Annual Meeting of the New Champions 2008

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Annual Meeting of the New Champions 2008

  1. 1. Annual Meeting of the New Champions 2008 The Next Wave of Growth Tianjin, People’s Republic of China 27-28 September Report
  2. 2. The views expressed in this publication do not necessarily reflect those of the World Economic Forum. World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 E-mail: contact@weforum.org www.weforum.org © 2008 World Economic Forum All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. REF: 141108
  3. 3. Contents Page 3 Executive Summary Page 6 Managing Risks Page 8 Drivers of New Global Growth Page 12 Technology and Innovation: The Next Wave Page 14 China as a Global Player Page 16 The WorkSpace Page 18 Acknowledgements Page 19 Mentors of the Annual Meeting of the New Champions 2008
  4. 4. 2 | Annual Meeting of the New Champions 2008
  5. 5. Executive Summary “This is probably the first transformational crisis of our globalized age. Many things will change.” Klaus Schwab, Founder and Executive Chairman, World Economic Forum Managing Director and Chief Business Officer, World The second Annual Meeting of the New Champions was Economic Forum: “A very important part of this forum is the first major global gathering after the financial markets bringing together the present and the future.” worldwide were roiled following the collapse of Lehman Brothers, the largest bankruptcy in US history, and the US Just how critical it is to look forward and seek new government’s rescue of AIG, the world’s biggest insurance opportunities was underscored by the presence of three company. other World Economic Forum communities in Tianjin: Technology Pioneers, Young Global Leaders and Young Nearly 1,200 business, government and civil society Scientists. These groups underscored the fact that the leaders from more than 80 countries convened to discuss next wave of growth will come from innovations in the near and longer term impact of the unfolding crisis as technology and science, as well as the emergence of well as the next wave of growth that would be necessary China and other fast-growing, large emerging economies for the recovery of the global economy. China was the such as India and Brazil to take a leading role in various appropriate setting in this context. The Binhai New Area of areas, from green business to global governance. Tianjin offered participants a glimpse into China’s great promise despite the economic turbulence taking place The discussions did not dwell on the dramas playing out overseas. The message was clear: in times of extreme on Wall Street and the world’s financial markets. Instead, pressure, a long-term perspective is critical. participants reflected on the wider implications of the crisis. “We are too tied together in a globalized world,” This has after all been a year of great difficulties and great remarked William R. Rhodes, Senior Vice-Chairman, successes for the Chinese – devastating winter weather Citigroup, and Chairman, President and Chief Executive was followed by a major earthquake in Sichuan Province Officer, Citibank NA, Citi, USA. Significantly, there was just weeks before the nation hosted the Olympic Games in consensus that the expected economic slowdown must Beijing. “We have overcome difficulties one after another not lead to friction and protectionism, but rather should and maintained the momentum of steady and fast pull the international community together to collaborate on economic growth,” said Chinese Premier Wen Jiabao in an global solutions such as the adoption of international address that struck a chord with participants. Wen accounting standards and regulatory norms. “What we underscored China’s determination to maintain sustained must have is international cooperation,” stressed Liu high growth as its contribution to global stability. Mingkang, Chairman of the China Banking Regulatory Commission. The strong presence and lively engagement in the discussions of CEOs from over 200 Global Growth This report on the Annual Meeting of the New Champions Companies, enterprises that are emerging as powerful 2008 is centred on four essays linked to the programme’s drivers of global growth and value, was also inspiring, a themes: Managing Risks; Technology and Innovation: The source of welcome optimism that belied the newspaper Next Wave; China as a Global Player; and Drivers of New headlines. “Listening to the voices of these New Global Growth. Champions is to see a path to the future,” remarked Mayor Huang Xingguo of Tianjin. Added Robert Greenhill, 3 | Annual Meeting of the New Champions 2008
  6. 6. “I “Listening hope to see some light at the end of to the voices of these New the tunnel at the end of next year.” Champions is to see a path to the future. Their views have been profound and Yoshihiko Miyauchi, Chairman and Chief Executive Officer, Orix imaginative.” Corporation, Japan Huang Xingguo, Mayor of Tianjin, People’s Republic of China Managing Risks Globalization has made the assessment and Drivers of New Global Growth management of risks difficult. The ranks of the New Champions – the dynamic Global • The proliferation of risks ranging from contagion in Growth Companies and the nimble emerging economies financial markets to looming environmental – will continue to grow and are in a good position to take degradation has made it difficult for business and advantage of opportunities created by the adverse government leaders to plan for the long term and to economic conditions. coordinate their responses, even though cooperative global approaches have become necessary. • The unfolding financial crisis has shown that the • The retreat in liquidity will reduce the availability of popular assumption that fast-growing emerging capital at a time when governments and businesses markets such as China have somehow “decoupled” are looking to finance major infrastructure projects. • Emerging economies that have large foreign exchange from the US economy was premature. In fact, the international liquidity crisis and the collapse in financial reserves are set to become major sources of liquidity market confidence from Iceland to Indonesia have and investment capital, particularly for the developing revealed the deeper and broader interconnectedness world. • These fast-growing economies must quickly develop of the world. • China has pledged to contribute to global stability by capital markets to distribute efficiently the needed maintaining strong growth which reflects the Chinese investment capital to budding enterprises or promising perception that the key to mitigating risk is to take a projects. • While the US may offer buying opportunities for those long-term view, continue pursuing necessary reforms and focus on achieving sustainable growth. with large amounts of capital, investor interest will be • Companies should not reduce their corporate thematic rather than geographic. The focus will be on engagement in society as they build the capacity sectors linked to the global drive towards urbanization. within organizations to approach the future in a more The growth of cities and the migration of people to strategic, holistic and systematic manner. urban areas will continue to fuel feverish growth in transportation, financial services, education, green business, infrastructure development and the supply of raw materials. 4 | Annual Meeting of the New Champions 2008
  7. 7. “The most important thing for China is human intellectual capital. In the coming 10 to 20 years, we will have to transform to an innovation-driven growth model.” Guo Shuqing, Chairman, China Construction Bank, People’s Republic of China Technology and Innovation: The Next China as a Global Player Wave China now stands as a haven of economic stability at a time when the US and other industrialized economies are Two critical drivers of future growth in the global economy engulfed in financial turmoil and threatened by prolonged will be the development of technology and the promotion recession. The long-term economic prospects of China of scientific innovation. appear strong, underpinned by an expanding middle class and growing investment in technology. • Old competitive models of knowledge protection will • China must manage outside expectations about the increasingly yield to cooperative models of sharing research across borders and even between rival extent of the help it will be able to provide the rest of corporations because of the critical need to deliver the world as the global financial crisis unfolds. • results faster and cost effectively. While many in the international community have called • National governments will have to allow their best and for China to take a more active position in global brightest researchers to collaborate more freely, given governance institutions, the Chinese leadership that international cooperation is essential to the remains reluctant to do so, given the major challenges success of large-scale research projects. it faces at home, including the income gap between • The private sector can be a major driver of basic urban and rural areas and the need for strong social scientific advances that may prove commercially security safety nets. Still, China’s monetary authorities lucrative. are playing their part, often unnoticed, in monitoring • Where business cannot or is unable to take the lead, and addressing the volatility in the financial markets. • partnerships with government and civil society can be China is considered a global player by the rest of the effective, particularly in areas such as the development world but the question remains as to how eagerly it of clean energy technologies. will embrace this role in coming years. • China is beginning to take steps to wean its economy off its reliance on exports and encourage the growth “Decoupling is not a reality. What is of domestic consumption. happening in the markets in the US is • The Chinese government aims to boost China’s affecting the credit markets worldwide. capacity to innovate and the country has emerged as There is just no confidence in financial a preferred destination for global R&D investment. institutions in the market.” William R. Rhodes, Senior Vice-Chairman, Citigroup; Chairman, President and Chief Executive Officer, Citibank NA, Citi, USA 5 | Annual Meeting of the New Champions 2008
  8. 8. Managing Risks When confidence in markets crumbles and trust in “If a CEO is just about numbers and profits, institutions once thought to be indomitable disappears, the business will not be sustainable. It’s what is left is fear – the dread of dangers that could about building sustainable businesses in multiply beyond control. And if they do: panic. During a debate on the risks to global growth in the World sustainable communities. What you do Economic Brainstorming session at the close of the should be part of your core business Annual Meeting of the New Champions 2008, some strategy. You do it because it’s good for participants went so far as to raise the prospect that a panicky world could be thrown into utter disarray if the your business not just because it makes unfolding liquidity crisis spreads and deepens. you feel good.” Comparisons to the Great Depression were not taken as hyperbole. This crisis is different from recent ones, many Samuel A. DiPiazza Jr, Chief Executive Officer, argued. PricewaterhouseCoopers International, PricewaterhouseCoopers, USA “This is probably the first transformational crisis of our globalized age,” reckoned Klaus Schwab, Founder and have significant and sudden negative effects on another Executive Chairman of the World Economic Forum. part of the world. Yet globalization clearly brings with it “Many things will change.” In Tianjin, the sense that the benefits to offset its costs. It is a catalyst for increased global economy is drifting in uncharted and choppy trade, which in turn results in lower food prices that waters was widespread. The complex interconnections in ultimately benefit the poor. this world are not unlike the structured financial instruments that are now much maligned. The multiplicity The uncertain way ahead prompted nervous speculation and opacity of all the links make it difficult to assess what among participants that somehow the world has tripped is going on – or what could go wrong. “It’s not easy to into an inflection point. “Uncle Sam will save Wall Street see the risks, not easy to manage them,” said Fu today but who will save Uncle Sam tomorrow?” asked Chengyu, Chairman, Chief Executive Officer and Zhu Min, Group Executive Vice-President of the Bank of Executive Director of the China National Offshore Oil China, referring to the US$ 700 billion financial rescue Corporation (CNOOC). While the price of oil is closely package that the US Congress was putting together at related to the value of the dollar, who can predict where the time of the meeting. The downturn in the US and the greenback will be in six months, he asked plaintively. developed economies, some feared, could lead to a rise in trade friction and protectionism. Others, however, were Risk management therefore has never been trickier. not ready to accept the notion that the United States was Companies are hampered from taking long-term on the wane, given the prospect of fresh leadership in perspectives because of volatility in the markets, making Washington in 2009, the size of the US economy and the it harder to pinpoint trends and predict the prices of considerable military and financial power that it still commodities, components, or the value of currencies, possesses. “People understand that the US will come out and more importantly to plan ahead. The food crisis at of this,” said Sayanta Basu, Chief Executive Officer of the the start of the year stirred unrest in many countries and Dubai Financial Group. “In hindsight, people will look sparked fears of inflation, catching many governments off back and say it was a great buying opportunity.” guard. This revealed how quickly food security might be compromised. Increased interconnectedness may mean A major lesson of the crisis is likely to be that those who that changing consumption patterns in one region could argued that dynamic emerging markets had decoupled 6 | Annual Meeting of the New Champions 2008
  9. 9. “It’s not easy to see the risks, not easy to manage them.” Fu Chengyu, Chairman, Chief Executive Officer and Executive Director, China National Offshore Oil Corporation (CNOOC), People’s Republic of China “Frontiermarkets mean something between the known and unknown, and compared with emerging markets, there are more risks and uncertainty but also more opportunities.” Wang Jianzhou, Chairman and Chief Executive, China Mobile Communications Corporation, People’s Republic of China from the US economy were wrong. “Decoupling is not a China can make at this time is to “maintain the reality,” declared William R. Rhodes, Senior Vice-Chairman momentum of sustained growth and avoid ups and of Citigroup and Chairman, President and Chief Executive downs.” This was the same sober approach that the Officer, Citibank NA, Citi, USA. “What is happening in the Chinese leadership took a decade ago as the Asian markets in the US is affecting credit markets worldwide. financial crisis spread ruthlessly through neighbouring We are in a crisis of confidence.” Indeed, the decoupling economies. For its resolve and steadfastness, China theory now appears incompatible with globalization, which by gained in international stature and earned the gratitude of its definition implies more, not fewer, linkages that are not once wary South-East Asia. only more profound but also less fathomable on the surface. For companies aiming to make their mark by pursuing the opportunities offered by the crisis, the advice from Value of the Dollar veteran executives was to keep a long-term view and remain committed to social responsibilities. “If a CEO is Steady erosion in the value of the dollar since 2003, particularly against the euro just about numbers and profits, the business will not be 120 sustainable,” said Samuel A. DiPiazza Jr, Chief Executive Currency per US$ (100=1 January 2003) Officer, PricewaterhouseCoopers International, Yen per US $ PricewaterhouseCoopers, USA. “It’s about building 100 sustainable businesses in sustainable communities. What you do [to engage in society] should be part of your core Euro per US $ business strategy. You do it because it’s good for your 80 business not just because it makes you feel good.” In his closing remarks, Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, reminded 60 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 participants that ”when we face a crisis, corporate social responsibility and corporate global citizenship should not Source: Reuters be put on the back burner.” Participants typically offered two general prescriptions for Energy and Metals Commodity Prices mitigating the risks proliferating in these troubled times. First, if you were doing the right thing, now is not the time Prices for most major extracted commodities have risen to stop. Second, this is the time to go for quality and more than three-fold in real terms since 2003 600 sustainability over all-out profit. In this new context, South-East Asia, for example, should continue efforts to 500 Real price index (100=January 2003) integrate their economies, as they seek to build a Coal 400 common market by 2015. For China, staying the course Copper means pursuing sustainable growth and economic 300 Iron Ore reforms designed to de-emphasize exports and boost 200 Oil* domestic consumption. Liu Mingkang, Chairman of the China Banking Regulatory Commission said that the crisis Aluminium 100 could lead to China’s economic growth moderating from 0 11% to 9%. “This is good for China,” he concluded. Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 “China doesn’t need speed first; China needs quality first.” * West Texas Intermediate crude oil Source: IMF; US Bureau of Labor Statistics; PwC analysis In the opening plenary, Chinese Premier Wen Jiabao took pains to stress that “the most important contribution” that 7 | Annual Meeting of the New Champions 2008
  10. 10. Drivers of New Global Growth “We’ve got to get used to living in a Even though the turmoil in the global financial markets had broken only weeks earlier, participants in the Annual slower growth environment where the Meeting of the New Champions 2008 agreed that the emphasis is not on the quantity and downturn offered many opportunities, many of them Chinese in the making. For it is in China and other speed but the quality and balance of emerging markets where current account surpluses, large economic growth.” foreign exchange reserves and big populations with bulging middle classes are fuelling an economic dynamism that is creating a new cast of agile players able Stephen Roach, Chairman, Asia, Morgan Stanley, Hong Kong to capitalize on current conditions to go global. SAR Even the most pessimistic forecasts for global growth still include robust projections for China, India, the Gulf, Brazil Global Growth Companies are typically adept at pursuing and Russia. Growth companies there, or that invest there, opportunities. According to a study by consulting group are in a good position to weather the storm. Smaller AT Kearney, companies from developing countries companies that have avoided relying on debt, moreover, including China, India, Malaysia, Russia, the United Arab can take advantage of the turmoil to open new markets Emirates and South Africa concluded 19% of the M&A and seize a bigger slice of existing ones. Concluded Jack transactions – 421 out of 2,168 deals – between Ma Yun, Chairman and Chief Executive Officer of China’s developed nations and developing countries in 2007. Alibaba Group: “These days everybody worries about things, but there are a lot of opportunities.” But in the current climate, even the deal-making zeal of the New Champions will be severely tested. Much of the spectacular growth in emerging markets in the past seven years has been the result of unprecedented amounts of cheap capital. But the days of easy money Global Growth Forecast and conspicuous consumption are over, at least in the Growth among oil exporters, along with China, India and Russia, US. “We’ve got to get used to living in a slower growth expected to dwarf growth in developed markets 10% environment where the emphasis is not on the quantity and speed but the quality and balance of economic 8 2008 2009 Forecast GDP growth growth,” said Stephen Roach, Chairman, Asia, at Morgan 6 Stanley in Hong Kong. The ability of the American consumer to keep borrowing to buy imported goods has 4 been crippled, perhaps permanently. “There will be great 2 consequences for other nations who like to sell things to Americans that they don’t need and can’t afford,” 0 United States Saudi Arabia United Arab Emirates India Iran Kuwait Algeria Norway Nigeria China reckoned Roach. Japan Eurozone Venezuela Russia Oil exporters Source: PwC; IMF 8 | Annual Meeting of the New Champions 2008
  11. 11. “These days everybody worries about “We are looking now to the larger, things, but there are a lot of faster-growing economies to take up opportunities.” the slack. We need them to be sources of liquidity, of demand, of investment, of confidence in the global economy.” Jack Ma Yun, Chairman and Chief Executive Officer, Alibaba Group, People’s Republic of China Peter Mandelson, Commissioner, Trade, European Commission, Brussels The retreat in liquidity is also likely to reduce the availability of capital to the developing world at a time Helping to fill the financing void represents a big when governments and businesses are looking to finance opportunity for those with the capital and expertise. From hundreds of billions of dollars in infrastructure and other years of accumulated export revenues, many export- projects to support growth. As the global economy driven economies are enjoying enormous surpluses. slows, moreover, deals financed by projections of cash Energy-rich Gulf States alone added US$ 215 billion to flow are likely to be jeopardized. Emerging economies their stock of foreign assets last year, according to the that have been supplying much of the world’s new Institute of International Finance. Their total assets, investment opportunities will now have to supply a including those of their central banks, sovereign wealth greater share of the world’s investment capital as well. funds and high net-worth individuals, are estimated at “We need them to be sources of liquidity, of demand, of US$ 1.8 trillion, with some estimates going as high as investment, of confidence in the global economy,” US$ 2.4 trillion. East Asia including China, Japan and declared Peter Mandelson, Commissioner for Trade at the Korea has more than US$ 3 trillion at its disposal. European Commission. While much of that money has been funnelled into developed markets, more Middle Eastern investors are Contributions to Global Growth in 2008 looking to seize opportunities in emerging markets like South-East Asia. China’s investors, meanwhile, are China to represent one quarter of global GDP growth this year becoming important players in financing commodity- related infrastructure projects. Indian companies are Other countries China scouring the world for new acquisitions. Despite spending the past decade recovering from its own financial crisis, Japanese banks are now in a strong France position to step in with billions of dollars of public savings. Korea UK United States Japan Brazil Russia Germany India Source: PwC forecasts 9 | Annual Meeting of the New Champions 2008
  12. 12. “You can’t have sustained economic growth without a well-functioning debt market.” Ziad Makkawi, Chairman and Chief Executive Officer, Algebra Capital, United Arab Emirates “What’s happening in America is One urgent task facing most export-oriented economies is to develop capital markets that can rapidly and spreading to other parts of the world. efficiently distribute this capital to budding enterprises, This is turmoil of a tsunami scale and especially the fast-growing companies aiming to go global. Emerging financial markets are still will impact Asia, including China. The underdeveloped and companies have tended to rely conventional wisdom is that over the instead on larger, deeper, more sophisticated markets like New York and London. In particular, aspiring financial next few years China’s exports will be centres such as Dubai, Mumbai and Singapore will need affected. To increase growth, it needs to to accelerate the development of bond markets to keep local companies well financed. “You can’t have sustained refine the export model and growth economic growth without a well functioning debt market,” derived from domestic consumption observed Ziad Makkawi, Chairman and Chief Executive Officer of Dubai’s Algebra Capital. must be accelerated.” Victor L. L. Chu, Chairman and Chief Executive Officer, First Foreign Reserves Eastern Investment Group, Hong Kong SAR Chinese and Russian currency reserves each surpass those of the US and Europe combined $1,000 particularly pro-market economies such as Brazil, Chile and Colombia that have built strong trade links with 800 China (standard dollar reserves, billions) Foreign reserves, excluding gold China and other economies in East Asia. Even sub- Saharan Africa appears to be somewhat insulated, having 600 improved governance and used debt relief in recent years 400 to bolster public finances. Russia US, UK and Eurozone 200 All of these markets represent growth opportunities to India companies and investors that are willing to risk their Brazil 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 capital. Participants were also quick to note that even the US will offer bargains once the panic in financial markets Source: IMF has abated. Some of the biggest medium- and long-term opportunities, however, will be thematic rather than Emerging markets appear to be well positioned to geographic. Urbanization, for example, is a major global address future financial needs. China, flush with export trend likely to be unaffected by the financial crisis. revenues, has recapitalized its banks. And India, with a Infrastructure demand related to urbanization will remain lower reliance on export income, has been bolstered by strong, financed by cash-rich governments, as well as remittances and investments from overseas Indians. As a demand for investment in securing supplies of raw result of exports of food and commodities, many Latin materials. American countries are in a relatively strong position, 10 | Annual Meeting of the New Champions 2008
  13. 13. “According to my research, investment contributes 37% to economic growth, domestic consumption 39%, net export 34%, so if you want to keep the economic growth rate above 8%, we have to strengthen these three driving forces.” Cheng Siwei, President, China Association for Soft Science Studies, People’s Republic of China Environmental sustainability needs, mainly linked to climate change, will also drive investment demand in Business Con dence Worldwide transportation, financial services and education. Green Con dence in Asia-Paci c remains high businesses are expected to flourish. All these developments are opening opportunities to deliver 250 Survey of business con dence, 4-week moving products and services catering to the poorest segments average (di usion Index; 100=January 2007) 200 of emerging economies, where incomes are growing faster than anywhere else. 150 Asia Paci c 100 Excelling in the leaner funding tight-credit environment will North America 50 require changing the status quo in the developing world. Governments will have to become more serious about Europe 0 economic reform, sustainability and equitable growth. -50 And companies will have to demonstrate to potential Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 investors and employees that they are no longer followers when it comes to good governance, risk management, Source: Moody's Economy.com corporate social responsibility and sustainable best practices. As China’s Premier Wen Jiabao told the CEOs of the Global Growth Companies gathered in Tianjin, “If you wish to remain or become New Champions, you must be innovative and take the lead.” 11 | Annual Meeting of the New Champions 2008
  14. 14. Technology and Innovation: The Next Wave “Distant water will not put out a fire close at hand,” goes Old competitive models of knowledge protection will the Chinese proverb – a reminder that the urgent will easily eventually yield to cooperative models of sharing research overshadow the important in the time of crisis. For companies across borders and even between corporations. This has grappling with decreased lending and declining consumption, stark implications for the existing intellectual property the benefits of scientific research and development may rights regime. “The bad news is that intellectual property seem far too remote. Such an outlook should be rejected. is no longer protectable,” said Neil Gershenfeld, Director While terraforming Mars or disproving the Higgs mechanism of The Center for Bits and Atoms at the Massachusetts in particle physics may seem like lofty, far-off goals, science Institute of Technology. “The good news is that intellectual will drive future growth. Investors and governments property can still exist, but it will not be based on control abandon or ignore scientific research at their peril. of scarce resources.” Companies will be compensated based on their abilities to add value rather than on tight control of intellectual property, Gershenfeld argued. Science and Engineering Graduates National governments must also allow the world’s best Asia produces 43% of the world's science and engineering graduates and brightest researchers to collaborate more freely. 700 Number of rst university science or engineering graduates, 2004 or most recent year (thousands) “There is a genuine worry in the scientific community that 600 we can’t communicate with everyone that we’d like to,” 500 said Brian Cox, Royal Society University Research Fellow 400 at the University of Manchester. Scientific development in 300 the US and United Kingdom have suffered because of 200 more stringent visa requirements, especially since 9-11, 100 that make it difficult for foreign researchers to work in 0 those countries. China Japan South Rest of EU non-EU North Latin Middle East Korea Asia Europe America America and Africa International cooperation is vital to large-scale research Source: NSF Science and Engineering Indicators 2008 that is not driven by commercial interests. The largest scientific experiment in history, the Large Hadron Collider (LHC), aims to recreate the conditions at the beginning of The United States, Europe and Japan led technological the universe. This project would not have happened were innovation throughout the 20th century. The scientific it not for cooperation among 86 countries and funding of community has become increasingly decentralized in just its US$ 9 billion price tag. While the US has reduced its the early years of this century. To nurture the new global funding for the space programme, the International scientific ecosystem, stakeholders should focus on three Space Station keeps humming thanks to 16 other goals. First, while national security and intellectual property countries that contribute to its operation. China may soon remain legitimate concerns, knowledge and talent must flow add its expertise and capital to the project. After a more freely across borders. Second, whenever possible, successful space walk mission that took place at the private enterprise should fund new science. Finally, the beginning of the Annual Meeting in Tianjin, China is likely private and public sectors should partner to ensure regulatory to follow the US by landing a spacecraft on the moon. structures that enable innovation and sufficient financing for long-lead research. This is particularly true when While governments and foundations will fund most long- research addresses collective global concerns like clean term research, the private sector can reap rewards from energy and our common stewardship of the environment. investing in new science, as capitalism is efficient at deploying capital to create value. If harnessed to scientific research, it can also be an effective promoter of new 12 | Annual Meeting of the New Champions 2008
  15. 15. “There is a genuine worry in the scientific community that we can’t communicate with everyone that we’d like to.” Brian Cox, Royal Society University Research Fellow, University of Manchester, United Kingdom “The bad news is that intellectual property is no longer protectable. The good news is that intellectual property can still exist, but it will not be based on control of scarce resources.” Neil Gershenfeld, Director, The Center for Bits and Atoms, Massachusetts Institute of Technology, USA technologies. Businesses that invest in biotechnology and success of products like Toyota’s Prius, the private sector nanotechnology are enjoying superior returns on has been slow to fund clean energy research. investment. Globalization, after all, has helped expand the market for life science products. Developing countries Over the long term, nanotechnology will enable greener with little or no pre-existing medical infrastructure can living, but as the technology develops, “regulation has to more quickly integrate healthcare advances than take an important role,” conceded Technology Pioneer countries in the Western world where, too often, Joe Brodd, Chief Executive Officer of Cima Nanotech. insurance companies impede medical progress. Markets reward transparency, but at the moment consumers are largely ignorant, and increasingly wary, of the nanocomponents of the products they buy. Yael McGuire, Biotechnology Stocks Co-Founder of ThingMagic, who is also a Technology Biotech returns outpacing the S&P 500 in 2008 Pioneer, suggested a common database based on the Wikipedia model where companies and consumers would 120 list all of the nanocomponents in products. AmEx Biotechnology Index Indices (100=3 January 2007) 110 Renewable Energy Investment, by Sector 100 Wind and solar represent two-thirds of clean energy investment $125 Services 90 S&P 500 E ciency Investment in clean energy (US$, billions) Other renewables 100 80 Biofuels 2007 2008 75 Solar 50 Source: Yahoo! Finance Wind 25 Even space exploration can be made profitable. A World Economic Forum Young Global Leader, Space Adventures 0 2004 2005 2006 2007 President and Chief Executive Officer Eric C. Anderson brings private citizens into orbit and sees the cosmos as Note: Includes venture capital, private equity, public markets and asset nance investment only a fertile vineyard. Mineral companies might one day mine Source: New Energy Finance asteroids; pharmaceutical companies harvest crystals in zero-G; and transportation companies use sub-orbital Finally, governments and foundations will play a vital role flights to slash intercontinental travel times. “It is in our in developing and propagating clean energy technologies. collective interest to bring the solar system within our Globally, investment in such technologies has trebled in economic sphere of influence,” said Anderson. the last three years. But much more needs to be done to reduce reliance on fossil fuels, which still generate over Where the private sector cannot or will not drive research 80% of the world’s energy. Governments can provide and development, or where it threatens to use science incentives such as tax breaks and subsidies to jump start recklessly, government and civil society must take the investment in emerging technologies, but such solutions lead. While the market for products using nanotechnology require careful consideration as unintended will exceed US$ 833 billion by 2011, environmental consequences often follow from such decisions. concerns threaten to keep that science from reaching its Government support for biofuels, for example, has full potential. And despite the staggering consumer generated concerns about food and water security. 13 | Annual Meeting of the New Champions 2008
  16. 16. China as a Global Player Thirty years ago China launched economic reforms that “What China can do is maintain the would transform the country and its place in the world. At momentum of sustained growth and a speed no one could have predicted even a decade ago, the nation has re-emerged as a global player on avoid ups and downs. That would be multiple fronts. our most important contribution to Consider China’s progress in technology. As the Annual global stability.” Meeting of the New Champions 2008 was getting underway in Tianjin, a Chinese astronaut was making the nation's first-ever space walk. On the diplomatic front, Wen Jiabao, Premier of the People’s Republic of China Beijing’s hosting of the 29th Olympic Games in August was regarded as a major success, despite some critical the domestic market. As Alibaba Chairman and Chief overseas coverage at the outset. Executive Officer Jack Ma Yun said, “the future of China is domestic demand and consumption.” But it is in the arena of economics that China’s gains are most apparent. Prior to travelling to Tianjin to deliver the The government is also seeking to transform China from opening address at the Annual Meeting of the New a country best known for its low-cost manufacturing to Champions, Premier Wen Jiabao spoke before the UN one respected for its innovative capacity. “The most General Assembly in New York of China’s ongoing efforts important thing for China is human intellectual capital,” to fulfil the Millennium Development Goals. “China has said Guo Shuqing, Chairman of China Construction brought down the number of people in absolute poverty Bank. “In the coming 10 to 20 years, we will have to from 250 million to 15 million in less than 30 years,” he transform to an innovation-driven growth model.” said. China has already emerged as a preferred destination for With its economic achievements well certified, China now R&D investment, both foreign and domestic. Beijing has stands as a haven of economic stability at a time when set a goal to increase national spending on R&D from the US and other developed economies are engulfed in 1.4% of GDP in 2005 to 2.5% by 2020. Domestic financial turmoil and entering what could be a prolonged technology leaders predict that in the next decade, China recession. More important, its longer term economic will for the first time create globally relevant technology outlook appears strong, underpinned by an expanding standards. middle class and growing investments in technology. China’s sturdy economic fundamentals and high China’s export-led economy is certainly not immune to a ambitions are all the more striking against the current global slowdown that originates from the US credit backdrop of financial turbulence in the West. In light of crunch and liquidity crisis. Liu Mingkang, Chairman of the the nation’s nearly US$ 2 trillion in foreign reserves and its China Banking Regulatory Commission, predicted GDP US$ 200 billion sovereign wealth fund, it is no surprise growth could slide from 11% to 9%. However, even if that some foreigners perceive China as a potential exports fall, Chinese firms can expect to profit from the economic saviour amid deepening global troubles. country’s growing consumer market. One of Beijing’s top priorities in recent years has been to wean the economy Indeed, one near-term challenge for China will be off its reliance on exports and encourage the growth of managing international expectations about just how much 14 | Annual Meeting of the New Champions 2008
  17. 17. “Within three to five years, climate change will become the most important issue shaping the future of US-China relations.” Kenneth Lieberthal, Professor of Business Administration, University of Michigan, USA “The current financial crisis allows us to learn how to regulate the modern financial system.” Zhang Xiaoqiang, Vice-Chairman, National Development and Reform Commission, People’s Republic of China help it will be able to provide to the rest of the world. Its But, as much as China may prefer to concentrate on own leaders view China still as a developing country that pressing needs at home, it will undoubtedly face needs time to mature – a nation hardly prepared to increasing pressure to be more involved in solving assume the mantle of global leader. They are also wary of international problems. Climate change is a case in point, the political blowback that can come with any attention- as China’s impressive economic growth has also given grabbing moves. But those who point to China’s rapid rise to record levels of carbon emissions. Some question ascent up the global economic rankings are less patient whether their country has a larger responsibility to curb as they see the country as possessing characteristics of its energy use, while others acknowledge a need for the both an industrialized and developing economy. country to be much more energy efficient. Its policies on energy security and climate change continue to shape There is perhaps no better indicator of China’s growing perceptions about China’s role as a global player. “Within clout than the recent calls for it to become more active in three to five years, climate change will become the most global governance institutions. “I think with this flat world important issue shaping the future of US-China relations,” in which we live, China has a bigger role to play in line said Kenneth Lieberthal, Professor of Business with its current position as one of the leading countries of Administration at the University of Michigan. He reckoned the world,” said Publicis Group Chairman and Chief that the issue could become either an example of Executive Officer Maurice Lévy. Some have gone so far cooperation between the two countries or a source of as to argue that China risks becoming a “free rider” on friction. the international stage, reaping the benefits of its growing international influence without playing as active a role in Given the sheer scale of its population and its increasing shaping the global financial and geopolitical agenda as it economic might, China’s impact on global issues will only should. That said, the Group of Seven economies has yet increase. Ready or not, China is now perceived to be a to expand its roster to include on a permanent basis major global player by the rest of the world. The question is emerging economies such as Russia, Brazil, India and China how it will choose to act in this role. in its regular deliberations on global economic governance. China's Foreign Reserves Yet there also remains a strong consensus among China's foreign currency reserves are greater than those Chinese elites that the nation is not yet ready to take up of Russia, India, Brazil and the Eurozone combined the responsibilities of the developed world. In their view, $1,000 maintaining stability at home remains top priority. 800 Presiding over the next stage of reforms in this highly (standard dollar reserves, billions) Foreign reserves, excluding gold China complex and diverse country is task enough for now. 600 “What China can do is maintain the momentum of sustained growth and avoid ups and downs,” said 400 Russia Premier Wen Jiabao. “That would be our most important contribution to global stability.” 200 Eurozone India Brazil 0 Chinese policy-makers already have to attend to a 1999 2000 2001 2002 2003 2004 2005 2006 2007 daunting list of challenges that include narrowing the income gap between urban and rural areas, creating a Source: IMF stronger social security safety net to prepare for an ageing population and promoting economic growth in the nation’s poor central and western areas. 15 | Annual Meeting of the New Champions 2008
  18. 18. WorkSpace The – the workshop with a difference – draws out the collective intellect and creative capabilities of participants to explore concrete opportunities for improving the state of the world. The WorkSpace at the Annual Meeting of the New Two WorkSpace sessions were held in Mandarin Chinese Champions 2008 gave participants the chance to think and facilitated the exchange of ideas and experiences outside the box, stretch boundaries and explore “The among Chinese leaders. The sessions explored two of Next Wave of Growth” in a series of 10 highly interactive the topics that concern them most: sessions. In a variety of collaborative exercises, leaders • Ways that organizations can be better prepared to from business, government, academia and civil society anticipate and handle risks were encouraged to think of new ways to approach • Successful principles of different leadership models some of the most pressing issues. For session summaries, photos and graphics go online Collaboratively, participants discovered insights on critical to: http://www.weforum.org/newchampions/workspace topics as they consider going global and planning for their next stage of growth: • The infrastructure, investment and policies required to deliver and support sustainable urban mobility systems • Successful strategies for building and sustaining an inclusive workforce • The outlook on national and international financial regulations, sources of funding and financial innovation • The future of the Web and mobile technology • Emerging business opportunities linked with the needs and interests of an ageing population • Entrepreneurial opportunities targeting base of the pyramid markets • Design principles that can be applied to adapt and strengthen organizations and help turn challenges into opportunities • Accelerators and inhibitors of global growth 16 | Annual Meeting of the New Champions 2008

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