Insight Magazine October 2011

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

INSIGHT The Journal of the American Chamber of Commerce in Shanghai October 2011

CORPORATE HEADQUARTERS

INSIGHT October 2011

The Journal of the American Chamber of Commerce in Shanghai

amcham shanghai President

Brenda Foster Directors Business Development & Marketing

Karen Yuen

F eat u res

12 One Steak Fits All

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FOOD TALK

By Bryan Virasami

Morton’s the Steakhouse CFO tells Insight about plans to expand in China and why they never compromise on the size of steaks.

Committees

Siobhan M. Das insight editor-in-chief/ Communications & Publications

David Basmajian Events

Jessica Wu Finance & Administration

Helen Ren

20 Waiter, Waiter!

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SERVICE INDUSTRY

By Julie Levin

Element Fresh owner Scott Minoie talks about his successful American-style restaurant and the challenges of training staff to meet Western standards.

Membership & CVP

Linda X. Wang

INSIGHT managing editor

Bryan Virasami Senior Associate Editor

Esther Young

Associate Editor

24 Passion, Respect and Heartbreak

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CHALLENGES

By Bob Benedetti

The Asia-Pacific business director at SSOE Group shares eight things all expat managers in China must know.

Ryan Balis Design

Alicia Beebe Layout & Printing

Mickey Zhou Snap Printing, Inc.

INSIGHT Sponsorship

28 Fight for the Best Talent

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COVER STORY

By Bryan Virasami

Multinationals are finding that their top Chinese executives are jumping to Chinese enterprises for higher pay and importantsounding titles.

sponsorship manager

Sophia Chen

(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 nsight standards

5 News Briefs

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46 Manager’s Notebook

DOORKNOCK

Get the inside view and highlights from AmCham Shanghai’s 2011 trip to Washington, D.C.

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EXECUTIVE TRAVELER

Busy executives tell us about their favorite hotels and why they prefer to stay there when traveling for business.

I N S I D E A m C ham 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

34 Overview of Proposed Amendments 40 From the Chairman: The Path to Stronger Exports 41 Board of Governors Meeting 47 Inside AmCham Shanghai Events

CORPORATE HEADQUARTERS

Cover illustration by David Dieter

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

Editor's note

C

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

hallenges facing U.S. companies in China are many and increasing. That’s why a delegation of AmCham Shanghai members spent the week of September 19 in Washington, DC to talk with policy makers about market access issues in China, an increasingly competitive landscape and what the U.S. needs to do about it, and Capitol Hill’s overemphasis on China’s currency.

What is not so commonly known, however, is the number one operational challenge facing American companies in China – the lack of qualified talent and, increasingly, the challenges U.S. multinationals face in holding on to their top employees to compete in the China market.

This month, Insight presents 14 pages on the struggle to find the country’s best talent in China.

Managing editor Bryan Virasami reports on how the seismic shifts in the talent landscape will affect nearly every major U.S. company operating in China. Articles from two experienced managers, Rao Talasila from Cisco and Robert Benedetti of SSOE, as well as and an interview with the owner of the restaurant chain Element Fresh, provide a

front line perspective on this issue and highlight how successful companies are managing HR challenges.

Also in the October issue, Insight welcomes Shanghai’s new U.S. Consul General Robert Griffiths.

We sit down with the new CG and ask him about visa services, China FDI, speaking Chinese and other issues.

As AmCham Shanghai’s 2011 Annual General Meeting approaches, this month’s Insight includes a full review of proposed amendments to the AmCham Shanghai Constitution. The five proposed constitutional amendments modernize the language of AmCham Shanghai’s Constitution, incorporate accepted methods of Board governance and clarify that any voting member in good standing can hold office or serve on the Board of Governors. In short, these proposed amendments will help AmCham Shanghai better meet the needs of our dynamic and fast-growing membership. Should members approve the amendments, they will take effect on January 1, 2012.

Finally, we ask executives about their favorite business hotels. See what they say on page 50.

imaginechina

News

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CHINA BUSINESS

China to import more pork The China Animal Agriculture Association projects that China will import a record 1 million tons of pork and pork offal in 2011, as the country attempts to address growing food inflation and meet stronger demand for the staple protein. Already, China’s pork imports over the first five months of 2011 are up 43% to about 400,000 tons. U.S. farmers are helping to supply China’s increasing need for pork with U.S. pork exports increasing five-fold over the first seven months of 2011 compared to a year ago to 91,000 tons, according to the U.S. Department of Agriculture (USDA). The U.S. was China’s secondlargest pork supplier in 2010 behind only Denmark. China became a net pork importer in 2007.

Top 500 companies The China Enterprise Confederation and the China Enterprise Directors Association released the 2011 list of China’s top 500 companies, the 10th such list. China Petrochemical Corp. (Sinopec Group) achieved the top slot with revenue of nearly RMB2 trillion (US$308 billion). China National Petroleum Corp., State Grid Corp., Industrial and Commercial Bank of China (ICBC) and China Mobile Ltd. rounded out the top five. Companies must earn at least RMB14.2 billion to be included on the list. The combined revenue of China’s top 500 companies amounted to more than RMB36.3 trillion in 2010, up 32% yearon-year. Combined profits and assets also increased to a total of RMB2.1 trillion and RMB108.1 trillion, respectively.

RMB2 trillion green investment China will invest RMB2 trillion (US$313

Longer visa-free layovers sought Shanghai Tourism Administration officials are applying to the central government to approve longer visa-free layovers in Shanghai for international passengers. Currently, travelers from more than 40 countries are allowed to land at both of Shanghai’s airports and stay in Shanghai without a Chinese visa for up to 48 hours before exiting China. Other large Chinese cities permit only a 24-hour layover without a visa. In an effort to boost tourism, Shanghai officials are looking to increase not only the duration of the visa-free stay but to extend the policy to neighboring cities in the Yangtze River Delta.

Details have not been released on how long such travelers may be permitted in Shanghai or the participating countries. billion) in low-carbon development “from 10 perspectives” as part of the 12th FiveYear Plan (FYP, Xie Zhenhua, vice minister of China’s National Development and Reform Commission (NDRC), is quoted by official media as saying at the Second China International Eco-City Forum in Tianjin.

To encourage low-carbon development,

China plans to establish 100 demonstration bases for resource use and launch lowcarbon pilots in five provinces and eight cities. By the end of 2015, China aims to cut 16% off the nation’s energy intensity – a measure of consumption per unit of GDP – from 2010 levels. China decreased its energy intensity by 19% over the previous

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FYP period ending in 2010.

CORPORATE NEWS

Caterpillar to add new China facility Caterpillar, Inc. announced it will build a new China facility that will include a proving ground for Asia-Pacific products and a plant for producing its new model of large wheel loader, as the Peoria, IL.-based industrial machine maker looks to build on its already large presence in China. The new facility, whose investment size was not disclosed, will be located in the Xitong Technical Industrial Park in Tongzhou, Jiangsu province. Already, Caterpillar operates 16 factories and three centers each for research and development (R&D), as well as for logistics and parts. In August, Caterpillar announced it would open another new China factory also in Jiangsu province to manufacture undercarriage components and track assemblies for Caterpillar hydraulic excavators.

Boeing signs 10-year Chinese airliner parts deal Arriving in China for the 14th Beijing Aviation Expo., officials with Boeing Co. signed a decade-long contract extension with a Shanghai subsidiary of the Commercial Aircraft Corp. of China, or Comac, to produce horizontal stabilizers used in Boeing 737 aircrafts. The deal is Chicago, IL-based Boeing’s largest with a Chinese contractor and is estimated to be worth more than US$100 million. Both companies have not released a monetary value for the contract, as well as refused to disclose the number of stabilizers Boeing will supply. Boeing’s goal is to sell China 2,500 jets over the next 20 years, or at least 50% of China’s expected number of aircraft orders over that period.

Dell, Baidu partner on mobile devices U.S. computer maker Dell, Inc. and Chinese search engine leader Baidu, Inc. are teaming up to develop smartphones

and tablet computers for the China market.

The partnership is expected to help Dell improve its tablet and mobile-product businesses with a well-known Chinese brand and compete against Apple, Inc. and Lenovo Group Ltd. The new products, which could be released as early as November 2011, will run on Baidu’s operating system called Yi. Dell’s products are sold at 10,000 retail outlets in China, helping the company increase its China sales 22% in the first quarter of 2011. China is the world’s largest market for personal computers and boasts 900 million mobile phone subscribers.

Google launches Chinese deal service Google announced the launch of a Chinese group-buying service called Google Shihui (“timely benefit” in Chinese) available on Google.cn. The new service, which Google is experimenting with, lets users find group discounts offered by website and by product type, such as food, hotels, entertainment and beauty products. The Mountain View, CA-based company faces intense competition in China, with more than 4,000 other discount-oriented sites in operation. Separately, China’s Ministry of Industry and Information Technology (MIIT) approved Google’s Internet license to operate in China. Google’s share of the China search market has slid to 19% in the second quarter of 2011, down from 36% in the fourth quarter of 2009.

MACROECONOMICS

FDI picks up 11% Foreign direct investment (FDI) into China accelerated 11% from the same month a year ago to US$8.4 billion, up from July’s US$8.3 billion recorded. For the year, China has attracted US$17.6 billion in FDI, an 18% increase year-on-year. The government has given the green light to about 18,000 foreigninvested companies to set up in China in 2011, up 8%. Foreign companies continue to expand in China, which recorded a robust 9.5% GDP rate in the second quarter of 2011. Companies are increasingly turning to investing in China’s growing services

sector and in lower-cost Chinese cities away from the more expensive coastal areas. The U.N. Conference on Trade and Development says China will remain the most attractive destination for FDI over the next two years.

Services growth slows A measure of China’s services sector growth decreased to its lowest mark in six years on a moderating Chinese economy and slower new business growth as costs increase and government tightening measures take effect.

The HSBC Business Activity Index shows a drop for the third consecutive month to 50.6 in August, down from 53.5 in July and the lowest mark since the tracking index began in November 2005. A reading above 50 signals an expansion of the services sector, while a reading less than 50 suggests contraction. Despite slower services growth, HSBC notes in its release that business confidence in the sector increased to its highest mark in four months thanks to “expectations of new product launches and success of commercial activities.”

Inflation growth moderates to 6.2% National Bureau of Statistics (NBS) data show China’s Consumer Price Index (CPI), a major gauge of inflation, eased slightly to 6.2% in August, down from a 37-month high of 6.5% recorded in July. Food prices, which make up about a third of the CPI, increased 13.4% in August year-on-year, while diesel and gas prices shot up 14.9%.

The country’s CPI reading has exceeded the government’s 4% inflationary target for 2011 in each of the first eight months of the year, averaging 5.6% on the year.

Meanwhile, China’s Producer Price Index (PPI), a measure of inflation at the wholesale level, edged down to 7.3% in August, down from 7.5% in July.

China to account for 50% of Asia’s rich by 2015 China is projected to account for half of Asia’s millionaires by 2015 thanks to a fast-

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growing economy and appreciation of the yuan, according to the Asia Wealth Report

by Julius Baer Group Ltd. and CLSA Asia Pacific Markets. By that time, there will be 1.4 million Chinese millionaires, or about half of the 2.8 million high net worth individuals across Asia. Affluent Chinese also are projected to hold a combined US$8.8 trillion of the US$15.8 trillion in wealth held by Asia’s millionaires. “In terms of the overall amounts of wealth that will increase, it’s very much a China story,” says Stefan Hofer, emerging market equity strategist at Julius Baer.

The ranks of China’s newly minted millionaires increased 12% to 534,500 in 2010, according to a separate report released in June 2011 by Capgemini SA and Merrill Lynch Global Wealth Management. China ranks fourth behind the U.S., Japan and Germany by number of millionaires.

U.S.-CHINA

U.S. a leading destination for Chinese investment China’s foreign direct investment (FDI) into the U.S. increased nearly 53% from 2005 to 2010, reaching more than US$6 billion last year and making China the fastestgrowing source of foreign investment in the U.S., according to the U.S. Department of Commerce. When looked at against China’s Ministry of Commerce (MOFCOM) data, nearly 9% of the US$68.8 billion in total outbound Chinese investment went to the U.S. in 2010. By number of individual investments, the U.S. is the No. 1 overseas investment destination for Chinese companies. The 16 U.S. investments made last year account for nearly 30% of Chinese companies’ overall overseas investments.

DreamWorks eyes China DreamWorks Animation SKG, Inc. is eying a Shanghai-based venture to build an animation studio in Shanghai and make films exclusively for the lucrative Chinese film market. A minority partnership with a Chinese filmmaker would permit the Los Angeles, CA-based film studio to bypass Chinese rules that limit the screening of 20

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imported films per year – a quota struck down last March by the World Trade Organization (WTO). Separately, DreamWorks made a deal with Chinese online video site Youku. com in August to stream its films online, beginning with the hit “Kung Fu Panda” movies. “Kung Fu Panda 2” became the largest-grossing animated film in China this past summer when it took in RMB597 million (US$93 million).

Illinois attracts Chinese wind farm builder Xinjiang Goldwind Science and Technology Co., China’s second-largest wind turbine manufacturer, says it will build a US$200 million wind farm in Illinois, as the company looks to continue to expand its technology and supply chain internationally. The farm is to be located in Lee County, IL on what will become the Shady Oaks wind farm project.

Goldwind is expected to begin construction this fall, and when complete the farm will generate 109.5 megawatts of power. Goldwind is aiming for 30% of the company’s profit to come from overseas by 2015.

Food safety gets lift from IBM IBM is working on software that would allow consumers and companies to analyze the safety of food – a trouble spot in China with food contamination incidents appearing with alarming frequency. Consumers scan the bar code of products on a hand-held device to receive a reliability score. The rating is based on a number of factors, including safety record, supplier history and recent recall information. For companies, the software scours the food-processing chain, using risk models to help companies narrow down the source of contamination.

The idea is a tainted product could be located before ending up on store shelves. IBM has not determined a launch date for selling the Food Safety Simulator software.

GOVERNMENT & POLICY

Social insurance kicks in Oct. 15 Foreign nationals working in China, as well as their employers, will be required

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to participate in China’s social insurance scheme starting October 15, according to a new measure issued by China’s Ministry of Human Resources and Social Security.

The measure requires contributions to cover pensions, medical insurance, unemployment insurance, occupational injury insurance and maternity insurance.

In Shanghai, where the municipal government is drafting regulations, the maximum contribution will be RMB15,430 (US$2,400) for employees and RMB51,900 (US$8,100) for employers. Please visit the AmCham Shanghai website (http://www. amcham-shanghai.org) for summary documents on the new measure.

China implements M&A rules China’s Ministry of Commerce (MOFCOM) formalized rules governing security reviews of mergers and acquisitions (M&As) of Chinese enterprises by foreign companies.

The rules, which came into effect September 1, set out that a security review will be conducted on any foreign interest sought in ultra-sensitive Chinese enterprises, such as military and defense-oriented enterprises and those located near military facilities.

Transactions that also will trigger a review involve a foreign controlling interest of Chinese companies in sensitive sectors like agriculture, energy and resources, infrastructure, transportation, technology and major equipment manufacturing.

The rules forbid foreign enterprises from circumventing the security review process through arrangements such as variable interest entities (VIEs), escrowed shares, entrustment, phased-in investment, leasing, loans and off-shore transactions.

PBoC tightens deposit rules The People’s Bank of China (PBoC) issued new rules that expand the types of deposits that banks must keep in reserve to “margin deposits,” which are collateral for certain credit-oriented products. The rules gradually started to go into effect in September, locking up an estimated RMB900 billion (US$140 billion) from the banking system that otherwise would

have been lent through February 2012.

The move is designed to rein in off-balance sheet lending, likely impacting smaller Chinese banks that rely on such products to increase their deposits. China has raised the country’s reserve requirement ratio nine times since the second half of 2010, most recently in June 2011 to a record 21.5% for large banks.

SHANGHAI BUSINESS

China to establish technology trade center in Shanghai China’s Ministry of Commerce (MOFCOM) will establish a technology import and export promotion center in Shanghai by the end of 2011, announced Commerce Minister Chen Deming in Shanghai at the 2011 Work Meeting on Cooperation between the Ministry of Commerce and Shanghai Municipality. The aim of the center is to boost China’s services trade, especially technology, which is a key sector that China wants to develop as part of the country’s 12th Five-Year Plan (FYP) to

rebalance the economy to a consumptiondriven model. The promotion center also will provide services in support of technology cooperation and transfer between China and the world, including information sharing, policy updates, talent training and exchanges, pilot projects and research.

Industry and Information Technology (MIIT) issued a special Growth Plan for SMEs, the first at the national government level, calling for an average of 8% growth in the number of Chinese SMEs over the 12th Five-Year Plan (FYP) period ending in 2015.

RMB3 billion to SMEs

Shanghai plans record-breaking expo center

The Shanghai Municipal Government established three credit and investment funds worth RMB1 billion each to help small- and medium-sized businesses (SMEs) gain access to credit amid increasing domestic costs – both material and labor – and a tight central government monetary policy. One fund will be used to provide loan guarantees to help SMEs gain credit and grow their business. The second fund will help cover underperforming loans that banks make to SMEs. Finally, the city will use the third fund to make direct investments in appealing startups.

In Guangzhou, China’s Ministry of

Shanghai is planning to build an exhibition center on an immense scale, according to Sha Hailin, deputy secretary general of the Shanghai Municipal Government. The government says the first phase of funding has been secured for the RMB23 billion (US$3.6 billion) project to be located in Shanghai’s Hongqiao Central Business District. The expo center will cover an area of 257 acres and will feature a main exhibition hall, auxiliary facilities and 100,000 square meters (1.1 million square feet) of grounds.

When complete, government officials say it is likely to become the world’s largest exhibition center.

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CHINA & THE WORLD

SOUTH AMERICA ASIA-PACIFIC

TAIWAN: Cross-strait banking rules relaxed Taiwanese banks operating in China will be given greater flexibility to expand under regulations approved by Taiwan’s Financial Supervisory Commission (FSC). The new rules permit Taiwanese banks to open a subsidiary in China without first opening two branches, as well as to own stakes in more than one Chinese bank. Taiwanese banks in China will be allowed to increase their risk exposure in China up to 100% their net worth. FSC also will lift the restriction that China-based Taiwanese banks lend solely to other Taiwanese or foreign businesses, opening their lending business to Chinese individuals or institutions. Finally, the cap on individual Chinese deposits will be roughly doubled to more than US$100,000.

MIDDLE EAST

ASIA-PACIFIC EUROPE

RWANDA: China to build TVET school Officials from the state-owned China Railway Engineering Co. and Rwanda’s Workforce Development Authority (WDA) agreed on a contract for China to build a modern Technical and Vocational Education Training (TVET) school in Rwanda. China is funding the project, which will cost US$11 million. The 93,000 square foot facility will be built in Barizo village, Musanze District in northern Rwanda on a space of nearly 12 acres. When complete, training courses will be offered in construction and building services, agriculture and food processing and information and communications technology (ICT) and electronics. The school is expected to open by January 2013 and have up to 1,100 students.

AFRICA

BELARUS: China, Belarus sign commercial satellite contract China and Belarus signed an agreement in which China will build and launch a communications satellite for the former Soviet republic. The deal is China’s first with a European client and seventh such contract for an in-orbit satellite. China Great Wall Industry Corp., a subsidiary of China Aerospace Science and Technology Corp., will launch a Dongfanghong-4 satellite from the Xichang Satellite Launch Center in Sichuan province in 2014. When operational, Belarus will use its first satellite for improving radio, television, Internet and other telecommunications services. China will also help with satellite operations for the first time by building a ground control station for Belarus in the capital city, Minsk.

MIDDLE EAST EUROPE

NORTH AMERICA MIDDLE EAST

AFRICA

UNITED ARAB EMIRATES: ICBC looks to expand Middle East presence State-owned Industrial and Commercial Bank of China (ICBC) is planning to increase its operations, especially commercial banking, in the Middle East, including in the United Arab Emirates (UAE), Qatar, Saudi Arabia and Kuwait. In the UAE, ICBC looks to build on its existing branches in Abu Dhabi and Doha and subsidiary in Dubai. A larger presence in the UAE will help ICBC expand yuan-denominated service offerings to the 200,000 Chinese living in the UAE. It also will help the bank capitalize on expanding yuan-denominated trade between China and the Middle East, as China continues to internationalize its currency.

NORTH AMERICA

SOUTH AMERICA MIDDLE EAST AFRICA

CANADA: Scotiabank acquires stake in Chinese bank The Bank of Nova Scotia, or Scotiabank, announced it is acquiring a 20% stake in China’s Bank of Guangzhou for US$727 million in an effort to increase its international presence. The deal is expected to help Toronto-based Scotiabank, which is Canada’s third-largest bank as measured by assets, add consumer banking branches and deposits in China, as well as develop its wealth management business.

The transaction is expected to be finalized this December and requires regulatory approval. Scotiabank has operations in 50 countries, including in China for nearly three decades. Separately, the bank is awaiting regulatory approval to add another three percent to its 15% stake in China’s Bank of Xi’an.

AFRICA ASIA-PACIFIC NORTH AMERICA

SOUTH AMERICA

BRAZIL: Chinese group buys stake in Brazilian miner A group of five Chinese state-owned companies led by Citic Group is buying a 15% stake in Brazil’s Companhia Brasileira de Metalurgia e Mineraçào, or CBMM, for US$1.95 billion. The deal illustrates China’s growing interest in acquiring niobium, which is used in steelmaking and has applications in automobile making and large infrastructure construction. Already, China is the world’s largest importer of niobium. CBMM is the world’s largest niobium producer, controlling 80% of the world’s supply. The other four Chinese buyers are Taiyuan Iron & Steel Group Co., Baosteel Group Corp., Anshan Iron & Steel Group Corp. and Shougang Corp.

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M ov e r s a n d S h a k e r s c o m p i l e d by j oy c e b i a n

Movers and Shakers highlights senior management level changes at multinational companies and major personnel changes within the Chinese government

DISNEY COMPANY The Walt Disney Co. in China appointed Michael Wellman managing director for Disney Stores China on September 6. The company plans to offer Disney-branded merchandise in stores.The first shops in China are expected to open next year. Wellman brings over 25 years experience managing consumer and retail brands, including New Balance, Adidas and Nike in Greater China.

Michael Wellman

PRIVATE SECTOR WELLS FARGO Wells Fargo & Co. appointed John Rindlaub regional president of Asia-Pacific, effective December 1, 2011. Rindlaub, a 10-year veteran of the company, served as executive vice president and regional manager for Wells Fargo’s Commercial Banking business in the Pacific northwest region of the U.S. Rindlaub, to be based in Hong Kong, succeeds Cliff Lawrence, who will be assuming the role as regional vice president for Wells Fargo’s Global Banking Business in Dallas.

John Rindlaub

IMAX IMAX Corp. named Jiande Chen to be CEO of IMAX China on September 8 as growth in the Asian market continues for the big screen exhibitor. Chen moves from Sony Pictures Entertainment in Beijing, where he was responsible for distribution, production and licensing over the last 12 years.

GENERAL MOTORS Wulin Gaowa recently became the first design director of GM China Advanced Studio. The GM China Advanced Studio will support GM’s global design organization, with a focus on meeting domestic needs. Gaowa started her automotive design career with DaimlerChrysler in 2000. She held important design positions at the Mecedes-Benz Technology Center in Sindelfingen, Germany and Italdesign Giugiaro in Moncarieri, Italy.

Wulin Gaowa

EATON Eaton Corp. named Erbing Shang country president for China in early September. Shang brings experience in general management in automotive, power generation and composite industries.

GOVERNMENT imaginechina

STATE COUNCIL Chen Wenhui was appointed vice chairman of the China Insurance Regulatory Commission. Previously, Chen was assistant chairman of the commission.

Chen Fanglei was appointed chairman of the Board of Supervisors for Key State-Owned Financial Organizations.

Chen was previously director of the General Office of the China Insurance Regulatory Commission.

Chen Wenhui

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

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FOO D TALK B y B rya n V i r a s a m i

One Steak Fits All

A Morton’s steak

Morton’s the Steakhouse CFO talks about portion sizes, expansion plans and the company’s success in Shanghai

Robert DiNella

S

ince it opened the first restaurant in Chicago 33 years ago, Morton’s The Steakhouse has changed its business strategy to expand around the world.

But wherever they open a new location, they never change the appetizer menu or tweak their ingredients – and this is true even in a rapidly changing city like Shanghai where the juicy T-bone is just about the same as the T-bone in Chicago.

Morton’s, which brags about having the “best steak anywhere,” arrived in Shanghai in October 2010, the only one on the Chinese mainland, and already there’s talk that it will become the largest of the company’s 77 steakhouses around the world.

Robert DiNella, the chief financial officer of Morton’ s of Chicago, sat down with Insight during a recent visit to China to scout for new locations.

Morton’s foray into Asia started in Singapore in 1998 followed by Hong Kong and then Macau.

DiNella said the company, which owns and manages all of its locations, prides itself on being consistent at every restaurant.

If it’s a gauge of the company’s priorities, Morton’s recently relocated David Martin, their regional director to Asia, from Honolulu to Hong Kong. Additionally, John Dowd, the vice president of construction, moved from his base in North

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Carolina to Shanghai. He is now fully focused on Asia, the company said.

DiNella says the company hopes to open at least one to three new restaurants a year in Asia in coming years.

During an interview at the restaurant located inside IFC Pudong (International Financial Center), DiNella answered questions about bringing steaks to more Chinese cities, the recently announced plan to put the company up for sale and why sticky rice isn’t on the menu in Shanghai or elsewhere.

Here are excerpts from the interview.

Insight: What brings you to China and can you share any news about expanding here?

Ronald DiNella: “My trip this week to five cities in eight days is to look for future development. We would like to open two Morton’s Steakhouses next year in Asia. We also get inquiries from around the world primarily from the Middle East, and some from Europe and also Central and South America.

We have made a conscious decision to focus on Asia.

“The economy in the U.S. is growing much slower than in Asia and while Morton’s is positioned at the high end, we cater to the business traveler and expense account diners. There is more competition in the U.S. Guests in the states aren’t buying the wines they used to buy, maybe they’re monitoring their expense accounts more. But in Asia, I think it’s just wide open. I believe by the third anniversary of this Shanghai restaurant it will become the highest volume restaurant in the company. That’s exciting!”

Insight: What’s changed that made you more willing to expand in China today?

RD: “That’s a great question. It’s funny how rapidly things are changing. One year ago, our partners, who live in Beijing said we’re not sure Beijing is ready yet for a western restaurant of Morton’s caliber. Today they believe we’re ready and we may be able to open two in Beijing now. We asked him four months ago about the viability of expanding into Shenzhen and Guangzhou, and he said ‘no,’ but now thinks the timing could work.

“The pace is so rapid here, the pace of acceptance, the pace of growth, the pace of luxury. You just look at these malls that they’re constructing, it’s amazing!”

Insight: There’s been some reports saying Morton’s is for sale? What can you tell us?

RD: “Our board has decided to explore strategic alternatives which could possibly include a sale, and we’re in the process of doing that right now.

They believe that the growth and the opportunities are good for the shareholders.”

Insight: Are you concerned that the new owner may not feel the same about preserving the consistency and quality Morton’s advertises?

RD: “If anyone were to buy the company and invest that kind of money into it, I think it would be a mistake for them to compromise 33 years of quality and reputation. The Ritz-Carlton got sold to Marriott and I think they still operate at a consistent level.”

Insight: The founder of Morton’s said the company should never change its menu to adapt to local taste buds. Have you made any exceptions at the Shanghai restaurant?

RD: “Aside from sticky white rice in Honolulu, I can’t think of one. It’s important that Morton’s menu is consistent. It’s the same menu around the world.”

Insight: What’s the feedback from Chinese guests about the food?

RD: “I think they come in here and they want an American steakhouse experience. We are not compromising on the menu.”

Insight: Do Chinese people appreciate the large portions?

RD: “I haven’t heard any negative feedback about the portion size. I think they’re smitten with the idea of an American steakhouse. We do everything larger than life. For example, our baked potato is a half kilo.”

“

I think they come in here and they want an American steakhouse experience.

We are not compromising on the menu.”

Insight: Why are steaks so expensive at Morton’s and other steakhouses in China?

RD: “Our steaks are not only imported from Australia, but you start off with a more expensive product. If you serve a high quality product, which is what we offer our guests, it’s expensive.”

Insight: Let’s talk about beef. Where do you get your steaks from?

RD: “Here in Shanghai, we bring in the beef from Australia. We serve USDA, grain fed, mid-western beef as well as some Australian beef in our other Asian locations.”

Insight: If you could import U.S. beef to serve in China, would you?

RD: “That is absolutely our preference. We believe it’s the best in the world. I’m sure people in Australia believe they have the best.”

Executive Chef Corwin Leong, left, in Morton’s Shanghai kitchen

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i n t e rv i e w B y B rya n V i r a s a m i

A Talk with the New U.S. Consul General Robert Griffiths sits down with Insight to talk about visa issues, trade and speaking Chinese

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obert Griffiths, who returned to Shanghai in August as U.S. consul general, recently sat down with Insight to talk about trade, visa policies and other issues at the U.S. Consulate office on Huaihai Middle Road.

The career member of the U.S. Foreign Service, who speaks Chinese and Thai, has also previously served in Bogota, Colombia, Taiwan, and Thailand, as well as Beijing. Before taking up his new post in Shanghai, Griffiths taught at the Foreign Service Institute in Arlington, Virginia. He has also worked for the Bureau of Economic Affairs, served as deputy director for Mainland Southeast Asia in the Bureau of East Asian and Pacific Affairs and worked for a year in the U.S. Senate.

Here’s the interview with the consul general.

U.S. Consul General Robert Griffiths

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Q: How has Shanghai changed since the last time you served here?

Griffiths: “More business, more profits, and more concerns about the future than before. Things have

expanded tremendously in every way. Businesses are doing better than they did before, but they’re more worried about what lies ahead.”

Q: What are companies worried about?

Griffiths: “They’re concerned about Chinese industrial policies, the effort to create national champions and whether or not there’s going to be an open playing field for foreign companies to participate or whether they will be limited in where they can operate, whether they will have access to full market opportunities. I think that’s the concern. I don’t think we’ve seen it happen quite yet but it’s prudent to be worried about it.”

Q: What are some of your biggest challenges and goals for the next year?

Griffiths: “Most people know the U.S. Consulate for visa services, and that’s something that we’re continuing to work very hard on. We also are going to – and this is very much in line with Ambassador Locke’s priorities – find ways to make sure that the trade and investment relationship between China and the United States continues to grow and is healthy, particularly in ways that will provide jobs in the United States. That’s a high priority for us and fortunately, when you really look at it, almost all the trade and investment relations that go on between us and China eventually, if not immediately, result in more and better jobs in the United States. So I think that the success of U.S. companies here goes hand in hand with trying to get Chinese companies to invest more in the United States. Establishing a playing field that is level and fair for everybody, with opportunities equal on both sides, is good for everybody.”

“I also have a goal of getting out and talking to audiences in China, particularly the youth, and making sure that they understand that the United States is truly a partner of China. As for our economic well being, we’re joined at the hip.

What’s going to be good for China is going to be good for the United States and vice versa. It’s important for the Chinese to understand that we’re a partner – while we’re going to be competing in the marketplace, we really are in this together and success depends on both of us being successful.”

Q: Speaking of visa issues, many companies say it’s a challenge for them to get U.S. visas for their Chinese staff, and others have said the wait time is too long. What can you do to address these issues?

Griffiths: “Let me outline four things that we’re doing. But first I should point out that a lot of the problems, the real challenges that we have in providing the kind of visa services that we really would like to, are matters of law and policy, and those issues have to be resolved in Washington and Beijing. But given that, what is it that we can do in Shanghai? I think the consular section here has done a very good job, creatively finding ways that we can provide the best service we can given the constraints that we’re under. The first thing is the corporate program that we have with AmCham Shanghai, which I think works pretty well. We also have programs to help local officials and students, to try to give them as much of an advantage as we can, to provide them the service that they need. The second thing is that we’ve done everything we can in the consular section to beef up our personnel resources. The officers currently working there are running double shifts so that we can extend the length of the day in which we provide visa services.

This past summer we brought in a number of people from the United States to supplement the staff here – experienced consular officers who are retired. We’re also creating new consular officer positions. In addition to that, China is part of a brand new program in the State Department to hire professional visa adjudicators who will do nothing but work on visas for their time on contract with the State Department. We will be getting some of those positions next spring.

“So we’re doing everything we can to beef up the personnel and the resources that we devote to visa issuance to try and keep the waiting times down as much as possible. The third thing is to expand our facilities. Even with more people, we’re constrained in the space that we have to operate. We’re working with the Westgate Mall now to double the size of the visa section so that we can have more windows and provide better service. Hopefully we will be able to get that underway in the next few months.

The last thing is a longer term solution. We are

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[T]he success of U.S. companies here goes hand in hand with trying to get Chinese companies to invest more in the United States.”

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As for our economic well being, we’re joined at the hip…”

working with the Shanghai government and Ministry of Foreign Affairs to find land where we can build new purpose-built facilities where we can move our consular operations and truly be able to provide the world class visa services that we want to provide in this world class city.”

Q: China foreign direct investment (FDI) in the U.S. is becoming a bigger issue. What is the Consulate doing to support that trend?

Griffiths: “We’re not only looking at Shanghai but we’re expanding our reach to Jiangsu and Zhejiang provinces and Anhui province as well to try and bring a greater awareness of the opportunities to invest in America. The Consulate has in recent years established an outreach unit where we have officers dedicated full time to developing our relationships in Zhejiang, Jiangsu and Anhui provinces so that we can be more aware of the opportunities there and make the business people in those provinces aware of U.S. opportunities. I know the Foreign Commercial Service is also putting greater focus on those areas as well, so we’re anxious to do everything that we can to promote investments in the United States from China. We are rolling out the Select USA program whereby people can go online and find out what all the incentives are in the different states and find the place that will be most attractive for what they would like to do. So yes that’s very high on our priority list.”

Q: American companies are expanding to neighboring cities and AmCham Shanghai is seeing a growing number of companies expanding there. Is the Consulate doing anything to help in these areas?

Griffiths: “I looked at some statistics recently that showed there are almost 7,000 U.S. and affiliated companies in Shanghai and almost the same number in the neighboring provinces, so that certainly tells us all that we need to not just focus on Shanghai, but also on Hangzhou, Nanjing, Suzhou and Ningbo and a number of other cities. They’re probably less aware of U.S. trade and investment opportunities than are people in Shanghai and eager to find out more, so I think that the value added in going out to those second tier cities is

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quite high. As I mentioned we’ve got a dedicated unit that is working on these relationships. One of the first things that I did when I arrived here was to travel to Hangzhou and Nanjing and meet the leadership out there. We’re very eager, together with the Foreign Commercial Service, to work with AmCham Shanghai and develop more opportunities in the provinces.”

Q: You often hear about what American companies want the U.S. government to do. What can U.S. companies do to help improve the overall U.S.China relationship?

Griffiths: “I am very proud of American business.

Everywhere I’ve been in East Asia – and that’s where I’ve spent most of my career – U.S. companies are where people want to work, and I think the examples that we’ve set are really very powerful.

Generally speaking, not in every case, but generally speaking, American companies model the best labor practices, the best environmental practices, the best safety records. They provide growth and management opportunities for their staff. This sort of example really demonstrates to China how the presence of American businesses here is a good thing for China. That is a great asset to our overall bilateral relationship and the kind of thing I would like to promote across the board so that the Chinese know we really are their friends, we’re their partners. We see great opportunities in China and hope that the Chinese will seek out great opportunities to invest in the U.S. and continue to interact with American businesses.”

Q: You mentioned at an AmCham Shanghai event that you first studied Chinese as a student. Do you find it’s helpful in your work here?

Griffiths: “I absolutely do. I try very hard to speak Chinese as well as I can because communication is such an important thing. But I think simply the fact that I have tried to learn Chinese and do try to use it communicates something very important.

The Chinese know that we have respect for their culture, that we see it as something valuable, and we want to pay the price so that we can be a part of it. I think that image goes a long way in helping people understand our true intentions.”

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doorknock B y Dav i d B a s m a j i a n

AmCham Shanghai’s Doorknock delegates visit the U.S. Department of Commerce in Washington

The Road to Washington

AmCham Shanghai delegates discuss trade with U.S. lawmakers

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ith a currency bill that attempts to force China to revalue the yuan and rare agreement among American politicians that the U.S. must “get tough” on China as a backdrop, a delegation of AmCham Shanghai members offered U.S. lawmakers its perspective on what should be done to enhance U.S. competitiveness in China during the 2011 Doorknock held in Washington, D.C. from September 19–23.

AmCham Shanghai’s message to Capitol Hill was clear. With U.S. exports to China likely to pass US$100 billion in 2011 and Chinese foreign direct investment (FDI) in the U.S. on the rise – China is critical to creating jobs in the U.S. and will be increasingly important to economic growth in the years to come.

With their focus on jobs, delegates received a generally favorable response. Rep. Charles Boustany (R-LA) and Rep. Rick Larsen (D-WA) who cochair the 60-member House U.S.-China Working Group can be counted among the most supportive.

The two members and their staff agreed with delegates on the importance of the U.S.-China trade relationship and offered ideas on how the working group and AmCham Shanghai could cooperate moving forward. Familiarity with China made for a productive meeting with Atman Trivedi and Heidi Crebo-Rediker, professional staff of the Senate

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Foreign Relations Committee, chaired by Senator John Kerry. The two staffers asked what Kerry could do moving forward to support U.S. companies in China. Business friendly freshman Rep. Tim Griffin (R-AR), who sits on the House Foreign Affairs Committee, not only agreed but strongly encouraged AmCham Shanghai to extend its communications to American voters themselves who he believes don’t understand the connection between job growth and trade with China.

However, despite the generally supportive response, delegates also received a strong dose of the political reality facing members of Congress, particularly those running for re-election in 2012.

Confronted with a laundry list of complaints about America’s unbalanced commercial relationship with China and a so far jobless recovery enraging American voters, Congress is looking to do something to create jobs. Most believed that, despite its clear shortcomings and questionable impact on U.S. job creation, approval of a currency bill in the Senate was likely.

A greater partnership Meetings with administration officials took a different tone. Delegates met with Assistant Secretary for East Asian and Political Affairs Kurt Campbell who responded enthusiastically to AmCham Shanghai’s plans to connect American SMEs with business

opportunities in China. In particular, AmCham Shanghai’s objective of enhancing the presence of the U.S. Export-Import Bank in China was a hit with Campbell who asked the Chamber to follow up with him directly on the specifics. Meetings with Deborah McCarthy, principal deputy assistant secretary, Bureau of Economic, Energy and Business Affairs (EEB) at the State Department and Reta Jo Lewis, special representative for global intergovernmental affairs, highlighted how AmCham Shanghai could be a vital source of information and guidance for U.S. states and cities. As evidenced by the long list of U.S. governors hosted by AmCham Shanghai this fall, McCarthy and Lewis both agreed that American politicians at the state and city level fully appreciate how increasing exports to China means jobs at home and asked that the Chamber work with the State Department to support this activity.

Acting Secretary of Commerce Rebecca Blank and Claire Reade, assistant U.S. trade representative for China Affairs heard specific challenges faced

by American companies in China as outlined in the Chamber’s Viewpoint publications which delegates carried to D.C. The Viewpoints highlighted opportunities and obstacles in key markets in China, including financial services, medical devices, pharmaceuticals, healthcare services and agriculture.

Commerce officials were understandably pleased to hear that delegates had been pushing for congressional support of agencies and programs like the U.S. Foreign Commercial Service to drive American exports. Perhaps more surprising, this message also resonated with many freshmen congressmen, who as business leaders, were open to the opportunities that China presents for businesses in their districts.

As with any Doorknock, success will hinge on the follow-up and AmCham Shanghai has a long to-do list. Insight will cover events, programs and partnerships as they develop. The Chamber welcomes member input as AmCham Shanghai continues to engage U.S. officials on issues critical to the U.S. business community in China.

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Despite its clear shortcomings and questionable impact on U.S. job creation, approval of a currency bill in the Senate was likely.”

s p e c i a l HR r e p o rt

By Julie Levin

Waiter, Waiter!

A waitress carries a salad at the Shanghai Centre Element Fresh

Element Fresh owner Scott Minoie talks about teaching new waiters how to take orders with a smile and dealing with picky customers

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t’s eight in the morning and inside the Dongping Road Learning Center, 14 Element Fresh workers gaze attentively up at the projector and show no sign of losing focus – even though most got out of bed at 6 a.m. to take the subway from the suburbs.

These “students,” who are 18 to 23 years old, are soaking in every syllable uttered by their teacher Daisy Zhang who is speaking at the front of the room.

Daisy Zhang, the class instructor and restaurant chain’s training manager, asks for volunteers to tell the class about today’s objective, and 10 hands go up.

“Tell, show, do, review!” the students call out in unison, reciting a familiar mantra used to explain the restaurant’s training method. Zhang does most of the talking and her most common phrase is “dui bu dui” (is this correct?), and encourages students to disagree.

The class on this day is “Effective English Communication,” one in a series of courses known

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collectively as Train the Trainer, or TTT. In the program, available to anyone nominated by his or her Element Fresh supervisor, employees are taught how to train incoming new members.

They learn everything from providing effective coaching and feedback to insuring the quality of fresh brewed coffee.

They learn to approach customers with a smile and to introduce themselves by name – a lesson that might seem obvious to some but strange to the chain’s Chinese workers. Owner and founder Scott Minoie says that teaching new employees about good service is one of his top challenges since many are not accustomed to such informal interaction between customer and server.

Minoie, a Boston native who first came to China in the late 1980s as an English teacher now operates 11 Element Fresh restaurants – nine in Shanghai and two in Beijing – and plans to launch several more by year’s end. He has 1,000 employees, the majority of whom are Chinese, while the majority of his customers are Americans.

During an interview over coffee at the chain’s flagship store in Shanghai Centre, Minoie, in a long sleeve button down and jeans, talks candidly about some of the challenges he has faced when it comes to finding and retaining staff, and his ambitious plans for the future.

In 2002, when Minoie opened the first Element Fresh restaurant he made it a priority to hire and train local staff to keep labor costs down and to support the personal advancement of his employees.

“Foreigners come in with higher salary expectations and I can’t justify paying someone more money to do the same job I can find someone here to do just as well,” Minoie says, adding that Element Fresh’s turnover rate is relatively low and that when employees do leave, it is mostly to move back home to their friends and family. This is one of Element Fresh’s biggest challenges in retaining staff because the majority come from provinces outside of Shanghai.

Service with a smile Despite these drawbacks, Element Fresh has a higher retention rate than many of its competitors and even has around a dozen employees who have been with the company since its inception, he says.

Minoie attributes employee satisfaction to the restaurant’s American style of management, which he says, like the service, is meant to be more open and relaxed.

He encourages the servers and hostesses to smile and be themselves and to return the hugs they sometimes get from loyal customers. He also offers incentives, including impromptu “lucky draws” and occasional staff trips to places like Hainan and Chengdu. An intranet site similar to Facebook allows employees to chat with one another and upload photos and is being expanded to make training opportunities available online.

Zhang, who joined the restaurant nine years ago as a juice bar staffer, now spearheads the training programs. She says that promoting internally helps to keep the service standards and company culture consistent even as Element Fresh expands with

new branches. In Beijing, a team of three former TTT students now manages the training for all new employees in the restaurants there on every aspect of good service including lessons on how not to hold a glass at the top and never to touch the ends of a straw.

Zhang says each employee must sit through new staff orientation and get training before serving their first Cowboy Breakfast or smoothie.

One discernable difference between Element Fresh and other restaurants in China is the amount of pressure new employees must handle. At Element Fresh, waiters and waitresses spend at least a full day shadowing their designated trainer before coming face-to-face with customers.

“They can sit in class and seem to understand everything perfectly,” Zhang says. “But the question I get asked all the time is ‘How do I actually apply this?’” Zhang says that what she initially found most challenging, and a concern her students share, is the ability to comfortably communicate in English.

“Coming from Anhui, a lot of them are shocked at first. They come in and have never talked to a foreigner,” Minoie says. Many are painfully shy in their first few days on the job and look down at their own clasped hands while taking an order.

However, the relatively high cost of living in

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Minoie attributes employee satisfaction to the restaurant’s American style of management, which he says, like the service, is meant to be more open and relaxed.”

A waitress serves coffee to diners

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Shanghai or Beijing has presented a challenge in hiring, especially because Chinese businesses in second- and third-tier cities often provide housing for their employees, something Minoie has experimented with, but ultimately rejected.

“We tried to do temporary housing but everything gets broken, and I’m not talking toilets being clogged – I’m talking the porcelain bowl being shattered,” he says. Instead, Element Fresh offers better pay to supplement the price of rent but realizes life can be tough for such workers.

“We’ve done a lot of research in the past year into how our staff lives, and we’ve found that many share small apartments an hour or more from where they work.”

In addition to good training, the company emphasizes the importance of a support system for workers. During peak business hours, for example, three managers are always on duty to control the traffic in and out of the kitchen, check on the quality and appearance of the food and ensure that diners are satisfied. When a problem pops up, such as a mixed up order or lukewarm coffee, servers are trained to defer to supervisors. He says that most of the problems can be traced back to the kitchen and less so with the serving staff.

‘Hey you!’

While most customers are patient with serving staff, Minoie and Zhang say that some patrons cross the line. Some have yelled “hey you!” at their waiter or waitress from across the restaurant. He advises his employees not to take this kind of attitude personally, pointing out that “you have no idea what happened to a person before they came into the restaurant. Maybe his dog died, or he got fired, or his wife just left.”

He also tries to look for workers who exhibit an ability to cope well with touchy diners. Qualities include outgoing personalities, and this may trump previous restaurant experience.

In fact, Minoie says that it can be especially challenging to retrain someone who has worked in a Chinese restaurant or hotel, where they were just “another cog in the wheel.” Those businesses tend to stress formality, which contradict Element Fresh’s values. He says that one of his favorite questions to ask in an interview is, “What makes you happy?” No matter the response, if he sees a smile, he knows he’s found a match.

Scott R. Minoie

Julie Levin is a freelance writer based in Shanghai.

Workers at a training session

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s p e c i a l HR r e p o rt B y R o b e rt B e n e d e t t i

Passion, Respect and Heartbreak

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Robert Benedetti

Eight things every expat manager in China should know

t’s difficult to have a discussion with an expat manager in China today without the conversation drifting to talk about acute “HR resource” challenges.

Lately, expat colleagues I talk to feel the “HR problem” has eclipsed everything else related to China business.

In the more than five years I have lived in China, I have hired dozens, fired a few and accepted far too many resignations in my role as business director for different foreign firms in China, most lately at my Ohio-based employer SSOE Group. Even my background in Los Angeles, as principal of a marketing consulting firm, did not prepare me for today’s human resources challenges I and others face in China.

While the number of workers I manage directly is relatively small, China HR challenges seem to transcend size. I have too many AmCham Shanghai colleagues who, lately, whether they are small businesses or large multinationals, express the same frustrations about recruiting and retaining their best workers.

It is important to note that I am not an HR specialist at SSOE Group, nor is it my area of professional expertise. But after more than five years in Shanghai and being involved in, or impacted by, dozens of hires, fires or resignations, I do feel like I have experience and perspectives which could be of value to Insight readers who are new to this uniquely Chinese phenomenon.

I realize the opinions expressed below may appear unorthodox to some, but operating as a foreign manager in China, and within an extremely dynamic city like Shanghai, I believe unorthodox thinking is required to be successful.

Here are eight things that all expat managers in Shanghai should know or think about every day.

1. Focus interviews on passion: Experienced

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expat managers in China might think I’m crazy suggesting that the Chinese demonstrate passion in the workforce, but they do. Chinese passion may seem different from the passion we understand as foreigners, but it’s there. Managers need to understand the kind of passion their organization needs, and recruit for it. To manage long-term growth goals, passion within an organization needs to be balanced for stability and growth. You need talented people who will stay with your organization simply for who you are, and others for the ways you can help them to develop their careers. For instance, I am aware of staff who stays with a company simply because of the country the company represents, and others who stay to tap into the rich experience that a progressive foreign firm can best offer. To promote a stable and growing enterprise, recruit for both “passion sets.”

2. Challenge HR staff: Most Chinese HR staff work hard and mean well, but a culture which, for generations, has been dependent on networking inside families or communities to find work or workers means modern HR tools, techniques and processes are required to find and retain staff today.

Helping your HR staff to be creative in their approach to recruitment, including some of the suggestions I mention in this column, means thinking creatively yourself and nurturing your staff to understand your thinking and implement it.

3. Connect with your people: As you’re able to connect at a personal level with the staff you are sure you want to keep, you improve your chances to keep them. Chinese staff, even managers, value a good working relationship with a foreigner manager, especially if that manager demonstrates respect and is genuine in interaction, counsel and encouragement. Be the kind of manager you ought to be to keep the people you ought to keep.

4. Make recruitment “ownership” part of your department managers’ bonus metrics: Expat managers who simply rely on HR teams for recruitment success will suffer in the long run. Recruitment is hard work, and without

everyone pulling together, it just gets harder. I recently spoke with an expat country manager who advised me about his frustration at getting his Chinese department-level staff to believe that talent recruitment was their responsibility too. As many of us foreign managers working here have come to understand, Chinese organizational structure is very hierarchical, and if staff recruitment is not perceived by a manager to be a primary job function then too many Chinese managers will believe recruitment is someone else’s responsibility. In China, every management-level job description needs to contain clear language with achievable targets and incentives to ensure all managers understand and perform their recruitment duties.

5. It’s a 24/7 game: If, operationally, you’re not set up for “continuous recruitment” you’ll be disappointed in your recruitment success. Plan and prepare for more resignations than you anticipate.

With a 24/7 recruitment program in place, you’ll be able to weather the inevitable heartbreaking defections.

6. Stay in touch: Chances are the people you didn’t like to see leave probably also hated to leave, too. While it’s hard to stay in touch with everyone in today’s fast-paced business world, doing so could help you over time. There’s a reason you hated to see certain people leave. It’s likely you felt they could contribute to your success and the success of your enterprise. Manage those relationships. Remember, staying in touch means a lot to Chinese staff and managers. In doing so, you are not only staying in touch with people you respect, and who could come back to work with you, but you are also giving yourself your best chance of tapping into their referral network of family, friends and colleagues.

7. Staff turnover and retention solutions are all local: It’s easy for busy expat managers who feel they are stymied by inexperienced Chinese HR staff to look to consultants or a home office for support. While consultants or home office executives are likely to have a broad industry understanding of your talent needs, your needs are likely to be so

targeted (e.g., needing specific technical skill sets) that consultants may be as stymied to provide the targeted and timely support you need. Salaries, and annual salary increases, is one of the primary areas where expat managers in China find themselves in conflict with salary/increase policies and procedures with consultants or a U.S.-based headquarter.

The legitimate requirements of U.S.-based HR executives and administrators need to be balanced with local market demands and requirements. While win-win solutions will not likely be easy to come by, incentive-based solutions developed in concert with key local managers and staff, may provide you with the best alternative to meet the needs of your employees and adhere to your company’s important global compensation policies and requirements.

You’ll need to be flexible in working with homeoffice HR executives, but when you find a way to develop a win-win compensation strategy you’ll be on your way to tackling one of your biggest HR challenges in China.

8. Contain your frustration over resignations: In my five years in Shanghai, I’ve become numb to the myriad of expected, unexpected and often dubious reasons given by Chinese staff who leave. No matter how illegitimate you believe the reason might be for someone to leave your organization, remember your frustration over the perplexing labor market in China may be blindsiding your memory that it’s every worker’s right to leave. As you (regrettably) become more experienced with disappointing, even illogical, resignations in China, become even more determined to implement some of the suggestions above, or your own ideas, to ease your frustration and get a better handle on your talent management.

Robert Benedetti is business director, Asia-Pacific, for SSOE Group, a global planning, engineering and construction management firm, and service provider to the most brand recognizable global multinationals. Robert has held various posts within AmCham Shanghai, most recently chair of the Design and Construction committee.

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Managers need to understand the kind of passion their organization needs, and recruit for it…”

SPECIAL HR REPORT B y R a o Ta l a s i l a

Confucius Says

Be a Good Boss

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Rao Talasila

A seasoned manager at a multinational draws inspiration from China’s most famous philosopher

ou are an insensitive boss! You didn’t take care of us,” says Julie Wang, softly but firmly. That was quite a strong and unexpected remark to face as a new manager trying to settle in China about eight years ago. The reason: I neglected to make dinner arrangements for my staff traveling with me on a business trip. In other words, I didn’t demonstrate benevolence (仁).

I made some tactical changes to my management style after that incident. But that episode lingered on my mind for many years even as revolutionary changes swept through the Chinese economy and society. It took me another six years of working and living in China, after that incident, to start a quest to fathom the philosophical & cultural underpinnings of China.

That quest led me to pursue a limited study on Confucius who lived 2,500 years ago and who apparently had an overwhelming influence over the conduct of Chinese citizens. I did my share of research on Confucius and soon realized there is an overwhelming amount of literature written on his thoughts. I also realized Confucius actually wrote little or none most of it is written down by his disciples and scholars over generations as interpretations on Confucian thought.

Some of the interpretations were probably distorted and promoted by the ruling classes so as to suit their interests and give an aura of legitimacy for their rule. Perhaps a lot of things have also been written about Confucius that he never really said or meant. But whatever be the interpretations, the core virtue that is universally agreed upon is benevolence (ren, 仁), often seen as the inward expression of Confucian ideals. In other words, when dealing with other people your actions should exhibit benevolence.

The other virtues often associated with benevolence

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are propriety/etiquette (li, 礼 ), righteousness (yi,义), wisdom (zhi, 智), and integrity (xin, 信). In layman terms, it boils down to “Do not do to others what you do not want done to yourself.”

Confucius was a scholar and also served as a justice minister in the Kingdom of Lu. He certainly had “hands-on” experience managing people and had a lot to say regarding proper governance. His philosophy is based on a close understanding of human nature and the correct conduct expected of people. Confucian philosophy primarily focused on four types of relationships (such as ruler & subject, father & son, husband & wife and elder brother & younger brother) where proper etiquette needs to be demonstrated. These virtues are supposed to be reciprocated bi-directionally between two parties.

But somehow after hundreds of years of evolution in interpretation of Confucian thought, it became a one-way affair of strict obedience of one person to another person. I am sure that if Confucius was alive today he will be aghast at how his thoughts have been distorted into a one-sided affair.

Govern by virtue With regards to effective governance/management, his exhortation is unmistakably clear: govern by virtue. An administrator who governs by virtue wins the hearts of the people and in turn wins their respect and backing.

Can Confucian principles be applied in managing people outside of China and people of non-Chinese origin? Is this “Govern by Virtue” too idealistic? My conclusion after having the opportunity to live and work in India, the U.S. and China is a resounding “Yes.” At the core of the matter, I feel “Govern by Virtue” is a universal concept. If Confucius was alive today, he would be seen as an enlightened

Trust and dedication Coming back to the practicality of managing organizations, what is the code of conduct that allow us come close to realizing the holy grail of “govern by virtue”? But first it we need understanding of employees’ needs and expectations. One of the special characteristics in Chinese management is that the manager needs to respect and take care of the

welfare and look after the career of his/her employees.

Many a times it translates into a mentor-mentee relationship with subordinates. Through such a long-term relationship, the manager wins the respect of his employees and they in turn reciprocate with trust and dedication. This fulfills the bi-directional responsibilities laid out by Confucius thought.

It is said that Chinese employees work for their managers and to a lesser extent to their companies.

Remembering this fact is key in building a healthy and sustaining relationship with employees. Allowing for sweeping generalizations, Chinese employees are competitive, emotional and have immense cultural and national pride. These characteristics translate to employees expecting fairness, career growth and being part of a benevolent organization.

Below are some of the typical examples that managers might encounter in China: Fairness: An employee walks into the manager’s office and is very upset that he is compensated less than his peers.

Employment security: An employee is not happy the company is not profitable and is concerned about his job security.

Family situation: An employee hailing from a different city recently had a new addition to the family and is not happy about the commute time and being away from family during such an important period.

Methods to resolve the issues above might vary from company to company. But applying benevolence, integrity and wisdom while addressing those issues will help build the trust with employees that is required to sustain the enterprise.

In conclusion, good management practices that adhere to the spirit of benevolence (仁) have universal applicability in any enterprise that is looking for sustainability. Confucius, if alive today, would have no problem identifying his core principles in action in many of the finalists in the “best employer” list irrespective of their national origin.

Rao Talasila is a senior manager at Cisco Systems in Shanghai. The views expressed in this article do not necessarily represent those of Cisco Systems.

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Can Confucius principles be applied in managing people outside of China and people of nonChinese origin?”

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management scholar even by today’s standards. He was certainly way ahead of his time, especially during the turbulent times 2,500 years back.

Many of us who have been through the corporate trenches might scoff at this idealistic sounding “Govern by Virtue” concept. But look deeper and this concept is not too idealistic and is at the core of any sustainable management practice in any organization. Good companies demonstrate “govern by virtue” by treating their employees, customers, shareholders and society with respect, trust, integrity and compassion. Especially when faced with a crisis, “govern by virtue” becomes the compass to guide managers and employees to overcome difficult situations.

Yes, there are many examples in which organizations are run without the spirit of “govern by virtue,” but they are doomed to wither away in the long run. Many management veterans would certainly agree that there are shades of grey in the “govern by virtue” implementations. There are instances which managers or organizations might temporarily stray from the equilibrium for tactical or other reasons, but sustainability of management practices requires coming back to the “govern by virtue” equilibrium point.

How many organizations in China are run through the guiding principles of Confucius?

Perhaps very few, say some Confucius experts. The reason: Chinese enterprises have adapted some of the misguided short term thinking from Western management practices. But one thing is clear, they reminded me: the world’s most admired companies with high corporate reputations have some healthy mix of Confucian virtues (such as benevolence, propriety, right conduct, wisdom and integrity) that are embedded in their DNA.

CORPORATE ETAROPROC HEADQUARTERS SRETRAUQDAEH

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c ov e r s to ry

B y B rya n V i r a s a m i

Who’s Got Talent?

As Chinese enterprises poach managers and executives from multinationals, what can U.S. firms do to remain competitive and fight this new trend?

A

fter he graduated from the Beijing Institute of Technology in 2006, Jeff Wenyu landed his first job at Motorola where he worked with a team charged with developing software for mobile platforms. But after two years, he decided to give up his title as senior software engineer and leave his team for a more important title and the promise of short-term financial success.

In essence, he left the global giant for an unknown Chinese startup where he walked in the door as a “team leader” tasked with building new mobile phone software just as the iPhone and other related mobile platforms were making headlines. The new job, however, fizzled out 12 months later, and he jumped to a more established Chinese firm that has a partnership with a mobile phone giant.

Wenyu, 29, said while he was torn about leaving Motorola in 2008, the recession left him uncertain about the financial condition of the U.S. telecommunications giant.

“My current company gives me overall responsibility for a product. Before that, I was focused on software developing,” Wenyu says. “Now I can be in charge of product design, development and operations.”

Wenyu’s experience may be symbolic of the new class of high-skilled Chinese workers – well educated and ambitious with multinational exposure – and yet willing to give up jobs at prestigious multinational companies for fast-growing privately owned Chinese firms that are offering higher salaries and better titles with more power.

While switching jobs is nothing new, the dynamic growth situation in China that’s drawn thousands of U.S.

CORPORATE

HEADQUARTERS companies here is also producing countless rapidly growing and financially successful private Chinese firms not to mention giants such as China Mobile, Baidu, Taobao and several mega banks.

According to a recent report from the talent management firm Korn/Ferry, hiring managers and other recruitment experts, the new economic climate is a major reason why MNCs are competing with each other and with Chinese firms for senior marketing managers, chief financial officers and other senior skilled workers.

Steve Fisher, a senior client partner at Korn/Ferry in Shanghai and co-author of the report, said that private Chinese firms are not only doing well, they’re expanding rapidly and want to, in some cases, recruit top talent that could take them global.

“There is a need for new types of talent as companies enter additional sectors, as they make acquisitions and as they go global,” Fisher says. “It really is a phenomenon related to growth in China and the globalization of some Chinese companies.”

The report, “Rise of the Chinese enterprise as employer of choice,” is based on a survey of 40 senior executives in China.

The report amplified the suspected trend that MNCs were finding it harder to keep talented people and confirmed the suspicion that Chinese firms were offering them generous compensation packages, faster promotions and sexier titles that carry power-sharing options, to jump ship.

“Gone are the days when receiving a good salary from a prestigious MNC was enough to motivate an ambitious manager in China,” the report says. “Today, smaller local

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enterprises with the potential for rapid growth in scale and profitability in China’s vast market offer not only a generous salary but also the financial gain from a possible IPO – a gain that has made many people millionaires overnight.”

In fact, the report said 45 percent of senior managers polled reported they would consider joining a pre-IPO Chinese enterprise while 30 percent would opt for a publicly-traded Chinese enterprise.

“There are more opportunities for them in Chinese-owned companies, there is also better pay and there tends to be better benefits,” says Wendy Radtke, Goodyear’s Asia-Pacific vice president of human resources. “The things that keep them at the multinationals are the type of boss that they work for. It’s a split between the opportunity and

the development that Chinese companies give them and multinationals can’t at that period of time.”

While the Korn/Ferry report focused on MNCs, competition for the best talent doesn’t appear to be confined just to large foreign companies.

Anecdotal evidence suggests the problem affects various industries and even non-governmental organizations and medium sized businesses.

Angela Fan, human resources director at the Ritz-Carlton in Pudong, says competition for top service staff – from waiters to managers – is fierce especially in Shanghai where the hotel industry is rapidly evolving. But it’s not just other high-end hotels eyeing workers who generally speak good English and have training in five-star service.

She says luxury brands and retailers recruit staff at high-end hotels with international standards.“These companies also need talent so they approach hotel industry talent and they will offer higher pay and benefits,” Fan says.

Rebecca Liu, the general manager at Cook (China) Medical in Shanghai, says it’s always a challenge to recruit industry professionals, including Chinese medical doctors, but they also compete against other Western medical companies in China for talent.

“We’re always fighting for people,” says Liu. “And in China this could be one of the biggest challenges

Hiring with Disney Magic

C

onstruction of the US$4.3 billion Shanghai Disney Resort began earlier this year in Pudong.

The resort, similar to other Disney parks, will have two hotels, a lake, a shopping and dining area, a castle and other popular attractions. In order to have a successful opening, the resort is wasting no time in recruiting.

Greg Morley, vice president of human resources at Shanghai Disney Resort, responded to a few questions about this process.

Insight: What can you tell me about what the company is doing to gain an edge in this “war for talent?”

Morley: “Competitive salaries, interesting titles and challenging assignments are a standard to be competitive. Our strategy is to deliver once-in-a-lifetime challenging work experiences, unique Disney training and career development that allow our team members to explore and grow. We are also focused on developing a workplace that is just plain enjoyable and fun for our team to come to every day. While we do not have our theme park, hotels or entertainment venues yet, our workplace is going to be a place where magic happens for our cast every day. That is what we are all about.”

Insight: How would you characterize the pool of candidates that you’ve encountered?

Morley: “Passionate, dedicated and proud of being part of the team. We realize with every new joiner, we are building something very special in Shanghai. Our team is aware that they are developing Shanghai’s Disney Resort and they take great pride in their work. They look forward to the day when they can take their loved ones to the resort and show off their great work.”

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for us, to get good people. How to attract people, how to keep people and how to develop people is always a big task for us.”

Korn/Ferry says consultants first heard about the growing loss of senior Chinese staff at MNCs starting in 2009, a year after the recession led to speculation that American MNCs were especially vulnerable all while China’s GDP rose about nine percent.

Chinese hiring managers and sought-after workers like Wenyu have also noticed the changing landscape.

“Compared with 2006, nowadays Chinese companies are more powerful and aggressive. There are more opportunities in Chinese companies because they are growing so fast,” Wenyu says.

“More and more Chinese companies can give good salaries, more chances for a promotion and even the possibility of an IPO.” Although the economic crisis seemed to have largely skipped China, MNCs in China froze hiring, reduced their operating budgets and took other steps to save money – and their Chinese staff noticed it. It also hasn’t helped that it’s becoming expensive to do business in China.

“Top level managers are priced for the world market. China is not a low cost environment at the managerial level,” Fisher says. “It’s a matter of supply and demand.”

Storming the beach Larry Wang, the CEO and founder of Wang & Li Asia Resources, a recruitment firm, says that three years ago, just 10 percent of his clients were Chinese companies while 90 percent were well-known multinational corporations. Today, more than 30 percent – or a third of his clients – are Chinese firms, including some of the largest Internet-based companies that are aggressively recruiting top level MNC-trained managers.

He used a war analogy to explain that more people are willing to follow in the footsteps of others and some are following former colleagues and bosses who once worked at MNCs. “Ten years ago, it’s like being the first on the beach on a landing and you’re storming that beach,” Wang says. “Now, there’s a beachhead of people who have already landed.”

Workers admire companies that have the potential to grow and aggressive growth is the top motivational factor. “The multinationals may be growing in the low double digits but a lot of these Chinese companies are growing 30, 40, 50 percent, so it’s kind of an accelerated environment,” Wang says.

In addition, there’s a major difference in the way MNCs operate, according to the Korn/Ferry report, that is starting to look old-fashioned to

“

Ten years ago, it’s like being the first on the beach on a landing and you’re storming that beach. Now, there’s a beachhead of people who have already landed.”

– Larry Wang, CEO, Wang & Li Asia Resources

Insight: Are there any special skills or experience that Disney seeks in new hires that is especially challenging to find in China?

Morley: “It will always be a challenge to find the right candidate for every role especially those roles requiring unique rare talent. We are currently focused on recruiting a team of design, development and construction talent to build the resort. While we have been fortunate to find the talent we need to build a high quality product, we will also seek to bring on board emerging talent and develop those talents to be fully capable to delivering the high quality and standards our guests will expect.

Insight: What are some of the expectations that candidates have that’s unique?

Morley: “The Shanghai Disney Resort project will require our cast to be imaginative, dedicated, team-oriented and high quality focused.

We are also looking for candidates who have passion in their work and for this project. They are proud of what they are doing and the impact the project will have in Shanghai.”

Insight: Do you feel there’s a shortage of good managerial candidates available to pick from?

Morley: “The talent issues in China are well-documented. Our focus is recruiting and developing leaders with passion for their profession and for the Shanghai Disney Resort project. As we continue to grow our team, we are looking to identify not only the managers of the present but those emerging talent who will take leadership roles as the organization grows and matures. We are very excited about the team we have so far.”

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We’re always fighting for people.”

– Rebecca Liu, General Manager, Cook (China) Medical

some Chinese workers. While large corporations adhere to a set of strict standards that translates into slow “controlled career growth,” it is too slow for many.

Wang says he often talks with CEOs who say privately that it’s their number one challenge. “I think it is a mission critical challenge for every multinational company operating in China,” Wang says.

Local private firms are not willing to spend years nurturing young workers and see them grow into managers, says an international beverage executive, according to the Korn/Ferry report.

An article in the Harvard Business Review that used data from the Corporate Executive Board based in the U.S., analyzed the trend and suggested how MNCs can repair the damage. The article said that in 2007, according to a survey, 41 percent of high-skilled Chinese professionals indicated they preferred to work for a Western MNC and 9 percent picked a domestic company. By the middle of 2010, 44 percent said they preferred MNCs while the preference for Chinese companies jumped to 28 percent. The 32-point gap in 2007 fell to 16 points.

The article also pointed out that MNCs are losing another edge: Chinese employees used to prefer multinationals since they were able to travel and get experience and training abroad. Now they see that their best chance for growth and longterm career satisfaction is in China.

Wang says some candidates he spoke to have complained about the quality of life at MNCs. They are no longer eager to do late-night conference

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calls with company officials in the company’s U.S. headquarters, conduct PowerPoint presentations to convince them about a proposal and explain what it’s like on the ground in China.

“They spend 30 percent of their time trying to convince the home office or presenting things to people that are assigned to be the key decision makers but they’re sitting overseas,” Wang says.

“If you have the choice of walking upstairs rather than waiting for somebody in a different time zone in a different part of the world, what would you do?”

Radtke of Goodyear echoed some of Wang’s sentiments about the new battle for talent. While the international tire company has not experienced loss of staff, she says it’s been taking longer to fill jobs and find qualified people. But she doesn’t see the sky falling just yet.

“It is a healthy competition because it’s forcing companies to really evaluate how they attract and motivate and develop certain people. It’s not just about money and it’s about developing capacity and it’s about creating opportunities and learning how to manage in a very different culture,” Radtke says. “Even some of the multinationals have to learn how to manage in different cultures. The new generation has different expectations.”

Another issue is the younger generation has grown to value a life out of the office – to socialize and meet their friends for dinner at a reasonable hour.

“They don’t want their entire careers at one company, they don’t want to spend all their time working, they want to spend time with their friends and to be socially networked, pay is important but they don’t want to work as hard other generations,” Radtke says. “People think they can do well and still spend time with friends and family.”

Like others in her field, Radtke says companies must prioritize people before products, and that individualized attention and training will prove effective. This and other techniques have helped Goodyear avoid the loss of senior managers to other companies.

The situation doesn’t appear to be hopeless for U.S. companies and the fact that a growing number of companies are relocating their headquarters or research and development centers to China is a positive sign, industry experts say.

The Shanghai Disney Resort, for example, is currently going up in the outskirts of the city and it’s fair to say most of the resort’s staff will come from China. But even though the resort is years

Larry Wang

Steve Fisher

from opening day, the company isn’t waiting to recruit workers – or cast members – as employees are called there.

Asked about some of the issues and challenges the Shanghai resort has been facing with recruitment, Greg Morley, vice president for human resource at Shanghai Disney Resort, says in a written response that the company has had some luck so far.

“It will always be a challenge to find the right candidate for every role especially those roles requiring unique rare talent. We are currently focused on recruiting a team of design, development and construction talent to build the resort,” Morley says. “While we have been fortunate to find the talent we need to build a high quality product, we will also seek to bring on board emerging talent and develop those talents to be fully capable of delivering the high quality and standards our guests will expect.”

Survival techniques What does the future hold for MNCs? What kind of changes do they need to implement to gain an edge? Is it just unique to China?

There’s no reason to worry or panic. In fact, there’s hope for MNCs caught up in the so-called war for talent, but are they doing what they need to win?

The Korn/Ferry survey and report estimates that about 15 to 20 percent of the people who left an MNC for a private Chinese firm left the new job before 18 months. A group of executives that participated in a poll said many of these workers packed up and returned to an MNC. Recruiting experts said MNCs enjoy an advantage for several reasons, although some may have to work harder to beat the competition.

Wendy Radtke

MNCs tend to have set rules about strong quality control and a set path to climb up the corporate ladder. Chinese enterprises, according to Korn/ Ferry, may provide more flexibility and a faster career path but decisions are often ad hoc and transparency may be questionable.

The report called on MNCs to “sharpen” their recruiting and retention policies. Specifically, some senior managers says that it’s wise to give more responsibility to staff who go beyond their job description – or make them learn by doing. Of course, raising salaries and getting creative with compensation packages are other ways to keep talent, along with more flexible titles.

Korn/Ferry also suggested that MNCs clearly demonstrate their commitment to China and longterm strategy to grow here and develop mangers to take the company forward. As economic conditions improve, MNCs may find that the hiring situation is much smoother.

Radtke of Goodyear says some firms may need to shake up their thinking.

“If the people looking to hire are expats, they need to reshape their thinking and they cannot think in a U.S. or European mindset. They really need to get into the China mindset and figure out how to best attract, retain and develop their talent because what they did in their home country will not work here,” Radtke says.

Some companies are raising salaries, offering interesting titles and providing better training.

And people like Wenyu expect it.

“Higher salary and promotion look like basic factors for job-hopping, but the major factor that attracts me to a new company is the business model and its blueprint. Personally, I like taking adventure and trying something new,” Wenyu says.

Bryan Virasami is managing editor of Insight.

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“

They don’t want their entire careers at one company, they don’t want to spend all their time working…”

– Wendy Radtke, Goodyear Asia Pacific

c h a m b e r u p dat e Election Results Announced at

AMCHAM SHANGHAI ANNUAL GENERAL MEETING November 17, 2011

Complete Details of the Proposed Constitutional Amendments AmCham Shanghai 2012 Chairman & Board of Governors Election and Proposed Amendments to the Constitution

BALLOT INFORMATION

Everything members need to know about the proposed changes to the AmCham Shanghai Constitution

O

Election Results Announced at

AMCHAM SHANGHAI ANNUAL GENERAL MEETING November 17, 2011

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n April 12, 2011 the AmCham Shanghai Board of Governors voted to submit to the Chamber’s membership for approval at its 2011 Annual General Meeting, amendment s to t he C onst itut ion of The American Chamber of Commerce in Shanghai. The proposed Constitutional amendments update and clarify the existing language of the Constitution and further ensure the transparent governance of the Chamber. If supported by twothirds of voting members, these amendments would take effect on January 1, 2012.

Absentee voting on the proposed amendments will begin on Monday, October 24, 2011 and close on Monday, November 14, 2011. The final chance to vote will be in person at the Annual General Meeting on Thursday, November 17, 2011.

To ensure that the membership is well informed of the proposed amendments, the AmCham Shanghai Board of Governors has requested that the proposed constitutional amendments be made easily available to the membership. The proposed amendments are provided below and can also be found at www.amcham-shanghai.org/constitution.

AmCham Shanghai’s C onstitution has not been significantly revised in 24 years. It is the strong belief of the Board of Governors that these proposed amendments will improve AmCham Shanghai’s operations and governance and help position the Chamber for exciting opportunities ahead.

PROPOSED AMENDMENT 1

Clarification of Membership categories and an update of proxy voting Rationale for Proposed Amendment:

In order to provide flexibility and allow for membership categories to be updated from time to time, it is recommended that specific membership categories be moved to the Chamber’s Bylaws and that the general membership categories of voting and non-voting be clarified in the Constitution.

In order to facilitate contemporar y voting procedures, proxy voting was further defined and absentee voting was added.

Article III, Membership Current Text Section A: Types of Membership 1. Corporate Membership Corporate Membership is defined herein to me an repres entatives of cor p orations, partnerships, sole proprietorships or other legal entities formed, founded or incorporated in the United States; or if formed, founded, or incorporated outside of the United States, having substantial investment or operational interest held

by United States legal entities or citizens. Further, the company must be established in or have a regional representative in China or have sufficient capital investment or operating interest as a business related interest in China, as determined by the Board of Governors. Each Corporate Membership includes the listing of one “principal” corporate employee. Additional employees may join the chamber, as associate members, provided they are affiliated with the same company as the ‘principal’ Corporate Member, for a reduced annual fee.

2. Individual Membership Any United States citizen resident in China who is engaged in business or a profession in China, but who cannot qualify for Corporate Membership, shall be eligible for Individual Membership, provided he or she is twenty one (21) years of age or over; the citizenship requirement with respect to an applicant for Individual Membership may be waived by the Board of Governors in its discretion. An Individual Member who subsequently qualifies for Corporate Membership may apply to upgrade the existing membership by submitting a revised application and paying the difference in fees.

3. Non-Resident Membership Any party who would otherwise qualify for Corporate or Individual Membership but for the fact that he or it is not resident in China, shall be eligible for Non-Resident Membership. NonResident Members shall be dues paying members of the Chamber.

4. Honorary Membership Honorar y Members shall be individuals elected by the Board of Governors. All Honorary Members shall be entitled to all of the privileges of Individual Memberships, except as hereinafter provided, and at the discretion of the Board shall be exempt from payment of entrance fees and membership dues. Honorary Members may include among others, such members of the local Shanghai business and professional community as the Board of Governors deems appropriate.

The American Consul General shall during his tour of duty in Shanghai be Honorary Chairman of the Chamber, and the Principal American Commercial Officer shall be an Honorar y Member of the Board of Governors (non-voting).

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“

Membership in the Chamber is open to a wide variety of individuals and entities who share the objectives of the Chamber.”

AmCham Shanghai 2012 Chairman & Board of Governors Election and Proposed Amendments to the Constitution

BALLOT INFORMATION

Election Results Announced at

AMCHAM SHANGHAI ANNUAL GENERAL MEETING November 17, 2011

5. Special Membership Individuals associated with non-profit, educational, governmental, charitable, cultural, fraternal or religious organizations in Shanghai whose activities are related to the objectives of the Chamber may be entitled to Special Membership.

Such members may include university educators, members of U.S. and non-U.S. Chambers of Commerce and similar organizations, members of U.S. and non-U.S. Consulate staff (other than the U.S. Consulate General and the U.S. Commercial Officer), and other individuals as the Board of Governors may deem appropriate. Members in this category at the discretion of the Board may be fully or partially exempt from payment of entrance fees and membership dues.

Section B: Determination of Membership 1 . T h e a c c e pt abi l it y of any appl i c ant t o membership or for change in classification of membership in the Chamber shall be determined by the Board of Governors.

2. Application for membership shall contain the name, address, and business activity or occupation of the candidate and shall be submitted to the Chamber office.

Section C: Voting Rights 1. Corporate Membership Corporate Memberships shall have full vot ing r ig hts to b e cast by t he Pr incip a l Corporate Member or his proxy at any General or Extraordinary Meeting of the Chamber. A maximum of two Associate Memberships, per Corporate Membership, shall also have voting rights at any General or Extraordinary Meeting of the Chamber.

2. Individual Membership An Individual Membership holding US Citizenship shall have full voting rights at any General or Extraordinary Meeting of the Chamber.

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3. Non-Resident Membership Non-Resident Memberships shall not have voting rights at any General or Extraordinary Meeting of the Chamber.

4. Honorary Membership Honorary Memberships shall not have voting rights.

5. Special Membership Special Memberships shall not have voting rights.

6. Proxy Any Corporate or Individual Member with voting rights may authorize any other member to vote on its or his behalf at any General or Extraordinary Meeting of the Chamber. Notice of such proxy authorization in writing must be received by the Chamber office in advance of the meeting at which such proxy is to be voted.

Section E: Resignation 1. In order to resign a membership, written notice must be given to the Secretary.

2. The Board of Governors shall record the resignation of any membership in the records of the Chamber.

Proposed Text Section A: Membership in the Chamber is open to a wide variety of individuals and entities who share the objectives of the Chamber. There are two categories of membership: voting and non-voting.

Section B: Voting Members Because of the importance of the right to vote, that right may only be granted by the Constitution. The current categories of voting members are: Corporate Members and Individual Members.

1. The term C or porate Memb er refers to corporations, partnerships, sole proprietorships or other legal entities formed, founded or incorporated in the United States; or if formed, fou nd e d, or i nc or p or ate d out s i d e of t he United States, having substantial investment or operational interest held by United States legal entities or citizens. Further, the company must be established in or have a regional representative in China or have sufficient capital investment or operating interest as a business related interest in China, as determined by the Board of Governors.

E ach C or p orate Memb er is entitled to designate three voting members: The Principal Corporate Member and two of its Associate Corporate Members.

2. The basic qualifications for an Individual Membership are: U.S. citizen, resident in China, and twenty-one years of age or over. The citizenship requirement may be waived by the Board of Governors in its discretion.

Each Individual Member is entitled to one vote.

Section C: Non-Voting Members There may be a wide variety of categories of Non-Voting Members. These categories are set forth in the Chamber’s By-Laws and may, from time to time, be amended by the Board of Governors.

Section D: Determination of Membership 1 . T h e a c c e pt abi l it y of any appl i c ant t o membership or for change in classification of membership in the Chamber shall be determined by the Board of Governors.

2. Applications for membership shall be submitted to the Chamber office together with all required documentation.

Section E: Membership Dues and Fees

“

set the amount of membership dues and fees.

Section F: Proxy and Absentee Voting 1. Proxy Voting Any eligible voting member may authorize any other member to vote on their behalf at any Annual General Meeting or Extraordinary General Meeting of the Chamber. Notice of such proxy authorization in writing must be received by the Chamber office in advance of the meeting at which such proxy is to be voted.

2. Absentee Voting Any eligible voting member may vote at any Annual General Meeting or Extraordinary General Meeting of the Chamber by absentee ballot, including online voting. The process for absentee voting shall be set forth in the Chamber’s Nominations and Election Process.

Section G: Resignation 1. In order to resign a membership, written notice must be given to the Chamber.

2. The Board of Governors shall record the resignation of any membership in the records of the Chamber.

PROPOSED AMENDMENT 2

Selection of the Board Vice Chairman Rationale for Proposed Amendment:

In the election of the Chairman the first runnerup may not want to serve as Vice Chairman.

Therefore, it is recommended that the Chair be able to choose the Vice Chairman in the same manner in which the Chairman chooses the other officers of the Board of Governors.

The Board of Governors has full discretion to

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Because of the importance of the right to vote, that right may only be granted by the Constitution.”

AmCham Shanghai 2012 Chairman & Board of Governors Election and Proposed Amendments to the Constitution

BALLOT INFORMATION

Article IV, Meetings of the Chamber, Section A.2.

Current Text

Election Results Announced at

AMCHAM SHANGHAI ANNUAL GENERAL MEETING November 17, 2011

2. The following business will be conducted at the Annual General Meeting. c. The election of the Chairman and Vice Chairman, by vote of those present and voting, including proxy votes and absentee votes. Votes shall be cast for the position of Chairman. The candidate who receives the highest number of votes for the Chairmanship shall become the Chairman and the candidate who receives the second highest number of votes for the Chairmanship shall become the Vice Chairman.

The Treasurer and Secretary shall be selected by the newly elected Chairman, after consultation with the Board of Governors, from among the newly elected members of the Board of Governors; such appointments shall be subject to an affirmative majority vote of the newly elected Board of Governors at its first meeting.

Proposed Text c. The election of the Chair by vote of those present and voting, including proxy votes and absentee votes. The Vice Chair, Treasurer and Secretary shall be selected by the newly elected Chair, after consultation with the Board of Governors, from among the newly elected members of the Board of Governors; such appointments shall be subject to an affirmative majority vote of the newly elected Board of Governors at its first meeting.

PROPOSED AMENDMENT 3

Clarification of “quorum” Rationale for Proposed Amendment:

Clarifies the definition of “quorum” for

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the Annual General Meeting (AGM) and an Extraordinary General Meeting. i.e. the 10% requirement for quorum includes all eligible voting members in attendance at the meeting plus all proxy and absentee votes cast by fax, on-line, mail, or any other method of voting approved by the Board of Governors.

Article IV, Section D: Quorum Current Text 1. The quorum for the Annual General Meeting and for an Extraordinary General Meeting shall be all the attending voting membership of the Chamber (not less than 10%) 2. In the event of there being no quorum present at any such meeting, the meeting shall be adjourned to the following week at a place, date and time to be appointed, and should the number then present, including proxy votes, be insufficient to form a quorum, those present shall be considered a quorum. For the purposes of this section, all proxy votes held by any person attending any meeting will be counted separately to determine whether a quorum exists.

Proposed Text 1. The quorum for the Annual General Meeting and for an Extraordinary General Meeting shall be 10% of the voting membership of the Chamber.

2. In the event of there being no quorum present at any such meeting, the meeting shall be adjourned and reconvened at a place, date and time to be appointed, and should the number then present, including proxy and absentee votes, be insufficient to form a quorum, those present shall be considered a quorum.

3. For the purposes of Article IV, each proxy and absentee vote cast will be counted separately and included in determining whether a quorum has been met.

PROPOSED AMENDMENT 4

Updating office holder requirements Rationale for Proposed Amendment:

To allow any voting member in good standing to hold office or serve on the Board of Governors whether they are a Corporate or Individual Member. Section A.2, however, continues to require that the Chairman and Vice Chairman be a principal Corporate Member.

Article V, Privilege to Hold Office Current text Any voting member or member resident in Shanghai and registered as an Associate Member under a Corporate Membership may hold elective office in the Chamber and serve on the Board of Governors.

Proposed Text Except as provided below in Section A.2, any voting member in good standing may hold elective office in the Chamber and serve on the Board of Governors.

PROPOSED AMENDMENT 5

Language update

Rationale for Proposed Amendment:

To u p d at e t e r m i n o l o g y a n d c l e a n u p the language of the AmCham Shanghai Constitution. For example, delete “telex” and add “teleconference” and “facsimile” when outlining how a Board member who is unable to attend a Board meeting may still participate. Delete “Chairman” and replace with “Chair”.

Technical Changes: • C h a n g e t h e t i t l e o f t h e d o c u m e nt t o “Constitution of the American Chamber of Commerce in Shanghai” • The Bylaws and Nominations and Elections Committee Process (NEC) documents are no longer attachments to the Constitution but separate documents so “Attachment I By-Laws of the Chamber” and “Attachment II Nominations and Election Process” has been deleted. The comment “By-Laws are as amended at the November 1, 2005 Board of Governors Meeting” was also deleted.

• Under Article V Privilege to Hold Office, S e c t i on A . O f f i c e r s 2 . “ a d e s i g n at e d representative” was changed to “the Principal Corporate Member” • Change “By-Laws” to “Bylaws” • Change “Chairman” to “Chair” and “Vice Chairman” to “Vice Chair” • Under Duties of Officers 3.a. change “all meetings” to “meetings” • Under Board of Governors 3. Vacancy of the Board of Governors c. delete “and Vice Chairman” and change “are” to “is”.

• Under Board Governors 4. Quorum paragraph one delete “to the following week” and add “reconvened”. Under paragraph two delete “telex” and add “teleconference” and “facsimile” • Article VIII, Dissolution, Section A, 1. Delete “for the time being resident in Shanghai” and add “an annual” before General Meeting; add” or Extraordinary General Meeting”; delete “postal, telex, telefaxmail” and add “absentee voting”.

• Under Article IX Bylaws capitalize the “c” on Constitution, delete the “s” on “Elections” and add an “r” to “Offices”.

• Un d e r A r t i c l e X A m e n d m e n t t o t h e Constitution delete “these rules” and add “this Constitution”; add “General Meeting” to “Annual”.

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“

The Vice Chair, Treasurer and Secretary shall be selected by the newly elected Chair, after consultation with the Board of Governors …”

inside amcham from the chairman

A Commitment to Export Growth

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s budget battles continue in our nation’s capital and Congress debates how best to stimulate the U.S. economy and create jobs, the U.S. should take a hard look at ways to enhance U.S. competitiveness in China. Despite all the challenges, China is vital to the global competitiveness of U.S. companies and their ability to create jobs for

American workers. In 2010, the U.S. exported US$93 billion worth of goods and services to China, supporting or creating 500,000 American jobs. U.S. exports to China have increased 460 percent since 2000, but our major competitors in China all hold a proportionally larger share of China’s import market. In fact, the U.S. ranked 12th in export performance in China among 21 countries and regions, according to U.S. Export Competitiveness in China, a new Viewpoint produced by AmCham Shanghai and PricewaterhouseCoopers.

Eric S. Musser Chairman of the Board of Governors

As President Obama calls for doubling U.S. exports, what can Congress do to drive export growth in support of this important goal? Fund federal agencies charged with expanding exports. The U.S. Foreign Commercial Service (FCS) is key to increasing the number of U.S. companies, especially small- and medium-sized companies (SMEs) that export to China.

Federal investment in the FCS historically provides among the best return on investment in the U.S. government. In 2008, for every dollar spent on the agency’s export promotion services, FCS returned US$420 in company-confirmed export successes. In 2010, FCS reported more than 1,000 confirmed export successes.

But office closings and hiring freezes over the past four years have left the FCS understaffed in China, and the lack of resources is beginning to take its toll. Today, there is a 35 percent vacancy rate of locally engaged staff in China, which is critical to supporting U.S. companies. Already, the ability of FCS staff in China to do vital market research for U.S. com¬panies is extremely limited.

Despite a growing interest from American companies seeking to access the China market, an overstretched FCS will soon have to start turning clients away.

The U.S. government should also support U.S. Department of Agriculture (USD) agencies and programs that help to grow agricultural exports, while advancing U.S. food standards and supporting engagement with Chinese officials. USDA’s Agricultural Trade Office (ATO) plays a key role in advocating for U.S. companies. In 2010, alfalfa exports jumped 221 percent to US$61 million in part because of efforts by ATO officers in Shanghai, Beijing and Guangzhou to address potential market access barriers and promote alfalfa as high quality fodder in Chinese dairy production. The USDA’s Market Access Program (MAP) is another winner.

This public-private partnership provides matching funds to U.S. food associations like the California Walnut Commission, the Alaska Seafood Marketing Institute, the Washington Apple Commission and the Ginseng Board of Wisconsin to promote their products overseas. MAP has a clear focus on growing exports from small U.S. agricultural companies, which often do not have the resources to reach remote overseas markets. These programs and others like them have a relatively insignificant impact on the federal budget and in every case deliver far more than they cost the American taxpayer. In the business world, that’s called a smart investment, and it’s one that the American business community in China believes should be maintained.

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inside amcham B OARD o f g ov e r n o r s b r i e f i n g

Highlights from the September 2011 Board of Governors Meeting Financial Report Helen Ren, director of finance and administration, reported that over the first five months of 2011, AmCham Shanghai remains in good financial condition. As of the end of August, the Chamber is over budget on revenue and costs have been kept under control.

The Corporate Visa Program continues to be over budget on revenue. The Board discussed the status of the Chamber’s investment budget and reviewed eight investment categories. All categories are either under budget or at budget.

President’s Report President Brenda Foster thanked Board members for their work and support of the proposed constitutional amendments which will be voted on by members at the November 17 Annual General Meeting. Brenda also reported that 17 candidates have filed applications to the Nominations and Elections Committee (NEC) to run for the 2012 Board of Governors and three submitted applications for Chairman. The Chamber’s upcoming provincial tours were reviewed, and Brenda thanked Governors Chan and Brekke for volunteering to lead the Chamber delegation attending the Nanjing Mayor’s Forum.

Brenda reviewed staffing changes that included the resignation of Siobhan Das, director of committees. Recent hires include

Kirt Greenberg, SME program associate and Matthew Garner, government relations associate. Brenda reported that the Suzhou Government Advocacy plan had been approved.

2011 AmCham Shanghai Washington, D.C. Doorknock Immediate Past Chair Robert Roche presented the key objectives of the 2011 AmCham Shanghai Washington, D.C. Doorknock which was held from September 19–23. Robert also highlighted Doorknock messages, which focused on enhancing U.S. export competitiveness in China and reviewed key delegate meetings.

In Attendance Governors: Andrew Au, William Brekke, Eddy Chan, Marie Kissel, Jim Mullinax, Ted Hornbein, Kenneth Jarrett, Eric Musser (Chairman), Robert Roche, Matthew Targett, Robert Theleen, Kevin Wale and Eric Zheng Attendees: Brenda Foster, President, David Basmajian, Siobhan Das, Robert Roche, Eric Fiedler, Jay Hoenig, David Turchetti, Karen Yuen and Linda X. Wang

The AmCham Shanghai 2011 Board of Governors: Chairman

Governors

Andrew Au Citibank China

Matthew Targett Bayer Technology and Engineering

Ted Hornbein Richco

Eric S. Musser Corning China

Immediate Past Chair

Robert W. Roche Acorn International

Robert Theleen ChinaVest

Kenneth Jarrett APCO Worldwide

Eddy Chan FedEx Express

Marie Kissel Baxter Asia-Pacific

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Kevin E.Wale General Motors China Group

Eric Zheng Chartis Insurance

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Driving China-Bound Exports Forward AmCham Shanghai’s latest Viewpoint urges policymakers to increase U.S. competitiveness in China to boost exports and increase jobs at home

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he China market continues to g r o w i n importance as a top destination f o r U. S . e x p o r t s a n d a n opp or tun it y to c re ate and support American jobs, according to AmCham Shanghai’s recently released Vi e w p o i n t , “ U. S . E x p o r t C ompetitiveness in China: Driving Exports in America’s Faste st-Grow i ng O ve rs e as Market.” The document was recently delivered to lawmakers in Washington, D.C. during AmCham Shanghai’s annual Doorknock trip.

In 2010, total U.S. exports increased 21 percent from the previous year to nearly US$1.3 trillion, supporting 9.2 million American jobs. Much of America’s recent export resurgence can be attributed to China. In 2010, the U.S. exported US$93 billion worth of China-bound goods, a 32 percent increase over the previous year and outpacing worldwide export growth. Those exports to China translate into supporting about 500,000 jobs in the U.S. in 2010.

U.S. companies are aggressively competing in China but run up against overseas competitors, especially from the European Union, Japan and South Korea, which enjoy well-established government trade promotion support. The result is despite impressive export growth to China in 2010 the U.S. managed only to maintain its 12th place position in AmCham Shanghai’s China Market Export Competitiveness Index for 2010, which measures the performance of the top

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exporters to China.

As America’s economic recovery continues, policymakers should focus attention on increasing U.S. competitiveness in China to boost export and job growth, building on important U.S. government support programs li ke t he Nat iona l E xp or t Initiative (NEI), according to the Viewpoint.

Growing importance Despite its challenges, China is America’s fastest-growing major export destination and third largest by volume behind only Canada and Mexico. Since 2000, the value of U.S. goods exports to China has increased 467 percent compared to 55 percent for the rest of the world.

Going forward, China is arguably the most important destination for U.S. companies, including small- and medium-sized enterprises (SMEs) to focus on growing exports. AmCham Shanghai estimates that by 2013, China will become the world’s biggest merchandise import market.

A widening Chinese consumer base and growing middle class, which McKinsey & Co. estimates will reach 400 million Chinese by 2015, are pushing up demand for more sophisticated goods and services to satisfy higher living standards. Meanwhile, China is rebalancing its economy to focus less on exports and more on growing domestic demand, expanding opportunities for American export sales.

Services increasing in demand A major opportunity for U.S. companies is tapping China’s largely underdeveloped services sector through exports. Services account for more than 40 percent of China’s GDP, significantly lower than the share found in other fast-growing developing economies like Brazil and India.

China’s increasing demand for services means opportunities for growth in U.S. exports and job creation. Already, U.S. services exports to China have more than tripled since 2000, reaching US$15.7 billion in 2009 and supporting tens of thousands of good, high-paying American jobs at home – 76,000 in 2009.

U.S. companies lead the world in providing sophisticated, innovative services that China needs to progress from an export-intensive economy to one driven by higher value added production and domestic demand. Sophisticated U.S. financial services, healthcare, tourism, education and other professional services are several of the many growth areas in China that U.S. service exporters should look to provide.

Despite the immense potential, U.S. and other foreign services companies face many challenges in China, including regulations that limit competition in certain services sectors like finance, restrictions on the number of branches that may be opened by U.S. firms, caps on foreign investment and inadequate enforcement of intellectual property rights (IPR).

Stepping it up U.S. companies are in a strong position to compete and win in China. Yet, the U.S. continues to give up ground in an increasingly crowded, and competitive, Chinese import market. The U.S. conceded 3.4 percent of China’s import market to rival nations between 2001 and 2010, costing the U.S. US$47.4 billion in potential GDP and over 280,000 lost job opportunities.

U.S. government policies that target the enormous opportunity for growth in China are the key to achieving ambitious U.S. export goals, creating high-paying U.S. jobs and advancing

export-led economic growth. To improve U.S. export competitiveness in China, AmCham Shanghai recommends that the U.S. government take the following specific, targeted actions: 1. Congress should build on 20 percent or higher growth of U.S. exports in 2010 by funding job creating programs like the NEI and other agencies and programs focused on enhancing U.S. export competitiveness in key markets like China’s; 2. Engage China in a robust, results oriented dialogue to address specific market access and re g u l ator y issu e s t hat are i mp a c t i ng t he competitiveness of U.S. exporters as well as companies and service providers operating in China and to ensure China meets its World Trade Organization (WTO) obligations; 3. Increase targeted export financing to the U.S. Export-Import Bank (ExIm), America’s official export credit agency, with a focus on supporting U.S. SMEs; 4. Leverage U.S. state and city resources to augment efforts of the federal government to increase the number of U.S. companies exporting to key markets like China’s; and 5. Address visa bottlenecks at U.S. consulates in China to increase the flow of Chinese tourism to the U.S. 6. Immediately ratify the U.S.-Korea (KORUS) free trade agreement (FTA) by the November 2011 APEC meeting in Hawaii and sign a comprehensive, high-standard and commercially meaningful Trans-Pacific Partnership (TPP) agreement to demonstrate the U.S.’s commitment to free trade in the Asia-Pacific and put the U.S. in a stronger position when engaging China;

China’s Imports from the U.S. and the Rest of the World Rest of the World 10.76%

United States 7.3%

Rest of the World 89.24%

Rest of the World 92.7%

2001

2010

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Source: National Bureau of Statistics of China

The Road to Washington The following is a list of the 2011 Doorknock delegates and their affiliations Robert Roche Chair, 2011 Washington, D.C. Doorknock Director, Acorn International Immediate Past Chair, AmCham Shanghai Robert is the Immediate Past Chair of AmCham Shanghai and an entrepreneur, attorney and investor who has lived in Japan and China for more than 25 years. He founded Acorn International, China’s largest TV shopping company and Oak Lawn Marketing, the largest TV direct marketing company in Japan. In Shanghai, he co-founded the URBN Hotel, the first carbon neutral hotel in China, and also served on the Board of the USA Pavilion at the Shanghai 2010 World Expo. In 2010 he was named to President Obama’s Advisory Committee for Trade Policy and Negotiations. Robert’s home state is Illinois.

Brenda Foster President, AmCham Shanghai Brenda has served as president of The American Chamber of Commerce in Shanghai since 2005 where she is responsible for representing the Chamber and American business interests in China. Prior to assuming this position she was President and CEO of ULU Group Ltd, a firm specializing in emerging technologies in the Asia-Pacific region. She has also held the positions of Executive Advisor to the Governor of Hawaii for International and National Affairs and Director of the State of Hawaii’s Office of International Relations. She is a member of the Council on Foreign Relations. Brenda’s home state is Hawaii.

Phil Branham Co-Founder and President, B & L Group, Inc. Phil has over 40 years of national and international experience in management, engineering and construction. He has lived and worked in various areas of China since 1997. His business and civic activities include serving as chairman of The American Chamber of Commerce in Shanghai in 2004, Past President of the American Society of Plant Engineers in Tucson, Arizona and on the International Advisory group for Xuhui and Luwan districts in Shanghai. Phil’s home state is Nevada.

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Jay Hoenig Chief Operating Officer, Hill & Associates (Asia-Pacific) President, Hill & Associates (China) Jay is responsible for managing Hill & Associates Group’s Asia Pacific o p e r at i o n s , i n c l u d i n g b u s i n e s s strategy, strategic planning, executive business development, client relations, country operations and all client projects and assignments. He has over 38 years experience in providing consulting services to both industry and government on a global basis. Before joining H&A, Mr. Hoenig was Asia-Pacific VP and general manager with Bechtel, managing director with Parson Brinckerhoff and senior director at Fluor Corp. Jay’s home states are Virginia and Arizona.

Benjamin H. Kinnas Senior Vice President and General Manager,Wells Fargo Bank, Shanghai Branch Ben is concurrently regional manager for trade finance in the Asia-Pacific region. He arrived in Shanghai in 2005 but he began traveling to China in 1992 while serving as general manager of the bank’s Tokyo branch.

He is an experienced emerging markets banker who advocates trade and sensible and appropriate financial markets reform and liberalization in emerging markets. Ben’s home state is South Carolina.

Marie Kissel Vice President, Government Affairs and Public Policy, Baxter Asia-Pacific Marie provides overall Asia-Pacific c o ord i nat i on and l e a d e rsh ip i n gove r n m e nt af f ai r s an d m ar ke t access for Baxter, a global, diversified healthcare company. She was previously senior manager of trade policy for DaimlerChrysler in Washington, D.C., where she managed company policy for all trade and WTO-related issues. She joined Baxter Asia-Pacific as director, government affairs and public policy in 2006. Marie’s home state is Indiana.

James Rice CEO, CSM nv China Jim serves as vice president of the Dutch food company CSM nv and CEO for the company’s operations in Greater China. He joined the company in March 2010 and has been in China since 1987. His career in China included roles as plant manager, sales director and general manager with leading consumer products companies. He currently serves as a member of the Board of Governors of AmCham Shanghai. Jim’s home state is California.

Gary Rieschel Founder & Managing Director, Qiming Venture Partners Gary has had a successful career as a senior executive, entrepreneur, investor and global business strategist in high technology. He was a senior executive at Intel, Sequent Computer, Cisco Systems and Softbank Corp. As a senior operating executive, Gary Rieschel created or helped structure several of the most successful joint ventures in the history of the technology industry. Gary’s home state is Washington.

Francesco Sirna Chief Financial Officer, Citi China Frank is responsible for all finance functions across Citi’s China-wide franchise. He began his career as an auditor with KPMG, joining Citi in 1989 in Italy. He has held various

Our Message: Increasing American exports is critical to driving sustained economic growth in the United States, and China is America’s fastest growing export market. Boosting U.S. export competitiveness, while at the same time pressing China for full market access, will help American companies compete in the world’s fastest-growing market and create new job opportunities at home.

While U.S. exports to China are increasing faster than any other global destination, U.S. export performance in China lags behind the competition – Germany and the European Union, Japan, South Korea, Australia and others. To compete effectively, the U.S. government must take concrete steps to enhance U.S. competitiveness in China.

senior finance positions in the corporate and consumer banks at both country and regional levels. He has spent his Citi career in emerging markets, working in Milan, Madrid, Bangkok, Miami and now Shanghai. Frank’s home state is Wisconsin.

Steven Tseng Partner,Value Chain Transformation Services, PricewaterhouseCoopers, LLP Steven has over 16 years of experience in advising mu lt inat iona l f ir ms on transfer pricing, business transformation, valuations, postmerger integration and other tax and financial advisory issues in the U.S., Europe and the Asia-Pacific region. Earlier in his career, Steven also worked for the Federal Reserve Board in Washington, D.C. and Goldman Sachs in New York.

Steven’s home state is California.

Benjamin Wang Chairman, AmCham Southwest China Chairman, BAP Investment Group Since 2005, Benjamin has served as chairman of the American Chamber of Commerce in Southwest China (AmCham Southwest China), based in Chengdu, Sichuan province. In addition, he is the founder and CEO of BAP Investment Corp. Ltd and the Coffee Beanery (China) Corp.

Ltd. Benjamin’s home state is California.

U.S. Export Competitiveness in China and Industry Insights AmCham Shanghai’s latest Viewpoint publications provide quantitative measurement of America’s competitive position in the China market and an overview of the business environment for U.S. companies in China’s agriculture, healthcare and financial service markets.

Our Viewpoints: U.S. Export Competitiveness in China Agriculture in China Healthcare in China Financial Services in China

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M a n a g er ’ s Not ebook

Coping with Underperformers

How to handle a worker who doesn’t deliver?

S

By Maurizio Basso

even months ago, Tom started working as a sales representative for a company in Shanghai.

For the first two quarters he delivered results as expected.

But last month, his sales started slipping markedly and he is now behind his target.

Erin, his manager, cannot wait anymore: she is under pressure to deliver on ever increasing sales quotas and she cannot afford to have somebody on her team not pulling his weight. She must resolve the situation, one way or another. Is the best solution to ask Tom to leave?

If this situation sounds familiar, you are in good company. The case of team members who once delivered great results and who are underperforming is a challenge that every manager has to face several times in his or her career.

Often, a manager’s first instinct is to use the “carrot-and-stick approach” and remind the employee that the company only wants high performers; promise him a bonus if the results turn around and, at the same time, warn that if things do not improve, the team member should prepare his or her resume to find another job.

This approach is both simple and simplistic: correcting a performance problem often requires a more sophisticated “coaching” approach.

Maurizio Basso is the international directo r for Greater China and Korea at National Instruments Corpo ration and manages hundreds of workers.

He can be reached at Maurizio.

Basso@ni.com.

The first step under the coaching approach is to establish if the team member is a good fit for a high-performance team.

An effective screening process should reject candidates who do not possess the motivation necessary to contribute to the team. If the “wrong” candidates are hired, the process must be reviewed and improved or the company could face the same problem again in the near future.

At this point, attention should shift to the factors that could be hurting performance.

Personal issues could be a factor and these could range from a lack of sufficient competency in some aspect of the job, health problems, family issues, financial stress, mental health, or even burnout.

While appropriate training to improve competency is a good approach, other personal factors are more complex to tackle and require an in-depth analysis of the situation.

If personal factors are not the issue, then external factors should be examined carefully to figure out an appropriate response: What changed in the economic profile of the target area or the customer segment? Did any major customer close a plant? Did the industry go through a shift that left customers now struggling to survive? Did new regulations move the market in a different direction?

The common denominator is the role of the manager in the team: he or she should act as a coach.

A manager who effectively uses the coaching approach will be seen as a leader who selects team members with care, who is serious about getting results, and who is

also invested Maurizio Basso in developing each member of the team to succeed. This way, they will trust their manager/coach and be willing to engage in a productive conversation that will move the performance issue forward, towards a possible resolution.

If the manager is perceived as a cold enforcer of rules who brandishes a carrot and stick at all times, the necessary dialog will never happen because the team members will, understandably, take a closed and protective stance and refrain from sharing key information for fear of retaliation. As a result, the problem will not be correctly assessed and the appropriate solution will not be identified.

During private talks with Erin, Tom discloses that his mother was hospitalized a month earlier, but now she is doing better.

His performance is expected to return to normal now that the heavy emotional burden has been lifted from his shoulders.

Erin has accomplished two things with this approach. First, she now understands why Tom’s initial excellent performance has suffered. Second, she has established the expectation that once Tom has addressed the personal factors impacting his work, his performance will return to normal.

Erin tells Tom to take the rest of the day off to help his mother get home, thus producing a third desirable result. Tom leaves the office that day with a smile on his face, vowing to repay Erin’s trust in him as a valued member of the team with stellar sales results for the company.

That is a commitment that no carrot or stick can buy.

Got an article idea for “Manager’s Notebook”? Contact Insight Editor-in-Chief David Basmajian at david.basmajian@amcham-shanghai.org.

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Marketing & Media Committee Sam Flemming: Marketing Brands in China through Weibo The Marketing & Media Committee hosted Sam Flemming, founder and CEO of CIC, who addressed AmCham Shanghai members at the Four Seasons Hotel.

He spoke about Chinese social media site, Weibo. What started as a clone of Twitter, a social media site popular in the Western world, morphed into a place where users are known as “netizens” and comments are also called “tweets.”

The fact that Facebook,YouTube and Twitter are blocked in China hasn’t stopped their Chinese counterparts from becoming bigger and more widely used. And as a result, Weibo has taken on a critical role in the marketing sector.

The site’s 200 million users are consumers of a generation that trusts and relies on social media as a tool for making decisions. Flemming admits to having written Weibo off as a sure failure at its birth but now sees it as a powerhouse from a marketing standpoint.

Sam Flemming, third from left, with Chris Beebe, Bryce Whitwam and Margie Chiang at the event held at the Four Seasons Hotel.

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Oregon Governor John Kitzhaber addresses an AmCham Shanghai crowd at the Four Seasons Hotel.

Oregon Gov. John Kitzhaber Meets AmCham Shanghai Members Governors of Arizona and Illinois also address business leaders September was a popular month at AmCham Shanghai for state governors from the U.S. Governors from three states – Illinois, Oregon and Arizona – graced Shanghai with their presence and met with AmCham Shanghai members.

First off, Arizona Governor Jan Brewer was the guest speaker at a lunch event on Friday, September 16 at Le Royal Meridien Shanghai. Brewer, brought a trade mission of Arizona CEOs focused on the clean-tech and solar industries.

Oregon Governor John Kitzhaber addressed Chamber members at the Four Seasons Hotel on September 21. His Shanghai stop was part of an 11-day trade mission to Asia and China. He also stopped in Shanghai, Beijing and Tianjin, as well as Japan and South Korea. A day later, on September 22, Illinois Governor Pat Quinn spoke to a group at the Four Seasons where he talked about trade and new deals with China.

Kitzhaber, who also brought a delegation with him, sat down for a brief interview with Insight and stressed that his state is working hard to boost trade with China.

“Our hottest product right now is straw and alfalfa,” says Kitzhaber when asked about the state’s top export to China. Oregon also sends fresh Dungeness crabs and oysters to China.

He also called for closer ties between the U.S. and China. “We need to spend more time and attention in the areas that we share in common,” Kitzhaber said. In China, he met with the State councilor and the vice minister of commerce.

China became Oregon’s No. 1 trading partner two years ago, and the state recorded an export value of US$4 billion worth of goods to China in 2010, including US$2 billion in agricultural exports.

Kitzhaber shared how Oregon is working to encourage Chinese investment to the state and promote Oregon’s business-friendly environment in China. Kitzhaber noted how Oregon has taken purposeful steps to increase its tax competitiveness, healthcare competitiveness, environmental stewardship and regulatory certainty and timeliness.

A member of the audience asks the governor a question.

Oregon is looking for ways to leverage its experience and strengths as a leader in innovation to help China address energy needs and increasing resource challenges related to large-scale urbanization. Established relationships in China and important public-private partnerships, such as the China-U.S. Center for Sustainable Development, will be key for Oregon’s working to help China achieve its goals.

Engagement with China also is key for increasing intellectual property rights (IPR) protections to ensure that

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Oregon and U.S. companies compete on a level playing field in China.

Going forward, Oregon is working to build on the state’s long history of strong economic and cultural ties with China. For example, the state continues to aggressively forge international exchanges with Chinese universities, encourage more Chinese tourists to Oregon and build on special ties with sister cities in China. Oregon, which established the first Confucius Classroom in the U.S. in 2008, recently celebrated the creation of 12 new Confucius Classrooms.

The trade mission is Kitzhaber’s first trade delegation to Asia since he was elected in 2010. Previously, Kitzhaber visited China as governor in 1996 and 1998 and as state Senate president in 1990.

Illinois Governor Pat Quinn with AmCham Shanghai Chairman Eric Musser

Events and Committee Highlights are reported by Ryan Balis, Christine Francois, Susan Lawrence, Joyce Bian and Esther Young

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EXECUTIVE TRAVELER

What’s your Favorite Business Hotel in China?

This month, Insight asked executives to tell us about their favorite business hotel in China. While some had a hard time choosing, here’s what they said.

Darren Burns, Managing Director, Weber Shandwick Worldwide-Interpublic (Shanghai) Hotel: Hotel

G, Beijing

What I like: “Nice design, excellent food and very well trained staff. Excellent location, right near Sanlitun and each night has a different special, so look out for that.”

Rebecca Liu, General Manager, Cook (China) Medical Hotel: The

Conrad Hotel and Resort, Hong Kong

What I like: “The location is quite nice and it’s connected to the Hong Kong MRT. It’s very easy for me to get to the office or dining places. The view is quite good. It’s near the harbor with a mountain view. The service is quite good and staff is very nice.”

Richard Ren, Director, Corporate Affairs, McDonalds (China) Hotel: Hongqiao

Hilton, Shanghai

What I like: “Hongqiao Hilton is my favorite due to its proximity to the office, brand new hardware, improving service and food in its café. Most important of all is the reasonable contract rate.”

Tom Tan, President, BorgWarner China Hotel: Westin

Beijing Chaoyang

What I like: “Easy access, the location, size of rooms and an excellent executive lounge.”

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2011 Bundle Tickets on Sale!

We’re keeping the feel-good vibe going!

Choose two or three round-trip tickets in Executive First Class or Economy Class and travel to your favorite Canadian or the US destinations.

Executive First Class Western Canada / U.S.A.

2 round-trip tickets

40,000

Our Executive First Suites are designed to provide you with your own personal space. Ideal for a good night’s sleep, each Suite features a lie-flat bed that fully reclines at the touch of a button while you remain seated.

Western Canada / U.S.A.

3 round-trip tickets 54,000

Eastern Canada / U.S.A.

3 round-trip tickets 75,000

Eastern Canada / U.S.A.

2 round-trip tickets

56,000

Economy Class Western Canada / U.S.A.

2 round-trip tickets

8,200

Western Canada / U.S.A.

3 round-trip tickets 11,400

Eastern Canada / U.S.A.

3 round-trip tickets 13,500

Eastern Canada / U.S.A.

2 round-trip tickets

9,600

The special fares exclude applicable tax and airport fees. Terms and restrictions apply. Air Canada reserves the right of interpretation of this promotional message.

Cities in Western Canada: Vancouver/Calgary/Edmonton Cities in Eastern Canada: Toronto/Ottawa/Montreal Cities in Western U.S.A.: Los Angeles/Portland/Seattle/San Francisco Cities in Eastern U.S.A.: Atlanta/ Boston/Chicago/Cleveland/Dallas/Houston/Orlando/Miami / New York/Philadelphia/Raleigh Durham/Washington

Air Canada China Call Center 400 811 2001 www.aircanada.cn