Euro Biz: Revving Up

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August 2009 Edition of EuroBiz magazine with cover story - Revving Up: The expansion of the Chinese car market is good for domestic and foreign manufacturers alike. Includes quotes from Bill Russo.

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Euro Biz: Revving Up

  1. 1. Journal of the european Union Chamber of Commerce in China aug 2009 Open ROad China’s car market puts its foot on the gas Buying Chinese stocks • Insurance markets • Better beer
  2. 2. contents august 2009 12 President's Foreword In ChIna 14 Business 14 14 Macro 15 Europe ChaMBEr UPdatEs 1 In Focus • This month in the Chamber • Lobbying highlights 19 Chamber Diary • Welcome new members! IntErvIEws 15 20 Chamber Interview A conversation with Hans-Joerg Probst of Ergo Insurance 22 new Generation Greennovate's Mihela Hladin on promoting environmentalism 18 August 2009 | EuroBiz
  3. 3. contents august 2009 30 COLUMns 24 Market Intelligence Laura Michelson Foreign firms need better information on domestic competition 2 Management Bill Dodson Expat GMs still like China, it's headquarters that's bothering them 28 Corporate training gabor Holch Getting more bang for the same training buck 30 wealth Management anthony noto Is it time to put your money in Chinese markets? FEatUrEs 32 Cover story automotive The expansion of the Chinese car market is good for domestic and foreign manufacturers alike 38 regions Hangzhou 34 Entrepreneurial Hangzhou is clustering information technology 38 8 August 2009 | EuroBiz
  4. 4. contents august 2009 41 LIFE 41 Golf Roving golfer Ty Webb assesses the Jian Lake Golf Club in Zhejiang 42 drinking Is it last call for China's brewpubs? 48 Chamber Board 50 advisory Council 42 52 China dining 54 Business toolkit 5 Company Index 58 Out of the Box Certification bodies are busy as Chinese organic food producers attempt to go global 58 10 August 2009 | EuroBiz
  5. 5. EuroBiz EuroBiz magazine is the journal of the European Union Chamber of Commerce in China, published monthly by SinoMedia Ltd. Welcome the delegates to attend the 106th Chinese Import Export Fair! Production Editor: Pete Sweeney Designer: Tony Wan Design Manager: Ricky Deng Distribution Manager: Vivien Wang Circulation Manager: Rebecca Cao Contributors: Laura Michelson, Gabor Holch, Anthony Noto, William Dodson, Orlando Crowcroft, Mark Andrews, Matt Koon, Mark Godfrey Advertising Director of Sales: Patrick Linehan Deputy Director of Sales: Caroline Fontaine Exhibition Period: Sales Managers: Jason Yan, Matthew Sumner, Juliana Piedrahita, Oct.14-18 22-26, Oct.30-Nov 3, 2009 Obie Gao, Fabien Bouhier, Karen Lo Business Room: RMB1200 net Director, Industrial Zones Investment Bureaus: Seth Jacobs Enjoy a 25% Early Bird discount, reservation made before Accounts Administrator: Ivril Huang August 31, 2009 Tel: 021 5385 9063 Break Period: Oct.19-21 27-29, 2009 Business Room: RMB 630 net EuroBiz is free of charge. For extra copies please e-mail: eurobiz@sinomedia.net Benefits: For editorial enquiries please e-mail the editor: • Welcome drink pete.sweeney@sinomedia.net • Complimentary High Speed Internet Access • Complimentary shuttle bus service to and from the European Union Chamber of Commerce in China Pazhou Complex Beijing Office: • Complimentary shuttle bus pick up from Lufthansa Centre, Office C412, 50 Liangmaqiao Lu Guangzhou-Kowloon railway station Chaoyang District, Beijing 100016 • Complimentary domestic call local call (except Tel: 010 6462 2066 Fax: 010 6462 2067 E-mail: euccc@euccc.com.cn Hongkong, Macau and Taiwan) Shanghai Office: • Complimentary use of gym, indoor and outdoor Unit 2204, Shui On Plaza, 333 Huai Hai Zhong Road, Shanghai, 200021 swimming pool Tel: 021 6385 2023, 6385 2133 Fax: 021 6385 2381 • Earn Wyndham Rewards points or airline miles E-mail: shanghai@euccc.com.cn Guangzhou Office: Unit 3005, 30t/F, Tower A, China Shine Plaza, No.9 Linhe Xi Road, For reservation or enquiries, Tianhe District, Guangzhou 510613 please contact us at +86 20 87372988-7085/7086 Tel: 20 3801 0467 Fax: 20 3801 0275 Email: shuang@euccc.com.cn 9, Mingyue Yi Road, Guangzhou Main Road Central Shenzhen Office: Guangzhou, Guangdong 510600, P.R.C. Rm. 308, 3/F Chinese Overseas Scholars Venture Building, South District, Email: hotel@ramadagz.com Shenzhen Hi-Tech Industry Park, Shenzhen 518057 Website: www.ramadagz.com / www.ramada.com Tel: 0755 8635 0920 Fax: 0755 8632 9785, E-mail: prd@euccc.com.cn Nanjing Office: E1, 30/F Zhujiang No.1, 1 Zhujiang Lu, Nanjing, Jiangsu 210009 Tel: 025 8362 7330 Fax: 025 8362 7331 E-mail: nanjing@euccc.com.cn Chengdu Office: Garden City Hotel, Room 811, No. 8 Daye Lu, Chengdu, Sichuan 610016 Tel: 028 8671 0577 Fax: 028 8666 5844 E-mail: chengdu@euccc.com.cn Shenyang Office: Room 2-1105, Office Tower 1, City Plaza, Shenyang 110001 Tel: 0024 8681 1888 Fax: 024 8107 7521 E-mail: shenyang@euccc.com.cn Tianjin Office: Room 15A17, Suite 17, Magnetic Plaza, Binshui Xi Lu, Tianjin 300381 Tel: 22 2374 1122 Fax: 22 2741 8822 E-mail: tianjin@euccc.com.cn Website: www.europeanchamber.com.cn EuroBiz | August 2009 11
  6. 6. prEsidEnt's forEword vote of confidence Dear readers, China matters a lot for European business. But na's exports to EU GDP growth: a 1 percent de- does Europe matter to China? cline in EU GDP growth induces an 11.5 percent EU exports to China rose to €78 billion in decline in Chinese exports. 2008 compared with only €26 billion in 2000. China is the clear winner from globalisation As a result, China was the EU's fourth most and has reaped benefits from its accession to important export market in 2008, behind the WTO in 2001. FDI has played a crucial role in US (€249 billion), Russia (€105 billion) and China's three decades of reform and growth. In- surprisingly even behind Switzerland (€98 bil- vestment by EU companies has introduced new lion). China accounts for 6 percent of exports technology and business experience to the Mid- from the 27 EU countries, but this translates to dle Kingdom, and it has powered China's rise a share of just 0.7 percent of EU GDP. from about 3 percent of global market share for So what about the other direction, China to high-tech goods in 1995 to 15 percent in 2008. Joerg wuttke Europe? Imports from China into the EU rose The Chinese government itself believes that President European Union Chamber to €248 billion, turning the EU into China's big- about 40 percent of technology transfers into of Commerce in China gest export market. Chinese products account China originate in Europe through European for 16 percent of all EU imports. exports or investment. Surprisingly, European The flow of competitively priced goods from FDI in China only represents 3 percent of total China benefits Europeans by restraining infla- EU investment abroad. Certainly the quality of tion, contributing to the well-being of European European greenfield investment in manufactur- consumers – particularly those of modest in- ing is very important in China compared with come – and reducing the cost of supplying Eu- many other locations – portfolio investment ropean consumers' basic needs, thereby increas- in the financials sector in Wall Street for in- ing the balance of disposable income available stance – yet the data indicate that more could to purchase high-end, locally produced goods be achieved. and services. Europe is now China's most im- There is still a sense among European busi- portant customer, taking 20 percent of all Chi- nesses that despite big achievements, condi- nese exports in 2008 (the US takes 17 percent tions for investors are still subject to too many and Japan takes 9 percent). serious restrictions. This was voiced clearly in In the media, the EU's trade deficit of the recent European Chamber Business Confi- €170bn in 2008 with China catches headlines. dence Survey published last month. European As staggering as this figure is, its significance investors in high-tech and branded goods are is overrated. The European Chamber does not interested in the Chinese market, but they fear believe that a perfect balance of trade between the theft of intellectual property if they transfer the EU and China would in itself be desirable or technology. They face a relatively unpredict- normal. What matters are the barriers to trade able mergers-and-acquisitions policy. The bar- and investment in China, which in 2006 were riers to market entry – the establishment costs estimated to cost EU businesses €21 billion in in capital requirements, licensing, forced joint lost trade opportunities every year. That is the ventures and ownership caps – make it difficult equivalent of the total GDP of Bulgaria. for European companies to choose China as an In other terms, it equals fully one-quarter of investment destination. Europe matters a lot all current EU exports to China. China appears to China, but the economic openness of China to have put out the welcome red carpet for for- matters to us even more. eign trade and investment, but to some the door seems only half-open. In some cases, it appears to be swinging shut. Action is required to cor- rect that, otherwise European concerns about the trade imbalance and market access will only grow. Europe's economic development matters more to China at this stage than the other way Joerg Wuttke around – for many certainly a surprising find- President ing. There are estimates of the elasticity of Chi- 12 August 2009 | EuroBiz
  7. 7. in chinA BUsInEss was made in response to the deten- tion of Rio Tinto's Stern Hu, who ChemChina to restart bid- heads iron ore marketing in China, ding for dow unit on suspicion of stealing state secrets China National Chemical Corp along with three other members of (ChemChina), the mainland's largest the company's iron ore team. Other chemicals maker, has resumed bid- foreign groups are following Rio ding for Dow Chemical's agricul- Tinto's lead and moving employees tural chemical unit. Dow restarted out of China. an auction for Dow AgroSciences, which could command a price of up China on course to become to US$7 billion (€5 billion), pitting world's largest auto market ChemChina against Monsanto and Chinese auto sales increased at the IC Switzerland's Sygenta, the world's quickest rate this year in June, put- HOME-MADE: An Airbus A320 rolls off the lines biggest farm chemicals maker. ting the country on course to top ChemChina has previously rejected the US as the world's largest auto offers of a minority stake in the unit, market, according to figures released foreign raw materials is increasing favoring a takeover or joint venture. by the China Association of Auto- as Beijing's stimulus spending takes mobile Manufacturers. Sales rose hold. China tightens controls on 36.5 percent year-on-year in June to dairy imports 1.4 million units, the fourth month China's second quarter GdP The Ministry of Commerce an- in a row that volumes have topped up 7.9% nounced that it is tightening 1.1 million units. Meanwhile, US China's annual GDP growth jumped in controls on imported dairy products car and light truck sales dropped the second quarter to 7.9 percent from to protect a domestic dairy indus- 28 percent year-on-year to 860,000. 6.1 percent last quarter. The 7.9 per- try that has struggled to rebound The jump in Chinese auto sales is cent jump, announced by the National from last year's contaminated milk attributed in a large part to govern- Bureau of Statistics (NBS) was made scandal. The new rules stipulate that ment subsidies and tax breaks on possible by heavy stimulus, and beat importers of fresh milk, milk pow- the purchase of smaller vehicles. economists' predictions of a second- der and whey will need to obtain an quarter growth rate of 7.5 percent. import license and provide detailed Urban per-capita incomes increased information on products each time MaCrO 11.2 percent and real rural per-capita they import, starting in August. incomes increased 8.1 percent. Exports, imports fall sharply in May world Bank revises China China's imports and exports both growth forecast to 7.2% fell in May, but some analysts The World Bank said China's said the worst is likely over as economy would grow 7.2 percent in investment rose sharply. May 2009, in an upward revision from its exports decreased by a record 26.4 previous forecast of 6.5 percent. In percent from the same month last its latest quarterly report, the bank year, while imports were down pointed to high levels of lending 25.2 percent, according to China's and a loose monetary environment customs agency. Despite a year-on- in making the change. The massive year import decline, demand for monetary influx is expected to fuel economic growth in coming quarters. PTX REJECTED: MofCom suspects foreign milk GaQsIQ to establish product safety blacklist rio tinto evacuates China China's product-quality watchdog research staff is set to establish a publicly avail- Australian mining firm Rio Tinto able blacklist of companies that fail has evacuated its entire staff in Chi- to meet acceptable standards. The na involved in research of the iron move was made in an effort to halt IC ore and steel industries. The move HALF-EMPTY: Imports declined in May the string of product safety scandals 14 August 2009 | EuroBiz
  8. 8. EU-ChIna airbus delivers first China-produced plane European aircraft maker Airbus signed in June by China Eastern PetroChina may invest in UK delivered its first middle-distance Airlines for 20 Airbus A320s to refinery aircraft to be entirely assembled be delivered by 2013. Aviation PetroChina is involved in discus- in China last month. The A320 air- analysts expect China to surpass sions to make its first investment in a plane, which was made at a factory the US to become the world's larg- European refiner. If the state oil firm, in northern Tianjin, was delivered est market for civil aircraft over which is involved in both oil produc- to Dragon Aviation Leasing and the course of the next few decades. tion and refining, were to invest in the will be flown by regional carrier China is expected to buy 2,800 Ineos refinery, it would be the latest in Sichuan Airlines. The delivery of new planes over the next 20 years a string of energy-related investments the A320 coincides with an order valued at €232 billion. by Chinese firms. In May, PetroChina spent US$1 billion (€700 million) to acquire a 45.5 percent stake in Singa- pore Petroleum Co from Keppel Corp. that have hit China over the past in India, said that inexpensive year. The General Administration of Chinese products had damaged the Xinhua to launch tv Quality Supervision, Inspection and market share of two-thirds of the program in Europe Quarantine (GAQSIQ) said that a na- companies it surveyed due to typi- State-run news agency Xinhua will tional network would be established cal Chinese predatory pricing. launch a television program in su- to provide information on supervi- permarkets and outside Chinese em- sion, food, measurements, standards, bassies in Europe to bring Beijing's approval, quarantine and inspection. view of the world to a Western audi- ence. Beijing will offer US$4.4 bil- Indian sMEs call for China lion to US$6.6 billion (€3.1 to €4.7 trade investigations billion) to media groups to carry India's Federation of Chambers of the programming in Brussels and Commerce has called for New Delhi other European cities. The Xinhua to accelerate anti-dumping investiga- TV offering is part of a larger move tions on imported Chinese goods. by Beijing that has also included The industry body, which represents overseas circulation for China Daily IC small- and medium-sized enterprises INSATIABLE: PetroChina to invest in the UK and an English-language edition of the Global Times newspaper. EuroBiz | August 2009 15
  9. 9. chAmBEr UpdAtEs this month in the Chamber Financial Forum Conference that details of new Financial Talent portant Chamber event: The first ever European Union Awards will be released soon. These • Primary sponsors: EU-China Trade Shanghai International Financial will work to reduce the tax burden Project and the City of London Forum took place on June 25, 2009 on key figures working in the finan- • Sponsors: China Treasury Online at the Grand Hyatt Hotel, Shanghai, cial sector in Shanghai. • Supported by: American Chamber attracting more than 200 attendees. Further speeches were delivered of Commerce in Shanghai The event was jointly organised by by Dr Zheng Yang, director-general the European Union Chamber of for the Foreign Exchange Adminis- President of turkey meets Commerce in China and the Shang- tration of the People's Bank of China with Chamber members hai Municipal Government Financial Shanghai, on the use of trials and The European Chamber and Turk- Services Office with the objective of first practices to accelerate the de- ish Industry Business Association examining the implementation of the velopment of Shanghai as an inter- (TÜSİAD) had the honour of hosting plan to develop Shanghai into an in- national financial centre. Dr Zhang the President of Turkey, Abdullah ternational financial centre by 2020. Guangping, deputy director-general Gül, for a unique dialogue session In his keynote address, Dr Fang of CBRC Shanghai, spoke about deri- with Chamber members during the Xinghai, director-general of the vates in China. Dr Jun Ma, chief econ- President's recent trip to China. Shanghai Municipal Government Fi- omist of the Greater China region for Arzuhan Doğan Yalçındağ, presi- nancial Services Office, emphasised Deutsche Bank, gave his view on dent of TÜSİAD, several Turkish state that the greater internationalisation the current global economic climate ministers, the Turkish Ambassador of Shanghai would benefit China as and what this means for Shanghai's to China, and the president of The a whole. He stated that there needs development. Dr Zhu Rongen, presi- Union of Chambers and Commodity to be greater decentralisation of the dent of Shanghai Brilliance Credit Exchanges of Turkey attended the ses- current national financial framework Rating and Investors Service Com- sion, which was moderated by Cham- with increased delegation of pow- pany, gave his view on the necessity ber President Joerg Wuttke. ers passed from Beijing to the local of developing supporting services, Following introductory remarks branches of the regulators. and Jackie Wang, global partner at by Iraz Turhan, TÜSİAD Beijing of- He further stated that China Egon Zehnder, offered her opinions fice director and European Chamber should be opened up more to compe- on what Shanghai needs to do to de- SME Forum business manager, and tition from foreign firms in order to velop human capital in the city. by TÜSİAD president Yalçındağ, dis- increase the provision of high-quality We would like to thank our kind cussion shifted to the challenges and financial services, and he announced sponsors and supporters of this im- opportunities facing European busi- nesses in China and the similarities with the Turkish experience. Wuttke provided President Gül with an overview of the business en- vironment in China for foreign com- panies, drawing on findings from the Chamber's recently published Business Confidence Survey 2009 to support his assertion that European businesses remain confident in Chi- na's future, but want to see a further opening up of the country's economy to improve competitiveness. Tarhan Feyzioglu, deputy rep- resentative with the International Monetary Fund (IMF) in China, then spoke on China's broader economic and investment climate, the govern- ment's macro-economic policies and Dr Fang Xinghai addresses the Chamber Financial Forum Conference their impact on investment growth, 1 August 2009 | EuroBiz
  10. 10. and China's progress on the road to economic recovery. Finally, Jens Ruebbert, head of Deutsche Bank China, introduced the issues facing foreign enterprises in the financial services sector in China, focusing on recommendations from the Chamber's position paper on market access and transparency. Afterwards, President Gül dis- cussed his meetings with his Chinese counterparts, which had focused heavily on cooperation on economic issues. Faced with the challenge of the current financial crisis, mutual understanding and cooperation are the priorities, he said. Attendees at a Financial Forum roundtable dinner with on FDI to Tianjin in the first quarter share their insights with members tianjin's vice-Mayor of the year, and outlined the strate- on Unleashing Potential: Growing The Vice-Mayor of Tianjin, Ren gies the government is developing in Your Emerging Leaders. They of- Xuefeng, joined with members of response to the crisis. fered bold advice for investing wise- the Tianjin chapter of the European ly in emerging leaders, such as mi- Chamber for an exclusive dinner on wise investments in nimising risk by selecting leaders on June 12th. More than 50 top execu- emerging leaders the correct fundamentals, requiring tives from key European businesses Are there ways to maximise returns committed, consistent performance, in Tianjin met with Ren, who is a on leadership investment and reap introducing challenges to maximise key figure in the Tianjin Municipal valuable returns? On June 4 and 5, growth, providing feedback from the Government and manages the city's the European Chamber held a semi- environment, and measuring gains commerce, economic cooperation nar in Shenzhen and Guangzhou, and re-investing dividends. and foreign affairs. In his address, inviting Dr Sarah Chan, Dr Karen Mayor Ren spoke about Tianjin's Steadman and Dr Dirk Baxter from Chengdu Business Guide economic climate, provided statistics Leadership Insights International to The European Chamber Chengdu EuroBiz | August 2009 17
  11. 11. chAmBEr diArY Chapter will soon publish the Cheng- will have a print run of more than popular basketball tournament. Ten du Business Guide 2009 to provide 5,000 copies and will be distributed teams representing member compa- an overview of the Chengdu busi- through the Chamber's extensive nies from a range of industries faced ness environment. Compared to the networks in China and Europe. off in the round-robin group stages, 2008 version, the 2009 guide will after which just five were left stand- include more detailed information second annual Chamber ing: Home Caught, Nanjing Interna- on Chengdu and its economic attrac- Basketball tournament in tional School, BASF YPC, and Sie- tions, covering tax policy, real estate, nanjing mens Numerical Control. But only HR, IPR, expatriate services, logistics, For the second year in a row, hoops two – Home Caught and Nanjing and legal guidelines. The guide will fans from across Nanjing's Europe- International School – would prog- also feature case studies of European an business community took to the ress to the final, with Home Caught Chamber member companies from courts last month for the European finally emerging as champions of the a variety of sectors. The 2009 guide Chamber Nanjing Chapter's hugely 2009 tournament. ■ Lobbying highlights in May The EU Ambassador Abou Briefing bodies, as well as a large gathering of The Director General of the Nation- was held on May 12, addressing EU- European Chamber members. al Tourism Administration (CNTA) China economic issues. Ambassador met with the European Chamber Serge Abou met with around 140 Eu- The Deputy Director General of the Travel Working Group as a follow-up ropean Chamber members in Beijing Ministry of Industry and Informa- meeting to further discuss the imple- during this event. The discussions tion Technology (MIIT) met with the mentation rules for the new law on touched upon a range of issues af- European Chamber Lighting Working Travel Agency Regulation, which fecting EU businesses, including the Group on May 14. During this meet- came into effect May 1. The two sides financial crisis and trade relations. ing, the two sides exchanged views exchanged views on how to improve on waste of electrical and electronic the overall travel market in China, The NDRC – EUCCC Joint Forum equipment (WEEE), restriction of haz- the outlook for 2009 and further co- was held in Beijing on May 25 and ardous substances (RoHS) and issues operation opportunities. CNTA also 26. The joint high-level forum with of common interest. presented the plan of the pilot proj- the National Development and Re- ects for the outbound travel market. form Commission (NDRC) was titled The Deputy Director General of the Building sustainability within the Centre of Science and Technology Cosmetics WG EU-China Workshop petrochemical and chemical indus- of Ministry of Housing and Urban on Application of Standardization try through energy savings, industry Rural Development (MOHURD) in China: On May 26 and 27, mem- clustering and environment footprint met with the European Chamber Con- bers of the Cosmetics and Lighting reduction. The PCR Working Group struction Working Group in Beijing on working groups in Beijing took part has been working for two years to May 14 to receive the Position Paper in a standards workshop organised by organise such a forum to create an 2008/2009. During the meeting, the the EUCTP and European Chamber, exchange platform between Chinese two sides exchanged views on issues which also featured several represen- authorities and the European chemi- relating to the construction industry, tatives from the SAC and AQSIQ. cal industry in China. including recent developments, laws A range of issues was discussed, and regulations imposed upon for- The China-EU Round Table Meeting including interpretations of the stim- eign investors in China, and the over- and Dinner was held on May 19. The ulus plan for the petrochemical and all future outlook for the construction Chairman of the Tianjin board met chemical industry, developments industry in China. The Centre of Sci- with prominent local figures to discuss and trends, and energy savings and ence and Technology also showed a issues including the recycling industry, the promotion of a circular econo- great interest in participating in proj- economic and social rights in the EU my. Attendees included delegates ects like the SWITCH project, an EU and China, and combating the financial from several prominent Chinese in- initiative to promote sustainable de- crisis in terms of potential solutions for stitutes, academies and government velopment and alleviate poverty. the EU, China and Tianjin. ■ 18 August 2009 | EuroBiz
  12. 12. welcome new members! The European Chamber extends our Chengdu AG, Zhuhai Representative Office warm welcome to all new member Alliance Francaise de Chengdu Royal Cargo companies in all chapters who joined Angel Obstetrics and Gynecology Tucano us during the past two months: Hospital German EAVN Group GMBH Shanghai Beijing Rieter Automotive Sound-Proof Parts Agropromotion Abbott Laboratories Trading (Chongqing) Aker Projects (Shanghai) (Shanghai) Sofitel Forebase Chongqing Bansard International Agropromotion YaFei Dental Group Danone Dairy Sales Arreon Carbon Gazeley Investment Consulting British Sugar Nanjing (Shanghai) Bureau Veritas Huurnink Indoor Environmental Huthwaite Clifford Chance Services Jaguar Land Rover China Double Dragon Travel Ma An Shan Spanesi Car Repair Novosana (Taicang) Ethical Edge Equipment Pacnet Business Solutions (China) Ici Caldaie Spa (Beijing) Schrader Electronics Links Moving Pearl River Delta Seco Tools (Shanghai) Nestle (China) Arvato Logistics Services China Wenfei Business Consulting Nord Anglia Consulting Decathlon (Shanghai) (Beijing) Goodrich Pacnet Business Solutions Jiangmen Emak Outdoor Power Shenyang (China) Equipment Wuerth Holding (China) Siemens VDO Asia Pacific JW Marriott Hotel Shenzhen (Shanghai) On Limited Tianjin The St Regis (Beijing) Pacnet Business Solutions Betatafence Wire and Mesh Products Western Academy of Beijing (China) (Tianjin) Raiffeisen Zentralbank Osterreich Mdexx Magnetronics Tianjin China by Numbers 2009 China by Numbers is the most comprehensive guide to the figures that are shaping China. The 2009 edition is fully updated and revised. OUT NOW Only US$40/RMB280 CONTACT US TO ORDER Tel: +852 3175 0322, or +86 21 5187 9633 ext. 864 and +86 10 5166 2335 ext. 864 order@chinaeconomicreview.com www.ChinaEconomicReview.com/book/cbn EuroBiz | August 2009 19
  13. 13. chAmBEr intErViEw • ErGo risk avoidance hans-Joerg probst of Ergo insurance on spreading coverage Hans-Joerg Probst came to China for the first who you started with. There's very high vola- time in 1970 as a young student on an intern- tility. In addition, insurance agents do not ship as a press officer. He studied Chinese have the image of being very professional. language and economics in Berlin, and was There is a lot of mis-selling where people are lucky enough to make a career of his passion just badly trained and lack sufficient knowl- for China. This January, Ergo Insurance Group edge to explain to consumers what they are asked Probst to help them run their operations actually selling. Sales teams are relying on in China. He currently serves as Ergo's chief relationship sales where people are buying representative in Beijing. EuroBiz talked to insurance because they know the person who Probst about Ergo's approach to spreading in- is recommending it. What the agent should surance awareness throughout China. be doing is explaining what the product is hans-Joerg Probst, and why they should be buying it. We want chief representative Q: Ergo is a relatively recent arrival to our agents to act as a sort of financial advisor in Beijing for Ergo China. Can you tell us about the company's – although we won't call them that – but they insurance background? need to be able to act that way to a family. A: Ergo was founded 11 years ago as a hold- Most of our competitors are focusing on ban- ing company by Munich Reinsurance Com- cassurance: bank tellers offering insurance pany [Munich RE], the largest reinsurance to their walk-in customers. Bancassurance in company in the world, to bundle together all terms of depth of advice is very superficial, their insurance products. But it's really im- so we don't think this is a good channel for portant to emphasise that the companies in- increasing insurance awareness. side Ergo, the operational entities, have a re- ally long history. Now Ergo is also looking at Q: What is the central government doing emerging markets in Asia, focusing on China to encourage foreign insurance firms to ex- and India, and it opened a representative of- pand into lower-tier cities? fice in China in 2007. A: Basically it boils down to political appeals, but there are some minor incentives. Local Q: What makes Ergo think it can succeed in authorities are allowed to reduce rental rates China after showing up so late? and provide local tax incentives when you set A: I think this is a valid question, but first up a company in their region. But the main of all the insurance density is still pretty low, incentive is the speed with which you can set even by standards of other emerging markets. up an office. If you are trying to set up an Because the market is far from saturated, office in Beijing, Shanghai, or Guangdong, there is still huge potential for newcomers. your waiting time could be longer. This wait- Also, Ergo will not be starting in large cities ing period is basically the political lever the like Beijing and Shanghai. We have set up op- government has created through the regula- erations in second-tier and third-tier cities in tory authority to direct insurance compa- areas like Liaoning, Shandong, Henan, Hebei nies towards the underdeveloped markets. and Sichuan. They all have tremendous po- But when these firms go into the provinces, tential because they have large populations, CIRC [China Insurance Regulatory Commis- but insurance penetration is quite low. sion] wants them to contribute to education and professionalisation of the markets. CIRC Q: Are there any differences in approach? does not want to see us poaching from other A: We focus on professional training of in- local insurance companies. I think this is rea- surance agents and this is definitely different sonable. from what China has at the moment. The cur- rent standard is, you recruit agents and after Q: How is the product mixture changing? one year you only have maybe 30 percent of A: The market in China is shifting away from 20 August 2009 | EuroBiz
  14. 14. heavy reliance on investment-linked experience in both markets, what – to looking at capital adequacy ra- insurance projects – that's how life are some aspects of Western insur- tios. If someone buys a 1 million insurance started here – into more ance that should not be imported? RMB life insurance policy, you need risk-focused long-term provision. A: What needs to be left behind, in to have a technical reserve in your In the past, Chinese people bought my view, is over-selling. The West is pocket so you can pay out if he dies insurance as an alternative to bank a saturated market. You are inundat- the next day. This seems to be a deposits, because insurance prod- ed by offers, and some offers are not problem with some Chinese compa- ucts in the 90s were offering similar transparent. This is particularly true nies, because they don't have suffi- interest rates. In the long term, this in critical areas like health and acci- cient capital. It was workable for a is not a feasible approach. People dent insurance. In a saturated mar- certain period of time. These new need to create their own capital base ket, agents still want you to buy even medium-sized insurance companies for longer-term provision. For ex- though you are adequately covered. in China were growing so quickly, ample, in European life insurance, Second, agents are trying to buy you so they had sufficient growth in you pay relatively small amounts to out of your previous insurance en- new premium receipts to cover their cover against the risk of death, but gagements to make a sale. This is all payouts. Since the financial crisis, there's no capital return, no savings eating up the same pasture. however, they have had less premi- component. But the upside is you are um growth, and now their capital is protected against the death of the Q: What needs to be fixed on the insufficient. This really concerns the breadwinner. We think this is more Chinese side in terms of regula- regulators. But the major political appropriate for China. tion? goal is expanding coverage, so they A: The issue is enforcement. In tolerate solvency problems. It's a Q: Ergo and its competitors are try- terms of managing a market, China difficult balance between enforcing ing to import Western ideas about is migrating from administrative solvency and helping the market to insurance into China. Given your methods – requesting reports etc. grow quickly. ■ EuroBiz | August 2009 21
  15. 15. intErViEw • GrEEnnoVAtE Green gold Greennovate's mihela hladin on promoting environmentalism Greennovate launched its environmental con- everyone has a role in making China a bet- sultancy in Shanghai in 2007 and since then ter place to live. has worked on a variety of high-profile proj- ects. EuroBiz spoke with Mihela Hladin, found- Q: And how have these goals been imple- er and director of Greennovate, in her office mented through your programs? – furnished using recycled and renewable ma- We started modestly on our own funding, terial and lit by energy-efficient fluorescents developing a programme called GECKO to – about the burgeoning environmental move- help high school students in more rural areas ment in China. to start thinking about the environment. The programme has expanded from teaching high Q: What inspired you start an environmen- schools in rural Guizhou and Hubei province Mihela hladin is tal consulting firm in China? to training Fudan University students here in founder and director of A: I'm from Slovenia. I was born in a beau- Shanghai to go out and teach the programme Greennovate (www. tiful country with a beautiful environment, themselves in Qinghai and Yunnan. Training greenovate.org) and I never knew I was lucky until I came these university students has really allowed here to China. I was transferred here while us to broaden our impact at time when no I was working with an environmental engi- one can support the programme. In Shanghai, neering company. We were focused on de- we started the Reuse.bag programme when veloping wastewater treatment facilities for the government banned plastic bags, and it the metallurgical sector. I travelled to the received a lot of press coverage. Then we de- most interesting places in China, but I didn't signed our green office as an example of how see where the whole thing was going. I was simple it is to be green. We used sustainable working with great people who were pushing resources like bamboo and reused old materi- industry forward very fast but compromis- als like saw boards for tables. last October. We ing on the environment. It wasn't an issue also teamed up with Eno, an indepent fashion of financial resources; it had to do with basic design company, to reach out to young people awareness with how long the consequences with a simple message that Green is the New of industrialisation will last. At dinner in one Gold. Chinese designers have been making t- town, I asked an older resident if he thought shirts to convey our message through fashion. his kids would come back and live in the This year we have a new series called NETI area, and he was shocked. He had probably with them, communicating energy, waste and never thought beyond providing them with water messages on shirts. financial stability. Q: What have you been able to do with your Q: What are you trying achieve and who are corporate clients? you working with? A: We just finished a big project with FedEx. A: We are developing unique, green ser- We worked with their team in the Wuhan of- vices with a measurable impact. We are fice for about six months on environmental a green hub for innovative people and re- topics from environmental footprints, energy sponsible companies, so when a company and population challenges to green innova- wants to do something related to environ- tions. Each time we were there they went mental awareness, you are most probably to schools in the area and taught what they going to bump into us. We want to work learned. Our next challenge is to start tailor- with companies that really care and see us ing our services to SMEs, which are crucial as more than something to put in their CSR for environmental awareness, and offer them report. We want people to understand that affordable projects that they can get involved the issues aren't too big for them and that in. 22 August 2009 | EuroBiz
  16. 16. Q: How do your services create things creates long-term success in a we are in talks now to become a part value for your clients beyond im- corporation. of the Green School Programme. proving the environment and their public image? Q: With state media expressing Q: Why have you reached out to A: Companies put us in the CSR sec- concern for the environment, have youth and businesses in lower-tier tion when maybe we don't belong you had any support from the gov- cities? there. Our programmes go beyond ernment at any level? A: Industries in cities under 5 million environmental impact in many ways. A: The government and environ- people usually have had the largest The environment touches and affects mental communication have really environmental impact in China. We everyone, and when employees see changed in the last few years. They are wanted to teach high school students that a company cares about the envi- becoming very open to environmen- because the older factory owners ronment, it increases company loyal- tal issues in the media. Things change probably won't change their minds. ty. I would argue that the team build- much more quickly here than in the Most of these students will stay in ing skills we provide aren't included West. Wherever we go, we have re- these communities and work, so even- in CSR programs, and I believe that ceived their support. We always work tually the change will come. We chose basic environmental awareness with local governments because we fashion as our medium for environ- should be part of regular training want to have their blessing before we mental activism in the cities because too. Of course we are able do things do anything. We talk a lot with them – lets face it – fashion is cool. Every like save money on energy costs and about environmental career opportu- teenager wants to be cool. We also use supply chains, but this should just nities with things like green-tech. We social networking sites as a powerful be a consequence. Certifications and tell them, It's real, it's here, it could tool. If you can get kids to connect en- checklists in the supply chain are be your next step. The Centre for En- vironmentalism with being cool, then one thing, but getting employees to vironmental Education and Commu- we don't just have to push it and it understand why they are doing these nications has also recognised us, and happens organically. ■ EuroBiz | August 2009 23
  17. 17. coLUmn • mArKEt intELLiGEncE Competing with China foreign firms need better information on domestic competition By Laura Michelson U ntil very recently, foreign businesses in China have been able to sell their prod- ucts due to superior quality; their Chinese competitors were satis- merce, there are around 9.7 million companies registered in China. One client recently was trying to keep track of what they described as their key 125 competitors in China. Obvi- fied with the lower-price end of the ously, the scope of such a project is market. This has been conventional massive. wisdom for quite some time, but the There are a number of ways to conventional wisdom is increasingly combat the inherent difficulties of dated. gaining market intelligence here. The growing strength of Chinese Given China's limited information competition is changing consump- infrastructure, foreign companies tion trends. At the same time, the vol- should consult a wider range of in- Laura Mitchelson is ume of new, foreign products hitting formation sources during secondary managing director for the shelves is lower and the range of research than they would in a more Amber, a shanghai-based business intelligence products being promoted as new in developed market. This means go- consultancy. Laura has 15 China is also narrowing. As a result ing beyond basic Google searches to years experience in china, of these two trends, it is becoming Chinese language news aggregators, advising companies on more important for multinationals to commercial databases and deep into operations and marketing understand and track their Chinese the web. strategy and managing competitors. Less market research in-depth market studies. and more market intelligence is now don't trust, verify As director on all key required. But even if such searches yield data, projects at Amber, she how reliable is it? To mitigate the risk has delivered more than rate of decay of garbage-in, garbage out, take advan- 100 international client Unfortunately, gathering market in- tage of experts to validate your data. research projects in telligence in China is no easy task. Use researchers either internally or mainland china. One of the main challenges for man- externally who have first-hand experi- agers is predicting the moves of com- ence with primary research in China, petitors. There is no complete Dun and who can read between the lines Bradstreet service in China, very and accurately interpret what they limited statistics on demographics, are hearing, seeing or reading. Find almost no sophisticated business re- people who can ask the questions that search panels and very low customer solicit concrete answers and who sys- loyalty program penetration. In addi- tematically cross-check and triangu- tion, there is very little detail of com- late information. pany strategy or much else listed on Always keep in mind the timing the websites of most Chinese compa- of your data and what it is telling you nies. Even if a company has data on about the market. The time lag in the the internet, business data in China release of even the most basic infor- decays at a rate of at least 6 percent mation and statistics in China means per year. that you are often behind the curve. The scale of the problem is also a There is a delayed reaction to market challenge. According to the State Ad- information in many industries in ministration for Industry and Com- China, meaning it's essential to dou- 24 August 2009 | EuroBiz
  18. 18. ble-check the official growth or trend about your competitors will simply examples of where improved busi- figures against the predictions of not be finding its way back to deci- ness intelligence and knowledge those within the industry and among sion makers unless you open this sharing within the company have your competition. channel. led to improved sales or to better cus- With a generation shift every 3-4 tomer retention. years, also bear in mind that some of Internal bias Make sure everyone knows how your younger team members are not On the other hand, sales teams may to use the web to maximum effect old enough to bring any historical not be the best filter of key informa- – this is not a given in an environ- perspective to the analysis they do tion about market trends or competi- ment where cultural values and back- on industry or competitor develop- tors. They are incentivised to sell, not ground play into ideas of what is ments. inform policy, yet many businesses strategically important. Include busi- Furthermore, there are alterna- gather most, if not all, of their com- ness intelligence gathering in the job tives to gathering market intelligence petitor information from their sales descriptions of all your middle- and through programs that are designed teams. This is the easiest and often ap- senior-level managers. primarily for that end. Using a sales pears to be the fastest route to infor- If your firm employs the strate- team seems to be the solution of mation, but risks internal bias. gies suggested above, it will have a choice for many businesses trying to If your business is dependent on much better chance of keeping, or keep track of their Chinese competi- internal sources of information on gaining, market share. If, on the oth- tors. the way markets move and on your er hand, you are content to rest on A sales team has to keep you ahead competitor's plans, there are many your laurels, confident that being for- of your local competitors through methods for maximising output. En- eign alone is enough to protect your understanding and predicting their sure information flows from man- brand and revenue streams indefi- moves. They are on the front lines agement down, and reward upward nitely, you may be in for an unpleas- of the market, and vital information intelligence providers. Offer concrete ant surprise. ■ EuroBiz | August 2009 25
  19. 19. coLUmn • mAnAGEmEnt the discontented Expat Gms still like china, it's headquarters that's bothering them By Bill dodson T here's a lot of uneasiness in the ex- pat community in China today, but it's not because China has lost its charms. It's the corporate situation that seems to be making a whole generation of job in the company, despite returning stel- lar results. Active lobbying for clarification of his next role in the company led to an offer of a global advisory position - code words for gradual layoff. expat general managers grumpy. By generation, I mean those who came re-enchantment here three or four years ago to establish a Chi- This is, to put it mildly, short-sighted. Stra- na operation from scratch. They were chosen tegic adjustments are sometimes necessary, specifically because task was Herculean and but companies that plan to be in China for required an uncommon collection of experi- the long haul have a lot to lose by removing ences, attitudes and skills. But today, some of or demoralising the one person who under- them feel distinctly under-appreciated. stands their Chinese operations best. Replac- Bill dodson has been Arnold is just such a general manager. ing them, as a rule, is not easy. managing, advising and Sent by his UK-based company to set up Sending in fresh blood in the form of writing on china business and economics since an operation to manage supplier networks a troubleshooter has its advantages, but 2000. he has been quoted in China, he was able to successfully ship only if the troubleshooter has deep busi- on china-related issues in a profitable product back to the UK within ness experience in China. Ditto for promot- a variety of international two years of establishment. ing domestic management, which can save publications, and speaks But in the late spring of 2008, when time money on the bottom line but can also lead regularly at china industry came for performance reviews, Arnold be- to severe communications problems. Also, conferences. he writes the lieved he deserved a raise and a stake in the unlike seasoned foreign managers, most popular blog this is china! China company, which had surpassed ex- Chinese managers have never experienced (thisischinablog.com). pectations. What he heard was: Well, you a down business cycle before. You can contact him at know we've got a downturn in the econo- So assuming there is a business case for bdodson88@gmail.com. my, let's delay that discussion for a bit. keeping the first-generation GM around, Arnold still has his current management how can firms motivate them? The key to role, but he's uncertain about a lot of things: re-enchanting the disenchanted China lead- whether he has a job to return to in the UK; er is to give him a stake in the China opera- whether he'll be adequately compensated tion he put so much sweat into, and to let for his string of successes; and whether him know the operation is still important. headquarters will even keep the Chinese Martin, for example, a Danish GM, is operation running. thrilled at how his operation is doing in Mads, the former GM of a Danish sales China and the strategic role it will be play- and design office in China, had started lob- ing in the development of the company bying for a new post a year before his con- globally. As a major shareholder in the tract had come due for renewal. The China China operation, he knows what the lead- operation he had established had surpassed ership in the home office is planning for its sales goals and was actually one of the the China operation because the CEO of bright spots in the company's balance sheet the company came to China personally for during the downturn. a week to meet customers and to discuss But after the CEO was replaced by anoth- the overall company plan with Martin. Af- er individual, who subsequently replaced terward, they hit the Shanghai nightlife top management with his own people, together for an evening neither could re- Mads realised he may actually lose his own member. ■ 2 August 2009 | EuroBiz
  20. 20. coLUmn • corporAtE trAininG Get back in shape it's time to start training more efficiently By Gabor holch A s the economy recovers, firms are once again looking to recharge em- ployee skills and morale for the road ahead. But such preparations cost money, and many of our clients have slashed training by will be shared. If turnover at the bottom of the pyramid is high, train the supervisors, who can share the skills and tools in a trickle- down manner. You may also want to assess the retention value of the training you deliver. 40-50 percent. Some companies have frozen As a rule of thumb, customised programmes training altogether. Others try to deliver ev- work better for retention, as the knowledge erything internally, which usually means gained is more specific to the particular job. dumping the job on HR personnel who are frequently overworked, unenthusiastic and Give contradictory messages unqualified to deliver real value in the train- Let's say you will deliver Six Sigma, project Gabor holch is a ing room. management and leadership skills courses management consultant, The question is, can you deliver similar this year. All of these courses address qual- trainer and co-founder value from a reduced budget? In most cases, ity issues, but they approach them from dif- of campanile Group, the answer is yes. While training budgets in ferent angles. However, if different training a group of business consultancies advising the past may have been more generous, much programmes use different standards to define clients on cross- of the money was wasted. To illustrate the and manage quality, the result is confusion. cultural business point, here are a few ways that companies of- Make sure that each programme delivered strategy, leadership ten waste training cash. follows the same values and guidelines as de- and communication. fined in your company's mission statement or campanile's clients are Provide training employees strategy. multinational companies don't need and public institutions Ignoring the needs and expectations of your Leave paid services unused in china, southeast Asia trainees is a general pitfall. It results from This is where I see the greatest amounts of and Europe. contact poor vertical communication between levels, cash going down the drain. Companies are Gabor at: gabor@sh- as well as poor horizontal communication be- often impressed by the added value that cbc.com tween HR and other departments. You may training providers deliver, such as evaluation find yourself sending a well-trained group of tools, refresher sessions, feedback reports or top managers on a skills-based programme, support tools like online learning. However, only to find out they actually needed a laid- many of these added services are never used. back session where they could brainstorm. Refresher sessions are forgotten or postponed Conversely, mid-managers or frontline peo- indefinitely. Participants do not log into their ple hungry for guidance and problem-solving online learning accounts. Forms on feedback tools may complain about the lack of sub- results are neatly filed in a box somewhere. stance at an experience-based session. The The best approach is to plan realistically solution is to define in detail desired training and keep participants, training providers and outcomes and delivery methods. HR accountable for making every penny work for your organisation. Ask yourself the essen- Ignore staff turnover tial questions: Is it a realistic expectation that Labour in China is a famously volatile re- your busy top managers will log on twice a source, and it is not rare for firms to spend week and spend 2 hours learning online? If it money training for their competition. You is, create incentives so that they really do. Simi- can solve this problem by carefully planning larly, if you spend hours collecting and analys- where the training content will enter your ing feedback, make sure you get the feedback organisational chart, and how the knowledge you need, and use it. ■ 28 August 2009 | EuroBiz
  21. 21. Food Safety China Enhancing food quality in China 28th of August, Shanghai In the last year, food safety has become one of the hottest topics in China. With the launch of a new food safety low on June 1, the topic has been given new urgency. How do we enhance food quality, and what kinds of standards should we follow? China Economic Review has invited specialists from the food safety supervisory authority, as well as leading food industry experts and food industry service providers who possess a unique mainland China perspective on the issues. The conference features an interactive and case-study-oriented panel discussion that will provide valuable knowledge and practical advice on how to maximize company value through food safety and risk assessment. Speakers include J. Chris Harreld, Institute for Business Value, IBM Special Consulting Service Partner Edison Chen, Ph.D. SBS/Asset Leader, Global Business Service, IBM FDA, Shanghai Prof. Xiaosong Hu, VP. China National Food Industry Association Conference Agenda 08:00 - 09:00 Registration 09:00 - 09:15 Opening remarks 09:15 - 10:00 Session I: Food safety major concerns in China • What are the emerging management trends • Developing criteria and objectives 10:00 – 10:30 Session II: Analysis the Food Safety Issues in China • The new methods that help to produce efficiently, safely and more economically 10:30 – 11:00 Tea break 11:00 – 11:45 Session III: Full Value Traceability Food Related Products • A strategic imperative for food related product companies to empower and protect their brands 11:45 – 12:30 Session IV: Business impact of traceability solutions • How to properly use traceability solution in food related industry 12:30 - 14:00 Lunch 14:00 - 14:45 Session V: Develop in Food Safety and how it turn to business growth • What are the new prevention and detection methods that effectively improve food safety in the supply chain • How does training education can help developing food safety and help business growth 14:45 - 15:30 Session VI: Compliance and impact of China’s food safety law • Complying and keeping updates on Chinese and international regulations 15:30 – 16:00 Afternoon tea 16:00 – 17:00 Session VII: Panel discussion: Case Study in Food Safety • Crisis Management: The efficient way to dealing with Crisis • How do use risk assessment to void safety issue. 17:00 -- 17:10 Closing Remarks Rates Who should attend Early Bird Rate (Before August 10): RMB2200/USD327 Food safety directors and managers, quality managers, supply Standard Rate: RMB2500/USD373 chain managers, procurement managers, general managers from all Food and relative industries and all Food and Beverage industry. Book Now @ www.chinaeconomicreview.com/conference or contact Grace TAN | Tel: +86 (0) 21 5187 9633 * 851 Fax: +86 (0) 21 5385 8953 Email: conference@sinomedia.net China Economic Review, and its local agent Shanghai Yanran Advertising Ltd
  22. 22. coLUmn • wEALth mAnAGEmEnt wading in is it time to put your money in chinese markets? By anthony noto M any expatriates move to China because they and their compa- nies are firm believers in the future of China and its role in the global economy. the current debt crisis, with the Shanghai Composite up over 80 percent year to date. how to invest Institutional investors and high net worth Once on the ground here, expatriates ex- individuals have a wide range of choices for perience the progress and see the dramatic investing in China – such as China-focused changes firsthand. The level and pace of private equity funds, hedge funds, venture growth is unprecedented in scale, and many capital funds and individual stocks. people working here naturally want to invest For the majority of expatriates, however, part of their savings in China to get a bigger these investments are unsuitable as they anthony noto, CFa piece of the action. typically have high minimums, poor liquid- is a fee-only financial Countless books have been written on ity and/or a very high level of risk. Therefore, planner at shanghai- the reasons to be optimistic about China's low cost mutual funds and Exchange Traded based noto financial future. Economic liberalisation is spurring Funds (ETFs) are the best options for most planning, a division of massive wealth creation, and some are fore- expatriates that would like to invest in Chi- diacron. noto financial casting China's economy to overtake the na. An ETF is a security that tracks an index, planning provides US as the world's largest in less than 20 a commodity or a basket of assets (like an personal financial planning and investment years. China has a high savings rate, large index fund), but trades like a stock on an ex- advice to expatriates reserves, and plenty of opportunity. change. living in mainland china In addition, the Chinese economy has Ironically, foreign investors that want to and hong Kong shown itself to be resilient through dif- invest here are best served by funds based ficulties such as the Asian crisis and even outside China. Hong Kong offers a num- PTX DUE CAUTION: Expatriates should be wary of investing too much in one market 30 August 2009 | EuroBiz
  23. 23. ber of China-focused ETFs and is a tant factor to keep in mind. China's more mature market than Shanghai prospects are attractive, but it is im- or Shenzhen. China-focused ETFs portant to recognise that it is still an traded in Hong Kong are made up of emerging economy with its share of H-shares and Red Chips. issues to work through, such as its The difference between H-shares banking system, a massive overhang and Red Chips is that H-shares are of state-owned shares, possible com- mainland-registered while Red Chips modity shortages and exposure to in- are not. China-focused funds are also flation, to name but a few. available in Europe. For example, Deutsche Bank of- Use caution fers a FTSE/Xinhua 25 Index ETF Despite perceived risks, diversify- in Italy, Germany and Switzerland. ing geographically can lower overall Lyxor, a unit of Société Générale, of- portfolio volatility – particularly as fers the China Enterprise Index ETF China's economy grows to be less de- available in France, Spain, Italy, Ger- pendent on exports. This means that a many and Switzerland. portfolio that includes Chinese stocks could be less risky than one without how much to invest such stocks. As a global citizen looking at a global Expatriates captivated by the investment environment, determin- growth occurring around them some- ing the proper amount to invest in times want to invest a significant por- China should be based on a number tion of their savings in China. When of factors. deciding to move here, expatriates The current weighting in terms of have already invested their greatest global market capitalisation is a good income generating asset in China starting point to consider in deciding – themselves. Putting too much sav- how much to invest in any given coun- ings in Chinese stocks on top of liv- try. To put this in perspective, China's ing and working here leaves income weighting in the world markets was and savings in an unnecessarily vul- 2.1 percent in May 2009 according to nerable position, as they share too SP. The majority of Chinese shares many interrelated risks. are still not freely traded. As an example of how dangerous Aside from technical elements this can be, when the American energy such as China's current weighting in company Enron imploded in late 2001, world markets, the proper amount to many employees lost their jobs and, at invest is also based on personal fac- the same time, watched their savings tors such as investor needs and risk held in company stock collapse. tolerance. Diversification is a fundamental For example, an expatriate that principle in growing and maintain- plans to retire here might choose to ing personal wealth. Emerging mar- hold more Chinese equities to better kets like China can be a valuable ad- address currency risk. dition to a portfolio, but expatriates Diversification is another impor- should not get carried away. ■ China-Focused exchange-traded funds listed in hong Kong Code Fund Name 2801 iShares MSCI China Tracker 2823 iShares FTSE/Xinhua China 50 Index ETF 2827 W.I.S.E. CSI 300 China Tracker 2828 Hang Seng H-Share Index ETF 2838 Hang Seng FTSE/Xinhua China 25 Index ETF 3024 W.I.S.E. SSE 50 China Tracker EuroBiz | August 2009 31
  24. 24. covEr story • AUtoMotIvE Revving up The expansion of the Chinese car market is good for domestic and foreign manufacturers alike by Mark Andrews 32 August 2009 | EuroBiz IC
  25. 25. I t was only a decade ago private car ownership seemed like a dream for Chinese consumers, but today the dream has already been held last April. More than 600,000 people attended the show, many of whom were actually shopping. Jason Shen, for example was a postgradu- The Chinese are natural savers and have liquid cash realized by much of the Chinese mid- ate student looking to buy his first in troubled times, dle class. The explosive growth of car. For me it's a family purchase, car ownership in China led analysts he said. If I have a car it is very con- which coupled with to predict China would soon become venient for me to take my wife to government incentives the world's largest auto market, and work, my child to school, and look in January they were proven right. after my parents. has boosted the China's growth has been well Solidly middle-class consumers Chinese car market ahead of forecast for several years, but like Shen are the future of the do- ahead of the US nobody expected China to take the mestic car market. Sales in the first ASH SUTCLIFF, CHINA CAR lead until sometime in the middle of half of 2009 amounted to 6.1 million the next decade, says William Russo, units, compared to 4.8 million in the TIMES president of Synergistics, a business US. Since 2003 China's vehicle mar- consultancy specialising in the auto ket has more than doubled in size sector. Even allowing for the impact from 4.56 million units to 9.67 mil- of the downturn in the US, it is still lion units [in 2008]. Of this total, 61 amazing how quickly the Chinese percent, or 5.91 million units, repre- market has grown, he says. sent passenger vehicles, says Russo. China's unofficial celebration of This is good news for foreign its new stature was marked by the manufacturers; two-thirds of all pas- 13th biennial Shanghai Auto Show senger cars sold in China are ➤➤ EuroBiz | August 2009 33
  26. 26. covEr story • AUtoMotIvE IC WORK FASTER: Even as foreign markets decline, Chinese car demand remains robust ➤➤ produced by foreign brands or them has given car buyers a great their joint ventures. amount of room to manoeuvre at the Around the end of last year the negotiating table. market faltered slightly, but the Chi- nese government stepped in with Foreign attention a plan to aid the industry. The plan In the past, many foreign manufac- aimed to boost the sales of more fuel- turers used the China market as a efficient vehicles, aid development of place to sell old designs. Sutcliffe domestic brands through RD and ac- points to the Volkswagen Santana, quisitions, and promote electric cars. Daihatsu Charade and Austin Mae- Since January 20, taxes on vehi- stro as examples of models that were cles with an engine displacement of produced in China long after they 1.6 litres or less have been reduced, had debuted in other markets. Nev- along with subsidies for purchase of ertheless, some of these models – the those of less than 1.3 litres. January Santana in particular – went on to set and February saw a nearly 19 percent sales records. increase in sales of such cars. However, today American, Japa- The Chinese are natural sav- nese and Korean manufacturers' ers and have liquid cash in troubled joint ventures are offering their latest times, which coupled with govern- designs on the mainland. Porsche's ment incentives has boosted the Chi- launched its new Panamera sports nese car market ahead of the US in saloon at the Shanghai Auto Show, sheer volume, argues Ash Sutcliffe, the first time Porsche had launched a author of the popular China Car new car at a non-European or Ameri- Times web site. This cash behind can show. 34 August 2009 | EuroBiz
  27. 27. Manufacturers are also now taking Santana in China by 2012, Volkswa- into account Chinese tastes and mod- gen's strategy seems to be targeting ifying their products to suit. Ford, for China with a mixture of its latest example, launched a saloon version international designs and localised of the popular Fiesta hatchback in versions. China this year designed specifically When it comes to the top end, the to appeal to the real men don't drive near-monopoly enjoyed by foreign hatchbacks market in China. Audi brands shows no sign of ending. Gov- produced a specially lengthened ver- ernment officials, leading purchasers sion of the A4 for China. Lengthened of luxury vehicles, no longer exclu- cars, with their greater rear legroom, sively purchase Audis, but are also are popular here as they can accom- buying Mercedes and BMWs. modate larger family units or busi- But some foreign carmakers are ness partners. looking to get in on the growing, Another leader has been General low-price market as well. ➤➤ Motors. In 2006, GM introduced a Chinese version of the Buick La- Crosse. While based on the archi- tecture of its American namesake, the Chinese model has a completely different body and interior designed in Shanghai. The domestic styling of the LaCrosse was so successful that GM's Shanghai subsidiary is now in charge of redesigning the interior and the exterior for its replacement, to be released later this year in both the US and China. Volkswagen has also got in on the act, launching the VW Lavida and VW New Bora in China last year. IC With the recent rumours that VW will end production of the Jetta and LOCALISED: A prototype on display at the Shanghai Auto Show EuroBiz | August 2009 35

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