FOCUS C H INA-BRITAIN B U S I N E S S
Improving your public speaking skills in China
From ancient trade town to modern cultural centre
Issue 5 April 2011
Will Wen Jiabao meet his goals for the poor?
The Building Blocks of Business
Seeing is Believing
眼见为实 China is changing. Regional cities
are seeing fast development creating new and exciting opportunities for UK businesses. Whether you are new to China or looking to grow an existing business CBBC can help you.
The China-Britain Business Council offers unrivalled
access to key decision makers and up-to-date intelligence on the very latest developments. To make the most of the opportunities available contact your local CBBC office to explore how we can help you achieve more.
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FOCUS CH I N A - B R I T A I N BUSINESS
s we move into the second quarter of 2011, we look at one of the more contemporary issues of doing business in China. Corporate Social Responsibility (CSR) is high up on the agenda for many companies – especially in terms of integrating CSR as part of a strategy for profit and growth. Our report examines why CSR is no longer a charitable option but is increasingly becoming a necessity when doing business in China. We continue the theme of responsibility with an interview with Carma Elliot OBE. After holding many diplomatic roles including Consul-General in Shanghai and in Chongqing, she is now Executive Director of children’s charity Half The Sky. After 23 years as a diplomat she explains how the charity has a unique relationship with the Chinese government. Elsewhere in this issue we take a closer look at the ancient city Xi’an in our regional focus, look at business opportunities in Hong Kong and Southern China as well as a look at the 2010 Bribery Act. As always, we welcome your feedback and thoughts.
02 Need to Know
All the latest China news, facts and figures
04 In Focus: Corporate Social Responsibility
How using CSR in China affects not only your image, but also your profitability
08 Industry News
The latest insights into markets in China
09 Topic Trend
Overcoming your own King’s Speech moments in China
10 The Big Interview: Carma Elliot OBE
Long-time diplomat Carma Elliot talks about building business ties and her switch to charity work
12 City Snapshot: Xi’an
FOCUS looks at how this ancient city is now a thriving business hub for northeast China
16 Research News
An examination of business opportunities in HK and Southern China and information about the 2010 Bribery Act
20 Events Roundup
A look at recent events in China and beyond
Your must-see three events this April
23 State of the Nation
Studying China’s current financial and economic climate
24 Bulletin Board
UKTI reveal the untapped opportunities in regional China
25 From the Newsroom
GK Dragonomics editor Tom Miller looks at whether Premier Wen Jiabao is meeting his targets for China’s poor
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Stephen Phillips Chief Executive, China-Britain Business Council
Duncan Clark Chairman, British Chamber of Commerce in China
China Britain Business FOCUS produced by Bespoke Beijing Editorial Director: Tom Pattinson Managing Editor: David Friesen Art Director: Jason Pym For submissions or questions please contact: email@example.com If you wish to advertise with us please contact: Fiona Huo, Business Development Manager, CBBC, firstname.lastname@example.org Tel: +86 (0) 10 8525 1111 ext. 313
NEED TO KNOW
CHINA NEWS Stat Surprise
China suffers shock trade deficit
Julian Wilson has helped take Khunu from a pipe dream to a fully-fledged product line with a growing list of high-end retailers. Khunu yak wool clothing is now for sale in such luxury destinations as St. Moritz and Lake Tahoe in California.
There is nowhere else in the world we could do this, partly because 90 per cent of the world’s yaks can be found in China’s mountainous provinces of Gansu, Qinghai, Sichuan and Tibet, and also because China is the centre of the worldwide garment industry. Although China is our principal location for sourcing and manufacturing, our sales markets are currently centered on Europe and North America.
Highs and Lows
Putting our supply chain together has been a challenge, not least because we are often dealing with groups of nomadic people unused to conducting commercial transactions and who generally do not speak Mandarin. A lot has been built on trust, but this has been highly rewarding. We feel we are making a difference to people’s lives. For more visit www.khunu.com
TBest he Business Loser Buy and Barbie hit the skids in China US retailer Best Buy is shutting its nine China stores to focus on its acquired Chinese domestic retail chain Five Star. Meanwhile, Mattel Inc.’s flagship Barbie store in Shanghai has closed after two years of poor performance.
Deal or No Deal?
China Guangdong Nuclear Power Holding Corp. (CGNPC) eyes major uranium deal
The Chinese government is seeking uranium to boost its atomic power generation. An offer of £756 million has been mentioned for Kalahari Minerals Plc, based on a price of 290p per share.The reason? Kalahari has a 43 per cent stake in Australian company Extract Resources, which holds the rights to a vast uranium deposit in Namibia. There is likely to be opposition from other Extract shareholders, including Rio Tinto and Japan’s Itochu, as well as concern from the Australia Securities and Investments Commission. However, with CGNPC’s massive buying power and a possible Joint Venture with Rio Tinto, a deal looks likely.Verdict: Deal
GChina reen Reading releases new renewable energy guidelines On March 3, 2011, the Ministry of Finance and Ministry of Housing and Urban-Rural Development (MOHURD) published a circular on carrying forward renewable energy architecture. This includes the promotion and production of solar, geothermal and biofuel energy across the country ― achieving renewable energy consumption of 20 per cent by 2020.
China News Focus images by Jason Pym and nipic.com
Julian Wilson turns minority material into high-end fashion
Hot Seat image provided by Khumu
The Hot Seat
China’s buoyant economy was stung recently by its largest trade deficit in seven years. A vast gap between exports, which grew by only 2.4 per cent from the same time last year, and imports, which have increased by almost 20 per cent, resulted in a £4.5 billion trade deficit. With domestic demand not increasing as expected the problems with China’s economy may be more serious than first thought.
NEED TO KNOW
FOCUS The new Forbes Rich List reveals Baidu’s Robin Li to be China’s richest person, with an estimated wealth of US$9.4 billion. He overtakes the Hurun Rich List leader Zong Qinghou, whose wealth has apparently fallen by over US$2 billion ―despite claims he spends just US$20 a day. The miserly drinks magnate has dropped t o third in the list, with Sany Chairman Liang Wengen now in second. Overall, it was a good showing for China’s super rich, with the number of billionaires doubling from last year.
Ci vs.onsumer Conundrum Le: Revenge of the ‘Pads Chinese computer maker Lenovo Group plans to launch the second version of its LePad tablet computer this year. The first generation LePad, only recently launched, is already playing catch-up to Apple’s iPad 2. Although LePad boasts Adobe Flash capabilities and supports multiple video formats, it lacks the lifestyle appeal of its rival. Verdict: Another 15 million worldwide sales for Apple
Salt selling out over radiation ‘fears’
Buyers in China flocked to buy salt after unfounded rumours that the iodine could protect against any potential radiation effects from the Japan nuclear disaster. China has now urged shoppers to stop hoarding salt, and one man has already been jailed and fined for starting the panic in Zhejiang Province.
Calling All Readers Vision 20:20 FOCUS is planning a series of ‘thought leadership’ articles by UK & Chinese experts on what the future might hold for China in 2020. We are currently seeking contributions for this new initiative. For further details or to submit your ideas, please contact: In the UK: Chris Cotton email@example.com Tel: +44 (0)207 802 2000
In China: Fiona Huo Fiona.firstname.lastname@example.org Tel: +86 10 8525 1111 ext. 313
Problem solved Q. Our company is considering setting up a new Wholly Foreign Owned Enterprise in China, however are concerned about copy-cat products appearing in the marketplace. How would you advise us to go minimizing the risk of this happening? A. IPR protection is a serious issue not only in China but in any foreign market. The first rule of thumb is to ensure you are prepared before you enter the market. China operates a ‘first to file’ system. This means that even if you hold patents in other regions, if you have not registered in China, other companies can register that IP and legally hold the right to use it as they see fit. Remember that no protection equals no rights (with exception of copyright). Get protection. Do your homework and plan and research carefully. Identify what your IP and trade secrets are, what you are going transfer. Carry out a risk assessment to investigate whether any potentially infringing products are already registered or in existence. If you plan on using business partners, due diligence is essential. The biggest threat to a company’s IP is not external but internal. Companies need to be especially vigilant to theft of confidential trade secrets including manufacturing processes, designs and systems. It is collusion between dishonest employees and other companies that, most often, leads to counterfeit products appearing in the market. Do not rely only on legal measures to protect your IPR in China. Question answered by Michael McCourt. Please send your questions to email@example.com
An Unlikely Story
Baidu boss is richer than Wahaha’s frugal Zong Qinghou
“CSR is what people used to call government relationships, PR and marketing”
Making Conscience Count Adrian Sandiford discovers that if you’re serious about doing business in China, then you need to get serious about Corporate Social Responsibility
SR is pure business in China. It’s not about people wanting to save the world. It’s a business strategy for developing markets”. That’s a bold statement. Especially since the debate about ‘Corporate Social Responsibility’ (CSR) has often been about whether companies really believe in what they’re doing or are simply engaging in a bit of positive PR. But to suggest that CSR is not only beneficial to a company’s image, but a vital part of a successful strategy in China, well, that’s a whole other conversation. Nevertheless, when the statement comes from Clare Pearson, the cofounder of one of the PRC’s leading charity magazines and a lawyer working with the Chinese government on CSR guidelines, we should take note. Forget about banks building orphanages in exchange for a photo opportunity and a warm fuzzy feeling. The reality of CSR in China is that it’s something companies must absolutely get right if they want to succeed. The big picture is that the world is changing, and issues such as climate change are increasingly high up the agenda. If your company is to appeal to this new reality, then it must engage. But, more than that, in China, the key role that CSR plays is dictated by the expectations of consumers, the interests of investors, and, perhaps most importantly of all, the desire of the government.
Let’s start with the bigger picture. It’s hard to avoid the fact that one of the key issues the world faces this century is climate change. In short, how companies relate to the world and its problems has become increasingly important. As Clare Pearson notes: “Companies can either opt out of the debate or, rather than presenting their product in abstract, can look to make a connection with the new world agenda.” This is not just idealistic theorising – the likes of Cisco are already engaging. Rather than using
old advertising methods, its CSR-led strategy is a perfect example of how effective the latter approach can be. Following the tragedy of the Sichuan earthquake, Cisco secured the majority of new IT contracts. The reason for this wasn’t brand power; it was CSR. When the disaster struck, Cisco already had its ‘21st Century Schools’ initiative in place, a CSR programme that places video-conferencing equipment in schools to encourage interactive learning. It’s an idea that came about after the devastation of Hurricane Katrina in 2005. And so when Sichuan hit, Cisco’s package of ICT equipment was ready to go. ‘They were able to help the authorities in Sichuan and put in their equipment,’ adds Pearson. “Once your equipment is in the schools, and you use it for training the kids in this fast growing area of China, you’ve won the game.”
“CSR is not about people wanting to save the world” Consumer and Investor Influence
Even if you refuse to accept that macro issues on a global scale are enough to alter how business is to be done, the evidence of what’s happening in China suggests that – in this particular market – the idea of CSR as a necessary part of any viable business strategy is pretty hard to ignore. More specifically, it’s something supported by a trio of recognisable influences: consumers, investors and government. ‘When British companies come to China, they need to understand the meaning of CSR here,” explains Brian Ho, the director of the China offices of CSR Asia – a social enterprise that specialises in sustainable business practices. “The culture and expectations from stakeholders are different.” Significantly, this includes a market of consumers who ask more of overseas operations. “There is more tolerance of local companies, but if a foreign company
Arup’s work in China includes the Water Cube in Beijing
Arup – an independent firm of designers, planners, engineers and consultants – was founded in London in 1946, but is best known in Beijing for its work on the Bird’s Nest Olympic Stadium and CCTV HQ. Beyond the buildings, however, lies an equally forward-thinking commitment to CSR… Sitting with Lewis Shiu, the director of Arup’s Beijing office, a few things are clear before he even begins to talk. The first is the firm’s impressive involvement with China’s most iconic structures – the CCTV HQ in
does something bad, there will be lots of criticism,” adds Ho. “If foreign companies want to see China as a market, not just a manufacturing base, they need CSR as their long-term strategy.” And then there are the investors, which is something that SynTao – a consulting company that focuses on CSR and socially responsible investment in China can shed light on. “The stock exchanges in Asian countries are getting more and more active in this field,” notes AnnaSterre Nette, a CIM (Centre for International Migration and Development) integrated expert placed at SynTao. “Companies aren’t just experiencing pressure from NGOs to disclose CSR information, but also from investors. The interest in responsible investment is not about moral values, but more to do with risk management.” It’s something that reflects a big picture view of a world with more pressing priorities. “If a company has a lot of old facilities pumping out greenhouse gases then you also know that this company has not been taken care of, that there is no real strategy of where it wants to go,” adds Nette. “This is the new type of investor who looks at the non-financial issues because it tells them about the management of a company. When it comes to CSR, it’s about being practical. What can your company do for people in China?” The call for companies to integrate CSR into their business model is not falling on deaf ears. Take PricewaterhouseCoopers (PwC), a global professional services
plain sight out of his window. But look the other way, at the more mundane view of an office interior, and the words ‘We shape a better world’ dominate the wall. Examining the firm’s behaviour, it’s soon apparent this is more than a slogan. When it comes to CSR, Arup ticks all the usual boxes, such as a commitment to philanthropy that includes donating computers to schools and orphanages, but the firm goes a step further through activities ranging from socially aware workshops to building much-needed bridges – literally. As Shiu explains, the workshops bring together academics, bankers, developers, NGO partners and others to investigate themes such as energy, climate change, urbanisation and poverty. The results end up as research-based publications driven by Arup. “It’s about drawing people’s attention to the future – what we can do, and what we should do,” says Shiu. Add the firm’s assistance after the Sichuan earthquake, where Arup offered free consultations on how best to design schools in an earthquake zone, plus its involvement with the Wu Zhi Qiao project, which involved a competition among its staff to design a bridge to help connect villagers in Yunnan, not to mention the raising of funds to build it, and it’s clear this is a company that truly recognises the importance of CSR in today’s ever-changing world.
firm headquartered in London. “Being a leading firm is about doing the right thing,” says PwC’s Callum Douglas. “To do that, we have to work on having corporate responsibility embedded in the way we do business, which goes beyond our charity work and gets right to the heart of how we perform in the market and how we impact on the environment.” Or, indeed, look at Pearson, a global media and education company. “We place enormous importance on the impact we have on the world,” notes Elizabeth D Knup, chief representative of Pearson in China. “Our goal is simple – to be a socially responsible company that has a positive impact on society.”
The Importance of Government
Above all else, however, there is the government. “The attitude of the Chinese government towards CSR has changed since the early 2000s,” says CSR Asia’s Brian Ho. “The government has recognised that CSR is an ideology that can be used to help create social harmony, and that companies can play an important role in that. So, starting from late 2005 until now, the Chinese government has done a lot to promote CSR, especially towards stateowned enterprises and foreign companies.” It’s a position that makes even more sense when you consider the difficulties NGOs have establishing themselves in China. The issues surrounding the problems in building a large NGO in China, or developing a strong voluntary sector, is obviously a much bigger question, but – in short – the
Oxfam’s poverty alleviation projects in China began in 1987
Oxfam Hong Kong’s CSR officer Cai Rui shares the NGO’s views on the topic
operating space for NGOs with interest groups and alternative agendas is much restricted and controlled by the authorities. And, with that being the case, it seems the government has recognised that by encouraging businesses to be more focused on CSR, it can fill that gap in the social structure. Or, as Clare Pearson, the lawyer and co-founder of the Charitarian charity magazine puts it: “The legal landscape is different in China; it’s hard to funnel money through NGOs, but you can funnel money through CSR projects. Companies are legally viable, but NGOs are legally suspect.”“I’d say the driving force is still the government,” agrees Anke Schrader, a researcher at The Conference Board’s China Center for Economics and Business – part of a global business membership and research think tank. “If you look at the policies, regulations and laws the government has released here in the last couple of years,” she says, “relating to the environment, to social and labour issues, as well as guidelines for public companies – most of the underlying principles for corporate behaviour are being pushed by the government onto the business agenda. If you want to do business successfully in China as a foreign company, it is becoming more important to think about CSR as a key strategy and government relations component.” And since it’s no secret that to succeed in China it helps to get the government on board, the importance of CSR becomes even more paramount. Successful CSR in China is about being proactive –meeting local government officials who have five social and five commercial objectives, and working out how your company can help fulfil the social ones. And then you can look to win on the commercial. It’s about showing a commitment to the country to ensure you’re seen as an integrated China brand. Because CSR here is not separate from business strategy; CSR is what people used to call government relationships, PR and marketing. It’s the same thing. It’s pure business.
How do you define CSR? Oxfam believes CSR goes beyond philanthropy and compliance, and addresses how companies manage their economic, social and environmental impacts, as well as their relationships with key stakeholders. Is there any difference between how CSR works in China than in the West? Our research report Corporate Social Responsibility Survey of the Hang Seng Index Constituent Companies 2009 compared the CSR performance of mainland companies and Hong Kong companies. Although the latter tend to do better overall, mainland companies are catching up fast. One of the interesting findings to emerge from the survey is how quickly mainland companies are learning about CSR. Who is driving the issue here? Stakeholders play different driving roles. When it comes to promoting sustainable development, business can play a more important and positive role. In Oxfam’s view, commercial enterprises should ensure their business activities address social and environmental concerns, as well as comply with the principles of sustainable development and the alleviation of poverty. Why is CSR important? Oxfam believes that the private sector plays a central role in development. Where there is a healthy and responsible private sector, there are greater possibilities for sustainable development and economic growth that can lead to poverty reduction. When companies integrate their social and environmental responsibilities into their core business operations and decision-making processes, their contributions can have a real impact.
images: Oxfam International
Wang Meihua (left) was helped by Oxfam’s farming assistance projects
From the Market All the latest sector news from China Healthcare by Chris Cotton
Financial Services by Duncan Levesley
According to a recent report prepared jointly by staff of the World Bank and UNICEF, health disparities remain significant between urban and rural areas and among different localities and socio-economic groups in China. More equitable allocation of government health resources is also needed in order to fully achieve health reform objectives. The report, entitled ‘Equity and Public Governance in Health System Reform: Challenges and Opportunities for China’, uses official data to analyse possible challenges to the implementation of China’s current health system overhaul. According to the report, despite weaker health status in China’s poorer rural communities, per capita government allocations increasingly favour wealthier areas, and better quality health services are increasingly centralised in urban areas. The risk of financial catastrophe due to ill health remained much higher for rural residents, but has also increased for urban residents since the previous survey in 2008. The report infers that one main objective of China’s health reforms, namely, improving the accessibility and affordability of health care, will be difficult to achieve. This is due to local reliance on national earmarked funding rather than adequate prioritisation of basic services in provincial and sub-provincial government resource allocations. Given China’s size and the decentralization of public services, provincial governments may have to become explicitly responsible for more areas associated with health system performance.
As reported last month in this column, the increasing use of the RMB in cross border trade is creating a great amount of opportunity in the financial sphere. In recent weeks a number of banks, including Bank of China and HSBC, have all expressed their confidence in this trend, and expectations are for it to continue and expand. This is not just servicing local trade―we are told that RMB accounts are now are being opened far and wide, from Hong Kong to Hanoi to Harare. Total cross border settlements in RMB reached RMB 510 billion last year. RMB 440 billion of this was in the second half of the year, indicating how quickly the loosening up of policy has led to the proliferation of business. The increase was mostly a result of a government decision to expand the pilot RMB cross-border settlement scheme from the original five cities to 20 starting in June, covering 67,359 mainland exporters compared to the previous coverage of 365 exporters. The state banks are leading the march, and Bank of China reported that they had handled RMB 160 billion―a 100-fold increase on the previous year. However, it’s not all state banks; others are getting involved too. With the UK positioned at the top of the leader board for foreign banking assets in mainland China, and a strong presence in Hong Kong, this will be an area of growing importance to the UK financial services industry. Also, in other moves to boost the role of its currency, China has inked eight bilateral currency deals worth a total of RMB 800 billion since 2008.
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by Vince Cunningham and Lisa Liu
China continues to surge ahead as the world’s largest motor car producer and consumer, with total sales up from 13.8 million in 2009 to over 18 million in 2010. Most production is for the domestic market, with exports for the first ten months of 2010 reaching 430,000 units. This was up 75 per cent on the same period in 2009 – with exported cars going to other Asian markets, Africa, the Middle East and South America. Despite choked highways, the Chinese motorist is fond of SUVs, sales of which are currently growing at over 50 per cent per annum. Prestige foreign brands also continue to sell well, with Bentley now having 13 dealers around China. Volume growth is currently being driven by increasing affluence in second-tier cities. Larger cities are being strangled by the increase in car ownership – to the point where Beijing has had to introduce a lottery for licenses to reduce traffic congestion. Elsewhere there is evidence that dealers are resorting to UK-style discounting to move stock. China is determined not to lag behind in automobile technology. The 12th ‘five-year plan’ is expected to push alternative energy, and 2014 should see five million electric cars on Chinese roads. The China Iron and Steel Research Institute expects to commercialise a “Third Generation” automotive steel product by 2014, which will offer significant improvements in manufacturability and crash protection through higher levels of tensile strength and ductility. This will make China’s automotive products more competitive. For more information, please contact firstname.lastname@example.org or email@example.com
Communication guru Warwick John Fahy looks at ways for executive speakers to raise their game
“Many business presenters struggle to get to the point” Getting to the point
Many business presenters struggle to get to the point, over-elaborating and leaving audiences wondering exactly what they are trying to convey. Sometimes changing industry can be the cause. Jessie Wang, a 15-year veteran from a Big Four consulting firm, switched to become an in-house tax specialist for a high-end real estate developer. Although everyone regarded Jessie as an expert, frustrations emerged in meetings and telephone calls with the directors. Her rambling presentations covered tax legislation in too much detail, when her audience simply wanted to grasp the main points quickly and directly. The solution worked on two levels. Firstly, I helped Jessie understand how to construct a message-based presentation using a technique called the ‘inverted pyramid’. Essentially, this executive summary approach puts the crucial information at the start and adds supporting points in
Learn how to speak like a king
decreasing order of importance. Thus, the opening couple of minutes outline the core message and key points to the audience. Secondly, to help Jessie adopt an in-house expert approach, I introduced a framework into which she could slot her own content. The approach I chose divides the content into three parts; the problem; a range of possible solutions to address it; and finally a recommendation with caveats. The resulting shorter, more outcome-focused meetings helped reduce tensions and improve key relationships with the commercial directors.
A common theme in The King's Speech is vocal projection, an obstacle facing many presenters. Jacky Li works in a Beijing professional services firm and, as a new partner, is expected to represent the company at industry events and bring in new business. Like many technical experts working in finance, IT, and engineering, Jacky is brilliant with numbers and processes, but rather introverted. However, at this stage in his career, he needed to somehow ‘become’ an outgoing executive working with a wider range of stakeholders.
Two barriers stood in the way. Firstly, he lacked confidence in the unfamiliar role. This is common for newly promoted executives who find their new portfolio includes a skillset they have never developed. Secondly, Jacky had a very quiet voice. This was not a problem when communicating one-to-one, but became a major factor when facing prospective clients or a conference hall of industry peers. I applied several approaches to expand the range and volume of his voice. Warm-up exercises were borrowed from opera singers, exaggerated vocal emphasis techniques were taken from improvisational theatre acting and scientific measurements were made with decibel readers. In about two months, Jacky could clearly hear, see and feel the change. He received some positive comments from his colleagues in a client sales meeting. As a result, Jacky was able to undertake his new role with more energy and confidence. Warwick John Fahy offers all BritCham members a complimentary copy of his book ‘The One Minute Presenter’. For more information contact Warwick at firstname.lastname@example.org
image: Laurie Sparham/ The Weinstein Company.
he Oscar-winning film The King's Speech opens with his majesty stammering awkwardly through a speech in front of 120,000 people. While you may not face that kind of pressure, the ability to deliver effective presentations is an important career skill, especially for senior managers. Often, a better presenter will be promoted ahead of a manager with superior technical skills. As an executive speech coach, I am invited to work with senior executives to help them communicate more effectively with their key stakeholders. Here we examine two common obstacles facing managers and executives in China and suggest a few solutions.
THE BIG INTERVIEW
Carma Elliot has moved from diplomacy to charity
David Friesen talks to Carma Elliot OBE about her move from long-time diplomat to children’s charity pioneer in China Can you tell us more about your involvement with the children’s charity Half the Sky? After 23 years working as a diplomat, I left the Foreign and Commonwealth Office at the end of 2010 to join Half the Sky as Executive Director. It was set up in 1998 by Jenny Bowen who adopted her child from China, and realised the effect that institutionalisation could have on children if they were not fully nurtured and loved. The first programmes aimed at enriching the lives of orphaned children living in China’s social welfare institutions were rolled out around ten years ago, and since then Half the Sky has grown immensely. With the exception of our
China Care Home in Beijing for orphaned children requiring specialised medical care, all our programmes take place within Chinese welfare care homes, and we work closely with the Chinese government. We now have 1,500 staff across China implementing programmes that take children from birth up until they leave the care system. Many of these children move on to vocational courses or even university study, with a real chance of leading a happy and productive life. We have a fairly unique model amongst foreign NGO’s ― we are one of the few registered with the Ministry of Civil Affairs. We fund our own programmes within the care homes, but we work with an agreed plan through
THE BIG INTERVIEW
the Ministry. Recently, they’ve asked Half the Sky to take its experience in developing care programmes and work with them on a cooperative training model that will be used by the Chinese government as its model for care within China. The programme will be rolled out across the country from next year.
“The cooperative training model will be adopted by the Chinese government as its model for care” You previously worked as the Consul-General in Shanghai during the EXPO. What would you say were the greatest challenges and achievements of this period?
Half the Sky provides training for care-givers, nannies and teachers
I spent four years in Shanghai as Consul-General, and my time was spent planning the most ambitious EXPO ever, developing a pavilion that would match China’s expectations for the event. This required a great deal of strategising in exactly how we wanted to position ourselves in what was a very competitive environment. We sought to establish a solid brand identity for Britain in China that conveyed the UK’s depth in creativity, innovation and its energy and excitement. We ended up with a fantastic pavilion and a programme of 350 events that were attended by thousands of Chinese VIP’s and international celebrities. The greatest achievement was winning the award for the best pavilion.
I worked for five years in Chongqing from 1999 to 2004 and set up the Consulate there, which was the first UK government venture in western China. My work involved addressing some of the disparities between East and West within China. There was also a focus on improving Chongqing’s competitiveness, particularly for export businesses. A combination of improving access through the Three Gorges Dam development and a huge influx of money has seen a rapid rate of development in the city. Foreign investment has increased exponentially since I started out – at that time there was only one large investment from the UK by BP in Chongqing. The range and depth of investment has gone from strength to strength, and the Consulate has moved from a fact-finding mission when it was first set up to helping establish a very strong profile for UK business in the region, which should develop even further over the coming years. What was behind your decision to join the British Chamber / CBBC in Beijing, and how will you work with them? I have just moved from Shanghai to Beijing in my new role for charity Half the Sky. It seemed logical after all my experience working within the Foreign and Commonwealth Office and sitting on the Chamber’s Executive
For the children who will never be adopted, the programmes are the closest thing they will receive to the love and support of a birth family
Committee in Shanghai to join the British Chamber here. Although Half the Sky was originally established in the USA, we are also a registered charity in the UK. I am keen to build up the international profile of the company, as well as contribute to the Chamber and CBBC through various events and initiatives. For more information, please visit www.halfthesky.org
Career Chronology 1964 – Born August 24 in Edinburgh, Scotland 1987 – Joint degree in Chinese and German, Leeds University 1987 – Joined the Foreign and Commonwealth Office 1999-2004 – Consul-General, Chongqing 2004-2006 – Consul-General, Jeddah 2006-2010 – Consul-General, Shanghai 2011 – Executive Director, Half the Sky Foundation
images provided by Carma Elliot and Half the Sky
You have also worked as Consul-General in Chongqing. How do you feel this city has developed and what are its future prospects in terms of Sino-UK business cooperation?
Since the 1990s Xi’an has become the cultural, industrial and educational centre of China’s central-northwest
Northern Lights X
i’an, previously known as “Chang’an”, is the starting point of the Silk Road that linked China to the West over a thousand years ago. In the modern era, it’s a city recognised as the most developed economy in the mid-west region of northern China, with continuous double-digit growth in the past five years. Xi’an ranks third, after Beijing and Shanghai, in terms of its number of higher education and national research institutions. About 50 universities and colleges are located in the city with over 600,000 enrolled students. A number of these rank in the top-tier of universities across China. This has allowed the city to become a major scientific research and national defence centre within China. Xi’an has been heavily involved in the research and development of satellites, the COMAC C919 civil aircraft (China’s first self-
produced civil aircraft), and many other national projects. One of the most important industrial areas is the
“Xi’an has become a major scientific research and national defense centre” national aviation development zone. This zone consists of four subsidiary development parks that play a significant role in the industry and attract both domestic and international companies to the region. The city also attracts investors in the advanced engineering industry and in the areas of power, automotive, chemical processing, refrigeration, and electrical machinery. In the automotive industry alone, major players include BYD, Shaanxi Auto Group, Shaanxi Heavy Truck, and Shaanxi Fast Gear. International com-
panies that have businesses in Xi’an include HSBC, Rolls Royce, Emerson, PFW, Coca Cola, ABB, Siemens, Mitsubishi, Infineon, Micron, BP, Bosch, and others. Xi’an is very much a gateway to the mid and western parts of China, and should command significant attention within any China business strategy. Xi’an also successfully won the right to host the 2011 International Horticultural Exposition, which will be known as the 2011 EXPO Xi’an. The exposition will run from 28 April to 22 October. Development for this event has included the construction of Xi’an’s first subway line, and the creation of an international trade and logistics park. In fact, the changes in the past five years have probably surpassed those that took place over the previous several decades. An ancient city has awakened and blossomed into an exciting regional business hub.
Anne Zheng takes a look at Xi’an’s growing reputation as a centre of education, culture and engineering in Shaanxi Province
David Friesen learns more about Rolls Royce’s operations in Xi’an under the XRA Joint Venture
ow long has Rolls Royce been operating in Xi’an and what operations and projects are you currently involved with? Our joint venture in Xi’an, called XRA, is an example of our commitment to collaborating with the Chinese aerospace industry. It opened in 1996, with Rolls-Royce joining forces with Xi’an Aero Engines (XAE), a subsidiary of Aviation Industries of China (AVIC) and now a Shanghai listed company. XRA employs 400 people in its 13,000 square metre factory, which specialises in casting and machining for turbine blades and nozzle guide vanes.
“Our joint venture in Xi’an shows our commitment to collaborating with the Chinese aerospace industry”
In 2009, we opened a 6,300 square metre factory at the Xi’an Export Processing Zone, also focusing on efficient and cost-effective machining processes for complex aero components.
It was finding the right partner ― Xi’an Aero Engines ― that helped us decide our joint venture would be located in Xi’an. The city has since built strong labour training institutions for skilled manufacturing, providing a stable pool of high quality employees for us. This has allowed us to proceed rapidly with our development of operations, and we can find the right locally-sourced staff.
Made in Xi’an: Rolls Royce
When XRA explored locations for building a new factory, which eventually opened in 2009, the Xi’an Municipal Government showed a helpful attitude towards XRA. They understood our business needs and helped us find a tax efficient solution. The Xi’an Export Processing Zone is an excellent location for doing this type of business, and the new facility went from the planning stage to a qualified Rolls-Royce supplier in little more than a year.
What does the future hold for Rolls Royce in Xi’an, in terms of projects, expansion and success? XRA set up a new subsidiary and new factory in 2009, which demonstrates our long-term commitment to Xi’an and to our collaboration with XAE. Given Rolls-Royce’s very large order book, there are good prospects for expanding the volume of parts made at XRA over the coming few years.
images: Rolls Royce
What are some of the reasons why Xi’an is a prime location for Rolls Royce? What have been some of the challenges?
Brit Art Attack
Katterfelto by Phillip Allen
n 6 March, the “Made in Britain ― Contemporary Art from the British Council Collection 1980 – 2010” exhibition opened in Xi’an. Launched by the Cultural and Education Section of the British Embassy, the exhibition will tour across China, visiting Hong Kong and Suzhou in the coming year. It aims to bring British art and the British Council Collection to a new audience, and ensure that the legacy of the UK’s participation in Shanghai Expo is shared by audiences across China. The British Council Collection is widely regarded as one of the most comprehensive holdings of modern and contemporary British art in the
world, containing some 8,500 art works by over 1,650 British artists, including paintings, sculptures,
“Made in Britain highlights some of the best examples of contemporary British art from the past thirty years” sketches, watercolours, block prints, photographs, installations and videos that show the development and achievement of British art from the 20th century to the present. Made in Britain features 50
artworks by 36 artists and highlights some of the best examples of contemporary British art from the past thirty years. These artists include past winners and nominees of the prestigious Turner Prize, established in 1984 to celebrate the best contemporary art in the UK. Works by Douglas Gordon, Damien Hirst, Richard Wright and Gillian Wearing will feature in the exhibit, along with other world-renowned artists including Sarah Lucas, Gilbert and George Hirst, representing the very best of contemporary British art in recent decades. The exhibition will run from 6 March to 10 April 2011 at the Xi’an Art Museum.
image: British Council
Ma Yan looks at the arrival of a show of British contemporary art in Shaanxi’s capital city
Shaanxi Warrior City Xi’an offers terracotta titans, religious relics and doughy delights, reports CBBC’s Anne Zheng 29 8823 8888), located in the Jianguo Hotel on Huzhu Road. For imported beers and tasty Western food, try recently-opened Green Molly (+86 29 8188 3339) in Gaoxin.
The first emperor’s warriors date from 210 B.C.
See and Do
The world-famous Terracotta Warriors, Ming Dynasty City Wall, Wild Goose Pagoda and the Qing Emperor Tomb make Xi’an one of the top destinations in China, receiving over 39 million tourists in 2009.
“The best place to sample a range of tasty treats is the Muslim Quarter” If you get through all the usual sights, make sure you check out Xi’an’s Great Mosque and the Stele Forest. The Great Mosque was originally built in AD 742 during the Tang Dynasty and is the largest and most well-preserved in China. The Stele Forest isn’t a forest at all, but rather a singular collection of Chinese calligraphy art carved on tall stone tablets.
including the favourite Xi’an snack, the ‘eight treasure rose mirror cake’. A round, sweet cake, it’s made with sticky rice with a coating of sesame and walnut. For other local dishes including guan tang dumplings and yangrou paomo (mutton soup with bread pieces), head to any branch of Xi’an Fanzhuang (www. xafanzhuang.com).
There are plenty of internationalstandard hotel options in Xi’an, but for reliable high-end quality consider the Xi’an Kempinski Hotel (www. kempinski.com). Facilities include an excellent spa and fitness studio, a range of Western and Chinese restaurants, and top-class business centre. Another good choice is the conveniently located Grand Park Hotel Xi’an (www.parkhotelgroup.com), which offers five-star quality in the heart of the old city.
Xi’an is best known for its culture and cuisine, but there are plenty of cosy bars to while away an evening. For a quiet drink, try Charlie’s Bar (+86
A highlight of any Xi’an tour is the local snacks. The best place in town to sample a range of tasty treats is the Muslim Quarter, located beside the Drum Tower. This 500-metrelong avenue is lined with countless stalls selling all sorts of delicacies,
image: BCG Guangzhou
“I have no hesitation in saying to UK companies that Hong Kong is a brilliant place to do business”
Night view of Zhu Jiang New Town - Guangzhou’s new CBD
How important is Hong Kong and the Pearl River Delta for UK businesses in China? FOCUS invited Iain Lindsay OBE, Director Trade and Investment, British Consulate General, Hong Kong and Alastair Morgan, British Consul General, Guangzhou to share a dialogue on the subject.
Iain Lindsay: I arrived in Hong Kong in July 2007. It was a dream come true. Even though I spent eight years in the 80s and 90s in Tokyo, including working with Alastair at the Tokyo Embassy, I have always wanted to live and work in Hong Kong. The vibrancy of the place is incredible, as is the ‘can do’ attitude. The experience has surpassed my expectations. Tokyo now seems very provincial by comparison. Alastair Morgan: I arrived in Beijing directly from Tokyo in 2006. It wasn’t such an easy transition. My wife in particular missed the smoothness of Tokyo’s highly developed services and inter-personal relations. For me, though, it was a tremendous opportunity. I had six months of intensive study to learn mandarin; something I’d wanted to do since university. After this came a fascinating and challenging job as Director of Trade & Investment. The sense of China’s latent power was extraordinary. Beijing felt, in some ways, to be the centre of the future world ― its development issues as well as its business opportunities. Last December I moved to Guangzhou. I like the city and its Cantonese culture. I like being responsible for helping British companies do business in an area as big as Turkey with an economy bigger than Australia.
Doing business in southern China
Iain Lindsay: Alastair and I are having this dialogue as we travel around the UK on the Asia Task Force’s “Doing Business in Asia” roadshow, aimed at getting more UK companies to focus on the exciting opportunities in the region. We do
a double act, reflecting the increasing integration of Hong Kong and Southern China business and the reality that many UK companies looking to the region for the first time
“The cities around Hong Kong are developing into a single conurbation with 40 million people” aren’t sure whether they are looking at Hong Kong, Southern China or both. After four years here I have no hesitation in saying to UK companies ― particularly SMEs ― that Hong Kong is a brilliant place to do business. Hong Kong is a gateway into mainland China and an international business centre The several hundred UK companies with a presence in Hong Kong (including increasing numbers of UK SMEs), together with the numerous accolades relating to the openness of the economy and the ease of doing business bear that out. My pitch to these new exporters is that Hong Kong is as straightforward as one, two, three: one country, two systems, three opportunities. The opportunities being: Hong Kong is a major market (the UK’s second largest market in Asia, bigger than Japan or India) with exports up more than 20 per cent last year; Hong Kong is a springboard into China (a message which resonates with UK SMEs looking to mitigate risk); and Hong Kong is a regional hub (in fact, it’s the biggest centre for UK business in all of Asia).
Alastair Morgan: I start from the China-wide perspective. China is already the world’s second largest economy and will be the largest in perhaps as few as ten years. British companies are doing more business here, with exports of goods up more than 40 per cent last year. However, we are still only achieving a fraction of our potential. The opportunities are all across the country. In southern and south central China there are huge opportunities in the Pearl River Delta and also in the fast-developing hinterland of the provinces that neighbour Guangdong. Guangdong itself, with 110 million people, has an economy of around US$700 billion. With high-speed rail, the cities around Hong Kong are developing into a single conurbation with 40 million people. With rising GDP and GDP per capita, there is business potential for the UK in all segments. In particular, there are excellent opportunities in architecture and infrastructure development, and goods and services for the wealthy and the burgeoning middle income groups. We can also help tackle the development challenges, with green technologies and low-energy solutions.
Hong Kong still where it’s at
Iain Lindsay: I remember attending an emerging market event in Leeds a few years ago and hearing a senior KPMG guy saying that Hong Kong was pretty much irrelevant to companies wanting to break into the China market. I begged to disagree, and had I then known just how many people KPMG employ in Hong Kong handling China business I would gladly have thrown that back at him.
instance, have a lot more people in the mainland than in Hong Kong and are establishing new offices all the time as they secure business in second-tier cities across Southern China and elsewhere. The business environment in the mainland has improved substantially in the years since China joined the WTO.
Getting into the Greater China market
Hong Kong’s financial district as viewed from Kowloon Bay
The reality is that Hong Kong continues to play a role as a soft landing zone within the region, but the
“Hong Kong continues to play a role as a soft landing zone within the region, but the context is changing” context is changing. The head of one of Asia’s biggest banks told visiting British Foreign Secretary William Hague a few weeks ago that Hong Kong was of increasing economic importance to China. The interna-
tionalisation of the Renminbi and the way mainland companies are increasingly going global via Hong Kong are two new aspects which enhance Hong Kong’s attractiveness and relevance as a business centre. Alastair Morgan: I agree with this. Chinese leaders realise the importance of Hong Kong and its advantages for the mainland. Hong Kong is also a beacon for the country in terms of anti-corruption, transparency and freedom of information and the rule of law. I don’t see this changing in my time here, even though the relative economic weight of Hong Kong is likely to diminish as the mainland economy grows faster. KPMG, for
Iain Lindsay: Cooperation between the mainland and Hong Kong UKTI teams has improved significantly over the last four years, reflecting our wish to offer UK companies a joined-up service and an intelligent, real-world view of the Greater China market. UKTI Hong Kong now has a relationship with CBBC, particularly Simon Shen and his team in Shenzhen. I would love to see CBBC open in Hong Kong. Until then, the UKTI office in the Consulate is at the disposal of CBBC. Looking ahead, and bearing in mind the challenging UK-China trade targets that have been set by Ministers, my view is that we have to take account of the Hong Kong factor in our China trade strategy: some UK companies will not look at the mainland except through the prism of Hong Kong. It is better to have them in Greater China than not at all.
Alastair Morgan: Hong Kong is one entry point to the mainland market but it isn’t the only one. Most companies looking to do substantial business in the mainland will need a physical presence in the mainland at some point – more than one, in fact. Mainland China’s outward investment will grow. Mainland Chinese companies will use their experience in Hong Kong, and its capital markets, as a guide, but the decision makers will mostly be in the mainland. Southern China will be a growing source of investment and re-investment. Guangdong leads China in IPR development with patent registrations by companies like Huawei, even if it also leads China in the manufacture of shanzhai products. Both are, in different ways, a testament to its entrepreneurial culture. We can’t afford to ignore it.
Fraud to the Sword
The Bribery Act 2010 has many implications for UK business in China, says Clyde & Co’s Hannah Doherty
ll UK companies shall become subject to the Bribery Act 2010 when it comes into force later this year, after much debate and controversy. But what are the implications of this new anti-corruption law for UK companies when doing business in China? This article shares insights recently gleaned by Clyde & Co from the Ministry of Justice and the Serious Fraud Office as to the potential liability of companies.
Corruption – a worldwide issue
Transparency International’s Corruption Perceptions Index for 2010 ranks 178 countries in terms of the degree to which corruption is perceived to exist among public officials and politicians. The UK is ranked 20th most transparent with a score of 7.6. China, in comparison, is ranked 78th with a score of just 3.5.
Chinese Government commitment to combating corruption
At the annual session of the National People’s Congress in March, Chinese Premier Wen Jiabao said: “We shall act more quickly to solve serious problems in combating corruption and promoting clean government”.
The new corporate offence
A key consideration for UK companies doing business overseas is their newly-imposed responsibility for preventing bribery being committed on their behalf by persons associated with them, where the associated person intends to obtain or retain
business for them or to obtain or retain an advantage in the conduct of business for them.
The new “adequate procedures” defence
The only defence to the corporate offence is for a company to show that it had “adequate procedures” in place to prevent bribery by its associates. In September 2010 the Ministry of Justice published draft guidance addressing the “adequate procedures” defence. Following a strong adverse reaction to the draft guidance, the Ministry of Justice announced that it is working on the guidance “to make it practical and comprehensive for business”. When the guidance is published it will be followed by a three month notice period before implementation of the Act.
Insights from the Ministry of Justice and the Serious Fraud Office
On 1 March 2011 Clyde & Co welcomed Roderick Macauley from the Ministry of Justice, together with Richard Alderman and Vivian Robinson QC from the Serious Fraud Office, to talk on the Bribery Act. A summary of the seminar is available
on www.clydeco.com. UK companies may be concerned as to their potential liability for their Chinese suppliers. Roderick noted that the focus is on those people who are representing the company. Therefore suppliers would not be within the scope of the corporate offence unless they are also performing services for the company. Joint ventures are a popular means by which UK companies conduct business in China. A discussion arose as to whether a joint venture entity shall inevitably be an “associated person” for the purposes of the corporate offence. Richard Alderman’s opinion was that the issue is not one of control but whether the joint venture provides services to the company in question, and whether proper due diligence has been done. Roderick commented that the final guidance on the “adequate procedures” defence not be prescriptive but should be expected to remain principles-based, which has the benefit of flexibility. The author shall be speaking on the subject of the Bribery Act on 30 March 2011 at a seminar hosted by CBBC, in conjunction with the FCO and UKTI.
“UK companies may be concerned as to their potential liability for their Chinese suppliers”
Savannah Volunteers Li Guozhi talks about VSO’s first Chinese volunteers in Africa
BSG Technology Director Karl Carter points out some finer detail on a tour of the sugar plant
Chinese Ambassador Liu Xiaoming visits British Sugar Group’s flagship Wissington factory for a look at sugar sustainability
ritish Sugar, part of Associated British Foods, is one of the largest and longest established UK investors in the Chinese agricultural sector. Since 1995 British Sugar has invested over RMB 3 billion in
“Wissington now produces almost 20 per cent of the UK’s sugar supply” the sugar cane producing region of Guangxi Province and the sugar beet growing provinces of Heilongjiang, Inner Mongolia and Hebei. It is now among the five largest sugar producers in China. In February, British Sugar welcomed His Excellency Liu Xiaoming, as Chinese Ambassador to the UK. The Ambassador was accompanied on the visit by Minister Counsellor Zhou Xiaoming and other colleagues from the Chinese Embassy: Mark Hazlehurst, Business Development Director of British Sugar; Chris
Cotton, Director of the China-Britain Business Council; and senior representatives from the regional UKTI team.. The Group’s Technology Director Karl Carter said, “Our biggest challenge is to blend the best of western and Chinese agricultural knowhow to increase agricultural productivity to help meet the growing Chinese demand for sugar and raise rural incomes.” During the visit, the Ambassador learned how Wissington grew into the world’s largest and most efficient sugar beet factory and now produces almost 20 per cent of the UK’s sugar supply. The tour also included the integrated bioethanol plant and recently expanded adjacent tomato glasshouse which ensure that the factory is extremely energy efficient with a much reduced carbon footprint. The delegation left with a vision of how British Sugar is taking the approach to sustainability and low carbon operations seen at Wissington into its Chinese factories.
For more information, please contact Li.Guozhi@vsoint.org or Simon. Brown@vsoint.org
image: British Sugar
oluntary Service Overseas (VSO) recently celebrated the enrolment of their first ever Chinese participants. Liu Jie, one of the early volunteers to sign up, will go to Nigeria to work in the HIV & AIDS programme. Wan Feng, another volunteer, will be heading to Kenya to work in VSO’s Livelihoods programme. This is the first step of a paradigm shift about how VSO supports volunteering in China and overseas from China. VSO will aim to bring in volunteers who specialise in volunteering so that it can better support China’s own volunteer sector in the future. A number of partner organisations were also involved in this historic moment for VSO, including the China International Centre for Economic and Technical Exchanges, the China Association of Social Workers Working Committee of Volunteers and the Beijing Volunteer Federation. Support also came from the British, Nigerian and Kenyan embassies in terms of active participation in the event staged to mark VSO’s first Chinese volunteers in Africa. Dan Chugg from the British Embassy said, “China’s relationship with Africa is going to be increasingly important in the coming years and exchanges and volunteering between China and Africa will be vital in helping the world meet the Millennium Development Goals.” VSO’s achievement also shows how Africa is an important third market between the UK and China, and will continue to present opportunities for cooperation in the future.
A Call to Alms
The Inaugural Asia Pacific Social Investment and Philanthropy Workshop in Shanghai was a great success, reports Edward Smith
ritCham member company the Beijing Consulting Group, which has offices in Beijing, Shanghai, Tianjin and Hong Kong, recently played a key role in organising and facilitating the inaugural Asia Pacific Social Investment and Philanthropy Workshop, which was held
“China’s philanthropic and social investment sector is undergoing a period of rapid transformation”
Michael Liffman, Founding Director of APCSIP
Sciences; Professor Wang Zhenyao, President, Beijing Normal University One Foundation Philanthropy Research Institute; Ms Teresa Zolnierkiewicz, Head of Philanthropy, ANZ Trustees; Mr Xu Yongguang, Vice Chairman & Secretary General, Narada Foundation; Mr Xie Jiachen, Division Chief, Charity & Volunteer Affairs, Shanghai Bureau of Civil Affairs; Mr Rupert Hoogewerf, Founder, China Rich List; Ms Julie White, Division Director, Macquarie Group and Head, Macquarie Group Foundation; and Ms Sam Mostyn, Director of the Institute of Sustainable Solutions, University of Sydney. At the concluding workshop dinner, Professor Wang Zhenyao noted in his summary remarks that “there is strong mutual benefit
in holding an ongoing dialogue. Western nations have considerable experience to share with China and China’s philanthropic and social investment sector is undergoing a period of rapid transformation creating a need for training, both academic as well as the sharing of practical experience in managing foundations and NGOs.” Following on from the successful hosting of the inaugural Asia Pacific Social Investment and Philanthropy Workshop, Dr Liffman was pleased to announce that efforts are now underway to bring together funding and additional partners to make this an annual event. For more information, please contact email@example.com
image: BJ Consulting Group
in Shanghai in late 2010. The event was organised by the Beijing Consulting group on behalf of Australia’s Swinburne University, home of the Asia-Pacific Centre for Social Investment and Philanthropy (APCSIP), a leading institute for the teaching and research of philanthropy. The workshop brought together more than 60 leading thinkers, researchers, foundation managers, NGOs, media, government regulators and practitioners. In his opening remarks, Dr Michael Liffman, Director of Swinburne University’s APCSIP noted that, “China has enjoyed many years of close cooperation in trade, investment, sport, culture, science and many other fields with its key trading partners. Today we are pleased to broaden that cooperation to also include the fields of social investment and philanthropy”. The workshop provided an important first step for a number of international experts to meet and share their experiences with their Chinese counterparts. A number of senior players from China and the Asia Pacific region attended the workshop: Professor Yang Tuan, Deputy Director, Center for Policy Studies at the Chinese Academy of Social
FOCUS gives you the lowdown on top events this April in China and the UK CBBC Business Dinner in honour of Mr Yu Zhengsheng, Secretary of the Shanghai Party Committee Central London, 11 April CBBC is honoured to host a dinner for Mr Yu Zhengsheng, Party Secretary of Shanghai, during his official visit to the UK. The position of Shanghai Party Secretary is particularly important in China, as many who have held this position have gone on to significant leadership roles in Beijing. Tickets and sponsorship opportunities are available. This will be an exclusive chance to hear Mr Yu discuss Shanghai’s plans to become an international financial centre. For more information, visit www.cbbc.org
Exhibition: Commercial Aircraft Summit & Expo 7-8 April, Shanghai Sector Focus: Aerospace
China is the world’s most dynamic market for commercial airplanes, and is valued at US$490 billion over the next 20 years. The third Annual China Commercial Aircraft Summit & Expo will allow attendees to hear updates on the suppliers’ selection work of China’s C919 program. There will also be a look at how the Aviation Industry Corporation of China engages with the global aerospace industry chain, and a chance to see and discuss next-generation aero engine technology. For more information please email firstname.lastname@example.org, call +86 10 5192 4451 or www.opplandcorp.com/aero
Exhibition: Hong Kong Gifts & Premium Fair 27-30 April, Hong Kong Sector Focus: Giftware, Jewellery & Tableware
The world’s largest gifts fair is organised by the Hong Kong Trade and Development Council and will be held at the Hong Kong Convention and Exhibition Centre. The Hong Kong Gifts & Premium Fair offers various gifts and premium products, such as travel goods, stationery, tech gifts, and party items. The British Jewellery, Giftware and Finishing Federation will lead a UK delegation to the exhibition. UKTI Tradeshow Access Programme (TAP) funding is available for eligible companies. For more information please email email@example.com
STATE OF THE NATION
Fanning the Flames
China’s economy is overheating, but activity is slowing as attempts to cool markets and balance trade continue
Quarterly GDP growth (% change on year before)
supply of affordable housing, higher transaction taxes, further increases in the minimum deposit required for mortgages, and additional restrictions on owning multiple homes.
Import and export growth (% change on year before)
Export growth rate Import growth rate
Authorities pledge to reduce import duties to “balance trade”
Fixed asset investment remains the key driver of growth, rising 24.5 per cent (in nominal terms) in 2010 on the year before. Most analysts predict economic growth will be 9-9.5 per cent in 2011, down from 10.3 per cent in 2010. The absolute size of China’s economy in 2010 was just shy of US$6 trillion ― making it the undisputed second largest economy in the world and over twice the size of the UK’s economy.
Further measures taken to cool the property market
In light of the overheating economy, further measures have been taken to cool the property market – one of the biggest culprits in terms of inflationary pressure. On 26 January the State Council introduced a series of measures, including boosting the
In an attempt to mitigate the international tensions caused by China’s trade surplus, Minister of Commerce, Chen Deming said late last year that his Ministry’s priority for 2011 was to boost imports. At the beginning of March, Vice-Minister of Commerce Zhong Shan said these measures would include reductions in tariffs for some products as well as a “simplification of administrative processes”. The authorities are yet to provide any details, but import duties on natural resources are already relatively low, so more likely candidates for tariff reductions include luxury goods – tariffs are prohibitively high and serve to encourage Chinese people to buy overseas – and high-tech goods.
Lianghui begins 12th Five-Year Plan
The annual session of China’s parliament’ took place in early March. China’s “second house”, the Chinese People’s Political Consultative Conference (CPPCC) opened its annual meeting on 3 March. China’s National
“China now has the second largest economy with a value of US$6 trillion” People’s Congress (NPC) opened on 5 March, when Premier Wen delivered his annual “state of the nation” address. Together the two sessions are known as the Lianghui (two meetings). The next Five-Year Plan (2011-2015) for social and economic development was formally adopted and released at the NPC. Late last year the authorities announced that the 12th Five-Year Plan would mark a more determined shift to a more sustainable, balanced, fairer, greener, and higher tech growth model.
Information provided by British Embassy Beijing
hina’s economic growth stood at 9.8 per cent in the fourth quarter of 2010, up from 9.6 per cent in the third quarter. Growth was 10.3 per cent for 2010 overall, well above the authorities’ 8 per cent target and up from 9.2 per cent in 2009. According to official figures, 2010’s 10.3 per cent annual growth figure can be broken down into 9.5 per cent domestic demand (government and private investment, consumer spending) and 0.8 per cent net exports (exports minus imports).
he figures speak for themselves. China is the largest market for UK firms outside the USA and EU and became the world’s second largest economy in 2010. It is also home to the biggest ICT market globally with some 600 million mobile users and 400 million internet users. With China set to become the world’s biggest market by 2050, the scale of commercial opportunity in China is indeed immense. Yet in a country which stretches some 3000 miles across the Asian landmass, deciding exactly where to do business can be somewhat overwhelming. Traditionally, commercial interest in China has generally focused on a few business ‘hot spots’ ― first tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen. Yet China should not be seen as a single national market – instead a diverse region made up of municipalities and over 30 provinces, each the size of the UK or bigger. Dozens of new cities have emerged and coastal areas have developed into sophisticated urban clusters. This means significant ― and indeed unlocked ― opportunities for UK companies looking to invest outside of the established international business centres and into the lesserknown regions. UK Trade and Investment (UKTI) ― the Government department that helps UK-based companies succeed internationally – commissioned the China-Britain Business Council (CBBC) and the University of Leeds to conduct major research into the opportunities for UK businesses in China’s regional cities. The findings, published in 2008, found significant openings for UK firms outside the traditional commercial centres with 35 cities deemed most attractive for UK business.
“There are significant openings for UK firms outside the traditional commercial centres” Combined, they account for around 16 per cent of China’s population and 36 per cent of China’s (GDP). Significantly, these cities all share specific characteristics such as low input costs, large and developing consumer and industrial markets and rapid economic growth. Competition tends to be lower too. A subsequent report on China’s second tier cities has since been published in February 2011, which high-
lights the wealth of business potential for British companies in Chinese regional cities, focusing specifically on the cities of Tianjin, Nanjing and Hangzhou. Among the findings is the welcoming of UK expertise in government-to-consumer applications. For example, the municipal governments in Nanjing and Hangzhou plan to roll out a variety of e-government services, and are keen to work with UK companies to develop innovative solutions. Major UK initiatives in China are helping to foster bilateral exchanges in ICT, such as ‘Enabling Innovation’ ― a UK-China partnership which is creating tangible platforms for engagement and partnership. Set up in 2008 by UKTI, ‘Enabling Innovation’ has so far assisted over 150 UK technology companies into the Chinese market. And many of these opportunities have been in regional cities. UKTI is also assisting UK companies win business with major Chinese companies and government departments in a number of provinces through its Global Value Chain initiative. The initiative works on a targeted approach – establishing long term relationships to provide a qualified understanding of needs that are then matched to UK capability. So far, activities have focused on communications and M2M, consumer electronics, embedded design and retail technology. Given the sheer speed with which China is developing, there is a clear need for economies like the UK to help move China’s industry up the value chain and develop services like the ICT sector. And in a country where new cities are emerging all the time – each with their own uniqueness – it’s not a question of how, but indeed where, to begin.
Opportunities continue to grow in China’s regional cities, writes John Davies, Global ICT Strategy and Technology Adviser at UKTI
FROM THE NEWSROOM
Premier Promises many poorer Chinese grumble that the benefits of the country’s sizzling economic growth are passing them by. China is now the world’s secondlargest economy, but most people remain poor. The average farmer earned around US$900 in 2010; a typical urbanite had less than US$3,000 of disposable income. This is the main reason why China’s consumers are far from ready to become
“China’s inequalities keep widening as the country’s growth passes by the poor” an engine of world economic growth. Turbo-charged growth should be great news for ordinary citizens, but much of the cash swilling around the economy ends up in government and corporate coffers. When the world financial crisis began in late 2008, China responded by funnelling vast waves of money into the economy through the largely
state-controlled banking system. Total lending in 2009-10 probably exceeded US$3 trillion. Much of this cash was invested in new apartment blocks, roads, bridges and railways – all useful things that would have been built anyway, in the fullness of time. But what few ordinary Chinese understand is that they financed this monetary blow-out themselves, thanks to the measly interest rates paid on household savings. Premier Wen promised that real household incomes would keep pace with economic growth. But giving ordinary people a bigger slice of the economic pie means liberalizing bank interest rates and ensuring that incomes rise more quickly than GDP. “Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possible and ensure that the people share more in the fruits of reform and development,” Wen told delegates. Expect to hear exactly the same thing next year, and for years to come.
Illustration: Timothy McEvenue
very annual meeting of China’s national parliament begins in the same fashion. First, the nine members of the Politburo standing committee pose, grim-faced, in identical black suits, white shirts and revolutionary red ties for the respectful photographers of the People’s Daily. Then Premier Wen Jiabao delivers a two-hour speech to the 3,000 or so delegates crammed into the Great Hall of the People in which he promises to improve ordinary people’s livelihoods and create a fairer society. Grandpa Wen, as he likes to be called, has been making the same speech every year since 2003, when he first came up with the catchphrase to “put the people first”. And to be fair, his government has made notable progress in improving the lot of China’s 700 million farmers and in expanding social welfare benefits. Yet most ordinary people do not feel that their interests are being “put first”. China’s inequalities keep widening, local-government officials continue to throw farmers off their land, and
Photography: AFP China
Tom Miller, managing editor at research firm GK Dragonomics, is unconvinced by Premier Wen’s promises.
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