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P14 The Productivity Conundrum

P20 Who's Hiring? Who's Firing?

P23 Thrive in Tianjin

China Brief June 2012

T h e A m e r i c a n C h a m b e r o f C o m m e r c e i n t h e P e o p l e ' s R e p u b l i c o f C h i n a

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Opportunities in China's healthcare provider sector

Injecting international investment www.amchamchina.org


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The MNC Talent Challenge

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Upgrade leadership to meet China, global demands By Edward Tse and Arnold Sun

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Injecting International Investment Examining the opportunities in China's healthcare provider sector

By Christine Mitchell

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The Productivity Conundrum

How to maintain profitable Chinese operations amidst rising labor costs By David Mitchell

Who’s Hiring? Who’s Firing?

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A regional perspective on Chinese hiring trends

23 Thrive in Tianjin By Jonathan Edwards

Growing at twice the rate of Beijing and Shanghai, data reports and forecasts for fitting the city into your China strategy By The Economist Intelligence Unit's Access China


Opportunity Knocks

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China Brief Interview Exclusive with US Undersecretary of State

Robert Hormats shares his insights on the S&ED, trade and bilateral investment

AmCham China Tianjin, BT Eagle Group's 11th Charity Golf Tournament By Amanda He

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Chairman's Message China Brief Flashback Know Your Working Groups The Oil, Energy and Power Forum Working Groups What they do and a listing of leadership Events A round-up of the chamber’s recent events Special Event AmCham China's Invest USA New Members AmCham China’s newest additions Member Spotlight Ella Onn US Senior Officials to AmCham China: We Are Here to Hear From You

In this issue, China Brief explores some of China’s latest market-entry opportunities and strategies for steering around the obstacles to succeed. As China’s healthcare spending rises 20 percent annually—and is estimated to reach $705 billion by 2015—our cover story examines how much-needed international investment can fit into an overburdened and under-resourced sector. See page 13 to learn how members can get involved with AmCham China’s newest partnership program, the US-China Healthcare Cooperation Program, jointly announced by PRC President Hu Jintao and US President Barack Obama. The cooperation program is already organizing high-level healthcare forums, initializing pilot projects, and supporting healthcare professional personnel exchanges in the US for Chinese health professionals and government agencies. Meanwhile, home to the highest growth rate in China— with a year-on-year growth rate of 16.6 percent—it’s no secret that Tianjin towers the news with its expansion and development. We partner with The Economist Intelligence Unit’s Access China to share the latest economic, commercial and industry insights for formulating your Tianjin business model. As international companies continue to expand into emerging markets, we also go a bit broader to analyze the latest figures on Asia-Pacific hiring trends. Who has the highest recruitment rate and who is downsizing the least? Turn to page 20 to see which industry currently is hiring the most, which country has the highest managerial recruitment rate, and how China fares in comparison with its neighbors. While these opportunities are not without accompanying challenges, when weighing your options, perhaps Sir Winston Churchill said it best: "A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty."

Megan Rhodes Editor

Article Submisson Policy:

China Brief actively seeks article submissions. We give strong preference to AmCham China members. Full submission details are available on AmCham China’s website www. amchamchina.org. Please send letters and submissions to: editor@amchamchina.org.


Editorial Staff

AmCham China Leadership

VP, Communications

Matthew Wisla Communications Director

AmCham China is a member-led organization. The chamber’s success is rooted in the vision, hard work and dedication of its members, many of whom are leaders within their companies and the business community. AmCham China is fortunate to have an exceptional group of members who contribute their talents and time to the organization. Through their efforts these volunteer leaders make it possible to provide the information and intelligence, business services, networking opportunities and events that benefit all members and the advocacy initiatives that help shape the business environment in China.

K.C. Swanson Editor

Megan Rhodes Creative manager

At AmCham China’s national level, the chairman, three vice chairs and ten governors comprise the organization’s Board of Governors. All voting members of AmCham China are eligible to participate in an annual election to select the Board. Additionally, members at three AmCham China Chapters from around the country (Central China (Wuhan), Northeast China (Dalian) and Tianjin) each have their own local executive committee (EC). These ECs ensure that every Chapter has an agenda that is responsive to the needs of local AmCham China members.

Zhang Hui Assistant Designer

Jin Peng Cover illustration

Zhang Hui

AmCham China Board of Governors

Contributors

Jon Abramovic Dominique Adams Kuan Chen Barbara Chen O'Connell Ryan Dutcher Michelle Guo Julia Howe Elizabeth Rowland Wenya Zhang Connie Zhao

Chairman

Ted Dean Individual vice chairs

Michael Crain

Gregory Gilligan

Wang-Li Moser

Individual

APCO Worldwide

Intel China Ltd.

Ira Cohen

Mark Duval

Matthew Estes

Barry Friedman

University of Maryland Robert H. Smith School

Motorola Mobility Technologies (China) Co., Ltd.

BabyCare Ltd.

Wal-Mart China

Nina Hsu

George Huang

Malone Ma

Ningke Peng

LTI Associates

Chubb Insurance

MetLife

Dow Chemical China

Lester Ross

Timothy Stratford

Wilmer Cutler Pickering Hale and Dorr LLP

Covington & Burling LLP Beijing Repr. Office

Chairman Emeritus

Treasurer

General Counsel

Associate General Counsel

John D. Watkins, Jr.

Kit On

Eric Emerson

Kenneth Zhou

GE (China) Co., Ltd.

Deloitte Touche Tohmatsu

Steptoe & Johnson LLP Beijing Representative Office

Wilmer Cutler Pickering Hale and Dorr LLP

Governors

For sponsorship information, please contact Christine Yu at (8610) 8519-0832 or e-mail: cyu@amchamchina.org Fenghua Advertising Co., Ltd. is a sponsorship coordinator for China Brief. (8622) 5885-2812

AmCham China Chapter Executive Committees

China Brief is published by the American Chamber of Commerce in the People's Republic of China (AmCham China). China Brief content does not necessarily reflect the opinions or positions of AmCham China or its Board of Governors. ©2012. All rights reserved.

Northeast China Chapter

Tianjin Chapter Chairman

Central China Chapter

Chairman

Michael Hart

Chairman

Tony Balow

Jones Lang LaSalle (Tianjin)

Intel

EC members

Aloha Business Services

vice chair

George Grosshans

vice chair

Preston Kuo Jayland Learning EC members

Tim Frosell Goodyear

Dorman Kwan PWC

Vlad Reyes

LDI Tianjin - Tianjin International School

Lucy Liu The Executive Centre Tianjin

Hank Martin Hank’s Sports Bar and Grill

Douglas Red Leadership Development International Inc. Tianjin Branch

Hilton Hotel Dalian

Jon Reed

Leif Rogers

Tianjin Custom Wood Processing Company, Ltd.

Bank of Jinzhou

Ella Onn Santa Fe

Mireille Wan Beijing CB Richard Ellis Property Consultants Ltd., Tianjin Branch

Janie Corum

Qiqing Jiang Cummins East Asia R&D Co.Ltd EC members

Steve Carpenter Diamond Power

Jun Hu GE (China) Co., Ltd.

Herb Mittler Wuhan Yangtze International School

Scott Shaw LDi Training

There are many opportunities to get involved with AmCham China. Interested members are encouraged to contact the chamber’s volunteer leadership or professional staff, or one of the more than 30 working groups listed later in this magazine and on AmCham China’s website (amchamchina.org).

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Under the Hood of the S&ED Economic Track

Ted Dean

AmCham China Chairman

“Beating low expectations.” That seems to be a common description of the economic track of the Strategic & Economic Dialogue (S&ED) held last month. Although foreign banks will gain greater access to several financial services sectors, this was not a Dialogue of headlinegrabbing break-throughs. But if you look under the hood, China offered several useful principals for market reform and a fairer playing field. AmCham China advocacy priorities—investment opening, intellectual property rights (IPR), standards, and transparency—were clearly on the agenda, even if the progress on each was mixed. The outcomes on investment are a case in point. China stated its intention “to implement a more proactive opening-up strategy” opening new sectors to increased foreign investment under this Five-Year Plan. Idle talk? Not entirely. China’s commitment to allow foreign investors to own 49 percent of a domestic securities joint venture is a rare example of China agreeing to opening a market further than it committed under the World Trade Organization. The speed with which China is implementing a commitment from last year’s S&ED—to open its mandatory auto liability insurance market to foreign investment—is also encouraging. On technology transfer, China agreed to new on-going discussions on the issue. Again, not a breakthrough. But keeping the issue on the agenda is important. And incorporating into the “Joint Fact Sheet” the commitment that tech transfer will not be a pre-condition for market access is a useful hardening of the principal. Of course, more work needs to be done to expand investment opportunities and eliminate forced tech transfer as an issue. The two sides did agree to restart negotiations on a bilateral investment treaty (BIT). Negotiations on a BIT provide an opportunity to press further on these issues and improve the investment approval process. AmCham China has argued that foreign investors should be allowed to file “encouraged” sector investments for the record, without further review and approval.

This would eliminate the toll booth process that gives rise to tech transfer demands at least in these sectors. On IPR, there was renewed discussion for software legalization and promoting the use of legal software in government and the enterprise sector. Trade secret protection was also discussed. No great breakthroughs, but AmCham China and others continue to work at this issue. Two other chamber priorities, industry standards and transparency, were also discussed but didn’t yield significant breakthroughs. To address the unfair playing field created by China’s industrial policies, in the “Joint Fact Sheet,” China committed “to provide fair treatment to foreign investors.” The “US Fact Sheet” goes further, stating China has committed that non-discriminatory treatment will extend “to credit, taxation, and regulatory policies.” Discussion of export financing guidelines and increasing the dividends paid by stateowned enterprises—both of which were included in the “Joint Fact Sheet”—are encouraging as they could, over the long-term, help remove two key advantages China’s state champions have in the marketplace. So where does this leave us? Quite simply, there is more work to do. But past US-China Joint Commission on Commerce and Trade and S&ED’s have sometimes seemed to offer only small market opening rewards at the end of long negotiations—two scoops of ice cream as a reward for finishing dinner. This time around, there seems to have been at least a discussion of a steadier diet of economic reform. None of the discussions will matter if the reform doesn’t come, but let’s take China at its word and hold up “fair treatment” for foreign investors as a standard that China can and should reach. Accelerating the process of market-based economic reform and opening is in China’s own interests, and in a market-based economy, market participants—foreign investors included—would compete on a fair and level playing field on commercial terms.

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New Podcasts: Deborah Brautigam, author of The Dragon's Gift: The Real Story of China in Africa, draws on three decades of research on China in Africa to sort out the myths and the realities of Chinese engagement. AmCham China speaks with US Undersecretary of State Robert Hormats on the key issues discussed during the recent round of the Strategic and Economic Dialogue in Beijing. Read the article excerpt on page 26.

In China Brief Flashback, we revisit the events and issues AmCham China members experienced 10 years ago. Here are a few highlights from June 2002:

The Awakening Private Sector

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Official statistics indicated that in 2002, China had more than 1.7 million privately run enterprises with an investment of US 132 billion, employing 27 million people. According to state figures, 30 percent of the nation’s GDP was generated by the private sector.

Popular Podcasts: American University professor Matthias Matthijs discusses the need for rebalancing in Europe, and parallels between intraEurope tensions and the US-China relationship. Economic Observer editor Zhang Hong explains why Beijing is an economic laggard, and what’s behind the star performances of Tianjin and Shaanxi province. AmCham China speaks with economist Derek Scissors from the Heritage Foundation about China's economic rebalancing. US Ambassador Locke talks about the recent US-China Strategic and Economic Dialogue, as well as some of the initiatives he is undertaking to improve Chinese direct investment into the United States. World Bank chief economist Justin Yifu Lin addresses the risks to China’s growth outlook.

Please see AmCham China's "Multimedia" web page to access our podcasts and China Connect videos.

Find us at:

iTunes

Search for: AmCham China

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hina Brief’s June 2002 cover story explored “China’s Awakening Private Sector.”

A comprehensive report on China’s emerging enterprises (released by the International Finance Corporation in 2000) stated the domestic output of private firms grew on average of 71 percent a year between 1991 and 1997, while employment increased by 41 percent. The report pointed to the domestic private sector as a major engine for economic growth in China, and predicted the country’s membership to the World Trade Organization would fuel this growth. China Brief's June 2002 cover

Chamber meets with National People’s Congress, discusses White Paper

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s part of the 2002 White Paper release, AmCham China leaders met with Cheng Siwei, then vice chairman of the standing committee of the National People’s Congress.

Cheng described the progress China had made in the six-month period after its accession to the WTO, and underscored the need to address social equality, justice, and the protection of private property ownership. In order to achieve these goals, Cheng emphasized China should train more judges and attorneys. AmCham China Chairman Christian Murck (currently the chamber’s president) noted he would speak before the US Trade Representative in June and looked forward to giving leaders the latest on-the-ground insights from China. Cheng championed AmCham China’s efforts to enhance communication between the Chinese government and the American business community. To read more about the 2012 White Paper release, see www.amchamchina.org/whitepaper To access the full China Brief archive, please go to: www.amchamchina.org/chinabrief.


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Injecting International Investment Examining opportunities in China's healthcare provider sector By Christine Mitchell

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R Zhang hui

esidents of the world’s most populous country are living longer and getting richer. Improved living standards and changing lifestyles are also creating a shift in China’s disease patterns, while demographic and socioeconomic trends are exponentially adding stress to a healthcare system that faces severe constraints on supply. China has 2.5 hospital beds per 1,000 people and an average hospital length of stay of 10.5 days (compared to the US average of 3.1 beds per 1,000 people and an average length of stay of 5.4 days). Foreign investment in healthcare institutions was limited to a maximum of 70 percent until November 2010, when the Chinese government announced that these restrictions would be gradually lifted to allow 100 percent foreign ownership. As of January 2012, full foreign ownership is permissible with the change of foreign-invested healthcare organization from “restricted” to “encouraged” category in China’s 2011 Foreign Investment Industrial Guidance Catalogue. Furthermore, China’s 12th Five-Year Plan dictates a clear, supplemental role for the private sector, with the aim to raise the standards of care and address the growing, non-basic healthcare needs of middle and upper-middle class Chinese. Before multinational investment floods into the Chinese healthcare system, it is worth noting this is one of the last sectors to be opened to international participants. As such, the Chinese healthcare market is complex and rife with examples of failed foreign partnerships. This article examines the current healthcare system and its challenges to help qualify these opportunities. First, an overview of the current healthcare landscape: payer, provider and consumer:

Payer: Social medical insurance’s unintended impact The Chinese government made great progress in expanding basic insurance to the masses with initiatives that started in the early 1990s. Currently, 95 percent of the population is covered by various basic social medical insurance schemes, and the individual out-of-pocket share has decreased from 60 percent in 2001 to 36 percent of total costs in 2011. Low provider service fees (under social medical insurance) are set by the government and are largely below cost to maintain affordability. This has an unintended and profound impact on the provider sector, where many providers reportedly over-prescribe drugs and tests to make-up the revenue difference. As a result, drug revenue accounts for 42 percent of public hospital revenue in 2011, and Chinese patients, on average, consume 10 times more antibiotics than their American peers. Some of the over-utilization problem is no

5 Steps for Successful Entry Before entering the healthcare sector, here are five steps for international participants to consider: The devil is in the details: study the intricacies of Chinese healthcare. Each geographical market has different politics and market dynamics. Furthermore, each specialty is subject to varying public and commercial insurance coverage rules and governmental regulations. A local partner’s assessment of the business potential is often too optimistic and inadequate for international decision-makers. Develop a unique China strategy: international entrants should create a strategy that leverages its strength or core value proposition to give a clear framework for evaluating opportunities. It is not enough to bank on “the provision of better healthcare service based on international best practice for wealthy Chinese locals and expatriate population” as a China strategy. Pick the right local partner: in reality a Chinese partner is necessary at the minimum to help navigate complex licensing process and build good government relations. It is especially important to do proper due diligence, select partner(s) with similar culture, vision, timeline, and requisite competency to execute plans, and establish clearly defined roles and responsibilities between the partners. Build an operating model with local partner(s): Chinese partners tend to move quickly and still adhere to the perspective that “If you build it, they will come.” Create a target model that encompasses international best practice and takes into account local constraints, and customs will help protect brand and intellectual property. Look long-term: take a longer perspective on your investment in China and look beyond the sheer size of the population. International entrants’ strength is in their technical and management know-how, concerted planning, policies and procedures, standards, processes and systems, and talent development—all difficult and time-consuming to establish and not easily replicated by local players.

doubt compounded by a payment system that is largely fee-for-service.

Provider: Public facilities overburdened, under-resourced Public healthcare facilities play a dominant role in Chinese healthcare. In terms of beds and admission volume, public facilities constitute 91 percent of total healthcare facility beds and 89 percent of admissions in 2011. Large urban hospitals with over 1,000 beds have the bulk of resources and medical talents—they are overwhelmingly the preferred care provider. Their overcrowded state is both a symbol of success and symptom of deeper macro system issues. j u n e

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The first macro-level challenge is a shortage of well-trained providers. China has 1.8 physicians and 1.5 nurses per 1,000 people (compared to the US average of 2.4 physicians and 10.8 nurses per 1,000 people). A second challenge is the lack of a strong primary care system in which the Chinese self-refer to specialists resulting in acute care facilities treating even colds and minor discomforts. A third obstacle is the over-utilization of healthcare services (as mentioned above). Last but not least, is the overcrowding issue, the result of limited application of standardized clinical pathways and high quality “step-down” care facilities, which provides goal-oriented, restorative care for patients with conditions of moderate or low acuity who require medical, nursing, and rehabilitation services. Consequently, Chinese acute care hospitals keep patients much longer than many of their western counterparts. In 2011, acute care hospitals’ average length of stay was 12.5 days.

Consumer: Preferring large public hospital providers

In 2011, the average total cost per outpatient visit was RMB 167 and the average cost for hospitalization was RMB 6,416 at public hospitals. The cost of hospitalization can be disastrously expensive, with the cost of an average stay equaling 34 percent of an urban resident’s disposable income and more than a rural resident’s net income. Even among uppermiddle and upper income individuals, our surveys show that perceived higher medical quality and lower cost are the primary reasons for choosing large urban public hospitals, despite issues with overcrowding, poor customer service and an overprescription of medicine and treatments.

Key Healthcare Provider and Subsector Opportunities The central government’s strategic plan for healthcare development as outlined in the 12th Five-Year Plan provides insights to opportunities in a planned economy. Below are some key provider sector opportunities: • Commercial insurance: with social medical insurance covering basic medical services, commercial health and long-term care insurance development is encouraged. The challenges in this sub-sector are to anticipate subsequent changes yielded by social medical insurance’s anticipated move towards capitation and disease-based payments and to create an insurance product in a market where good, segmented service utilization data is lacking and/or not easily available. • Primary care: no advanced healthcare system is complete without a strong primary care system 1 2

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as the foundation. The Chinese government intends to train 150,000 general practitioners by 2015 and promote health management contracts between practitioners and families. The challenges are manifold, however: how to build the infrastructure when consumers are used to self referring to specialists; how to create an integrated system with downstream secondary and tertiary providers; how to train a pool of general practitioners to provide good preventive care and chronic disease management; and how to keep this foundation financially afloat without over-reliance on pharmaceutical drugs, tests, medical supplies, and device revenue. Rehabilitation and long-term care facilities: to achieve the right care at the right place at the right cost, the government is encouraging the build-up of step-down care infrastructure. However, this poses many challenges within the current fee-forservice environment, including how to attract or train and retain therapists, nurses, nurse assistants, and social workers who are the backbone of a good step-down care facility. Hospitals: in order to increase standard of care and in part to address the needs of a growing middle and upper class, the Chinese government is encouraging the private sector to participate and invest in the provider sector. The government has expressed a goal of non-public facility beds to comprise approximately 20 percent of total healthcare facility beds and services by 2015, up from nine percent of 4,786,831 beds in 2011. For international participants, there are many business models available, ranging from management contracts to joint ventures with local public or private entities to wholly foreign ownership of green-field and existing facilities. The challenge is to identify the right business model that fits an international entrants’ risk profile, the skills and expertise they bring to the table, the location of the investment (local government’s receptivity and market dynamics), and the source of the provider and management talents. Telemedicine and remote patient monitoring: given China’s vast size and shortage of welltrained physicians, telemedicine and remote patient monitoring care modalities can help bridge the gap in healthcare provisions. They offer patients increased access and convenience at reduced costs, and they enable providers to broaden patient reach, increase capacity to care for more acute patients, and improve collaboration with lower-tier facilities. The challenge for new entrants is the multiple partners required to establish a comprehensive system from collecting, transmitting, and interpreting data to arranging and delivering timely medical services. Hospital information systems and regional health information exchange: the Chinese government has outlined a goal of establishing


standardized health records for at least 75 percent of the residents and standardized management of at least 40 percent of persons with high blood pressure and diabetes. Similar to elsewhere in the world, information technology is considered the key to achieving better clinical care and hospital management, better coordination of care, and better public health and resource management in China. The challenge for international players is to localize their products to the Chinese market. The need for private sector and international entrants’ know-how and resource in the China marketplace is clear, whether from a demographic, socioeconomic, disease, policy or system perspective.

The key to success is knowing where and how to play, focusing on building a good business that is sustainable and scalable. International entrants must satisfy the government’s and local providers’ agendas in addition to consumer needs. Furthermore, they must clearly articulate how they can partner with domestic players to successfully implement localized, value-added solutions. Christine Mitchell is a Shanghai-based senior manager in healthcare consulting with PwC China. For more information, please see: www.pwccn.com or contact Christine at Christine.Mitchell@cn.pwc. com. Sources for this article are available online at www.amchamchina.org.

AmCham China’s Healthcare Cooperation Program (HCP)

HCP

HEALTHCARE Cooperation Program

中国美国商会医疗卫生合作项目

By Jun Zhou AmCham China’s cooperation programs are a new type of platform for assisting China’s development while showcasing American goods, services and technology. These programs—in healthcare, energy and aviation—support the development of markets and industries and the aims of both the US and Chinese governments to increase business and bilateral cooperation. Participation provides a framework for the private sector and industry decision makers to collaborate on development, policy, and to execute high-level technical exchanges, conferences and capacity building initiatives.

What is HCP? Chinese President Hu Jintao and US President Barack Obama jointly announced the creation of a US-China Healthcare Cooperation Program in 2010. Officially launched in March 2011, the initiative aims to build closer working relations and long-term cooperation between the US and Chinese governments and industry in the healthcare sector. Based on the US-China Public Private Partnership US-China on Healthcare framework, the partnership provides a vehicle for companies to

“As a responsible company, we continue to support the development of healthcare capacity in China that benefits patients. HCP offers a perfect platform for public-private cooperation through its constructive, projectbased approach.” —Chindex work together in partnership with the two governments to facilitate technical collaboration and exchanges. HCP receives support from the US Trade and Development Agency (USTDA) and leverages US healthcare industry strengths in the areas of public health, policy research, training, research and development and technology to support the Chinese government’s goal of enhancing patients’ access to healthcare services in China. HCP programs and initiatives are in strategic alignment with China’s healthcare development priorities.

HCP has eight member-led working groups: • • • • • • •

Healthcare IT Rural Healthcare Hospital Management System Emergency Response Traditional Chinese Medicine Healthcare Financing Disease Prevention & Health Management • Quality and Safety

Updates and developments: • Supporting the TDA-funded Healthcare Professional Personnel Exchange Program in the US for Chinese health professionals and

relevant government agencies, including a hospital management orientation visit, healthcare IT orientation visit, and an emergency response workshop. • Initializing two pilot projects: 1) county hospital physician chronic disease management training and 2) a feasibility study on the efficacy and safety of TCM through healthcare IT technology. • Organizing high-level healthcare forums, summits and workshops in China to increase awareness of innovation in healthcare; providing support to healthcare policy makers on accessibility and affordability issues; and strengthening US-China collaboration on non-communicable disease prevention, healthcare IT, emergency response, hospital management, healthcare reform, financing, TMC, and rural healthcare. Jun Zhou is the Executive Director for HCP. To learn more, see www.amchamchina.org/cooperationprograms or email Hui Wang: hwang@amchamchina.org

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The Productivity Conundrum How to maintain profitable Chinese operations amidst rising labor costs By David Mitchell

fotolia.com

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ising labor costs are nothing new in China. In fact, labor costs have been appreciating annually in excess of five percent since the mid-1980s. The challenges posed by these increases are well documented, including AmCham China’s 2012 Business Climate Survey: 82 percent of multinational corporation executives in China believe labor costs are negatively affecting their operations. The financial figures underpinning these concerns are daunting: • Morgan Stanley reports that manufacturers in China will pay more than US $ 900 million in increased labor costs over the next five years. • University of Southern California research finds that Chinese labor costs have already surpassed the Philippines, will pass Mexico within the next 12 to 24 months, and should exceed Taiwanese labor costs by 2018 to 2019. • Towers Watsons reports average

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annual wage increases exceeding 10 percent for the past five years, with some industries (such as life sciences) exceeding 25 percent on an annual basis. While nothing new, two critical factors have changed in recent years that have prompted executives of both multinational and Chinese firms to question how they can maintain profitable Chinese operations in the face of rapid wage appreciation. First, Chinese labor costs, compared to labor costs in other regions, have become comparatively non-competitive. In previous years, a Chinese worker earning US $200 per month, even if annual wages increased by five to 10 percent, was a small enough cost that this increasing labor expense was not a material concern. Now, Chinese labor costs are 30 to 40 percent more than those of similarly skilled employees in neighboring countries such as Thailand or Malaysia,

and up to 60 percent higher than markets such as India’s. Not surprising, AmCham ASEAN’s 2011 Business Climate Survey reported that 15 to 25 percent of US manufacturers are in the process of shifting at least some production operations from China to Southeast Asia. Similarly, the EU Chamber of Commerce in China reported that 20 percent of German companies have China dis-investment plans. Second and perhaps more importantly, years of rapid productivity gains are coming to an end. Rising labor costs can be sustained even indefinitely as long as labor productivity increases at an equal or faster rate. This was long the case in China, with DBS Bank research finding that from the early 1990s until 2006, productivity growth significantly outpaced rising labor costs. This changed in 2007, and every year since, Chinese labor costs have risen at the same rate, or faster, than productivity. This is a non-sustainable trend and it’s the increase in unit labor costs that is driving companies to reassess the economics of expanding their operations in China. The productivity challenge is faced across multiple industries in China, from manufacturing to hospitality to retail. The International Labor Organization reports that the productivity of Chinese workers is just 20 to 25 percent of the productivity of American, European, and Japanese employees. So, what can be done?

Move For manufacturers and supply chain providers, choices are increasingly being made to relocate operations to inland Chinese regions (where labor costs are 20 to 25 percent lower, though rising even more rapidly than in Chinese coastal regions), or to relocate to a lower cost country.


Compensation Historically, Chinese workers have been paid for hours worked, not productive hours worked. This creates a system of extremely high overtime hours and relatively low productivity. An increasing number of multinational employers are experimenting with compensation plans that state, for instance, “if one previously worked 90 hours to make 100 widgets, but one can now accomplish the same production in just 60 hours, the employee can earn the same total salary.” While this may appear unsustainable at first glance, many multinationals find that an incremental move toward incentivizing productive work can pay long term dividends. Other companies are experimenting with monthly awards, such as cash prizes for the most productive employee or rewarding employees who propose efficiency improvements.

Inspect what you expect Finally, companies need to measure productivity. While this may sound obvious, the reality is that in China most employers

track when their employees come to work and when they leave, but have very little idea of exactly how productive workers are throughout the day. Tools and systems are increasingly available in China to provide managers with real-time visibility to labor productivity, with drilldown reporting on variances due to factors such as absenteeism, tardiness, training, equipment downtime, or other factors impacting employee availability. Companies are also increasingly adopting processes, such as kaizen and 6 Sigma (see sidebar), to drive productivity and quality improvements. China has clearly entered a new era. While still acting as the “factory to the world,” China’s days as an attractive producer due to an unlimited supply of low wage labor are over. For multinational firms to operate profitably in China, it’s clear that the focus much switch from reliance upon a large pool of low cost workers to constantly improving the productivity of an increasingly expensive workforce. Confronted with this new reality, one already sees significant movement underway by China-based multinational executives

to adjust compensation to reward efficiency, introduce efficiency programs, and deploy systems that are designed to measure productivity and identify areas of inefficiency. David Mitchell is the director, Asia Pacific, at Kronos Incorporated, a US-based workforce management technology company. He has lived and worked in China and the Asia Pacific region since 1997.

TOOLS TO DRIVE PRODUCTIVITY Sigma 6: created in 1986, Sigma 6 is a business management strategy developed by Motorola to improve the quality of process outputs. In order to reduce cost production and increase profits, Sigma 6 identifies and eliminates issues that impede output. Kaizen: a Kaizen strategy aims to standardize operations through measuring operation cycles, gauging measurements against requirements, and innovating systems to meet targets.

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The MNC Talent Strategy Upgrade leadership to meet China, global demands By Edward Tse and Arnold Sun

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s stand-alone China strategies are increasingly replaced by global strategies that have China at their core, multinational companies (MNCs) have to upgrade the size and quality of their China leadership teams. This would be difficult at the best of times—making it still harder today is both a shortage of talent and the intense competition for that talent. Driven by the twin forces of market liberalization and global integration, China has made itself a key part of the global economy in the last two decades. Its momentum looks highly probable to continue. And with these changes come ever greater demands for new and greater talent capabilities. Senior management must be able to manage both incountry and global demands. The range of functions continues to expand—local research and development has become essential, as increasingly are high-level planning, marketing and finance functions—MNCs need to tackle a range of talent challenges. In order to address these business challenges, companies have to develop human resource strategies that allow each of them to carve out their own unique set of competitive advantages. Booz & Company has developed a four-phased

In China Brief’s “Artist Spotlight,” we partner with one of Beijing’s galleries to feature a selected artist’s work that lends a new perspective on an article from the magazine.

Companies that can grasp the complicated career dynamics of women... will find themselves able to tap an enormously rich talent segment. approach (see graphic on the next page). The first step is identifying what capabilities are required—what does a company expect its staff to be able to do, and how should they behave. The next step is to link these desired capabilities and behaviors with its value propositions so that it can set its talent objectives. With this groundwork completed, the company can then move on to design action plans that can motivate and engage staff. The final step is implementing and fine tuning the processes, tools and accountabilities identified by these plans in ways that deliver peak and sustainable performance. In China, this is often a need for greater linkage between the aspirations of individuals on the one hand and the opportunities that companies are finding themselves presented with on the other. To retain and nurture staff in such an environment, talent strategies must take the implications of the need to link these two sets of interests into account throughout their human resources management

Gallery Statement: Red Gate Gallery is pleased to announce an exhibition of Jiang Weitao’s latest abstraction work titled “Gap.” Over the last few years, Jiang has perfected his highly glossed oil on canvases…. there is a warmth and a delicacy to each of his colored abstractions.

Jiang Weitao’s work is currently exhibited at the Red Gate Gallery. To learn more, please see: www. redgategallery.com/ or contact the gallery’s director, Brian Wallace, at: brian@ redgategallery.com

processes—recruitment, retention, localization and development.

Recruitment Recruitment must both start early and have direct connections with a company’s longer-term China goals. Hiring from universities requires systematic screening and selection procedures. Summer internships are popular with most leading MNCs. But better still than just starting early is also investing in education-related recruitment. Carefully prepared campus support and events can familiarize undergraduates with a company’s activities. Some companies provide support to courses related to their needs. Talented women are another resource that companies should explore. A study from the Center for Work- Life Policy, co-sponsored by Booz & Company, finds that part of the China’s talent crunch is hiding in plain sight—educated Chinese women (see China Brief’s December 2011 issue for the Center’s exclusive article). According to the study, nearly 3 million women graduate from Chinese universities annually. These women are ambitious and determined. Some 76 percent of the women surveyed for the study aspire to a top job, compared to 52 percent in the United States. Companies can also look to hire Chinese graduates from business schools overseas, first giving them work at in their home country or other markets around the world, and only later transferring them to a management role in China. Johnson & j u n e

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Talent strategy development process Capabilities Required What do we expect our people to be able to do and how should they behave?

Value Proposition Business Requirements

Employee Perspectives

What do our people need to ensure full engagement and performance potential?

A successful talent strategy must take both business requirements and employee perspectives into account

Johnson operates such a scheme, hiring US business school graduates, putting them to work at headquarters for one or two years, mainly on China-related functions tasks, before moving them back home in a leadership role.

Retention For retention, the starting point must be realism—and so ensuring compensation packages are competitive is crucial. For the best people, companies will have to offer world class benefit packages. Already, senior management compensation levels match global standards. For other key jobs, differentiated compensation will be necessary, with generous rewards for high performers. The best international corporations are working on this. Money, however, is only part of the answer. Companies who can get inside the minds of their staff and understand their motivations will almost inevitably fare better in the long run. Nowhere is this truer than in the case of female staff. As was noted above, women in China are hugely ambitious, but at the same time, gender bias continues to limit women’s careers. Over one-third of men and women surveyed said that women were treated unfairly because of their gender, and nearly half of educated Chinese women said they had encountered bias severe enough to make them consider scaling back their career ambitions or leaving the workforce entirely. Companies that can grasp the complicated career dynamics of women, especially their ambitions, and then remove the obstacles that prevent them from 1 8

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Design and Approach

Ongoing Management

How can we motivate behaviors and attract, retain, develop the talent required to deliver the business strategy?

What are the processes, tools and accountabilities for sustainable management and delivery that leads to peak performance?

A phased implementation plan leads to targeted solutions to begin making progress against strategy

doing so, will find themselves able to tap an enormously rich talent segment.

Localization China staff localization strategies must be aimed at converting current expatriate positions into ones occupied by local staff—not simply, or even primarily, because local staff are cheaper than ones brought in from overseas, but because in the long run key positions will have to be filled with people who understand China’s complexities from the inside. A key first step for all companies is assessing their current localization status across all entities and functions. The data from this process can then be used to establish where localization needs are greatest and what harmonization policies need to be put in place. Then targets and priorities can be set and measures put in place to reach them. Companies should also look for ways of transfer best practices from other operations within China. If one arm of an MNC’s China business has found a successful route to localizing a key position it be must be given the tools to share its experiences with other units in the country.

Development To thrive in the long term, they will have to make the effort and take the risks necessary to nurture local talent—even if the cost of doing ends up being higher than using expatriates. Making a new employee welcome can play an important role in ensuring corporate longevity, as do clearly mapped

career development paths, especially ones that can show integration between a company’s China and global operations. Advanced training is usefully supplemented with mentor systems that allow senior leaders to share their experiences and best practice knowledge. Overseas rotation opportunities offer another option for integrated Chinese talent into a company’s global networks. Building a consistent corporate culture can strengthen ties between a company and its employees. It is crucial that leaders believe in and actively promote the company’s core values. Procter & Gamble, before sending any expatriate staff to China, considers not only their business and management skills, but also whether they are able to share its core values with local staff. Many successful MNCs have already started to react proactively to meet the talent challenges in China. To ensure their China teams are filled with A++ talent, what they must now do is take their actions to a higher level. Headquarters must become engaged in executive nurturing, ensuring that the best people are brought on board in the first place, that they are compensated appropriately, and that they are inducted into the global workings of their company. Together, these steps will allow the company to attract, localize, retain and develop the talent required to deliver on its business strategy. Edward Tse is a senior partner and chairman for greater China at Booz & Company. Arnold Sun is a principal at Booz & Company.


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HIRING

FIRING

A regional perspective on Chinese hiring trends By Jonathan Edwards

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he “Global Snapshot” project from the multi-national recruitment firm, Antal International, asked over 17,000 organizations in major markets across 56 countries whether they were currently hiring or shedding staff at a managerial and professional level and whether they intended to do so over the coming quarter. Chinese hiring rates are once again well above the global average of 55 percent this quarter. Currently, the number of Chinese businesses recruiting new staff stands at 72 percent, a five percent increase from December’s figures. This good fortune is set to continue over the next few

More people see material impact from human resources challenges this year than last year. Cost of social benefits shows the biggest increase.

but we have many clients requesting services for mass recruitment projects, often involving more than 100 hires. Demand for professional staff in the tier one cities (Beijing, Shanghai, Guangzhou, Shenzhen) remains healthy, while we are seeing large increases in demand in tier two and tier three cities as international companies penetrate further into the Chinese market. Specifically we are seeing a great demand for managerial and technical staff in a variety of industries such as automotive, chemical, clean energy and manufacturing. The move towards localizing all but the most senior management is continuing and this is further driving

months, with the hiring activity in China remaining above 70 percent. With a four percent unemployment rate in 2012, China beats all of its Asian neighbors. This spring has seen the level of Chinese job cuts rise from 17 to 24 percent, indicating a modest, but noticeable increase to the turnover rate in China’s employment market. Skilled staff can expect pay reviews of upwards of 15 percent a year. It is common for candidates to ask for a 25 percent increase in their basic salary when they switch jobs, with many moving on every 18 months to two years. We have seen a few international clients implement a recruitment freeze due to the international business climate,

How do the following human resources issues affect your business operations in China? 2012 Increasing salary and wage expenses

70%

Difficulty attracting, developing and retaining skilled staff

67%

2011 15% 13%

Difficulty attracting, developing and retaining managers

62%

15%

Cost of social benefits

65%

11%

Difficulty attracting, developing and retaining technical staff Difficulty firing employees

59% 53%

Negative impact

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8%

69%

8%

65% 48%

9% 5% 6%

63%

12%

54%

11%

Material damage

Source: AmCham China's 2012 China Business Climate Survey

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71%

9%


demand for strong local candidates. Clients are asking for a complete HR solution involving recruitment process outsourcing, training, delivery centers and employer branding. China still maintains some of the lowest firing rates for the region, with predicted figures for downsizing staff remaining low at 26 percent. Across the sea, the percentage of Japanese companies letting employees go has increased from 23 percent to 36 percent this quarter. Only India (24 percent) and the Philippines (five percent) have similarly low firing rates. Furthermore, Taiwan currently boasts the second highest recruitment rate for the Asia-Pacific region, with 68 percent of businesses taking on new recruits. However, the turnover rate in Taiwan’s job market is predicted to jump to 48 percent next quarter. In line with the rest of Asia, the luxury goods industry is experiencing the greatest hiring levels now and over the next three months: with Japan’s figures set at 91 percent and Asia as a whole at 90 percent. Other particularly active areas within

China figures for 2012 1st quarter Are you currently hiring at managerial/professional level? 72%

Do you expect to hire at managerial/professional level over the coming quarter? 71%

Are you currently letting people go at managerial/professional level? 24%

Do you expect to let people go at managerial/professional level over the coming quarter? 26% Source: Antal International China’s employment market at present are business services, accounting and consulting and the fashion industry at 91 percent and 90 percent respectively. These sectors are also set to remain stable for the following quarter, varying just one percent and three percent in turn, however, those industries are also the ones that are cutting the most staff in China, which has resulted

Top business challenges: 2012

2011 43% 30% 37% 28% 29% 20% 26% 21% 26% 22% 25% 31% 24% 24% 23% 20% 18% 18% 8%

Human resources constraints top 2012 business challenges

18%

Source: AmCham China's 2012 China Business Climate Survey

in a high staff turnover. The Asia-Pacific region generally shows positive results for employment in all sectors, an average of 70 percent of companies are recruiting or will be recruiting at a professional and managerial level over the next few months. The leader in the region is the Philippines, with an incredible 97 percent of businesses hiring at present and intending to hire next quarter. However, things are not going great for Singapore, where despite a slight increase since last year’s snapshot, the hiring rates have remained similar to the ones of Western Europe. However, the number of companies cutting staff is set to decrease over the next quarter, which indicates that the market is rightsizing. More specifically, the disciplines and functions that are most in demand in the region are sales and marketing, with 37 percent of businesses looking to fill those positions. Ranking second and third are transports and logistics and engineering and production, also in high demand among employers in Asia-Pacific. According to Antal’s CEO, Tony Goodwin, “In a bigger picture, the overall hiring across the more than 17,000 organizations taking part in this 11th edition of Global Snapshot is only down by one percent. It seems that this level of activity will remain more or less constant over the coming quarter, suggesting that a degree of stability has finally returned to the global employment market for managers and professionals.” Jonathan Edwards is a partner at Antal-Shanghai. For more information on Antal International, please see www. antal.com. j u n e

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fotolia.com

Thrive in Tianjin Growing at twice the rate of Beijing and Shanghai, data reports and forecasts for fitting the city into your China strategy By The Economist Intelligence Unit’s Access China

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hina Brief partners with The Economist Intelligence Unit’s Access China to explore Tianjin’s latest economic, commercial and business developments. Below is a data report analysis and forecast to assess the market potential for your products and services, as well as investigate the operating conditions, infrastructure, consumer trends and purchasing patterns of Tianjin municipality.

Retail sales grew by a respectable 19.4 percent in 2010, against 21.5 percent in 2009. Automotive sales rose by 48.5 percent on the back of various subsidy programs.

Consumer profile

Retail outlets in Tianjin are fairly modern, and the arrival of several high-end department stores is transforming the city’s downtown area into a relatively fashionable shopping destination. Carrefour, a French hypermarket, has recently expanded in the city, buying out the local holdings of its Taiwanese partner, Uni-President.

Average urban disposable income per head rose by 13.5 percent in 2010, surpassing the 10.3 percent rise recorded in 2009. Rural cash income per head increased by 10.5 percent in the same period, on par with the 10.4 percent growth rate recorded in 2009.

Tianjin has become a magnet for luxury goods consumers. Clothing brands, such as Gucci of Italy and Louis Vuitton of France, have opened stores in the city. The city hosts regular yacht shows and boasts one of China’s few polo clubs.

Penetration rates of many consumer durables are high in the rural areas of Tianjin. Rural residents will be upgrading to more sophisticated models and spending more on other essentials, such as healthcare.

The city opened China’s first consumer protection bureau in 2011. The main purpose of the bureau is to protect consumer interests by mediating consumer disputes that may involve the court system.

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Y

The tianjin opportunity

ou may have already read Tianjin’s latest statistics: an industrial city whose economy is growing at twice the rate of Beijing, Shanghai and the country at large; investments in aerospace, new energy and logistics are complementing those of pharmaceuticals, microelectronics and automobiles to further broaden its economic development. What the reports do not tell you is with Tianjin’s new hotels, accessible riverside and revived Italian quarter, the city is a cultural, affordable place to spend a weekend strolling past historic European architecture in the middle of one of China’s biggest cities. Over the past 10 years, a number of bridges have created links across the Hai River, which runs through the heart of Tianjin and creates different vantage points to take in a developing city. Meanwhile Tianjin is still a manufacturing powerhouse, but is also becoming a tourist destination and has a small, but growing service sector. Many of these new developments also add to the city’s portfolio of things to do, whether it’s a new five-star or boutique hotel, a luxury shopping village, or a new museum to browse. For expatriate residents of the city, 2011 saw the opening of a new international school (central Tianjin’s fourth English speaking international school) and a new foreign invested hospital, (Beijing United Family) creating more options for a comfortable life. Recent property developments have reshaped the city’s skyline and with plenty more projects coming, it will continue to evolve. Movie director James Cameron of Titanic and Avatar fame, agreed to establish a film company in Tianjin’s Binhai New Area to promote 3-D film technology. Chinese media mogul Bruno Wu also recently announced plans to create “Chinawood,” a center for film financing and development. Tianjin is hosting an increasing number of international events (the Volvo Golf Championship in April for example) that help put the city on the map and helps it to increase service quality levels. These are just a few examples of Tianjin’s economic and cultural successes, we welcome you to visit and discover more about a city on the move! Michael T. Hart is the managing director of Jones Lang LaSalle’s Tianjin operations and the Chairman of AmCham China’s Tianjin Executive Committee.

Economy Tianjin recorded an increase of 16.4 percent in GDP in 2011, according to preliminary statistics issued by the local statistics bureau. Although this was a slower rate than the 17.4 percent growth recorded in 2010, it was nearly double the national growth rate and, together with Chongqing, the fastest in the country. The boom in Tianjin’s economy was driven by the Tianjin Binhai New Area (BNA), which accounted for more than half of the municipality’s total GDP. The GDP of the BNA, at RMB 503 billion, surpassed the GDP of Shanghai’s Pudong New Area, at RMB 471 billion, in 2010. 2 4

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Tianjin is expected to continue on its strong growth trajectory. Investment in the city is largely domestically oriented, and compared with other provinces, not as closely tied to property. As such, the Economist Intelligence Unit expects that Tianjin’s GDP growth will prove fairly resilient to the overall national slowdown, and forecasts a GDP growth rate of 15.1 percent in 2012. In the short term, infrastructure spending will buoy Tianjin’s economy. There are substantial projects under way to extend the metro system and improve road and rail links with nearby Beijing, and neighboring Tangshan.

Tianjin's Economic forecast 2012

2014

2016

1,337.2 1,884.1

2,543.5

GDP Nominal GDP (Rmb bn) Real GDP growth

15.1%

13.2%

11.0%

Expenditure on GDP (Rmb bn) Private consumption

323.6

444.9

591.8

Government consumption

162.6

201.1

249.1

Gross fixed investment

995.3 1,431.9

1,906.3

Stockbuilding Foreign balance

50.4

56.7

63.4

-194.6

-250.4

-267.1

12.6

13.0

13.4

Population and income Population (m) GDP per head (Rmb)

105,957 144,605 189,833

Real wages (% change, year on year)

11.5%

10.2%

9.2%

3.7%

4.4%

4.1%

2.5%

3.8%

3.5%

15.3

20.7

25.3

37.0

50.1

58.2

66.0

90.3

102.5

Prices Consumer prices (av; % change) Producer prices (av; % change)

Foreign investment (US $ bn) FDI utilised

External trade (US $ bn) Exports (by location of producer) Imports (by location of consumer)

Source: Economist Intelligence Unit


Industry In 2010, the secondary sector continued to grow more quickly than the tertiary sector, reflecting the persistent emphasis on manufacturing in the city. The tertiary sector accounted for just over 45 percent of GDP in 2010, a much smaller proportion than Shanghai’s 59 percent and Beijing’s 76 percent. Renewable energy has been designated a new pillar industry, exploiting the strengths of several wind-turbine manufacturers already in the area. Notably, Vestas Wind Systems of Denmark, the world’s largest wind-power manufacturer, inaugurated its wind-turbine control system manufacturing facilities in Tianjin Economic Development Area (TEDA) in October 2009. The city is aiming to achieve production capacity of 7,000 mw during the 12th Five-Year Plan. Having grown by over 30 percent annually since 2008, Tianjin’s culture industry has also developed, with value-added output rising from RMB eight billion to RMB 30 billion between 2005 and 2010. Tianjin has a growing aviation industry centered on the Tianjin Airport Economic Area in the BNA. Major recent investments include the Aviation Industry Corporation of China building a facility with an investment value at RMB eight billion for the production of light aircraft for civilian use, and Hainan Airlines established a maintenance and management services joint venture for private aircraft with an investment value of RMB 1.4 billion. Along with other massive domestic and foreigninvested projects, the city government expects the output value of the local aviation industry increase to RMB 100 billion by 2015 and RMB 280 billion by 2020. Another sector on the move is animation. In May 2011, the city opened the National Animation Industry Park in the Sino-Singapore Tianjin Eco-City. Although the industry accounts for 3.3 percent of GDP, the city government hopes to sustain this rate of growth in the current Five-Year Plan. In 2011, it has already successfully attracted RMB 52 billion in investment.

City Rankings The purpose of the emerging city rankings is to identify fast-growing cities. As such, growth indicators—rather than those reflecting absolute size or wealth—were chosen. However, in order to ensure the ranked cities have the critical mass attractive to investors, a minimum population cut-off point of one million people by 2015 (the end of the Five-Year forecast period) was used. This leaves 94 out of 287 cities (up from 84 cities in 2014). Economy: Tianjin is ranked eight out of 94 and its economic environment is among the 10 best in China, owing to a high proportion of FDI in the municipality’s GDP. However, GDP per head is not

GDP growth comparison (%) 18 15.5

16.5

17.4

16.4 15.1

15.1

Tianjin

14 14.5

9

16.5

9.1

10.2

13.2

12.3 11

10.2 8.1

8.3

7.5

5

8.2

8.2

7.9

Beijing

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: National Bureau of Statistics

as high as in richer competitors situated along the China’s southern coast. Logistics: Tianjin is also ranked among China’s top 10, ranking eighth out of 94 due to its excellent infrastructure. With famous high-speed train and good port links, Tianjin is an easily accessible city and thus an ideal place to invest and do business. Companies such as Amazon have recently relocated to Tianjin from Beijing largely because of its convenient and cost-effective logistics. Education: the city is ranked 61 out of 94. Although Tianjin ranks above Shanghai due to its access to education, the disproportionate ratio of students to education facilities is still an issue with the number of primary schools and universities per head remaining low, coming in below Beijing. Pollution: Tianjin’s pollution ranking is high for a rapidly industrializing city. With its high treatment rates of industrial wastewater and solids, it ranks 13 out of 94.

12 Million Strong Tianjin residents will tell you the pace of life is less stressful and people are more relaxed than their neighbor 30 minutes to the north. Despite being China’s fifth largest city, inhabitants champion its community, “big-town” feel, while the city is also home to over half of the world’s Fortune 500 companies and hosts the highest growth rate in all of China. With multinational companies snapping-up office space at the 86-story Tianjin World Financial Tower, and growing government incentives for new businesses, Tianjin is booming at 12 million strong, with many more to come. The Economist Intelligence Unit’s Access China has data, analysis and forecasts for every province, prefecture and 287 of China’s largest cities. Learn more at www.eiu.com/china or call 010-8571-2188. j u n e

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US Undersecretary of State:

US-China Investment, Trade and Competitive Neutrality The following is an excerpt from AmCham China’s China Brief Insight podcast series. To hear the rest of the podcast, please visit our website at www.amchamchina.org/podcasts or find us on iTunes.

Jin peng

Undersecretary Robert Hormats addressing members and fellow US government officials in the chamber's conference center

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n this AmCham China exclusive interview, China Brief Insight speaks with US Undersecretary of State Robert Hormats, who shares his insights on the latest bilateral trade and investment developments as well as the key takeaways from this year’s Strategic and Economic Dialogue (S&ED), an annual high-level dialogue for the US and China to discuss global, regional and bilateral economic and security issues.

and competitiveness of price but not competitive advantages due to highly subsidized export financing visa-vis other countries. There is an OECD [Organization for Economic Co-operation and Development] code for standards of export financing, and we would like to see China accept that code, or at least have some broad acceptance of the notion that we should not compete by trying to lower the interest rate, or provide highly generous export financing.

Q Welcome back to Beijing. What is your take on this year’s S&ED?

Q Did this level of progress match expectations from the last meeting?

A I thought it was very successful…I think we made some progress in terms of opening up the environment for foreign investments. We talked a lot about state enterprises, competitive neutrality, and export financing— which refers to the problem that one country provides more generous export financing than others. We do not mind competing on the basis of quality

A We do not expect the S&ED to be a place where we get dramatic breakthroughs. We think that the importance of the S&ED is to have a dialogue among senior leaders of China and the United States on a wide range of issues. We had a discussion of economics and regulations of both countries, trade issues and commercial issues, and areas where American investments can play

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a greater role in China. We emphasized the importance of not having restrictions on American or foreign companies in China. We also placed a lot of emphasis on the protection trade secret, and one of the points I tried to make is that a number of things in the 12th Five-Year Plan are very consistent with the kind of things that we want to do. They want more foreign investment, and American companies want to invest more in China, but they want intellectual property protection, and they want their trade secret zone. We also want more Chinese investment in the United States with governor to provincial leader conversations and other ways to alleviate political concerns.

Q What is the concept of “competitive neutrality” and how does it affect the US and China? A The policy is to make a distinction between whether China has state enterprises, and how it provides incentives for those state enterprises in a way that also distorts trade. The fundamental point is whether China desires to have state enterprises or not does not matter to us; that is their sovereign decision. The second point though is a bit different, and that is, the extent that the Chinese government provides large subsidies for state enterprises or for non-state enterprises that are national champions, does affect the interests of our companies, and other foreign companies, and even Chinese companies. So generally, your system and how you organize it is purely up to you, but the rules that your companies play by should be based on the notion of competitive neutrality, according to which you should not provide them with benefits that give them an artificial competitive advantage vis-a-vis private enterprises in the United States or elsewhere. And it is not just state enterprises; in some cases, it could be a situation in which their own or some of their own private enterprises get a certain series of advantages from the government, and that distorts the competitive neutrality as well. Q How are the negotiations for the TPP [Trans-Pacific Partnership]? A The negotiations are going well. The idea is to create a free trade agreement of nine countries in the pacific basin of North America, South America and mostly the southern part of Asia, which would enhance trade with rules on treatment of state enterprises, protection of intellectual property, labor and environmental practices, and several others. The concern that one hears in China that the agreement is designed to contain China is not true. In fact, the objective is to pull together initially the countries with which we already had free trade agreements with on both sides of the Pacific, and try to combine those to make them into one more efficient free trade agreement with higher standards. But the one thing that does affect China is that if we have very high standard of policy agreements on things like intellectual property, avoiding large subsidies to state enterprises, environmental policy, and other kinds of policies, it can perhaps convince Chinese companies that want to export into those markets to encourage the government of China to accept similarly high standards. So we hope by setting high standards, we would encourage other countries to adopt similarly high standards. To hear this and other podcasts covering business and economics in China, please visit the AmCham China website or search “AmCham China” to subscribe to us on iTunes. j u n e

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A m C h a m C h i n a I n Ac t i o n – W o r k i n g G r o u p s

AmCham China Cooperation Programs

Know Your Working Groups

Please see www.amchamchina.org/cooperationprograms to learn more.

US-China Aviation Cooperation Program 16 Pat Power, FAA Marc Allen, Boeing (China) Co., Ltd.

The Oil, Energy and Power Forum

US-China Energy Cooperation Program 17 ECP@amchamchina.org Julie leng

Please see www.amchamchina.org for more infromation about AmCham China's forums.

Agriculture 1 Michael Boddington, Boddington Consulting Kevin Eblen, Monsanto

AmCham China’s Oil, Energy and Power Forum (OEP) is an active working group for members involved in oil exploration and production; refining; energy production; mining for energy; chemical energy production and power industries. The forum provides a platform for interaction, discussion, research and presentations. As the environment of energy and power is constantly evolving, OEP hosts events to help members address the latest trends, topics and developments in the China market. For example, due to the growing interest and debate on shale gas, the OEP forum recently held a roundtable discussion led by energy experts from the US and China, which was attended by over 40 AmCham China members and guests. The event featured panelists Hugh Tucker, partner and head of oil and gas section, Baker Botts; Zhou ZiZhou, head of China energy, HIS Cambridge Energy Research Associates; and Bradley Way, head of Asia energy at Renaissance Capital. Another successful event was meeting with the Ministry of Land and Resources last April, discussing the development of unconventional oil and gas in China with Daniel Zhang, the Ministry’s vice director at the Strategic Research Center of Oil and Gas Resources. In late May, OEP met and planned projects and initiatives, including contributing advocacy recommendations to the chamber’s 2013 American Business in China White Paper. The forum also planned future event topics, such as nuclear energy, business sustainability for the relocation of people, and implementation for large energy projects. Stay tuned for more information coming soon. OEP is chaired by Darron Jackson (ConocoPhilips China, Ltd.), Greg Ray (Independent Project Analysis, Inc.) and Zhiyong Zhao (Hess China Oil and Gas Beijing). Want to get involved? Please contact Sujing Wang: sjwang@amchamchina.org

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Export Compliance Working Group 3 & 6 Marc Allen, Boeing (China) Co., Ltd. Chris Szymanski, SMIC Co.

Forum Chairs Aerospace 4 John Bruns, Boeing (China) Co., Ltd. Kevin Wu, Textron

OEP hosts a variety of topical events, including shale gas(above)

US-China Healthcare Cooperation Program Jun Zhou, jzhou@amchamchina.org

Business Process Outsourcing 1 Julie Liu, Cummins China Michael Liu, Compupacific International Inc. Gabrielle Sanders, Convergys Software Service (Beijing) Co., Ltd. Clean Technology 1 Robert Jones, Ecolinx Emiel van Sambeek, Azure International Cosmetics 2 Carol Shen, Estee Lauder (Shanghai) Commercial Co., Ltd. Environmental Industry 1 Daniel Li, Albemarle (Shanghai) Chemical Co. Michael Nicholls, Otek Australia Pty. Ltd. Financial Services 3 Li Jianbo, JP Morgan Healthcare Industry 18 Jimmy Ip, Edwards Lifesciences World Trade (Shanghai) Co., Ltd. Roberta Lipson, Chindex International, Inc. Carol Yan, Johnson & Johnson Medical (China) Ltd. Human Resources 6 Alan Babington-Smith, LMI China (Shanghai) Inc. Jim Leininger, Towers Watson

Manufacturing (Central China Chapter) 14 Tom Tong, Diamond Power Machine (Hubei) Company, Inc. Hunter Guan, America SednAir Compressor System Company Marketing, Advertising and Public Relations 2 William Moss, Motorola David Zeke Yusah, Lenovo Kate Wang, Caterpillar Media and Entertainment 2 Mathew Robert Alderson, Harris Moure PLLC, Beijing Arturo Casares, Mexico Guajillo Entertainment SA DE CV Beijing Representative Office James Dyson, Fleishman-Hillard Oil, Energy and Power 1 Darron Jackson, ConocoPhillips China, Ltd. Greg Ray, Independent Project Analysis, Inc. Zhiyong Zhao, Hess China Oil and Gas Beijing

Provincial & Regional Development 10 Emory Williams, SureBlock Company Lily Yang, Schneider Electric Real Estate and Development Industry 1 Eric Hirsch, Jones Lang LaSalle Jin Yong, CB Richard Ellis Real Estate (Tianjin Chapter) 11 Micheal Hart, Jones Lang LaSalle Retail and Distribution Industry Matthew Estes, BabyCare Ltd. Barry Friedman, Wal-Mart

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Insurance 3 Lester Ross, Wilmer Hale Sufang Cui, Principal Life Insurance Company

Small Business 5 Anthony Goh, US-Pacific Rim International, Inc.

Intellectual Property Rights 5 Roger Somerville, Business Software Alliance

Small Business (Northeast China Chapter) 15 Esther Baldwin, Intel

Information & Communications Technology 1 Robert Fonow, RGI Ltd. Max D. Klein, USITO Justin Zhao, Microsoft

Standards 3 John Larkin, LTI Associates Fei Liu, ASTM International China Office

Manufacturing and Sourcing 3 Harold Lang, Terex (China) Investment Co., Ltd. Dwight Nordstrom, PRI Management & Consulting Ltd. Manufacturing (Tianjin Chapter) 11 Scott Taylor, Individual

Tax 4 Wendy Guo, Pricewaterhouse Coopers Brett Norwood, Deloitte Touche Tohmatsu CPA Ltd. Tourism Industry 2 Jamie Lee, Individual

Support Staff: 01. Sujing Wang (sjwang@amchamchina.org) 02. Julie Leng (jleng@amchamchina.org) 03. Wenya Zhang (wenya.zhang@amchamchina.org) 04. Cindy Du (cdu@amchamchina.org) 05. Barbara Chen O'Connell (bococonn@amchamchina.org) 06. Jonathan Abramovic (jabramovic@amchamchina.org) 07. Elizabeth Rowland (erowland@amchamchina.org) 10. Breeze Wang (bwang@amchamchina.org)

11. Amanda He (amandahe@amchamchina.org) 12. Anna Li (ali@amchamchina.org) 13. Joan Zhu (jzhu@amchamchina.org) 14. Jasmine Sun (jsun@amchamchina.org) 15. Ekaterina Gubanova (egubanova@amchamchina.org) 16. Grace Li (gli@amchamchina.org) 17. ECP@amchamchina.org 18. Wang Hui (hwang@amchamchina.org)


A m C h a m C h i n a I n Ac t i o n – e v e n t s

Committee Chairs

A Round-Up of the Chamber's Recent Events

Please see www.amchamchina.org for more infromation about AmCham China's committees. Connie zhao

Business Sustainability 5 & 2 Karen Guo, Dow Chemical (China) Co., Ltd. Kaying Lau, Individual

Business Sustainability (Central China Chapter) 15 Qiqing Jiang, Cummins East Asia Research and Development Company, Ltd.

Chinese Government Affairs 10 Wan Li, Cummins

Chinese Government Affairs (Central China Chapter)

TBD

Customs & Trade 8 & 2 Xiaoping Jiang, Flextronics (China)

Customs & Trade (Northeast China Chapter) 17 Manny Chua, Intel Semiconductor (Dalian) Ltd.

Election 5 David Diebold, David Diebold & Associates (HK) Ltd. Beijing

Golf Program 1 Hans Lootiens, Renaissance Beijing Capital Hotel Su Cheng Harris-Simpson, SCHS Asia

Golf (Central China Chapter) 16 Li Xin, Cummins Power Generation

Golf (Tianjin Chapter)

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Hank Martin, Hank's Sports Bar & Grill

Legal 9 Timothy Stratford, Covington & Burling LLP Beijing Rep. Office Hank Wang, Garvey Schubert Barer

Public Policy Development 8 Patrick Chovanec, Individual Jeff Moon, Cisco

US Government Relations 8 & 9 James McGregor, APCO Worldwide Inc.

Visas 5 Gary Chodorow, Frederick W. Hong Law Offices Beijing Darlene MacNeill, Deloitte Touche Tohmatsu CPA Ltd.

Women’s Professional 5 Su Cheng Harris-Simpson, SCHS Asia Lin Gao, Motorola Solutions Kitty Vorisek, DHK International

Women’s Professional (Tianjin Chapter) 14 Lucy Liu, TEC Tianjin Jennifer Zhang, Deloitte Tianjin

Work Safety 6 Harold Lang, Terex (China) Investment Co., Ltd.

Young Professionals 5 Jeremy Huff, NBA China

Young Professionals (Central China Chapter) TBD

Chris Adams (left) and David Dollar debriefing the S&ED

US Embassy Briefing on the 2012 S&ED AmCham China recently hosted a briefing with representatives from the US Embassy on the US-China Strategic and Economic Dialogue (S&ED). The US Embassy's Financial Attaché David Dollar and Minister Counselor for Trade Affairs Chris Adams explained to members the latest commitments made by the Chinese government and this year’s economic outcomes. Key Points • China has taken measures to rein in its growth, but may have hit the brakes too hard and now needs to add more stimulus, including significant tax reductions for the service sector. • The Chinese government is cutting import taxes, growing the service sector, improving the financial sector, and lifting the equity cap to 49 percent. • Although not much progress was made in term of protecting trade secrets, the Chinese government indicated commitment to making the issue a priority in the 2012 plan. • The Chinese government will simplify procedures and increase transparency for investment.

JCCT: Pharma and Medical Devices Peter Perez, US subgroup co-chair and deputy assistant secretary for manufac-

turing at the US Department of Commerce, recently provided AmCham China members with a debriefing on the ChinaUS Joint Commission on Commerce and Trade (JCCT) Pharmaceuticals and Medical Devices Subgroup Meeting in Shenzhen. Key Points • State Food and Drug Administration (SFDA) made the regulatory reform of medical devices a top priority this year. Recommended key issues to address included: 1) license re-registration 2) risk classification 3) harmonization of regulatory framework with international frameworks 4) market authorization requirements. • In 2012, both the US and China agreed to a number of activities including a proposed standards workshop in September. • Key SFDA officials expressed willingness to meet AmCham China members to discuss their concerns and to explain SFDA regulations and compliance procedures. • Pharmaceutical counterfeit drugs and regulatory data protection issues were raised as a matter of importance. Businesses can seek a variety of channels, such as industry associations and non-profit organizations (including AmCham China and the US embassy) to help address their concerns.

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Julie leng

ing, while the US is predominantly the latter. • Investments is not as big as we think, with some organizations over reporting numbers. RMB 5.6 billion is a more accurate estimate. Brautigam also detailed the positives for Chinese engagement in Africa, including consumer choice and access, addressing enormous infrastructure needs, policy space (unconditional investment), and opportunities for business. To learn more, listen to Brautigam’s podcast online at www. amchamchina.org/podcasts.

Can China Go Green? From left: Will Moss, Yang Fan and Michael Pranikoff giving a social media update

Social Media and Corporate Communications Over 40 members attended the MAP Forum’s “2012 China Social Media and Corporate Communications Update,” featuring panelists Michael Pranikoff, global director of emerging media for PR Newswire; Yang Fan, CEO of Coweibo; and Vincent Lee, senior manager, Edelman Digital. Will Moss, director of Motorola Mobility Communications and the forum co-chair, moderated the discussion.

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China in Africa: The Other Story Deborah Brautigam, author of The Dragon's Gift: The Real Story of China in Africa, recently presented at the AmCham China conference center, outlining the key findings from three decades of research on China’s engagement in Africa, separating the facts from fiction. Key Points • Brautigam noted China has been in Africa earlier than people may think, since the 1970s, and therefore China has not just arrived, rather they are expanding. • 150 billion in trade last year does not show the balance of exports and imports. China’s trade relationship with Africa is importing and export-

Key Points • China aims to double its income by 2020, and again by 2030 to become a high-income country. Thirteen out of 101 countries have escaped the “middle-income trap” (including Japan and South Korea). China’s challenge is to overcome the trap through innovation and differentiation. • China aspires to reduce environment externalities (degradation and depletion of resources) from nine percent of Wenya zhang

Key Points • For social media to be most effective, panelists noted content should be easy to access, easy to find, easy to use, and highly visible online. • Adding video, pictures, and sound bites are all good vehicles for increasing visibility, which creates greater engagement with netizens. • Not commenting, not reacting, and doing nothing in the face of an online complaint is the worst possible strategy. Implementing a preventative strategy is ideal. Fast responses and good coordination with the legal department can resolve a disaster before it occurs. • Other tips included instituting a longterm plan, as social media is not a short-term device. For maximum impact, commitment and regular maintenance are essential.

Information on the web has a relatively short lifespan; even the hottest topic will be redundant, on average, in 17 days. Netizens have a much higher expectation of their social media experience therefore to increase follower loyalty companies should provide useful information and host offline events, thus having greater engagement with netizens.

As part of AmCham China’s new event series, “China and the Environment” the chamber recently hosted The World Bank’s Carter Brandon, who is working with the Development Research Center of the State Council and with the Ministry of Finance. Brandon examined the magnitude of China's sustainability needs in both economic and physical terms, and explored the economic policies required to address them.

Carter Brandon outlining the economic benefits for China going green


A m C h a m C h i n a I n Ac t i o n – e v e n t s GDP to three percent or less by 2030. Most developed nations are at two percent, which is a sustainable level. This goal requires extensive human and technological capital. • To achieve green growth China must decouple upward trends in resource use, carbon emissions, environment degradation. China has one of the largest gaps between GDP and green GDP. • “Green” is a source of growth because it helps 1) realize economy-wide efficiencies by eliminating market distortions and combating the wasteful use of resources such as water and land while inducing innovation. 2) create new markets by shifting consumer preferences toward new greener products and services. 3) lower risks (reduces the exposure to volatile commodity prices and supply disruption).

In the future, there could be demand imbalances and property liquidity problems due in part to previous government led building initiatives that lacked actual market demand. As the government transitions and power is handed over, personal government projects may be abandoned as the new government shifts its area of focus. Lack of real estate transparency and poor property management could leave buyers saddled with properties that in the future they cannot sell.

Advertising, Marketing in Highly Regulated Industries

group. Topics covered in this discussion included how to get a company message across to the general public, how to react and adapt in China’s highly fluid regulatory environment, and how to cope with consumer issues. Key Points • In 2011, Chinese national advertising turnover reached RMB 312 billon (with over 29,000 advertising agencies already established in China) making China the third biggest market in the world in terms of advertising. • Demand for cosmetics is increasing, encouraging big name brands to enter the market. Famous cosmetic brands such as Chanel, L’Oreal, and Estee Lauder are already highly popular. • False and exaggerated advertisements misleads many consumers, which results in cosmetics, food, and private healthcare advertising in China becoming highly restricted (i.e. private hospital advertisements were prohibited from showing: hospital names, logos, efficiency rates, phone numbers, or the names of their medical staff, and each advert had to be approved by the Ministry of Health and CAA.

julie leng

Obstacles that can hinder the adoption of green policies include: market distortions on land, labor, capital, water, an over-reliance on command and control measures, inadequate property rights, and weak monitoring and enforcement measures. Going green can improve the quality of growth by reducing environmental degradation, improving public health, and building resilience to climate-related hazards.

rapidly. As China becomes wealthier people tend to spend more on retail and generally there is always a first boom in hotels and retail. • The China 50 has a continent-sized market, if it was a standalone economy, it would be ranked the fifth largest economy in the world. • Tier one cities are over stretched and under provisioned in terms of logistics, therefore the government is focusing on the development of other cities to make economic growth more sustainable.

Real Estate Trends and Opportunities AmCham China’s Real Estate Forum recently hosted the “China 50, Fifty Real Estate Markets that Matter” report, which covers the real estate trends and opportunities of the 50 up-and-coming tier two and tier three cities in China. The event featured Michael Hart, chairman of AmCham China Tianjin chapter and managing director of Jones Lang LaSalle’s Tianjin office and Eric Hirsch, chairman of AmCham China’s Real Estate Forum and head of Jones Lang LaSalle’s markets team. Key Points • In 2011, the middle class expanded rapidly, and it is projected that the middle class will reach 66 million by 2020. This new middle class will be concentrated in the rest of the China 50 cites. • It is expected that as the middle class rises the retail sector will also expand

Alan Kahn describing advertising strategies

AmCham China recently hosted an informative panel discussion on effective marketing strategies in China. The panel consisted of Alan Kahn, vice president of marketing and communications at United Family Healthcare, May Zhang, principle owner and CEO, Asia Enterprises Ltd, Stephen Peng, lawyer, China Advertising Association (CAA), and Richard Wageman, partner, DLA Piper who moderated the

The main roles of the CAA are to provide assistance for: pre-advertising consultations and examinations; advertising complaints and dispute mediation; and advice to enterprises on China’s advertising laws and regulations to minimize infringements. Greater communication between enterprises and the CAA can lead to an overall improvement in the industry.

Build Brand Equity through Culture AmCham China jointly hosted an event with the Meridian International Center, a non profit that promotes cultural understanding between China and the US. Dr. Curtis Sandbergwill, senior vice president for the arts at Meridian International Center, outlined the organization’s key initiatives.

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Lessons for Developing Shale Resources AmCham China’s Oil, Energy & Power Forum hosted a roundtable to discuss the issues surrounding the US shale experience, the potential lessons and pitfalls for China. The discussion was led by energy experts from the US and China and was a follow-up event to AmCham China’s December 2011 presentation on the revolution in US shale and gas production. Speakers included Hugh Tucker, partner and head of oil and gas section, Baker Botts; Zhou Zizhou, head of China ener-

gy, HIS Cambridge Energy Research Associates; and Bradley Way, head of Asia energy, Renaissance Capital. Issues discussed included the current state of play in China and the opportunities for foreign players in China.

infrastructure needed inhibits significant usage, this area has great potential for development and in a few years unconventional plays like shale energy may outstrip conventional ones.

Northeast China Chapter

Key Points • Foreign investors will have to enter a Monthly Networking joint venture with Chinese companies. Night Retention of technical and operation personnel along with the continued advancement of refinement technology is key to success. • China has a vast amount of potentially recoverable shale gas that could reduce China’s dependence on imported gas as well as aid in cutting emissions. China has announced an ambitious target for shale production however these targets may be delayed due to regulatory issues and ground risks. Members in Northeast China making connections • The geology in China is at the New World Hotel different with a higher Recently Northeast China hosted its monthamount of sulfur in shale and therefore ly networking night, with members and higher exploitation costs. guests gathering for drinks, food, and conversation at the New World Hotel‘s PoolIn North America increased shale activside Lounge. The Chairman of Northeast ity has resulted in more coal fired power China’s executive committee, Tony Balow, plants being retired and increasingly it is thanked everybody for attending and gave becoming an attractive alternative for feeda brief introduction to the chapter’s upcomstock and transportation fuel. Although the ing events. For more information and to get involved with Northeast China events, email Kate Gubanova at egubanova@amchamchina.org.

Amcham china staff

Key Points • The new American-Chinese Cultural Initiative is a public/private partnership between American and Chinese businesses, non-profit organizations, and government entities to promote cultural understanding between the two nations. • Meridian’s programs focus on commonalities across humanity and it specializes in storytelling on cultural topics. Businesses can leverage Meridian’s expertise as part of their corporate social responsibility programs. • The Chinese government, particularly the Ministry of Culture, would like to extend the private/public partnership and seek ways to communicate Chinese culture via Meridian’s channels.

Julie leng

Corporate and US Expat Tax Updates

Hugh Tucker on developping China's shale gas resources

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AmCham China Northeast China held its third taxation seminar, addressing corporate tax, tax implications on non-trade remittance of cross-border transactions, and how best to minimize tax for US expatriates working in China. The event was held at the International Finance Tower in Dalian and was attended by over 30 tax and finance professionals. Speakers included Samuel Yan tax partner, business and tax advisory at Ernst & Young, and Jason Mi tax partner, human capital business and tax advisory services, Ernst & Young, Beijing Office.


A m C h a m C h i n a I n Ac t i o n – e v e n t s

Women’s Professional Committee Executive Lunch

Central China Chapter Manufacturing Logistics

Amcham china staff

AmCham China Central China recently hosted a logistics manufacturing event at the Wuhan Economic Development Zone, addressing how to create an effective transportation and logistics plan. Led by Wang Yongwei, general manager of JHJ International Transportation Co., Wuhan Branch, more than 20 members and guests attended this event. Wang gave an informative talk about logistic issues that impact a company’s daily operations and also offered professional solutions to these issues. To get involved with Central China’s Manufacturing Committee, contact Jasmine Sun: jsun@amchamchina.org.

Monthly Networking Night Mireille Wan welcoming Tianjin's women professional committee Amcham china staff

AmCham China Tianjin recently hosted its first Women’s Professional Committee networking event at The Astor Hotel. Thirty female professionals representing a wide range of industries attended the event. Christian Metzner, general manager at The Astor hotel, welcomed attendees and Mireille Wan, managing director at CB Richard Ellis, gave an overview of the committee’s purpose and goals. The luncheon was a unique opportunity for Tianjin’s women professionals to meet, develop ties and share ideas.

Central China members enjoying a networking evening at Aloha Diner

AmCham China, Central China members gathered recently for their monthly networking night at Aloha Diner. Janie Corum, chairperson of the Central China Chapter’s executive committee, opened the evening and welcomed members and guests. The winner of the lucky draw was Steve Carpenter, CFO, Zhong Relations Inc, who received a bottle of wine. The chapter’s monthly networking night takes place on the second Tuesday of each month and offers guests the opportunity to network and create new business relationships.

Tianjin Chapter Tianjin Historic Walking Tour AmCham China Tianjin’s Vice Chairman Douglas Red, a longtime resident of Tianjin and local history enthusiast, recently led a walking tour of the British Concession area for members. Red revealed little-known facts about Tianjin’s concession era past and gave an account of the key figures that lived and worked in the area. The group viewed unique buildings such as the restored house of the head eunuch of the Qing Dynasty’s royal family. Participants explored the grounds and absorbed some Tianjin history. More cultural events are under development, visit “upcoming events” section of AmCham China’s website for more.

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A m C h a m C h i n a I n Ac t i o n – S p e c i a l e v e n t

AmCham China Tianjin, BT Eagle Group's 11th Charity Golf Tournament By Amanda He Photos by Cheng zi & Ma shiwen

O

ver 60 golf enthusiasts arrived on a sunny, windless day in May to compete at the World Golf Club in Tianjin. The annual charity golf tournament raised over RMB 110,000 for the Jian Hua Foundation, an organization that provides community outreach through education, medical aid and occupational therapy. Special thanks to our major sponsors, BT Eagle Group and Tianjin Custom Wood Processing, who made this event possible through their generous support. Gratitude and appreciation also go to the Renaissance Tianjin Lakeview Hotel, Taylor Printing, Cintas, Northern Lights, Hank’s Sports

Bar and Grill, United Family Hospital, Jones Lang LaSalle and the St. Regis Hotel. Your generosity created a successful night. After a great day of golfing, attendees enjoyed a buffet dinner at the Renaissance Tianjin Lakeview Hotel, accompanied by awards, prize drawings, live auction, and entertainment by jazz and blues singer Tami Jones Andrews. Many thanks to everyone who came to compete and contribute to such a wonderful cause, we look forward to seeing you again next year! Amanda He is the assistant chapter manager for AmCham China Tianjin.

AmCham China would like to thank our generous sponsors: Major Sponsors:

Hole Sponsors:

Winners: Hole-in-one: Steven Smail (the first hole–in-one winner in AmCham China Tianjin’s golf tournament history) 1st place: Pat Power and Randy Phillips 71 2nd place: Mike Bogus and Chase Webb 73 3rd place: Tim Beagle and Patrick O’Shea 76 Longest drive: Bernie Delaney Most accurate longest drive: Paul Holmes Nearest to pin: Paul Peet (8#) Sean McGuigan (10#) Putter Contest Winner: Bernie Delaney Pitching Contest Winner: Anders Axen

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Dinner Sponsor: Prizes Sponsors:

Printing Sponsor:

Beverage Sponsor:


A m C h a m C h i n a I n Ac t i o n – S p e c i a l e v e n t

AmCham China's Invest USA Ambassador Locke kicks-off 2012 investment seminar series By Feng (Andy) Li

From left: Eric Yao, Bill Zarit, Chen Jun, Ambassador Locke, James Brown and Qi Xiaoyao

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n a warm Monday morning in Xi’an, senior Chinese executives arrived early for a small group breakfast with Ambassador Gary Locke and AmCham China’s Invest USA Program Advisory Group. They represented an assortment of companies, including: Shaanxi Nonferrous Metals Holding Group, Xi’an Aero-Engine PLC, Shaanxi Oversea Investment and Development Co. Ltd., Shaanxi Provincial Expressway Construction Group, and Shaanxi Regional Electric Power Group. During the breakfast, Ambassador Locke stressed it is a myth that the US is a difficult market to enter. In fact, government approvals are minimal, if required at all. Over the past six months, the visa interview waiting time has been reduced from over 20 days to two to four days, helping Chinese executives investing and trading with the US get visas faster than before. Following the breakfast, additional executives and officials joined, including Shaanxi Vice Governor Jing Jun-hai, Shaanxi China Council for Promotion of International Trade (CCPIT) President Chen Jun, Shaanxi provincial government officials, and over 60 senior executives from over 50 Chinese companies that are interested in learning the ins and outs of investment in the US. The semi-

Manager Mark Hamer. Panelists presented Greenfield Investment opportunities in the US, as well as resources available to facilitate investment . Panel discussions were followed by interactive one-on-one sessions between the AmCham China Invest USA Advisory Group and Chinese participants. Afterwards, the Advisory Group discovered five Chinese companies have invested in the US, and around 15 companies expressed interest in investment. While it was raining when attendees left Xi’an in the afternoon, and cooler than the morning, spirits were warmed by the successful seminar and positive feedback from participants. The event illustrates how Invest USA is beneficial for both potential Chinese investors and service providers, and how the initiative will continue to be an effective vehicle to attract Chinese invesment to the US.

nar was opened by AmCham China Chairman Ted Dean, followed by opening remarks from Shaanxi Vice Governor Jing and Ambassador Locke, all of whom expressed the importance of Chinese investment in the US, and encouraged Chinese compaFeng (Andy) Li is the business developnies to identify resources through programs ment director at AmCham China. He can like AmCham China’s Invest USA, and the be reached at: andyli@amchamchina.org. US Department of Commerce’s Select USA program. UPCOMING EVENTS Bill Zarit, the US Embassy minister counselor for commercial affairs, Invest USA has a series of upcoming events morderated the first panel, Invest USA across China to help equip investors with the via Mergers and Acquisitions (M&A). tools they need for successful investment: Featured panelists included: Bing1. June 5: Ambassador’s Trade Mission and ham McCutchen LLP partner Ye Invest USA Seminar in Changchun Xiaowei; Ernst & Young Partner El2. June 14: Invest USA Seminar, AmCham eanor Wu; and Covington & Burling China Tianjin LLP Senior Associate Eric Yao. 3. Late June: Invest USA Seminar in NanAndy Li, AmCham China’s busijing, Conference on US-China City-Level ness development director, opened Economic Cooperation and Investment the second panel on Invest USA via 4. September 6: Invest USA Seminar, Greenfield Investment. Speakers inAmCham China Central China Chapter, cluded Deloitte Asia Pacific InternaWuhan tional Core of Excellence Co-leader 5. September 20: Invest USA Seminar in Lili Zheng; Wilmer Cutler PickerWestern China International Fair, Chenging Hale and Dorr LLP Partner (and du, Sichuan AmCham China’s Associate General 6. November 11-12: Invest USA Seminar in Counsel) Kenneth Zhou; and ArkanChina Overseas Investment Fair, Beijing sas Economic Development CommisChina World Hotel sion Global Business Development

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A m C h a m C h i n a I n Ac t i o n – M e m b e r s h i p a n d s e r v i c e s

New and Renewed AmCham China Members Wei Du, Comtech EF Data Corp.

Corporate Members Machi Simon, Joy Global (Tianjin)

Heavy Machinery Co., Ltd. Vlademir Reyes, Conrad Dalian &

Hilton Dalian Molintas Denise, DoubleTree by Hilton

Langfang Zhenhong Xiong, Cummins Fuel

Systems (Wuhan) Co., Ltd. Standard Industries Co., Ltd. Beijing Representative Office Clay Vogel, KaziaLi Design

Kate Wang, Caterpillar (China)

Office Xiaofeng Ma, Comtech EF Data Corp.

Beijing Office Xin Liu, Comtech EF Data Corp. Grace Huang, Diebold Financial

Equipment Company, Ltd. Beijing Branch

Lance Wang, Monsanto Biotech

Information Technology, LLC

Research (Beijing) Co., Ltd.

Xiaofeng Zhu, Hunan Carefx

Fengming Zheng, Cummins Fuel

Information Technology, LLC

Systems (Wuhan) Co., Ltd.

Dawn Wang, Smith & Nephew

Orthopaedics (Beijing) Co., Ltd. Willow Wang, Russell Reynolds

Associates Co., Ltd. Karen Cheng, Russell Reynolds

Associates Co., Ltd. Rebecca Liu, Cook (China) Medical

Trading Co., Ltd. Beijing Branch Laura Lin, Cook (China) Medical

Trading Co., Ltd. Beijing Branch Aaron Zhao, Marsh (Beijing) Insurance

Brokers Company Ltd. Joan Xi, Marsh (Beijing) Insurance

Brokers Company Ltd. James Woods, Joy Global (Tianjin)

Heavy Machinery Co., Ltd. Nelson Tan, Conrad Dalian & Hilton

Dalian Michelle Li, DoubleTree by Hilton

Langfang Wenying Li, Comtech EF Data Corp.

Beijing Office Zhanjie Zhang, Comtech EF Data

Corp. Beijing Office Lin Cui, Comtech EF Data Corp.

Beijing Office

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Equipment Company, Ltd. Beijing Branch Relations Worldwide

Gesheng Xiao, Hunan Carefx

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MacLean Brodie, Ogilvy Public

Investment Co., Ltd.

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Equipment Company, Ltd. Beijing Branch

Additional Corporate Members

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Raymond Li, Diebold Financial

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Beijing Office

Nicholas Didovic, Hong Kong

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Beijing Office

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Steven Zhang, Kimberly-Clark (China)

Company Ltd. Bruce Zhang, Kimberly-Clark (China)

Company Ltd. Jessica Cai, Kimberly-Clark (China)

Company Ltd. Chuangguang Li, KaziaLi Design

Collaborative Payton Huhta, KaziaLi Design

Collaborative

Non-US Corporate Members

Manufacturing International (Shanghai) Corporation Ingrid Huang, Semiconductor

Manufacturing International (Shanghai) Corporation Jessie Zhang, Lenovo (Beijing) Ltd. Gao Yang, Lenovo (Beijing) Ltd. Mansell Xue, Banyan Tree Tianjin Anita Chen, eLongNet Information

Technology (Beijing) Co., Ltd. Frank Doreleijers, International SOS Jay Lins, International SOS Joanna Correa, International SOS Jon Craig, International SOS Katja Schimmelpfennig, International

SOS Magnus Romberg, International SOS Nathalie Helgason, International SOS Stephanie Zheng, Beijing De Na

Culture Diffusion Co., Ltd. Charlie Tang, Beijing De Na Culture

Diffusion Co., Ltd.

Non-Resident Corporate Members Monling Sheng, Richard Ivey School of

Business (Asia) Limited Elizabeth Haenle, Premiere Speakers

Inc. Da Chen, Union Bank

Not-for-Profit Organization Membership Lulu Zhou, The Nature Conservancy

Stefan Thumige, Banyan Tree Tianjin

Additional Not-for-Profit Organization Membership

Li Wang, Zhong Yuan Si De Science

Hongge Qu, The Nature Conservancy

Shulei Pang, RPS (Beijing) Inc.

Development Ltd. Daniel Wong, Beijing De Na Culture

Diffusion Co., Ltd.

Additional Non-US Corporate Members Lian Hsu, Semiconductor

Individual Membership Jack Wong


A m C h a m C h i n a I n Ac t i o n – m e m b e r s p ot l i g h t

China’s business community is composed of one of the most diverse and interesting groups of people in the world. Every month, China Brief spotlights one of AmCham China’s 2,900 members, offering readers a more personal look at neighbors, business associates and friends in the community. If you are interested in being featured, or have a member spotlight recommendation, please email editor@amchamchina.org

Ella Onn 安艾拉 Hometown: Kuala Lumpur, Malaysia Courtesy of Ella Onn

Position/Company: Division Manager for household goods

and relocation services at Santa Fe Relocation Services. Job duties: Development at the Dalian office, and working with household goods and relocation teams to enhance service in Dalian and the surrounding region. Time in Dalian: 19 months AmCham China Role:

Executive Committee Member, Northeast China. Why I joined AmCham China:

I joined AmCham China because of the chamber’s extensive business network and resources—membership introduces me to a broad range of people that support me in Dalian, both personally and professionally. Favorite Dalian activities:

Meeting new people, trying out new restaurants, family time with husband and baby, and going to the beach during the summer months.

Soup vs. sugar, salt vs. cigarettes:

When I first moved to China seven years ago, every time I would order soup, I would get sugar. When I asked for salt, I would get cigarettes. I kept mixing up the tones for “tang” and “yan.” After seven years, I thought I’ve gotten it down but just last weekend, it happened again. Three things I can’t live without: Family, friends and KTV!

People may be surprised to know that a relocation company…

Favorite AmCham China event:

does more than just moving household goods. We do other services as well including immigration, home searches, school searches, orientations, records management and pet relocations to name a few.

The chamber’s July 4th event in Dalian was terrific. The venue was great, the food was delicious and the people were happy. Positive energy all around. First job:

My greatest inspiration:

I learned a lot from my mother. She was a strong, hardworking, independent woman who raised two kids by herself. She never lectured or gave any serious talks about life to my brother and I while we were growing up, but through her actions, I’ve always wanted to be like her and have the same attitude and values. She’s my idol!

In high school, I worked at Party World in Houston. I sold party supplies for any children’s themed party you could imagine. Little-known fact about me: Between my husband and I, we

have 12 siblings in total. Including our parents, our family is scattered in 10 different cities, seven countries, and four continents. Family reunions do not come easy!

Why I decided to take a leadership role at AmCham China:

Favorite Chinese character: My favorite character is “tai” from

I wanted to get more involved in the Dalian community. When a friend (who was a member of the Executive Committee) mentioned there was one available spot, I jumped on the opportunity.

the word “taidu” (态度), which means “attitude.” If you break down that character, it is 能 (neng: can do) and 心 (xin: heart). I love this meaning—having a great, can-do attitude and genuinely doing it from the heart.

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US Senior Officials to AmCham China: We Are Here to Hear From You

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mCham China recently hosted two US-China Strategic and Economic Dialogue (S&ED) events, starting on May 4th with a high-level US delegation including US Secretary of Commerce John Bryson, US Trade Representative Ron Kirk, and US Undersecretary of State Robert Hormats, who met with members to get a pulse on which policy issues should be prioritized in Washington, DC. To read an excerpt from the chamber’s exclusive podcast interview with the US Undersecretary, please see page 26. A members-only briefing followed days later, with representatives from the US Embassy sharing the key S&ED takeaways at AmCham China’s conference center. Turn to page 23 to read insights from the US Embassy's Financial Attaché David Dollar and Minister Counselor for Trade Affairs Chris Adams, who address how the Chinese government’s latest commitments will affect your company’s operations in the short-and long-term.

Malcolm Lee (left), former AmCham China governor, (2008-2009) now works on Secretary Bryson’s policy team

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AmCham China Chairman Ted Dean (left) with US Trade Representative Ron Kirk

US Secretary of Commerce John Bryson listening to AmCham China members


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June 2012  

The June 2012 issue of China Brief magazine.

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