China Europe Business Meeting7-9 November 2007, Frankfurt, Germany

a Horasis-leadership event

Report compiled in cooperation with

Co-hosts:Deutsche Börse Group State of Hessen

Co-chairs:Bertrand Collomb Chairman, Lafarge, FranceJim Goodnight Chief Executive Officer, SAS, USAErnesto Heinzelmann Chief Executive Officer, Embraco, BrazilLawrence Ho Chief Executive Officer, Melco, Hong Kong SARDavid K.P. Li Chairman, Bank of East Asia, Hong Kong SARCherie Liem Managing Director, GT Enterprises, ChinaLim Chee Onn Chairman, Keppel Corporation, SingaporeKlaus-Peter Müller Chairman, Commerzbank, GermanyAndrey Sharonov Chairman,Troika Dialog Investment Company, RussiaJean-Pascal Tricoire Chief Executive Officer, Schneider Electric, FranceSundeep Waslekar President, Strategic Foresight Group, IndiaJerry Zhang Chief Executive Officer, Neocomm Technologies, ChinaLevin Zhu Chief Executive Officer, China International Capital Corporation, China

Thought Leadership Partner:KPMG

Strategic Partner:Sal. Oppenheim

Media Partners:BusinessWeekCaijing MagazineInternational Herald TribuneWirtschaftsWocheSina Corporation

Knowledge Partners:APAXArcandorBaker & McKenzieDeininger ManagementFrankfurtRheinMain GmbHGTZHolcimIDA IrelandInvest in GermanyMoody’s Investors ServiceOspraie ManagementPhynova Roland BergerU21Global WHU Zurich Financial Services

Andreas Preuss, CEO, Eurex, Deutsche Börse

Volker Hoff, Minister for Federal and EuropeanAffairs, State of Hessen

Horasis is a global visions community committed to enact visions for a sustainable future (http:/www.horasis.org)

Table of Contents

Foreword 4

Editorial 10

Chinese Challengers 11

Between Valuation and Value Creation 13

Global Bailout 15

Reverse Globalization and the China-Equation 17

Foreword

The third China Europe Business Meetingof Horasis convened in Frankfurt on 7-9November under the theme ‘GlobalizingChinese Firms’.The theme reflected theincreased emphasis of Chinese firms to buildglobal and sustainable brands.The ChinaEurope Business Meeting once again pro-vided a platform for business and politicalleaders from China, Europe and the rest ofthe world to discuss Chinese firms’ rise toglobal eminence.

China's economy is growing rapidly, as is itsforeign exchange reserves, and is assuminga more active management and strategicinvestment of these reserves. In addition weare witnessing the emergence of a new breedof Chinese multinationals many with largeamounts of cash to invest cross-border.Recent examples as China DevelopmentBank’s (CDB) stake-purchase agreementwith London-based Barclays PLC and Indus-trial and Commercial Bank of China (ICBC)’sbuy into South Africa’s Standard Bank, aswell as many other acquisitions around theglobe - by state-owned or private firms-underpin Chinese firms’ global ambitions.

The China Europe Business Meeting has beenheld in the recognition that visions withinthe Sino-European economic sphere requirethought leadership and mutually beneficialpeer-to-peer networks. As one of the parti-cipants, Chen Ping, Chairman, China

Investment Partners Group, China, put it:‘The China Europe Business Meeting hasbeen proven to be the foremost annualgathering of Chinese business leaders andtheir global counterparts - exactly the kindof meeting for intellectually stimulatingdiscussions and business-driven match-making exercises we have been waiting for.’

Business leaders from over 30 countries,including CEOs from Brazil, India, Russia(the BRI(C)s, South Africa and the MiddleEast, came together for one and a half dayretreat to debate the critical requirementsfor Chinese firms to successfully expandtheir operations towards a global level-playing field.The China Europe BusinessMeeting was co-hosted by the DeutscheBörse and the State of Hessen, and supportedby KPMG and Sal. Oppenheim, as well asmany knowledge and media partners.‘In atrue multi-stakeholder setting, the ChinaEurope Business Meeting helps to fosterpositive trade and cultural relations,’commented Supachai Panitchpakdi,Secretary-General, UNCTAD, Switzerlandin his speech during the opening dinner.

Chinese firm’s corporate globalization wasat the heart of the agenda, with a joining offorces among an engaged community ofbusiness leaders, led by the co-chairs:Bertrand Collomb, Chairman, Lafarge,France; Jim Goodnight, Chief ExecutiveOfficer, SAS, USA; Lawrence Ho, ChiefExecutive Officer, Melco, Hong Kong SAR;Ernesto Heinzelmann, Chief Executive

Jim Goodnight, Chairman, SAS, speaking aboutthe global impact of the subprime crisis

Ernesto Heinzelmann, CEO, Embraco, Brazil Jean-Pascal Tricoire, CEO, Schneider Electric,gives an investors perspective

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Officer, Embraco, Brazil; David K.P. Li,Chairman, Bank of East Asia, Hong KongSAR; Cherie Liem, Managing Director,GT Enterprises, China; Lim Chee Onn,Chairman, Keppel Corporation, Singapore;Klaus-Peter Müller, Chairman, Commerz-bank, Germany; Andrey Sharonov,Chairman,Troika Dialog InvestmentCompany, Russia; Jean-Pascal Tricoire,Chief Executive Officer, Schneider Electric,France; Sundeep Waslekar, President,Strategic Foresight Group, India; JerryZhang, Chief Executive Officer, NeocommTechnologies, China and Levin Zhu, ChiefExecutive Officer, China InternationalCapital Corporation, China.

Among the many discussion topics oneraised particular interest, the session onsustainable development – as sessionrequested by our Chinese participants.

Chinese firms increasingly acknowledge theimportance of long-term developmentgoals in accord with society and the environ-ment.With a rapidly growing economy, andas the world's most populous nation, Chinafaces great stresses on its resources andenvironment.The Chinese government hastaken sustainable development as an im-portant objective for China's economic andsocial development. As Cherie Liem,Managing Director, GT Enterprises, Chinaholds:‘A sustainable world needs asustainable China.The corporate sector –Chinese or foreign owned – shouldspearhead the efforts to attain the nation’sgoal of a green GDP.’

Another key topic that emerged at theChina Europe Business Meeting was thepotential backlash against Chinese firmswishing to expand into Europe and NorthAmerica.‘China Bashing is the talk of theday in various Western capitals’, concludedChen Ping, Chairman, China InvestmentPartners Group, China.‘The potential biasversus Chinese investors is the single mostimportant hindrance to globalize our cor-porations.’ Indeed, blaming the Chineseseems very fashionable these days: onintellectual property rights, poisoned toysand the trade deficit. ‘The criticism ofChina is restricting the free flow of capital’,argued Gao Luan, Chief Executive Officer,Tianjin Property Rights Exchange, China .‘We need a strong China. China is theworld’s new growth engine’, continuedLevin Zhu, Chief Executive Officer, ChinaInternational Capital Corporation, China.Participants reached consensus that Europeand North America should deal with Chinaat eye level. ‘What is needed is dialogue. Itis important to work with China to help it

‘China is the world’s new growthengine.’Leving Zhu, Chief Executive Officer,China International Capital Corporation, China

Cherie Liem, Managing Director, GT enterprises,explains why China is the new engine ofglobalization

Chen Ping, Chairman, China InvestmentPartners listens to a question from the audience

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Closing Remarks from the co-chairs

tackle the various challenges’, stated DavidBell, Chairman, Pearson, United Kingdom.

As Tan Chin Nam, Permanent Secretary,Ministry of Information, Communicationsand the Arts, Singapore stated:‘We need toadvocate a balanced world, with globalisationproviding benefits to everybody, not just afew’. Indeed, in the spirit of the ChinaEurope Business Meeting, entrepreneurs,investors and consumers should enter a truepartnership relation with China. Accordingto Michael Nobel, Chairman, NobelCharitable Trust, Sweden:‘Capitalism alsomeans competition – Europe should notbuild Chinese walls around its economies -falling back into protectionism.’ VladimirSpidla, Commissioner for Employment,Social Affairs & Equal Opportunities, Euro-pean Commission, Belgium echoed thiscomment by saying that ‘the partnershipbetween China and the European Union(EU) is strong and growing.’

A session on China’s recent investmentsinto Africa and the generic impact on worldtrade attracted particular interest. Hostedby Alison Smale, Managing Editor, Interna-tional Herald Tribune, France, the panellistsdiscussed China’s role in fuelling Africa’seconomic growth and in what ways thegrowing ties will be similar to and differentfrom those with its traditional partnersfrom Europe and North America. LiuJianjun, President, China Africa BusinessCouncil, China said that the relationshipwith Africa remains a priority for theChinese government. China continues tohelp African countries improve livingstandards. Reflecting on Industrial andCommercial Bank of China (ICBC)’sacquisition of a stake in South Africa'sStandard Bank, which at 5.5 billion dollarsis the biggest Chinese financial acquisitionever, Firmino G Mucavele, Chief Executive,NEPAD, South Africa reasoned that ‘Chinesecompanies are not coming for the rawmaterials only.They are less driven bypolitical orders than by economic oppor-tunities.’ Enos Chiura, Chairman, MerchantBank Central Africa, Zimbabwe illustratedthat the Chinese government and thecorporate sector engage in many humani-tarian projects across the continent.Jean-Marie Masse, Head, Global Financial

‘What is needed is dialogue. It isimportant to work with China to helpit tackle the various challenges.’David Bell, Chairman, Pearson, United Kingdom

Levin Zhu, CEO, China International Capital Corporation, shares a comment on the Chinese banks

Germany - Land of Ideas

6

a question from the audience

Markets, IFC, USA said that all investmentsinto Africa geared to stimulate economicgrowth should be welcomed by the worldcommunity.

Other sessions were on mergers andacquisitions, branding, private equity andinnovation – all rather practical topics tosupport Chinese firms’ efforts to inter-nationalize their operations. Becoming atruly global company means much morethan establishing a portfolio of units indifferent countries around the world.‘Togain competitive advantage from globaliza-tion, the whole must be worth more, in

terms of efficiency and/or the capacity tocreate value for customers, than the sum ofits parts’, said Myles Lu, Chief ExecutiveOfficer, Roxbeam, China. Many Chinesecompanies now need to broaden theirsources of competitive advantage wellbeyond the low cost of manufacturing orservice operations.This means they needtheir own brands, distribution capabilitiesand service centres in markets around theworld.‘To better differentiate theirproducts and services, they may also needto conduct R&D in global hotbeds of newtechnology and locations with a deep poolof qualified scientists and engineers, tocomplement innovation activities at home’,said Volker Hoff, Minister for Federal andEuropean Affairs, State of Hessen, Germany.

One way to stretch the scope of Chinesefirms is to seek Initial Public Offerings(IPOs) outside China - using the proceedsof the IPO to expand operations in Chinaand overseas. One of the sessions examinedwhat is needed to attract top Chinesecompanies to list overseas. Chen Guoping,Chairman,Vtion Technologies, China,reflected on his company’s plans to go

Firmino G. Mucavele, CEO, NEPAD reviewing China's investments into Africa

Martin Wolf and Cherie Liem

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public in Frankfurt.‘Vtion Technologies haschosen a Frankfurt-listing due to DeutscheBörse’s special service for Chinese firms aswell as Germany’s lead in wirelesstechnologies.’ Kevan Watts, Senior VicePresident, Merrill Lynch & Co Inc, USAreferred to the recent successful IPOs ofChinese firms around the world, havingintroduced the capital markets as adiscipline on the management of China’sbanks. David K.P. Li, Chairman, Bank ofEast Asia, Hong Kong SAR added that ‘thehuge demand for Chinese IPOs indicates acontinued fascination with investorsviewing the shares of mainland firms as aproxy for Chinese growth’. And, as HanPing, Deputy Director General, ChinaSecurities Regulatory Commission, China,stated,‘The authorities thrive to create thesupporting framework to allow Chinesefirms to list overseas.’

Jean-Claude Trichet, President of theEuropean Central Bank, gave a review onthe emergence of China in the globaleconomy and China’s role in global financialmarkets:‘Rapidly rising imports of low-costconsumer goods from China is nothing to

be necessarily afraid of, since it canbring important benefits to Europeanconsumers as well as to the economy atlarge. Access to lower-priced goods booststhe purchasing power of consumers and thebroader economy can potentially alsobenefit from lower underlying inflationarypressures.’ He concluded that ‘there is nodoubt that the global economy has bene-fited enormously from the emergence ofChina and that this new giant has broughtnew opportunities as well as challenges toEurope.’ Meng Aiying,Vice President,State-owned Assets Supervision and

Jean-Claude Trichet, President, European CentralBank, talking about China's Role in GlobalFinancial Markets

Bernd Pfaffenbach, State Secretary, Federal Ministry of Economics and Technology, Germany, addressing participants

8

Meng Aiying, Vice President, SASAC delivers herkeynote speech

Administration Commission of the StateCouncil, China added that ‘the Chineseauthorities will always maintain an open andconstructive dialogue with the EuropeanCentral Bank and other Europeaninstitutions.’

After all, participants encountered multiplebusiness opportunities while voicing sugges-tions and making appeals at the varioussessions.They reached consensus that Chinais assuming a greater leadership role inworld affairs, even though China’s transitionfrom a command to market economy willcontinue to be gradual. According to BerndPfaffenbach, State Secretary, FederalMinistry of Economics and Technology,Germany ‘China’s policies and practices ontrade, energy and geopolitics will increas-ingly shape the global agenda in general andEurope in particular.’

Horasis’ intention is to create a globalmeeting bringing together CEOs fromemerging markets – with China at the core– and business leaders from the developedword.We envision to attract leadingChinese and global CEOs year after year,creating a community of senior businessleaders. Chinese CEOs have greatconfidence in this meeting as a globalplatform for engaged dialogue with thedeveloped nations.

Horasis looks forward to welcoming youback to next year’s edition, to be held inBarcelona, Spain, in autumn 2008.

Dr. Frank-Jürgen RichterPresidentHorasis:The Global Visions Community

Frank-Jürgen Richter, President, Horasis, welcoming participants

9

The meeting co-chairs during the opening panel

Robert Zhou, CEO,Arrail Group commenting about Human Resources while Martin Posth, Chairman, Deininger (China) looks on

10

Editorial

China’s sustained economic growth of morethan ten percent has been fascinating politi-cians and economists around the globe foryears.As Europeans such a two-figure growthrate is particularly impressive, because wedont’t experience similar conditions in ourdomestic markets.Thus the dialogue withChina and its company representatives hasbecome increasingly important.That’s whyKPMG proudly supports the “China EuropeBusiness Meeting 2007”.

The increasing number of interconnectionsbetween both regions has opened the doorsfor several new partnerships between Chinaand Europe. An example are theinvestments that are now flowing in bothdirections.The generation of European“adventurers” who set off for China in the80’s and 90’s to do business “on the ground”,has found its equivalent in China. Anincreasing number of Chinese entrepreneursare coming to Europe to open up newopportunities and to develop new marketsfor their businesses.

This trend is welcome. By taking advantageof opportunities in shared markets, we canjointly consolidate and improve ourposition in a dynamic global economy.Putting up protective barriers would be the wrong way to go. Our view is to thecontrary; steps taken to open up marketsbetween Europe and China, have revealedtremendous, positive growth.When Chinabecame a member of the WTO at the endof 2001, it was merely a starting point, notthe final stage in the development of jointtrade relations. Further opening up by bothsides on equal terms, will put us in aposition to increase the flow of trade inboth directions.

This report is designed to give you somenew perspectives and commentary fromspeakers and delegates at the China EuropeBusiness Meeting and deliver additionalinsight about Sino-European relations asdiscussed at this year’s conference inFrankfurt.

I hope you find the report as stimulating aread as I have and I look forward to yourresponses and feedback.

Prof. Rolf Nonnenmacher Co-Chairman KPMG Europe LLP

Prof. Rolf Nonnenmacher, Co-Chairman, KPMG Europe LLP

ChineseChallengers

Award for the Chinese BusinessLeaders of the Year 2007

The desire to ascend the global stage hasdriven this year’s prize winners of the“Chinese Business Leader of the Year”.Theaward winners’ companies and businessstrategies are examples of how dominantChinese companies have become on theglobal markets.

The prize-winners in the categories “Leader-ship”, “Innovation” and “Internationalisation”have successfully overcome challenges thatEuropean companies also have to meet:striving to improve image and profile oftheir business and brands at an internationallevel and developing sales markets onforeign continents to open up new growthopportunities. Furthermore they havekicked-off a new innovation drive amongEuropean countries.

The award ceremony showed that Europehas not inherited the mantel of marketleadership and innovation for life:Theprize-winner in the “Innovation” categoryshowed that China has already achievedmarket maturity in an area in whichGermany claims the title of “worldchampion” – renewable energy sources.Dr. Zhang Zhengyu, Chairman Hi-TechWealth, was awarded Chinese BusinessLeader of the Year in the category

“Innovation” for developing the world’s firstsolar-powered mobile phone.The prize-winner in the “Leadership” category,Charles Chao, CEO SINA Corporation,showed that a global brand from China cannow compete on an equal level with theGoogles and Microsofts in the online andmultimedia industry. And finally the prize-winner in the category “Internationalisation”,Feng Jun, Chairman Aigo, has its “Made inChina” brand name on a high-tech productmade in Europe – cockpits of Formula 1racing cars.

Leadership – Charles Chao, CEO,SINA Corporation

Charles Chao was appointed ChiefExecutive Officer of SINA Corporation inMay 2006. Prior to that, Mr. Chao was theCompany's President and Chief FinancialOfficer. Holding degrees in Journalism aswell as a Master of Professional Accounting,he is largely responsible for the success ofthe company's past mergers and acquisitions.He has played a vital role in building SINAinto an Internet media and online advertisinggiant in China.The company providesservices for online and mobile content,games, search services and online shopping.With more than 230 million registeredusers worldwide and over 700 million dailypage views, SINA is the most recognizedInternet brand name in China and amongChinese communities globally.

‘The award winners enriched thebusiness world with new stimuli andadded new internationalrepresentatives to the global elite.’Prof. Rolf Nonnenmacher,Co-Chairman of KPMG Europe LLP

Chinese Business Leaders of theYear, with Frank-Jürgen Richterand Rolf Nonnenmacher

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[www.sina.com]Internationalization – Feng Jun, Chairman, Aigo

Feng Jun is the CEO of Aigo Corporation,the world's second largest provider andmanufacturer of portable storage and digitalproducts such as autorun USB flash disks.After graduating from the School ofArchitecture and attending an ExecutiveMBA of Beijing University, he began hisown business in 1993 with two employeesand 200 RMB in China. Mr. Feng led thecompany to become the leading brand in itsdomestic market as well as a truly inter-national brand with a current global turnoverof 800 million US dollar.Today Aigo exportsits products to 17 countries on fourcontinents, with over 3,000 outlets ofwhich over 100 aigo branded retail stores.

The worldwide sponsorship of McLarenMercedes’ Formula 1 Racing Team is justone example of Aigo’s aspiring globalizationstrategy.

[www.aigo.com]

Innovation – Dr. Zhang Zhengyu, Chairman,Hi-Tech Wealth

Dr. Zhang Zhengyu is founder, Chairmanand Senior Engineer of Hi-Tech WealthCorporation, a provider of advancedelectronic and mobile communicationproducts in China.With his work Dr. Zhanghas become instrumental in developing thecompany’s research and market strategies.One of its outstanding advances for thetelecommunications industry was thelaunch of the world’s first solar-poweredmobile in June 2007. Prior to theincorporation of Hi-Tech Wealth in 1997,Dr. Zhang already gained several years ofmanagement experience with high techcompanies in China. Dr. Zhang holds 20patents in China and obtained a Bachelor of Science from the Beijing Institute ofTechnology and a Ph.D. in artificialintelligence from Beijing University ofAeronautics & Astronautics.

[www.htwchina.com]

During the coffee break

Connecting with participants

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13

BetweenValuation andValue Creation

Chinese companies are steadily increasingtheir presence and business activities inEurope. Firmly in focus here is the searchfor value-creating technologies and inter-nationally-proven management experience.

The growing interest of Chinese companiesin a presence in Europe’s markets was thetopic of several panels at this year's ChinaEurope Business Meeting in Frankfurt,which was supported by KPMG as thoughtLeadership Partner.

The growth of large-scale companies in thePeople’s Republic is now breaking nationalboundaries: they are aspiring to reach new

heights on the international stage – in thenew emerging markets of Africa or LatinAmerica, and increasingly in the developedeconomic areas of the European Union.

Denis Molumby, Executive Director of theIrish Development Agency (IDA), emphasizesthe fact that the perception and interest ofthe Chinese in Europe have increased signifi-cantly in recent years. Chinese companiesfocus on two things in particular: access tothe massive EU consumer market with al-most 500 million potential customers, andhighly developed technologies and innovativeproduction methods, which will improveproduction in Chinese companies.

This is also reflected in the strategy thatmany companies from the Far East followwhen setting up a base in Europe. Accor-ding to Thorsten Amann, Head of KPMG’sNew and Emerging Markets Practice, afterthe first step of opening a sales office, itmight well be expected that “value-creatingcorporate functions will be the next develop-ment move for Chinese companies inEurope”. Because of the cost structures, thisis not so much about building up productioncapacities as about setting up design centersand research and development departments.

Philip Bowring, columnist at the Inter-national Herald Tribune in Hong Kong, saysthat this development will, however, onlybe implemented step-by-step. Many compa-nies that have expanded internationally arestill directly or indirectly in state owner-ship.The government in Beijing actuallyexplicitly supports the globalization ofimportant companies in order to establishnational Chinese champions on the inter-national stage. However, the politicalinfluence and the currently very high priceswith M&A activities in Europe would havean arresting effect on this process.

Boardroom Dialogue Session

Michael Frenkel, Dean, WHU, hosting the panel on Foreign Direct Investment in China

Jerry Zhang, CEO, Neocomm Technologies, during the debate with the other co-chairs

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Desmond Shum, CEO of Airport CityDevelopment Holdings in China, points outthat with their investments in Europe,Chinese companies are more interested in,“creating benefit for businesses at home inChina”. For some companies, he believes,Europe is still a means to an end – forcontrolling competitiveness with exports orfor domestic growth benefits, for example.

The panel members identified threeparticular issues as the most significantchallenges for Chinese companies inEurope: Firstly the image of the “Chinesethreat” (an image that is also widely spreadby the media), continues to be a major hurdlefor Chinese investments in Europe.Theyalso warned against the danger of thesealready existing barriers being increased byprotectionist measures from Europeaninstitutions and governments, which couldmake global cooperation and the possibilityof international M&A transactions betweenthe two regions more difficult.

The high costs in the human resources area– from the Chinese point of view – are alsoan important factor. Chinese companiesdepend to find local employees in Europeancountries for the medium term.Thesewould then be able to develop the businesswith in-depth market knowledge and inter-nationally-proven management experience.Chinese representatives at the conferencealso emphasized that there are still culturaldifferences in the corporate governancearea.They believe that Chinese companieswill take some time to get used to theEuropean management and work ethic. Ascompany reps see it, the models of hierar-chically structured but group-orientedwork environments transposed from backhome, are very slow in merging withinternational customs.

‘Europe is still a means to an end – for controlling competitiveness withexports or for domestic growthbenefits, for example.’Desmond Shum, CEO of Airport City DevelopmentHoldings, China

Exchanging Business Cards

Global Bailout

David K. P. Li, Chairman, Bank of EastAsia spoke with NEWSWEEK's GeorgeWehrfritz at the Horasis China EuropeBusiness Meeting in Frankfurt. Excerpts:

The subprime mortgage mess is rattlingnerves this week, even in the place oncedeemed a safe haven in the global economy:Asia . David K. P. Li, Chairman of the HongKong-based Bank of East Asia, says the

turmoil in financial markets won't abateuntil the true scope of the mortgage-linkeddebt crisis is revealed early next year, andhe is convinced that leading central banksmust act now to avert a global downturn. Lialso says a significant slowdown in China 'sgrowth rate has begun, and he fears that astock market bust there could cost millionsof small investors their savings.

NEWSWEEK: Financial markets are inturmoil this week.What do you think ishappening?

David K. P. Li: It all started two or threeyears ago, when investment banks in Europeand America began to pass on more risk tocustomers.They packaged [home mortgage

loans] up nicely so they could earn incomewhile escaping liability. Purchasers lovedthem for the simple reason that they earneda high interest rate, but they didn't realizethe risks involved.The banks said [theseproducts] were very safe, and the creditrating agencies were not doing their home-work, [so] they rated these vehicles as[investment-grade] debt.They did so basedon the reputations of the participants, noton what was inside each package of loans.

Leading banks have already declaredlosses in the billions. How long do youexpect the crisis to persist?

Bigger problems could come out over thenext few months. But [the situation] willsettle down once the auditors agree on away of valuing the market risk. By the firstquarter of next year we should have a clearpicture of the liability each bank has andwhat has actually happened.

What should the U.S. Federal ReserveBoard and the European Central Bankbe doing today?

The central banks have to come to therescue. Basically, they should create some-thing similar to the Resolution Trust Corp.,which was established to deal with thesavings and loan crisis in America [in the

David Li, Chairman, Bank of East Asia, summarizes the discussions

Can other emerging markets follow China's growth recipe?

15

1980s].Today's problem is bigger. If theystructure it nicely, then the recession inAmerica isn't going to be that bad.

So the U.S. economy is headed for arecession.

At the moment it is highly likely, but howdeep the recession will be one never knows.Next year is an election year, so the recessionwon't likely be felt until after the electionbecause so much money will be spent toprop up the economy. I reckon there will behard times after the election.

How would an American slowdownaffect Asian growth?

The American economy still affects Asia agreat deal.The two economies can't bedecoupled from each other. If would help ifthe consumer market in China takes off, buttoday China is still so dependent on theU.S. and European markets that a recessionin America would have an impact in Europeand across Asia.

What do you forecast the Chinesegrowth rate to be in a year?

The third quarter figure was 11.6 percent.But in the fourth quarter they'll be lucky ifthey hit 10 percent. Hopefully, it will bearound 8 percent next year. China needs 7to 8 percent to sustain its employment rate,so I hope they can sustain at least thatmuch. It all depends on how quickly theAmerican economy slows down.

How concerned are you about assetvaluations in China? Is it fair to say that astock bubble exists?

The bubble is indeed there, but whether itbursts or not is another matter.The Chinesegovernment is trying its best to let the airout gradually if they can, but it takes timefor their policies to work.

What are your best- and worst-casescenarios for China over the next year to18 months?

My best-case scenario is that the so-calledfinancial through-train [which would allowmainland Chinese to invest more in HongKong ] will arrive, thereby harmonizing thetwo stock markets.Then Hong Kong willbecome the financial center of China . Myworst-case scenario is that the bubble burstsand a lot of people in China lose most oftheir savings. It will be a hard lesson, but Idon't think there will be riots in the streets.

Dr.Tan Chin Nam, Permanent Secretary, Ministry of Information, Communications and the Arts,Singapore, meeting Dr. Supachai and Commissioner Spidla

Hu Shuli, Editor-in-Chief, Caijing Magazinemaking a point

Lawrence Ho, CEO, Melco, commenting on oilprices and the dollar

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Reverse Globali-zation and theChina-Equation

By Bruno Lanvin, Professor, INSEAD,France and Frank-Jürgen Richter,President, Horasis

The world’s power elite gathered at theChina Europe Business Meeting in Frankfurtto debate the ‘The Globalization of ChineseFirms'.The theme reflected the currentstate of the world which one could call‘reverse globalization’. As China and otheremerging economies grow in prominenceand rewrite the rules of globalization,some, among the initial protagonists ofglobalization – the industrialized countriesof the West – are overtly advocating moreprotectionism, nationalism and anti-globalization.The China Europe BusinessMeeting hence offers a unique opportunityto wake up consciences and ambitions ofthe ‘Old West’, and to remind the inter-national community of the dangers andsufferings that such attitudes have generatedin the past.

One of the main criticisms made to globali-zation by its detractors has been that it was‘western-driven and western-centric’ – inother words that the West calls the shotsand that most benefits go to the westernplayers. Joseph Stiglitz proclaimed that theso-called ‘Washington consensus’ vandalizedthe world.Yet, as globalization was gatheringmomentum, it assumed new and strikingfeatures, which run contrary to that western-focused characterization:

First, non-western national players startedto emerge as vital sources of energy andinitiative in globalization. China is clearlythe new engine of globalization, with hercompanies expanding globally at an unprece-dented pace. And the country is increasinglyturning to Africa, often filling the void leftby Western countries. In more than onerespect, the world is benefiting from China’seconomic growth. Other large countrieslike India, Brazil, Russia are among the newglobalizers, while smaller players (e.g.Singapore, Finland, Estonia) contribute tomaintaining globalization’s vitality throughniche positioning and technologicalinnovation.

Chen Hong, CEO, Hina Group gives his view onthe financing growth in the years ahead

Dan Jiang,Vice President, Boer Energy Group,commenting on China's oil industry

Jospeh Deiss, former President of Switzerland, moderating thefinance panel

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Second, globalization has moved from beingchiefly characterized by a rapid increase intrade and international investment tocombining a set of more complex mecha-nisms and modes of cross-border exchanges.The world is flat, as Tom Friedman holds,and Western multinationals and Asia’s newoutsourcing champions combine their talentsand comparative advantages to co-producetheir services.

Third, some immaterial dimensions ofglobalization have started to emerge, inwhich culture, history and spiritual valuesare playing an increasingly important role.Earlier this years, Abu Dhabi signed a dealwith the Louvre to open a satellite of thefamed Paris museum in the United ArabEmirates – a project that led many Frenchto believe that Europe is selling its soul.This initiative yet remains one of the mostexciting examples of what ‘trueglobalization’ could be.

Fourth, globalization has ceased to be theexclusive business of nation states and bigbusiness. A new group of players, whichone could call ‘global local players’ isassuming increasingly important roles inshaping globalization: cities are competingwith cities, regions with regions, to attractinvestment and create value at the globallevel.

Those four trends are not contradicting thefirst wave of globalization. Nor are theycancelling it. Reverse globalization is not areversal of globalization. Actually, thosefour trends are reinforcing globalization bygiving it the respectability - and hence thesustainability – that it once lacked. Half ofmankind still live on less that two dollars aday: if globalization does not benefit thosepeople, it is not only doomed to fail: it willalso be remembered as a tragedy.The factthat a country like China, with its two-digitgrowth but also with its 200 million poorpeople, is emerging today as both a majorbeneficiary of globalization and a majordriver in its future should be regarded as anopportunity.Yet, it remains a challenge,because the involvement of major playersfrom the ‘emerging economies’ inglobalization also requires a rapid discussionabout their participation in the overallgovernance of global affairs.

In the spirit of the China Europe BusinessMeeting, entrepreneurs, investors andconsumers should enter a true partnershiprelation with China, making reverseglobalization a win-win proposition for ourglobal economy.

Levin Zhu, CEO, China International Capital Corporation and Jean-Pascal Tricoire, Schneider Electric

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Andrey Sharonov, Chairman,TroikaDialog Investment, talking about Russia'sapproach on economic development

Klaus-Peter Müller, Chairman, Commerzbank and Frank-Jürgen Richter, President,Horasis, sharing a light moment

Supachai Panitchpakdi, Secretary-General, UNCTAD

Charles Chao, CEO, SINA - the Chinese Business Leader of the Year, with Prof. Rolf Nonnenmacher, Co-Chairman KPMG Europe LLP

Matthias Graf von Krockow, Spokesman, Personally Liable Partner,Sal. Oppenheim, Luxembourg

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