Jan&feb issue by AmChamShanghai

January/February 2016

POWER PLAY How will uncertainty in the South China Sea, anxiety over China’s economy and drama in the U.S. presidential election impact the broader U.S.-China relationship in 2016? SPECIAL CONTRIBUTORS: Alexander Cooley, Jennifer Harris, Lyle Goldstein, Peter Petri and Andy Rothman

ALSO INSIDE • Interview with Ker Gibbs • President’s Report • Cyber Attacks

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INSIGHT January/February 2016

The Journal of the American Chamber of Commerce in Shanghai

amcham shanghai President

Kenneth Jarrett

Cyber Hacking

New Chairman at the Chamber

U.S.-China Relations

VP OF PROGRAMS & Services

By Xiaoyan Zhang

A former ethical hacker explains the pitfalls of international hacking.

Scott Williams VP of Administration & Finance

Helen Ren Directors Business development & Marketing

Patsy Li Committees

Stefanie Myers

By Bryan Virasami

Ker Gibbs, the 2016 Chairman of AmCham Shanghai, talks about his priorities and shares his views on bilateral relations.

COMMUNICATIONS & PUBLICATIONS

Ian Driscoll Events

Jessica Wu government relations & csr

By Jennifer Harris

Will bilateral relations improve or spiral out of control in 2016?

Veomayoury "Titi" Baccam Membership & CVP

Linda X. Wang

INSIGHT EDITOR-IN-CHIEF

Bryan Virasami

Senior Associate Editor

Ruoping Chen

South China Sea

By Lyle Goldstein

Is it possible that the tensions in the South China Sea could evolve into military conflict? A professor at the Naval War College explains.

Content Manager

Kathryn Grant INTERNS

Donnie Giolzetti Zoe Jordan

I nsig h t standards

5 Movers and Shakers

7 Presidentâ&#x20AC;&#x2122;s Report

Design

Alicia Beebe Printing

Mickey Zhou Snap Printing, Inc.

MONTH IN PICTURES

Highlights from Recent Events

EXECUTIVE traveler

Manoj Mehta of naked Retreats

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

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

38 From the Chair 39 Board of Governors Meeting 41 Government Relations 42 Event Highlights Cover design: Mickey Zhou

Editor's note

Bryan Virasami editor-in-chief

hina remains a source of plenty of international intrigue and news. It’s a place where even incremental changes tend to trigger big headlines. But in this issue of the magazine, our special guest contributors take a stab at explaining the most important issues and offer their two cents on what we can expect in the Year of the Monkey. Lyle Goldstein of the U.S. Naval War College provides a broad overview of the simmering tensions in the South China Sea and makes an unconventional and sober case against military conflict – or rather why it’s both in the interests of China and the United States not to escalate things. At the same time, as China continues to develop several islets in the middle of the sea, it’s difficult to say where things are headed given longstanding claims by various countries in South East Asia. Andy Rothman, who has contributed to these pages several times in the past and is now based in San Francisco, argues that China’s economy is not in serious trouble as many fear. He makes his argument with figures and touts consumption as

a key reason things are changing. He declares: “China has rebalanced away from a dependence on exports, heavy industry and investment, and has become the world’s best consumption story.” Peter Petri of Brandeis University takes on the Trans-Pacific Partnership and outlines why it’s a sensible agreement and says the U.S. Congress should approve this monumental deal. In a separate piece, Alexander Cooley explains the relationship between China and Russia, and his analysis provides insight not usually found in news reports. Finally, Jennifer Harris of the Council on Foreign Relations and a former top aide to Hillary Clinton, takes on the critical issue of U.S.-China relations and predicts that 2016 could be a big year. She points out China’s reliance on its global influence and suggests potential challenges this year to that position, citing economic issues. Our March issue will provide a breakdown of results from our annual China Business Report, scheduled to be released in January. Thanks for reading Insight.

M o ve r s a n d S h a k e r s compiled by Junling cui

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

Goodyear Goodyear Tire & Rubber Co. named Chris Delaney president of its Asia Pacific business unit. Delaney has more than 30 years’ experience in Asia Pacific, North America, Europe and the Middle East. He has spent the past four years as CEO of Goodman Fielder Limited, a publicly listed food company in Australia and New Zealand. His previous experience includes time with Proctor & Gamble as vice president and general manager in North America and the Middle East and at Campbell Soup Co., where he was president of the Asia Pacific unit. Chris Delaney

Private Sector JLL Claire Stephens was appointed head of China for the Workplace Strategy team at JLL. In her new role, she will lead its specialized consultancy services unit. Based in Shanghai, Stephens joins JLL Claire Stephens following a successful career spanning 15 years in corporate real estate consulting and workplace strategies, with a broad based background across all areas of the built environment, including sustainability, facilities management and urban infrastructure. Apart from advising clients in China and regionally on strategic workplace initiatives, she will also be responsible for other corporate consulting areas including M&A integration, due diligence, portfolio planning, organizational change/strategy and location advisory. Prior to JLL, Stephens worked for JCI as its Asia Pacific Change Manager. EIM International interim and transition management agency E.I.M. hired Brigitte Wolff to be its China president. In this role, she is responsible for the firm’s operations in China, India and across Brigitte Wolff ASEAN nations. Prior to E.I.M., Wolff served as managing director of Management Engineers for six years. She joined Booz & Company through its merger with ME in 2013. Wolff started her career with UBM management consulting and became partner at Abacus Corporation in 2001.

MEC Media agency MEC named Gordon Domlija as CEO of MEC China. From the beginning of 2014 to this October, Domlija served as chief strategy officer of Mediacom. Prior to that, he was the managing director of Mindshare for five years, starting from 2008 when he moved to China. Domlija graduated from the University of Leicester in 1994 and has more than 15 years’ experience in the advertising industry.

government Chen Zhaoxiong was named deputy minister of industrial and information technology. Most recently he was vice governor of Hunan province, a position he held since 2007. From 2005 to 2007, he served as vice chairman of China Chen Zhaoxiong Electronics Corporation. Chen holds a doctorate from the Chinese Academy of Sciences. An Lusheng, the former Party Secretary of Shanghai’s Zhabei District, was named the Party Secretary of the newly merged Jing’an district. An had been the Party Secretary of Zhabei since March. Prior to that, he had been the director of the An Lusheng district since August 2013. He is also the former head of the Shanghai Railway Bureau.

If your company has executive personnel changes, please contact Junling Cui at junling.cui@amcham-shanghai.org.

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2014

PRESIDENT ’S Report

Our Second Century Begins As we welcome the start of a new year, we also welcome the beginning of the Chamber’s second century. Before previewing some of our plans for this year, allow me to summarize highlights of our centennial year: Heightened Profile: We used the centennial year to strengthen AmCham Shanghai’s position as a leading business organization. The rediscovery of our rich history, together with special anniversary year programming and activities, raised our profile with key external stakeholders – such as the Chinese and U.S. governments and the media – and deepened their understanding of our permanence, contributions and expertise. We received a congratulatory letter from President Obama, and Commerce Secretary Pritzker joined us for a special anniversary reception. Our successful charity gala results now finance a special scholarship fund that supports 75 AmCham Shanghai Centennial scholars attending Fudan and Jiaotong universities.

provider – Cigna – and negotiating attractive rates for our members. Increased Outreach to the Chinese Business Community: We significantly expanded our involvement in the wave of outbound Chinese investment, creating business opportunities for our members. Via a new Invest USA Committee, we have supported programs in Shanghai, Hangzhou and Nanjing that involved matchmaking and promotion of investment projects in the United States. We now have nearly 20 Chinese industrial parks using our SME Center platform. And we have done more to involve Chinese business leaders in major events, such as our 100th Anniversary Forum. Improved Programming and Membership Engagement: Our global CEO series expanded to eight events, we held a special conference on e-commerce and the retail trade, our food safety and auto outlook conferences attracted large crowds and excellent speakers and the survey feedback on events overall reflected a high level of satisfaction. The number of events was also high – around 470! While we still have a ways to go, we took important steps to becoming more digitally savvy with the start of our corporate WeChat account, more webinars and webcasts.

Increased Influence & Access: Our September Washington DC Doorknock was received at a particularly senior level, both by the Obama Administration and on the Hill. President Xi Jinping quoted from our 2015 China Business Report on the eve of his State Visit to the United States. We took a series of steps to enhance our government relations work this past year, including the establishment of a new Government Affairs Committee, a new dialogue with Shanghai CIQ, our first government affairs conference and a more active schedule of regional trips. We also included Chinese government officials from across the Yangtze River Delta in our October centennial celebration dinner. Our media coverage increased significantly this year.

So much for 2015. What about 2016? We have a few key initiatives planned for this year. These include a thorough review of our IT architecture and digital strategy that should lead to a revamped website and greater use of social media platforms, expansion of our Yangtze River Delta footprint, special programs to strengthen engagement with members, and a continued campaign to expand our membership base.

Improved Services: During this past year, we increased our ever popular training programs by 30 percent. The 40 sessions attracted over 900 participants. Our Suzhou office significantly increased its activities, providing valuable support to many U.S. companies. We improved our health insurance plan by adding another insurance

Kenneth Jarrett, President

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insight

deal of the month B Y Z O E J ORDAN

Qualcomm and Xiaomi in License Agreement

ualcomm Incorporated, a Chinese mobile chip maker, and Xiaomi Corp., China’s leading smartphone and Internet company, entered a 3G and 4G patent license agreement in early December. Under the agreement, Xiaomi has a royalty-bearing patent license to develop, manufacture and sell devices using Qualcomm technology to connect phones with networks via 3G and 4G. In the past year, Qualcomm has generated US$8.2 billion in patent royalties from its 170 patents and generated US$25.3 billion in revenue, mostly from wireless chip sales. The company’s share price increased 5.5 percent to US$52.10 the day the deal was announced. While four out of the five top Chinese handset makers now license Qualcomm’s patents, it has struggled to collect patent royalties from Chinese phone makers. The company faced more troubles earlier

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in February when it finally settled a dispute with Chinese antitrust authorities and the National Reform and Development Commission (NDRC). As a result, Qualcomm was fined US$975 million and ordered to restructure its licensing policies. Although the companies have not provided details of the agreement, Qualcomm says that it is consistent with February’s settlement. The royalty rates, although significantly lower than those Qualcomm collects in other markets, have not been disclosed. Qualcomm has also signed licenses with companies such as LTE, Huawei and TCL since the dispute. Tech giant Xiaomi is China’s second-largest smartphone vendor behind Shenzhen-based Huawei Technologies Co. Ltd. Sometimes referred to as the “Apple of China,” the company is known for its cheap yet high-performance smartphones and has become Apple’s largest competitor in China’s smartphone market. The deal allows Xiaomi to develop smartphones with modems directly on the device’s chip. Qualcomm’s investing arm, Qualcomm ventures, owns a stake in Xiaomi, making Xiaomi a relatively easy target for the deal. The next largest company speculated to engage in licensing deal talks with Qualcomm is Lenovo Group Ltd. The licensing agreement helps alleviate issues that have impeded Qualcomm’s performance in recent years and should bolster its image. On the company blog, Senior Vice President and General Manager Eric Reifschneider stated, “With ever y new licensing agreement we conclude, especially with more prominent licensees – and Xiaomi is one of them – we gain momentum. It’s another sign that we are moving forward successfully with our licensing business in China.”

Train tickets to get ads

Google plans China Play store Google left China in 2010 after refusing to censor search results. Now it may be planning to reopen some services, probably via a shell company it owns called Pengji Information Technology (Shanghai) Ltd. Among Pengji’s listed business functions are IT development and computer software development. Google reported in late November that it plans to launch a Chinese Google Play store.

Work begins on Universal theme park State-owned China Railway Corp. (CRC) announced that starting early next year, it will sell advertising space on train tickets. The advertisements will be sold by three out of their 18 regional branches: Nanning, Kunming and Urumqi. CRC expects that advertisements will soon appear on over 130 million train tickets and has plans to expand the program to more of their branches. Advertisers have until December 14 to submit bids. In 2014, CRC sold a record 2.4 billion train tickets.

Universal Parks & Resorts plans to open a Hollywood-style international theme park in Beijing by 2020. Universal Parks & Resorts has partnered with state-owned Beijing Shouhuan Cultural Tourism Invetment Co. The US$8 billion theme park will be North China’s first international theme park and will include entertainment options based on popular movies like “Jurassic Park” and “Despicable Me.” The first stage of the park is estimated to be completed in 2019. shutterstock

Apple Pay strikes deal Apple expects to bring its mobile payment system to China by February. Apple has struck a deal with Bank of China, China Construction Bank, Agricultural Bank of China and the Industrial and Commercial Bank of China, which will allow customers to use their iPhone or Apple Watch, linked with their debit or credit card, to pay for items. Apple Pay was launched in the U.S. last October and is also available in the UK, Australia and Canada. After its launch, Apple Pay’s main competitor will be Alipay, owned by Alibaba.

Singapore

China to cut import tariffs Starting next year, China will reduce import taxes on consumer goods by an average of 50 percent. It will cut import tariffs on products such as suitcases, sunglasses, bags, garments and skincare products while adjusting export tariffs on products such as steel billets. The Ministry of Finance reported that the change is important in order to “maintain stable growth and push forward structural reform” and is designed to make foreignmade products, especially luxury goods, cheaper for consumers. China is growing at its slowest rate since 2009, yet Chinese consumers are still the world’s biggest luxury-item spenders.

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c y be r s e c u r i t y B Y X IAOYAN Z HANG

Mission Impossible: Halting Cyber Attacks

Xiaoyan Zhang

Getting a handle on international cyber attacks and figuring out the commercial impact on U.S.China relations are difficult if not impossible goals

eported cyber attacks between the U.S. and China have been increasing in frequency, scale and s ophistication. Hackers are motivated by various reasons, including fun and fame. Since the late 2000s, however, a greater number of hackers are allegedly motivated by commercial gain, and they’re going after data, trade secrets and other i n t e l l e c t u a l p r o p e r t y. H e i g h t e n i n g t h e controversy are accusations that both governments sponsored or supported some of the attacks. While both countries say they are exploring how to fight cybercrimes, U.S.-China commercial relationships are taking a toll.

The trend The 2013 Snowden revelations appear to be the watershed that enhanced the linkage of cyber attacks to IP theft. A March 2014 New York Times article, for example, stated that the National Security Agency (NSA) had hacked into Huawei Technologies to obtain know-how regarding its communication lines. A few months ago another report said a hack allegedly conducted by the Chinese People’s Liberation Amy enabled three large Chinese State-owned enterprises to gain an advantage over their U.S. competitors. Subsequently, the U.S. has accused China of hacking into U.S. companies with a focus on the high-tech, high-end equipment manufacturing and new materials industries. Aside from the shift of focus, hacking me t ho d ol o g i e s are s e e m i ng ly g ai n i ng i n sophistication as well. For example, “zero-day attacks” are being used more frequently where a hacker exploits application vulnerabilities before

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either they are discovered or can be fixed so that the target has “zero days” to mitigate the attack. I n r e s p o n s e , t h e U. S . a n d C h i n a i n September formally agreed not to support or conduct “cyber-enabled theft of intellectual p r o p e r t y… w i t h t h e i nt e nt o f p r o v i d i n g comp et it ive advant ages to comp anies or commercial sectors.” Yet in the weeks following that agreement, several U.S. technology and phar maceut ic a l comp anies suf fere d d at a breaches allegedly initiated from China. In its “2015 Annual Report to Congress,” the U.S.China Economic and Security Review C om m i s s i on u r g e d , i nt e r a l i a , t h at n e w strategies, perhaps even offensive and retaliatory in nature, must be adopted. The goal to control cross-border cybercrimes appears to be a mission impossible.

The costs T h e e c on om i c c o s t of c y b e rc r i m e s i s estimated at US$375 billion to US$575 billion annually worldwide by a 2014 McAfee study. The costs of defending cybercrimes involving intrusion detection, data recover y and remediation have also steeply increased. A sur ve y of 59 U.S. f ir ms by t he Ponemon Institute with Hewlett-Packard found that the average annual cost of responding to cyber attacks was US$12.7 million, up 96 percent over the previous five years, with an average of 138 successful attacks each week, up 176 percent from 2009. The average time taken to detect an attack was 170 days, with an average of 45 days being spent remediating the damage. Another economic effect of cybercrimes is the shift away from jobs that create value to

defensive jobs aimed at shielding attacks. Cyber attacks against U.S. targets alone could result in a permanent reduction of as many as 200,000 U.S. jobs. The sheer cost of IP theft and its chilling effect on innovation led then NSA Director Gen. Keith Alexander to state in a 2012 speech that cyber espionage represents “the biggest transfer of wealth in history.” When the Internet search engine giant Google decided to leave China, it linked its decision to sophisticated cyber attacks on its computer systems. T h re e Asp e c t s of C ro ss - b ord e r Cy b e r Attacks. Circumventing the problem of cross-border cybercrimes and minimizing the impact to U.S.-China commercial relationships require a closer examination of the complex nature of cross-border cyber attacks and its interplays with technology, law and politics. • Attribution is yet to mature It is notoriously difficult to identify the source of well-executed cyber attacks. No international c onve nt i on or ag re e me nt e x ist s on w hat constitutes attribution. Among all the reported cyber attacks from China into the U.S., only the PLA hack has led to a charge. The Chinese government not only denied the charge and suspended cyber-security talks with the U.S. but also swept aside other accusations as “irresponsible and unscientific” and accused the U.S. itself of cyber espionage. Attributing cyber intrusions requires intensive forensic i nv e s t i g at i o n a n d a n a l y s i s a n d i s o f t e n inconclusive. Cyber attacks can be routed through servers located in multiple countries to disguise their true origin. A “distributed denialof-service” attack may originate from multiple (often thousands of) unique IP addresses, which are often forged by IP spoofing for the purpose of concealing the identity of the sender. An IP address is a unique number identifying each Internet-connected device from the billions around the globe, so that messages and other information sent by one device are correctly routed to the intended destination. If attacks are repeated, attribution may be improved through

pattern recognition and other techniques. Private cyber intelligence firms are contributing to the attribution solution by publishing its methodology online. Having tracked about 20 groups that are spying on organizations inside the United States and around the globe, for example, Mandiant recently released a report identifying APT1 as one of the most persistent of China’s cyber threat actors. Together with the report, Mandiant also published 3,000 indicators, which can be used with other tools provided by

Former NSA Director Gen. Keith Alexander issued a warning about cyber espionage in 2012

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Weâ&#x20AC;&#x2122;ve Done Some Remodeling

Find all of Insight at our new address: http://insight.amcham-shanghai.org

Mandiant to search for signs of APT attack activity. • No treaties Prosecuting hackers residing outside the jurisdiction may involve cross-jurisdiction collection of evidence and transfer of witnesses a n d s u s p e c t s . Ne i t h e r c u r r e n t U. S . n o r international law is prepared to adequately address such matters, an issue equally present in other types of international crimes. Absent an extradition treaty that requires China or the U. S . t o t u r n ov e r s u s p e c t s or c onv i c t e d c r i m i n a l s t o t h e o t h e r, t h e c y b e r c r i m e enforcement will remain disabled. The PLA Hack indictments, for example, will have a limited ef fect on the accused if China is unwilling to extradite the five Chinese officers for a trial in the U.S. • Cost of doing business Cyber attacks will always occur as long as the Internet exists. Perhaps cybercrimes should be treated as part of the “cost of doing business” on the Internet rather than some extraordinary phenomenon that deser ves retaliation or escalation to a “war” level. There is no absolute security. With proper tools and some basic computer training, anyone can hack, although successful hacking requires careful planning and perhaps a little luck. No government can fully control its citizens’ conduct or guarantee an end to cybercrimes. While both the U.S. and China governments have agreed not to support or sp ons or c y b er attacks to steal cer tain intellectual property, private cyber attacks will continue to b e launched, independent of government efforts at deterrence. Fortunately, successful hacking requires some level of contribution by the victim. A target can invite a hack, for example, by passively exposing vulnerabilities, actively downloading malicious code or surrendering authentication credentials. Perio dic v u l ne r abi l it i e s ass e ss me nt and a d e qu ate security training can significantly reduce the likelihood of a successful hack. According to The New York Times, the infamous 2015 hack a g a i n s t t h e U. S . O f f i c e o f P e r s o n n e l

Huawei’s headquarters

Management, which resulted in the theft of over 22 million Americans’ extremely sensitive personal information, including fingerprints, Social Security numbers and financial records, might have been prevented if the OPM had heeded the warnings issued by its inspector general five months before the attack: OPM ser vers and devices were inadequately inventoried, contained gaps regarding userauthentication and were not regularly scanned for system vulnerabilities. To effectively mitigate cybercrime risks, it is essential to standardize attribution methodology and develop international agreements on extradition for cybercrimes. Meanwhile, U.S. companies should ensure that adequate security procedures and policies are in place, elevate security awareness of their staff through training and education and adopt proper authentication, authorization, security and intrusion detection measures commensurate with the value of their data and IP assets.

Xiaoyan Zhang is a Counsel of Mayer Brown JSM based in Shanghai. She has over 14 years of combined legal and industrial experience. Her practice focuses on cross-border intellectual property litigation and technology transactions. Prior to law, she was a Certified Information Security Systems Professional for several businesses in the U.S.

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“

Attributing cyber intrusions requires intensive forensic investigation and analysis and is often inconclusive.”

interview B Y B RYAN V IRASAMI

‘We Can’t Mess This Up’ to see that company grow. “On the personal side, my mother grew up in Shanghai. I’m half Chinese, half American. Both my parents are academics, so I grew up on college campuses, which was a very rich experience. College campuses are a whole different thing when it comes to diversity – you really see people from all countries and ethnicities. Diversity has very much been a part of my upbringing.”

Ker Gibbs＼

The new Chairman of AmCham Shanghai talks about the importance of strong bilateral relations, his top priorities for 2016 and U.S. presidential politics

Ker Gibbs, a longtime AmCham Shanghai member who served on the Board of Governors for two years, was elected 2016 Chairman of AmCham Shanghai in November. During a December interview, he discussed the importance of keeping U.S.-China relations stable, his plans as Chairman of the Chamber, and the U.S. election’s impact on China. The following are excerpts from the interview.

Insight: Could you tell us something about yourself, where you’re from and a little about your professional life? Ker Gibbs: “I’m from San Francisco and I’ve been making investments here in China for quite a long time. My career has basically been at the intersection of finance and technology. Coming from Silicon Valley, I’ve worked for tech firms my whole career and then got into the financial side. At this point I’ve deployed capital into technology, media and some life science companies. I also made an investment in Orange Hotels. It’s been fun

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Insight: Why did you want to become Chairman? KG: “I’m a social animal by nature. I enjoy getting out and meeting members. That’s what got me involved in the Chamber in the first place, in committee leadership and things like that. I’ve basically just kept going from there. Again, the diversity of our Chamber is amazing when you think about the differences we have and people doing interesting things. “It’s been a great learning experience for me. Chamber leadership is a great vantage point to see the different things going on in the business community here in Shanghai. As far as moving into the role of Chairman, obviously Bob (Theleen) knew he would be stepping down this year and he encouraged me to take more of a leadership role on the board. I’ve felt great support from my fellow board members as well, which I think is critical for the Chairman. It was their support that led me to put my name up for candidacy. I see the Chairman role as providing a focal point to harness the energy and ideas from the other board members. “The third reason is the U.S.-China relationship itself. We can’t mess this up; it is just too important to let it be driven by misunderstanding or conflict, and I don’t think it will be. The relationship has been so mutually beneficial. It can be hard to see that because we get up every morning and read the headlines. But I would encourage people to take a historical perspective. You have to look at it as a 30, 35-year experience. If you look at it that way, this

relationship for both sides has worked extraordinarily well. The tricky part is to make sure that we keep on an upward trajectory and not to get sidetracked.” Insight: Is there anything that you bring to the position that’s different from past chairs? KG: “I come from a business operations and investment world as opposed to government relations and policy. I will be spending more of my time thinking about how our Chamber runs as a business, our membership numbers, the services and revenue from services and things like that.” Insight: In the past, every Chairman tried to identify and promote at least one new initiative under their watch. Is there one thing you’d like to change or prioritize in 2016? KG: “I want to wait and meet with the new board in January before setting us on a certain path. Having s aid t hat, w hat is on my mind is continuing this shift towards services. I think the Chamber has to behave like any other company, which is what it is, and think hard about our customers, who are members, and think about our product, which is services to those members,

fundamentally. I want us to take a fresh look at that and always be looking to innovate and improve. “There are certain areas of the Chamber that I’m not looking to change because our execution is really good. The Washington Doorknock is an area where the Chamber is executing extremely well. Ken and the staff do a great job with that. This was my first time attending the Doorknock this year. I know it’s hard for members, especially those not involved in policy or GR, to justify the time and expense to go all the way to Washington, but it’s a fantastic program that our Chamber does extremely well. I would like to find ways to give more exposure to this so that more members can benefit from it.” Insight: If it’s not too soon, could you share your top three key priorities as Chairman? KG: “Number one is definitely our primary mission, which is the U.S.-China commercial relationship. We’ve got a great relationship with Ambassador (Max) Baucus; he’s been down here a lot. We see Consul General Hanscom Smith a lot as well. We know the leaders here in China and also in Washington. We need to continue to play a

Chamber’s 100th Anniversary dinner

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strong role in keeping them informed about what’s going on here on the ground. I want to involve as many members in that process and in that dialogue as I can. “Second, we talked about services. I want to see that we keep making improvements in those areas. I’ve been out to Suzhou. I like what we’ve done in Suzhou so far; I would like to do more. We’ve learned a lot as a Chamber in terms of what the members want and don’t want in Suzhou. The programming has to be different; we’ve learned that. We have good staff out there, and I think they’re still learning and adjusting. It’s a very entrepreneurial environment. But we’re just getting to critical mass in Suzhou, so we have to grow there. In order to get bigger in Suzhou, we need to understand our competitive position relative to other Chambers and business organizations. The Chamber does have competitors. We may be the only American Chamber in Shanghai, but when

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you look at it from the members’ perspective, they have choices. We need to understand what those choices are and make sure we have a compelling and differentiating set of services.” Insight: In your view, what is the most important U.S.-China bilateral issue today that also concerns Chamber members and their companies? KG: “There are a lot of issues, that’s clear. In some sense it’s the tension itself that our members are worried about. President Roosevelt, during the depression, said ‘all we have to fear is fear itself.’ What we have here is a situation where, yes, we have serious issues, but it’s the tension itself that really is setting the environment. It makes us hypersensitive and that’s an unfortunate thing. “Another U.S. president, President Carter, was out here about a year ago. He said, look, there’s tension in the relationship that we need to work out. But he reminded us of the gap and mistrust

“

It’s an evolving relationship, but one thing is clear: neither side can afford to see the other fail.”

The Chamber’s Doorknock delegation at a meeting in Washington

and this enormous distance that he and his Chinese counterparts had to cross in order to establish diplomatic relations at that time. So his message to us, which I very much took on board, is that this is nothing compared to what they had to achieve in order to establish diplomatic relations. The issues that are before us right now, although serious and difficult, are by no means insurmountable. He challenged us to work this out. We have issues but they are absolutely solvable. “Having said that, I would say on Internet, cyber security and freedom of information in general, we have a fundamentally different way of looking at things. The Ambassador, when he was down here, gave us a little bit of color on that. He’s been trying to get the Chinese to understand and appreciate the difference between government-togovernment spying versus industrial spying for commercial advantage. My sense is he has successfully moved them on that point. “TPP is important; AIIB is important. On TPP, this is an agreement between everyone in Asia Pacific except China. We need to move in a direction to bring China into this system and not push them farther out. China joining TPP will be good for China, good for trade and good for regional stability. AIIB is in some ways the reverse of TPP in the sense that everyone is in it except for the United States and Japan. There was initially some drama there, but AIIB can be a good thing in the long run.”

Insight: Outbound investment is a big story today. Should the chamber play a larger role in helping Chinese companies enter and invest in the U.S. market? KG: “I think [in] the next ten years, this relationship will be redefined, and the outbound investment will be a major piece in the new definition of this relationship. So yes, I think it is something the Chamber certainly should be involved in. “The question is going to be how China will execute in its foreign direct investment. Will they learn from our mistakes, and what kind of global citizens will they be? So those are the questions. One point I want to make is that America has always been the beneficiary of foreign direct investment and immigration. America will benefit here, I have no doubt, but the question is what will it look like? China has a way of changing things, and it always has. It’s definitely something that the Chamber is and should be involved in. I think we have an opportunity to influence and guide that whole process.” Insight: As Chairman, you’re also the chief spokesman for the Chamber. Do you think the Chamber needs to raise its public profile and how? KG: “We should certainly highlight the positive impact that American business and entrepreneurs have here in China. We don’t have great statistics, but U.S. businesses employ thousands of people in

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Ker Gibbs and 2016 BOG members chat with Jing Ulrich of JPMorgan Chase

China. On average, we have a relatively high payroll per person. I know that from talking to local government officials; they are very much aware of it from a tax revenue point of view and in terms of skills, training and opportunities for advancement.” Insig ht: The re are many challenging issues facing the U.S.-China relationship today. How would you characterize the overall relationship and what rol e can Am C ham pl ay in solving some of the problems that exist? KG: “I would characterize the relationship as evolving, meaning that it’s changing and the future hasn’t yet been decided. China a n d t h e U. S . a r e s t r at e g i c competitors. That’s a term a lot of people are using. It’s an evolving relationship, but one thing is clear: neither side can afford to see the other fail.” Insight: The GOP presidential candidates in the U.S are bashing China. Do you think that might make your job as Chairman more difficult?

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KG: “China has learned a lot about the American system. I don’t think they are fooled by all the rhetoric. The Chinese leadership understands how this works in America, that the political process is what it is. So I don’t think they are taking things too seriously, at least that is true among my Chinese friends when I am talking to t hem. The y’re not t aking it personally.” Insight: I understand you read a lot. What books are you reading now? KG: “The books I happen to be reading right now are David Shambaugh’s China Goes Global, and I’m reading a cute book of fiction called Ghost Bride. I met Shambaugh recently and wanted to read his views. Ghost Bride was recommended to me by a friend. I’m enjoying it. I was also reading a book by Ha Jin, called War Trash. He’s the author of Waiting, which I enjoyed very much. War Trash I had to put down because his story about the human tragedy of the Korean War was just too horrible. Waiting was about a different kind of human tragedy, not quite so gruesome.”

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SPECIAL 2016 PREVIEW Editor’s Note: If the past year is any gauge, the coming year should be a great time for those studying China and U.S.-China relations. Conflict is roiling in the South China Sea, China’s economy is likely to face further challenges and many of the candidates running for president in the U.S. are bashing China. In our annual Year in Preview special, five distinguished scholars share their views on the South China Sea, U.S.China relations and economic issues and another explores the relationship between China and Russia and tells us what it means for the overall relationship with the U.S. We hope these five essays provide some insight into the coming year.

THE WRITERS

A CRACK IN THE PLAN? By Jennifer Harris Jennifer M. Harris is a senior fellow at the Council on Foreign Relations. She was a member of the policy planning staff at the U.S. Department of State where she was a lead architect of Secretary of State Hillary Clinton’s Economic Statecraft agenda.

NO, THE SKY IS NOT FALLING By Lyle Goldstein, PhD Lyle Goldstein is Associate Professor in the China Maritime Studies Institute at the U.S. Naval War College in Newport, RI. He is author most recently of the book Meeting China Halfway: How to Defuse the Emerging U.S.-China Rivalry.

STRATEGIC PARTNERSHIP OR POSTURING? By Alexander Cooley Alexander Cooley is Director of Columbia University’s Harriman Institute for the study of Russia, Eurasia and Eastern Europe and a Professor of Political Science at Barnard College. His books include Great Games, Local Rules: The New Great Power Contest in Central Asia (Oxford).

‘WE’RE ALL CHINA INVESTORS’ By Andy Rothman Andy Rothman is Investment Strategist at Matthews Asia, the largest Asia-only investment manager in the U.S.

THE STAKES ARE HIGH By Peter Petri Peter A. Petri is the Carl Shapiro Professor of International Finance at Brandeis University.

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A Crack in the Will China’s economic challenges and the U.S. presidential elections keep bilateral relations in a holding pattern?

Ships and submarines from the Singapore navy and the U.S. Navy gather in formation during Cooperation Afloat Readiness and Training (CARAT) Singapore, an annual bilateral exercise with the U.S. Navy, U.S. Marines and the armed forces of nine partner nations

BY JENNIFER HARRIS

ne could be forgiven for thinking the coming year a holding pattern for U.S. – China relations. Its most important contours are already rather drawn. Growth in China will slow. Growth in the U.S. will have fended off its own worst enemy, thanks to a recent budget and spending deals that fund the government through next fall. Washington will settle into political hibernation as attention shifts to November’s U.S. presidential elections and as legacy concerns claim more and more of the Obama Administration’s time and diplomatic energies. Beijing, for its part, will gear up for the 19th Party Congress in 2017. But while seemingly valid, viewing 2016 as a holding pattern would be wrong. In fact, these headlines obscure more than they reveal. Lurking beneath them is a set of questions that, wide open as they are important, will likely shape U.S.–China relations into 2017 and beyond. Begin with slowing growth in China. No one

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really doubts the Chinese government has the resources to engineer 6.5 to 6.8 percent growth in 2016. The real question is whether it can proceed with meaningful reforms along the way. Concerning signs of structural drift — slowing Chinese demand for finished and intermediate goods that defies easy explanation and ever-dwindling interest payments

Joe Bishop/U.S. Navy

Plan?

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Jennifer M. Harris Jennifer M. Harris is a senior fellow at the Council on Foreign Relations. She was a member of the policy planning staff at the U.S. Department of State where she was a lead architect of Secretary of State Hillary Clinton’s Economic Statecraft agenda.

compared to total debt outstanding for publicly traded companies in China – suggest that President Xi’s reforms cannot wait for rosier growth. For all the talk of boosting Chinese domestic consumption, the way it will happen is through more productive investment. This, in turn, requires continued financial reforms. Happily, B eijing has made important strides in liberalizing the exchange rate, overhauling land acquisition, curbing local government borrowing and improving both local government and corporate bond markets – what amounts to more reform progress than many Asian countries (including South Korea and Japan). But too many of Beijing’s spending decisions still bid poorly. Sharp, sustained increases in military and domestic security spending are hardly China’s highest areas of potential return on investment. In g au g i n g h ow s t ron g l y B e ij i n g w i l l

prioritize investment productivity in 2016, where to look? One such sign lies (once again) in urbanization. Having supplied much of the magic behind China’s decades of 7 percent-plus growth, urbanization still has more untapped growth potential to offer. Yet, unlike the traditional rural-to-urban refrain, this time China’s urbanization potential lies more in its largest cities, which are far larger than its smaller- and mid-sized cities and much less dense. If President Xi is serious about generating enough growth to sustain a real reform agenda, increasing urban density in C h i na’s l arge st c it i e s is among t he mo st compelling places to start. A second place to g au g e C h i n a’s r e f o r m s e r i o u s n e s s i s i t s leadership – where much hangs on President

President Obama and President Xi head to an event at the White House in September

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No aversion

The Presidents of Russia, the U.S. and China with other leaders during the APEC summit in 2014 in Beijing

“

Some may mistake slowing Chinese growth as translating into waning external clout…”

Xi’s ability to install reform-minded allies in key posts before the 19th Party Congress. Outcomes, after all, are never decided at meetings, China’s Party Congress being no exception. Yet, t he l arger d anger to such cer t ain headlines for 2016, beyond what questions they can obscure, is the false comfort they can engender – the risk that policymakers simply infer too much from them. First, some may mistake slowing Chinese growth as translating into waning external c l out , a s i f s l ow e r g row t h i mp l i e s s om e diminut ion in B eijing’s c ash on hand. If a ny t h i n g , t h e r i s i n g p r e m i u m o n m o r e productive investments (and the fact that, without far greater reform progress, such investment opportunities will be in short supply domestically) places new importance on China’s array of state-led outbound investment efforts, such as the Asian Infrastructure Investment Bank and the One Belt, One Road initiative. And because these initiatives are funded by China’s policy banks, which are in turn financed by C h i n a’s t r a d e su r plu s and it s fore i g n exchange holdings, they remain largely separate from – and unaffected by – slower Chinese growth.

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Another risk is that more hawkish elements of Chinese foreign policy mistake a White House hyper-focused on the Middle East and tiring of new foreign policy crises as an opening for China to escalate its territorial disputes. With upcoming elections in Taiwan poised to return the (pro-independence) DPP party to power and with maritime tensions in the South and East China Seas still building, provocations and pretexts will be easy for Chinese leaders to find. But it would be a mistake to read the U.S.’ recent resistance to deepening its military involvement in the Middle East or Eastern Europe as a more general aversion to confronting security threats. Quite the contrary. In fact, these hesitations derive from what remains of President Obama’s central (if too often frustrated) foreign policy priority: solidifying the U.S.’ status as a resident power in Asia – diplomatically, economically and militarily. It requires strategic restraint of the sort now in evidence in President Obama’s Russia and Middle East policies. Should any of China’s territorial disputes escalate in ways that would test the White House, especially in a general election year, crises could quickly spiral into unintended consequences. The final risk is not so much a potential misreading as simply a new sort of aggravation, unfamiliar to Beijing: for the first time in a generation, slowing Chinese growth could allow many countries in Asia to imagine their future as something other than economically d o m i n a t e d b y C h i n a . A s I a r g u e i n my for t h c om i ng b o ok , War by O the r Mean s (Harvard University Press, 2016; co-authored with Bob Blackwill), Beijing has – brilliantly and for nearly two decades now – translated its future economic growth into present geopolitical leverage across Asia and beyond. It is perhaps the singular defining feature of Chinese foreign policy in the 21st century. And in 2016, it may begin to see its first cracks. How Beijing responds could well shape the next chapter of China’s relations with the United States and indeed the wider world.

A Seahawk helicopter lands on USS Fort Worth in the South China Sea］

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No, the Sky is Not Falling Antonio Turretto Ramos / U.S. Navy

The level of tension over China’s actions in the South China Sea is exaggerated and armed conflict is fueled by internal politics BY LYLE GOLDSTEIN

tarting around 2009 and 2010, the South China Sea has been a source of intense turbulence for U.S.-China relations. The dispute showed few signs of abating over the course of 2015, as each side maneuvered to gain a strategic advantage. Americans contend that China is bullying its neighbors and seeking control over a critical artery of global trade. The Chinese meanwhile are ever more convinced that the United States is leveraging the complex territorial dispute in order to maintain its regional profile and to forge a coalition to block the expansion of China’s influence. Even as the pace of military deployments and exercises picks up on both sides, rhetoric from U.S. and Chinese defense officials, such as from the 2015 Shangri La Dialogue in Singapore, harkens back to the Cold War era. Undoubtedly, journalists feed a frenzy of tensions as most have concluded

that rivalry sells – creating a self-reinforcing dynamic within the defense commentariat on both sides. Defense analysts may well have to look to the business community for a dose of common sense on the South China Sea. First and most obviously, a military showdown

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Lyle Goldstein Lyle Goldstein, PhD is Associate Professor in the China Maritime Studies Institute at the U.S. Naval War College in Newport, RI. He is author most recently of the book Meeting China Halfway: How to Defuse the Emerging US-China Rivalry (Georgetown University Press, 2015).The opinions expressed in this article are entirely his own and do not reflect official assessments of the US Navy or any other agency of the US Government.

would inevitably scupper the staggering gains reaped from the Asia-Pacific economic miracle from the last few decades. Then, there is the obvious problem that both the U.S. and China possess nuclear weapons in sufficient quantity to “end” the other – a sobering thought for any leader contemplating a resort to arms, to be sure. But a further bit of common sense may be needed to shake military leaders back to their senses, and this involves the simple and irreducible fact that the world’s two leading superpowers should in no circumstances contemplate a catastrophic war over “rocks and reefs.” At the most esoteric level, the dispute revolves around the fine points of the United Nations Convention on the Law of the Sea (UNCLOS). Maritime lawyers on both sides have been busy writing briefs on what constitutes an “island” versus a “rock.” Another major point of contention concerns what sort of military activities are

Cmdr. Harry Marsh, left, commanding officer of USS Stethem, bids farewell to PLA Navy Senior Capt. Jin Wei, director of the General Office of the North Sea Fleet, after a port visit to Qingdao in July 2015. The visit was part of a relationship building exercise

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permitted in which zones; for example, ships relying on “innocent passage” may transit through territorial waters but are not permitted to operate aircraft. The most important set of legal arguments concerns the delineation of Economic Exclusion Zones (EEZs) and vitally which authority should adjudicate disputed zones. While it is somewhat encouraging that lawyers on both sides are at the center of this evolving maritime dispute, there do not seem to be obvious legal pathways toward resolution, regrettably. In fact, Manila’s suit against Beijing at the International Law of the Sea (ITLOS) has arguably increased regional tensions rather than reduced them.

Airfields vulnerable Another frame for analyzing the South China Sea dispute is focusing on the geopolitical context, and this approach may offer both a more succinct explanation for the development of the dispute as well as a more obvious approach to pursuing dispute resolution. Indeed, a concise way to understand South China Sea tensions is to consider the relationship between a hegemon and a rising power, a phenomenon familiar to historians and scholars since at least Thucydides’ rendering of the destructive conflict between Athens and Sparta more than two millennia ago. The dangers of armed conflict, fed by misperception, xenophobic internal politics, voracious military-industrial complexes and puffed-up threat scenarios are rife. Indeed, many defense analysts have greeted China’s expanded buildup of facilities in the Spratly Islands area of the South China Sea as a kind of “sky is falling” moment for Asia-Pacific regional order. However, that conclusion relies on a panoply of specious premises, of which only a few can be

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explained here. A common argument, for example, holds that the new airfields are sufficiently long to deploy all types of combat aircraft, so the alteration to the balance of power must be significant. However, that argument does not account for the fact that in the age of precision strike, these new Chinese airfields in the South China Sea are intensely vulnerable and would surely be rendered inoperable by cruise missile strikes within the first few hours of any war. Another unfortunate way in which the Chinese threat to the South China Sea is exaggerated concerns the allegation that Beijing is seeking to “control” the South China Sea. Despite the allegation, there have been no instances of China hindering merchant traffic in the exceedingly busy shipping channels. Indeed, such a policy of interfering with “freedom of navigation” would be completely contrary to China’s position as a maritime trade juggernaut. The few “incidents” that have occurred have been related to military surveillance activities or to fishing practices and oil/gas prospecting. Yet, these are each special circumstances that are certainly amenable to negotiated solution and pose no serious threat to the United States or maritime commerce generally. To put these issues in perspective, it is worth keeping in mind that the U.S. and Canada also have numerous maritime disputes, because the maritime domain is highly complex, yet such disagreements can indeed be managed peacefully.

No appetite for violence In my recent book on U.S.-China relations, the longest chapter examines the South China Sea dispute and proposes a “cooperation spiral” to halt and reverse the “escalation spiral” that is now amply evident. This set of mutual compromises involves small steps and large ones toward resolving the dispute. Trust-building small steps i n clu d e j oi nt m i l it ar y e xe rc i s e s an d t h e establishment of a standing counter-piracy patrol, in addition to a Southeast Asia region-wide maritime law enforcement organization similar to that which already functions effectively in Northeast Asia. More ambitious compromise steps might encompass Beijing opening its large Yalong

Leaders at the ASEAN summit in November

Bay naval base to annual visits by ASEAN delegations, while Washington could reciprocate by decreasing its surveillance flights in the northern South China Sea. The most important step would involve China fully clarifying its claims (with accompanying base lines) and accelerating joint development negotiations, while the U.S. moves to support a more constructive bilateral framework for negotiations on the maritime dispute. To be sure, such compromises would be painful to swallow in both Beijing and Washington, but the alternatives of militarized rivalry (wasting potentially trillions of dollars) and the open-ended possibility of armed conflict between nuclear powers are hardly palatable. Meanwhile, truly urgent international security issues, such as the North Korean nuclear issue, are being neglected while U.S. and Chinese strategists alike have their gaze fixed on the reefs and rocks of the South China Sea. Businessmen, both American and Chinese, are wise to be skeptical and ask tough questions of their respective governments about policies that only seem to accelerate the dangerous rivalry in the South China Sea.

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Strategic Partnership or Under the surface, China-Russia relations are complicated and constrained due to divergent global outlooks

BY ALEXANDER COOLEY

he rise of the Russia-China strategic partnership as a potential counter to U.S. influence has increased speculation among scholars and policymakers about whether we are witnessing a fundamental shift in global politics. Russiaâ&#x20AC;&#x2122;s defiant pivot to China following the Ukraine crisis and the imposition of Western sanctions was underlined by the public signing of the US$400 billion gas deal in May 2014 and talk of a new era of close partnership and cooperation. But beneath the surface, Beijing and Moscow share differing views about how to increase and exert their influence in international politics: Moscow seeks to counter the West, leading it to reject U.S. and EU-led institutions and to renationalize its economic activity. By contrast,

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B eijing pursues a more evolutionar y and gradualist approach, seeking to steadily increase its influence and role within international institutions. So while China and Russia publicly tout their strategic partnership, regularly signing new cooperation documents and framework

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Posturing?

Alexander Cooley Alexander Cooley is Director of Columbia University’s Harriman Institute for the study of Russia, Eurasia and Eastern Europe and a Professor of Political Science at Barnard College. His books include Great Games, Local Rules:The New Great Power Contest in Central Asia (Oxford).

The presidents of China, Russia and the U.S. during the 2014 APEC meeting

agreements, the actual depth of the relationship, especially in the economic sphere, is constrained by their diverging global outlooks. Despite the promise of ever-increasing partnership, 2015 revealed the limits and constraints on China-Russia economic relations. The collapse in oil prices and Western sanctions placed great pressure on the ruble, while its devaluation sent shockwaves throughout Eurasia. As a result, the total value of Chinese-Russian trade decreased year-on-year by 30 percent in the first six months of 2015, while investment also decreased by 25 percent despite the fact that overall Chinese investment overseas rose by 29 percent. Moreover, while Russia had hoped that its “pivot east” would secure increased financing from China for Russian firms unable to borrow from Western sources, Chinese banks have proven

reluctant substitutes, in part because of their fear of being sanctioned by the United States. Given the slowdown in the Chinese economy, the contraction in the Russian economy and the increasing downward pressure on oil and commodity prices, China-Russia trade is unlikely to rapidly recover in 2016. Indeed, even existing investments or framework deals in energy and commodities may be slowed or even renegotiated given the uncertain economic environment and Beijing’s perception that it might secure better bargaining terms. Second, Moscow and Beijing will also be hardpressed to reconcile the respective regional economic architectures that they champion – for China, One Belt One Road (OBOR) and for Russia, the Eurasian Economic Union (EEU). OBOR represents an ambitious attempt to upgrade regional infrastructure and transportation in order to connect China with Europe, the Middle East and South Asia. For Russia, the EEU provides a framework for ensuring a system of Russian-led rules and regulations defined to strengthen trade and investment within the post-Soviet sphere. Whereas OBOR seeks to promote trade and transit through Eurasia and strengthen China’s global links, the EEU is designed to “wall-in” Russia and Eurasia and protect it from other competing external economic forces. For example, Russia’s retaliatory countersanctions against EU agricultural products were also designed to boost domestic and regional agri-business. Russian and Chinese officials have commenced

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be a forum to promote regional cooperation and development in Central and South Asia. By contrast, Russia uses the SCO to issue critical statements of U.S. and Western actions on issues like Syria, missile defense and the presence of U.S. militar y bases in the region. Moscow has consistently blocked Chinese economic proposals for an SCO regional trade forum, a development bank and an SCO anti-crisis fund. Unable to agree on the organization’s fundamental purpose, the SCO continues to mostly function as a ceremonial organization. Dmitry Fedorovich Mezentsev, left, Secretary-General of Shanghai Cooperation Organization, at a signing ceremony in Shanghai in 2014

negot iat ions to co ordinate and integ rate investment projects under the OBOR and the EEU – but negotiations in 2016 will prove exceedingly difficult, as the sheer volume of Chinese economic activity in Eurasia will be difficult to regulate from this format even if Beijing accepts the EEU as a partner organization.

Differing views Third, Russia and China’s different worldviews will also put them at odds over the role of new regional organizations such as the Shanghai Cooperation Organization (SCO), the BRICS and the Asian Infrastructure Investment Bank (AIIB). For Russia, these institutions provide sites to criticize the West and to develop new sources of rules and decision-making that challenge Western counterparts. For China, these institutions are intended to further promote economic globalization and supplement, not replace, international institutions like the IMF, World Bank and WTO. Also, consider Moscow and Beijing’s different views of the purpose of the SCO, which is expected to admit India and Pakistan as the organization’s seventh and eighth new members during the SCO summit meeting in 2016 in Tashkent, Uzbekistan. For China, the SCO should

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China’s terms Of course, there are many other global issues on which China and Russia agree and regularly cooperate: together they coordinate UN votes, oppose Western overseas military interventions and lead the charge against Western efforts to enact political conditions in global governance; b ot h are champions of re-ass er t ing st ate sovereignty and government control over the internet and the media and both would like to exercis e a g re ater voice in inter nat iona l standards-making traditionally dominated by the West. But, tellingly, despite talk of grand “geoe c o n o m i c s h i f t s ,” m o s t e c o n o m i c d e a l s increasingly take place on China’s terms. Although Russian officials and commentators vigorously reject speculation that they are becoming a “junior partner,” the asymmetries in the relationship are too stark to ignore; while China is Russia’s leading trade partner, Russia was only China’s 9th largest partner in 2014 and is likely to fall out of the top ten in rank in 2015 and 2016. Mindful of Russian sensitivities about its international standing, Chinese officials make a point of referring to Russia as an important great power in public settings and to avoid criticism of Russian foreign policy actions in hotspots like Ukraine and Syria. But behind the scenes, China increasingly is driving the relationship in support of its own agenda, making the Russian bet to decouple from the West and the “globalization” with Chinese partnership an increasingly risky proposition.

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‘We’re all China Investors’ A U.S.-based strategist explains the real story behind the numbers in China Andy Rothman Andy Rothman is Investment Strategist at Matthews Asia, the largest Asia-only investment manager in the U.S.

BY ANDY ROTHMAN

hen your board members and shareholders look at China, are they looking at its past or its future?

Many in the U.S. are pessimistic about China’s economy, largely because they don’t realize how much China’s economy has changed. China’s old economy looks weak. Exports were down by about 3 percent through the first 11 months of last year, compared to an increase of 6 percent in 2014. Industrial production was up 6 percent, compared to 8 percent a year earlier. Fixed asset investment increased 10 percent, down from a 16 percent growth rate during the same period in 2014. But those statistics offer an incomplete picture of China’s economy.

Not an export-led economy Exports, for example, haven’t contributed to GDP growth for the past seven years. I estimate that only about 10 percent of the goods rolling out of Chinese factories are exported. China largely

consumes what it produces. Manufacturing is sluggish, especially heavy industries such as steel and cement, as China has passed its peak in the growth rate of construction of infrastructure and new homes. But manufacturing has not collapsed, with a private survey revealing that factory wages were up 5 to 6 percent last year, reflecting a fairly tight labor market, and more than 10 million new homes were sold in 2015.

Consumption and services More importantly, few recognize that 2015 was almost certainly the third consecutive year in which the manufacturing and construction part of China’s economy was smaller than the consumption and ser vices part. China has rebalanced away from a dependence on exports, heavy industry and investment and has become

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China has Been the U.S.’ Fastest Growing Export Market... by Far

Growth rate of U.S. exports to its 10 biggest markets, since China joined the WTO in 2001 177%

Brazil

74%

Canada

116%

Mexico

666%

China Japan

3% 68%

Germany UK

30% 100%

Netherlands

180%

HK S. Korea

60%

Total US exports minus China

Source: Matthews Asia

the world’s best consumption story. Understanding this dramatic shift is key to assessing the impact of China on the global economy and on your firm’s prospects.

We are all China investors I tell our clients that even if they never own a Chinese equity, they are effectively a China

investor. China accounts for about one-third of global growth – greater than the combined shares of the U.S., Europe and Japan. This helps explain why U.S. exports to China have increased by more than 600 percent since it joined the WTO, while U.S. exports to the rest of the world rose by less than 100 percent.

GDP and consumption This rebalancing is driven by Chines e consumers, with consumption accounting for 58 percent of GDP growth during the first three quarters of 2015. Shrugging off the mid-June fall in the stock market, real (inflation-adjusted) retail sales actually accelerated to 11 percent in October and November, the fastest pace since March.

Strong income growth

An investor reacts to the Shanghai Composite Index at a stock brokerage house in Qingdao city in July

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Unprecedented income growth is the most important factor supporting consumption. In the first three quarters of last year, real per capita disposable income rose more than 7 percent, while over the past decade, real urban income rose 137 percent and real rural income rose 139

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percent. Some of that increase was driven by government policy: the minimum wage in Shanghai, for example, rose 187 percent over the past 10 years. (In the U.S., real per capita disposable personal income rose by about 8 percent over the last 10 years.) And it is worth noting that one reason that the fall in the A-share m ar ke t d i d n’t d e pre s s C h i n e s e consumers is that although the market was down sharply from its recent peak, the story wasn’t quite as bad as some made it out to be. As of the December 15, 2015 close, the A worker cuts steel at a plant in Hebei Province in 2014 Shanghai Composite Index was down 32 percent from its June 12 peak. But the index was up 9 percent from the start of the year, and it was up 20 percent from a in the day. year ago. Thus, the Shanghai Composite Index was outperforming the S&P 500 Index on a yearLower growth, larger to-date basis (with the S&P 500 down 1 percent as opportunity of December 15) and on a one-year basis (with the S&P 500 up 6 percent). In other words, the lower growth rate is generating a larger opportunity for many companies selling goods and services to Chinese Rebalancing and for investors in those companies. We need to accept and understand, however, that the necessary restructuring and rebalancing What’s ahead? of China’s economy, along with changes in demographics and the law of large numbers (two This year is likely to deliver more of what we decades of 10 percent growth), does mean that saw in 2015. Periodic volatility – due in part to almost every aspect of the economy will continue the steadily rising share of private-sector activity, to grow at a gradually slower year-on-year pace and in part to short-term policy mistakes as the for the foreseeable future. The strong consumer government turns increasingly to market-oriented story can mitigate the impact of the slowdown in tools – will again lead to dramatic headlines. But manufacturing and investment, but it can’t drive the risk of a hard landing remains low. growth back to an 8 percent pace. Prospects for another round of state-owned So while the growth rates of most parts of the enterprise (SOE) reform are high, and I anticipate economy are likely to continue to decelerate material capacity reductions in constructiongradually, keep in mind that the “slow” pace of 6.9 related sectors. This will result in job loss, but the percent growth during the first three quarters of government appears set to provide those workers last year, on a base that is about 300 percent with a level of benefits that should limit the bigger than it was a decade ago (when GDP impact on social stability. g row t h w a s 1 0 p e rc e nt ) , me ans t h at t he GDP growth – possibly the least important incremental expansion in China’s economy in economic statistic in China – is likely to cool to 2015 was about 60 percent bigger than it was back the 6 to 6.5 percent range this year.

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President Obama makes the case for TPP with U.S. agriculture officials in October

The Stakes are High The Trans-Pacific Partnership is a strong agreement that should be ratified by Congress, says author BY PETER PETRI

he 2016 Asia-Pacific trade agenda is full. The Trans-Pacific Partnership (TPP) now depends on nothing more (or less) than U.S. Congressional action. In November, APEC will unveil its strategic study of a Free Trade Area of the Asia Pacific (FTAAP), a region-wide agreement with huge potential. The 16-country Regional Comprehensive Economic Partnership will be under pressure to catch up with the TPP. In December, the WTO will decide whether China is accorded â&#x20AC;&#x153;market economyâ&#x20AC;? status, which would mean more favorable treatment in trade disputes. Good news on at least some of these fronts would boost prospects for stable, productive economic relations in this massive region. The stakes are high. The TPP offers new, comprehensive rules to meet the challenges of the contemporary economy. This is a major achievement, in sharp contrast with two decades of stalled global negotiations. The TPP appears to be a strong agreement. For example, it will eliminate nearly all tariffs among members, including big fish like the 350 percent U.S. tariff on

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tobacco products. But more importantly, it sets rules to ensure competition in new areas ranging from electronic commerce and digital property rights to finance, communications and professional services. It also offers a model for expansion, with a membership that spans countries as poor as Vietnam and Peru and as rich as Australia and Japan. Colleagues and I estimate that, once fully

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PETER PETRI Peter A. Petri is the Carl Shapiro Professor of International Finance at Brandeis University.

implemented, the TPP could add nearly US$500 billion to global incomes, as well as foster critical reforms from Canada and Japan to Malaysia and Vietnam. The FTAAP idea is even more ambitious. Proposed by the business advisory arm of APEC in 2004, it would create a free trade zone spanning all 21 APEC economies. At that time, it was warmly received by President George W. Bush, but progress since has been slow. In 2014, China became FTAAP’s surprising champion, helping to launch a strategic study to clarify what the agreement might entail and how it could be realized. This work is now underway under joint Chinese and U.S. direction and will be presented to APEC leaders in Peru. The premise of FTAAP is that no region-wide trading system can be successful unless it includes China and the United States, and a constructive report could pave the way for the convergence of the TPP and other initiatives. Yet little can be taken for granted. In the United States, the prospect of a TPP vote in a presidential election year has haunted supporters of trade since the negotiations began. They were right to worry. As the vote draws near, several prominent Republicans, traditionally supporters of trade policy, face difficult races and are wavering. Democrats, in turn, are too dependent on anti-trade lobbies to follow their soon-to-retire President. Senate Majority Leader Mitch McConnell, who will need to orchestrate Congressional action, has called a vote this year a “big mistake.”

TPP opens doors President Obama, to be sure, has not given up. Fresh off surprisingly friendly budget votes in Congress, he is campaigning hard to ratify the TPP in 2016. A vote might come in the political lull between the end of the presidential primaries in late spring and the party conventions in July, or in the lame-duck Congressional session that follows

the November elections. After that, the outlook dims. Hillary Clinton, for example, must hope that the TPP will be concluded soon; if she becomes President, she will face intense political pressure to reopen negotiations. Yet delaying the TPP, even for one year, amounts to leaving substantial U.S. economic benefits on the table. A ratified TPP would also affect other trade initiatives. The TPP would open a pathway to a wider agreement and generate competitive pressures for it. Most good trade agreements have ripple effects; countries want to join them. For example, the European trade zone expanded from six countries to 28, ASEAN from five to ten, and NAFTA from two to three (and more, if parallel bilateral agreements are included). The TPP has already grown from four to 12 members, and Costa Rica, Colombia, Indonesia, Korea, the Philippines, Thailand and others are now eager to join. China too has shown interest, and its membership would be the grand prize. Is a comprehensive, rules-based Asia-Pacific trading system a realistic goal? Not in the near future. The China-U.S. relationship, in particular, faces headwinds ranging from economic and political developments in China to political divisions in the United States. But a high-quality, inclusive regional agreement remains the most attractive option available. No alternative can offer as stable and productive a basis for economic and political progress in the region, and by implication the world. As we await the judgements of 2016, work needs to continue on China-U.S. economic cooperation. Recent joint efforts on the environment, the inclusion of the RMB in the SDR basket and successful outcomes in Geneva on information technology and agricultural subsidies offer reasons for hope. Agreement on China’s market economy status would add to this list of achievements. The task of building an integrated Asia-Pacific economy will take decades but offers benefits that would match its ambition.

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“

…The prospect of a TPP vote in a presidential election year has haunted supporters of trade…”

AmCham Shanghai

Sponsor Appreciation dinner at naked Hub

CSR Innovation Series on Ecotourism

GA Conference

Talk on changing consumer behavior The Invest in USA forum in Nanjing 34

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Month in Pictures

The Barnett-Oksenberg Lecture

Roundtable on senior housing and healthcare

Guests at the Christmas mixer

Consul General Hanscom Smith with guests at the Monthly Member Briefing

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THE CHAIR’S CORNER A Chat with Rebecca Liu of the Healthcare Committee We launched a new column in December to help our readers get to know the AmCham Shanghai committee chairs. In this issue, we talk with Rebecca Liu, General Manager of COOK (China) Medical and Co-Chair of the Healthcare Committee.

Q: What are the top two issues facing your industry

open. So far, the decision has been the right one, especially from a

in China today?

market access point of view. Having offices in both Beijing and

Rebecca Liu: “The first issue is the constant change.The

Shanghai allows us to build good relationships with local

industry has become highly regulated since last year, especially

government agencies, such as the China Food and Drug

after Order 650 (regulations for the supervision and

Administration (CFDA), as well as enjoy the benefits of Shanghai’s

administration on Medical Devices in China) was enacted in June

transparent business environment.”

2014. There have been more barriers, and as a foreign enterprise, Cook China faces more challenges in comparison to domestic

Q: What is the biggest opportunity for U.S.

competitors in terms of market access and regulation implication.

companies operating in the Chinese market?

“The second challenge is the people.The talent pool in China

RL: “Demand. Due to an increasing middle class and a rise in

is very limited in the healthcare industry and retaining talent is

chronic diseases like obesity and diabetes, the opportunity for U.S.

even more difficult, so naturally, the turnover rate is very high in

technology is substantial.”

China. Nonetheless, our turnover rate is comparatively low due to our company culture and core values.”

Q: Do you have any advice for newcomers to your industry in China?

Q: Which are the leading Chinese companies in your

RL: “You need to engage and understand the local culture and

industry?

people. Speaking of culture, often during a large meeting, people

RL: “In general, our main competitors are domestic firms.

tend to keep quiet, but that doesn’t necessarily mean they agree

However, depending on the product line, like in aortic, endoscopy

with you.Thus, it’s important to clarify whether they understand

and critical care needs, there are different competitors. Microtech

your position. Newcomers should also have local people be more

Nanjing and Lepu Medical are a few well established local firms

involved at the senior local management team level and do a

known for gastroenterology and aortic technology. Domestic

better job of interpreting a company’s corporate culture. Doing

companies also have the advantage of receiving favored treatment

the right thing for patients is also a really important ideal in this

from the government and their costs of market access are lower.

industry.”

In addition, they are also effective at catching up with U.S. innovation.”

Q: How do you use social media? RL: “I enjoy social media personally. Some companies in the

Q: What is the best business decision you’ve ever

healthcare industry use WeChat to communicate with doctors to

made?

discuss cases and transfer images.They also use it to track

RL: “When I joined Cook Medical, I was asked whether we

products, so social media can play a very interesting role in

should close one of our offices in Shanghai or Beijing. I thought

healthcare. However, we also need to be very careful about

both offices had good reasons to exist, so I decided to keep both

privacy, which is something Cook is looking to be a part of.”

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inside amcham from the chairman

Make Space for China

Ker Gibbs Chair of the Board of Governors

hina recently opened the doors to the Asia Infrastructure Investment Bank (AIIB) and appointed Mr. Jin Liqun as president-designate. The AIIB is starting with US$100 billion to support infrastructure development projects in Central Asia. Fifty-seven countries have signed on as members. The United States is not among them. America declined, initially encouraging allies to stay away too, pointing to redundancy with institutions like the World Bank and Asian Development Bank (ADB), and China’s record around governance and transparency. In years to come, we will look back on this as an important moment in China’s relationship with the U.S. and the rest of the world. China has rarely embraced multilateral institutions, preferring bilateral arrangements that are more easily controlled. For China, AIIB is a major step toward becoming a true global player. Mr. Jin, China’s appointee to lead the bank, is a remarkable man. He worked at the World Bank in the 1980s and at ADB. He speaks

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English with near native proficiency and reads in several other languages across a wide variety of subjects. Our colleagues at AmCham in Beijing invited Mr. Jin to dinner and graciously invited me to come along. Throughout the course of our conversation, Mr. Jin quoted German philosophers and referred to various books and theories. Finally, as our evening drew to a close, he lamented America’s decision to stay out of the bank. Had America forgotten that we were allies in the Second World War? Mr. Jin is not wrong to be disappointed with America’s decision, and he picked the right point in history to frame the discussion. The current development institutions were formed in the closing months of the Second World War with the express purpose of never again letting economic imbalances lead us down the path to war. Bretton Woods, where the new rules of global trade and finance were determined, was highly contentious. Harry Dexter White and John Maynard Keynes fought bitterly over whose plan would be adopted. The U.S. and Britain, having joined forces to defeat the Nazis, argued for months over fundamental questions like where the new institutions would be based. Before the war, London was the undisputed center of world finance. Why, argued Keynes, an Englishman and the leading macroeconomist of his time, should Washington become the headquarters? China’s proposal to form the AIIB was bound to face opposing views. Economic power is shifting, thankfully this time not as a result of war. We have just witnessed the fastest peaceful economic rise of any major country in the history of the world. The current rules of global trade have given us decades of stability and growth. Can we find a way to keep that, but make space for China to exert leadership? I’m hopeful that the AIIB will succeed under the good governance that China has promised. I also hope a path can be found for the U.S. (and Japan) to join at some point. China has no reason to feel wounded by the U.S. decision to stay out, at least for now. China is famous for succumbing to hurt feelings. Fortunately for us, Mr. Jin is made of sturdy stuff. New members will need to abide to the Articles of Agreement, but Mr. Jin told me the door is open for the United States and other countries to join. As AmCham members we have a stake in how events like AIIB play out. I would like to hear from members on topics that shape our operating environment. This monthly column will be my opportunity to comment on events, as a starting point for that conversation.

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

Board Approves 2016 Budget, Gets Update on Business Survey, Revises Chamber Logo Highlights from the December 2015 Board of Governors Meeting AmCham Shanghai Logo With the imminent retirement of the Chamber’s 100th anniversary special logo, the Board approved a revision to the previous logo that includes the phrase “since 1915” as an integral part of the design. The Chamber will start using this new logo in January. 2016 Budget Approved The Board approved the Chamber’s budget for 2016. The approved budget projects a break-even year, bringing to an end several years of deficit budgets. The board also approved increasing corporate membership rates to RMB9,500. China Business Report Update Chamber president Kenneth Jarrett said AmCham Shanghai received 406 responses for the annual business climate survey, an excellent response rate. Work is currently underway on the analysis and preparation of the report, which will be released in late January.

Board Motion Commending Outgoing Chairman The Board unanimously passed a motion expressing appreciation to Robert Theleen for his three years of exceptional service as Board Chairman. Committees Director Leaving The Board also passed a motion thanking Committees Director Stefanie Myers for her hard work and contributions to AmCham Shanghai. Stefanie and her family will relocate to Hong Kong in late January. Meeting Attendance Governors: Jimmy Chen, Ker Gibbs, Cecilia Ho, Aina Konold, Robert Theleen (Chairman), Helen Yang, Glen Walter, Cameron Werker, Shirley Zhao Apologies: Mike Crotty, William Duff, Jun Ge, Ning Lei Attendees: Veomayoury Baccam, Kenneth Jarrett (President), Li Qiang, Helen Ren, Scott Williams

The AmCham Shanghai 2016 Board of Governors Governors

Chairman

Ker Gibbs ChinaBio

Jimmy Chen FedEx Express

Michael Crotty MKT & Associates

Cecilia Ho International Paper Asia

Timothy Huang Bank of America Merrill Lynch

Aina E. Konold GAP Inc.

Ning Lei Navistar

Glen Walter Coca-Cola

Helen ChingHsien Yang DuPont

Vincent Yang SKF

Eric Zheng AIG Insurance

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Government Relations The Art of Government Affairs

Key JCCT Outcomes AmCham Shanghai President Kenneth Jarrett; U.S.-China Business Council Chief Representative Jake Parker; and Principal Commercial Officer for the U.S. Department of Commerce’s Foreign Commercial Service in Shanghai Cameron Werker briefed members on the key outcomes and impact of the 26th U.S.–China Joint Commission on Commerce and Trade (JCCT) meetings.

Nina Wang and Patrick Wang

AmCham Shanghai’s inaugural Government Affairs (GA) Conference, held on December 9, examined GA practice and policy issues and advised on GA strategy. Brett Krause, JP Morgan Chase Bank President, opened with a discussion on CEO expectations on GA strategy, how GA practitioners can better communicate with CEOs and how to institutionalize GA practices. At the panel on building a GA function with impact, Reggie Lai, Co-Chair of the AmCham GA Committee and the Senior Director of Government Affairs Asia at TE Connectivity, said that the Chinese government “interferes in every aspect of our business,” adding that companies must create an effective strategy and use it to their advantage. Dan Sun, VP of Government Affairs at Honeywell China, emphasized the importance of good planning and said that Honeywell’s strategy is to “have no surprises.” A briefing on Shanghai government policies and the 13th Five Year Plan was also provided by Shanghai government speakers and academics. The panel included Dong Tao, Shanghai Foreign Investment Development Board; Kevin Weng, PhD at Jiaotong University School of Medicine; and Ye Fan, Foreign Investment Department, Pudong Commission of Commerce.

The annual JCCT meeting serves as the primary forum for high-level dialogue between the United States and China on commercial and economic issues. Normally both sides issue their own outcome document, as well as a joint outcome document. At the time of the talk, only the U.S. had issued an outcome document. The JCCT meetings were a modest success that achieved some progress on ICT procurement issues, medical devices, trade secrets and IPR enforcement. The U.S. Government’s efforts to “re-imagine” the JCCT and provide more opportunities for business representatives at the meetings appear to be paying off. High-level Chinese government officials including Vice Premier Wang Yang attended the business roundtables and appeared interested in hearing from companies. One of the most prominent outcomes of the JCCT was the commitment made by the Chinese on nondiscriminatory and transparent policies for ICT information security. China assured the U.S. side that Chinese banks would be free to purchase ICT products regardless of the country of origin. China also made commitments that any commercial secrets obtained in the enforcement of the Anti-Monopoly Law will be protected and not shared with other agencies or third parties. Additionally, China clarified that it is in the process of amending the AntiUnfair Competition Law, indicating a stronger commitment to the protection of trade secrets, which includes stronger access to judicial and administrative procedures.

The conference concluded with an overview of the 13th FiveYear Plan. Scott Kennedy, Deputy Director of the Freeman Chair in China Studies at the Center for Strategic and International Studies, predicted that the plan will not be a “great leap forward” but just include incremental changes. Its primary goal was perfecting China Inc., and much of the drafting is dominated by the Communist Party.

(From left) Cameron Werker, Jake Parker and Kenneth Jarrett brief members on the JCCT outcomes

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Committee highlights

inside amcham

Ecopreneurs: The Case for Going Green Members of AmCham Shanghaiâ&#x20AC;&#x2122;s Environmental and Entrepreneurship Committees attended presentations by Heather Kaye, owner of FINCH designs, and Bunny Yan, founder of the Squirrelz, on November 17. Presentations focused on how to achieve a triple bottom line of people, profits and planet by utilizing recycled materials in the apparel industry. The speakers offered strategies for identifying and capitalizing on green products in China, increasing brand value and appealing to the new wave of consumers in China. They also shared ideas for entrepreneurs seeking to reduce costs and generate profits by going green. Kaye spoke about how, coming from a background in design, she developed an interest in manufacturing and sourcing. Kaye started FINCH designs with her partner Itee Soni in 2010 as an organic apparel company. They worked with several organic fabrics but realized that their consumers were mostly interested in buying their prints. Soon they started making rain capes with signature print designs made out of recycled polyethylene terephthalate (PET), or plastic bottles. Similarly, Yan discussed how waste can be turned into valuable products. One to five percent of all factory production is wasted every day. However, this waste should be considered misplaced treasure as it is composed of excess materials, leftover trimmings or misprinted packaging. These materials are new from the factories but disposed of daily because their value is very difficult for the factories to extract. The Squirrelz focuses on sourcing new waste from factories through their materials platform and providing it to designers to be made into products. They create a win-win situation as factories reduce their waste and designers can cut costs while only buying the pieces they need for their collection.

From left, Heather Kaye, Bunny Yan, Caroline Pan and Michael Rosenthal

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Committee highlights

inside amcham

Promoting Ecotourism and Sustainability

Speakers Manoj Mehta and Nick Zhang discuss ecotourism

AmCham Shanghai hosted the fourth and final installment of the CSR Innovation Series on “Ecotourism and Sustainability” on December 15. Guest speakers Nick Zhang, project officer for the Nature Conservancy, and Manoj Mehta, CEO of naked Group, spoke about ecotourism’s major role in the future of the travel industry. Zhang kicked off the event by discussing the Longwu Water Trust Fund, China’s first water fund, which is used to acquire land management rights and attract green investment. Zhang co-designed and developed the project in collaboration with Wanxiang Trust Company and Alibaba Foundation. The Longwu Water Trust Fund promotes a platform for increasing domestic awareness on conservation practices and outdoor nature investment. Zhang discussed the environmental impacts of China’s fast developing economy and noted that 75 percent of all major lakes have been polluted. Agricultural non-point sources like fertilizer and herbicide account for nearly 70 percent of total pollution. The Longwu Water Trust Fund aims to play a key role in eliminating pollution in the reservoir catchment and centralizing a previously inefficient management system. It also offers a chance for anyone to become an owner of quartered sections of bamboo forest in the reservoir’s surrounding area. Zhang spoke specifically about incorporating local food and supplies, as well as hiring local talent to give back to the community. Mehta spoke about the rapid expansion of tourism in China and how ecotourism plays a critical role in conserving the environment and sustaining the wellbeing of local populations. He touched upon naked Group’s sustainability approach through their resort’s ecoconscious structural design, such as utilizing solar-powered water heaters, eco-friendly waste water treatment systems and thermal exterior mud walls as insulation. In addition to implementing eco-friendly technology, Mehta also pointed out that naked Group achieves environmental awareness through education and action. During the Q&A session, members asked about strategies and how their respective companies can become more eco-conscious and promote environmental sustainability.

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Committee highlights

inside amcham

The Barnett-Oksenberg Lecture: David M. Lampton David M. Lampton, Hyman Professor and Director of China Studies at the Johns Hopkins School of Advanced International Studies, delivered the keynote speech during this year’s Barnett-Oksenberg Lecture held at the Four Seasons Hotel. “Americans and Chinese must jointly navigate the treacherous waters in a world that has become very different from the post-WWII era,” Lampton said. He believes that the current strategic direction of U.S.-China relations is not healthy, despite recent positive and important developments. Points of progress included President’s Xi Jinping’s September visit to the United States, the historic meeting in Singapore between President Xi and Taiwan President Ma Ying-Jeou, climate change cooperation, military-to-military exchanges, guidelines for air and sea encounters, further progress in bilateral economic relations, tenuous forward movements in cyberspace, as well as mounting Chinese investment in the U.S. and the hundreds and thousands of Chinese students who come to the U.S. for education and research each year. Lampton described three perspectives for managing U.S.-China relations. First, global power dynamics are changing, so the previous dominant power (the U.S.) must make room for the rising power (China). At the same time, China must allow the international system time to gradually adapt to a stronger China, and David Lampton at the Barnett-Oksenberg lecture “neither Beijing nor Washington should have as its first recourse building separate trade and economic and security institutions that seek to exclude the other.” Leaders must also set priorities in maintaining balance among international entanglements, available resources, essential external commitments and domestic needs. Finally, today’s U.S.-China relationship is a society-to-society relationship, with a myriad of intergovernmental, corporate, non-profit and educational linkages and dialogues, as well as vast investment and employment stakes. It is in these areas where American and Chinese interests converge that both governments need to be bold.

For more information on AmCham Shanghai’s 23 industry-specific committees, please contact committees@amcham-shanghai.org.

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Event highlights

inside amcham

Invest in USA Forum in Nanjing Draws Crowd Over 300 investors, government officials and service providers convened at the Invest in the United States Forum & Exhibition at the Nanjing Shangri-La to share best practices and mutually beneficial opportunities for Chinese foreign direct investment to the United States. As the third Invest USA Committee event in 2015, it drew an audience from across the Yangtze River Delta region. “We couldn’t have been more pleased with the turnout, the reception and the results of the Invest USA conference today,” Scott Williams, vice president of AmCham Shanghai said. The optimistic tone was set early by U.S. Ambassador to China Max Baucus, in his recorded video presentation and echoed in opening remarks by dignitaries including U.S. Consul General Hanscom Smith and Chamber President Kenneth Jarrett. Speakers included Eric Zhang, Vice President of Shanghai Vanke Property Management Company, who spoke about how a commitment to investment in the U.S. is changing China’s largest real estate developer. “Everywhere, we need cities to upgrade and transform,” said the developer, who sees Shanghai following the lead of great U.S. cities and becoming increasingly “multi-layered.” One forum highlight was the signing ceremony between Zeller Realty Group and Shanghai Prosperity Fund Management Co. Ltd., finalizing the formation of Zeller88 Real Estate Fund, which will invest approximately US$800 million into quality U.S. commercial office properties. The Zeller deal, supported by the work of AmCham Shanghai, Invest USA Committee and other U.S. organizations, is another successful investment cooperation between private- and public-sector constituencies across China and the USA, Williams said. Conference breaks offered opportunities for attendees to familiarize themselves with the exhibitors’ projects and service offerings. U.S. states represented at the exhibition included Idaho, Michigan, New York, Ohio and Virginia, and project holders were from California, Florida, Hawaii and Texas.

U.S. Consul General Hanscom Smith

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Executive Traveler Manoj Mehta, the group CEO at naked Retreats, tells us about some of his favorite things.

What do you spend most of your time on at work? “Coaching and mentoring my team,

How would you describe your typical resort guest? “A person with exclusive taste who cares for the

reviewing naked growth plans and having fun with naked people.”

environment and enjoys getting away from the city hubbub and experiencing stunning natural settings…and wants to do it in style!”

Why is the company called naked? “naked is an attitude to live a simple and sustainable life. The

‘naughty’ connotation of the word helps us to spread a serious message to ‘live naked’ – to shed the ‘excess’ and live a simple and sustainable life.”

What do you read for fun? “Before moving to Shanghai, I spent a long time in Buffalo, New York,

following the Buffalo Bills, and American Football was a big part of my life. Moving to Shanghai in 2005 created a big problem with 12 hours time difference between Shanghai and the U.S. East Coast. I

tried to follow the games and watch “Monday Night Football” … well

What’s your favorite place to eat besides at the retreat? “Shanghai is truly an international

it was more like “Tuesday Morning Football” and was really not

capital of global food! With so many great places in Shanghai it’s

morning. I grew up playing cricket and joined Shanghai Cricket Club,

hard to pick one or two places that stand out. That being said,

and this provided me not only with the opportunity to meet a lot of

whenever I have out of town visitors, there are two places I always

interesting people but also connected me back to international cricket

take them to – not only as an introduction to China but also to

- a connection that was lost for almost 20 years. With all sorts of apps

enjoy an awesome meal - these two places are Di Shui Dong and

available on your smartphones and a cricket loving community in

Hai Di Lao Hot pot. Both very different styles but both share a the

Shanghai, reading cricket provides me with a light distraction I need

richness of flavors and spicy food.”

from busy work life.”

naked Retreats

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sustainable and certainly not worth getting drunk at work at 9 in the