, consult their local physician and obtain a doctor’s note describing their condition. All employees should be instructed to inform their HR department of their illness and any changes in their condition. Local management should also consider a plan, with the consultation of health professionals, on how to respond if an employee at one of their facilities becomes ill with H7N9.

contingency planning Given the current environment and lack of information about the spread of H7N9, Hill & Associates recommends that companies operating in the Yangtze River Delta (Anhui, Jiangsu, Shanghai and Zhejiang) take proactive risk mitigation measures. Companies outside of this area, but still operating in China or the Asia region, should closely monitor developments and consider adopting a similar proactive approach. At this time, companies should be developing/reviewing their avian influenza outbreak contingency plans and be on alert for potential escalation in the spread of the virus. Companies should be rehearsing and testing their plans now, as a precaution to determine what measures are effective.

In the event of an escalation, the impact to business operations and/or employees could occur without warning. Therefore, companies should already have formed a team among their local leadership to monitor the latest developments of the virus and government actions, inform internal and external stakeholders about the company’s response and ensure that company systems are functioning properly to ensure continuity of business.

Kevin Biggs is senior risk intelligence consultant, China, and Risk Report Editor at Hill & Associates (PRC) Ltd. based in Shanghai.

M AY 2 0 1 3

insight

35

AmCham Shanghai New Members U.S. Corporate Membership Amsted China Services Ltd. ZHENG Brad

Shanghai CBRE Property Consultants Limited SLEVIN Andrew

DH Business Services (Shanghai) Co., Ltd. LIU Jingrong

WABCO (Shanghai) Management Co., Ltd. LIU Leon

Pramerica Fosun Life Insurance Co., Ltd. YEUNG Wing Piu Richloom (Shanghai) Trading Co., Ltd. MITCHELL Nolan Sesame Street Brand Management and Service (Shanghai) Co., Ltd. ZHU Shirley Shanghai Youtell Biochemical Co., Ltd. YANG Wei Suzhou Polymer Science Advanced Materials Co., Ltd. STASNEY Mark

U.S. Associated Corporate Membership

Non-Resident Corporate Membership Alaska Glacier Products LLC GAN Tianquan Heifer Project International, Inc. TONG Michelle

Corporate Int’l Affiliate Membership

Industrial Info Resources YIN Charlie

Absolute Engineering Technology Co., Limited SUN Peng

Kobre & Kim LLP MCGOVERN William

Air New Zealand (Asia), Shanghai Office BAHL Sandeep American Medical Center KAO Alicia Build Your Dream Exhibitions Asia Ltd. WARNIER Valerie China Enterprise Communications Limited LOK Ka Chiu

Lionheart Project Logistics, Inc. LI Lassie Paragon Partners Asia Limited BOSWORTH David Union Bank, National Association CHEN Da

Small Business Membership Caterer Goodman Partners Limited LONGSTREET William

Advent International (Shanghai) Co., Ltd. DE VECCHI Filippo

Contec Clean Room Technology (Suzhou) Co., Ltd. CORNELIUS Choi

Bayer (China) Limited YUAN Boyong

CTR Market Research Co., Ltd. KUSTERER Chase

Behr (Beijing) Paint Company Limited, Shanghai Branch ZHANG Zhihong

Etteplan Consulting (Shanghai) Co., Ltd. STRUZYNSKI Rick

Le Passage Mohkan Shan- French Luxury Country House Hotel PERES Christophe

Herbert Smith Freehills LLP, Shanghai Representative Office (UK) HORRIGAN Brenda

Lew & Barr Consulting Services (Shanghai) Limited LY Joanne

NewBridge Partners (Shanghai) Co., Ltd. AJACQUES Nicolas

Associate Membership

Pan Pacific Suzhou DORING Barclay

ADP Business Services (Shanghai) Co., Ltd. CHEN Yingqi

PTL Group SHALGO Zvi

AECOM, Ltd. KAPAVIK Brian

Scholpp Engineering (Shanghai) Branch Company SCHERMER Torsten

Armstrong Teasdale LLP, Shanghai Office (U.S.A.) CHEN Yingwen

Shanghai Adecco Personnel Services Limited CHEN Cindy

Ashland (China) Holdings Co., Ltd. MCLEOD Daniel PEI Helen ZHU Clara

Hershey (Shanghai) Foods Research and Development Co., Ltd. YUAN Qingbin Novelis (China) Aluminum Products Co., Ltd. LIU Qing Oracle (China) Software System Co., Ltd., Shanghai Branch SAID Bing Regus Business & Conference Centre (Shanghai) Co., Ltd. LEIJTEN Hans Rexnord Industries (Shanghai) Co., Ltd. TALA Hexlge Servcorp Business Services (Shanghai) Co., Ltd., Puxi Branch MIAO Su 36

insight

VWR International China Co., Ltd. HAAS Stanley

M ay 2 0 1 3

Forevermark Marketing (Shanghai) Company Limited JIANG Hyaline

Bayer (China) Limited DAI Doris Brenntag (Shanghai) Chemical Trading Co., Ltd. GU Iris Chrysan Industries, Inc. ONOFRAY Jennifer Corning China (Shanghai) Regional Headquarter BARNEY Nate Dacheng Law Offices, Chicago Office, Ltd. MA Michael DCM Education Information Consulting (Shanghai) Co., Ltd. MAWAL Christine Leyla Eagle Ottawa China, Ltd. LV Robbie Eaton Industries (Wuxi) Co., Ltd., Shanghai Branch VILLARMARZO-SOLIS Ignacio eBay CBT China SHEN Jamie

PTL Group DAM Jessica SCHREIER Arie

Shanghai Crowne Plaza Lake Malaren Shanghai RENNIE Richard

Quaker Chemical (China) Co., Ltd. XU Rong

Shanghai Demei Law Firm GARRISON Eric

Regus Business & Conference Centre (Shanghai) Co., Ltd. LE Happy WANG Roy

Shanghai Jasgo Business Consulting Co., Ltd. DIBBLE Alexandra

Individual Int’l Affiliate Membership

Rexnord Industries (Shanghai) Co., Ltd. YIN Jiehong ZHANG Xiayun CHEN Sam

APR Asia Co., Ltd. TORRETI Federico Galtronics Electronics (Wuxi) Co., Ltd. MONTGOMERY Shaul

Texas Instruments Semiconductor Technologies (Shanghai) Co., Ltd. CHEN Hsin Yi Sheana Thermo Fisher Scientific (China) Co., Ltd. CHANG Henry Chuan-Chih WABCO (Shanghai) Management Co., Ltd. JIN Jane YU Sujie

Individual U.S. Citizen Membership

Fredrikson & Byron PA Shanghai Representative Office US ZOU Ben

Alantum Advanced Material and Technology (Shanghai) Co., Ltd. LI Jun

Hitachi Consulting (China) Co., Ltd. YOUNG Tyler Aaron

Genpact BEDDIE J. Paul

IBM (China) Investment Company Limited LIU Jean

InterContinental Shanghai Ruijin RICE Bradford

Kobre & Kim LLP WU Shaun XIANG Joyce

Long Mashen Enterprises LOMASON Keith

Lew & Barr Consulting Services (Shanghai) Limited CHENG Joseph MKS Instruments (Shanghai), Ltd. SWORD Ellen Wynn NewBridge Partners (Shanghai) Co., Ltd. LAFFIN Celine PricewaterhouseCoopers Management Consulting (Shanghai) Limited HUTCHINSON Erinn

Pinghu Economic Development Zone, Business Promotion Bureau SEE Steven Reya Group GREGSON Taylor Self-Employed CHU Lenora

HROne BENGUIAT Y GOMEZ Valerie Victoria Pinsent Masons LLP Shanghai Office STUCKEN Bernd-Uwe Rouse Consultancy (Shanghai) Ltd. BOISSELET Audrey

Faegre & Benson LLP Shanghai Office FENG Judy

MIT-SJTU GRAHAM Judson

Hilti (China) Distribution Ltd. XIA Dai

SA Capital Limited ROQUE Richard Shanghai Mapletree Mangement Company CHIN Benny

Non-Resident Individual Membership China Trade Institute MYERS Thomas

CASIC Corporate Membership The State of North Carolina China Office RONG Xin

Educational Membership Boston University FIELD Andrew

M ay 2 0 1 3

insight

37

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

C o r p o rat e S o c i a l R e s p o n s i b i l i t y

Simon Zadek, visiting scholar at Beijing’s Tsinghua University, delivers the keynote address at the 8th Annual AmCham Shanghai CSR Awards

Leah Jin, center, partner at KPMG China, receives the CSR Leadership Award on behalf of her company

Winners of AmCham Shanghai’s CSR Awards pose for a group photo

38

insight

M ay 2 0 1 3

AmCham Shanghai Hosts Eighth Annual CSR Awards

M

ore than 150 government officials, company representatives, and CSR practitioners and scholars gathered to recognize businesses that have made notable contributions to corporate citizenship in China at AmCham Shanghai’s Eighth Annual Corporate Social Responsibility (CSR) Awards Ceremony on April 11. This year’s award winners were: KPMG China for CSR Leadership, Standard Chartered Bank China for CSR Innovation, Deloitte China for Corporate Community Involvement and Thermo Fisher Scientific China and Enactus China for CSR Partnership.

“By recognizing these outstanding programs, AmCham Shanghai aims to not only acknowledge their efforts but also to provide models for other organizations as they plan their own CSR programs,” noted AmCham Shanghai President Brenda Foster.

“We hope these award-winning programs honored today will inspire other companies to find innovative ways to carry out CSR activities and increase awareness of the power of CSR partnership and community involvement.”

Simon Zadek, a leading CSR expert and visiting scholar at Beijing’s Tsinghua University, delivered the keynote address on the role of business in creating shared value. Zadek stressed the importance of connecting social innovators at the micro level with policy makers at the macro level and working closely

with multinational corporations, international organizations and key government stakeholders to create permanent and sustaining results in CSR. Stephen Yiu, chairman of KPMG China, said: “We have to educate, empower and equip our young generation, not only with the right professional knowledge and skills, but also by enabling them to grow into visionary leaders who can bring innovative and sustainable solutions to economic, social and environmental problems that we are all responsible for.”

“Companies in the lead tend to have wellarticulated strategies, good management structure and process in place, and more dedicated resources to incubate a strong culture of community involvement. They tend to effectively leverage their corporate assets to manage the CSR portfolio with a balanced score card,” said C.Y. Yeung, director of

Corporate Social Responsibility at Intel China and Chair of the AmCham Shanghai Business Council for Sustainability and Responsibility (BCSR). Yeung served as a member of the judging panel for the 2013 AmCham Shanghai CSR Awards.

The 2013 winners were selected from nearly 40 nominees and according to a rigorous evaluation framework developed with reference to ISO 26000, the guidance on social responsibility released by the International Organization for Standardization. This year’s judging panel comprised leading scholars and practitioners, including Gregory Berzonsky, vice president of United Way Worldwide, Bradley Googins, associate professor at Boston College C ar rol l S cho ol of Manage me nt , and Bi l l Valentino, director of the Beijing Normal University CSR Center.

M ay 2 0 1 3

insight

39

i n s i d e amc h am from the chair

Tribute to a Visionary

O

ur President, Brenda Foster, has been a force of nature at AmCham Shanghai since the day she arrived eight short years ago. She will step down as president at the end of June. Brenda’s first trip to China was in the mid-1970s. For those of you who did not experience China at that time, it was a grim, gray country with the last days of the Cultural Revolution still very much visible on the streets of Beijing and throughout the countryside. As I have had the pleasure of working closely with her in recent years, her instincts and her judgments about China were clearly formed through those experiences.

Brenda witnessed the deprivations in China, but she saw the hope, the intelligence and the determination in the eyes of men, women and children to make great changes to their society. She made a bet on China, and AmCham Shanghai has been one of the many beneficiaries of her vision. Here are a few of the milestones of AmCham Shanghai during the Foster years of leadership: Robert Theleen

• • • •

AmCham Shanghai’s membership has grown to nearly 4,000.

We have doubled the number of employees to about 50.

We increased the number of committees by nearly 30 percent.

We initiated breakthrough programs, such as the YRD expansion and the SME Center.

• Our much-respected research now influences the world’s view of China.

• In 2007, we had no formal Government Relations department. We now have a GR team and an independent Washington Doorknock to provide our national leaders with insights and our members’ views.

Chair of the Board of Governors

Brenda also gave AmCham a heart in the form of Corporate Social Responsibility programs that annually contributed millions to worthwhile charities throughout the country. Brenda’s leadership took many forms.

With the Chinese government, officials always knew they had not only a knowledgeable friend, but a worthy advocate of American business interests of our members. For American industry, she led the fight for advocacy initiatives in both Washington and in Beijing. She also has been instrumental in working closely with senior leaders in Shanghai to advance this city’s vision of becoming both an industrial and financial center of global importance.

It is my hope that each of you will take the time to say thank you in the final months of her tenure, which fittingly will end at our Fourth of July event this year.

On behalf of your Board of Governors, employees and members, it is my pleasure to say thank you, Brenda, for your leadership in greatly shaping AmCham Shanghai to become the voice of American business in China.

Mahalo and Aloha.

40

insight

M ay 2 0 1 3

i n s i d e amc h am B O A R D o f g o v er n o r s br i e f i n g

Highlights from the April 2013 Board of Governors Meeting Update on President Search Bob Theleen, AmCham Shanghai Board Chair, reported that the list of candidates for the position of president was recently narrowed down to a “short list.� Of these, finalists will be chosen. The search committee is expected to make a final recommendation to the Board sometime this spring. The Chair noted the high quality of the candidates and the professionalism and efficiency demonstrated by the search committee.

2013/2014 NEC Chair and Board Recruiter A discussion was held regarding the selection of a chair for the Nominations and Elections Committee (NEC) which is charged with selecting a slate of candidate for the Board elections. The chair can be a past or non-running chair of the Board, a past or non-running incumbent on the Board or a past or non-running committee chair.

The Board elects the chair of NEC and then the elected chair may pick two more Board members to serve on the NEC. Committee chairs are also eligible to participate on the committee.

The NEC will be convened in June 2013. The Board also discussed the role of Board Recruiter which is needed to lead the

effort to recruit candidates to run for chair and other seats on the Board.

Announcement of 2013/2014 Committee Chairs A list of recommended committee chairs for FY 2013/14 was provided by staff. The Chair commented that a recent breakfast meeting with committee chairs was very well done and productive. The Chair moved to approve the list of recommended committee chairs as provided by staff, which the Board approved unanimously.

In Attendance Governors: Keith Cole, Lienjing Chen, Sherman Chu, Marie Kissel, Jim Mullinax, Peter Sykes, Robert Theleen (Chair), Eric Zheng Apologies: Andrew Au, William Brekke, Jimmy Chen, Curtis Hutchins, Kenneth Jarrett Attendees: David Basmajian, Steven Chan, Brenda Foster (President), Patsy Li, Stefanie Myers, Helen Ren, Scott Williams, Jessica Wu

The AmCham Shanghai 2013 Board of Governors Governors

Chair

Andrew Au Citibank China

Jimmy Chen FedEx Express

Sherman Chu Cisco Systems

Keith N. Cole General Motors

Kenneth Jarrett APCO Worldwide

Marie Kissel Baxter Asia-Pacific

Chen Lienjing Pratt & Whitney

Peter Sykes Dow Chemical

Eric Zheng AIG Insurance

Robert Theleen ChinaVest

Vice Chair

Curtis Hutchins Eaton (China) Investments

M ay 2 0 1 3

insight

41

AmCham Shanghai

Ma Xiuhong meets AmCham Shanghai members

U.S. Consul General in Shanghai Robert Griffiths, second right, greets China’s Former Vice Minister of Commerce Ma Xiuhong

Here is a selection of snapshots captured in the past month.

Ma Xiuhong visits AmCham Shanghai

Ma Xiuhong, right, with Steven Chan, Amcham Shanghai director of Government Relations and CSR

42

insight

NOVEMBER 2012

Eaton Corporation’s William roundtable on sustainability

Month in Pictures

Eighth Annual AmCham Shanghai Corporate Social Responsibility Awards

AmCham Shanghai staff and members participate in the Jinqiao 8K Run

B. Doggett, second left, participates in a y strategies and their impact on business

Faith Hampton from The Renewal Center speaks at a Food Service Subcommittee event on solving talent needs by partnering with NGOs NOVEMBER 2012

insight

43

deal of the month

By James Miller

Zarsion Holdings Inks US$1.5b Deal with California Firm imaginechina

B

eijing-based real estate group Zarsion Holdings Group C o., Ltd. and California-based Signature Development Group signed a US$1.5 billion mutual-investment deal to codevelop 65 acres of Oakland, Calif., waterfront property, California Governor Jerry Brown announced at the U.S. embassy in Beijing during a week-long visit in April. The move, Zarsion’s first venture in the United States, signals growing Chinese investment in California.

Up on complet ion, t he Bro ok lyn B asin development project will host 3,100 residential units, approximately 200,000 square feet of retail and commercial space and a marina with up to 200 boat slips, Signature said in a press release.

At the announcement of the deal in Beijing, Brown said that the “massive influx of Chinese investment will put thousands of Californians to work and dramatically improve Oakland’s waterfront.” Brooklyn Basin is expected to contribute 10,000 new jobs in the area from the start of construction in 2014 to its estimated completion in 2021, according to Signature.

Jean Quan, Oakland’s first female and first Chinese-American mayor, said: “California is a good target for Chinese investors because we are looking for infrastructural development,” according to a local media report. She added that California is especially suited for an influx of Chinese investment-based immigration given its history as a popular destination for Chinese immigrants and its current favorable business environment.

Since assuming his post as governor in 2011, Brown has led a campaign to attract more Chinese investment into California. He met with President Xi Jinping in February 2012 and Premier Li Keqiang last month. During Brown’s visit, another four deals

California Governor Jerry Brown, left, shakes hands with Gao Hucheng, Minister of Commerce of China, during a meeting at the Ministry of Commerce in Beijing on April 10, 2013

worth nearly US$300 million were signed between C h i n e s e a n d C a l i f or n i a c omp a n i e s – i n pharmaceuticals, technology, renewable energy and university-based funding for innovation.

After a 10-year hiatus, California re-opened its Shanghai trade office last month. The CaliforniaChina Office of Trade and Investment in Shanghai will be a joint public-private venture run by the Bay Area Council and numerous private companies from northern California. The initial focus of the office will be to draw Chinese investment in climatechange technologies, renewable energy, building and plants efficiency and low-carbon fuel, said Brown at the dedication ceremony.

From 2000 to 2012, California attracted more Chinese firms than any other U.S. state, negotiating 166 investment deals, according to Rhodium Group, a New York-based research firm. Rhodium said Chinese investment in California is expected to reach US$60 billion by 2020, eclipsing the current US$1.3 billion. Meanwhile, California’s exports to China were worth US$14 billion in 2012 – a 300 percent increase from 2000 – and this figure is expected to grow as well.

m ay 2 0 1 3

insight

45

Government Relations China’s Former Vice Minister of Commerce Visits AmCham Shanghai Chinese former Vice Minister of Commerce Ma Xiuhong visited AmCham Shanghai and toured the SME Center on April 16. AmCham Shanghai organized a roundtable with Ma and various international chambers and business associations to discuss China’s green development and the upcoming 2013 China International Green Innovative Products and Technologies Show (CIGIPTS). She also met with AmCham Shanghai members to address the role of international companies in China’s green future.

Chinese former Vice Minister of Commerce Ma Xiuhong, third left, during a roundtable on green development

Ma is currently the Vice Chairman of the Foreign Affairs Committee of the Chinese People’s Political Consultative Conference, President of the China Foreign Trade Center and Director General of the China International Green Innovative Products Technology Show. She served as Vice Minister of Commerce from 2003–2010 and has worked at the Ministry of Foreign Trade and Economic Cooperation in various capacities for 20 years.

Eaton Executive Addresses CSR Roundtable on Sustainability AmCham Shanghai’s Business Council for Sustainability and Responsibility (BCSR) hosted a roundtable discussion on March 26 with William B. Doggett, senior vice president of public and community affairs at Eaton Corporation. The roundtable focused on how sustainability strategies shape and create business opportunities globally and in China. Doggett noted that multinational corporations are facing the challenge of balancing the ever-increasing energy need with conforming to sustainable business practices. Launched last year, the BCSR promotes corporate social responsibility, sustainability awareness and best practices to advance public policies and ensure long-term social and economic well-being in China.

Donation Drive Yields 300 Used Electronic Items for Schools

Computers and other electronics donated to rural schools

46

insight

MAY 2 0 1 3

AmCham Shanghai in collaboration with Netspring Social Enterprise successfully coordinated an electronic donation drive from March 28–29, collecting more than 300 computers and related parts from more than 25 companies in Shanghai and Suzhou. All collected items will be refurbished and distributed to create computer classrooms in elementary schools throughout rural villages in China as part of the Green IT Classrooms Against Poverty program. Any unusable items will be disposed of properly to prevent harm from electronic waste. If you were unable to participate this time and would like to donate items from your office, please contact Ally Qin at yiqin@ netspringworld.com or call (021) 6049-3693 to schedule a drop-off or pick-up.

Committe highlights

inside amcham

IT and Design & Construction Committees Smart Cities Series: Buildings AmCham Shanghai’s Information Technology (IT) and Design & Construction committees and the Urban Land Institute jointly hosted an event on smart buildings on April 11. The second session in the Smart Cities series, the event looked at the implementation of high technology in the design, construction and operation of smart buildings and the current and future opportunities in this space.

Panelists discuss high technology in the design, construction and operation of smart buildings

Xiaomei Lee, principal and managing director at Gensler, presented on the design and planning process for the Shanghai Tower project. Using designs that include open lounges that maximize natural ventilation and light, and an aesthetic that complements the existing Shanghai skyline, Lee demonstrated how smart design comes from understanding and working with the surrounding natural and urban environment.

Hongyu Li, regional managing director of AECOM Building Engineering in China, presented on the next step of the smart building process: translating building design into engineering and construction plans. Li stressed the importance of including engineers as part of the design team from the very beginning of the design process to ensure a smooth transition from design planning to design optimization and implementation.

Timon Smith, executive vice president at FacilityOne, discussed the handoff from design and construction to facility management. Smart building tools are only as good as the people using them, Smith stressed, adding that the use of smart technology solutions, such as building information modeling (BIM), can help achieve a smoother transition and better communication between phases.

Food Service Subcommittee Talent Needs, Innovative Partnerships and NGOs AmCham Shanghai’s Food Service Subcommittee hosted the event “Solving Your Talent Needs: Innovative Partnerships with NGOs” on March 27, featuring two nonprofit organizations, Shanghai Young Bakers (SYB) and The Renewal Center.

SYB provides 12-month bakery training and internships for disadvantaged Chinese youth and sends their best students to France for further bakery courses, said Floriane Lemoine, SYB program manager. In cooperation with education NGO Stepping Stone, these students are also equipped with English language skills, which enable them to find qualified jobs and live independently, she added. Faith Hampton, volunteer Women’s Director at The Renewal Center, said the nonprofit provides training and work placement into local businesses such as Element Fresh and MAYA. Floriane Lemoine, SYB program manager, discusses NGO partnerships

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

m ay 2 0 1 3

insight

47

Committee highlights

inside amcham

Small Business, Marketing & Media and IT Committees Experts Discuss Techniques to Sell Online in China With the high cost of living in Beijing and Shanghai and the expansion of industries to lower-tier cities, many people are now following growing opportunities in smaller cities – and bringing their “first-tier” tastes, values and buying habits along with them, noted Kunal Sinha, Chief Knowledge Officer at Ogilvy & Mather China. For these consumers, online shopping offers the choice and variety of first-tier cities at a good price, he added.

Attendees learn about strategies on how to sell online in China

Sinha made the remarks during an event on how to sell online in China hosted by AmCham Shanghai’s Small Business, Marketing & Media and Information Technology (IT) committees on March 20. The program covered Chinese consumer trends, strategies and opportunities for branding online, and practices and challenges for building a successful e-commerce business in China.

With more people accessing the Internet and relying on online platforms as a point of reference for fashion and style, consumers outside tier one cities are looking to international cities, such as New York, London and Paris, as benchmarks for fashion and brands – not to Shanghai or Beijing as in the past, Sinha said. And brand ambassadors, such as bloggers and other consumer reviewers, have become an invaluable way to cultivate brand traffic with their growing influence, he noted.

Also during the event, Gary Clubb, international business development manager at TMall, stressed the importance of taking full advantage of user data collected by the e-commerce platform by frequently updating Web pages to stay on top of trends and buying habits. Eric Rongley, CEO of Bleum, emphasized the need for having specialized staff focused on monitoring the Chinese market, and for small businesses to outsource this position if there is no internal capacity to do so.

Logistics & Transportation Committee Next-generation Supply Chain Management: Leaders vs. Laggards Is your company a “Leader” or a “Laggard”? AmCham Shanghai’s Logistics & Transportation Committee on March 19 hosted a discussion on next-generation supply chains with Craig Kerr, partner at PwC, who presented findings from PwC’s 2013 Global Supply Chain Survey. This year’s survey was the ninth and largest-ever global supply chain survey conducted by PwC. It included insights of more than 500 supply chain experts in Europe, North America and Asia, from companies of all sizes and across a wide range of industries.

Craig Kerr, partner at PwC, presents findings from PwC’s 2013 Global Supply Chain Survey

The survey also featured a performance comparison of two groups of companies – Leaders and Laggards – and identified six traits of highly effective supply chain managers, or Leaders. Among these traits, Kerr noted that Leaders acknowledge that supply chains can be strategic assets; offer best-in-class delivery, competitive costs and flexibility; and customize their supply chains according to customer segments and needs.

As loyalty between customers and suppliers wanes, natural disasters cause disruptions to supply chains and online retail changes supply chain dynamics, companies have no choice but to adapt and modify their supply chains to meet today’s needs, said Kerr.

Simply taking a Western supply chain model and trying to implement it in China or Asia will not work in the same way, he said, adding that the key is adaptability, especially in changing market conditions.

48

insight

MAY 2 0 1 3

Event highlights

inside amcham

AmCham Shanghai Hosts Consul General Griffiths at Monthly Member Briefing AmCham Shanghai hosted U.S. Consul General in Shanghai Robert Griffiths at a Monthly Member Briefing on April 9. Members also heard from the leadership of different consulate sections, including Paul Taylor, Deputy Principal Commercial Officer, Kristin Hagerstrom, Consular Chief, Dale Largent, Public Affairs Section Chief, and Jim Mullinax, Political and Economic Section Chief.

U.S. Consul General in Shanghai Robert Griffiths briefs

AmCham Shanghai members on consular affair updates Griffiths highlighted the continued efforts by the Consular Section to expand consular facilities and improve visa services. As of last year, 400,000 visas were issued, and visas issued have increased to 2,000 daily, Griffiths pointed out. He also briefed members about soon-to-begin construction plans to double the amount of office space and interview windows available in the Consular Section.

Taylor discussed plans of a cloud computing mission in partnership with Microsoft and other technology companies set to take place at the end of May. Largent invited members to Jazz Appreciation Month and upcoming events by Education USA, the advising arm of the State Department that promotes study in the U.S. Mullinax reminded members of Secretary of State John Kerry’s upcoming visit to China and of several dialogues set to take place later this year.

m ay 2 0 1 3

insight

49

EXECUTIVE TRAVELER In this issue we asked executives to tell us which airline they like the most when traveling in the Asia-Pacific region. Here’s what they told us.

Edward Bell, Head of Strategy & Planning, Ogilvy & Mather Shanghai Favorite Airline: Singapore Airlines Remarks: best in the region, the best in the world actually. But the one thing that really gets me is the timely service of the satay

Singapore Airlines Business Class Paul Milburn Delphi Electronics Favorite Airline: Singapore Airlines

Chicken and lamb satay skewers served on Singapore Airlines

Remarks: “Airline lounges especially in Singapore are excellent. I think airline service has improved significantly over the years, but I still think Singapore Airlines is still the best for overall service. Food is very good even in economy.”

Tom Hendricks Fluor China Favorite Airline: Delta Air Lines Remarks: “I prefer Delta because of their Business Class Additionally, their connections work the best for me when travelling to the United States. Lastly, their most-frequent traveler phone hotline is most helpful.”

First Class dining on Cathay Pacific Liangqi Lin, President, AkzoNobel China Favorite Airline: Remarks: “All services. I have been a Diamond Card member of Cathay for the last decade.”

Constantino Flores, VP Operations – Asia, Mission Foods Favorite Airline: Korean Air Remarks: flying with them especially when traveling eastbound to the Business Class in Delta Air Lines of that they are a SkyMiles partner.”

50

INSIGHT

M AY 2 0 1 3

Coming This summer! more, more, more, Air CAnAdA! 35 weekly direct flights to Specular Toronto and Breath-taking Vancouver! Starting June 1st.

Daily departures from Beijing and Shanghai.

Air Canada. Your preferred air carrier to North America.

Air Canada China Call Center

400 811 2001

Executive First Suites are available on overseas flights on all Air Canada-operated wide-body aircraft, except certain Boeing 767s. 速Executive First is a registered trademark of Air Canada.