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INSIGHTThe Journal of the American Chamber of Commerce in Shanghai - Insight December 2016
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INTERVIEW P.20Professor Jeffrey Legro
on the changing world order
Also, we look at the development of three key industries in China’s service sector: legal, consulting and property management
James W. Robinson, managing director of APCO Worldwide, on where U.S.-China relations might be headed under the new administration and the impact on multinationals
Management Consulting
Trump andthe impact onU.S.-Chinatrade relations
Property Management Services
Legal Services
POLICY P.22Rhodium Group on 25 Years
of U.S.-China Direct Investment
MEMBER FOCUS P.26With Virginia Moore of project
logistics company YN Logistics
Simon WanCHINA
Laurie O’DonnellCHINA
David EalsonNEW ZEALAND
Nancy ChuHONG KONG
Vijay KarkareINDIA
Dominic YimCHINA
James Ng CHINA
Tieu Yen TRINH VIETNAM
John VijayrangamINDONESIA
Allan RaeAUSTRALIA
Markus WehrhahnTHAILAND
William LiuJAPAN
Kasper Cheung CHINA
Sonia Vaswani HONG KONG
Your Game Changing Partners, 19 Offices in Asia & 70 Worldwide
2017 : We Must THINK AHEADCornerstone Specializes in Finding GameChangers and Hard-to-Fill Talents
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CONTACT US FOR MORE INFO simon wan-chief executivephone no.:+86 21 6474 7064
E-mail: simon [email protected]: www.cornerstone-group.com
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Movers and shakers
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amcham shanghai
PresidentKenneth Jarrett
VP of Administration & Finance helen ren
Directors
Business Development, Marketing & Events
Patsy liCommittees
Jessica WuCommunications & Publications
ian DriscollGovernment Relations & CSR
Veomayoury "titi" BaccamMembership & CVP
linDa X. WangTrade & Investment Center
leon tung
insight
Senior Associate Editor ruoPing chen
Associate Editor Doug struB
Content Manager DeBorah tang
Design gaBriele corDioli
Printing
snaP Printing, inc.
insight sPonsorshiP
(86-21) 6279-7119story ideas, questions or
comments on insight: Please contact ruoping chen
(86-21) 6279-7119 ext. [email protected]
insight is a free monthly publication for the members of the american chamber of
commerce in shanghai. editorial content and sponsors' announcements are independent and do not necessarily reflect the views of the governors, officers, members or staff
of the chamber. no part of this publication may be reproduced without written consent
of the copyright holder.
shanghai centre, suite 568 1376 nanjing West road shanghai, 200040 china tel: (86-21) 6279-7119 fax: (86-21) 6279-7643
www.amcham-shanghai.org
special thanks to the 2015-2016 amcham shanghai President’s circle sponsors
INSIGHTThe Journal of the American Chamber of Commerce in Shanghai - December 2016
FEATURES
Where Lawyers Can’t PracticeForeign law firms and China’s legal services sector
Solicited Advice On management consulting in China
Shaping the CityscapeProperty services in an era of rapid development
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POLICY PERSPECTIVES
To Make America Great AgainTrump must acknowledge the U.S. and China are stronger together
AmCham Author Series A conversation with the editor of Shaper Nations: Strategies for a Changing World
Two-Way Street Rhodium Group on 25 years of U.S.-China direct investment
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MEMBER NEWS
Government Appreciation DinnerA summary of the evening’s event
Member Focus With Virginia Moore of project logistics company YN Logistics
Board of Governors Briefing Notes from last month’s meeting
Event Report Recap of selected events from last month
Month in PicturesSelected photos from last month’s AmCham events
Committee Chair’s Corner With Ningling Wang, chair of the Legal Committee
Esoterica Amusing Chinese internet stories from 2016
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CAREER
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AmCham Shanghai is truly the “Voice of American Business
in China”. It offers unrivaled value to its members.
- Eric Zheng President & CEO,
AIG China
AmCham Shanghai is a thriving network of professionals who help one another grow and prosper.
- Manoj Mehta CEO, naked Group
Stay Connected
Join Us Now:
Jane Wang (86 21) 6279 7119-5682
AmCham Shanghai is truly
the “Voice of American Business
in China.” It offers unrivaled value
to its members.
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America has chosen a new presi-
dent. Some of us voted for him, others
would have preferred anyone but Don-
ald Trump. Both groups are part of one
nation, of which he will be our president.
Outside the United States, Mr. Trump
has challenges. His popularity in the U.S.
was notoriously hard to measure un-
til actual votes were cast and counted.
Polls taken outside the country could
not be more clear. Although relatively
popular in Russia and China, 85% of Eu-
ropeans have little or no confidence in
Trump to “do the right thing on world af-
fairs,” according to Pew Research. Time
will tell if they are right or wrong. His fail-
ure would be our failure.
One of the great things about Amer-
ica is we don’t all need to agree. We do
need to cooperate. Our democratic sys-
tem requires us to work with people with
whom we have differences. Diversity of
opinions can make us strong.
AmCham Shanghai is nonpartisan
and works closely with all branches of
the U.S. government. If asked, we will
give the new administration an accurate
and up-to-date picture of the situation
American companies face on the ground
here in China. That’s our role. The views
we express need to be accurate, help-
ful and constructive. We will continue to
advocate our positions even if, as in the
case of TPP, we are at odds with the new
administration. On China policy ques-
tions we can look for common ground
and build from there.
Some say Trump is an isolationist and
that the burden of America’s leader-
ship abroad has been too heavy to bear.
Whether that’s true or not, we need to fix
our problems at home. America needs a
new plan for the domestic economy, one
that recognizes the reality of China and
India as massive pools of inexpensive la-
bor. The benefits of trade have not been
balanced. If Mr. Trump has a better plan
then we should work with it.
As president, Mr. Trump is likely to
make strong demands on China for rec-
iprocity. Americans see how prosperous
China has become and they are ques-
tioning whether this is a reciprocal re-
lationship. Equal treatment is a worthy
goal. We all want more market access, a
level playing field and greater transpar-
ency.
Cross border investment in both di-
rections is a good thing. It creates jobs
and builds value. In the case of China
is it fair, is it balanced? How level is the
playing field? If Chinese companies can
acquire media companies in the U.S.,
businesses like AMC theaters and Dick
Clark Productions, then should Amer-
ican companies be able to make me-
dia investments here in China? Why
shouldn’t American companies be able
to make the same kinds of investments
in China as Chinese companies are mak-
ing in America?
American banks and insurance com-
panies have a limited share of the mar-
ket here in China. AmCham has openly
called on China to further open the mar-
ket and eliminate equity caps. After all,
this was the expectation when China
joined the WTO. The current adminis-
tration has been pushing for a Bilateral
Investment Treaty that would go a long
way toward achieving these goals. Could
a Trump administration continue this
work?
The Trans-Pacific Partnership in its
current form, which AmCham strongly
supported, is all but dead. There are
those who believe the new administra-
tion will be able to renegotiate and get
some form of the TPP passed. It wasn’t
perfect. The provisions on biologics
could be improved, and many were not
satisfied with how it handled currency.
On some issues, common ground will
be harder to find. On climate change
and environmental issues Mr. Trump’s
position is squarely at odds with the ex-
perts, and with China. Ironically, this has
been one of the bright spots in the China
relationship under the current adminis-
tration. Trump is wrong about this and
needs to be better advised. It would also
be helpful if Mr. Trump would stop talk-
ing about foreigners and immigrants in
an unhelpful way regardless of his per-
sonal views. America’s relationship with
China is important. All of us depend on
this relationship to continue on the path
of open dialogue and cooperation, not
hostility and conflict. I
Chairman’s Letter
KER GIBBSChair of the Board of Governors
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GOVERNMENT
Yuan Jiajun was
appointed vice party
secretary of Zhejiang
province. Yuan started
his career as an
engineer at the China
Academy of Space
Technology. He became the chief
commander of the Shenzhou spaceship
system in 2000 and the vice general
manager of China Aerospace Science and
Technology Corporation in 2007. From
2012 to 2014, he served as vice chairman
of Ningxia Hui Autonomous Region. Most
recently, he was the vice executive
governor of Zhejiang province.
Chen Quanguo was
named party secretary
of Xinjiang Uygur
autonomous region.
Prior to this, Chen was
the party secretary of
the Tibet government.
Chen was born in Henan and worked in
different positions of the Henan government
for decades. In 1998, he became vice
governor of Henan province and was
promoted to governor 11 years later.
Wu Zhenglong was
appointed party
secretary of Nanjing.
Previously Wu was a
member of the
standing committee of
Jiangxi province. From
the end of 1999 to 2014, Wu worked in
different positions of Chongqing municipal
government, including party secretary of
Wanzhou district, director of Chongqing
municipal reform office and member of the
standing committee.
PRIVATE SECTOR
StarBuCkSBelinda Wong was
promoted from
president to chief
executive officer of
Starbucks China.
Wong has been
instrumental in Starbucks’ unprecedented
growth in China – from 400 stores in 2011 to
over 2,300 stores today. In her new role,
Wong will focus on the overall long-term
growth strategy and lead the innovation
pipeline for Starbucks China. She will be
responsible for key areas, including digital
and e-commerce opportunities across the
market and overseeing the opening of
Starbucks’ first international Starbucks
Roastery in Shanghai in 2017.
Wong joined Starbucks in 2000 and served
as marketing manager of McDonald’s China
Development Company for five years
before that. She holds a bachelor of
business administration degree from the
University of British Columbia.
MetlifeMetLife appointed lee
Wood CEO for its Hong
Kong business. Wood is
a seasoned insurance
professional with over
15 years of broad
industry experience. He was most recently
senior vice president at Allianz Taiwan Life
Insurance Company Limited with
responsibility for marketing, product
development and the direct marketing
channel. Prior to this, he spent five years at
HSBC Life (International) Limited in Taiwan as
managing director.
He has also held various senior marketing and
general manager roles at leading insurance
companies throughout Asia which include
ING Antai Life Insurance Company Limited in
Taiwan, PT AIG Insurance Indonesia and AXA
Life Insurance Company Limited in Japan.
Wood holds an MBA and Masters of Divinity
from Emory University in Atlanta, Georgia.
MiCroSoftMicrosoft named rob
Behennah the new
general manager for
its services group in
the Asia Pacific.
Behennah will be
responsible for the strategy, consulting
and support of Microsoft’s Enterprise
Customers across 12 countries in the Asia
Pacific region. Prior to Microsoft, Behennah
has spent the last four years in regional
leadership positions at Salesforce.
During his 25-year professional career,
Behennah has built a successful track
record in delivering outstanding results in
customer adoption, revenue protection
and growth at companies such as Cap
Gemini, Lotus Software, IBM, SAP and
Salesforce.
Warner Chappell MuSiC Warner/Chappell
Music (WCM), the
global music
publishing arm of
Warner Music Group,
announced the promotion of Monica lee
to President, Asia-Pacific. In this new
position, Lee will oversee the publisher’s
operations across the region.
Lee previously served as senior vice
president, WCM, Asia-Pacific, since 2009.
She first joined WCM in 2002 as creative
director for Taiwan following its
acquisition of Musset Publications, an
independent publishing company where
she was general manager. Before she
joined Musset in 1999, Lee held a range
of A&R roles at Universal Records Taiwan
and PolyGram Records Taiwan.
Movers and Shakers highlights major personnel changes within the Chinese government at various levels and senior management-level movements within multinational companies in China
If your company has executive personnel changes,please contact Junling Cui at [email protected].
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Movers and shakers
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In the 1990s, China opened its
legal services market to for-
eign law firms. Twenty years
later, about 170 foreign firms have
seized the opportunity to en-
ter an environment of uncertain
prospects. Foreign firms have re-
sponded to the country’s unique
challenges differently: some firms
have deepened their ties through
mergers with Chinese law firms,
while others have closed shop
(most notably multinational firm
Fried, Frank, Harris, Shriver & Ja-
cobson LLP in 2015, and Cad-
walader Wickerhsam & Taft stat-
ing that it will leave China by the
end of 2016)).
a unique legal environment
There is no obvious reason for a
foreign law firm to come to China.
The challenges start with the law
itself. There is “inconsistent appli-
cation of law by the local bureaus,”
said Kilpatrick Townsend & Stock-
ton LLP co-chair of Asia Practice
and partner Gentry Sayad. “What
may be true in Shanghai may not
be true in Beijing.” Because of this,
lawyers must spend more time
looking at how the law has been
applied throughout the country.
“What clients would think is a
simple question always requires
more time and investigation,” said
Sayad.
Even if the laws were consis-
tently applied, the different em-
phasis on legal precedents poses
another problem. Legal prece-
dents do not have the same in-
fluence in China as they do in
many developed nations. While
in their home country a lawyer
might be able to reference pre-
vious decisions as they advise
their clients, they cannot have the
same assurance that past deci-
sions will influence future ones
in China. Whatever the virtues or
vices of Chinese law, it can also
be a political tool, enforced (or
not) as befits political ends. This
environment limits the author-
ity precedents otherwise held in
developed countries, and poses
a unique challenge for China’s
lawyers.
Because of the law’s incon-
sistent application across re-
gions and the challenge posed
by precedents, foreign lawyers
in China must pay special atten-
tion to government relations. “You
need to get answers for your cli-
ent without spending an inordi-
nate amount of time doing it,” said
Sayad. To do this, he says, it’s im-
portant to figure out how to “get
the government guy to say ‘yes.’”
Sayad noted that it is common for
government officials to deny re-
quests from foreign companies.
The government relations work
that lawyers do is also important
as they help companies who are
making legal claims. “[The gov-
ernment] is not going to make
any effort to proactively gather
evidence, so really it’s up to [the
company] to find the evidence on
a company’s behalf and provide
the narrative. And with the assis-
tance of counsel, tie it up neatly
with a bow and say ‘Here you go.
Here is why you’re allowed to do
this,’” said Sayad.
Differences for foreign firms
All of the above difficulties
impact foreign and Chinese law
firms alike. But foreign firms face
unique restrictions that add to
their operating challenges. “For-
eign firms are technically prohib-
ited from practicing Chinese law.
They are allowed to interpret and
guide their clients on how to op-
erate in China, but technically
Foreign law firms and China’s legal services sector
By AmCham Staff
FEATURES
Where Lawyers Can’t Practice
What clients would think is a simple
question always
requires more time and
investigation
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8
speaking they cannot practice
Chinese law. The two clear in-
dications of practicing Chinese
law would include appearing in
front of a Chinese court and they
cannot give legal opinions under
Chinese law,” said another interna-
tional lawyer. Sayad agrees: “For-
eign lawyers are restricted from
giving opinions on Chinese law,
and to the extent we advise our
clients on legal matters in China, it
is either in coordination with Chi-
nese local counsel or it’s based on
publicly available information and
our experience as foreign lawyers
registered in China.”
Note that these restrictions are
on foreign firms, not simply foreign
lawyers: Chinese lawyers that join
foreign firms must give up their
Chinese law licenses. These re-
strictions frustrate foreign firms,
particularly since the inverse is
generally not true. As the U.S.-
China Business Council’s 2013
report on “Legal Market Access
Issues in China” notes, “U.S. regu-
lations permit Chinese law firms
in the United States to hire U.S.-li-
censed lawyers who may practice
in the United States without similar
restriction.”
In 2001, when China acceded
to the World Trade Organization
(WTO), access to the country’s
service industry was largely lib-
eralized. Foreign accountants,
for instance, could begin prac-
ticing in China. But law firms did
not receive the same welcome.
As attorney Mark Cohen noted in
a 2012 paper: “Market access lib-
eralization offered to foreign law
firms at WTO accession was com-
paratively small, and was largely
limited to permitting foreign law
firms to open up more than one
representative office. However,
such offices continued to be re-
stricted in the type of services
they could provide.”
The restrictions are clear, but
not all lawyers agree that they are
a problem. For instance, Qiang
Li, co-country managing part-
ner for China at international law
firm DLA Piper, argued that “the
degree of openness of the legal
services sector is commensurate
with the amount of opportunity
that exists for the international
law firms at this point.” While he
can imagine “more liberalization
of the legal market as China’s
legal reform progresses,” he be-
lieves that there simply “aren’t
enough opportunities for the
market to be completely opened
up to everybody.” Nevertheless,
foreign lawyers still eagerly await
the liberalizing changes that will
give them market access akin to
their service-industry peers.
firm partnerships and mergers
In the meantime, successfully
navigating China’s legal services
industry and providing their for-
eign clients with the service they
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MOVeRS ANd ShAkeRS
9
expect in their home countries
has required foreign law firms in
China to partner with their Chi-
nese counterparts. Sometimes
that partnership comes through
M&A: two notable examples be-
ing the three-way merger be-
tween Australia’s Mallesons Ste-
phen Jaques, Britain’s SJ Berwin
and China’s King & Wood in 2013,
and the merger of global law firm
Dentons with China’s Dacheng in
2015. These mergers received a
lot of attention within China’s le-
gal industry, and the industry is
watching closely to see whether
they will succeed or fail.
Many lawyers assume these
mergers are riddled with chal-
lenges. One reason is pricing
differences. In major markets
like New York City, first-year as-
sociates at major law firms are
paid an average base salary of
US$160,000. Conversely, a first
year associate at a major firm in
China can expect a base salary of
approximately $50,000 plus dis-
cretionary bonus. When firms like
these work together, an interna-
tional lawyer says, “you’re looking
at a very different business model
and a very different cost basis.”
That China’s legal services
industry is at an earlier stage of
development than many of their
Western counterparts is another
potential sticking point. Private
law firms have only been al-
lowed in China since 1992, and
in 2015 The Economist reported
that the legal sector constituted
0.1% (US$7.6 billion) of China’s
GDP, compared with the more
than 1% average contribution
from the sector in major Euro-
pean countries.
Chinese law firms have offered
increasingly high-quality service,
but quality assurance cannot al-
ways be assured across a firm. In
the United States, says Sayad, “I
can pick a big firm that everyone
knows and be pretty sure that
whatever office I call, I will for the
most part get a quality lawyer and
quality service. But in China that’s
still developing. A firm that’s got
a great office in Shanghai might
still not have developed sophis-
tication in Guangzhou.” The repu-
tational risk that could come from
choosing a partner of inconsis-
tent quality is worrying for some
foreign firms, and is one of the
reasons why many firms choose
to work with a variety of Chinese
firms on a case-by-case basis.
This is the road that Kilpatrick
Townsend & Stockton has taken
in Shanghai. “We work with some
great Chinese firms on different
matters and around the country,”
says Sayad.
What makes it worthwile?
These challenges are sizeable,
but dreams of future returns have
encouraged many foreign firms
to endure them. As Chinese com-
panies have grown and begun to
spread their influence overseas
through outbound investment,
foreign law firms have endeav-
ored to win M&A mandates from
these transactions. While, as an
international lawyer notes, “20
years ago [foreign firms] focused
mostly on supporting the China
operations of their clients from
Europe or the United States,”
building relationships and trust at
Chinese companies so that they
can be involved in future out-
bound investment transactions
seems to be the new motivation.
Focusing on outbound invest-
ment might also prove a strategic
way for foreign firms in China to
differentiate themselves from in-
creasingly sophisticated Chinese
firms. There are more than 19,000
Chinese law firms, and as these
firms develop, they are beginning
to gain the capability and reputa-
tion to represent foreign clients
on their own. Notable leaders in
this maturing market are the “Red
Circle,” the term used for eight
Chinese top-tier law firms, which
includes King & Wood Mallesons,
Jun He Law Offices, Fangda,
Zhonglun, Haiwen and Partners,
Commerce & Finance, Global Law
Office and Jingtian & Gongcheng.
Because of the aforementioned
differences in pricing models,
these law firms are usually able
to serve clients more cheaply
than their foreign counterparts.
To fend off the increasing compe-
tition, foreign firms are leveraging
their understanding of their home
market to entice more Chinese
clients.
Whether or not they become a
profit center, many international
firms see the value of maintaining
a presence in China in order to
support their clients. “I think peo-
ple came here because their cur-
rent clients wanted them here,”
says Sayad. “I suspect that some
of the offices are not very big
revenue generators.” Li echoes
this feeling, noting that “because
international clients have a ten-
dency to distrust the [Chinese]
government...international firms
can play a very important inter-
mediary role.”
The future for China’s legal ser-
vices sector is largely dependent
on how the country’s rule of law
develops. And much encourage-
ment for that reform, Li argues,
will come from China’s domestic
law firms. “Domestic firms have
scaled so much and might be a
factor in China’s legal reform – get-
ting the government to acquiesce
to building a more rule-based so-
ciety, rather than just a govern-
ment-dominated society,” he says.
“These law firms are getting very
big and they will have to do some-
thing. If the government continues
to dominate, they will not be able
to play an important role.” I
FEATURES
In major markets like
New York City, first year associates at
major law fir-ms are paid an average
base salary of US$160,000. Conversely, a first year
associate at a major firm in China can
expect a base salary of ap-proximately $50,000 plus
discretionary bonus
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China’s manufacturing slow-
down has been an almost
daily fixture in the business
news media for the past few years.
Somewhat less bruised is the ser-
vices sector, which the Chinese gov-
ernment hopes will take up some of
the slack as the country continues its
economic transition. One sub-sector
that is doing well is consulting, and if
China follows the U.S. model, there
should be plenty of room for growth.
“The [consulting] industry con-
tinues to be a dynamic, vibrant
market, and I think the outlook is
very promising,” says Carol Liao, se-
nior partner and managing director
of Greater China for Boston Con-
sulting Group (BCG).
There is evidence to back up Liao’s
statement. The market research firm
Source Global Research estimated
that China’s consulting market grew
7% over 2015, reaching a total market
value of US$4 billion. IBISWorld’s 2016
report on management consulting
in China, meanwhile, estimated total
revenue for the industry to be $23 bil-
lion with a workforce of 458,000 em-
ployees. Despite differences in defini-
tions and data sets (for instance as to
which companies are categorized as
management consultants), both re-
ports reflect an industry that is on the
upswing.
But from the same sources, it is
also clear that the consulting indus-
try in China is still in a nascent phase
compared to more mature Western
markets, especially that of the Unit-
ed States. The U).S). consulting indus-
try, the world’s largest, saw growth
of 7.7% in 2015 to reach a market
value of $54.7 billion, according to
Source Global Research. IBISWorld
had management consulting in the
U.S. sitting at $253 billion in revenue
with an estimated 1.7 million em-
ployees working in the industry.
There is also the question of con-
sulting’s geographic reach in China
compared with developed markets,
with most consulting firms here con-
centrated in the economically pros-
perous eastern regions and first-tier
cities. According to Chinese broker-
age Founder Securities, the consult-
ing industry accounts for only 0.18%
of GDP in China compared to 1.2% of
GDP in the United States.
Solicited Advice
Management Consulting
in ChinaBy Ruoping Chen
(source: IBISWorld)
China$23 bn
China458,000
U.S.$253 bn
U.S.1,700,000
Consulting industry,annual revenue (2016)
no. of employees (2016)
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lenges. Looking ahead, Liao be-
lieves there are three key factors
shaping the market for manage-
ment consulting services. “One
is transformation under the ‘new
normal,’ meaning not just growth-
driven, but also how to have a more
efficient and lower-cost supply
chain operation, how to adapt and
change the organization, as well as
the governance of a company.”
“The second is digitalization
across all businesses and all pro-
cesses,” and “Lastly, primarily for
Chinese companies, there’s a big
theme on going global, in how to
expand overseas.”
China’s Ministry of Commerce
calculates the country’s outbound
direct investment to have increased
53.3% year-on-year, reaching US$146
billion in the January-October period
of 2016. In 2015, the country became
a net capital exporter for the first time.
From exporting consumer goods to
acquiring foreign big-name brands,
more and more Chinese companies
are internationalizing, and there is
plenty of opportunity for consultan-
cies to get involved in the process.
That includes, Liao says, helping
companies form their globalization
strategy, choosing which countries to
invest in, setting up a global gover-
nance structure and having a proper
integration roadmap.
Views on consulting may differ
The way in which consultan-
cies work with Western companies
versus Chinese companies can be
distinctly different, often depending
on whether the client is headquar-
tered in China and on how well a
company is developed within its in-
dustry. Consulting projects for multi-
nationals headquartered elsewhere
but with a strong presence in China
are often led by a global consult-
ing team with participation from the
China office. Such consultation proj-
ects tend to be clearly-defined and
targeted because they are driven by
the corporate sales and marketing
departments, Liao says.
Chinese companies, on the other
hand, generally demand a broader
While China’s economic growth
is slowing to its weakest in 25 years,
the consulting industry is unlikely to
follow suit. An economy in transition
facing a range of issues such as in-
dustrial overcapacity, heavy debt
burdens, weak export numbers, a
cooling property market and rising
labor costs all contribute to uncer-
tainty in the business environment.
Some companies are responding
with budget tightening, but oth-
ers are seeking “brains-for-hire” to
help them navigate through difficult
times. Consulting companies that
position themselves effectively can
gain an advantage.
Meanwhile, countercyclical com-
panies, such as those in the private
health, energy and education sec-
tors, will continue to hire consultants
as they look to compete more effec-
tively within their hyper-competitive
sectors, to expand in size and diver-
sify their businesses. Many of these
industries, such as pharmaceuticals,
also face increased government
scrutiny and regulation, creating
even more advisory opportunities
for consultancies and other related
professional services.
“Demand for consulting is more
correlated with our clients’ willing-
ness and determination to make
change,” says Liao. “This happens
regardless of whether they’re in a
high growth industry or an industry
facing significant challenges.” De-
mand, she adds, is not linked with
GDP or industry cycles.
a rise in Chinese clients
Carol Liao, who has worked with
BCG since 1995, reports a rise in re-
cent years in the number of Chinese
companies seeking professional
consulting services. Historically,
BCG’s primary focus was on help-
ing foreign multinationals to enter
and grow in the Chinese market.
But today, Chinese companies, both
private and state-owned, represent
over half of BCG’s client base.
This change in client demo-
graphics has led to a more diverse
range of requirements, ones driven
by clients’ specific business chal-
range of consultation. “For example,
given the changing market environ-
ment, the company wants to drive a
whole transformation journey. Then
we need to work with the client to
actually identify supply chain, sales,
even diversification into other mar-
kets, and of course, globalization,”
says Liao.
There are several explanations
for this difference between Chinese
and non-Chinese company require-
ments. Modern consulting has been
around in the West for nearly a cen-
tury, but it only began in China in
the 1990s when consulting firms
followed multinationals into the
country as they set up operations
and began to invest and expand.
Now, with an increasing number of
Chinese clients, many consultancy
firms are facing a gap in perception
and understanding among Chinese
companies in terms of how to best
use consultancy to support their
business needs.
According to Helen Chen, a man-
aging director and partner at L.E.K.
Consulting and head of L.E.K.’s Chi-
na practice, there is a perception
that strategy consulting in particular
is less mature in China, especially
when compared to legal or account-
ing services which have been seen
as providing more concrete ser-
vices. “China still has a ‘hard goods’
mentality, and concepts around soft
services in the professional services
industry are still developing,” she
says. “China’s probably more familiar
with intermediary services, such as
the zhongjie [agent] in real estate, or
brokerages, where someone is sell-
ing you something and as a result
they get a commission.”
As a result, these clients may
only use consultancies for specific
roles rather than taking full advan-
tage of the breadth of services and
insights their consultants can pro-
vide. One example Chen gives is
of Chinese companies planning to
expand internationally. A Chinese
company may be willing to pay a
brokerage fee to acquire a com-
pany overseas, but may not be ask-
ing themselves important strategic
questions such as, “Should I be in-
FEATURES
0.18%Consultingindustry
as percentageof China’s GDP
(source: Founder Securities)
China still has a ‘hard goods’
mentality, and concepts
around soft services in the
professional services
industry are still
developing
Helen Chen, managing director
and partner at L.E.K. Consulting
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When you’re rooted in
China, the DNA of your
firm is aChina-based kind of DNA
Edward Tse, founder and CEO
of Gao FengAdvisory Company
ternational? Which countries should
I go into? Do I have the wherewithal
to be in a developed country, or
should I go to an emerging coun-
try? Which countries are my prod-
ucts most suited for? Where can I
be the most competitive? Do I want
to have infrastructure of my own, or
do I work with a local partner?”
In contrast to U.S. clients who
tend to choose consultancies based
on a set of targeted business needs
and the type of consulting expertise
needed for their sector, Chinese cli-
ents less familiar with the consulting
industry may not have a complete
understanding of what they want. In
such cases, Chinese clients often in-
vite a wide range of consultancies to
pitch for a particular project, ranging
from established international firms
to small startup boutiques, regard-
less of whether they are the right fit.
Where Chinese consultancies stand
Along with the upsurge in Chi-
nese companies as clients, the
nature of the consultancies has
also changed. In recent years, a
crop of homegrown Chinese con-
sultancies has established them-
selves as competitors in the mar-
ket. Most are still relatively small
in operation, but they are growing
quickly. Hejun Consulting Group,
one of the largest Chinese con-
sultancies, now has over 1,000
employees. In an interview with
China Daily, Hejun’s vice president
Xu Dichang said in 2014 that the
company’s revenues increased
22.6% year-on-year and that his
company aims to be operating in-
ternationally by 2020.
“Some of these [Chinese con-
sultancies] are from people who
were at international consulting
firms who have gone out and cre-
ated their own boutique firms,” says
Chen. “We also see Chinese aca-
demics, for example, hanging out
a sign and becoming independent
consultants or providing research
services, so it’s a very wide range of
consulting being offered.”
Edward Tse is one such entre-
preneur. After building and leading
the Greater China operations of BCG
and Booz & Company for 20 years,
he left to start his own consultancy
Gao Feng Advisory Company. Given
that China has become “a major epi-
center in the world for business in-
novations” and the speed at which it
is changing, Tse believes that it’s in-
creasingly important for consultants
to be rooted in China and be globally
minded and resourced. That means
being able to fully understand the
China context and China’s role in the
world, both of which are needed to
help clients make the correct busi-
ness decisions.
“When you’re rooted in China, the
DNA of your firm is a China-based
kind of DNA. Therefore, the way you
look at how the world’s businesses
are changing, you look at it from a
China perspective along with the
world’s perspective, and by putting
China at the core of global strate-
gies,” says Tse.
He adds that while global con-
sultancy firms may have estab-
lished offices in China, they are
susceptible to influence and direc-
tion from the people back at their
global headquarters. “Take one
example. When we look at the in-
novations that come from China,
many people from the West will
still think that China is still a copy-
cat nation. In reality, if you take a
China perspective, you know that
today, while there are still many
copycat companies, there are an
increasingly larger number of in-
novative and entrepreneurial ones,
and some of these companies are
becoming very powerful...not only
within China but also with the rest
of the world. So if you’re not rooted
here in China, you will not have that
full perspective.”
a challenging place to operate
According to Tse, consulting in
China is additionally challenging
due to the complexity of its busi-
ness environment. Doing business
in the West can also be compli-
cated, but the environment here
is more multi-dimensional than in
many other countries.
There are several reasons for
this. China is still transitioning from a
planned economy to a market econ-
omy. The vastness of the country
with its regional inequalities, rapid
social changes, rising income lev-
els and emerging middle class has
made product market segmentation
much more complex. At the same
time, many different kinds of enter-
prises are in the market, and market
dynamics vary widely depending
on whether or not a sector is closed
(e.g. oil and gas) or open (e.g. con-
sumer goods).
L.E.K.’s Chen also notes that “in-
vestment versus return has always
been a question [foreign multina-
tionals] have to answer for China.
The regulatory changes and ac-
celeration of regulatory changes
have made it very difficult for com-
panies to know their footing.” She
argues that these companies need
to keep pressing home the mes-
sage to headquarters on the long-
term potential of the China mar-
ket in order to ensure continued
commitment, adding that “China
can seem very hard for the people
back home.”
Operating a business in China
can be more challenging than
most other places. “All this creates
a higher requirement for manage-
ment consultants to really help
their clients to be successful. And,
in return, China is training the best
minds in management consulting,”
says Tse. I
Ruoping Chen is senior
associate editor for AmCham
Shanghai’s publications and
communications department.
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ShapingtheCityscape Property services in an era ofrapid development
By Doug Strub
MOVeRS ANd ShAkeRS MOVeRS ANd ShAkeRS MOVeRS ANd ShAkeRS FEATURESC
RE
DIT: S
TE
PH
EN
WH
ITE
Never has a city materialized
at the speed and scale of
modern Shanghai. From
the dilapidated tenements, ancient
warehouses and empty plots of
Lujiazui district of 1994 (see page
14) to today’s mega skyscrapers
that have become China’s financial
center, the past 20 years have seen
Shanghai transform into a world-
class metropolis.
The sheer number of buildings
constructed over this period has
brought a wealth of opportuni-
ties to Western property services
companies. Today, these firms are
still growing, but a number of fac-
tors are reshaping how they oper-
ate. Slowing economic growth and
the shifting structure of China’s
economy are changing what types
of buildings get built and new gov-
ernment policies are changing what
is allowed, and where. In Shang-
hai, the more than 130 skyscrap-
ers (buildings at least 150 meters
in height) are pushing the limits of
how much can be constructed on a
finite amount of land; and the rise
of local competitors in the property
services field is bringing new chal-
lenges to Western firms in this once
foreign-dominated field. On the
other hand, a growing number of lo-
cal clients seeking such services is
providing a welcome source of bal-
ance. There are those who say the
20-year boom is coming to an end,
but while many of these changes
bring difficulties, they come with
many opportunities as well.
laying the foundationWestern construction and project
management firms have been in Chi-
na since the 1990s, and have signifi-
cantly influenced the development
of the sector. These companies typi-
cally oversee the entire process of a
new structure’s realization, including
design, permissions, the identifica-
tion of appropriate contractors, final-
ization of specifications, monitoring
of the construction process for qual-
ity and safety, and managing costs
and schedules. In the early days of
rapid construction, these services
were not commonly used by Chinese
developers and the clients of West-
ern firms were almost entirely foreign
companies expanding into China.
“The project management disci-
pline didn’t exist here until just a few
years ago,” says Phil Branham, presi-
dent of B&L Group, a Shanghai-based,
American-owned project manage-
ment and consulting company.
Previously, the top priority for lo-
cal developers was to keep costs low,
build quickly and sell quickly. Impor-
tant decisions were typically left to
the contractors or not made at all.
“‘I want a compressor’ [an investor
would say], and they would give a rat-
ing for the compressor, and then the
contractor would supply it,” Branham
says. “And then they would say ‘ok,
we want a white paint,’ or whatever it
is, and the contractor would supply it.”
Contractors would then quote a price
for paint and seek out a cheaper, infe-
rior paint to boost their profit.
This created an environment
where quality was far less of a con-
cern than cost, and also left plenty of
room for corruption and other prob-
lems along the way. With no one
focused on optimizing the process
of project completion, things like
obtaining the required permits and
overseeing specifications were of-
ten not handled in a structured way,
leading to delays and inefficiencies.
“The procedures you go through on a
project with costs and schedule and
quality and deliveries, those proce-
dures did not exist here,” Branham
says. “The investor was never sure
of what stage they were in or if they
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were proceeding according to law.”
Today, property development in
China is maturing and such services
are in much greater demand. The mar-
ket is shifting to a more long-term view
based on asset quality. But it is a slow
transition that has a long way to go.
“Historically it’s very much been
a cost-driven market. It’s about build
things quickly, and generally sell
things quickly, because that’s how
you make your money,” says Ray Chis-
nall, Asia Pacific regional director and
China country manager at Gleeds, a
leading global property and construc-
tion consultancy. “With property val-
ues doubling so quickly here, people
make a lot of money by buying and
selling. There hasn’t been the same
tradition [as in the West] of seeing an
asset that you are building for a 20-30
year life – and investing in it on that
basis and maintaining it in that way.”
Gleeds established its first China
office in 1994 and, Chisnall says, “for
the first 10-15 years, all of our clients
would’ve been foreign, because they
understood the difference between cost
and value.” But in recent years this has
changed, and today Chisnall estimates
that about a third of Gleeds’ Shanghai
business comes from local clients.
Meanwhile, the “new normal” of
slowing economic growth and China’s
efforts to transition from reliance on
manufacturing to an economy where
domestic consumption plays a leading
role has also had an impact. The shift
away from manufacturing has been
accelerated in Shanghai by govern-
ment policies pushing such industries
to the outskirts of the city to reinforce
its role as China’s financial center.
“There’s definitely been a reduction in
the number of projects people have
been doing,” Chisnall says.
One trend significantly impact-
ing the property services business
is online shopping. Chisnall refers
to this as the dilemma of “bricks
versus clicks,” where some retail-
ers are choosing a smaller physical
presence accompanied by a stron-
ger online focus. This in turn has had
significant repercussions for shop-
ping malls, which in Shanghai were
already suffering from high land
prices and rental rates as well as
oversupply.
B&L Group’s Branham adds that
another significant challenge arises
from the lack of reciprocity regard-
ing investment flows between the
United States and China, and hopes
to see the proposed Bilateral Invest-
ment Treaty (BIT) and Trans-Pacific
Partnership (TPP) agreement passed.
“Lack of reciprocity really hurts. It
hurts our clients, which in turn then
hurts us,” he says. “If we could get a
reciprocity agreement, things would
get better. It would allow Americans
into more industries in China.” None-
theless, Branham remains optimistic
about growth in China, albeit coming
from new directions. “Industrial obvi-
ously is down, so we’re going to have
to shift a lot more resources into the
high-end commercial area,” Branham
says. “High-end commercial is going
to become big for us, at around 50%
of our business model.”
Office space on the riseGrowth of high-end commercial
property has indeed been strong. Four
new projects hit the market in central
Shanghai locations in Q3 of 2016, with
the corresponding 206,000 square
meters of office space representing
the largest quarterly increase since
2013. Although the new supply has
temporarily caused the vacancy rate
of Grade A office space to reach its
highest level in several years, occu-
pancy still remains above 90%. “On the
commercial real estate side, if we look
at the office standpoint, the occupancy
rate in tier-1 cities in China has grown
to a very healthy rate,” says Mario Qian,
director of Occupier Services, China,
for DTZ/Cushman & Wakefield.
While vacancy rates in lower-tier
cities are much higher, DTZ/Cush-
man & Wakefield is continuing to
expand its already large presence
throughout China. “We have around
20 different branch offices,” Qian says.
“We have covered almost 80% of tier-
2 cities, and we would like to open
another few offices this year.” While
DTZ/Cushman & Wakefield’s expan-
sion demonstrates their optimism,
competition in the office services
sector is intensifying, both from in-
ternational firms and emerging local
competition. “Recently we see some
local Chinese real estate service
companies,” Qian says. “They’re ei-
ther coming from residential or they
Lujiazui, Pudong, on a smoggy day in 1994. Photo by Stephen White of iaction
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Movers and shakers
15
FEATURES
come from our competitors such as
CBRE, JLL, etc.”
Despite the economic slowdown,
the occupier services sector has also
seen a rapid expansion of local cli-
ents. “Four or five years ago, 90% of
the business came from servicing
international clients,” says Michael
Wu, director of Tenant Representa-
tion and Office Services for Colliers
International. “But this year will be
50/50, and toward the end of the
year I believe domestic companies
may even exceed the business op-
portunity from international clients.
It’s quite a shift.”
The shifting nature of work in
many sectors and professions is
also creating change. In many cit-
ies around the world, growth in the
tech sector has increased demand
for office space in trendier loca-
tions. In China, it is also common for
growth to be focused into clusters of
government-designated high-tech
zones, although this has had less
impact in Shanghai due to its role
as China’s financial center, Wu says.
Rather than tech sector growth, a
recent trend impacting office space
in Shanghai has been the rise of co-
working spaces, with several of sig-
nificance emerging in recent years.
Building the futureWhile the changes taking place
in the property services sector are in
large part the product of broader eco-
nomic changes occurring in China,
they are also the result of increasing
maturity in these industries. On the
construction and project manage-
ment side, more local clients are
seeking established professional ser-
vices companies to oversee their proj-
ects as they transition from the old
ways of quick-and-cheap construc-
tion to a more sophisticated approach
of focusing on building value into the
assets they create. On the occupier
services side, at least in Shanghai and
some other tier-1 cities, the increase in
local clients is even more impactful as
these cities shift toward more service-
oriented economies.
Most of the challenges facing the
property services industry are more
about navigating change in a rapidly-
evolving environment rather than the
emergence of any sustained barriers
to growth.
“Opportunity happens every day
and everywhere,” Wu says optimisti-
cally. “It’s a very trendy thing. It goes
along with the economy, it goes along
with the marketplace, it goes along
with government policy. No specific
industry, we have different waves of
market opportunity coming in. So we
just have to be very adaptable.” I
What’s inside the buildings? Insight from a veteran interior architect
In addition to the companies overseeing construction and mana-
ging completed properties, design of a building’s interior is often han-
dled by another set of specialists. Stephen White, managing director of
interior architecture and design build firm iaction, was among the first
foreigners to design the interiors of the emerging cityscape. Arriving
in the early 1990s, White has contributed to many of the city’s iconic
buildings. “We did the first tenancy for an office in the Jinmao buildi-
ng, which was for a German bank, Dresdner Bank,” White says. “They
moved in in January ‘99, at a time when the Jinmao building was really
outstanding in Pudong, because there really wasn’t much around it.”
Unique architecture is prominent in Shanghai, and this has im-
pacted the interior design sector. “Shanghai is a city of making a
statement, and there has been an increasing need to create your
own identity and stand out from the pack,” White says. “Quite often
people reconsider their image for their facility here to develop it
further in an Asian context. And that makes it quite often a more
interesting proposition.”
One of the biggest changes over this period has been the develop-
ment and application of modern regulations. Fire codes, for example,
were still evolving, and “the application of these regulations was very
much a work in progress.” Because of this, when the Swiss consulate
moved into its 22nd floor offi-
ce they had iaction install an
emergency escape chute that
can be pushed out of the win-
dow down to the street. Today,
White says the fire codes and
other regulations are similar to
international standards, and
in recent years their enforce-
ment has improved markedly.
Similar to other profes-
sional service industries, competition has grown fierce and new local
competitors are emerging. But growth of local clients is strong as well,
and is providing new opportunities. “Now that Shanghai’s been topped
out in terms of its tall buildings in Pudong, we’re seeing more tall buil-
dings coming through in Puxi,” White says, optimistic about the future.
The recently completed office tower of the new Sinar Mas Center just
became the tallest building in Puxi, demonstrating this trend. Others in-
clude Dazhongli and One Museum Place. Asked about this growth and
what the greatest opportunity is moving forward, White replies: “Han-
ging on to the tail of the dragon… as it grows and becomes more active.”
The atrium at Baosteel Resources headquarters, designed by iaction
Doug Strub is associate
editor for AmCham Shanghai’s
publications and communica-
tions department.
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President-elect Trump won the 2016
election in part due to his rhetorical
position that “America is losing to
China.” In forecasting what Trump’s elec-
tion will mean for Sino-U.S. economic
relations, we must ask how this asser-
tion will translate into policy. What will it
mean for U.S. businesses operating in or
trading with China? How should multina-
tionals navigate the uncertainty?
Before sharing my perspectives, I
should first offer several caveats: Pun-
ditry around Trump has been notoriously
flawed. Equally, few have successfully
predicted the course of President Xi
Jinping over the past four years. What’s
more, while we know Trump is deeply in-
fluenced by those around him, we don’t
yet know who he will appoint. While Wil-
bur Ross, Steve Bannon, Dan DeMicco
and Peter Navarro have advised can-
didate Trump, it’s safe to assume that a
wider circle of advisors will be available
to President Trump.
Also, “stuff happens.” Unanticipated
events will shift the context for govern-
ing. Much has been written of Graham Al-
lison’s Thucydides Trap, where seemingly
trivial incidents achieve outsized signifi-
cance when an emerging power (China)
confronts an established power (the U.S.).
An unforeseen event in the South China
Sea, Hong Kong, North Korea or Central
Asia could be disproportionally destabi-
lizing. Additionally, social and environ-
mental mega-trends such as automation,
climate change, global pandemics and
cyber-attacks will continue to have un-
predictable impacts on both nations and
are beyond the control of any individual
leader.
In looking forward, it’s worth examin-
ing the motives of both President Xi and
President-elect Trump and their core
constituents. Let’s start with Trump. Many
have focused on Trump as a business
man, negotiator and deal-maker. He and
his advisors claim to be guided by “eco-
nomic nationalism,” “American capital-
ism,” and “America First.” But he is also
a master communicator and showman.
According to political consultant Mark
McKinnon, Trump’s campaign created
a narrative in which he preyed on the
fears of the electorate (terrorism, Amer-
ican decline, economic drift), defined
clear villains (Islamic-inspired terrorists,
illegal Mexican immigrants, and offshore
Chinese manufacturers) and prescribed
populist solutions (stop Muslims entering
the U.S., build a wall, impose tariffs, scrap
trade deals). The campaign then bundled
all this into a promise to “Make America
Great Again.” To fulfill this promise, the
Trump administration has to deliver on at
least some of his audacious goals, par-
ticularly to create “millions” of new man-
ufacturing jobs, double the GDP growth
rate to 4%, and rebuild America’s infra-
structure. His policy prescriptions include
cutting red tape (“cutting two regulations
for every new one that is enacted”); over-
hauling the tax code and reducing cor-
porate income tax to 20%; and imposing
tariffs of 45% on China.
My guess is that President Trump will
focus on achieving his headline goals
first (jobs, GDP growth, domestic secu-
rity) rather than acting on every one of his
provocative policy ideas. The prospect
of widespread import tariffs and a pain-
ful trade war with China seems unlikely
given moderating influence of (1) a wider
team of better-informed advisors, (2)
sensitive Republicans in Congress, and
(3) the potential negative reaction of the
stock market.
The danger, however lies in the seeds
of Trump’s campaign narrative. If prog-
ress in “Making America Great Again” is
slow — which it likely will be — President
Trump will be forced to refocus public
attention toward one of his external vil-
To Make America Great AgainTrump mustacknowledge the U.S.and China arestronger together By James W robinson, Managing Director, apCo Worldwide
19
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Movers and shakers
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19
lains — Islam, immigrants, China — with
unforeseeable consequences.
President Xi faces his own constraints.
Ahead of next fall’s 19th Communist Party
Congress, Xi needs to make himself un-
assailable by maintaining the guise of do-
mestic stability and economic prosperity.
This is predicated on continued delivery
of modest GDP growth of 6-7%, “purify-
ing” the Party of corruption, absorption of
unemployment from China’s own sput-
tering manufacturing sector, doubling
GDP between 2010 and 2020, as well
as demonstrating China’s international
statesmanship.
His agenda is being pursued through
a number of public initiatives and cam-
paigns (think One Belt One Road, Made
in China 2025, Internet Plus, the Chinese
Dream among others) and a slew of
moves to integrate China into interna-
tional systems of governance, including
the creation of the Asian Infrastructure
Investment Bank; adding the Renminbi
to the IMF’s basket of “special drawing
rights” currencies; adhering to interna-
tional ruling by the likes of the WTO and
UN; assuming a leadership role in the
Paris Climate Treaty; and being a lead-
ing voice on the Regional Comprehen-
sive Economic Partnership (RCEP) trade
agreement.
So how does this shake out for multina-
tionals doing businesses in China? here
are five predictions:
1. trump needs a public “villain.”
With the propaganda-savvy Steve
Bannon and Roger Ailes at his side,
we should anticipate Trump’s com-
munications will continue the narra-
tive journey of his campaign. He will
need to live up to his tough-guy im-
age and demonstrate action against
offshoring to places like Mexico and
China. We should expect the new
administration to find a high-profile
“whipping boy” that will be used as
an example of being “tough on China.”
Trump might inflict punitive tariffs
against a sector—such as Chinese
steel—or he might take action against
an individual company that symbol-
izes the damage of globalization to
American workers (think Carrier and
Mexico). Denying Market Economy
Status to China, or naming it a cur-
rency manipulator might be other
relatively painless (and largely irrele-
vant) ways to “punish” China.
2. Both Xi and trump need a “win.”
With multilateral trade deals off the
table for the U.S., bilateral investment
offers a rational place for both leaders
to demonstrate a win. With more than
US$70 billion of Chinese outbound
investment to the U.S. in 2016, and
billions of dollars of U.S. investment
flowing to China, both countries have
much to gain from enabling a friend-
lier investment climate for job creators.
Both leaders will be inclined to nego-
tiate a deal, perhaps a Grand Bargain,
that can be sold as a win to domestic
constituents—particularly blue col-
lar Ohio, Pennsylvania and Michigan,
in Trump’s case. This might be a “high
quality” Bilateral Investment Treaty
(BIT) that opens the U.S. more widely to
job-creating Chinese investors (in infra-
structure or agriculture, for example),
while also forcing China to offer more
reciprocal rights in currently restricted
sectors such as technology, services
and biotechnology.
3. tpp is dead. long live rCep. Ced-
ing leadership in regional trade to
China by rejecting the TPP might be a
long-term geopolitical miscalculation
by the U.S. That said, TPP negotiations
already forced governments to reveal
concessions that could be achieved
potentially on a bilateral basis with
the U.S. TPP’s demise has also added
fuel to RCEP, which has the potential
to open markets and supply chains for
businesses—including American mul-
tinationals—across other RCEP coun-
tries, including Japan, Korea, India and
ASEAN, which in aggregate represent
46% of the world’s population and 24%
of global GDP.
4. ego and “face” have never been so
important. Trump’s ego and need for
stature offer opportunities for Beijing to
curry favor at relatively low cost. Amer-
ican businesses should also look to
show their support for the administra-
tion. Early state visits between Beijing
and Washington would give President
Trump the platform, pomp and pag-
eantry he seemingly craves, and give
face and reassurance to Xi and his do-
mestic stakeholders.
5. american rebalance; asia retreat.
In all likelihood, China will be far down
the list of Trump’s priorities. While there
will likely be some early chest thumping
about China, the President needs to use
his Republican majorities in Congress
to push through quick-win domestic
policies that Trumpkins can merchan-
dize for the 2018 midterms. In adopting
“economic nationalism” as the guid-
ing doctrine, the Asia Rebalance will
be degraded or reimagined as a mili-
tary-centric “peace through strength”
strategy, according to Trump advisors
Peter Navarro and Alexander Gray. We
might also expect to see reconstituted
versions of the Strategic and Economic
Dialogue (S&ED) and the Joint Commis-
sion on Commerce and Trade (JCCT),
which observers suggest have become
ineffectual.
For American businesses in China, our
initial advice is to: (1) carefully monitor and
map the personalities and regulations of
the new administration and align them
with risks and opportunities; (2) keep a
low public profile and exercise caution in
communicating your China story — par-
ticularly in the U.S.; (3) use third party
intermediaries — trusted friends, trade
associations and think tanks — to gather
intelligence and create a context for en-
gagement on tough issues; and (4) build,
reinforce and institutionalize relation-
ships with a new a generation of leaders
in DC and Beijing.
Before the election, David Dollar of
the Brookings Institution observed the
relationship between the U.S. and China
has become asymmetric and suggested
the next U.S. president should engage
in “responsible hardball” with China.
Temperamentally, however, President
Trump will be more inclined to “irre-
sponsible hardball,” which will harm the
economies of both nations. Henry Kiss-
inger urged the future U.S. President to
engage in “intense study” of China. We
know that Trump met Kissinger soon
after the election. Let’s hope the Pres-
ident-elect and his advisors heed this
advice and come to recognize the inter-
connectedness of American Greatness
and China’s Peaceful Rise. I
POLICY PERSPECTIVES
20
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What particularly interesting insights
on China’s national strategy did the au-
thor of the chapter on China provide for
the book?
Men Honghua highlights the way that
China’s peaceful rise and its strategy of
development was changing China itself,
that it had raised issues of a new identity
for China. No longer the old Communist
Party, it now is searching for what its new
identity is — a new socialist power, a new
great power? It’s interesting that he high-
lighted, in talking about the process of
foreign policy-making, that more constit-
uencies are now involved in China’s for-
eign policy making: various political of-
ficials, think tanks, academics, and even
Chinese officials are paying attention to
netizens and their expression of views.
So you see a country that’s thinking more
broadly, and more people are involved in
its foreign policy, even as the central gov-
ernment, of course, sets strategy. That di-
alogue of what strategy should be, what
type of country China should become,
was noticeable for me.
Would you say that the author has a pos-
itive view of where China is heading?
Yes, he thinks that China is on a good
track. It basically is focused on its own
development but recognizes that you
also need to look after your security is-
sues, and acknowledges that there’s a
dilemma with China’s own development
and growth. This growth by its very pres-
ence sometimes makes others wary or
uncertain about what China might do,
and therefore, it was important to rein-
force the notion of its peaceful rise and
interest in economic development over
other objectives.
In Shaper Nations, you describe a world
in which multi-polarity rises as U.S.
hegemony fades. Could you describe
what kind of new global order this
might create?
Maybe not so much a coherent global
order as the one we’ve seen since World
War II, and certainly since the end of
the Cold War, where there was a kind of
clear set of rules and there were clear
global organizations. I think the issue
with the relative decline of the U.S., not
that the U.S. is declining but that others
are rising, so power is more equally dis-
tributed, is that these countries — the
shaper nations that are going to be more
influential in the future — are more fo-
cused on their regions.
I believe the development of regional
orders is where you’ll see the most
progress. Most of these countries are
hesitant to get involved in shaping over-
all global order. It’s too large; it would
absorb too many of their resources.
So the grand global projects are likely
to be more difficult unless they come
out of cooperation among regional or-
ders that build up to something a little
bit bigger. So I think you’ll see a trend
toward focusing on regional order over
the big deals like the WTO or a big UN
transformation.
AmChamAuthorSeries A conversation with the editor of Shaper Nations: Strategies for a Changing World
By ruoping Chen
Professor Jeffrey W. Legro is vice provost of global affairs and Taylor professor of politics at the University of Virginia. His new book, Shaper Nations: Strategies for a Changing World, provides illuminating perspectives on the national strategies of eight emerging and established coun-tries that are shaping global politics at the beginning of the 21st century.
21
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Movers and shakers
With what is happening in the South
China Sea, do you think there is a risk
for confrontation between China and
other countries?
Right now, the states involved still
have an overwhelming incentive to con-
centrate on economic development and
to pursue cooperation that advances that
development. Ultimately their power is as
much and probably more dependent on
economic prosperity as it is on the pro-
tection of peripheral areas on the bound-
ary. The area for flashpoints are where
you have the shaper nations in the same
region competing for regional influence
that they see is increasingly important
to their welfare. So the mutual desire for
influence in the same region can lead to
competing claims.
China finds itself in a region of shaper
nations: India on one border and Japan,
a shaper nation as well, and a country
that is underperforming in terms of in-
fluence in international relations relative
to its power. Another flashpoint. So you
see these types of tensions on the bor-
ders. But the incentives to move to a wide
scale conflict are hard to find, because
no one sees conflict as getting the goals
they seek. They don’t see physical expan-
sion as the means to their ends. Those
situations are possible, conflict is possi-
ble, especially at times where there is in-
centive to spur nationalism for whatever
immediate political reason. But in terms
of strategies, economic development
and peaceful means of development is
still, I think, the priority of all the powers
in the region.
In January, there will be a new admin-
istration in the White House. What con-
sequences might a Trump presidency
have on global affairs?
We know there’s going to be conse-
quences, but what exactly will they be?
It’s hard to say at this point, because a
lot of things were said in the campaign.
I think some themes that are likely to
emerge, from people who have looked at
this closely over the years and who have
followed Trump closely over the years,
fall into a couple of different areas:
First, in the security realm, it is clear
that he has focused most on the threat
from ISIS and terrorism. That would prob-
ably be the number one security issue.
Second is widespread complaint over
trade and the free trade system. Trump
has mentioned this over the years, and
it’s likely that he is going to do something,
but what exactly, we’ll have to wait and
see. He prides himself on being a negoti-
ator, and perhaps he wants to negotiate a
better bargain for the U.S., rather than de-
construct the globalized economy, which
of course would have important implica-
tions for the U.S. itself.
He has for years written about the
unfair deal with allies and who pays for
the alliances — where U.S. troops are in
Western Europe and Japan, alliances with
South Korea and close partnerships with
Saudi Arabia. He believes those countries
should be carrying more of the burden.
I expect something will happen in that
realm, but it’s difficult to see the big
changes that could happen that wouldn’t
rupture those relationships, given that
people in those countries widely believe
that they are already carrying the vast
burden of the load in that relationship. So
those are the areas I believe will be most
likely to see action in foreign policy.
Maybe the final one is, he’s been talk-
ing fairly consistently about stronger de-
fense. So maybe we’ll see a little bit more
significant defense building. But again
internally his emphasis is on infrastruc-
ture and building U.S. infrastructure. That
takes money, defense spending takes
money, and maybe you see those things
as the same thing, but obviously there are
different consequences.
Trump has suggested pulling troops
from Japan and Korea. Do you see this
as an opportunity for China to assert a
bigger leadership role if the U.S. were
to withdraw more from the global
stage?
I think China would want to tread very
lightly there. To step up would be to con-
firm fears of people in the region about
China really wanting hegemony in the
region. I also don’t think Donald Trump
is about leaving the Pacific. He’s about
a different deal with allies in the region,
but he’s been pretty clear that the U.S.
needs to be there, maybe with a more
enhanced naval presence in the Pacific.
I don’t think you’re going to see the U.S.
departing from the Pacific, even if there
are some adjustments in its alliances. I
believe the U.S. will remain very engaged,
both in terms of security and in terms of
economic affairs and trade.
With the TPP all but dead, might there
be something to replace that with?
The TPP, as called the TPP, is dead.
It’s not politically viable. Does that mean
some sort of trade agreement in the fu-
ture is not viable? No. I think what you’re
going to see is a tough line from the pres-
ident-elect in relations with China in the
first 12 to 18 months of his presidency.
Then you’re going to see willingness or
openness to explore new kinds of trade
arrangements, perhaps not only with
China but with the array of countries in
Asia. They may look a little different. Per-
haps they will have different provisions
for workers and others who might be
hurt by those free trade agreements, but
I think the nature of the global economy
and the pressures on the President to
produce economic welfare argue in favor
of continued agreements. And what you’ll
see that is different is perhaps new U.S.
government policies to offset those who
may lose from those agreements. I
POLICY PERSPECTIVES
22
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Two-Way Street:25 Years of U.S.-China Direct Investment
American companies have been
active in the Chinese economy
throughout the post-1979 reform
period, investing hundreds of billions of dol-
lars. In the past decade, Chinese investors
have begun to expand their U.S. presence
as well, turning the FDI relationship into
a two-way street with multi-billion dollar
flows every year. This change has important
economic and political implications, and
has turned FDI into a first-order priority in
the bilateral relationship.
It is essential that our discourse about
FDI — to the greatest extent possible — be
data-driven. However, current FDI statistics
of both the U.S. and Chinese governments
are compiled with the primary goal of analyz-
ing balance of payments-related questions;
they are subject to significant distortions due
to tax optimization and other shorter-term
considerations; they have long delays and
many gaps; and they do not offer the granu-
larity necessary to analyze many policy-rele-
vant questions. This study sets out to create
greater transparency on U.S.-China direct in-
vestment flows to facilitate a fact-based and
more productive policy debate.
u.S. fDi in ChinaSince the 1970s, U.S. multinationals were
key proponents of normalizing the rela-
tionship with China, and their operations in
China have been central to ties between the
two countries. Over the past quarter century
these firms have transferred technology,
created jobs and helped reshape the Chi-
nese economy.
The most commonly used official esti-
mates of the U.S. FDI stock in China suggest
a modest value, reflecting the methodolog-
ical shortcomings of balance of payments
statistics. The U.S. Bureau of Economic
Analysis puts the stock of American FDI in
China at US$75 billion as of 2015. China’s
Ministry of Commerce counts $70 billion of
cumulative utilized FDI from the U.S. to that
date. Both datasets have limited utility for
analyzing two-way FDI flows. We offer an al-
ternative perspective on the scope and pat-
terns of U.S. FDI in China, by introducing a
new transactions-based dataset created by
identifying, qualifying and counting every
single FDI transaction over $1 million since
1990. We count nearly 6,700 American in-
vestments in China with a combined value
of $228 billion. Our dataset includes more
than 1,300 U.S. companies that have built
significant operations in China, 430 of them
investing more than $50 million and 56 with
billion-dollar bets.
We also provide details on a variety of
other policy-relevant metrics not available
in official statistics. For instance, we can
discern that more than 71% of total U.S. FDI
by value went into greenfield projects, the
majority of them small- and medium-sized.
We describe investment patterns across
industries over time, illustrating how the fo-
cus has shifted from exploiting comparative
advantage in light manufacturing to serving
local consumers and customers. Finally, our
data indicates that American investment in
China peaked in 2008 and has been largely
flat since, with a declining trend since 2012.
Chinese fDi in the u.S.Official statistics are similarly problematic
for describing the scale and patterns of Chi-
nese FDI in the U.S. Official U.S. estimates for
the stock of Chinese FDI range from US$15
billion to $21 billion. Official Chinese numbers
put the figure at $41 billion, more than twice the
U.S. estimates. Rhodium Group has maintained
a transactional dataset on Chinese FDI in the
U.S. since 2011. For this study, we have updated
this catalogue to include investments back to
1990, to provide a fully comparable count of
Chinese FDI in the U.S. for the past 25 years.
For the entire period of 1990 to 2015, we count
more than 1,200 individual transactions with a
combined value of $64 billion.
Our transactions data also clarifies details
on the structure and patterns of this Chinese
investment. We show that Chinese market
entry in the U.S. was dominated by acqui-
sitions rather than greenfield FDI, and that
Chinese companies have expanded their
presence from urban coastal economies to
a great number of U.S. states. Another im-
portant finding is that Chinese investment in
the U.S. is now increasingly driven by private
sector activity (an average of 77% in the past
three years), and that the investor mix has
lately evolved from large multinational cor-
porations to include private equity firms, ven-
ture capitalists and other financial investors.
ConclusionsWe have demonstrated that the com-
mercial stakes on both sides are two to four
times higher than commonly used statistics
suggest. Our data show that while some
Americans are eager to talk about imposing
reciprocity requirements for inward Chinese
FDI, the cumulative value of U.S. FDI trans-
actions permitted in China to date is four
times than that of China in the U.S. Similarly,
while many Chinese complain about the
lack of American openness, our data show
that the U.S. is open and welcoming to Chi-
nese investment, and that Chinese compa-
nies are now investing more in the U.S. an-
nually than American companies in China.
These observations emphasize that both
sides need to reconsider the data before
staking out new policy positions. I
By rhodium Group
This excerpt is from a larger report by the Rhodium Group and the National Committee on U.S.-China Relations, with support from AmCham Shanghai and the Chinese General Chamber of Commerce-USA. The full report is available for download at www.rhg.com and an interactive website is available at www.us-china-fdi.com.
Grow Your Business With Members Enquiry: Zoe Zhang (86 21) 6279 7119-5667 [email protected]
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The experience of being
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to help companies innovate
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24
Stars Sponsor platinum table Sponsors
Stripes Sponsors
AmCham Shanghai’sFifteenth Annual ShanghaiAppreciation Dinner
AmCham Shanghai yesterday celebrated the long-
standing partnership among the Shanghai Municipal
Government, the U.S. business community and the
U.S. government at a dinner with U.S. Ambassador to China
Max Baucus, U.S. Consul General Hanscom Smith, Shanghai
Vice Secretary General Sun Jiwei and more than 260 guests.
AmCham Shanghai members were joined by 70 other high-
level government officials from Shanghai Municipality and
representatives from the Jiangsu and Zhejiang provincial gov-
ernments. The Shanghai Municipal People’s Government Com-
mission of Commerce, Foreign Affairs Office, Shanghai Customs
and many other departments sent representatives to discuss
Shanghai’s economic and commercial development, interact
with AmCham Shanghai members and learn more about U.S.
companies in the region.
Shanghai Vice Secretary General Sun Jiwei expressed ap-
preciation for AmCham Shanghai’s contribution to the devel-
opment of Shanghai. The event highlighted the ongoing coop-
eration between the United States and China, which the Vice
Secretary General called “The ballast and stabilizer of the U.S.-
China relationship.”
Ambassador Baucus emphasized the importance of the
U.S.-China relationship and the large and growing menu of
Right: President of North Asia for Archer Daniels Midland Donald Chen
U.S. Ambassador Max Baucus (at the podium), L-R: AmCham Shanghai President Ken Jarrett, Shanghai Vice Secretary General Sun Jiwei, U.S. Consul General Hanscom Smith, AmCham Shanghai Board of Governors Chair Ker Gibbs
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Movers and shakers
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MEMBER NEWS
interests that the two countries share. He also said that U.S.
companies had been at the forefront of this relationship, cre-
ating jobs for millions of people.
AmCham Shanghai 2016 Chairman Ker Gibbs spoke about
the Chamber’s advocacy role and also referenced the recent
U.S. election result and the need for the Chamber and others
to continue making the case for free trade. He praised both
the Shanghai government’s continuing efforts to transform
Shanghai into a global city and the benefits that U.S. compa-
nies have brought to China.
“American businesses enjoy the benefits of China’s ac-
complishments every single day. We make good use of
China’s infrastructure, talent and markets. As a result, the
majority of American businesses are doing well here. Despite
the challenges we are growing, and we continue to invest.
We are major taxpayers and creators of good quality, highly
skilled jobs. That’s good for China, it’s good for America, and
it’s good for peace and stability everywhere,” said Gibbs.
The dinner was sponsored by several longtime AmCham
Shanghai members including Stars Sponsor Honeywell, Stripes
Sponsors TE Connectivity and United Family Healthcare, and
Platinum sponsors ExxonMobil, Federal Express and Nu Skin. I
Corporate table Sponsors
L-R: Partner of Markets Strategy for KPMG David Frey, President of B&L Group Phil Branham, AmCham China President Alan Beebe
Left to right, AmCham Shanghai President Ken Jarrett, Shanghai Vice Secretary General Sun Jiwei, U.S. Ambassador Max Baucus,
U.S. Consul General Hanscom Smith, AmCham Shanghai Board of Governors Chair Ker Gibbs
U.S. Ambassador Baucus mingles with AmCham Shanghai
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Member Focus
Virginia Moore manages a project logistics com-
pany, YN Logistics. Originally focused on imports
for international engineering, procurement and
construction companies, the company also tran-
sports equipment for projects worldwide.
When and why did you first come to China?
I came to China as a carefree youth in 1990. It seemed like there
would be a lot to understand here. And having heard Ronald Rea-
gan’s Evil Empire speech about communism, it seemed like some-
thing one ought to experience. I went back to America for one year
in 1992, but I have been here since.
How did you get into the shipping industry?
China’s shipping industry was opening up in the early 90s – or at
least the solid wall of domestic monopolies had a chink. Also, my
partner was a graduate of Shanghai’s Maritime University. I had to
learn contract terms for shipping in Chinese and English simulta-
neously. Shipping has its own language. There are lists. The thing
about shipping is that there are many moves to each step. But
people think it’s just a ship.
YN is a highly specialized logistics and shipping company. Can
you describe some of your more difficult past projects?
My favorite project was for a woodchip plant up the Yangtze
River in Hubei, in an area where the path of the river was too un-
steady to have permanent terminals for berthing of vessels. We
had to build a temporary terminal to discharge the cargo that was
brought in from Singapore. But the real challenge was that we
were competing with the Three Gorges project for the equipment.
It took a while to realize what the problem was because no one
really wanted to say.
The most fun operation we had was bringing a Chinese barge
owned by a division of the Shanghai port to Masan, Korea to pick
up an 800-ton piece for a job in Caojing Development Zone in the
outskirts of Shanghai. The Chinese barge had not been in interna-
tional waters before and it did not have computerized automatic
ballasting. It had already taken six months to negotiate the project
but now the insurance company didn’t think the barge had enough
pumps aboard. The Chinese thought they did. It took another three
months to resolve. The two pumps only cost US$100 each.
In the meantime I was getting more and more pregnant, and it
frightened all the barge people that someone so pregnant was
running the operation. But I now have a lot of credibility with the
Shanghai port authorities.
You ship very large industrial products. Does that create spe-
cial customs clearance needs?
Many of the projects are duty exempt because they are cap-
ital equipment. Customs regulations regarding duty exemp-
tions have been tightening incrementally for the past ten years.
Whether the cargo can be exempted depends on the description
of the cargo in the shipping documents. This can be difficult to
explain to an overseas supplier who is used to describing their
product on their own terms.
We once shipped an entire ThyssenKrupp steel plant from Germany.
The mill was from the 1930s or around then and a private Chinese steel
mill purchased the entire thing in 1998. Then the government took a
harder look at such old plants and such projects stopped.
Recently, as the regulations for second))-hand equipment have loos-
ened, we have found that most of the cargo is being imported into
inland destinations. And those inland factories are terrified of clearing
customs in Shanghai. Again, we need to get them in the habit of creat-
ing immaculate documentation to present to Shanghai Customs.
Given that you have to negotiate with local authorities to
Assembly required
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MEMBER NEWS
move traffic lights, electric cables, etc., how many months
in advance do you begin the planning to move a large piece
of machinery?
For cargo that is over six meters in height there are often a lot
of serious obstacles. Those jobs usually require six to eight weeks
planning with the local authorities to set up a date. But usually
we need to start planning once the equipment specifications are
proposed — because some cargo cannot be moved on the road at
all and we need to survey the obstacles to let the engineers know.
However, as everyone’s eyes are on these big pieces, they usually
give time for planning. Our biggest problems arise when there is
some small part missing on a site and someone makes an order
for overnight delivery.
What else do you ship besides large industrial machinery?
We have invested in a shipping company that ships cement and
steel products. Most of our logistics customers are in engineering,
procurement and construction. One of our big customers manu-
factures port equipment and that equipment often needs parts so
we also ship parts.
You are a Western female entrepreneur in China working in
an industry traditionally dominated by males. How have you
succeeded?
I was in charge of sales for many years. I think I relied on in-
spiring fear of Chinese regulations, which are based on the So-
viet model and therefore onerous and tedious. If you want to
import things into China you have to do a lot of planning. So I
was frequently trying to explain to people that if you don’t un-
derstand those regulations, you’re not going to get your cargo
in. Regulations trump womanhood. I would suggest that more
women in general should spend more time at the Chinese
ports. Wide open spaces. Usually with views. And stevedores
are generally willing to comply with shrill voices nagging about
lashing [lashing down cargo properly to a vessel]. That has al-
ways been my experience.
Has the shift away from heavy industry to services impacted
your business?
China has become an exporter of equipment. Our business has
moved from imports to exports around the world. I think the bigger
impact is about global projects in mining, power and oil and gas
which have been halted.
Many of your clients are foreign multinationals. Do you also do
projects for Chinese companies?
We do face some difficulties competing with the state forward-
ers. And yet, we are also able to get business assisting those same
forwarders in their overseas business, again by providing detailed
technical plans.
What is your company’s competitive advantage?
We follow international best practice for movements of oversize
cargo. We have people monitoring each stage of a movement.
And for customs regulations, we ask overseas suppliers nicely if
they can describe their cargo in more detail. People value our per-
sistency. And belief that customs issues can be settled before the
cargo arrives.
You have been managing a team of local Shanghainese for
some years. What advice would you give to an expatriate who
has been freshly posted here?
I had a discussion with a women’s group about this issue some
weeks ago. One woman had been sent here with a clear mission
from headquarters: to make the organization think more strategically,
to look more to the future. That was her role, and to her it all made
sense. In order to grow you have to do things like change a product.
However, each of those things was actually challenging to peo-
ple here in the organization, but she was puzzled by why the or-
ganization wasn’t accepting these ideas. The real issue was that
you have to know where people’s interests lie — that whole Chi-
nese thing of “you are where you sit.” You need to really appreciate
that systems that exist here have a lot of traction. You also have
to know how deeply people may feel, how cautious they may be.
If I am back in St. Louis, in my own culture, we do this automati-
cally without thinking. We know all of these issues, and we know
them deeply, and our minds are already thinking about how to get
around them, how to corral people.
Also, there’s the issue of you coming in from the United States.
This is not someone coming in who is going to work up from the
bottom. You are coming in from on top or from the side. I came
here when I was young so I have been part of the processes that
now need re-examining. Changing things requires understanding
why a process was previously done differently. Being here has
taught me to ask those questions of myself and to accommodate
other ideas, because they can actually contribute to the process.
You first joined AmCham in the early 1990s. What would you
like us to do more of?
I am impressed by all the recent initiatives. I guess I would rec-
ommend anything that expanded the reputation of what American
business stands for. I
No, it’s not an ICBM
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28
GoVernorS
MEETING ATTENDANCE
Governors: Ker Gibbs, Mike Crotty (by phone), Cecilia Ho,
Tim Huang, Aina Konold, Ning Lei, Nancy Leou, Glen Walter,
Helen Yang, Vincent Yang, Eric Zheng,
Regrets: Jimmy Chen, Gentry Sayad, Cameron Werker
Attendees: Ken Jarrett, Helen Ren, Titi Baccam, Ian Driscoll,
Patsy Li, Jonathan Shyu
Ker GibbsChinaBio
Cecilia hoInternational Paper Asia
ChairMan
ViCe Chair
Jimmy ChenFedEx Express
michael CrottyMKT & Associates
timothy huangBank of America Merrill Lynch
aina e. KonoldGAP Inc.
ning Lei Lei & Company
Glen WalterCoca-Cola
helen Ching-hsien YangDuPont
Vincent YangILE
eric ZhengAIG Insurance
Board of Governors Briefing
Highlights from the November 22, 2016, Board of Governors Meeting
Chair’s repOrt
Chairman Ker Gibbs noted that he recently visited AmCham China
and met with the President and Chairman-elect, Bill Zarit. He also
attended the World Internet Conference in Wuzhen. The Chair
also said that he met recently with a group of former AmCham
Chairs to exchange views on the Chamber.
presiDent’s repOrt
According to Chamber President Ken Jarrett, the Chamber had already
received 452 votes in the BOG elections, surpassing the 20% partici-
pation rate, a new high for the Chamber. Jarrett said that he would like
the votes to reach 25% and believes that the Chamber will reach this
goal. He also reported on the Chamber’s efforts to fill the Vice Presi-
dent of Operations position. Finally, he provided an update on the Rho-
dium Group’s project on U.S.-China two-way investment flows that the
Chamber is supporting. He participated in the launch events for the
report in Washington D.C., New York, Shanghai and Beijing.
StrateGiC plan upDate
The President provided the Board with an updated version of the
three-year strategic plan for the years 2015-2017. The changes add up-
dates for 2017, providing details on the implementation plans for next
year. The plan is an essential part of the budget preparation.
nanJinG Center upDate
YRD Center’s Jonathan Shyu briefed the board on the Nanjing Center’s
progress. The Center was launched in March 2016, and the basic ele-
ments are now in place. It has an advisory council, an online presence,
and has conducted 20-plus events. The Center is focused on impro-
ving programs, increasing membership, and stabilizing operations.
neW ChaMBer WeBSite
Communications and Publications Director Ian Driscoll reported on the
Chamber’s new website, which he estimated would launch in late Ja-
nuary. It will be a modern website and there will be cohesion among all
of the various Chamber websites (TIC, Suzhou, Nanjing and the main
website). The current Insight website will be folded into the new website.
The AmCham Shanghai 2016 Board of Governors
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Movers and shakers
29
MEMBER NEWS
Event Report
tWo-WaY Street: 25 YearS of u.S.-China DireCt inVeStMent
On November 17, AmCham Shanghai held an event for Two-
Way Street: 25 Years of U.S.-China Direct Investment – a new
report from Rhodium Group and the National Committee on
U.S.-China Relations (NCUSCR), with support from AmCham
Shanghai and the China General Chamber of Commerce-USA.
Steve Orlins, president of the NCUSCR, said that the deeply in-
tertwined investment relationship of the two countries should
now influence wider policy choices. Daniel Rosen, founding
partner of Rhodium Group, added that policy decisions around
investment flows and trade have taken on a new urgency fol-
lowing the U.S. election. The report gives policymakers a
clearer, more fact-driven understanding of FDI flows.
Thilo Hanemann, director of Rhodium Group’s cross-border
investment practice and lead author of the report, presented
the findings. Rather than looking at financial flows (as does the
U.S. Bureau of Economic Analysis), the report uses a new trans-
action-based approach that analyzed nearly 8000 transactions
dating back to 1990. Using this method, the report concludes
that total American investment into China from 1990-2015 was
US$228 billion – three times the $75 billion reported by the U.S.
government. While investment flows in the opposite direction are
a newer phenomenon, the report shows 30-40% average annual
growth over the past five years, reaching a total of $64 billion.
Rosen concluded the presentation with a list of policy impli-
cations. First, the deepness of integration makes it important to
consider the consequences of a tit-for-tat trade war and who will
suffer. Secondly, in an era of globalization it is important to view
the U.S.-China relationship in a multilateral context, not just bilat-
eral. Finally, Rosen stressed that the data revealed how complex
the issues of symmetry and reciprocity are.
The session closed with a business leader-led Q&A discussion.
Cecilia Ho, president of International Paper Asia, and Aina Konold,
vice president & CFO of Gap Inc. Greater China, discussed their com-
panies’ histories of investment in China. Calven R. Wong, deputy gen-
eral manager of public affairs for Fosun Group, talked about Fosun’s
US$8 billion of investment into a variety of sectors across America.
Ceo SerieS With keVin akeroYD: hoW Data-DriVen
COmmuniCatOrs will earn tOmOrrOw’s CustOmers
On Friday, November 18, Kevin Akeroyd, CEO of media commu-
nications management company Cision, spoke at a morning mem-
bers gathering at the Portman Ritz Carlton Hotel.
Among Akeroyd’s messages was the idea that today’s buyers get
more of their information from online influencers and third-party sources,
and put less weight on company messaging, promotions and advertis-
ing. They are far more willing to trust the recommendations of friends
and family than other sources. He cited a survey that showed, among
other things, that 88% of consumers claim to be resistant to advertising.
Marketing technology, observed Akeroyd, is becoming increasingly
sophisticated with companies having to take account of demographics,
psycho graphics and social graphics. Improvements in data analytics
means that companies can now target 30-40 different versions of ad-
vertising at different audiences. Advances in data interpretation are also
leading to what he called a “shift from vanity metrics to an attribution
model.” However, he stressed that maintaining a consistent messaging
and strategy across the various mediums available today was essential.
After sharing his thoughts on earned media being one of the most
effective tools and the next wave of innovation in marketing technology,
Akeroyd took questions from the audience. While most questions fo-
cused on data’s role in targeting consumers, Akeroyd also spoke about
how Cision has been created out of several existing companies and the
challenges and opportunities of the acquisition process.
panel DiSCuSSeS future of u.S.-China relationS
On November 22, AmCham Shanghai hosted a panel of experts
for a discussion on the future of U.S.-China relations following the
election of Donald Trump to be the next President of the United
States. AmCham Shanghai President Kenneth Jarrett moderated a
panel that included Bill Powell, Asia editor/chief international corre-
spondent for Newsweek magazine; James McGregor, chairman of
APCO Worldwide’s Greater China Region; and Song Guoyou, profes-
sor at Fudan University’s Center for American Studies.
The panelists discussed the implications of the election of Donald
Trump and what his presidency could mean for U.S.-China relations.
All of the panelists agreed that regardless of what type of president
Donald Trump is, there will inevitably be changes in the U.S.-China
relationship. Much of his agenda could depend upon whom he ap-
points to various cabinet positions and how well his team works with
the leadership on Capitol Hill. The panel also talked about how they
expected Chinese President Xi Jinping to deal with President Trump
and what types of negotiations could be expected. I
Two way street: Daniel Rosen discusses investment flows following the U.S. election
Three wise men mull Trump’s ascendancy
AmCham Shanghai
Official from Hangzhou Bay New Zone delivers remarks at an Industrial Park Series Event
Curious citizens discuss live election results
during the presidential election viewing party
AmCham Shanghai hosts the Kunshan Municipal
Appreciation Luncheon
Psephologists ponder the future
at the presidential election viewing party
AmCham Shanghai Month in Pictures
A panel discussion on how Trump’s presidency
will affect future U.S.–China relations
AmCham Shanghai celebrates the Fifteenth Annual
Shanghai Appreciation Dinner
Former AmCham Chairman Bob Theleen questions
panelists about the future of U.S.-China relations
U.S. Ambassador Max Baucus networking with members
at AmCham’s 2016 Shanghai Appreciation Dinner
A panel discusses 25 years of U.S.-China direct investment
Professor Jeffrey W. Legro explains
how emerging nations are shaping a changing world
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32
Committee Chair’s Corner
A Chat with Ningling Wang
Ningling Wang is managing partner at Finnegan,
Henderson, Farabow, Garrett & Dunner, LLP.
She is the co-chair of AmCham Shanghai’s
Legal Committee.
What basic advice would you give to foreign companies
bringing valuable IP to China?
It is important to have IP protection. Foreign companies
should file their patent applications with the State IP
Office in China and their trademark applications with the
China Trademark Office. Once they get IP protection, they
can then talk about enforcement. Historically, foreign
companies aren’t comfortable with the IP enforcement
system in China so they ask “why bother?” It’s critical for
them to file patent applications in China and gain patent
protection at the same time as they are exploring market
opportunities in China.
Foreign companies have historically been the strongest
champions of IPR law reform in China. But is demand
for patent protection from Chinese companies and
entrepreneurs driving changes to IPR protection laws
in China?
Yes, especially in the last five years. The Chinese
government is now promoting innovation and aims to
provide stronger IP protection for Chinese companies.
Many domestic Chinese companies are asking the
government for stronger IP protection and enforcement
in China. For example, Huawei, Alibaba and ZTE are
leaders in the high-tech industry. With these Chinese
companies leading the way in worldwide competition,
more and more domestic Chinese companies realize the
importance of having strong IP enforcement in China, so
they can use this system to protect their business. This is
a good trend and promotes more rules and regulations
to make sure the environment is good for both business
and innovation.
What is the most significant legislation the Chinese
government has passed to strengthen IPR protection
in China?
It’s hard to tell which one is the most significant, but
the patent law plays an important role in strengthening
IPR protection in China. It will be revised soon. Last year,
the Chinese government published a draft of the Fourth
Amendment of the Patent Law for public comments. The
draft includes, for example, some provisions regarding
monetary damages. The low amount of compensation has
been the weakest link in patent infringement cases, because
normally in China, when you file a patent infringement case,
you might not get a very high monetary damage award.
The government realizes that’s probably the reason why
people think the IP/patent system is not that strong. So the
government has included provisions in the draft to increase
monetary damages especially for willful infringement
(meaning you know there’s a patent, yet you still infringe
the patent).
What is the most interesting case you’ve had to deal with
in regards to patent litigation/IP/licensing?
The most interesting one is when we helped a foreign
client implement IP enforcement in China. It’s interesting
because the product is a luxury baby stroller. It’s a very
famous brand outside of China, and it has become popular
in China for those who can afford it. And we found a lot
of counterfeit products. It’s not a traditional counterfeiting
case—some copycats use the same trademarks as our
clients, some of them use their own brands. In addition
to trademark infringement, we also dealt with patent
litigation. We further worked with customs to seize certain
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MEMBER NEWS
counterfeit products leaving China. The infringed products
were being exported to foreign countries, and that’s how
our client found out about the infringement. In fact, the
counterfeit products were manufactured in China whereas
the real products’ key parts were manufactured outside of
China.
How do you view the recent merger between Australian
law firm Mallesons and China’s King & Wood?
It’s a very interesting joint venture. And actually, there’s
a more recent one with Dacheng and Dentons. But, they’re
different. For King and Wood, it’s more of an international
merger because they now work together closely as one
firm, and they also changed the firm’s name. This might
be a trend — Chinese law firms seeking collaboration with
international law firms. With Dacheng and Dentons, the joint
venture is looser. They formed an alliance but they’re still
operating separately.
Foreign law attorneys cannot practice in the courts in
China. I think if the Chinese government opens up its doors
more, that may be a welcoming change. In the economic
zone in Shenzhen, attorneys from Hong Kong can practice
law and foreign law firms can form joint ventures with local
law firms. The national regulation right now is still pretty
restrictive, but you never know what will happen in the next
five years.
What is the best business decision you’ve ever made?
Establishing Finnegan’s Shanghai Office. The firm decided
to open a representative office in China in 2008, and I moved
to Shanghai from headquarters based in Washington DC. It’s
been an interesting journey for me, and it’s been eight years.
There have been lots of opportunities and exciting cases,
interesting experiences and challenges in China. It’s not
easy but it’s been exciting.
Why did you transition from a chemical engineering
background to law? Did you know you wanted to be a
lawyer?
Having a technical background is a unique perspective of
being a patent attorney. At Finnegan, an IP-specialized law
firm, we have about 380 attorneys - 90% of our attorneys
have technical backgrounds. We went to undergraduate
schools majoring in science and engineering, and then we
went to law school before we joined Finnegan.
In China, getting a law degree starts with undergraduate
studies, but I was in a “science and technology”
undergraduate degree and did not think of becoming an
attorney. After I graduated from college, I was looking for
a job. At that time, China’s job market had just started to
become more open and job fairs were a new phenomenon.
I went to a job fair near where I lived for fun. And at the fair,
there was an IP specialized law firm hiring graduate students
who had master degrees in science and engineering. I was
very lucky to be accepted, although I just had a bachelor’s
degree. That law firm where I got my first job is Liu, Shen &
Associates, which is now the top IP specialized law firm in
China. I worked there for a year, but then I still wanted to do
research, so I went to the U.S. for a PhD program in chemical
engineering at Virginia Tech. Later, I realized it would be
better for me to do IP law. I ended up getting a JD degree
after three years in graduate school.
If you were not a lawyer, what would you like to be?
When I was young, I wanted to be a medical doctor. But
now, I would want to be a professor. I’m currently teaching
patent law courses for various law schools in China, and I
enjoy interacting with young students.
Have you encountered any hurdles in the legal industry
as a woman?
Personally, I didn’t have any hurdles. In other words,
Finnegan is pretty good in terms of diversity. The firm has
good policies to encourage female attorneys to grow with
the firm. For example, the firm provides generous maternity
leave benefits. It’s also important for female attorneys to
have mentors. I personally benefited from the mentor
program at Finnegan. I am grateful to Finnegan for its
promotion of diversity. When I came to China, sometimes
I felt there were some stereotypical views against women
attorneys. And attorneys in general as a profession are not
well respected in China. But I hope, with our efforts, China
can become a better country. I
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34
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Esoterica
Adhering to a long-held tradition, this
month’s Insight concludes with a brief
listing of the some of the birdbrained,
bewildering and sometimes bri l l iant
things the citizens of China have done
to make the news more amusing this
past year.
free falling Crocodile
In August, a Sichuan grandmother
awoke to discover a live crocodile in her
back garden. As the garden was walled
off, the woman was rightly perplexed by
the animal’s presence. Had it fallen from
the sky, she apparent ly wondered?
Neighbors later revealed that a family on
the fifth floor of her building kept croco-
diles, and that at least one family member
was a gastronome with a taste for exotic
foods. Dinner had escaped, fallen almost
50 feet onto the roof of a shed, and all
without injury. The crocodile was later
carted off by wildlife authorities.
naked ious
According to the Nandu Daily, Chinese
university students this year took to up-
loading nude photographs onto online
lending platforms. The reason: the photo-
graphs act as collateral for loans. While
most loans are capped at RMB15,000, stu-
dents at prestigious universities can ac-
cess even more cash, albeit at weekly in-
terest rates of up to 30%. Which is where
the photographs come in. Students who
fail to pay off their loans face the ignominy
of having their nude photos splashed
across the web.
Climbing your own Great firewall
Earlier this year Fang Binxing, one of
the architects of China’s Great Firewall –
which blocks internet users in China from
accessing much of the web’s content lo-
cated outside of China – gave a speech
on internet safety at the Harbin Institute
of Technology. In a comical twist of fate, a
website Fang attempted to load produced
a message all too familiar to those resid-
ing in China: “Page not found.” In a move
that surprised the live audience, Fang
then opened a VPN in an attempt to es-
cape the confines of the firewall that he
himself created. Worsening the situation,
his VPN dropped its connection twice,
prompting him to give up and instead
search for screenshots of the desired
webpage on Baidu.
in flagrante Delicto
Two scintillating celebrity extramarital
affairs exploded onto the Chinese internet
this year. In the first, beloved actor Wang
Baoqiang, nicknamed “Baobao” by his
fans, went straight to social media to air
his dirty laundry. In a statement released
on Weibo, he descr ibed his wife Ma
Rong’s affair with his agent as having “se-
verely hurt the marriage and destroyed
the family” and thus he was filing for di-
vorce. Fans obediently attacked the guilty
female party. Months later, a second
bomb. Beloved bad-boy badminton
champion Lin Dan was caught on camera
canoodling in a hotel room with mod-
el-slash-actress Zhao Yaqi while his wife,
Xie Xingfang, also a badminton champion,
was pregnant with their child. Lin Dan
made a brief apology, Zhao Yaqi made a
teary apology, and, like a script for a jilted
politician’s wife standing by her man, Xie
Xingfang released a statement saying she
would support a “man who takes respon-
sibility for his actions and is willing to cor-
rect his mistakes.”
no Monkey Business
What would you do to retrieve your hi-
jacked taxi from a monkey? That’s the
question a taxi driver in Qingdao had to
ask in September when, reported the
People’s Daily Online, a monkey almost
caused an accident after he leapt across
the cab to take control of the steering
wheel. The animal’s trainer (and director of
the local circus) could explain: the monkey
can ride a unicycle, and thus cannot resist
the urge to jump on wheels of all kinds.
The police became involved when the
trainer and his monkey refused to exit the
taxi, and the pictures went viral on Weibo.
“Monkey King,” one user commented. “You
are so naughty.”
to new heights
The Transit Elevated Bus (TEB) was
surely China’s leading engineering accom-
plishment of the year. Almost 70 feet long,
25 feet wide and 15 feet tall, the ‘bus’ is de-
signed to maneuver through traffic by rising
above it, not nudging, pushing or violently
speeding past it. Greeted with a mixture of
adulation, surprise and doubt, the TEB runs
on a track. So as the Wall Street Journal
helpfully pointed out, “it’s a train.” And each
train is estimated to cost US$4.5 million, so
it’s not a cheap bus (or train). Doubts about
the bus were voiced soon after its trial run.
“This may create some psychological pres-
sure for motorists,” said Zhang Jianwu, a
professor at the Institute of Automotive
E n g i n e e r i n g a t S h a n g h a i J i a o t o n g
University, in an interview with the China
Youth Daily. Still, the TEB puts to bed the
long-held myth that Chinese companies
can only copy the best of the West. The
bus’s designer, Song Youzhou, is thinking
way outside the box. I
MEMBER NEWS
By amCham staff
Wait till you see it levitate
He scores again
Amusing ChineseInternet Stories
from 2016
Amusing ChineseInternet Stories
from 2016
Amusing ChineseInternet Stories
from 2016
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