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ASEANAFFAIRS

T he Voic e of S outhe a s t A s ia
2010 | Vol. 4 No. 6 | ASEANAFFAIRS.COM
CONTENTS
November-December 2010 I Vol. 4 No.6
ASEAN IN REVIEW

November-December 2010 Vol. 4 No. 6


OU T
8 Your Views SI D E
IN
 Editorial

 Subscription form / Index of advertisers


 Asean economies roar
Liu Haiyan Xu Kuangdi Alyce Su, Ph. D. Binsheng teng Jeffrey Chen
&ORMER6ICE-AYOROF"EIJING
3ENIOR6ICE#HAIRMANOF#&)%
#HAIRMAN
#HINA&EDERATIONOF)NDUSTRIAL%CONOMICS
&OUNDER
#HINA1UEEN#APITAL
!SSOCIATE$EAN THE-"!0ROGRAM
#HEUNG+ONG'RADUATE3CHOOLOF"USINESS
#HAIRMAN#%/
.EO0AC,IGHTING'ROUP  Asean Talk
I SEE NO HOPE FOR BURMA
&ORMER53!MBASSADORTO4HAILAND 2ALPH,3KIP "OYCE
DISCUSSESHISNEWROLEAS0RESIDENT "OEING3OUTHEAST!SIA
 Asean Year in Review
ANDREmECTSONDEVELOPMENTSIN4HAILANDAND-YANMAR

 Asean Talk
 Indonesia
THE BLACK SHEEP REMAINS BLACK PUSHING FOR QUICKER
Li Ruogu Jean-Claude Juncker J.C. ISEUX, CHEN HONG CARLA CICO $AVID3WARTZENTRUBERCRITICALLYANALYZESTHERECENT-YANMAR ASEAN ECONOMIC COMMU-
#HAIRMAN 0RIME-INISTEROF "!2/.6/.0&%44%. #HAIRMANAND#%/ #% ELECTIONANDREVEALSTHATITWASAMEREPUBLICRELATIONSEVENT
#HINA%XIMBANK ,UXEMBOURG 0RESIDENTOF2)%33 4HE(INA'ROUP #HINA 2IVOLI30!)TALY
THATWASBADLYMANAGEDATBEST NITY START-UP

 Asean Money  Thailand


HOT MONEY FINDS ASEAN LOOKS TOWARD THE 2011
0AUL%BELING*NREXAMINESTHERIVEROFHOTMONEYmOURING ELECTION
INTO!SEANANDITSIMPACT

 Asean Money

Zhang Yue
#HAIRMAN
TARIQ AHMED NIZAMI
#HIEF%XECUTIVE/FlCER &OUNDER
DAN BRUTTO
0RESIDENT
ANDRÉ LOESEKRUG-PIETRI
#%/&OUNDING-ANAGING0ARTNER
Michael Barbalas
0RESIDENT DARK POOLS, HOT MONEY Malaysia
"ROAD'ROUP #HINA #%/#LUBS5!% 503)NTERNATIONAL 53! !#APITAL!SIA 'OODRICH#HINA
7HEREDOESHOTMONEYCOMEFROM3HAYNE(EFFERNANIDEN WILL NEW ECONOMIC MODEL
TIlESTHESOURCESOFTHEFUNDSTHATBECOMEHOTMONEY WORK?

China in Spotlight : Pages 35-72  Asean Environment


CSR leads to sustainability  Singapore
The emerging role of China in the 21st century is a focal &ORTUNECOMPANY 044 BELIEVESCORPARATESOCIALRESPON NEW CASINOS ATTRACT
point for conjecture and a certain degree of apprehension SIBILITYISMUSTFORSUSTAINABILITY TOURISTS
Wolfgang Lehmacher Thomas Homberg
in the world outside of China. Is China an ally, a
&ORMER0RESIDENT#%/
'EO0OST)NTERCONTINENTAL
#ORPORATE6ICE0RESIDENT
%!$3 74 Asean Aviation
competitor, an adversary or perhaps all three?
In this issue, AseanAffairs presents a current picture of
CARGO FOCUS AT THAI  Philippines
!NINTERVIEWWITH0ICHAI#HUNGANUWAD -ANAGING$IREC SECOND-FASTEST GROWING
China, primarily from the words of its business leaders as TOROF4(!)!IRWAYSCARGOANDMAILDIVISION HIGHLIGHTSTHE ECONOMY IN ASEAN
well as foreign business persons who have had extensive AIRLINESNEWEMPHASISONTHECARGOSECTOR
experience inside China. We hope this information
provides readers with a candid and accurate view of  Beyond Asean
 Vietnam
China today and where the country is heading. AUSTRALIA-ASEAN TRADE WILL THE PRESIDENT STEP
Jennifer Angenend NEARS A$100 BILLION
Zhang Jianwei
0RESIDENT $IRECTORAND#O /WNER !USTRALIAN!MBASSADORTO!SEAN'ILLIAN"IRDDESCRIBESTHE DOWN IN 2011?
3INOTRANS #HINA 7ATER&ILLED"ARRIER3YSTEMS 53! GROWTHOFTHERELATIONSHIPBETWEEN!SEANAND!USTRALIAAND
THEIMPACTOFTHENEWFREETRADEAGREEMENT

78 Asean Trade  Myanmar (Burma)


WHAT HAPPENS AFTER THE ELECTION?
GLOBALIZATION 4.0:TRADE’S NEW CENTER
OF GRAVITY
$AN"RUTTO 0RESIDENTOF503)NTERNATIONAL ODDRELLYIMPORTANT
ISSUESINTHE!SIANSUPPLYCHAIN
22 Brunei
NEEDS A BETTER-TRAINED WORKFORCE
Nan Cunhui
#HAIRMAN
#HINT'ROUP
Jianwen (Jon) Liao
!DJUNCT0ROFESSOROF3TRATEGYAND)NNOVATION
#HEUNG+ONG'RADUATE3CHOOLOF"USINESS
Stan Fung
-ANAGING$IRECTOR
&AR3IGHT6ENTURES
Lili Zhao
-ANAGING%DITOR
#HINA%THOS
Karen Tang
%XECUTIVE$IRECTOR
"ETTER(ONG+ONG&OUNDATION
78 Asean Traveller
ASEAN’S BOLD NEW WINE INDUSTRY
&OUR!SEANCOUNTRIES )NDONESIA -YAMAR 4HAILANDAND6IETNAM 22 Cambodia
NOWBOASTSMALLBUTGROWINGWINEINDUSTRIES WILL OIL AND GAS MONEY CHANGE
THE COUNTRY?
84 Asean in Figures
 Asean Events 22 Laos
BUCKING ENVIRONMENTAL GROUPS TO
David Huang
%CONOMIC#ONSULTANT
484$#OMPANY
Charles Tang
0RESIDENT
"INACIONALDA#½MARADE#OM£RCIO
)ND¢STRIA"RAZIL #HINA
Han Wei
%XECUTIVE6ICE 0RESIDENTAND
3ECRETARY 'ENERAL7%#"!
Aloysius Wee
-ANAGING0ARTNER
$ACHENG#ENTRAL#HAMBERS,,0 3INGAPORE
Jim Zhang
-ANAGING$IRECTOR
.ATURE#ONSERVANCY 87 Asean Bazaar HARNESS THE MEKONG
 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
CHINA IN SPOTLIGHT
In this issue, Asean Affairs examines the relationship between China and the world through the eyes of a galaxy of observers and
business leaders both inside and outside of China.Their insights gained from intimate knowledge and firsthand experience provide a
deep understanding of doing business in the middle kingdom. Also the advent of the China-Asean Free Trade Agreement on January 1
projects an important new trading bloc on the world stage. But will the trading be one-way out of China or will there be balanced two-
way trade? Asean Affairs, as media partner of the 6th Global China Business Meet in Luxembourg (Nov 21-22, 2010), interviewed 23
business leaders and observers of China to produce this unique annual special country feature, China in Spotlight.

On the following pages


36 Overview: Horasis Global China 49 CHINA’S NEW WORLD ROLE 60 BUILDING TALENT IN CHINA
Business Meeting, 21-22 Nov., 2010 Aloysius Wee Wolfgang Lehmacher
-ANAGING0ARTNER &ORMER#%/ 'EO0OST)NTERCONTINENTAL
38 Honouring the Chinese Business $ACHENG#ENTRAL#HAMBERS,,0
Leaders of the Year 2010 62 SUCCESSFUL STRATEGIES IN CHINA
50 CHINA’S ROAD TO DEMOCRACY Carla Cico
40 CHINA-ASEAN: BEYOND TRADE? Lili Zhao #%/ 2IVOLI30!)TALY
David Swartzentruber -ANAGING%DITOR Charles Tang
-ANAGING%DITOR !SEAN!FFAIRS #HINA%THOS 0RESIDENT "INACIONALDA#AMARADE#OMERCIO
)NDUSTRIA"RASIL #HINA
42 INSIDE CHINA: INSIGHTS FROM THE 52 MANAGING INVESTMENTS INSIDE Tariq Ahmed Nizami
RED BARON AND OUTSIDE OF CHINA #HIEF%XECUTIVE/FlCER&OUNDER
J.C.Iseux Alyce Su, Ph. D. #%/#LUBS5!%
0RESIDENTOF2OYAL)NSTITUTEOF%AST 7EST &OUNDER #HINA1UEEN#APITAL Dan Brutto
3TRATEGIC3TUDIES David Huang 0RESIDENT 503)NTERNATIONAL
%CONOMIC#ONSULTANT 484$#OMPANY Chen Hong
44 THE NEW SILK ROAD TO CHINA Stan Fung #HAIRMANAND#%/4HE(INA'ROUP
Rajiv Biswas -ANAGING$IRECTOR &AR3IGHT6ENTURES Michael Barbalas
%CONOMIST Andre Loeskrug-Pietri 0RESIDENT 'OODRICH#HINA
#%/AND&OUNDING-ANAGING0ARTNER Thomas Homberg
47 A STRATEGY FIX FOR MNCS !#APITAL!SIA #ORPORATE6ICE0RESIDENT%!$3
Jianwen (Jon) Liao Jennifer Angenend
6ISITING0ROFESSOR 56 SUSTAINING GROWTH IN CHINA $IRECTORAND#O /WNER
#HEUNG+ONG'RADUATE3CHOOLOF"USINESS Karen Tang 7ATER&ILLED"ARRIER3YSTEMS
%XECUTIVE$IRECTOR
48 CHINA STILL AWAITING "ETTER(ONG+ONG&OUNDATION 70 THE AGE OF THE CHINESE
TRANSFORMATIVE LEADERS Jim Zhang CONSUMER
Binsheng Teng -ANAGING$IRECTOR .ATURE#ONSERVANCY Han Wei
!SSOCIATE$EANAND!SSOCIATE0ROFESSOR .ORTH!SIA2EGION#HINAAND-ONGOLIA %XECUTIVE6ICE 0RESIDENT
#HEUNG+ONG'RADUATE3CHOOLOF"USINESS Jeffrey Chen AND3ECRETARY 'ENERAL
#HAIRMAN#%/ .EO0AC,IGHTING'ROUP 7%#"!

34 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE


GLOBAL CHINA BU
USINESS MEETING

*EANNOT+RECK£-INISTEROFTHE%CONOMYAND
&OREIGN4RADE,UXEMBOURGREmECTINGONTHE
SUCCESSOFTHE3HANGHAI7ORLD%XPO
*EAN #LAUDE*UNCKER 0RIME-INISTEROF,UXEMBOURG 8U+UANGDI #HAIRMAN #HINA&EDERATIONOF)NDUSTRIAL ,IU(AIYAN 3ENIOR6ICE #HAIRMAN #HINA&EDERATIONOF
%CONOMICS #HINAAND7ORLD%CONOMIC/UTLOOK )NDUSTRIAL%CONOMICS DURINGTHEWELCOMERECEPTION

(2('RAND$UKE(ENRIOF,UXEMBOURG FOURTHFROMLEFT WITHMEMBERSOFTHE#HINESEDELEGATION

2OBERT$ENNEWALD#HAIRMAN&EDIL,UXEMBOURGIN
DISCUSSIONWITH8U+UANGDI#HAIRMAN#&)%

The Global Visions Community


(%*OSE,UIS'UTERRES,EFT $EPUTY0RIME 0ANELISTSAREGETTINGTOGETHERBEFORETHEIRSESSIONATTHE'LOBAL 32OY2IGHT &OUNDER#HAIRMAN !SEAN!FFAIRS
Synopsis of the 2010 Horasis Global China Business Meeting -INISTEROF%AST4IMORWITH*#)3%58 #HINA"USINESS-EETINGIN,UXEMBOURG 4HAILAND ISCHAIRING$ESIGNING#HINAS%NTREPRENEURIAL
"!2/.6/.0&%44%. 0RESIDENTOF2)%33 %COSYSTEMSESSIONWITH8IANG"ING#ENTRE $EAN
ATTHE'LOBAL#HINA"USINESS-EETINGIN #HEUNG+ONG'3" #HINAAND/LIVER.YUMBU #HIEF
,UXEMBOURG %XECUTIVE #ARET 5NITED+INGDOMATTHE'LOBAL#HINA
"USINESS-EETINGIN,UXEMBOURG
The sixth Horasis Global China Business jun, Vice Chairman and Chief Executive
Co-hosts: ,UXEMBOURGFOR"USINESS #HINA&EDERATIONOF)NDUSTRIAL%CONOMICS
Meeting, Luxembourg, 21-23 November Officer, Fosun Group, China; Nan Cun- Co-organizers:!SIA0ACIlC#%/!SSOCIATION #AIXIN-EDIA #%/#LUBS5!% #HINA#%/2OUNDTABLE &UTURE#HINA3OCIETY #HINA
2010, brought together a large number of hui, Chairman, Chint Group, China; Juan +INGDOM#LUB 7ORLD%MINENCE#HINESE"USINESS!SSOCIATION 9OUNG0RESIDENTS/RGANIZATION90/
0ROFESSOR,OU-ARINOFFAND-OTTIE+ESSLER Strategic Partners:#%)"3 0RICEWATERHOUSE#OOPERS
#HAIRMAN"ANNER#HEMICALS CEOs from China with leaders from around María Nin, President and Chief Executive Media Partner:
Media Partners:!SEAN!FFAIRS
the globe to discuss China’s and the world’s Officer, La Caixa, Spain; Patrick O’Basuyi, Knowledge Partners: !CCENTURE "AKER-C+ENZIE *ULIUS"AER'ROUP 2OLAND"ERGER
current economic state. Chairman, Obax Group, USA; Dinesh C.
More than 400 business leaders from 45 Paliwal, Chairman and Chief Executive he said. ‘The broader message from the G20 meeting was a power- embourg, explained that “while actively coping with the global
countries, including CEOs from the Mid- Officer, Harman International, USA; Sal- ful recognition of the shift in economic power to emerging nations economic crisis, China attaches great importance to strengthening
dle East, Asia, Latin America, as well as man Al Jishi, Chairman, Salman Group, like China _ away from the western industrial powers,” added coordination and cooperation with the European Union.”
Europe and North America, came together Saudi Arabia; Yat Siu, Chief Executive Of- Hu Shuli, Editor-in-Chief, Caixin Media, China. Liang Xinjun, Vice
The plenary sessions in the main hall were followed by a round
to debate the critical requirements for ficer, Outblaze, Hong Kong SAR; John Tan, Chairman and Chief Executive Officer, Fosun Group, China sug-
of unique and intensive boardroom dialogue sessions, where del-
Chinese firms to successfully expand their Chief Executive Officer, Asia Capital Rein- gested that the G20 process needed to be made more inclusive.
egates interacted with the panellists on a variety of fundamental
operations toward a global level playing surance Group, Singapore; Xiang Wenbo,
Jeannot Krecké, Minister for the Economy and Foreign Trade, issues. More than 20 themed panels across the one and a half days
field. The Horasis Global China Business President, Sany Heavy Industry Co., China;
Luxembourg, opened the meeting in a dinner session that was in- embraced a wide variety of topics, some focussing on specific
$IDIER-OUGET-ANAGING0ARTNER0W#,UXEMBOURG Meeting was co-hosted by Luxembourg Zhang Yue, Chairman, Broad Air Condi-
formative and candid. sectors such as energy, infrastructure, or financial services, with
ANNOUNCINGTHE#HINESEBUSINESSLEADERSOFTHEYEAR for Business and the China Federation tioning, China; Zhang Jianwei, President,
others featuring discussions reflecting on the diversification of the
of Industrial Economics. Sinotrans, China; Zhou Xin, Chairman, Speaking for the Chinese government, Xu Kuangdi, Vice Chair-
Chinese economy and the country’s emerging leadership role in
E-HOUSE China Holdings, China; and Zhu man, 10th National Committee of the Chinese People’s Political
The following co-chairs represented the the world.
Jimin, Chairman, Shougang Group, China. Consultative Conference, and Chairman, China Federation of
meeting vis-a-vis to the government au-
Industrial Economics, painted a lucid vision for the future of the
thorities from China, Luxembourg and the Li Dongrong, Assistant Governor, People’s
Chinese economy.
world: Jeffrey Chen, Chief Executive Bank of China, China, said that it was es-
Officer, Neopac Lighting Group, China, Tai- sential for developed and emerging coun- In a special plenary session on the EU-China Agenda, Lux-
wan; Carla Cico, Chairman, Rivoli S.P.A., tries to continue to support a stable recov- embourg’s Prime Minister Jean-Claude Juncker stated that Dr. Frank-Jürgen Richter
Italy; Boris F.J. Collardi, Chief Execu- ery. He echoed the outcomes of the G20 “China’s relations with the European Union are burgeoning.” He President
tive Officer, Julius Baer Group, Switzer- Summit which took place 10 days prior to examined how China and the European Union can work together Horasis: The Global Visions Community
,UIS'˜MEZ#OBO#HAIRMANAND land; Kolapo Lawson, Group Chairman, the Global China Business Meeting. “Coop- to address global and regional issues.
&OUNDING0ARTNER3INO,ATIN#APITAL#HINA Ecobank Transnational, Togo; Liang Xin- eration on global and region levels is key,” In the same session, Zeng Xianqi, Ambassador of China to Lux-

36 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE


Honouring the Chinese Busin
ness Leaders of the Year 2010
Chinese business leaders were recognized for their achie
hievements at the Sixth Global Chinese Business Meeting

!WARDCEREMONYINHONOROF:HANG*IANWEI0RESIDENT3INOTRANS#HINA ,I2UOGU #HAIRMAN #HINA%XIMBANK AWARDEDBY0REMIER*UNCKER .AN#UNHUI #HAIRMAN #HINT'ROUP AWARDEDBY0REMIER*UNCKER :HANG9UE#HAIRMAN"ROAD!IRAWARDEDBY
$IDIER-OUGET-ANAGING0ARTNER0W#

Mr. Zhang Jianwei WHOHASCONSIDERABLEEXPERIENCEINTHE $URINGHISBRILLIANTCAREER Mr. Li RuoguHASSTRONGLYSUPPORTED Mr. Nan CunhuiISTHE#HAIRMANOFTHE"OARD#HIEF%XECUTIVE Mr. Zhang Yue THE#HAIRMANOF"ROAD!IRCONDITIONING WASBORN
TRANSPORTATIONANDSHIPPINGINDUSTRY HASRUN3INOTRANSSINCE #HINASRATEPOLICY ESPECIALLYWHENHEWASA$EPUTY'OVERNOROFTHE /FlCEROF#().4'ROUP#ORPORATIONANDHASHADANOUTSTANDINGAND IN#HANGSHAINANDGRADUATEDINWITHADEGREEINlNEARTS
AS0RESIDENT3INOTRANSISONEOFTHEKEYSTATE OWNEDENTERPRISESIN 0EOPLES"ANKOF#HINA.OWASTHE#HAIRMANAND0RESIDENTOFTHE INCREDIBLEASCENTTHATBRINGSHIMATTHETOP(EHASSTARTEDHISCAREER !FTERWORKINGASATEACHERANDLIBRARIANFORSEVERALYEARS HEFOUNDED
#HINAITPROVIDESINTEGRATEDLOGISTICSSERVICEINCLUDINGSEA AIRANDROAD %XPORTn)MPORT"ANKOF#HINA%8)- HEAIMSATSUPPORTING#HINESE ASSHOEREPAIRER.OWHEISONEOFTHEMOSTIMPORTANTENTREPRENEURIN "2/!$IN!SANENTREPRENEUR HEPOUREDHISINNATEPASSIONFOR
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SERVICESFORTHECOMINGYEARS3INOTRANSISWELLINVOLVEDONTHEGLOBAL ANDPOSITIONS#HINAINTHElELDOFTHECOOPERATION WISHESTOTURNHISELECTRICAIRCONDITIONINGINTONON ELECTRICAIRCONDI
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QUALITYOFMANAGEMENT FOREXAMPLE

This year, the Global China Business Meeting has been held Import Bank Fully is owned by the Chinese government and is
in Luxembourg, a small but very dynamic country at the heart of under the direct leadership of the State Council. The Bank has 17
Europe. Around 400 business leaders from all over the world gath- domestic business branches and representative offices as well as
ered here on November 21-22, to share their perspective on China’s three overseas representative offices in South Africa, Paris and St.
development, the globalization of Chinese firms, and their strategy
towards future China. PwC is proud to be the strategic partner of
Petersburg.
EVEN WITH THE ECONOMY
the 6th Global China Business Meeting and award four Chinese
 Mr. Nan Cunhui, Chairman of the Board & Chief Execu-
tive Officer of CHINT Group Corporation. CHINT Group Corpora- SUBDUED, HOWEVER, THE TRE-
Leaders who have been chosen by a jury led by Horasis. These
Chinese decision makers excel in leadership and business strategy.
tion, formerly The Switch Factory, was founded in 1984 and is now MENDOUS ENTREPRENEUR-
They are highly significant of the economic development of today’s
one of the first class global electrical product manufacturers with
23,000 employees. IAL SPIRIT OF CHINESE BUSI-
China.
 Mr. Zhang Jianwei, President of Sinotrans Limited. He NESS LEADERS HAS DRIVEN
Even with the economy subdued, however, the tremendous
entrepreneurial spirit of Chinese business leaders has driven the
is also the Director of Sinotrans & CSC Group and the Chairman of
Sinotrans Air, the managing director and deputy chairman of China
THE ECONOMIC GROWTH,
economic growth, the development and the influence of China Maritime Law Association, as well as vice chairman of China Fed- THE DEVELOPMENT AND THE
at worldwide level. Therefore, four business leaders have been
awarded for their outstanding performance as business leaders
eration of Logistics & Purchasing (CFLP). INFLUENCE OF CHINA AT
this year and for being an example for all the entrepreneurs.
 Mr. Zhang Yue, Chairman of Broad Air Conditioning. He
has been granted over 100 patents for his inventions. And he also
WORLDWIDE LEVEL.
 Mr. Li Ruogu Chairman and President of the Export- serves as the Vice Chair of the United Nations Environment Pro-
Import Bank of China (Exim) since June 2005. China Export- gramme’s Sustainable Buildings & Climate Initiative (SBCI). #ELEBRATINGTHE#HINESE"USINESS,EADERSOFTHE9EAR
38 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
CHINA-ASEAN: BEY
YOND TRADE?
Asean Affairs’ managing editor explores the long and complex
ex relationship
r between China and the Asean By
David Swartzentruber
countries. With the start of the China-Asean Free Trade Agreement
Ag this year, what comes next?
An evolving role
During the last half of the 20th century
8 percent from the previous year, to US$212
billion, and it is expected to fall further this ASEAN HAS ADOPTED A “HEDGING” POLICY
and into the current period, the relation- year. BY COURTING THE U.S., PARTICULARLY AS CHI-
ship between China and the Asean coun-
tries has been marked by periods of friend-
There is growing nervousness that
Asean could become China’s domain.
NA HAS ADOPTED AN AGGRESSIVE POSTURE IN
ship and animosity, trust and distrust. Reportedly, every Asean leader to sit with THE DISPUTE OVER TERRITORY IN THE SOUTH
Throughout this time China has
matured through its period of revolutionary
President Obama during his Asia trip asked
questions about trade, and they all hope
CHINA SEA, OBSERVERS SAY.
zeal and its role as a diplomatic outcast to for a more active American presence in the lines to improve Thailand’s logistics, the cause more poverty.”
become a full-fledged member of the inter- region to strike a balance so that the Asean groundbreaking ceremony for a China Despite the apparent desire of the
national community. The visit of U.S. Presi- countries would not be pulled into a China- culture center in Bangkok, and increased Laotian government to promote sustainable
dent Richard Nixon to China in February dominated landscape. financing for a Thai-Chinese industrial park development, however, it’s apparent that
1972 was a major breakthrough moment for Other signs of edginess are also ap- in Thailand’s eastern seaboard. some Chinese companies and individuals
China and touched off her acceptance into pearing in news reports from the region A couple of days after the donation, are going to require a large measure of
the international community. such as the “Chinaization” of villages in Thai Prime Minister Abhisit Vejjajiva came control from Beijing.
Prior to that landmark event, however, southern Laos, adjacent to Thailand, as out for use of the Chinese yuan in trade In Cambodia, at a hydropower dam
Indonesia and Burma were among the Chinese traders make their presence felt. matters in Asia, a step that the Asian Devel- along Cambodia’s border with Thailand,
first countries (in 1950) to recognize the The future of CAFTA may well lie in opment Bank had also proposed. and in Burma, Laos and even Vietnam, Chi-
new People’s Republic of China. Most of how the Chinese economy can absorb the These efforts underline China’s na is engaged in a massive push to extend
the other Asean countries did not estab- manufactured imports of the Asean coun- increasing role in the seven continental its economic influence into Southeast Asia.
sacre. CAFTA will allow 90 percent of all tries rather than just intermediary goods.
lish diplomatic relationships with China Asean countries, many of them lacking Using investment, China is transforming a
Since 1991 the relationship between goods -- that is, around 7,000 items traded
until the 1970s. Some of this foot-dragging crucial infrastructure that when improved huge swath of territory along its southern
was undoubtedly caused by concern over
China and Asean has blossomed, culminat- between China and Asean countries -- to The cordiality and investment can serve as trade channels into and from border.
ing in the China-Asean Free Trade Agree- be zero-tariff in the six richest Asean
China’s aggressive military posturing, as
ment. At the same time, Asean has adopted countries. But the poorest four ASEAN
offensive China. “Cambodia is approaching China with
several Asean countries were members of There is a decided split within Asean Thailand is not alone. open arms. It’s how the United States took
a “hedging” policy by courting the U.S., par- members, Vietnam, Cambodia, Laos and
the U.S.-backed regional alliance, SEATO over its neighborhood. Its geopolitics,” said
ticularly as China has been involved in the Myanmar, will not need to cut tariffs to the
(Southeast Asia Treaty Organization), from Lak Chee Meng, the senior reporter on the
dispute over territory in the South China same levels until 2015. Meanwhile, by 2015,
1954-1977. Cambodia Sin Chew Daily, one of the coun-
Sea. Four Asean countries plus Taiwan duties on other “highly sensitive” commodi-
As U.S.-China relations improved, try’s four Chinese-language dailies.
claim rights in the South China Sea: Brunei, ties will be cut to no more than 50 percent,
China took important steps to move closer
Malaysia, Philippines, and Vietnam, which which would include toilet paper in China,
to the Asean countries. In 1980 China
has appealed directly to the U.S. about popcorn in Indonesia, and snowboard
The future of China-Asean
stopped supporting Chinese insurgencies relations
the issue. Japan also has had numerous boots in Thailand.
in the region and in 1989 China passed In the past 15 years the Chinese may
direct conflicts with China over territorial The level of free trade is short of the
laws requiring Chinese abroad to adopt the have learned much from their relationship
disputes in the South China Sea. EU or NAFTA trade pacts. Many firms fear
citizenship of the countries of residence. with Asean. The list of things that China
Asean’s hedging policy has been Chinese competition in various countries.
This is important as, for example, Asean may have picked up from Asean could
invigorated by the pro-active policy of the Indonesia, which wanted to reopen parts
member Thailand has the largest popula- include the removal of suspicions, coop-
Obama administration, which has shown of the deal, has not readied itself for freer
tion of Chinese-Thai residents of any of the erative security, multilateral consultation,
increased interest in Southeast Asia. trade. On the other side of the coin are
Asean members. dialogue consensus, and non-coercive ways
Asean members Singapore, Malaysia, Indo-
Beijing’s official contact with Asean
began in July 1991 when Chinese Foreign
China-Asean Free Trade nesia and the Philippines that are four of of handling disputes.
Agreement China’s major trading partners. The trade Will these lessons translate into how
Minister Qian Qichen was invited to attend Chinese conducts itself in Asia and else-
Ten years after it was envisioned, the pact also lacks a mechanism for the resolu-
the 24th Asean Foreign Ministers’ meeting. between the Asean countries that are The Laotian government is already where?
China-Asean Free Trade Agreement (CAF- tion of trade disputes.
This reaching out by China was in many located on the Asian continent and those taking some steps to prevent Laotian A good case to look at is the South
TA), the world’s largest free-trade area by The major goods China imports from
ways an attempt to overcome the world’s offshore-Indonesia and Philippines. The people from being exploited and to protect China Sea dispute, where China prefers to
population, came into effect on January 1. Asean countries are intermediary goods
condemnation and sanctions imposed after continental countries have a stronger and biodiversity. Most of the illegal wildlife traf- engage in a unilateral approach in settling
The agreement between China and the 10- such as machinery, minerals and fuels,
the June 4, 1989 Tianamen Square mas- more tangible relationship with China. ficked winds up in Chinese restaurants. the various claims with the four involved
country Association plastics, fats and oils, rubber, and organic
Thailand is a case in point with a “The highest level of government Asean countries. The multilateral approach
of Southeast Asian chemicals. China uses these imports to
large Chinese Thai population and where does take illegal wildlife trade seriously,” is favored by these Asean members and
Nations (Asean) cov- manufacture low-cost goods that are ex-
Chinese-language newspapers are still be- explains Bouphanh Phanhthavong of the they have been supported by the United
ers nearly 1.9 billion ported to the United States and the EU.
ing printed. Ministry of Agriculture and Forestry. “The States.
people. In terms of In 2010 Asean traded more with both
Following the recent flooding in national poverty reduction plan clearly It should also be mentioned that sev-
economic value, this Japan and the EU than it did with China,
Thailand that claimed more than 200 lives, states that environment protection is one of eral Asean countries _ Indonesia, Malaysia,
is the third-largest and other important trade partners are
a Chinese official paid a visit and gave 10 three pillars to reducing poverty. The other Philippines, and Thailand _ have moved far-
regional agreement, South Korea, Australia and India. Prior to
million yuan (US $1.5 million) to aid relief two are economic growth and sociocultural ther along the path toward a participatory
after only the EU and 2009, China-Asean trade expanded rapidly,
efforts. This followed closely after the Thai development. If the natural resource base and democratic system than has China.
NAFTA, the North with volume skyrocketing from US$78
Parliament approved a largely Chinese- is depleted or destroyed, local people’s Is China’s ascent the start of a new
American Free-Trade billion in 2003 to US$231 billion in 2008.
financed project for two high-speed rail livelihoods will also suffer and ultimately Monroe Doctrine in Southeast Asia?
Agreement. However, China-Asean trade in 2009 shrank
 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
INSIDE CHINA: INSIGHTS FROM THE
T RED BARON
Jean Christophe Iseux, Baron von Pfetten, in ian relief in both cases. instead of “bigger”.
an interview with Li Hui Wei of Contemporary  Major achievements in terms of giving a better standard  State-owned capital should change from “profit-oriented”
World, the official monthly publication of the of life to the Chinese farmers after successful ongoing land reform to “public interest oriented”.
policies. Such change of the people’s mindset is a prerequisite for a
International Department of the Communist  China’s entry into the World Trade Organization. sound implementation of new rules and regulations enacted from
Party of China’s Central Committee (CPCCC),  Chinese government’s intelligent use of the LU Xun “Yang the central government.
reveals unique insights gained over a decade of Qi” model to take the best from the West and leave the rest.
working inside China.This interview was published  China’s international status as a “responsible” member of Q: We hear that your biggest wish is to join the Communist
in Chinese in the November 2010 edition of the the international community with well recognized China involve- Party of China (CPC). May we know the reason why you
publication and translated into English for Asean ment in United Nations peace forces and the exceptional market- want to join the CPC and what you think about the develop-
Affairs. ing of the 2008 Beijing Olympics and 2010 Shanghai Expo. ment of the CPC?
A: Beyond my 1999 party report I would like to add:
Q: As a French scholar with a noble family background, you Q: What problems do you think China is still faced with in  CPC has an historical meaning for the Chinese people: the
are regarded as an “overseas Lei Feng” in China. What at- her economic development? party assures the stability of the country and is giving the Chinese
tracts you to China? A: The most important problem facing the Chinese economy is the people back their pride after so many centuries of foreign humiliation.
A: The two most attractive elements of China for me are: increasing gap between the countryside and the city. China is still  CPC has an historical meaning for the world: the CPC-
a. The Chinese people – particularly the good-natured a developing country with a rather low gross domestic product per strengthened China is the only country giving alternative ideals
Chinese farmers. I am fond of Chinese cleverness (street wisdom), capita. since the fall of Soviet Union and insures stable economic develop-
humor, hospitality, friendliness and sense of honor (face). Since I would like to add the following: ment for the country to enable the country to become the engine
1997 I have stayed a few days each month in the countryside living  Continue to expand domestic demand and stimulate the of growth for the world at large
with Chinese farmers. consumer market away from foreign direct investment and the  CPC current ideals are very close to those of my great-
b. The Chinese culture. I am particularly fond of Tang export oriented economic growth model. Efforts are needed to grand-uncle, Joseph Faisant, that were embodied in the Radical- Baron JC hunting at his estate in Burgundy, France, Nov 2010
Dynasty porcelain, Ming Dynasty furniture, Qing Dynasty archi- increase the income of residents in raising the minimum wage Socialist Party of France in the1920s. He was MP and helped to
tecture, Beijing Opera and Chinese modern paintings (like the one standard. It would be helpful to raise the minimum purchase price organize young Chinese to work and study in France, including J.C. ISEUX,
next to my home). I have visited every Chinese province at least of grain and boost the income of farmers. Deng Xiaoping in 1921, who worked at the steel mill of my family
 Manage the growth of urbanization carefully. Implementa- in Burgundy. These ideals can be simplified into a vegetable called
BARON VON PFETTEN,
once. On every visit I try to better understand the local culture. 0RESIDENTOF2)%33
tion of land reform raises the possibility that farmers will trade “The Radish”: Red outside (socialist), White inside (traditional
Q: You’ve stayed in China for more than 10 years. How do their land use rights, thus depriving them of an important security. values) and always very close to the butter plate (attention to the
you perceive China’s achievements in reform and opening  Support the service sector, which is environmentally economy and well-off society). I personally particularly subscribe *EAN#HRISTOPHE)SEUX "ARONVON0FETTEN IS0RESIDENTOFTHE2OYAL)NSTITUTE
OF%AST 7EST3TRATEGIC3TUDIESSINCE AND6ISITING0ROFESSOR$IRECTOR
up? friendly and instrumental in job creation. The government can pro- to the making of an “Harmonious Society” which still remains to OF2ESEARCHATTHE0EOPLES5NIVERSITYOF#HINA(EISWELLKNOWNTOHAVE
A: The last 30 years of Chinese achievement since the start of the vide incentives for starting one’s own business, effectively giving be achieved in China and the rest of the world. BEENTHElRSTANDONLY#AUCASIANSPECIALLYINVITEDMEMBEROFA#HINESE
open door policy is straight-forward: more support to the rising private economy. PARLIAMENTARYINSTITUTION#HANGCHUN#00## 
 Major macroeconomic developments in terms of gross  Bolster the international influence of the renminbi and Q: Recently, China’s position in the international commu-
(EISHONORARYADVISERTOSEVERALCENTRALANDLOCALGOVERNMENTAGENCIES
domestic product growth, making China the engine of growth for encourage Chinese companies to establish international footholds nity has been rising. However, there are some unfriendly
IN#HINA.$2# -/&#/- -/% 3HANGHAI "EIJING 4IANJIN #HONGQIN 
Asia-Pacific economies. and acquire valuable resources and assets overseas. comments about China. In your opinion, how should China (EISALSONON EXECUTIVEDIRECTOROFSIXCOMPANIESIN(ONG+ONG02#
 Major microeconomic achievements with 20 state-oper- I would also suggest that China’s current development trans- improve her image in the international community? ANDINVOLVEDIN#HINABUSINESSINVESTMENTADVISORYTOADOZEN&ORTUNE
ated enterprises listed in the Fortune 500, with Petrochina topping formation be accompanied by a profound reform of people’s ideas: A: I am very surprised by the last three years of increased misun- MULTINATIONALS/UTSIDE#HINAHEIS(ONORARY2EPRESENTATIVEOFTHE
derstanding of China by the rest of the world, particularly Europe, 6ANCOUVER"OARDOF4RADE (ONORARY0ROFESSORAT!SSUMPTION5NIVERSITY
the list.  The phrase “economic growth” should be replaced with OF4HAILAND AND!DVISERTOTHE53#OALITIONOF3ERVICE)NDUSTRIES(EWAS
 China’s rapid response when faced with major cata- “economic development”. probably due to the financial crisis which is still very damaging
NAMEDA'LOBAL,EADEROF4OMORROWBYTHE7ORLD%CONOMIC&ORUMAT
strophic events such as the 1998 flood and the 2009 earthquake.  Local government officials should switch from “rich na- in terms of its decreasing wealth and increasingly protectionist $AVOSIN
I would like to particularly praise the People’s Liberation Army tion first” mentality to “rich people first”. mindset. I now feel that the Chinese government should better use
(ERECEIVEDBACHELORS MASTERSANDDOCTORATEDEGREESINENGINEERING
when more than 1 million soldiers were dispatched for humanitar-  The economic cake should be made “better” China’s rich culture to win the hearts and minds of Western people
FROMTHE5NIVERSITYOF3TRASBOURGANDAMASTERSDEGREEINMANAGEMENT
by promoting Chinese cultural FROM/XFORD5NIVERSITYIN
centers abroad, for instance; and
also use foreign voices to represent 0ROFESSORVON0FETTENISTHEAUTHOROFSEVERALRESEARCHPAPERSONTHESUB
JECTSOF#HINAFOREIGNDIRECTINVESTMENTSTRATEGIES THE#HINESEMODELOF
China outside. Given its rapid eco- CORPORATEGOVERNANCE AND!SIANLEADERSHIPCHANGES PRESENTEDAT5NITED
nomic growth, some commentators .ATIONSAND!0%#SUMMITS
have argued China has become a
global power and is no longer a de-
veloping country. Others say China
should redefine itself a “responsible
THE MOST IMPORTANT PROB-
stakeholder” helping maintain the LEM FACING THE CHINESE ECON-
present international order. These
arguments are inconsistent with
OMY IS THE INCREASING GAP
China’s reality. For all the hype BETWEEN THE COUNTRYSIDE
about China’s rise, its per capita AND THE CITY. CHINA IS STILL A
GDP ranks 104 worldwide in a World
Bank report, lower than many other DEVELOPING COUNTRY WITH A
developing countries. China should RATHER LOW GROSS DOMESTIC
JC Iseux, left, with General Fidel Ramos, former president of the
Philippines
In 2005, Professor von Pfetten, left, is greeted by General Cao
Ganggquan, then Chinese Minister of Defense, right.
and will continue to align itself with
other developing countries. PRODUCT PER CAPITA.
 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
THE NEW SILK R
ROAD TO CHINA
With domestic markets stagnant, European firms may wish to travel the New Silk Road to dynamic Asian markets.
Seven centuries ago, the Silk Road Asean, India, Central Asia and the Middle nominal GDP is expected to exceed that of will grow at 15 per- The Rise of Asian Consumer Markets
described by Venetian trader Marco Polo East, are projected to be the fastest grow- the United States, making China the world’s 2EALRETAILSALES AVERAGEANNUALGROWTHRATES
cent per year, with 3OURCE)(3'LOBAL)NSIGHT
in ‘Il Milione’ _ the account of his travels ing regions of the global economy over the largest economy, broadly similar in size to demand for branded
to Cathay _ comprised a series of transport next two decades. The markets of the New the combined GDP of the European Union. goods growing even 18
By
Rajiv Biswas
routes overland and by sea from Southern Silk Road economies therefore offer con- Indian nominal GDP is projected to exceed more quickly, at 16
Europe through Central and South Asia siderable opportunities for European busi- that of Japan by 2025, and the size of the In- around 20 percent OUTLOOK
through to China. In the 13th Century, nesses, in contrast to moderate economic dian economy is also expected to be larger 14
per year. Western The shift in economic power from
China was one of the world’s leading civili- growth at best in Europe. than any individual EU economy. multinationals can 12 West to East brings new opportunities for
zations, and the Silk Road not only opened The world economy is currently The importance of the New Silk Road no longer operate 10 Europe at a time when it faces tremen-
up flourishing trade between East and experiencing a major shift in economic to the European economy is demonstrated effectively without dous structural challenges from ageing de-
West, but also the importation of significant power from West to East, as China and by the rapid growth in EU merchandise 8
a strategic focus on mographics, high government debt levels,
new technology from China that facilitated India emerge as new global economic exports to China, which tripled between the Chinese market.” 6 and deep-seated financial sector prob-
Europe’s economic development and scien- giants. While East Asia’s export-driven 2000 and 2009. In terms of actual values, However, 4 lems. With growth in domestic European
tific advance. growth model during the 1980’s and 1990’s total EU merchandise exports increased other Asian growth consumer markets expected to be very
by 56 billion euro between 2000 and 2009, 2
engines are also weak for decades, the greatest opportuni-
rising from 26 billion euro in 2000 to 82 rising in importance, 0 ties for European companies will be in
billion euro in 2009. With the value of ser- notably India, which -2
2001-05 2006-10 2011-2015 2016-2020 2021-25
the fast-growing consumer markets on the
vice exports from the EU to China having within a decade is %5#HINA!SIA 0ACIlC New Silk Road, including the Middle East,
reached 18.5 billion euro in 2009, total EU projected to become South Asia, ASEAN and China.
exports to China amounted to around 100 an economy roughly However, the economic ascendancy
China summits which allow for a regular
billion euro in 2009. As the global recovery the size of China’s economy today. Asean is exchange of views. Our positions converge of the East is also giving rise to new com-
strengthened in the first half of 2010, total also expected to become one of the world’s on a significant number of issues.” petition for global economic governance,
EU exports to China rose by 43 per cent leading growth engines, due to the rapid with the rising economic powers of Asia
The transport routes of the New Silk
over that of a year ago. growth of Indonesia and Vietnam, whose increasingly pressing for a greater role in
Road are also strengthening significantly,
With the size of Chinese GDP expect- consumer markets are currently growing international political and economic gover-
helping to enable the rapid growth in trade
ed to continue to expand rapidly over the strongly. nance. This has already led to the emer-
in goods and services amongst the econom-
next two decades, the For Europe, gence of the G-20 as the new forum for
ic regions that comprise the New Silk Road.
implications for Euro- which faces the international economic policy-making, and
The traditional sea lane from the Strait of
pean trade and invest- prospect of decades greater voting rights for emerging markets
Hormuz to the Malacca Strait and north to
ment are far-reaching. of weak growth in de- the South China Sea remains of vital stra- at the IMF and World Bank. This poses a
Furthermore, there mand from domestic challenge to the old governance structures
tegic importance as a key shipping route
More than 700 years later, Europe is was heavily driven by the strength of is a major rebalanc- consumer markets, that Europe used to dominate within the
for Middle Eastern oil and gas to energy-
beset by structural economic problems, demand from the U.S. and Europe, by 2010 ing taking place in the rapid growth in IMF, World Bank and BIS.
hungry East Asia, and also for exports of
including demographic ageing and rising the ascendancy of China as the world’s the structure of the retail sales projected The Asian ascendancy and rapid
East Asian manufactures to European mar-
fiscal burdens of pension and health care second largest economy has also resulted Chinese economy, for the Asia-Pacific growth of the New Silk Road economies
kets. However, China is at the forefront of
provision, amidst fiscal debt crises in a sig- in Chinese demand becoming a key driver with a significant region, notably for brings new hope for Europe at a time when
initiatives to strengthen high-speed rail and
nificant number of EU member countries. of exports from other Asian countries. shift away from the China, offer very at- it faces significant structural challenges.
highway links across the region, improving
With domestic growth and market expan- Over the next decade, the Asia-Pacific traditional growth en- tractive opportunities land transport links from Northeast Asia However, it also has its price, as Asian
sion limited, Europe’s focus is again turning region is projected to remain the fastest- gines of exports and for a wide range of countries will increasingly challenge the
to Southeast and South Asia, Central Asia
to the countries along the Silk Road as the growing region of the global economy, investment, towards export industries. post-World War Two status quo of a global
and also to Western Europe. Air transport
fulcrum of opportunity in the 21st century. with both China and India growing at an domestic demand- The Prime governance model dominated by the U.S.
infrastructure is also being rapidly devel-
Indeed, the economic regions com- average rate of around 8 per cent per year. driven growth. Rapid Minister of Luxem- and Europe.
oped across most of
prising the New Silk Road, including China, Within 15 years, by the year 2025, Chinese growth in wages is bourg, Jean-Claude Asia, with significant
expected to support Juncker, stated at the investment in airport
Europe’s New Silk Road strong medium-term Horasis Global China infrastructure and
'$0GROWTH AVERAGEANNUALPERCENTAGECHANGE expansion in consum- Business Meeting
3OURCE)(3'LOBAL)NSIGHT rapid expansion of
er demand, helping in November that Asian airline capacity
6 to boost the share of “Europe’s 21st cen- projected over the next
consumption in GDP tury will be shaped
5 twenty years. Oil and
over the long term. by emerging market gas pipeline networks
4 Mr Liang Xinjun, Vice Chairman economies, of which China’s economy from Central Asia
and CEO of the Fosun Group, a leading will be by far the most important. For the
3 and Russia to China
Chinese conglomerate, expects the Chinese EU, China already is a key trade partner, are also the focus of
consumer market to grow very strongly ranking second only to the U.S. China and
2 ambitious development
over the coming decades. Speaking at the the EU are strategic partners, with EU- projects.
1 Horasis Global China Business Meeting
in November, he projected that “within 10 Rajiv Biswas is a professional economist with extensive experience in Asia-Pacific macroeconomic, trade and financial market issues. He is
0 the Asia-Pacific Chief Economist for IHS Global Insight. His previous experience includes working as the Director for Southeast Asia for The
years, China will become the world’s larg-
2001-05 2006-10 2011-2015 2016-2020 2021-25 Economist Group and as Executive Director for Asia-Pacific Country Risk for UBS. He has also worked as a senior economist for the Com-
est consumer market. If China’s GDP grows
monwealth Secretariat and as an international economist for the Royal Bank of Scotland. He is a graduate of the LSE and Imperial College,
%5!SIA 0ACIlC at between 7 and 8 percent per year over London University.
the next five to 10 years, domestic demand
44 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
A STRATEGY FIX FOR MNCS
Prof. Jianwen (Jon) Liao of Cheung Kong Graduate School of Business explains
what MNCs can learn from P&G, GE, and Yunnan Baiyao.
In recent years, the MNCs more grassroots approach. In third-tier and
that once dominated the China fourth-tier cities, their salesmen go store
market have begun to lose by store to make sales. Johnson & Johnson
failed to go the last mile and it has lost 15
ground to Chinese competi- percent market share to Yunnan Baiyao
Dr. Jochen Wirtz
Associate Professor of Marketing, and Direc-
Dr. Yılmaz Arguden
Chairman, ARGE Consulting
Gour Saraff
Managing Director Spain Chapter
tors. What brought about this over the last three years. And its market
tor of the UCLA – NUS EMBA Rothschilds Turkey EICC (European India Chamber of
Commerce SPAIN-Chapter)
change? share is continuously declining.
MNCs typically adopt one of two Taking this bottom-up approach,
strategies when they expand into China. Chinese companies are acting as disrup-
Some pursue a global strategy that focuses tors in many industries. Look at Huawei. It
on scale and efficiency. These companies went from the countryside to major cities,
centralize operations such as marketing and then to Southeast Asia, Africa and the
and R&D. Others take a multi-domestic Middle East. And it’s now penetrating the
approach that focuses on responsiveness mainstream telecommunications market in
and localization, with decentralized local North America and Europe. Huawei went
from the bottom to the top.
JIANWEN (JON) LIAO
Rajiv Biswas
Director, Southeast Asia
Silvano Coletti
Chief Executive Officer
Tunku Zain Abidin Tuanku Muhriz Paul W. Bradley
Global Advisory Board Chairman & CEO
Ravi Chaudhry
Chairman Representative
operations.
President
Southeast Asia Corporate CHELONIA S.A. Institute for Democracy and Arshiya International Ltd CAPRICA CeNext Consulting & However, the mindsets behind the two What can multinational companies
Network, Singapore Economist Economics Affairs, Malaysia International Investment Pvt Ltd
Intelligence Unit strategies remain the same in that MNCs do to remain competitive? *IANWEN*ON ,IAO0ROFESSOR,IAOIS!DJUNCT
try to extend the business models and core Fundamentally they have to change 0ROFESSOROF3TRATEGYAND)NNOVATIONAT#HEUNG
competencies they have already estab- the way they do business and make China +ONG'RADUATE3CHOOLOF"USINESS(ISPROFES
lished in developed countries to China. And SIONALEXPERIENCESPANSACROSS.ORTH!MERICA
their second hometown, rather than just AND!SIA#URRENTLY 0ROFESSOR,IAOALSOSERVESAS
in both cases, the MNC business model in being visitors here. When these two busi- AHIGHLYSOUGHTAFTERCONSULTANTONSTRATEGYAND
China usually targets top-tier customers ness models clash in the middle, there is INNOVATIONFORMAJORCOMPANIESIN#HINAAND

Register Now first. Then they have tried to take a “top-


down” approach and leverage economies
of scale so that the products or services
just one choice -- develop a new business
model for the Chinese market that is differ-
-.#S#HINA OPERATIONS

Carla Cico www.aseanaffairs.com/premium Philipp Dera become accessible to customers in lower-


ent from what they have gotten used to in
other markets.
J&J FAILED TO GO
CEO
Rivoli S.P.A. Italy
Hundreds of articles by business leaders,
Consultant, Head Berlin Office
GBP INTERNATIONAL
priced markets. If you look at very successful MNCs, THE LAST MILE AND
thousands of pages of archived
And what has been the strategy of
Chinese companies?
they have been willing to change their
strategy in China. They acquire a local Chi-
HAS LOST 15 PER-
materials, all back issues of Asean Affairs Chinese companies take the opposite nese brand and then compete against the CENT MARKET SHARE
magazine and much more. approach -- the bottom-up approach. In Chinese. That’s one way to stay competi-
tive in the China market. Another way is
IN THREE YEARS.
the very beginning, Chinese companies
No one knows Southeast Asia better than had a hard time competing in tier-one and to develop a low-end brand of product to GE CEO Jeff Immelt wrote an article
AseanAffairs. tier-two markets, so they typically attacked compete against Chinese companies. recently in the Harvard Business Review
the lower end first. But these companies Originally, P&G Rejoice products cost about GE’s experience in China producing
have gradually started to move up the value more than 20 RMB. Why did it decide to de- a low-end ultrasound scanner for hospitals
Mr. Aloysius Wee Johnny C. Chiang
chain. velop products that sell for only 9.9 RMB? in the countryside, a process he referred to
Managing Partner Minister
Dacheng Central Chambers LLP Taiwan Government Information Office Meanwhile, the problem for MNCs It wanted to compete with local produc- as reverse innovation. The typical ultra-
taking the top-down approach is that they ers. P&G basically developed the Chinese sound scanner in the United States cost
often haven’t been able to make their shampoo market in the 1980s when we $150,000, so GE could only sell the equip-
product cheap and competitive enough didn’t have any local shampoo. By 2001, ment to tier-one hospitals in Beijing and
to penetrate down into the larger market. fifty percent of the shampoo market had Shanghai and other major cities.
Sooner or later, they hit a wall in the mid- been taken over by local makers. There was a big market of consum-
tier market, beyond which they have no So P&G had to do something to ers who could not afford this, so GE
competitive advantage. compete against competitive prices. It established a research center in Wuxi with
What is worse, in industries where had two choices. One was to develop a the goal of researching and developing
MNCs used to have a competitive advan- cheaper product, but at a huge cost -- brand a lower-end portable scanner hooked up
tage, such as medical equipment, we’ve dilution. The other choice was to develop with a laptop. They created something that
Al Costa Ralf Hundertmark Dr Richard David Hames TARA KIMBRELL COLE Rana Kapoor a second brand for direct competition
Director Senior Vice President Distinguished Professor Founding CEO Founder/ Managing Director & CEO seen the emergence of Chinese companies. is completely new, extremely cheap and
Alkol Biocombustibles Business Development and Founding Director and Executive Coach YES BANK Limited with Chinese producers. P&G wanted to
AIT Hames group synovations® They’ve improved their manufacturing, de- accessible. That approach is completely
catalyzing
y g innovative thought
g
sign and marketing. They’ve become more leverage their brand, so it went ahead and different from the company’s conventional
h
competitive in higher-value areas that used produced a shampoo for just 9.9 RMB. In ultrasound scanner, which emphasizes
to be dominated by MNCs. the end, it was willing to suffer some brand sensitivity and image clarity.
Take the example of Band-Aid and dilution to be able to better compete with Now this product, which was de-
[domestic bandage company] Yunnan Chinese companies. veloped for the Chinese countryside, has
Baiyao. Johnson & Johnson’s strategy is to Are there any examples of foreign become a sensation in the U.S. market. It’s
have their salespeople dress in nice shirts companies developing successful very portable, so it’s become popular with
and suits while staying in nice hotels. So new strategies to remain competi- doctors working in places where accidents
Saumil Shah Daniel J. Brutto Steve McCoy what does Yunnan Baiyao do? It takes a tive in the China market? occur.
Managing Director President Founder and Principal
46 EnerGaia
-AGAZINEs.OVEMBER $ECEMBER UPS International Counterpoint Consulting Sdn The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
Bhd, Malaysia
CHINA STILL AWAITING CHINA’S NEW WORLD ROLE
As China assumes a new world role, Aloysius Wee suggests that China needs

TRANSFORMATIVE LEADERS
to engage its neighbours at the human level

Peter Drucker was wrong – at least in his predictions about Chinese business leadership, says
Strategic Management Prof. Binsheng Teng of Cheung Kong Graduate School of Business
THE DRAGON EMERGES
China is poised to become the next
THESE ARE EXCIT-
world superpower. It is already the second ING TIMES, WHERE By

In the 1990s, Austrian economist Peter rate strategy, at present there are very few
largest economy in the world and being in
this preeminent position, China finds itself
ASIANS LIVE IN A Aloysius Wee

Drucker predicted that within the next 10 enterprises in China that factor ethics into in an awkward situation. The United States WORLD WHERE Agreement that came into effect this year.
But a definitive agreement between India
years, China would be producing its own
management luminaries. These new leaders
their corporate strategies.
But one such example I have found
is now engaging China in a way that shows
it recognizes China’s arrival on the world
ECONOMIC AND and China has not been reached. Once a de-
would generate innovative strategies and is Hi-min Solar Energy Group, which has a stage. From human rights to the renminbi POLITICAL FOCUS IS finitive agreement is reached to link India,
China and Asean, we will see the birth of a
new frameworks for thinking about busi-
ness, he said. Regrettably, we have yet to
remarkably enlightened approach to doing
business. Hi-min president Huang Ming has
revaluation to regional politics, it seems
that the U.S. is making its voice heard on
SHIFTING BACK TO trading and economic zone with a tremen-
see the emergence of the high-level think- said the company’s mission is to develop China’s moves. The world as we know it is THIS PART OF THE dous potential for growth.
Apart from the physical infrastructure,
ers Drucker envisioned, and I’m relatively
pessimistic about the near-term outlook.
a profitable business out of a technology
that helps protect the environment and by
changing.
WORLD. there must be a legal infrastructure to sup-
FLIGHT OF FANCY AND port trade and commerce. Already Asean
In November 2009, I took Cheung extension, benefits humanity. Both the busi- power generation and sludge clearing
FIREPOWER ministers at recent Asean summits have
Kong’s EMBA class to Japan for a trip. ness and administrative sides of the com- equipment. They have also participated in
China’s strong military presence in recognized this and have started working
With great interest we visited Kyocera, a pany operate on this principle. I believe various peacekeeping assignments under
the region has not only caught the atten- towards integrating and streamlining the
company founded by Kazuo Iwamori, one leveraging socially beneficial technology to the auspices of the United Nations.
tion of the U.S. but also its neighbours who legal infrastructure to support the arrival
of Japan’s so-called “four sages” of manage- create profitable business is an incredibly BINSHENG TENG Politically, China is already assert-
are aware of the military build-up. China is of the Asean Economic Community in
ment, whose business ideas are grounded valuable endeavor. If more business leaders ing its dominance in the region. In recent
now reasserting herself in the dispute with 2015 and Asean trade with the rest of Asia,
in the basic notion of mutual respect. I began to employ this approach, it could years, Chinese leaders have made many vis-
Japan, Vietnam, Taiwan and the Philippines particularly China and India.
was struck by the similarity between his set a powerful example for other Chinese "INSHENG4ENGIS!SSOCIATE$EANAND!SSOCIATE its to strengthen ties with its Asian neigh-
principles and the traditional Confucian companies. 0ROFESSOROF3TRATEGIC-ANAGEMENTAT#HEUNG
over territories in the South China Sea. It LINKING ASIA – PAX ASIANA
bours such as India, Vietnam, Malaysia and
concepts of benevolence and charity. It’s important for companies to create +ONG'RADUATE3CHOOLOF"USINESS(EISALSOA was not too long ago that an economically Apart from linking these regions
Singapore. China is fast replacing the U.S.
Sadly, we don’t yet see these ideas positive environments, and this represents 4ENURED0ROFESSOROF3TRATEGIC-ANAGEMENTAT weak China was invaded by Japan and ex- through favourable trade agreements, there
as the dominant Big Brother in this region.
reflected in Chinese business models. In- the first step towards broader changes. 'EORGE7ASHINGTON5NIVERSITY!NAUTHORITYON ploited by France, Germany, Great Britain, should also be the infrastructure to physi-
STRATEGICALLIANCES 0ROFESSOR4ENGSERVESONTHE The subtleties are poignant and at the same
stead, entrepreneurs and top managers are But for businesses to truly transform their and Russia. cally link these regions together. There
EDITORIALBOARDOF)NTERNATIONAL%NTREPRENEUR
driven to maximize profits for themselves, cultures, we need powerful entrepreneurial SHIPAND-ANAGEMENT*OURNAL are discussions between various countries
both on a personal and a corporate level. leadership. to link their current rail networks to each
Such are the current realities of modern Consider Japan’s so-called “four sag- Further economic development in and other to enable seamless train travel from
business culture in China. es,” of whom Iwamori is one. Each of these after the 1990s brought about a focus on Singapore, through Malaysia, Thailand and
To be sure, we should approach business leaders basically made his name the business practices of the United States. Vietnam to China, and a possible route via
the situation with an element of humil- in the 70s. At the time, Japan was twenty In addition, China’s own business culture Cambodia and Myanmar into China. When
ity. We still lag behind other markets on years into its post-war development, but and traditions, including Confucianism and such a network is established, cross-border
many fronts, and we need to take gradual, taking a longer view, the country’s theories local mutual aid associations, have also trade will also increase.
practical steps to bridge the gap. We need of modern business can be traced back to contributed to the current business climate. Regional flights are already devel-
to work on resolving problems within our the Meiji Restoration. So basically, busi- Some may look to Japan as the most oping, fuelled by the rise in budget and
legal and regulatory systems, while at the ness models in Japan can be said to have likely model for corporate and economic private airlines across Asia. Air travel has
same time strengthening corporate ethics. over 100 years of continuous and unbroken development, due to our long shared cul- increased significantly in the last decade
Only then can we really focus on better development and progress. tural history, but I disagree. We may have due to the rise of budget and private air-
business practices. China’s era of modernity, having a number of cultural similarities stemming lines and also governments more receptive
Our current state of affairs doesn’t begun in the late 19th century, can also from extensive interaction in the Tang to an open sky policy.
inspire optimism. From my standpoint as claim more than a century of history, and Dynasty period, but when it comes to us These are exciting times, where
an academic who concentrates on corpo- since economic reforms began 30 years as people, I think we’re much closer to the Asians live in a world where economic
ago we’ve experienced a period of ex- Americans. The Japanese have a strong and political focus is shifting back to this
tremely rapid growth. Yet as a result of
YET AS A RESULT OF various upheavals in our social history, the
tendency to be group thinkers, whereas I
believe individualism is deeply engrained in
ENGAGEMENT AND
RESPONSIBILITY
time disturbing. As China rises to become
a major economic power, its influence will
part of the world. We are looking at a Pax
Asiana where we will see improved wealth,
VARIOUS UPHEAVALS development of corporate culture in China the Chinese people. For a start, China needs to engage extend to the political sphere as well. peace and prosperity in Asia through
IN OUR SOCIAL HIS- has been severely disrupted a number of
times over this period. We’re still focused
Thus, I believe we need to aim for a
Chinese corporate culture that lies some-
its neighbours at the human level. China
has been taking active steps to participate
In the area of trade and commerce
where China is now leading Asia, it has to
cooperation, collaboration and respect for
each other. To achieve this, there must be a
TORY, THE DEVELOP- on copying other countries and remaking where between Japan and the United States in humanitarian projects involving the find a role as a leader and not as a competi- leader, and in the way things have evolved,
MENT OF CORPORATE ourselves. It will take time to forge our own
business principles.
and is infused with our traditional values.
In the meantime, we must wait for the
military and medical units. In the recent
heavy floods in Pakistan in July this year,
tor. It has to position itself as pulling or
pushing the various economies along rather
this role has landed in China’s lap. How it
manages this new role will determine its
CULTURE IN CHINA The path we have taken in develop- emergence of a new generation of innova- the People’s Liberation Army of China than competing with them. A step in this destiny and the fate of the people that it
HAS BEEN SEVERELY ing our commercial climate and culture is
unique. When we established the People’s
tive business leaders before we can know
precisely what shape the Chinese business
provided the Pakistani military with tents, direction is the Asean-China Free Trade can and will influence.

DISRUPTED A NUMBER Republic, we relied heavily on the advice model will take. !LOYSIUS7EEISTHE-ANAGING0ARTNEROF$ACHENG#ENTRAL#HAMBERS,,0 3INGAPORE WHICHIS3INGAPORESlRST3INGAPORE #HINAJOINTVENTURELAWlRM
OF TIMES OVER THIS and practices of the U.S.S.R. Later, when
we opened up to the world in the 1980s,
This article has been translated from
Mandarin. It was originally published in the China
(EHASMORETHANYEARSOFEXPERIENCEINDEALINGWITHCROSSBORDERTRANSACTIONS PARTICULARLYIN#HINA )NDIAANDACROSS!SEAN!LOYSIUSALSOSITSONTHEBOARD
OFVARIOUSLISTEDCOMPANIESANDCHARITABLEORGANIZATIONSANDISLEGALADVISORTOVARIOUSNON PROlTENTITIES(EISAREGULARSPEAKERATREGIONALEVENTSANDWRITESFOR
PERIOD. we aimed to follow in Japan’s footsteps. Business Journal.
VARIOUSPUBLICATIONSONLEGALANDCROSSBORDERISSUES

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OUR PROGRAMME FOR THE FUTURE:

We give entrepreneurs the capital


CHINA’S ROAD TO DEMOCRACY
Would China’s political reform necessarily lead to democracy? Would democracy with Chinese to invest in developing countries.
characteristics develop and finally evolve into an established form of government that can
deliver more meritocracy, equitability, prosperity and happiness than democracy?
It has been just over a year since future. The consensus in China is that its
China Ethos magazine hosted a debate on road to democracy has to be an incremen-
China’s road to democracy at the English tal one, a continuous and gradual historical
speaking Union in London that attracted process that should take its own course
tremendous interest and participation. without any pressure from outsiders. Radi-
It was during the recess period that I re- cal political reform, they argue, will inevita-
member being overwhelmed to the point bly create chaos.
of boredom by the ubiquitous discussions
from the media and the experts on the eco- Chinese dynasties on average alter-
nomic crisis we were facing. nated every a few hundred years, and no
one is more aware of that than the CCP. To
I remember telling a friend enthusi- stay in power the ruling party will have to
astically that the debate would be about evolve, although not necessarily into a de-
China and democracy, to which he replied, mocracy, and deliver what Chinese people
“You mean China and its lack of democ- want: meritocracy, equitability, prosperity
racy.” Indeed, China and democracy are and transparency. Democracy is a form
usually incompatible, at least in the eyes Lili Zhao of government that should be viewed as a
of the West. The general perception is that -ANAGING%DITOR means rather than pursued as an end. The
China’s phenomenal achievement has been #HINA%THOS majority of Chinese people are non-ideolog-
primarily in the economic sphere, while ical pragmatists who simply want to live in
political reform has been sluggish. This a fairer, freer and richer society, whether it
,ILI:HAOISTHE-ANAGING%DITOROF#HINA
is untrue. From Mao’s totalitarianism to %THOS AQUARTERLYBUSINESSANDLIFESTYLE is a democracy with multiparty elections or
Deng’s authoritarianism to the current lead- MAGAZINEFOCUSEDON#HINA3HEWASBORNIN a democracy with Chinese characteristics.
ership’s socialist approach and discourse #HINAANDEDUCATEDINTHE5+3HEHOLDSA
on democracy, China has undergone a dra- DEGREEINlNANCIALECONOMICSANDISALSOA
And what of the Chinese generation
matic political transformation. QUALIlEDlNANCIALADVISOR that is to propel the shift towards democ-
racy? The post-80s generation, a term
“Democracy with Chinese character- widely used for people who were born
UK population, are members of the coun-
istics” has been hailed as the only logical from 1980 to 1989, is a subject which I am
try’s ruling party: the Chinese Communist
path to China’s road to democracy by its particularly passionate about and is of per-
Party (CCP). Since 1997 CCP membership
advocates and regarded as Chinese propa- sonal relevance. Estimated to be around
has grown 13 percent, far greater than the 5
ganda by its opponents. This has provoked 200 million, we are often seen as apolitical
percent population growth during the same
some to question what democracy means and money-driven. This, I have to say, is a
period. One is indeed justified to be scepti-
for the Chinese. Others in the West are generalisation well justified. Life for the
cal about the CCP’s full embrace of democ-
justifiably concerned that China may modern Chinese urbanite is good and they
racy, and the distinctly remote likelihood of
fundamentally change the perception of – are free to pursue their goals provided they
a multiparty system.
thereby challenging the Western model of don’t attack the government.
– democracy. But does this single-party rigidity pose
The increasing tide among the post-
a problem to its people? Not necessarily!
However, Chinese leaders, at least in 80s generation is to have a strong and
their talk, seem to acknowledge that there While there is a general call for more united China. That doesn’t mean we are
is a universally accepted meaning of de- freedom of speech, separation of powers, devoid of dissatisfaction about the govern-
mocracy. Premier Wen Jiabao was quoted equality, accountability, and transparency, ment and are completely oblivious of the
in 2006 as saying, “When we talk about de- multiparty elections is not expected or, injustices taking place in China.
mocracy, we usually refer to the three most indeed, desired by China’s mainstream
important components: election, judicial A fairer, freer, richer and more trans-
intellectuals and public in the foreseeable
independence, and supervision based on parent society is more of a concrete and
immediate concern for most Chinese peo-
checks and balances.” A FAIRER, FREER, ple than the distant concept of democracy.
He has recently reaffirmed his stand
for political reform both at home and
RICHER AND MORE Whether this can be achieved through an
innovative and disciplined one-party rule
aboard though his liberal democratic talk TRANSPARENT SO- or by resorting to western-style democracy
was partly censored by his own press.
President Hu also repeatedly stated that CIETY IS MORE OF A remains to be seen.

there will be no modernisation without


democracy. Those words are indeed en-
CONCRETE AND IM- There is an important consideration
that must be borne in mind for all those
couraging, but critics cast their doubt on MEDIATE CONCERN who are impatient with China’s democra-
tisation process. After centuries of humili-
Anyone who invests in developing countries and emerging economies will enjoy a stronger position
the party’s genuine commitment to democ-
racy and see statements like these more as
FOR MOST CHINESE ation and a mere three decades of reform
in tomorrow’s competitive environment. We support enterprises from the initial idea until they

political rhetoric to win public support and PEOPLE THAN THE and opening-up, Chinese people haven’t
savoured, indeed many of them haven’t
achieve their goal: whether in infrastructure, industry, agribusiness or the financial sector – we
provide investment capital, competent advice and plenty of knowhow. Visit www.deginvest.de.
thereby strengthen party power.
DISTANT CONCEPT even tasted, wealth long enough to rank
Or call us on +49 221 4986-1432.
China has more than 1.3 billion peo-
ple, of which 70 million, more than the total OF DEMOCRACY. democracy above it.

 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia


Our business is developing. .OVEMBER $ECEMBERs-AGAZINE
MANAGING INVESTMENTS INS
NSIDE AND OUTSIDE OF CHINA
CHINA IS WORKING VERY HARD TO
IMPROVE ITS LEGAL STRUCTURE AND
FINANCIAL MARKET TO ATTRACT FOR-
EIGN INVESTORS. HOWEVER, WHILE IT IS
EASY TO ESTABLISH LAWS, IT IS DIFFICULT
TO ENFORCE LAWS, GIVEN THE “NEW-
NESS OF LAWS” TO THE CHINESE CON-
TRACTING PARTIES AND THE LARGENESS
OF THE CHINESE ECONOMY.
Alyce Su, Ph. D. David Huang Stan Fung Andre Loeskrug-Pietri - STAN FUNG.
&OUNDER %CONOMIC#ONSULTANT -ANAGING$IRECTOR #%/&OUNDING-ANAGING0ARTNER
#HINA1UEEN#APITAL 484$#OMPANY &AR3IGHT6ENTURES !#APITAL!SIA
system, and no solid foundation as well. Su: I usually have no comment on a
Fung: China is working very hard to ranking offered by any entity. Any entity
China Queen Capital FarSight Ventures TM improve its legal structure and financial of real substance does not need to offer
market to attract foreign investors. a ranking of others to boost its own
However, it is easy to establish laws influence. What is the cost to offer a
but it is difficult to enforce laws, given ranking? The same cost as publishing
!LYCE35 0H$ &OUNDEROF#HINA1UEEN#APITAL $AVID(UANGWASAPPOINTEDASALIFETIMESENIOR -R&UNGHASMORETHANYEARSOFEXPERIENCEIN !NDR£,OESEKRUG 0IETRI  ISTHE&OUNDING the “newness of laws” to the Chinese words of the same quantity.
 HASHELDINVESTMENTPOSITIONSAT&LINT ECONOMICCONSULTANTBYTHE"EIJINGGOVERNMENT VENTURECAPITALINVESTINGANDYEARSOFEXPERIENCE -ANAGING0ARTNEROF!#APITAL!SIA ANDHASlFTEEN contracting parties, and the largeness of Huang: So what? Heritage Foundation put
2OCK'LOBAL)NVESTORS '!-  IN$AVIDESTABLISHED484$#OMPANYINLATE WITHEMERGINGANDESTABLISHEDTECHNOLOGY YEARSOFPRIVATEEQUITY AUTOMOTIVEANDAEROSPACE the Chinese economy. Thus, it is up to China at 132 even below Yemen, Rwanda,
'OLDMAN3ACHS  AND0ACIlC)NVESTMENT ASANINTERNETCOMPANYTHATOFFERSPERSONAL COMPANIES3TANIS-ANAGING$IRECTOROF&AR3IGHT EXPERIENCE"ASEDIN"EIJING ANDBOTHA'ERMANAND
-ANAGEMENT#OMPANY0)-#/    SERVICETOHELPPEOPLETOKNOWTHEMSELVESBETTER 6ENTURES &RENCHNATIONAL HEISALSOTHE.ATIONAL#HAIROFTHE the buyers to perform the appropriate due Columbia and so on. If I were the Chinese
0H$IN0HYSICSFROM#ALIFORNIA)NSTITUTEOF %UROPEAN0RIVATE%QUITY7ORKING'ROUPIN#HINA diligence, and to retain the right counsel government, I just skip their evaluation and
4ECHNOLOGY  in ensuring the proper legal framework do not even think about it. I cannot say that
and structures in transactions. With these they are doing this on purpose or they have
careful measures (which one should some bias on this issue, but I am sure that
Four experienced financial experts with extensive Chinese experience respond to questions about the invest
vestment scene in China and the rising exercise in any circumstance anyway), they can not see the real picture and they
level of Chinese investment in other countries.They are: Alyce Su, Ph.D., Founder of China Queen Capital; David
avid Huang established TXTD Company, investors can then exercise their rights if did not see the whole picture of China. I
situations turned bad. do not know what was the value of making
China
Stan Fung, managing director of FarSight Ventures, and Andre Loesekrug-Pietri, Founder and CEO, A Capital, Chi Loeskrug-Pietri: In all the countries this scale? It is easy to open a big mouth
of the world, you are always in a less and it is OK to be #132. It does not mean
Q: Does Danone’s experience investing if they are doing right. There are many successes. investor is, what do you do when a bond good foot when in a dispute with a local anything to me.
with local entrepreneur, Zong Qinghou, foreign yogurt brands in China and they André Loesekrug-Pietri: This major issuer fails to pay you, or your equity partner, because the local partner knows There is an old Buddhist saying: If a
serve as a warning to foreign investors? all live extremely well. Why do we think setback is a reminder that each country partner reneges on you? the rule of the game and has its networks, few blind men touch the elephant, none of
Qinghou took money and technology Danone lost the opportunity? Danone will has its own business culture, and that Su: For any debt investment, clearly there which allows better information. In case them are able to get the whole picture of
from Danone and set up a parallel not be a failure if they do not want to be. China is no exception. I think it should needs to be enough collateral, recourse, it becomes a public case, he will have an the huge elephant.
company. Eventually Danone settled And, I can hardly agree the statement not deter investors to come to China, in and collection mechanisms. For any equity easier way to get the public on his side. The Only when you are in China, can you
with Qinghou and lost an opportunity to that Qinghou took money and technology particular now when the domestic market partner, clearly one needs to know the fact that China has, on top of these facts, see the real China and the real business
be a player in the Chinese market. from Danone. I am sure that Danone is way is picking up massively. But a lot can be character of one’s partner. Hence control central and local governments frequently environment. I also know some other think
Su: If a foreign investor has the luxury to too smart to not let Qinghou took money learnt through this case: how important it premium exists. involved, makes these disputes sometimes tanks that put China as the #1 investment
go alone in China, then by all means. If one and technology from them. It is business is to be clear about each parties objectives; Huang: I am sorry to know that Danone more challenging to manage for foreign paradise. I do not even want to think about
must find a local partner, clearly one needs and it is serious business, no one wants how much unstable legal situations, and Qinghou could not work together investors. My personal golden rule is to their rank. Just see those huge/big/medium/
to understand whom one is partnering to lose. The issue is: United, they stand, especially for IP, should be avoided; how but one story cannot be an example of always remain very aware of alignment small/tiny companies are doing great
with. Mr. Zong QingHou’s entire generation otherwise, they both are losers or, at least important is that communication with unsuccessful experience. I am sure both of interests of all parties, and bring a business in China.
in China probably suffered more than any one of them will think that they are a loser. local governments, employees, consumers Zong and Danone have their own reasons strong differentiation in your products, Fung: There is a tendency for think tanks
foreign investor could imagine. Fung: When I work with foreign investors are done with a local touch and local or excuses, their own business values, services – even in your investment strategy. (such as The Heritage Foundation), the
Huang: Let me say this: To state that and partners in China, and for that matter, experts; and finally that involvement in the their own story of their time and their own Otherwise the competition will be too press and the public to compare countries
Danone lost the opportunity to be a player in any country, I always recommend operations is crucial, especially for foreign viewpoint of this case. It is not fair to make important to survive. based on indexes (such as the Index
in Chinese yogurt market is not accurate, patience, caution, and not rushing into a JV firms, in order to understand better the a judgment because we only see a small of Economic Freedom) without taking
not even correct. China has 1.4 billion or working with the first interested party local way of doing business, track possible part of this iceberg. To be fair, they both Q:The Heritage Foundation, a U.S. think into account other factors that have
people and hundreds of yogurt brands (from both sides). If possible, work with misalignment of interests – and correct made mistakes in the past. If they start over tank, puts China at 132 in the world made countries different. Without going
including many many, foreign brands, a credible referrals. Even then, start small them while they are manageable. again, they will see a different result. Also, on its economic freedom scale, below into details on the 100+ factors used to
solid company like Danone will never be before growing into bigger commitments. if A fails to pay B, the most common reason Yemen, Rwanda, Columbia, and Niger. represent a country, I want to point out
a loser in the largest market in this globe This will enhance the opportunity for Q: Basically, the question for a foreign is that they did not build up a reasonable What’s your opinion? that leading emerging countries such as
 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
MANAGING INVESTMENTS INSIDE AND OUTSIDE OF CHINA
Going forward, I think the situation in international M&A and a low use of
lasting friendships.” will change with Chinese family-owned advisors which could complement these
businesses with overseas non-Chinese missing skills. The second weakness is a
Q: Many investment advisors family-owned businesses, as most current lack of talents to manage foreign teams.
recommend putting no more than generation of resourceful families are Chinese firms are still not at the top of the
5 percent to 10 percent of your somewhat commonly global in nature.” list of employers for international talents
investment dollars in this sort of an Huang: “I have to say this: There is huge – in parallel and linked to the fact that it
emerging market (China). Do you agree? gulf between any two cultures, languages, is very difficult for foreigners to adapt to a
Su: “Owning the right companies “in companies, countries even between two Chinese corporate culture. Lastly, it may be
or about China” deserves more than 10 people because they are speaking different easy to ‘write the check’, but the challenge
percent of almost any portfolio mandate for languages, living in different geographic lie in the integration and capturing the
the next decade. Clearly I disagree.” locations, under different political arenas, expected synergies, which require strong
Huang: “It is a tough question. Many swimming in different business pools and process, industrial and cross-cultural
investment advisors equals who? have different values of life. skills.”
I will say this: Investment is always The issue is to find the way to work
risky, the issue is how to value the together, just like marriage: Make love, not Q: Chinese investment in the west faces
three primary challenges. First, the Alyce Su, Ph. D., Founder, China Queen Capital
percentage of risky. If you are smart war.” speaking at the New Frontiers for Overseas
enough to analyze the market, the future Fung: “Cross-border investment and political pressures and name-calling Investments session during the Global China
and the potential, you will minimize the merger/acquisition is difficult! There are likely to result from any worthwhile Business Meeting 2010 in Luxembourg.
risks. Of course, there is no blind investor. issues related to cultural differences, and high-profile activity between an
learn and you have to have the will to learn.
I hate to blame or laugh at those language barriers, differences in established company and its Chinese
At this point, Chinese do a better job of this
losers and hate to state that they are expectations, differences in legal and suitor. Second, Chinese companies
Reviving Economic Growth session chaired by Alex Wan (2nd from left), China CEO Roundtable; than other nations.
Senior Advisor of China Daily, China at the Global China Business Meeting 2010 in Luxembourg. not smart enough to control their own regulatory frameworks, corporate culture have to prove that they can adapt their
“Make peace with different people,”
investment. If you failed, do not blame the differences, difficulties in cross-border management cultures to the western
Confucius stated 2500 years ago.”
India, China, Brazil, South Africa, began have never been in a country and you do market, do not blame the country, face integration and consolidation, etc. These way of doing business.Third, the ability
Loeskrug-Pietri: “I fully agree with this
their reforms only in the past two to four not have staff in an unfamiliar soil, do you toward the wall and blame yourself. issues are faced not only by Chinese to integrate two cultures and execute a
analysis. Chinese firms should be aware
decades, while developed countries such have the guts to throw your money in? If There is no one can win his/her companies investing abroad, but are business plan that works globally. What
that they are like hot potato and their
as the United States, Hong Kong and you do, you are insane. investment 100 percent in human history, also encountered by foreign companies are your thoughts on this?
image is not necessarily good in the public
the United Kingdom, have decades and Think about this: US stock, UK stock, as I know. As a smart investor, you invest investing in China. Beyond these issues, Su: “The Chinese company that bought the
opinion: this is first and foremost because
decades of development experience behind Japan Stock and you name all the stock the future, not the past.” there are additional elements of mistrust IBM-PC business offered a good example
these firms are still relatively unknown to
them – thus making direct comparisons markets, which one is not tough? The funny Fung: “Investment advisors should assess and misunderstanding between government to this comment, but I think this is case-
the general public and sometimes even
irrelevant. If one insists on using an index, thing is: when you make money from the the Return Objectives, Risk Objective, and and government, and between government dependent.”
to the business community. Remedies
I would rather look at the trend of the stock, it is not tough, if you lose, it is tough Constraints (such as Time Horizon, Taxes, and the public (in both directions).” Huang: “First things first, as I know,
are : minority investments (raising fewer
country rankings over a long period of time and it is getting tougher and tougher. Right? Liquidity, Legal and Regulatory, and Unique Loeskrug-Pietri: “I fully agree. Chinese Chinese people are learning, at least they
eyebrows since there is no change of
in order to draw meaningful (but yet not My answer is: Harry is very right, but, Circumstances) of their clients before investors face multiple challenges when are willing to learn more. If you knew
control, nor strategy), co-investments
complete) conclusion.” all the stocks are tough, not only Chinese proposing investment recommendations investing abroad. And this is mainly due a Chinese company and an American
with local firms – like us – who will help
Loeskrug-Pietri: “Regarding the Heritage stocks.” and recommending asset allocations. to the fact that while China is one of the company doing business together you will
the Chinese investor be more comfortable
Foundation, and without being an expert of Fung: “This is just common sense. Will Thus, without knowing the specifics of an largest exporters in the world, it is still realize one simple thing: almost all Chinese
about the target company before the deal,
their criteria, I think this can be explained you invest in Brazilian companies, individual or investment entity, it is difficult at an infant stage regarding international can speak English unfortunately, only few
navigate the local intricacies (a sort of
by the fact that China is still very much Indian companies, or even United States to assess the recommended allocation investments. OECD countries have in Americans can speak Chinese and they
‘reverse JV’ as a reverse to what happened
influenced by its central planning, which companies without having done an in-depth in emerging markets. In the long run, average the equivalent of 27.7 percent of have to use an interpreter and most of them
in China for 20 years) and finally a strong
has to be recognized as pretty effective. due diligence and analysis on the regions, stock prices reflect growth prospects, and their GDP invested abroad. China has only do a lousy job.
capacity to create value for the invested
In private equity, you would say that the the countries and the companies? Are discount risk attributes of countries and 2 or 3 percent, including investments in It is not easy to understand a different
company : these deals need to make strong
‘Track-record’, i.e. the capacity to deliver you going to rely on third party reports to companies within those countries. If one resources, which used to represent 2/3 political environment but it is not an
strategic sense, in order to be obviously
on your promises of Central Planning make critical investment decisions? Of expects emerging markets to continue their of this pot. This means a low experience excuse for not working well. You have to
positive for all parties.”
has been remarkable, and that the Five course, the answers are NO and NO. Given rapid growth, one should participate in
Year Plan is a great tool to anticipate the that said, there is always a home-biased their growth through investments in those
sectors that will be strongly developed. In advantage for investors when they are markets. However, the exact allocation
some areas requiring a long term vision closer to the companies and can visit the should be case dependent.”
and heavy investments, this is a real tool companies locally; but then there is also Loeskrug-Pietri: “I don’t. Considering that
for investors. On the other side, being in an advantage of being farther away so China once represented 25 to 30 percent
sectors less favored by the plan makes you that investors can get a better sense of the of the world’s GDP, that you have here
swim against the tide – difficult.” markets and the competition. You have to some of the most entrepreneurial talents,
do both.” and that in 2009 alone, 50 percent of the
Q: “Unless you live there or have a staff Loeskrug-Pietri: “I fully agree. And growth, in value, came from this country,
of analysts that does, making consistent for a simple reason, China’s years have I let you do the math if 5 or 10 percent is a
money buying individual Chinese stocks to be counted in multiples, i.e. things high enough allocation.”
is a tough game.”-Harry Domash. Please change in China in one year as fast as
comment. Q: One of the difficulties when Chinese
in 3, 5 or 7 years in the West. Holding
Su: “I think it’s true anywhere that if one companies invest abroad is the huge gulf
boards twice a year, coming here every
wishes to make consistent money one at in corporate culture and often a degree
quarter, flying in and out of fancy hotels
least needs intimate knowledge with one’s of negativism toward China on the part
will not get you to the heart of the action
investments, but having local presence of politicians. What’s your view on these
– the daily transformation of society
to making consistent money in China is a issues?
and business, new consumption habits,
sufficient but not a necessary condition, an Su: “China outbound acquisition started
trends and gossip, evening drinks with
important logical distinction.” mostly with cash-rich State Owned
partners keeping you updated on the latest
Huang: “Harry is 100 percent right, if you Enterprises, hence the previous episodes. Chinese Private Investors: Needs and Strategies session chaired by Boris F.J. Collardi, Chief Executive Officer, Julius Baer Group, Switzerland at the
investment opportunities and building long Global China Business Meeting 2010 in Luxembourg.
 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
SUSTAINING GRO
ROWTH IN CHINA
Analyzing China’s growing economic strength and how it can be sustained
ined without increasing, and even while reducing, environmental damage

Karen Tang Jim Zhang Jeffrey Chen


%XECUTIVE$IRECTOR -ANAGING$IRECTOR #HAIRMAN#%/
"ETTER(ONG+ONG&OUNDATION .ATURE#ONSERVANCY .EO0AC,IGHTING'ROUP Jim Zhang (Left) Managing Director, Nature Conservancy and Karen Tang (3rd from Left) speaking at the Quest for Sustainability session during
the Global China Business Meeting 2010 in Luxembourg.
Q: With 1.3 billion people squeezed Conservancy was able to assist the Chinese not just environmental laws, but most laws,
into a country smaller than the United government on emissions in the forestry need close monitoring. However, with the
States, is there any hope at all for sector and was working with local govern- success that China has been demonstrating
sustainability in China? ments in Sichuan and Inner Mongolia to in the past two decades, once they have the
Jim Zhang feels that pursuing sustain- restore forests, Jim Zhang said. will/target, they can make it.”
ability is the only option for China and the Jeffrey Chen: “These are very complex is-
Q:The desert is sweeping into China’s
Chinese government. The consumption rate sues. I think that developed countries have
valleys, choking rivers and consuming
of the average Chinese consumer is lower more experience and can do something to
-S+AREN4ANGWASAPPOINTEDASTHE *IM:HANGJOINED4HE.ATURE#ONSERVANCY *EFFREY#HENRECEIVEDHISCOLLEGEAND precious farm land, and the green walls
%XECUTIVE$IRECTOROFTHE"ETTER(ONG INAS-ANAGING$IRECTOROFTHE.ORTH POSTGRADUATEEDUCATIONAT.ATIONAL#ENTRAL than that of an average American, noted help China in this regard.”
to stop it do not appear to be working. Is
+ONG&OUNDATIONIN3HEISAVETERAN !SIA2EGIONCOMPRISING#HINAAND-ONGOLIA  5NIVERSITYASA3PACE0LASMA0HYSICS Karen Tang, and this might help China on
this a coming disaster? Q: Just over 15 percent of China is now
INMEDIAMANAGEMENTANDWORKEDASSENIOR "EFORETHIS *IMHADALONGCAREERASAPIONEER MAJOR ANDINHEJOINED%LECTRONICS the road to sustainability, she believes.
MANAGEMENTINPRINT-ING0AO 9AZHOU INTHE#HINESETELECOMMUNICATIONSINDUSTRY /PTOELECTRONICS2ESEARCH,ABORATORIES A: Both Jim Zhang and Jeffrey Chen protected as natural reserves; logging of
“The ‘Scientific Development Con-
:HOUKAN ELECTRONICS#HINESE4ELEVISION WHEREHECONSISTENTLYENGAGEDINSOCIALAND OF)NDUSTRIAL4ECHNOLOGY2ESEARCH)NSTITUTE said that in some areas, the “green wall” natural reserves has been banned since
cept’ incorporates a nation’s sustainable
.ETWORK ANDMULTIMEDIA(ONGKONG ENVIRONMENTALACTIVITIES )42) THEMOSTPRESTIGIOUSINDUSTRIAL approach was working, and adopting the 1998; and the government has pledged
4ELECOM)-3 (UTCHISON7HAMPOA'ROUP  RESEARCHANDDEVELOPMENTCENTERIN4AIWAN development, social welfare, increased
right technologies and policies could pre- to cut CO2 emissions intensity per unit
democracy and the creation of a har-
vent increased desertification. of GDP by 40-45 percent by 2020 from
monious society, and the concept is the
2005 levels. Will these measures work?
socioeconomic ideology of the Chinese Q:The disregard of the environment is
Jim Zhang: “Considering China’s determi-
government,” according to Jeffrey Chen. one of the major causes of the current
When western nations began developing their economic strength during the Industrial Revolu- However, he noted that the overpopulation severe status of China’s pollution. Is this
issue in China strains land, energy, water attitude changing in China?
tion, the sight of factories belching huge plumes of smoke was a comforting sign to many that goods and other environmental resources, creat- Jim Zhang: “China is no different than any
were being produced, creating jobs for the masses and wealth for the owners. ing obstacles to sustainability. other country in the world in this respect,
In the 21st century, however, those similar plumes of industrial exhaust are less attractive, as it Q: A study by the Netherlands but it is encouraging how quickly the situ-
Environmental Assessment Agency ation is changing. Take me for example. I
is now recognized that they bring, along with industrial growth and jobs, environmental consequenc- come from the business world with little
shows that China has already become
es. the predominant source of carbon previous engagement in the environment
And at a time when nations are in a race to acquire energy supplies such as coal and oil, the is- dioxide, the main global warming and now I am dedicated full time to envi-
sue of economic sustainability comes to the fore. emission. What efforts are being made ronmental issues by managing The Nature
to reduce this? Conservancy North Asia region. Chinese
Jeffrey Chen, CEO of NeoPac Lighting, a producer of sustainable LED lighting; Karen Tang, exec- A: The combined forces of developing na- public awareness and engagement are mov-
utive director of the Better Hong Kong Federation; and Jim Zhang, managing director of the North tions switching their manufacturing bases ing very fast.”
Asia Region (China and Mongolia) for The Nature Conservancy, discussed China’s sustainability is- to China and China’s economic growth and Q: China is moving aggressively on
sues for Asean Affairs. domestic growth in manufacturing were clean energy, outpacing both the U.S.
described by Jeffrey Chen as factors in and EU in green investment. Still,
the growth of carbon emissions in China. while the nation has put in place many
He cited the development of solar energy, environmental laws, these regulations
vehicles using alternative energy sources, appear to need better implementation
smart grids and LED lighting as significant and monitoring. Do you agree?
tools to fight carbon emissions. The Nature Jeffrey Chen, Chairman/CEO, NeoPac Lighting
Karen Tang: “China is a big country, and Group speaking at the Sustainability session.

 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE


SUSTAINING GROWTH IN CHINA

nation and quickness on the ground, these Your view of this statement.
measures will very likely succeed. Take the
nature reserve system as an example. The
CHINA WILL Karen Tang: “We need to think out of the
box, and I believe technology, including
more than 2500 nature reserves covering 15 HAVE NO WAY TO green energy technology on combating
percent of China were established in a very
short period of time, mostly over the last
KEEP DOING WHAT drought or flooding, which helps food grow,
will definitely be useful. Also, birth control
three decades.” SHE HAS DONE IN in China has proved to be very encourag-
Jeffrey Chen: “The Chinese government
has strong intentions to reach this goal.
THE PAST 30 YEARS. ing. I think the population issue in China is
more or less contained. As it moves toward
Between 1980 and 2000, the average annual HER ECONOMIC modernization and urbanization, popula-
growth rate of China’s energy consumption
was 4.3 percent and the average growth
DEVELOPMENT tion, will, to a certain extent, be more natu-
rally contained.
rate of the gross domestic product (GDP) MODEL NEEDS A BIG Q: As is the case in many countries, the
was 9.6 percent. The energy consumption
intensity of GDP during the past 20 years
CHANGE. flight from rural areas to the cities is
occurring in China. Does this pose a risk
was actually reduced from 3.79 kilograms
to effective land management?
of coal equivalent/dollar in 1980 to 1.20 nomic experts have suggested the govern- Jeffrey Chen: “It is actually an urbaniza-
kilogram coal equivalent/dollar in 2000. ment change the policy to stem the rapid tion policy and process in China. By enforc-
Q: Jianguo Liu, Michigan State University growth of the real estate market boom in ing the policy, the Chinese government
Distinguished Professor of Fisheries and China.” intends to get more land from farmers and
Wildlife, who holds the Rachel Carson manage the land more effectively. This is
Q: An encouraging note is that
Chair in Sustainability, says the Chinese also a land redistribution process.”
sustainability reporting is increasing
government should enact new policies to Jim Zhang: “As the gap between rich and
among Chinese corporations and
stem the growth of households. Is this a poor enlarged, and the rural people’s in-
stakeholders in these corporations are
practical idea? come rose less than the average growth of
paying more attention to these reports.
Karen Tang: “China is moving to a more the urban society, this kind of problem has
Is that enough?
open society with higher expectations from occurred. China will have no way to keep
Jim Zhang: “Paying more attention is not
its citizens, and the government has to doing what she has done in the past 30
enough! A best practice in every corpora-
adopt a more relaxed policy on giving birth, years. Her economic development model
tion and stakeholder will also be crucial.”
especially to ethnic minorities and to those needs a big change. This will be clearly
who have a single child in their family.” Q: If China hopes to meet the needs seen in the upcoming Five Year Plan (2011-
Both Jim Zhang and Jeffrey Chen think of the growing population, it needs to 2015). A more sustainable policy set is at
the One Child Policy is on the way out, and radically alter its current methods of the gate to come out next year.
Zhang noted that “most of the Chinese eco- resource management on a large scale.

(R-L) Wolfgang Lehmacher, Former CEO, GeoPost Intercontinental, Richard Jian Li, Executive Director, Golden Concord Holdings, Hong Kong SAR,
S. Roy, Founder & Chairman, AseanAffairs, Thailand, and Xiang Bing, Dean, Cheung Kong GSB, China speaking at the Designing China’s Entrepre-
neurial Ecosystem session during the Global China Business Meeting 2010 in Luxembourg.
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BUILDING TALENT IN CHINA
An interview with Wolfgang Lehmacher

Many changes have taken place in human Is there still frequent “poaching” of
resource management since the 1978 key personnel by other foreign compa-
economic reforms. Would you please ex- nies in China?
plain these to our international readers? “The ‘war for talent’ is not a Chinese
“The exponential growth of business phenomenon and can be witnessed in
in China since the late 1970s to the present almost every single developed and fast
has created various challenges and sig- growing economy. China recently ranked
nificant developments in terms of human high among those countries where people
resource management, in roughly three often changed their job – a shift from the
phases. traditional single corporation loyalty which
In the third and current phase which is prevalent in Asian economies. This shift
started in the early 2000s to the present, the in attitude is opportunistic in nature, and
theme has been heavy competition. Private- a rational response to the employment
ly owned enterprises have become sizable, potential which exists in one of the world’s
state owned enterprises have grown larger, fastest growing economies.”
and it is commonplace that in each industry
more than two large foreign players exist
It is often cited that multinational Wolfgang Lehmacher
corporations in China must change their &ORMER#%/
who compete head to head. Based on the
HR strategies to enable them to keep
abundance of choice for employees, reten-
pace with surging market competition 'EO0OST)NTERCONTINENTAL
tion has become a core challenge. Foreign
and with changing employee needs and 7OLFGANG,EHMACHERISA'ERMAN
companies need to protect their staff from
profiles. Have these changes occurred BUSINESSMANANDTHEFORMER0RESIDENTAND
being hired not only by other foreign com-
and what are they? #%/OF'EO0OST)NTERCONTINENTAL THE,A
petitors but by state owned and private 0OSTEGLOBALEXPANSIONVEHICLE,EHMACHER
“Indeed, employee needs and profiles
Chinese companies as well.” GRADUATEDIN"USINESS!DMINISTRATIONANDHAS
have changed over the years. During the
HELDVARIOUSSENIORMANAGEMENTPOSITIONS
Is the lack of educated professionals rise of China, many employees were over- AT4.4n ANDAT&RENCH,A0OSTE
in business still a problem in China? whelmed by the opportunities available and n 
“China is currently moving from a pro- were focused and driven solely by financial
duction-based economy to an innovation- aspirations. In recent years, it seems that tracting and retaining human capital have
based economy, which requires new skills many Chinese employees have realized that proven immensely successful, e.g. Intel,
and knowledge. At this point, two classes remuneration is only one facet to work life Procter and Gamble and Google, and will
of imperatives to improve talent exist. and satisfaction. Equally important criteria follow the same proven strategy in China.
The first imperative to develop this include the working environment and the As the Chinese employment market is so
can be classed as organic. Various Chinese learning opportunity as well as the growth large and dynamic and a constant influx of
commitments have been made to liberalize prospects available within the company.” talent is needed, companies are well ad-
education by removing barriers on foreign vised to leverage the entire range of instru-
It is often said that companies in
education which existed previously. This ments which assist this, including building
China too often “buy” talent for the Robert Breitenfeld
has allowed local talent to be developed on an appealing image to enhance their hiring Aviation Marketing
short run rather than “build” talent for
par with foreign standards, with increasing capabilities.” & Business Development
the long run. Is this still the case?
participation rates for secondary and terti-
“Sincerely, I do not believe that poach- Multinationals, particularly U.S.
ary education.
ing and buying practices are a sustainable firms are seeking to ensure upward
The second imperative to develop this
business practice, and they definitely mobility for talented Chinese nationals
can be classed as inorganic. Over the last
provide negative signals to the market, the and are often dissatisfied with the pace
ten years, a wave of Chinese returning to
ecosystem and the employees. Companies of “localization” or their overreliance
China has been witnessed – bolstering the
with a long term interest and strategy need on expatriate leadership.To counter
talent available.”
to build talent. I believe sustainable busi- this, they bring in expatriate talent at
Is the emphasis on technical skills
over business skills still a problem in
ness success is not built on individuals but
on well functioning teams. Building these
the professional and technical levels on What do you get from connecting at Vienna International Airport?
short-term assignments of less than two
China?
“This area represents a huge devel-
teams needs time, staff and knowledge
continuity. High team productivity requires
years. Is this still a familiar pattern? More passengers with Europe‘s shortest Minimum Connecting Time.
“In the short term, new entrants have
opment and optimization potential for that people work together and grow over a been known to bring expatriates into China
Chinese companies. For those Chinese certain period of time.” to bridge gaps of knowledge, corporate cul- Short distances and efficient operations at VIE guarantee your passengers‘ connections – even within 30 minutes!
enterprises having international expansion ture and expertise between the foreign head
ambitions, business acumen and skills will
Understanding and shaping a com- VIE – with a catchment area of 15.8 million people, the most important transfer hub for Central & Eastern Europe.
pany’s employment image can boost office and local practice. In the long term, I
be paramount. Internationalization re- have always believed in local talent, in man-
employee engagement. Do companies
quires that the entire approach to business agers and employees knowing the market
do this in China?
needs to be reviewed and various questions and the local ecosystem as well as the mi-
“International companies which have
answered – outside of the operational com- cro markets the company operates in. For
understood and incorporated the dimen-
petencies which employees hold specific to this need and first-hand local knowledge,
sion of company image with the aim of at-
their profession and industry.” local employees are indispensable.”
www.viennaairport.com
 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
SUCCESSFUL STRA
ATEGIES IN CHINA
Eight business leaders discuss the strategy for foreign firms to e
enter the Chinese market and what it takes to be successful.

CARLA CICO CHARLES TANG TARIQ AHMED DAN BRUTTO CHEN HONG MICHAEL BARBALAS THOMAS HOMBERG JENNIFER ANGENEND
#% 0RESIDENT NIZAMI 0RESIDENT #HAIRMANAND#%/ 0RESIDENT #ORPORATE6ICE0RESIDENT $IRECTORAND#O /WNER
2IVOLI30!)TALY "INACIONALDA#½MARADE #HIEF%XECUTIVE/FlCER 503)NTERNATIONAL 53! 4HE(INA'ROUP #HINA 'OODRICH #HINA %!$3 7ATER&ILLED"ARRIER
#OM£RCIO)ND¢STRIA
"RAZIL #HINA &OUNDER #%/#LUBS5!% 3YSTEMS 53!

#ARLA#ICOISPRESENTLY#%/OF2IVOLI #HARLES!4ANGISCHAIRMANOFTHE !S#HIEF%XECUTIVE/FlCEROF#/% !SPRESIDENTOF503)NTERNATIONAL $R(ONG#HENISTHE&OUNDER -ICHAEL"ARBALASISCURRENTLYPRESIDENT 4HOMAS(OMBERGIS#ORPORATE *ENNIFER!NGENENDISDIRECTORANDCO


'ROUP3P! ALEADING)TALIANCOMPANY "RAZIL #HINA#HAMBEROF#OMMERCE #LUBS5!% 4ARIQ!HMED.IZAMIHEADS $AN"RUTTOISRESPONSIBLEFORALL503 #HAIRMANAND#%/OF4HE(INA'ROUP FOR'OODRICH#HINA'OODRICHISA53 6ICE0RESIDENTAND(EADOF3TRATEGIC OWNEROF7ATER&ILLED"ARRIER3YSTEMS
INCIVILINFRASTRUCTURE PRESENTIN3OUTH AND)NDUSTRY(EISALSOAMEMBEROF AHOLDINGCOMPANYWHICHHASINTERESTS INTERNATIONALPACKAGE FREIGHTFORWARDING 7ITHMORETHANPROFESSIONALSIN &ORTUNECOMPANYINTHEAEROSPACE #OORDINATIONAT%UROPEAN!ERONAUTIC )NCBASEDOUTOF4EXAS*OININGTHE
!MERICA !FRICAAND%ASTERN%UROPE THE&ERNAND"RAUDEL)NSTITUTEOF7ORLD INREALESTATE GOLDANDDIAMONDS ANDLOGISTICSBUSINESSES ASWELLAS53 "EIJING 3HANGHAI 3INGAPOREANDTHE INDUSTRY0REVIOUSLYHESERVEDASTHE $EFENCE3PACE#OMPANY DRIVINGTHE COMPANYOVERYEARSAGO SHEHAS
"ORNIN6ERONA )TALY SHEEARNEDHER %CONOMICSIN3AO0AULOANDTHE#O OIL TRADING TRAVEL ENTERTAINMENT INTERNATIONALPACKAGESERVICES(EIS 3ILICON6ALLEY THE(INA'ROUPHAS 0RESIDENTOFTHE!MERICAN#HAMBEROF DEVELOPMENTOF%!$3'ROUP3TRATEGY BEENINTEGRALINTHEEXPANSIONOFTHEIR
-"!AT,ONDON"USINESS3CHOOL &OUNDEROFTHE2ESEARCHAND3TUDY MEDIA HOSPITALITY SECURITY FOOD ALSOAMEMBEROF503S-ANAGEMENT BECOMEONEOFTHEMOSTREPUTABLE #OMMERCEIN#HINA WITHMORETHAN "EFOREJOINING%!$3 HESERVED BUSINESSANDPRODUCTLINES3HEIS
)NSTITUTEFOR%CONOMIC$EVELOPMENT MANUFACTURING MEDICAL SHIPPING #OMMITTEE WHICHISRESPONSIBLEFOR INVESTMENTBANKINGANDPRIVATEEQUITY  MEMBERCOMPANIES YEARSINTHE'ERMAN!RMED&ORCESAS ALSOINVOLVEDINOTHERCOMPANIESAND
EDUCATIONANDINFORMATIONTECHNOLOGY THEDAY TO DAYMANAGEMENTOFTHE lRMSIN#HINA APARATROOPERANDGENERALSTAFFOFlCER ENTREPRENEURIALBUSINESSVENTURESIN
COMPANY OTHERINDUSTRIES

Asean Affairs invited a group of eight the external environment of business in


executives to share their experiences With a population of more than 1.3 billion, China is the world’s largest
st m
market and sends out a siren song beckoning companies worldwide to the region of interest. Being the extremely
and insights on doing business in China. enter its market. But the Chinese market in line with other countries with
h ext
extensive land mass, is not homogenous, there is great diversity between re- attractive emerging marketplace that it is,
Panel members were: Jennifer Angenend there is a wealth of information available
of Water Filled Barrier Systems; Michael
gions and provinces.The question remains what is the best and most cost-effe
-effective way to enter the Chinese market? to those seeking opportunity in China. Ad-
Barbalas, currently president of Goodrich ditionally, and perhaps more importantly,
China and former president of the Ameri- seeking insight and information from those
can Chamber of Commerce in China; Dan- who are intimately familiar with China and
iel Brutto is president, UPS International; have lived, worked and found success there
Dr. Hong Chen is the founder, chairman can be an invaluable tool and provide an
and CEO of The Hina Group; Carla Cico, extremely beneficial perspective.”
CEO of Rivoli Group S.p.A., a leading Cico: “To talk with people that have al-
international Italian company in civil in- ready had the experience. It is important
frastructure; Thomas Homburg, corporate to talk with as many people as possible,
vice president and head of strategic coor- because each case has its own reality and
dination at EADS; Tariq Nizami, CEO and to have a broader understanding can help
founder, CEO Clubs, United Arab Emirates you to have a better overview of the real
and Charles Tang, president of the bina- situation. A due diligence process is very
tional Camara de Comercio and Industry important in order to try to limit future ma-
Brazil-China. jor problems. China is not easier or more
difficult than any other new market, but
Q: What is the best way for entrepre-
because of the competition both interna-
neurs and companies to learn about Chi-
tional and local now days it takes more in
na before entering the Chinese market?
term of resources to open a market there.
Angenend: “From the perspective of an
One of the major problems is to find good
entrepreneur who has expanded into new
and reliable persons, with experience and
regions and marketplaces, the best way to
understanding of the local mentality, if they
learn about any market before entry is by
are foreign, or of the international mental-
comprehensive study and research; this not
(L-R) Jeffrey Chen, Chairman/CEO, NeoPac Lighting Group, CARLA CICO, CE0, Rivoli S.P. A. Italy, Liangg Xinj
Xinjun, Vice Chairman and Chief Executive Officer, Fosun Group, China, Frank-Jürgen Richter, President, ity, if they are local.”
only includes understanding laws and eco- Horasis, Switzerland, Nan Cunhui, Chairman, Chint Group, China, John Tan, Chief Executive Officer, Asia
ia Cap
Capital Reinsurance Group, Singapore and Patrick O’Basuyi, Chairman, Obax Group, USA speaking at the Nizami: “I have been doing business with
nomic trends but also cultural customs and Plenary Session: Envisioning the Post Crisis World Economy during the Global China Business Meeting 2010
010 in Luxembourg.

62
6 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
SUCCESSFUL STRATEGIES IN CHINA

China for the last 6 years but before any or


first business I had to visit for more than a
year to learn and understand the local mar-
ket. China has to be studied very carefully
in any industry before moving into the mar-
ket as China is a very different local market
because of their consumption patterns,
spending habits and most of all culture. In
doing business with China you are never
late because the market is so big. I always
say that China is like a big ocean and there
are fish for everyone, it depends on if you
are prepared to catch the most from the
market.”
Brutto: “Research is essential before
entering any market, and China is no ex-
ception. A vast, complex nation, China is
anything but a homogenous market. The
world’s most populous nation is a rich
mixture of languages, cultures and ethnici-
ties. Economic development and average
per-capita income varies by province and S Roy, Founder & CEO, Asean Affairs, (Centre), chairing the session with Daniel J. Brutto, Presi-
by city. Therefore, it is essential to gather dent, UPS International (R) and Alan Hassenfeld, Chairman of the Executive Committee, Hasbro
specific, local information from reliable (L) at Horasis Annual Meeting January 2010, Zurich, Switzerland
sources about a broad range of topics, in-
cluding local business life and government
regulations for foreign companies. tive to other regions. We are all moving for- of China. They should lower the price of
Above all, entrepreneurs and busi- ward into a more global marketplace, and the software for China market. As China is
nesses need to look at their own strengths I believe that there are always solutions to huge, they can then sell more copies and
and resources, know what they can do any challenges or problems that may arise; actually get more revenue and profit. Au-
best, and have a clear vision for what they awareness of these potential challenges is todesk did this, and is very successful.”
want to achieve in China. As China is a vast key to ensuring potential success in this or Homberg: “For every company, IP protec-
market with very different characteristics, any other business climate.” tion and technology transfer are of the
China is not right for every company.” Barbalas: “China has been putting in place highest importance everywhere in the
Chen: “China is a very dynamic, vast, and the legal system needed to protect intellec- world. Consequently, it is encouraging to
complicated society. The ways the busi- tual property including patents, trademarks see that the Chinese government continues
nesses are conducted are quite different and copyrights. It is important for new to improve intellectual property protection.
from the rest of the world where a lot of companies coming in to use the legal sys- This is essential for China’s industry in or-
legal systems are being improved. Before tem to protect their intellectual property in der for it to be a reliable business partner,
getting into China, it is best to find some- the same way and to the same extent they and to engender trust between investors
one or firm who knows China very well, would do in their own home market. Be- and Chinese companies.”
and recruit such a person as either consult- yond this, business associations from both
ants or doing a field study on the relevant the US and Europe continue to highlight Q: Starting “small” is often suggested as
industry. You can also talk to the Chamber intellectual property protection as one of a good way to start, do you concur?
of Commerce of your country in China, and the top 10 issues for companies doing busi- Cico: “Small” related to China is always a
seek their help. Of course, going to vari- ness in China. Within your own company relative term! No matter what you are do-
ous conferences or events related to China there are many practical steps you can take ing in China, in which industry you are in
would also be a good thing to do.” to protect your intellectual property while and what are your objectives : it is always
you build your business in China.” money and time consuming. I think that
Q: An often-overlooked issue for compa- what is important is to decide in which part
Brutto: “China’s software piracy rate has
nies to consider is intellectual property of China you want to establish your pres-
decreased to 79 percent .”
protection. China’s software piracy rate ence, if you are a new comer. Now days the
Chen: “Depending on the industry, things
has been reported as high as 92 percent. location is very important and considering
have changed quite a bit, and Chinese gov-
What’s your view on this issue? the extension of the Chinese market and
ernment start to get tough on piracy. For
Angenend: ”For some industries, the state the difference among the local markets and
instance, a few years ago, a lot of TV
of intellectual property protection may not customers behavior, this aspect needs to be
videos could be downloaded for free, and
matter as much; however, for many indus- considered very carefully.”
each episode was sold for 2000 RMB on
tries it certainly serves as a deterrent to Nizami: “In China small is big as the mar-
line. Now, companies who bought the legal
entry into this marketplace. Before entering ket is growing tremendously with over 1
rights of the TV series, such as Sohu, are
the Chinese market, it is essential that an billion people. So be prepared to expand
suing those who pirated it. Thus, each epi-
entrepreneur or company realistically visit your business much before than in your
sode now is sold for 20,000 RMB online. So
this IP protection and enforcement issue, business plan especially if you are moving
things are improving quite a bit. An advice
understand if and how it could impact their from the west. In China the demand of In-
to foreign companies is that they should
success, and formulate a dynamic plan ternational brands is growing the fastest in
treat the Chinese market differently than
along with strategies for actively address- the world.”
European countries or US, where the GDP
ing it. For some, this may mean fundamen-
per capita is many times higher than that
tally altering the way they do business rela-
64
6 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
SUCCESSFUL STRATEGIES IN CHINA

Barbalas: “New companies coming to


China can expect to invest for one or more IN CHINA YOU WILL BE ALWAYS A GUEST:
years before they start seeing results. It NEVER FORGET IT.
takes time to build the China team, under-
stand the market and build the customer MANY YEARS AGO, THE CEO OF A VERY IM-
recognition that a successful business PORTANT SWEDISH INDUSTRIAL GROUP
needs to take off.”
Cico: “There is no a rule or a criteria for DEFINED THE JOINT VENTURE WITH A CHI-
this and very much depends to the prod- NESE PARTNER AS “..A MARRIAGE WHERE
ucts (and brand) that you want to sell. In
reality the time and effort that you need in YOU DO NOT LOVE EACH OTHER BUT YOU
China are the same that you need in any ARE FORCED TO SLEEP TOGETHER”.
new market. The fact that people think
that in China takes longer, it is because a
TWENTY-THREE YEARS LATER I THINK THAT
lot of people were expecting it to be easier THIS DEFINITION STILL STANDS. -CARLA
and faster to do it in China. It was easier
until 10-15 years ago, when there were
CICO
few foreign brands in China and very little
competitions from local brands. Last, but been introduced in the China market.” graphics within China, and then develop
not the least, the consumers were less so- Tang: “This would depend on many fac- an appropriate marketing strategy to sup-
phisticated and easier to be pleased. Now tors and type of products. Some brands port that image. A marketing strategy that
the consumer is not buying a product only are launched within a short period of time, works in the U.S. might not necessarily
because it has a foreign name, but also for while others take longer to firm their im- work in China. A company must maintain
(L-R) CARLA CICO, CE0, Rivoli S.P. A. Italy, JENNIFER ANGENEND, Director and Co-Owner, WaterFilled Barrier Systems, USA. and THOMAS the price and the quality. age.” enough flexibility to adapt to shifting needs
HOMBERG, Corporate Vice President, EADS, speaking at the respective session during the Global China Business Meeting 2010 in Luxembourg. Another problem is that you have to and stay abreast of consumer demands.”
Brutto: “To succeed in China, a company
study carefully where to position the prod- must work closely with local communities Q: Are the government restrictions to
Barbalas: “Starting small is a good strategy China, I believe many niche market players Angenend: “The Starbucks model for suc- uct, and this positioning can be different and governments. Although there is no set distribution, particularly in the retail sec-
to minimize your risk and build up your will find ways to create successful busi- cess will not be right for every business, than the one in your home countries and/or time frame for building a strong brand in tor, a problem?
knowledge and experience. Staying small nesses.” industry and idea, regardless of where it is. others markets.” China, it’s critical to understand that busi- Agenand: “As with anything, these issues
is not a good idea though. One secret to Tang: “The Chinese market absorbs all Of course, there are key components to the Chen: “China is a huge country and creat- ness in China is based on relationships and have a variable impact depending on the
success in China is to grow fast. It may types of products, whether from com- success of this model that any company or ing a brand in China will take a lot of effort trust, which takes time to develop. industry and business type in question. Be-
take a while to find the right strategy and modities, or not. In China one can see the entrepreneur can learn from and incorpo- and money to do so. Especially, China has ing aware of the challenges and being real-
different cultures across the country. One First of all, it is important for a com-
approach for your business in China. Once amount of foreign brand cars, higher tech- rate into their own business.” istic about one’s own business and industry
brand that is making sense in the south pany to demonstrate its operational com-
you do, however, it is important to grow as nology machinery that have made Germa- Barbalas: “I don’t think there is one model as well as how it may be impacted by these
may not be making sense in the north. It all petence and be recognized by the Chinese
fast as you can.” ny’s economy so strong, wines from France for success in China. Those companies challenges creates an opportunity to for-
depends on a company’s marketing strate- government and regulatory authorities as
Tang: “Depends on the business one in- and other countries. that have done best have understood the mulate new and innovative approaches to
gies and how people implement them. So being valuable to the economic and overall
tends to start. Sometimes one must start There are many niches still to be filled Chinese consumer, adapted their business expand and grow.”
in general, I agree with you that it takes development of China.
with sufficient scale.” in the Chinese markets. One example is a models to the Chinese realities and stayed Chico: “Restrictions are always a prob-
longer to create a brand image in China. Second, foreign enterprises must un-
Brutto: ”To many foreign businesses, Brazilian manufacturer of cheap hot water nimble to adjust to changes in the business lem!”
However, there are also exceptions. With derstand that China is not a homogeneous
China is still a new and untried market. taps and shower heads for about US$ 10 environment.” Barbelas: “Groups such as the American
today’s Internet media, as well as impact of market. To enhance a brand’s chance of
So starting small and growing organically each. Normally hot water in China comes Chamber of Commerce continue to report
Q: It is often mentioned that it takes celebrity marketing, certain brands may get success, a company should offer products
often is the most solid path to long-term from boilers that are large, expensive and that getting the required licenses is still an
longer to create a brand image in China. created in a short period of time, say 1 to 3 targeted to specific regions and demo
success. costly to install.” issue.”
Why and how long does it usually take? years.”
Starting out with smaller projects,
Q: It is often thought that the best way A: Angenend: “The distinct culture of each Nizami: “I have been involved in China for
finding the right local employees and part-
for a company to enter China is with Chinese province makes the time frame some time and have seen things moving
ners, and verifying the quality standards
a Chinese partner. Any suggestions for longer for a brand and company reputation very slowly, but it all depends on the prod-
of local suppliers are important to estab-
finding a good partner? to be established. There could be several uct, services and most of all timing. For a
lishing a strong foundation in China and
Tang: “Depending on your field of busi- factors at play, especially depending on the good brand it will take years. I have been
developing the expertise needed to grow
ness, you may not need a Chinese partner. industry in question. In regard to consumer involved with the Buddha Bar brand from
over time.
Our chamber has introduced many strong products, the Chinese have an expectation France for a year and now it is coming into
Some of the world’s biggest compa-
partners to companies wanting to do busi- of demonstration of reliability which is the reality of making one. We had to do an
nies grew in China by starting small. UPS
ness in China.” perhaps more stringent and pronounced extensive study of the local Shanghai mar-
first began modest operations in China
Homberg: “Let me say that the partnering than in other places. In general, much like ket, the spending habits and evening activi-
back in 1988. Through organic, steady
selection is crucial for both the Chinese it takes time and reliability to build trust ties before deciding to move to Shanghai,
growth, we now serve 330 cities and oper-
partner and the foreign investor.” in interpersonal relationships; these are the city with the largest international com-
ate 198 flights every week that connect
Brutto: “Finding a logistics partner is also also components that contribute to build- munity.
China to the rest of the world. “
critical to success in China. When seek- ing trust in a brand. Additionally, each of Brand recognition in China is one of
Q: China is often cited as a good location ing a partner it’s critical to find a company China’s provinces is distinctive and it may the toughest jobs for the local brand own-
for commodity products but what about that can move products to and from China not only take time but also proven per- ers because in the last decade only, Chinese
niche players? quickly, efficiently and cost-effectively, formance to establish a good reputation people have been exposed to the interna-
Angenend: “There is no argument that helping to carve out a competitive edge.” throughout each. When other things are not tional market in China and outside. Brands
China is an excellent place for production necessarily as transparent, establishing the must have a good local marketing company
Q: Is the Starbucks model for success in (L-R) Frank-Jürgen Richter, President, Horasis, Switzerland, Jean-Claude Juncker, Prime Min-
of commodity products…however, with the accountability essential to building a solid especially in small cities in China. Only in
China still a good model to follow? Are ister of Luxembourg and Xu Kuangdi, Chairman, China Federation of Industrial Economics -
increasing attractiveness of investment in brand may not take some time.” the last 15 years have worldwide brands China and World Economic Outlook at the Global China Business Meeting 2010 in Luxembourg.
there others?
66
6 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
SUCCESSFUL STRATEGIES IN CHINA

Tang: “We had a success story when the a joint venture. These include an often Twenty-three years later I think that this
Brazilian instant coffee brand,’Pele,’ was complicated application procedure with ap- definition still stands.”
introduced through a Chinese distributor provals required from several government Homberg: “Joint ventures are always a
without any problems.” authorities. In addition, the foreign investor viable alternative. EADS, jointly with our
Hong: “No. I don’t think the government must be willing to share company technol- partners, manages numerous, successful
restricts the distribution in the retail sector. ogy, know-how, and sensitive business in- joint ventures, comprising global leaders
The market is pretty free unless someone formation with third parties. like ATR in turboprop aircrafts. One pre-
On the positive side, joint ventures requisite for success in joint ventures is to
Q: What is a realistic time frame for suc-
significantly reduce business risk to foreign carefully craft industrially roles and leader-
cess in China?
investors. And a Chinese partner may be ship, in order to enable dynamic business
Barbalas: “New companies coming to
more familiar with dealing with Chinese development and company evolution over
China can expect to invest for one or more
authorities and bureaucracy, and offer time.
years before they start seeing results. It
advantages in terms of existing business As I mentioned earlier, in the aero-
takes time to build the China team, under-
contracts, product markets, distribution space sector we are often obliged to es-
stand the market and build the customer
networks and business connections.” tablish joint ventures when entering new
recognition that a successful business
Chen: “It depends on how a firm defines markets, given the nature of the business
needs to take off.”
“success” in China. Different industries and existing regulations. In China, EADS
Q: Are joint ventures a viable alternative and different expectations all vary. Internet found highly motivated and capable part-
to direct investment in China? companies, such as Baidu, Tencent, and ners with which we have established very
Angenend: “There are quite a few things Alibaba, all become $30-$40 billion USD successful joint activities. One example in
to consider when entering into any joint market cap companies in 10 years. Certain the Space segment is our joint venture “Be-
venture, in China or otherwise. Entering companies, with the help of venture capital, jing Spot Image” with the Chinese Centre
into a joint venture can be a viable strate- and private equity, went from nothing to a for Earth Observation and the Digital Earth
gic way to enter the Chinese marketplace, public companies in 2-4 years. However, (CEODE) for Geo Information Services.”
but, as with anywhere, it is essential to in general, it takes about 10 years to build Tang: “Joint ventures are a viable alterna-
do your due diligence and understand the something meaningful.” tive to direct investment in China and some
intangibles when embarking on this type Cico: “Yes, they are, but you need to be wholly owned foreign companies have also
of investment. For some companies and very careful during the selection of the been successful in China.”
businesses this may be a viable alternative, partner, the negotiation of the agreement Nizami: “Definitely, joint ventures are the
and for others it may not be. Overall, when and never think of your partner as one of key to a secure investment in China, with-
considering expanding into a completely your friend. Last , but not the least remem- out local direct investment you will be lost
new market, I believe there are universal ber, to include in the contracts already a and taking a big risk in the China market
principles for success: know your business, clear way out methodology, in case some- where language and introduction plays a
know your industry, gain a comprehensive thing goes wrong in the relationship. viable role. I suggest finding the right joint
understanding of the operating climate and In China you will be always a guest: never venture partner is the key to success but
external environment of business in the forget it. the question is how to find the right partner
area of interest, be realistic, and strive for Many years ago, the CEO of a very im- in China as they all look the same.
innovation and adaptability. This may take portant Swedish Industrial Group defined
Finally, I would say that we all should
quite a bit of time and effort, and for some the joint venture with a Chinese partner as
learn from the past to correct our present
companies and entrepreneurs, expanding “..a marriage where you do not love each
for a better future in the Chinese market.”
into China may not be the best decision other but you’re forced to sleep together”.
at this point in time, but to those who can
make it work, there is unquestionably
much to be gained. “
Barbalas: “When you have joint ventures
between companies from different coun-
tries, cultures and systems, I do not think
that you can expect the success rate to go
up. Making a joint venture work for both
parties requires putting in the hard work up
front to make sure that there is a long-term
alignment of interests and then to put in
the management resources that can man-
age the joint venture and relationships that
make it work.”
Brutto: “A company’s goals and operation-
al philosophies should be the key factors
when deciding whether to choose a joint
venture or direct investment structure.
In general, a partnership with a
Chinese enterprise can help a company
overcome start-up difficulties, create dis-
tribution networks and attain vital market
information.
There are challenges associated with
Networking at the Global China Business Meeting 2010 in Luxembourg

 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
THE AGE OF THE CHINESE
CONSUMER
In this interview, Chinese business executive Han Wei answers
questions about the Chinese consumer, developing consumer mar-
kets in China and what foreign companies need to do to be suc-
cessful in China.
Q: Are Chinese consumers still wary of A: “I see this in two ways. On one hand,
new brands? China overall is still a developing country
A: “According to a Chinese retail market and most people’s consumption is limited;
research report by Deloitte & Touche, one therefore, there is not much high-end pur-
of the world’s leading accounting firms, chasing power. On the other hand, there
Chinese consumers like to try new brands, are many rich people in China and their
especially consumers in second-tier cities. purchasing power is amazing. It is most im-
According to direct consumer experience, portant to target the rich people, and target
many Chinese people favor foreign brands. your marketing.”
Some Chinese enterprises use foreign Han Wei
brand names, such as ‘Younger.’ ” Q: Many international and Chinese
brands have not succeeded because they %XECUTIVE6ICE 0RESIDENTAND
Q: The Chinese tend to trust local did not recognize the many different 3ECRETARY 'ENERAL
brands. What is a strategy for marketers types of Chinese consumer; they locked 7%#"!
to overcome this? into the stereotypes. Do you agree?
A: “Cooperate with Chinese enterprises A: “Yes. You need to know China well. If
and use Chinese brands.” you want to make foreign brands success-
ful, localize appropriately rather than stick-
Q: Is the generation in their late teens ing to stereotypes. For example, McDon-
and early twenties the ideal target for ald’s launched a “spicy chicken” and other
new brands? foods in many markets, rather than staying
A: “For people in their early 20s, compared with their standardized menu.”
with their predecessors, there is greater
emphasis on personal feelings and faster Q: Research indicates China is not as ho-
acceptance new brands.” mogeneous as one might believe; there (AN7EIIS%XECUTIVE6ICE 0RESIDENTAND
are thought to be seven regional mar- 3ECRETARY 'ENERALOFTHE7ORLD%MINENCE
Q: Chinese like to impress with a qual- kets. Do you agree? Is a separate strat- #HINESE"USINESS!SSOCIATION4HEASSOCIATIONIS
ity brand but research indicates that egy needed for each market? AGLOBALORGANIZATIONTHATPROMOTESCOOPERATION
BETWEENTHETOP#HINESEENTREPRENEURSAND
they are willing to pay only a 2.5 percent A: “In China, different regions require dif- ENTERPRISES-S7EIHOLDSADOCTORATEDEGREE
premium for branded products. How ferent marketing strategies. The regions FROM!MERICAN#ITY5NIVERSITY
can marketing people deal with this di- are usually divided into seven or at least
chotomy? several, and there is no standard classifica-

Virtual Ribbon Cutting Ceremony with the co-hosts and co-organizers



 -AGAZINEs.OVEMBER $ECEMBER The Voice of Southeast Asia .OVEMBER $ECEMBERs-AGAZINE
THE AGE OF THE CHINESE CONSUMER

www.aseanaffairs.com/sop

JOIN US ATO SAVE OUR ONLY HOME


message from the founder of Asean Affairs
The Save Our Planet Forums were started by Swarup Roy, founder of The keynote addresses were given by Peter Chin, Malaysia’s Minister
Asean Affairs - the Global Publication of Southeast Asia. The confer- of Energy, Green Technology and Water; and Rafidah Aziz, MP, former
ences started in March 2010 in Bangkok (12th March and 25th March) Malaysia Minister of International Trade and Industry. The remaining
and continued in Malaysia (3rd Aug 2010 in Kuala Lumpur). It contin- 17 speakers hailed from 12 different countries.
ues in 2011 in Thailand, Singapore, and Malaysia. Plans to organize Corporate partners
the series in India, Vietnam, Indonesia and China are on the drawing The Save Our Planet concept has attracted a wide range of partners
board, culminating in a mega conference at the end of the series of including Bayer, Biersdorf, Ebeling Heffernan, Emerson, PTT Public
events. Company - Thailand, the German government through its local embas-
Concept sies, German Technical Cooperation (GTZ), Siemens, European Union
It is now apparent to many that the task of implementing measures and Tesco.
to combat climate deterioration falls on the private sector, including Potential partners looking to support the Save Our Planet initiative are
companies and individuals. To accomplish this, shared solutions need the US$29 billion dollar Birla Group, the French energy giant US$110
to be produced. The goal of the Save Our Planet conferences is to billion GDF Suez Group, the Hinduja Foundation of Switzerland and
develop and define these practical solutions. London, and the heads of state of Asean and European countries.
Who’s Who Speakers and Hi-Profile Delegates from 12 Save Our Planet Foundation
countries at SOP 1 & SOP 2 The creation of the Save Our Planet Foundation as a nonprofit organi-
SOP 1 was an international event with 17 speakers and 200 delegates zation to fight climate change is another goal. The foundation would
attending from 12 countries. Inaugurated by the Chairwoman of Ase- support innovations in technology, processes and methods across Asia
anAffairs, Her Highness Princess Mom Luang Rajadarasri Jayankura and fund startup companies to fight climate change. The foundation
of Thailand, we had such distinguished speakers as Dr. Michael Nobel would create various mechanisms to achieve these goals, one of them
of the Nobel Charitable Trust, Dr. Haans Schumacher, the Ambassador launching an “Asian Green Awards” for the best innovations and com-
of Germany to Thailand; Dr. Art-Ong Jumsai Ayuthaya, Dominikus von panies involved in the eco-economy.
Pescatore of BAYER, David Oberhuber from The German Technical
Packed Hall of the Global China Business Meeting 2010, at Congress Center in Luxembourg Cooperation, Tony Novak of EMERSON, Chris D’Couto, CEO of Neah Final report to the United Nations
Power Systems, USA; Niraj Sharan from Aura Inc Italy & India, Sumit At the conclusion of the Save Our Planet mega conference, a compre-
Phokrel from the Asian Development Bank, Shayne Heffernan from hensive report will be produced and submitted to the United Nations
Environment Programme (UNEP), anticipating that this report would
tion. This needs to be based on the product
itself.” IF YOU WANT home appliances to the country” campaign,
the government and companies embarked
Ebeling Heffernan, The Honorable Barry Gusi from the Philippines,
and Stuart Scott of the Climate Summit. be viewed as a major Asian contribution to the climate crisis issue.

Q: Are there different attitudes between


TO MAKE FOREIGN on a strategic action for the rural market.” Save Our Planet - Malaysia
A total of 200 leaders from business, government, think tanks, embas- We seek your support to
the regions when it comes to consumer BRANDS SUCCESS- Q: Research by Gallup indicates that sies, chambers of commerce and media in Malaysia attended the Save
Our Planet Forum, 3rd August 2010, at the Mandarin Oriental Hotel.
Save Our Home and Our Planet.
Swarup Roy
roy@aseanaffairs.com

behavior?
A: “Consumer habits are different in dif-
FUL, LOCALIZE AP- brand preference was in decline in the
last decade dropping from 78 percent to
ferent regions. For distance, buying vegeta- PROPRIATELY, RATH- 67 percent in 2004, for example. Is this Sponsors and partners of Save Our Planet-Malaysia L-R: Swarup Roy, Founder
bles in the north is in “pounds”, however, in
Shanghai, quantities may be much smaller.
ER THAN STICKING trend still continuing?
A: “I disagree. During the last decade,
and CEO of Asean Affairs; Pierre Barthes, General Manager, Mandarin Oriental,
Kuala Lumpur; Seitle S. Dhillion, Vice President and Head of Oil and Gas Division,

Another one is that different regions have TO STEREOTYPES. China’s rapid economic development has
Siemens Malaysia; Herbert Dittmar, Managing Director, Bayer-Malaysia; Peter Chin,
Malaysia’s Minister of Energy, Green Technology and Water; Tony Novak, Country
General Manager, Emerson-Thailand; Rafidah Aziz, Former Minister of International
different habits about whether to use a strengthened the brand concept. Chinese
Q: Coastal Chinese consumers are bet- Trade and Industry, Malaysia; H.E. Vincent Piket, Ambassador and Head of European
shopping bag.” consumers are more concerned about the Union Delegation to Malaysia; Natasha Zulkifli, Executive Director, Malaysia Europe
ter off than inland consumers. Do com-
“brands” themselves. But, at the same time, Forum; and Shayne Heffernan, Founder, Heffernan Group and Ebeling Heffernan
Q: Chinese consumers have a last- panies have to acknowledge this in their (Bahamas).
as the product of enrichment, there are
minute decision making style. How can marketing plans?
many brands in each product line, so the
marketing plans cash in on this? A: “China has a vast area and a large
preference of Chinese consumers to a par- Left: Save Our Planet, Bangkok, 12th March, 2010. (L-R) Mr.
A: “Chinese consumers think that products population due to historical and political Dominikus von Pescatore, Senior Bayer Representative for Country
ticular brand is declining. Especially with Group North ASEAN and Managing Director of Bayer Thai Co., Ltd.;
on the same shelf would all be the same. reasons. There are economic disparities be-
China’s economic development, a number Dr. Michael Nobel, Founder, the Nobel Charitable Trust; Dr. Hanns
But the top-rated product would be by tween urban and rural areas and between Schumacher, Ambassador of the Federal Republic of Germany to
of domestic brands have grown up, rival- Thailand; Dr. Raphael L’Hoest, Counsellor for Economic Affairs Ger-
itself, more expensive and more difficult east and west. When doing the market-
ing international brands. For international man Embassy, Bangkok; Swarup Roy, Founder & CEO of AseanAffairs;
to purchase. Marketing, promotional and ing plan, the company cannot ignore this Mr. David Oberhuber, Country Director Thailand of GTZ; Mom Luang
brands, quality, service and other aspects of Rajadarasri Jayankura, Chairwoman of Asean Affairs; Stuart Scott,
other activities, need to be systematic, not factor, in pricing, channel development,
continuous improvement are based on the Director, The Climate Summit, USA.,
just a one-time occurrence.” brand communication and product differ-
Chinese market.” Right: Save Our Planet 2, Thursday, 25th March, 2010, Queen Sirikit
entiation. For example, with China’s “Move National Convention Center, Bangkok.

772 Magazine • November-December 2010 The Voice of Southeast Asia November-December 2010 • Magazine 9