INSIGHTThe Journal of the American Chamber of Commerce in Shanghai - Insight December 2016

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INTERVIEW P.20Professor Jeffrey Legro

on the changing world order

Also, we look at the development of three key industries in China’s service sector: legal, consulting and property management

James W. Robinson, managing director of APCO Worldwide, on where U.S.-China relations might be headed under the new administration and the impact on multinationals

Management Consulting

Trump andthe impact onU.S.-Chinatrade relations

Property Management Services

Legal Services

POLICY P.22Rhodium Group on 25 Years

of U.S.-China Direct Investment

MEMBER FOCUS P.26With Virginia Moore of project

logistics company YN Logistics

Simon WanCHINA

Laurie O’DonnellCHINA

David EalsonNEW ZEALAND

Nancy ChuHONG KONG

Vijay KarkareINDIA

Dominic YimCHINA

James Ng CHINA

Tieu Yen TRINH VIETNAM

John VijayrangamINDONESIA

Allan RaeAUSTRALIA

Markus WehrhahnTHAILAND

William LiuJAPAN

Kasper Cheung CHINA

Sonia Vaswani HONG KONG

Your Game Changing Partners, 19 Offices in Asia & 70 Worldwide

2017 : We Must THINK AHEADCornerstone Specializes in Finding GameChangers and Hard-to-Fill Talents

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CONTACT US FOR MORE INFO simon wan-chief executivephone no.:+86 21 6474 7064

E-mail: simon wan@cornerstone-group.comwebsite: www.cornerstone-group.com

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Movers and shakers

3

amcham shanghai

PresidentKenneth Jarrett

VP of Administration & Finance helen ren

Directors

Business Development, Marketing & Events

Patsy liCommittees

Jessica WuCommunications & Publications

ian DriscollGovernment Relations & CSR

Veomayoury "titi" BaccamMembership & CVP

linDa X. WangTrade & Investment Center

leon tung

insight

Senior Associate Editor ruoPing chen

Associate Editor Doug struB

Content Manager DeBorah tang

Design gaBriele corDioli

Printing

snaP Printing, inc.

insight sPonsorshiP

(86-21) 6279-7119story ideas, questions or

comments on insight: Please contact ruoping chen

(86-21) 6279-7119 ext. 4583ruoping.chen@amcham-shanghai.org

insight is a free monthly publication for the members of the american chamber of

commerce in shanghai. editorial content and sponsors' announcements are independent and do not necessarily reflect the views of the governors, officers, members or staff

of the chamber. no part of this publication may be reproduced without written consent

of the copyright holder.

shanghai centre, suite 568 1376 nanjing West road shanghai, 200040 china tel: (86-21) 6279-7119 fax: (86-21) 6279-7643

www.amcham-shanghai.org

special thanks to the 2015-2016 amcham shanghai President’s circle sponsors

INSIGHTThe Journal of the American Chamber of Commerce in Shanghai - December 2016

FEATURES

Where Lawyers Can’t PracticeForeign law firms and China’s legal services sector

Solicited Advice On management consulting in China

Shaping the CityscapeProperty services in an era of rapid development

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POLICY PERSPECTIVES

To Make America Great AgainTrump must acknowledge the U.S. and China are stronger together

AmCham Author Series A conversation with the editor of Shaper Nations: Strategies for a Changing World

Two-Way Street Rhodium Group on 25 years of U.S.-China direct investment

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MEMBER NEWS

Government Appreciation DinnerA summary of the evening’s event

Member Focus With Virginia Moore of project logistics company YN Logistics

Board of Governors Briefing Notes from last month’s meeting

Event Report Recap of selected events from last month

Month in PicturesSelected photos from last month’s AmCham events

Committee Chair’s Corner With Ningling Wang, chair of the Legal Committee

Esoterica Amusing Chinese internet stories from 2016

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CAREER

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AmCham Shanghai is truly the “Voice of American Business

in China”. It offers unrivaled value to its members.

- Eric Zheng President & CEO,

AIG China

AmCham Shanghai is a thriving network of professionals who help one another grow and prosper.

- Manoj Mehta CEO, naked Group

Stay Connected

Join Us Now:

Jane Wang (86 21) 6279 7119-5682

jane.wang@amcham-shanghai.org

AmCham Shanghai is truly

the “Voice of American Business

in China.” It offers unrivaled value

to its members.

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America has chosen a new presi-

dent. Some of us voted for him, others

would have preferred anyone but Don-

ald Trump. Both groups are part of one

nation, of which he will be our president.

Outside the United States, Mr. Trump

has challenges. His popularity in the U.S.

was notoriously hard to measure un-

til actual votes were cast and counted.

Polls taken outside the country could

not be more clear. Although relatively

popular in Russia and China, 85% of Eu-

ropeans have little or no confidence in

Trump to “do the right thing on world af-

fairs,” according to Pew Research. Time

will tell if they are right or wrong. His fail-

ure would be our failure.

One of the great things about Amer-

ica is we don’t all need to agree. We do

need to cooperate. Our democratic sys-

tem requires us to work with people with

whom we have differences. Diversity of

opinions can make us strong.

AmCham Shanghai is nonpartisan

and works closely with all branches of

the U.S. government. If asked, we will

give the new administration an accurate

and up-to-date picture of the situation

American companies face on the ground

here in China. That’s our role. The views

we express need to be accurate, help-

ful and constructive. We will continue to

advocate our positions even if, as in the

case of TPP, we are at odds with the new

administration. On China policy ques-

tions we can look for common ground

and build from there.

Some say Trump is an isolationist and

that the burden of America’s leader-

ship abroad has been too heavy to bear.

Whether that’s true or not, we need to fix

our problems at home. America needs a

new plan for the domestic economy, one

that recognizes the reality of China and

India as massive pools of inexpensive la-

bor. The benefits of trade have not been

balanced. If Mr. Trump has a better plan

then we should work with it.

As president, Mr. Trump is likely to

make strong demands on China for rec-

iprocity. Americans see how prosperous

China has become and they are ques-

tioning whether this is a reciprocal re-

lationship. Equal treatment is a worthy

goal. We all want more market access, a

level playing field and greater transpar-

ency.

Cross border investment in both di-

rections is a good thing. It creates jobs

and builds value. In the case of China

is it fair, is it balanced? How level is the

playing field? If Chinese companies can

acquire media companies in the U.S.,

businesses like AMC theaters and Dick

Clark Productions, then should Amer-

ican companies be able to make me-

dia investments here in China? Why

shouldn’t American companies be able

to make the same kinds of investments

in China as Chinese companies are mak-

ing in America?

American banks and insurance com-

panies have a limited share of the mar-

ket here in China. AmCham has openly

called on China to further open the mar-

ket and eliminate equity caps. After all,

this was the expectation when China

joined the WTO. The current adminis-

tration has been pushing for a Bilateral

Investment Treaty that would go a long

way toward achieving these goals. Could

a Trump administration continue this

work?

The Trans-Pacific Partnership in its

current form, which AmCham strongly

supported, is all but dead. There are

those who believe the new administra-

tion will be able to renegotiate and get

some form of the TPP passed. It wasn’t

perfect. The provisions on biologics

could be improved, and many were not

satisfied with how it handled currency.

On some issues, common ground will

be harder to find. On climate change

and environmental issues Mr. Trump’s

position is squarely at odds with the ex-

perts, and with China. Ironically, this has

been one of the bright spots in the China

relationship under the current adminis-

tration. Trump is wrong about this and

needs to be better advised. It would also

be helpful if Mr. Trump would stop talk-

ing about foreigners and immigrants in

an unhelpful way regardless of his per-

sonal views. America’s relationship with

China is important. All of us depend on

this relationship to continue on the path

of open dialogue and cooperation, not

hostility and conflict. I

Chairman’s Letter

KER GIBBSChair of the Board of Governors

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GOVERNMENT

Yuan Jiajun was

appointed vice party

secretary of Zhejiang

province. Yuan started

his career as an

engineer at the China

Academy of Space

Technology. He became the chief

commander of the Shenzhou spaceship

system in 2000 and the vice general

manager of China Aerospace Science and

Technology Corporation in 2007. From

2012 to 2014, he served as vice chairman

of Ningxia Hui Autonomous Region. Most

recently, he was the vice executive

governor of Zhejiang province.

Chen Quanguo was

named party secretary

of Xinjiang Uygur

autonomous region.

Prior to this, Chen was

the party secretary of

the Tibet government.

Chen was born in Henan and worked in

different positions of the Henan government

for decades. In 1998, he became vice

governor of Henan province and was

promoted to governor 11 years later.

Wu Zhenglong was

appointed party

secretary of Nanjing.

Previously Wu was a

member of the

standing committee of

Jiangxi province. From

the end of 1999 to 2014, Wu worked in

different positions of Chongqing municipal

government, including party secretary of

Wanzhou district, director of Chongqing

municipal reform office and member of the

standing committee.

PRIVATE SECTOR

StarBuCkSBelinda Wong was

promoted from

president to chief

executive officer of

Starbucks China.

Wong has been

instrumental in Starbucks’ unprecedented

growth in China – from 400 stores in 2011 to

over 2,300 stores today. In her new role,

Wong will focus on the overall long-term

growth strategy and lead the innovation

pipeline for Starbucks China. She will be

responsible for key areas, including digital

and e-commerce opportunities across the

market and overseeing the opening of

Starbucks’ first international Starbucks

Roastery in Shanghai in 2017.

Wong joined Starbucks in 2000 and served

as marketing manager of McDonald’s China

Development Company for five years

before that. She holds a bachelor of

business administration degree from the

University of British Columbia.

MetlifeMetLife appointed lee

Wood CEO for its Hong

Kong business. Wood is

a seasoned insurance

professional with over

15 years of broad

industry experience. He was most recently

senior vice president at Allianz Taiwan Life

Insurance Company Limited with

responsibility for marketing, product

development and the direct marketing

channel. Prior to this, he spent five years at

HSBC Life (International) Limited in Taiwan as

managing director.

He has also held various senior marketing and

general manager roles at leading insurance

companies throughout Asia which include

ING Antai Life Insurance Company Limited in

Taiwan, PT AIG Insurance Indonesia and AXA

Life Insurance Company Limited in Japan.

Wood holds an MBA and Masters of Divinity

from Emory University in Atlanta, Georgia.

MiCroSoftMicrosoft named rob

Behennah the new

general manager for

its services group in

the Asia Pacific.

Behennah will be

responsible for the strategy, consulting

and support of Microsoft’s Enterprise

Customers across 12 countries in the Asia

Pacific region. Prior to Microsoft, Behennah

has spent the last four years in regional

leadership positions at Salesforce.

During his 25-year professional career,

Behennah has built a successful track

record in delivering outstanding results in

customer adoption, revenue protection

and growth at companies such as Cap

Gemini, Lotus Software, IBM, SAP and

Salesforce.

Warner Chappell MuSiC Warner/Chappell

Music (WCM), the

global music

publishing arm of

Warner Music Group,

announced the promotion of Monica lee

to President, Asia-Pacific. In this new

position, Lee will oversee the publisher’s

operations across the region.

Lee previously served as senior vice

president, WCM, Asia-Pacific, since 2009.

She first joined WCM in 2002 as creative

director for Taiwan following its

acquisition of Musset Publications, an

independent publishing company where

she was general manager. Before she

joined Musset in 1999, Lee held a range

of A&R roles at Universal Records Taiwan

and PolyGram Records Taiwan.

Movers and Shakers highlights major personnel changes within the Chinese government at various levels and senior management-level movements within multinational companies in China

If your company has executive personnel changes,please contact Junling Cui at junling.cui@amcham-shanghai.org.

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Movers and shakers

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In the 1990s, China opened its

legal services market to for-

eign law firms. Twenty years

later, about 170 foreign firms have

seized the opportunity to en-

ter an environment of uncertain

prospects. Foreign firms have re-

sponded to the country’s unique

challenges differently: some firms

have deepened their ties through

mergers with Chinese law firms,

while others have closed shop

(most notably multinational firm

Fried, Frank, Harris, Shriver & Ja-

cobson LLP in 2015, and Cad-

walader Wickerhsam & Taft stat-

ing that it will leave China by the

end of 2016）).

a unique legal environment

There is no obvious reason for a

foreign law firm to come to China.

The challenges start with the law

itself. There is “inconsistent appli-

cation of law by the local bureaus,”

said Kilpatrick Townsend & Stock-

ton LLP co-chair of Asia Practice

and partner Gentry Sayad. “What

may be true in Shanghai may not

be true in Beijing.” Because of this,

lawyers must spend more time

looking at how the law has been

applied throughout the country.

“What clients would think is a

simple question always requires

more time and investigation,” said

Sayad.

Even if the laws were consis-

tently applied, the different em-

phasis on legal precedents poses

another problem. Legal prece-

dents do not have the same in-

fluence in China as they do in

many developed nations. While

in their home country a lawyer

might be able to reference pre-

vious decisions as they advise

their clients, they cannot have the

same assurance that past deci-

sions will influence future ones

in China. Whatever the virtues or

vices of Chinese law, it can also

be a political tool, enforced (or

not) as befits political ends. This

environment limits the author-

ity precedents otherwise held in

developed countries, and poses

a unique challenge for China’s

lawyers.

Because of the law’s incon-

sistent application across re-

gions and the challenge posed

by precedents, foreign lawyers

in China must pay special atten-

tion to government relations. “You

need to get answers for your cli-

ent without spending an inordi-

nate amount of time doing it,” said

Sayad. To do this, he says, it’s im-

portant to figure out how to “get

the government guy to say ‘yes.’”

Sayad noted that it is common for

government officials to deny re-

quests from foreign companies.

The government relations work

that lawyers do is also important

as they help companies who are

making legal claims. “[The gov-

ernment] is not going to make

any effort to proactively gather

evidence, so really it’s up to [the

company] to find the evidence on

a company’s behalf and provide

the narrative. And with the assis-

tance of counsel, tie it up neatly

with a bow and say ‘Here you go.

Here is why you’re allowed to do

this,’” said Sayad.

Differences for foreign firms

All of the above difficulties

impact foreign and Chinese law

firms alike. But foreign firms face

unique restrictions that add to

their operating challenges. “For-

eign firms are technically prohib-

ited from practicing Chinese law.

They are allowed to interpret and

guide their clients on how to op-

erate in China, but technically

Foreign law firms and China’s legal services sector

By AmCham Staff

FEATURES

Where Lawyers Can’t Practice

What clients would think is a simple

question always

requires more time and

investigation

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8

speaking they cannot practice

Chinese law. The two clear in-

dications of practicing Chinese

law would include appearing in

front of a Chinese court and they

cannot give legal opinions under

Chinese law,” said another interna-

tional lawyer. Sayad agrees: “For-

eign lawyers are restricted from

giving opinions on Chinese law,

and to the extent we advise our

clients on legal matters in China, it

is either in coordination with Chi-

nese local counsel or it’s based on

publicly available information and

our experience as foreign lawyers

registered in China.”

Note that these restrictions are

on foreign firms, not simply foreign

lawyers: Chinese lawyers that join

foreign firms must give up their

Chinese law licenses. These re-

strictions frustrate foreign firms,

particularly since the inverse is

generally not true. As the U.S.-

China Business Council’s 2013

report on “Legal Market Access

Issues in China” notes, “U.S. regu-

lations permit Chinese law firms

in the United States to hire U.S.-li-

censed lawyers who may practice

in the United States without similar

restriction.”

In 2001, when China acceded

to the World Trade Organization

(WTO), access to the country’s

service industry was largely lib-

eralized. Foreign accountants,

for instance, could begin prac-

ticing in China. But law firms did

not receive the same welcome.

As attorney Mark Cohen noted in

a 2012 paper: “Market access lib-

eralization offered to foreign law

firms at WTO accession was com-

paratively small, and was largely

limited to permitting foreign law

firms to open up more than one

representative office. However,

such offices continued to be re-

stricted in the type of services

they could provide.”

The restrictions are clear, but

not all lawyers agree that they are

a problem. For instance, Qiang

Li, co-country managing part-

ner for China at international law

firm DLA Piper, argued that “the

degree of openness of the legal

services sector is commensurate

with the amount of opportunity

that exists for the international

law firms at this point.” While he

can imagine “more liberalization

of the legal market as China’s

legal reform progresses,” he be-

lieves that there simply “aren’t

enough opportunities for the

market to be completely opened

up to everybody.” Nevertheless,

foreign lawyers still eagerly await

the liberalizing changes that will

give them market access akin to

their service-industry peers.

firm partnerships and mergers

In the meantime, successfully

navigating China’s legal services

industry and providing their for-

eign clients with the service they

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9

expect in their home countries

has required foreign law firms in

China to partner with their Chi-

nese counterparts. Sometimes

that partnership comes through

M&A: two notable examples be-

ing the three-way merger be-

tween Australia’s Mallesons Ste-

phen Jaques, Britain’s SJ Berwin

and China’s King & Wood in 2013,

and the merger of global law firm

Dentons with China’s Dacheng in

2015. These mergers received a

lot of attention within China’s le-

gal industry, and the industry is

watching closely to see whether

they will succeed or fail.

Many lawyers assume these

mergers are riddled with chal-

lenges. One reason is pricing

differences. In major markets

like New York City, first-year as-

sociates at major law firms are

paid an average base salary of

US$160,000. Conversely, a first

year associate at a major firm in

China can expect a base salary of

approximately $50,000 plus dis-

cretionary bonus. When firms like

these work together, an interna-

tional lawyer says, “you’re looking

at a very different business model

and a very different cost basis.”

That China’s legal services

industry is at an earlier stage of

development than many of their

Western counterparts is another

potential sticking point. Private

law firms have only been al-

lowed in China since 1992, and

in 2015 The Economist reported

that the legal sector constituted

0.1% (US$7.6 billion) of China’s

GDP, compared with the more

than 1% average contribution

from the sector in major Euro-

pean countries.

Chinese law firms have offered

increasingly high-quality service,

but quality assurance cannot al-

ways be assured across a firm. In

the United States, says Sayad, “I

can pick a big firm that everyone

knows and be pretty sure that

whatever office I call, I will for the

most part get a quality lawyer and

quality service. But in China that’s

still developing. A firm that’s got

a great office in Shanghai might

still not have developed sophis-

tication in Guangzhou.” The repu-

tational risk that could come from

choosing a partner of inconsis-

tent quality is worrying for some

foreign firms, and is one of the

reasons why many firms choose

to work with a variety of Chinese

firms on a case-by-case basis.

This is the road that Kilpatrick

Townsend & Stockton has taken

in Shanghai. “We work with some

great Chinese firms on different

matters and around the country,”

says Sayad.

What makes it worthwile?

These challenges are sizeable,

but dreams of future returns have

encouraged many foreign firms

to endure them. As Chinese com-

panies have grown and begun to

spread their influence overseas

through outbound investment,

foreign law firms have endeav-

ored to win M&A mandates from

these transactions. While, as an

international lawyer notes, “20

years ago [foreign firms] focused

mostly on supporting the China

operations of their clients from

Europe or the United States,”

building relationships and trust at

Chinese companies so that they

can be involved in future out-

bound investment transactions

seems to be the new motivation.

Focusing on outbound invest-

ment might also prove a strategic

way for foreign firms in China to

differentiate themselves from in-

creasingly sophisticated Chinese

firms. There are more than 19,000

Chinese law firms, and as these

firms develop, they are beginning

to gain the capability and reputa-

tion to represent foreign clients

on their own. Notable leaders in

this maturing market are the “Red

Circle,” the term used for eight

Chinese top-tier law firms, which

includes King & Wood Mallesons,

Jun He Law Offices, Fangda,

Zhonglun, Haiwen and Partners,

Commerce & Finance, Global Law

Office and Jingtian & Gongcheng.

Because of the aforementioned

differences in pricing models,

these law firms are usually able

to serve clients more cheaply

than their foreign counterparts.

To fend off the increasing compe-

tition, foreign firms are leveraging

their understanding of their home

market to entice more Chinese

clients.

Whether or not they become a

profit center, many international

firms see the value of maintaining

a presence in China in order to

support their clients. “I think peo-

ple came here because their cur-

rent clients wanted them here,”

says Sayad. “I suspect that some

of the offices are not very big

revenue generators.” Li echoes

this feeling, noting that “because

international clients have a ten-

dency to distrust the [Chinese]

government...international firms

can play a very important inter-

mediary role.”

The future for China’s legal ser-

vices sector is largely dependent

on how the country’s rule of law

develops. And much encourage-

ment for that reform, Li argues,

will come from China’s domestic

law firms. “Domestic firms have

scaled so much and might be a

factor in China’s legal reform – get-

ting the government to acquiesce

to building a more rule-based so-

ciety, rather than just a govern-

ment-dominated society,” he says.

“These law firms are getting very

big and they will have to do some-

thing. If the government continues

to dominate, they will not be able

to play an important role.” I

FEATURES

In major markets like

New York City, first year associates at

major law fir-ms are paid an average

base salary of US$160,000. Conversely, a first year

associate at a major firm in China can

expect a base salary of ap-proximately $50,000 plus

discretionary bonus

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China’s manufacturing slow-

down has been an almost

daily fixture in the business

news media for the past few years.

Somewhat less bruised is the ser-

vices sector, which the Chinese gov-

ernment hopes will take up some of

the slack as the country continues its

economic transition. One sub-sector

that is doing well is consulting, and if

China follows the U.S. model, there

should be plenty of room for growth.

“The [consulting] industry con-

tinues to be a dynamic, vibrant

market, and I think the outlook is

very promising,” says Carol Liao, se-

nior partner and managing director

of Greater China for Boston Con-

sulting Group (BCG).

There is evidence to back up Liao’s

statement. The market research firm

Source Global Research estimated

that China’s consulting market grew

7% over 2015, reaching a total market

value of US$4 billion. IBISWorld’s 2016

report on management consulting

in China, meanwhile, estimated total

revenue for the industry to be $23 bil-

lion with a workforce of 458,000 em-

ployees. Despite differences in defini-

tions and data sets (for instance as to

which companies are categorized as

management consultants), both re-

ports reflect an industry that is on the

upswing.

But from the same sources, it is

also clear that the consulting indus-

try in China is still in a nascent phase

compared to more mature Western

markets, especially that of the Unit-

ed States. The U）.S）. consulting indus-

try, the world’s largest, saw growth

of 7.7% in 2015 to reach a market

value of $54.7 billion, according to

Source Global Research. IBISWorld

had management consulting in the

U.S. sitting at $253 billion in revenue

with an estimated 1.7 million em-

ployees working in the industry.

There is also the question of con-

sulting’s geographic reach in China

compared with developed markets,

with most consulting firms here con-

centrated in the economically pros-

perous eastern regions and first-tier

cities. According to Chinese broker-

age Founder Securities, the consult-

ing industry accounts for only 0.18%

of GDP in China compared to 1.2% of

GDP in the United States.

Solicited Advice

Management Consulting

in ChinaBy Ruoping Chen

(source: IBISWorld)

China$23 bn

China458,000

U.S.$253 bn

U.S.1,700,000

Consulting industry,annual revenue (2016)

no. of employees (2016)

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11

lenges. Looking ahead, Liao be-

lieves there are three key factors

shaping the market for manage-

ment consulting services. “One

is transformation under the ‘new

normal,’ meaning not just growth-

driven, but also how to have a more

efficient and lower-cost supply

chain operation, how to adapt and

change the organization, as well as

the governance of a company.”

“The second is digitalization

across all businesses and all pro-

cesses,” and “Lastly, primarily for

Chinese companies, there’s a big

theme on going global, in how to

expand overseas.”

China’s Ministry of Commerce

calculates the country’s outbound

direct investment to have increased

53.3% year-on-year, reaching US$146

billion in the January-October period

of 2016. In 2015, the country became

a net capital exporter for the first time.

From exporting consumer goods to

acquiring foreign big-name brands,

more and more Chinese companies

are internationalizing, and there is

plenty of opportunity for consultan-

cies to get involved in the process.

That includes, Liao says, helping

companies form their globalization

strategy, choosing which countries to

invest in, setting up a global gover-

nance structure and having a proper

integration roadmap.

Views on consulting may differ

The way in which consultan-

cies work with Western companies

versus Chinese companies can be

distinctly different, often depending

on whether the client is headquar-

tered in China and on how well a

company is developed within its in-

dustry. Consulting projects for multi-

nationals headquartered elsewhere

but with a strong presence in China

are often led by a global consult-

ing team with participation from the

China office. Such consultation proj-

ects tend to be clearly-defined and

targeted because they are driven by

the corporate sales and marketing

departments, Liao says.

Chinese companies, on the other

hand, generally demand a broader

While China’s economic growth

is slowing to its weakest in 25 years,

the consulting industry is unlikely to

follow suit. An economy in transition

facing a range of issues such as in-

dustrial overcapacity, heavy debt

burdens, weak export numbers, a

cooling property market and rising

labor costs all contribute to uncer-

tainty in the business environment.

Some companies are responding

with budget tightening, but oth-

ers are seeking “brains-for-hire” to

help them navigate through difficult

times. Consulting companies that

position themselves effectively can

gain an advantage.

Meanwhile, countercyclical com-

panies, such as those in the private

health, energy and education sec-

tors, will continue to hire consultants

as they look to compete more effec-

tively within their hyper-competitive

sectors, to expand in size and diver-

sify their businesses. Many of these

industries, such as pharmaceuticals,

also face increased government

scrutiny and regulation, creating

even more advisory opportunities

for consultancies and other related

professional services.

“Demand for consulting is more

correlated with our clients’ willing-

ness and determination to make

change,” says Liao. “This happens

regardless of whether they’re in a

high growth industry or an industry

facing significant challenges.” De-

mand, she adds, is not linked with

GDP or industry cycles.

a rise in Chinese clients

Carol Liao, who has worked with

BCG since 1995, reports a rise in re-

cent years in the number of Chinese

companies seeking professional

consulting services. Historically,

BCG’s primary focus was on help-

ing foreign multinationals to enter

and grow in the Chinese market.

But today, Chinese companies, both

private and state-owned, represent

over half of BCG’s client base.

This change in client demo-

graphics has led to a more diverse

range of requirements, ones driven

by clients’ specific business chal-

range of consultation. “For example,

given the changing market environ-

ment, the company wants to drive a

whole transformation journey. Then

we need to work with the client to

actually identify supply chain, sales,

even diversification into other mar-

kets, and of course, globalization,”

says Liao.

There are several explanations

for this difference between Chinese

and non-Chinese company require-

ments. Modern consulting has been

around in the West for nearly a cen-

tury, but it only began in China in

the 1990s when consulting firms

followed multinationals into the

country as they set up operations

and began to invest and expand.

Now, with an increasing number of

Chinese clients, many consultancy

firms are facing a gap in perception

and understanding among Chinese

companies in terms of how to best

use consultancy to support their

business needs.

According to Helen Chen, a man-

aging director and partner at L.E.K.

Consulting and head of L.E.K.’s Chi-

na practice, there is a perception

that strategy consulting in particular

is less mature in China, especially

when compared to legal or account-

ing services which have been seen

as providing more concrete ser-

vices. “China still has a ‘hard goods’

mentality, and concepts around soft

services in the professional services

industry are still developing,” she

says. “China’s probably more familiar

with intermediary services, such as

the zhongjie [agent] in real estate, or

brokerages, where someone is sell-

ing you something and as a result

they get a commission.”

As a result, these clients may

only use consultancies for specific

roles rather than taking full advan-

tage of the breadth of services and

insights their consultants can pro-

vide. One example Chen gives is

of Chinese companies planning to

expand internationally. A Chinese

company may be willing to pay a

brokerage fee to acquire a com-

pany overseas, but may not be ask-

ing themselves important strategic

questions such as, “Should I be in-

FEATURES

0.18%Consultingindustry

as percentageof China’s GDP

(source: Founder Securities)

China still has a ‘hard goods’

mentality, and concepts

around soft services in the

professional services

industry are still

developing

Helen Chen, managing director

and partner at L.E.K. Consulting

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When you’re rooted in

China, the DNA of your

firm is aChina-based kind of DNA

Edward Tse, founder and CEO

of Gao FengAdvisory Company

ternational? Which countries should

I go into? Do I have the wherewithal

to be in a developed country, or

should I go to an emerging coun-

try? Which countries are my prod-

ucts most suited for? Where can I

be the most competitive? Do I want

to have infrastructure of my own, or

do I work with a local partner?”

In contrast to U.S. clients who

tend to choose consultancies based

on a set of targeted business needs

and the type of consulting expertise

needed for their sector, Chinese cli-

ents less familiar with the consulting

industry may not have a complete

understanding of what they want. In

such cases, Chinese clients often in-

vite a wide range of consultancies to

pitch for a particular project, ranging

from established international firms

to small startup boutiques, regard-

less of whether they are the right fit.

Where Chinese consultancies stand

Along with the upsurge in Chi-

nese companies as clients, the

nature of the consultancies has

also changed. In recent years, a

crop of homegrown Chinese con-

sultancies has established them-

selves as competitors in the mar-

ket. Most are still relatively small

in operation, but they are growing

quickly. Hejun Consulting Group,

one of the largest Chinese con-

sultancies, now has over 1,000

employees. In an interview with

China Daily, Hejun’s vice president

Xu Dichang said in 2014 that the

company’s revenues increased

22.6% year-on-year and that his

company aims to be operating in-

ternationally by 2020.

“Some of these [Chinese con-

sultancies] are from people who

were at international consulting

firms who have gone out and cre-

ated their own boutique firms,” says

Chen. “We also see Chinese aca-

demics, for example, hanging out

a sign and becoming independent

consultants or providing research

services, so it’s a very wide range of

consulting being offered.”

Edward Tse is one such entre-

preneur. After building and leading

the Greater China operations of BCG

and Booz & Company for 20 years,

he left to start his own consultancy

Gao Feng Advisory Company. Given

that China has become “a major epi-

center in the world for business in-

novations” and the speed at which it

is changing, Tse believes that it’s in-

creasingly important for consultants

to be rooted in China and be globally

minded and resourced. That means

being able to fully understand the

China context and China’s role in the

world, both of which are needed to

help clients make the correct busi-

ness decisions.

“When you’re rooted in China, the

DNA of your firm is a China-based

kind of DNA. Therefore, the way you

look at how the world’s businesses

are changing, you look at it from a

China perspective along with the

world’s perspective, and by putting

China at the core of global strate-

gies,” says Tse.

He adds that while global con-

sultancy firms may have estab-

lished offices in China, they are

susceptible to influence and direc-

tion from the people back at their

global headquarters. “Take one

example. When we look at the in-

novations that come from China,

many people from the West will

still think that China is still a copy-

cat nation. In reality, if you take a

China perspective, you know that

today, while there are still many

copycat companies, there are an

increasingly larger number of in-

novative and entrepreneurial ones,

and some of these companies are

becoming very powerful...not only

within China but also with the rest

of the world. So if you’re not rooted

here in China, you will not have that

full perspective.”

a challenging place to operate

According to Tse, consulting in

China is additionally challenging

due to the complexity of its busi-

ness environment. Doing business

in the West can also be compli-

cated, but the environment here

is more multi-dimensional than in

many other countries.

There are several reasons for

this. China is still transitioning from a

planned economy to a market econ-

omy. The vastness of the country

with its regional inequalities, rapid

social changes, rising income lev-

els and emerging middle class has

made product market segmentation

much more complex. At the same

time, many different kinds of enter-

prises are in the market, and market

dynamics vary widely depending

on whether or not a sector is closed

(e.g. oil and gas) or open (e.g. con-

sumer goods).

L.E.K.’s Chen also notes that “in-

vestment versus return has always

been a question [foreign multina-

tionals] have to answer for China.

The regulatory changes and ac-

celeration of regulatory changes

have made it very difficult for com-

panies to know their footing.” She

argues that these companies need

to keep pressing home the mes-

sage to headquarters on the long-

term potential of the China mar-

ket in order to ensure continued

commitment, adding that “China

can seem very hard for the people

back home.”

Operating a business in China

can be more challenging than

most other places. “All this creates

a higher requirement for manage-

ment consultants to really help

their clients to be successful. And,

in return, China is training the best

minds in management consulting,”

says Tse. I

Ruoping Chen is senior

associate editor for AmCham

Shanghai’s publications and

communications department.

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ShapingtheCityscape Property services in an era ofrapid development

By Doug Strub

MOVeRS ANd ShAkeRS MOVeRS ANd ShAkeRS MOVeRS ANd ShAkeRS FEATURESC

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Never has a city materialized

at the speed and scale of

modern Shanghai. From

the dilapidated tenements, ancient

warehouses and empty plots of

Lujiazui district of 1994 (see page

14) to today’s mega skyscrapers

that have become China’s financial

center, the past 20 years have seen

Shanghai transform into a world-

class metropolis.

The sheer number of buildings

constructed over this period has

brought a wealth of opportuni-

ties to Western property services

companies. Today, these firms are

still growing, but a number of fac-

tors are reshaping how they oper-

ate. Slowing economic growth and

the shifting structure of China’s

economy are changing what types

of buildings get built and new gov-

ernment policies are changing what

is allowed, and where. In Shang-

hai, the more than 130 skyscrap-

ers (buildings at least 150 meters

in height) are pushing the limits of

how much can be constructed on a

finite amount of land; and the rise

of local competitors in the property

services field is bringing new chal-

lenges to Western firms in this once

foreign-dominated field. On the

other hand, a growing number of lo-

cal clients seeking such services is

providing a welcome source of bal-

ance. There are those who say the

20-year boom is coming to an end,

but while many of these changes

bring difficulties, they come with

many opportunities as well.

laying the foundationWestern construction and project

management firms have been in Chi-

na since the 1990s, and have signifi-

cantly influenced the development

of the sector. These companies typi-

cally oversee the entire process of a

new structure’s realization, including

design, permissions, the identifica-

tion of appropriate contractors, final-

ization of specifications, monitoring

of the construction process for qual-

ity and safety, and managing costs

and schedules. In the early days of

rapid construction, these services

were not commonly used by Chinese

developers and the clients of West-

ern firms were almost entirely foreign

companies expanding into China.

“The project management disci-

pline didn’t exist here until just a few

years ago,” says Phil Branham, presi-

dent of B&L Group, a Shanghai-based,

American-owned project manage-

ment and consulting company.

Previously, the top priority for lo-

cal developers was to keep costs low,

build quickly and sell quickly. Impor-

tant decisions were typically left to

the contractors or not made at all.

“‘I want a compressor’ [an investor

would say], and they would give a rat-

ing for the compressor, and then the

contractor would supply it,” Branham

says. “And then they would say ‘ok,

we want a white paint,’ or whatever it

is, and the contractor would supply it.”

Contractors would then quote a price

for paint and seek out a cheaper, infe-

rior paint to boost their profit.

This created an environment

where quality was far less of a con-

cern than cost, and also left plenty of

room for corruption and other prob-

lems along the way. With no one

focused on optimizing the process

of project completion, things like

obtaining the required permits and

overseeing specifications were of-

ten not handled in a structured way,

leading to delays and inefficiencies.

“The procedures you go through on a

project with costs and schedule and

quality and deliveries, those proce-

dures did not exist here,” Branham

says. “The investor was never sure

of what stage they were in or if they

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were proceeding according to law.”

Today, property development in

China is maturing and such services

are in much greater demand. The mar-

ket is shifting to a more long-term view

based on asset quality. But it is a slow

transition that has a long way to go.

“Historically it’s very much been

a cost-driven market. It’s about build

things quickly, and generally sell

things quickly, because that’s how

you make your money,” says Ray Chis-

nall, Asia Pacific regional director and

China country manager at Gleeds, a

leading global property and construc-

tion consultancy. “With property val-

ues doubling so quickly here, people

make a lot of money by buying and

selling. There hasn’t been the same

tradition [as in the West] of seeing an

asset that you are building for a 20-30

year life – and investing in it on that

basis and maintaining it in that way.”

Gleeds established its first China

office in 1994 and, Chisnall says, “for

the first 10-15 years, all of our clients

would’ve been foreign, because they

understood the difference between cost

and value.” But in recent years this has

changed, and today Chisnall estimates

that about a third of Gleeds’ Shanghai

business comes from local clients.

Meanwhile, the “new normal” of

slowing economic growth and China’s

efforts to transition from reliance on

manufacturing to an economy where

domestic consumption plays a leading

role has also had an impact. The shift

away from manufacturing has been

accelerated in Shanghai by govern-

ment policies pushing such industries

to the outskirts of the city to reinforce

its role as China’s financial center.

“There’s definitely been a reduction in

the number of projects people have

been doing,” Chisnall says.

One trend significantly impact-

ing the property services business

is online shopping. Chisnall refers

to this as the dilemma of “bricks

versus clicks,” where some retail-

ers are choosing a smaller physical

presence accompanied by a stron-

ger online focus. This in turn has had

significant repercussions for shop-

ping malls, which in Shanghai were

already suffering from high land

prices and rental rates as well as

oversupply.

B&L Group’s Branham adds that

another significant challenge arises

from the lack of reciprocity regard-

ing investment flows between the

United States and China, and hopes

to see the proposed Bilateral Invest-

ment Treaty (BIT) and Trans-Pacific

Partnership (TPP) agreement passed.

“Lack of reciprocity really hurts. It

hurts our clients, which in turn then

hurts us,” he says. “If we could get a

reciprocity agreement, things would

get better. It would allow Americans

into more industries in China.” None-

theless, Branham remains optimistic

about growth in China, albeit coming

from new directions. “Industrial obvi-

ously is down, so we’re going to have

to shift a lot more resources into the

high-end commercial area,” Branham

says. “High-end commercial is going

to become big for us, at around 50%

of our business model.”

Office space on the riseGrowth of high-end commercial

property has indeed been strong. Four

new projects hit the market in central

Shanghai locations in Q3 of 2016, with

the corresponding 206,000 square

meters of office space representing

the largest quarterly increase since

2013. Although the new supply has

temporarily caused the vacancy rate

of Grade A office space to reach its

highest level in several years, occu-

pancy still remains above 90%. “On the

commercial real estate side, if we look

at the office standpoint, the occupancy

rate in tier-1 cities in China has grown

to a very healthy rate,” says Mario Qian,

director of Occupier Services, China,

for DTZ/Cushman & Wakefield.

While vacancy rates in lower-tier

cities are much higher, DTZ/Cush-

man & Wakefield is continuing to

expand its already large presence

throughout China. “We have around

20 different branch offices,” Qian says.

“We have covered almost 80% of tier-

2 cities, and we would like to open

another few offices this year.” While

DTZ/Cushman & Wakefield’s expan-

sion demonstrates their optimism,

competition in the office services

sector is intensifying, both from in-

ternational firms and emerging local

competition. “Recently we see some

local Chinese real estate service

companies,” Qian says. “They’re ei-

ther coming from residential or they

Lujiazui, Pudong, on a smoggy day in 1994. Photo by Stephen White of iaction

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Movers and shakers

15

FEATURES

come from our competitors such as

CBRE, JLL, etc.”

Despite the economic slowdown,

the occupier services sector has also

seen a rapid expansion of local cli-

ents. “Four or five years ago, 90% of

the business came from servicing

international clients,” says Michael

Wu, director of Tenant Representa-

tion and Office Services for Colliers

International. “But this year will be

50/50, and toward the end of the

year I believe domestic companies

may even exceed the business op-

portunity from international clients.

It’s quite a shift.”

The shifting nature of work in

many sectors and professions is

also creating change. In many cit-

ies around the world, growth in the

tech sector has increased demand

for office space in trendier loca-

tions. In China, it is also common for

growth to be focused into clusters of

government-designated high-tech

zones, although this has had less

impact in Shanghai due to its role

as China’s financial center, Wu says.

Rather than tech sector growth, a

recent trend impacting office space

in Shanghai has been the rise of co-

working spaces, with several of sig-

nificance emerging in recent years.

Building the futureWhile the changes taking place

in the property services sector are in

large part the product of broader eco-

nomic changes occurring in China,

they are also the result of increasing

maturity in these industries. On the

construction and project manage-

ment side, more local clients are

seeking established professional ser-

vices companies to oversee their proj-

ects as they transition from the old

ways of quick-and-cheap construc-

tion to a more sophisticated approach

of focusing on building value into the

assets they create. On the occupier

services side, at least in Shanghai and

some other tier-1 cities, the increase in

local clients is even more impactful as

these cities shift toward more service-

oriented economies.

Most of the challenges facing the

property services industry are more

about navigating change in a rapidly-

evolving environment rather than the

emergence of any sustained barriers

to growth.

“Opportunity happens every day

and everywhere,” Wu says optimisti-

cally. “It’s a very trendy thing. It goes

along with the economy, it goes along

with the marketplace, it goes along

with government policy. No specific

industry, we have different waves of

market opportunity coming in. So we

just have to be very adaptable.” I

What’s inside the buildings? Insight from a veteran interior architect

In addition to the companies overseeing construction and mana-

ging completed properties, design of a building’s interior is often han-

dled by another set of specialists. Stephen White, managing director of

interior architecture and design build firm iaction, was among the first

foreigners to design the interiors of the emerging cityscape. Arriving

in the early 1990s, White has contributed to many of the city’s iconic

buildings. “We did the first tenancy for an office in the Jinmao buildi-

ng, which was for a German bank, Dresdner Bank,” White says. “They

moved in in January ‘99, at a time when the Jinmao building was really

outstanding in Pudong, because there really wasn’t much around it.”

Unique architecture is prominent in Shanghai, and this has im-

pacted the interior design sector. “Shanghai is a city of making a

statement, and there has been an increasing need to create your

own identity and stand out from the pack,” White says. “Quite often

people reconsider their image for their facility here to develop it

further in an Asian context. And that makes it quite often a more

interesting proposition.”

One of the biggest changes over this period has been the develop-

ment and application of modern regulations. Fire codes, for example,

were still evolving, and “the application of these regulations was very

much a work in progress.” Because of this, when the Swiss consulate

moved into its 22nd floor offi-

ce they had iaction install an

emergency escape chute that

can be pushed out of the win-

dow down to the street. Today,

White says the fire codes and

other regulations are similar to

international standards, and

in recent years their enforce-

ment has improved markedly.

Similar to other profes-

sional service industries, competition has grown fierce and new local

competitors are emerging. But growth of local clients is strong as well,

and is providing new opportunities. “Now that Shanghai’s been topped

out in terms of its tall buildings in Pudong, we’re seeing more tall buil-

dings coming through in Puxi,” White says, optimistic about the future.

The recently completed office tower of the new Sinar Mas Center just

became the tallest building in Puxi, demonstrating this trend. Others in-

clude Dazhongli and One Museum Place. Asked about this growth and

what the greatest opportunity is moving forward, White replies: “Han-

ging on to the tail of the dragon… as it grows and becomes more active.”

The atrium at Baosteel Resources headquarters, designed by iaction

Doug Strub is associate

editor for AmCham Shanghai’s

publications and communica-

tions department.

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President-elect Trump won the 2016

election in part due to his rhetorical

position that “America is losing to

China.” In forecasting what Trump’s elec-

tion will mean for Sino-U.S. economic

relations, we must ask how this asser-

tion will translate into policy. What will it

mean for U.S. businesses operating in or

trading with China? How should multina-

tionals navigate the uncertainty?

Before sharing my perspectives, I

should first offer several caveats: Pun-

ditry around Trump has been notoriously

flawed. Equally, few have successfully

predicted the course of President Xi

Jinping over the past four years. What’s

more, while we know Trump is deeply in-

fluenced by those around him, we don’t

yet know who he will appoint. While Wil-

bur Ross, Steve Bannon, Dan DeMicco

and Peter Navarro have advised can-

didate Trump, it’s safe to assume that a

wider circle of advisors will be available

to President Trump.

Also, “stuff happens.” Unanticipated

events will shift the context for govern-

ing. Much has been written of Graham Al-

lison’s Thucydides Trap, where seemingly

trivial incidents achieve outsized signifi-

cance when an emerging power (China)

confronts an established power (the U.S.).

An unforeseen event in the South China

Sea, Hong Kong, North Korea or Central

Asia could be disproportionally destabi-

lizing. Additionally, social and environ-

mental mega-trends such as automation,

climate change, global pandemics and

cyber-attacks will continue to have un-

predictable impacts on both nations and

are beyond the control of any individual

leader.

In looking forward, it’s worth examin-

ing the motives of both President Xi and

President-elect Trump and their core

constituents. Let’s start with Trump. Many

have focused on Trump as a business

man, negotiator and deal-maker. He and

his advisors claim to be guided by “eco-

nomic nationalism,” “American capital-

ism,” and “America First.” But he is also

a master communicator and showman.

According to political consultant Mark

McKinnon, Trump’s campaign created

a narrative in which he preyed on the

fears of the electorate (terrorism, Amer-

ican decline, economic drift), defined

clear villains (Islamic-inspired terrorists,

illegal Mexican immigrants, and offshore

Chinese manufacturers) and prescribed

populist solutions (stop Muslims entering

the U.S., build a wall, impose tariffs, scrap

trade deals). The campaign then bundled

all this into a promise to “Make America

Great Again.” To fulfill this promise, the

Trump administration has to deliver on at

least some of his audacious goals, par-

ticularly to create “millions” of new man-

ufacturing jobs, double the GDP growth

rate to 4%, and rebuild America’s infra-

structure. His policy prescriptions include

cutting red tape (“cutting two regulations

for every new one that is enacted”); over-

hauling the tax code and reducing cor-

porate income tax to 20%; and imposing

tariffs of 45% on China.

My guess is that President Trump will

focus on achieving his headline goals

first (jobs, GDP growth, domestic secu-

rity) rather than acting on every one of his

provocative policy ideas. The prospect

of widespread import tariffs and a pain-

ful trade war with China seems unlikely

given moderating influence of (1) a wider

team of better-informed advisors, (2)

sensitive Republicans in Congress, and

(3) the potential negative reaction of the

stock market.

The danger, however lies in the seeds

of Trump’s campaign narrative. If prog-

ress in “Making America Great Again” is

slow — which it likely will be — President

Trump will be forced to refocus public

attention toward one of his external vil-

To Make America Great AgainTrump mustacknowledge the U.S.and China arestronger together By James W robinson, Managing Director, apCo Worldwide

19

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19

lains — Islam, immigrants, China — with

unforeseeable consequences.

President Xi faces his own constraints.

Ahead of next fall’s 19th Communist Party

Congress, Xi needs to make himself un-

assailable by maintaining the guise of do-

mestic stability and economic prosperity.

This is predicated on continued delivery

of modest GDP growth of 6-7%, “purify-

ing” the Party of corruption, absorption of

unemployment from China’s own sput-

tering manufacturing sector, doubling

GDP between 2010 and 2020, as well

as demonstrating China’s international

statesmanship.

His agenda is being pursued through

a number of public initiatives and cam-

paigns (think One Belt One Road, Made

in China 2025, Internet Plus, the Chinese

Dream among others) and a slew of

moves to integrate China into interna-

tional systems of governance, including

the creation of the Asian Infrastructure

Investment Bank; adding the Renminbi

to the IMF’s basket of “special drawing

rights” currencies; adhering to interna-

tional ruling by the likes of the WTO and

UN; assuming a leadership role in the

Paris Climate Treaty; and being a lead-

ing voice on the Regional Comprehen-

sive Economic Partnership (RCEP) trade

agreement.

So how does this shake out for multina-

tionals doing businesses in China? here

are five predictions:

1. trump needs a public “villain.”

With the propaganda-savvy Steve

Bannon and Roger Ailes at his side,

we should anticipate Trump’s com-

munications will continue the narra-

tive journey of his campaign. He will

need to live up to his tough-guy im-

age and demonstrate action against

offshoring to places like Mexico and

China. We should expect the new

administration to find a high-profile

“whipping boy” that will be used as

an example of being “tough on China.”

Trump might inflict punitive tariffs

against a sector—such as Chinese

steel—or he might take action against

an individual company that symbol-

izes the damage of globalization to

American workers (think Carrier and

Mexico). Denying Market Economy

Status to China, or naming it a cur-

rency manipulator might be other

relatively painless (and largely irrele-

vant) ways to “punish” China.

2. Both Xi and trump need a “win.”

With multilateral trade deals off the

table for the U.S., bilateral investment

offers a rational place for both leaders

to demonstrate a win. With more than

US$70 billion of Chinese outbound

investment to the U.S. in 2016, and

billions of dollars of U.S. investment

flowing to China, both countries have

much to gain from enabling a friend-

lier investment climate for job creators.

Both leaders will be inclined to nego-

tiate a deal, perhaps a Grand Bargain,

that can be sold as a win to domestic

constituents—particularly blue col-

lar Ohio, Pennsylvania and Michigan,

in Trump’s case. This might be a “high

quality” Bilateral Investment Treaty

(BIT) that opens the U.S. more widely to

job-creating Chinese investors (in infra-

structure or agriculture, for example),

while also forcing China to offer more

reciprocal rights in currently restricted

sectors such as technology, services

and biotechnology.

3. tpp is dead. long live rCep. Ced-

ing leadership in regional trade to

China by rejecting the TPP might be a

long-term geopolitical miscalculation

by the U.S. That said, TPP negotiations

already forced governments to reveal

concessions that could be achieved

potentially on a bilateral basis with

the U.S. TPP’s demise has also added

fuel to RCEP, which has the potential

to open markets and supply chains for

businesses—including American mul-

tinationals—across other RCEP coun-

tries, including Japan, Korea, India and

ASEAN, which in aggregate represent

46% of the world’s population and 24%

of global GDP.

4. ego and “face” have never been so

important. Trump’s ego and need for

stature offer opportunities for Beijing to

curry favor at relatively low cost. Amer-

ican businesses should also look to

show their support for the administra-

tion. Early state visits between Beijing

and Washington would give President

Trump the platform, pomp and pag-

eantry he seemingly craves, and give

face and reassurance to Xi and his do-

mestic stakeholders.

5. american rebalance; asia retreat.

In all likelihood, China will be far down

the list of Trump’s priorities. While there

will likely be some early chest thumping

about China, the President needs to use

his Republican majorities in Congress

to push through quick-win domestic

policies that Trumpkins can merchan-

dize for the 2018 midterms. In adopting

“economic nationalism” as the guid-

ing doctrine, the Asia Rebalance will

be degraded or reimagined as a mili-

tary-centric “peace through strength”

strategy, according to Trump advisors

Peter Navarro and Alexander Gray. We

might also expect to see reconstituted

versions of the Strategic and Economic

Dialogue (S&ED) and the Joint Commis-

sion on Commerce and Trade (JCCT),

which observers suggest have become

ineffectual.

For American businesses in China, our

initial advice is to: (1) carefully monitor and

map the personalities and regulations of

the new administration and align them

with risks and opportunities; (2) keep a

low public profile and exercise caution in

communicating your China story — par-

ticularly in the U.S.; (3) use third party

intermediaries — trusted friends, trade

associations and think tanks — to gather

intelligence and create a context for en-

gagement on tough issues; and (4) build,

reinforce and institutionalize relation-

ships with a new a generation of leaders

in DC and Beijing.

Before the election, David Dollar of

the Brookings Institution observed the

relationship between the U.S. and China

has become asymmetric and suggested

the next U.S. president should engage

in “responsible hardball” with China.

Temperamentally, however, President

Trump will be more inclined to “irre-

sponsible hardball,” which will harm the

economies of both nations. Henry Kiss-

inger urged the future U.S. President to

engage in “intense study” of China. We

know that Trump met Kissinger soon

after the election. Let’s hope the Pres-

ident-elect and his advisors heed this

advice and come to recognize the inter-

connectedness of American Greatness

and China’s Peaceful Rise. I

POLICY PERSPECTIVES

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What particularly interesting insights

on China’s national strategy did the au-

thor of the chapter on China provide for

the book?

Men Honghua highlights the way that

China’s peaceful rise and its strategy of

development was changing China itself,

that it had raised issues of a new identity

for China. No longer the old Communist

Party, it now is searching for what its new

identity is — a new socialist power, a new

great power? It’s interesting that he high-

lighted, in talking about the process of

foreign policy-making, that more constit-

uencies are now involved in China’s for-

eign policy making: various political of-

ficials, think tanks, academics, and even

Chinese officials are paying attention to

netizens and their expression of views.

So you see a country that’s thinking more

broadly, and more people are involved in

its foreign policy, even as the central gov-

ernment, of course, sets strategy. That di-

alogue of what strategy should be, what

type of country China should become,

was noticeable for me.

Would you say that the author has a pos-

itive view of where China is heading?

Yes, he thinks that China is on a good

track. It basically is focused on its own

development but recognizes that you

also need to look after your security is-

sues, and acknowledges that there’s a

dilemma with China’s own development

and growth. This growth by its very pres-

ence sometimes makes others wary or

uncertain about what China might do,

and therefore, it was important to rein-

force the notion of its peaceful rise and

interest in economic development over

other objectives.

In Shaper Nations, you describe a world

in which multi-polarity rises as U.S.

hegemony fades. Could you describe

what kind of new global order this

might create?

Maybe not so much a coherent global

order as the one we’ve seen since World

War II, and certainly since the end of

the Cold War, where there was a kind of

clear set of rules and there were clear

global organizations. I think the issue

with the relative decline of the U.S., not

that the U.S. is declining but that others

are rising, so power is more equally dis-

tributed, is that these countries — the

shaper nations that are going to be more

influential in the future — are more fo-

cused on their regions.

I believe the development of regional

orders is where you’ll see the most

progress. Most of these countries are

hesitant to get involved in shaping over-

all global order. It’s too large; it would

absorb too many of their resources.

So the grand global projects are likely

to be more difficult unless they come

out of cooperation among regional or-

ders that build up to something a little

bit bigger. So I think you’ll see a trend

toward focusing on regional order over

the big deals like the WTO or a big UN

transformation.

AmChamAuthorSeries A conversation with the editor of Shaper Nations: Strategies for a Changing World

By ruoping Chen

Professor Jeffrey W. Legro is vice provost of global affairs and Taylor professor of politics at the University of Virginia. His new book, Shaper Nations: Strategies for a Changing World, provides illuminating perspectives on the national strategies of eight emerging and established coun-tries that are shaping global politics at the beginning of the 21st century.

21

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Movers and shakers

With what is happening in the South

China Sea, do you think there is a risk

for confrontation between China and

other countries?

Right now, the states involved still

have an overwhelming incentive to con-

centrate on economic development and

to pursue cooperation that advances that

development. Ultimately their power is as

much and probably more dependent on

economic prosperity as it is on the pro-

tection of peripheral areas on the bound-

ary. The area for flashpoints are where

you have the shaper nations in the same

region competing for regional influence

that they see is increasingly important

to their welfare. So the mutual desire for

influence in the same region can lead to

competing claims.

China finds itself in a region of shaper

nations: India on one border and Japan,

a shaper nation as well, and a country

that is underperforming in terms of in-

fluence in international relations relative

to its power. Another flashpoint. So you

see these types of tensions on the bor-

ders. But the incentives to move to a wide

scale conflict are hard to find, because

no one sees conflict as getting the goals

they seek. They don’t see physical expan-

sion as the means to their ends. Those

situations are possible, conflict is possi-

ble, especially at times where there is in-

centive to spur nationalism for whatever

immediate political reason. But in terms

of strategies, economic development

and peaceful means of development is

still, I think, the priority of all the powers

in the region.

In January, there will be a new admin-

istration in the White House. What con-

sequences might a Trump presidency

have on global affairs?

We know there’s going to be conse-

quences, but what exactly will they be?

It’s hard to say at this point, because a

lot of things were said in the campaign.

I think some themes that are likely to

emerge, from people who have looked at

this closely over the years and who have

followed Trump closely over the years,

fall into a couple of different areas:

First, in the security realm, it is clear

that he has focused most on the threat

from ISIS and terrorism. That would prob-

ably be the number one security issue.

Second is widespread complaint over

trade and the free trade system. Trump

has mentioned this over the years, and

it’s likely that he is going to do something,

but what exactly, we’ll have to wait and

see. He prides himself on being a negoti-

ator, and perhaps he wants to negotiate a

better bargain for the U.S., rather than de-

construct the globalized economy, which

of course would have important implica-

tions for the U.S. itself.

He has for years written about the

unfair deal with allies and who pays for

the alliances — where U.S. troops are in

Western Europe and Japan, alliances with

South Korea and close partnerships with

Saudi Arabia. He believes those countries

should be carrying more of the burden.

I expect something will happen in that

realm, but it’s difficult to see the big

changes that could happen that wouldn’t

rupture those relationships, given that

people in those countries widely believe

that they are already carrying the vast

burden of the load in that relationship. So

those are the areas I believe will be most

likely to see action in foreign policy.

Maybe the final one is, he’s been talk-

ing fairly consistently about stronger de-

fense. So maybe we’ll see a little bit more

significant defense building. But again

internally his emphasis is on infrastruc-

ture and building U.S. infrastructure. That

takes money, defense spending takes

money, and maybe you see those things

as the same thing, but obviously there are

different consequences.

Trump has suggested pulling troops

from Japan and Korea. Do you see this

as an opportunity for China to assert a

bigger leadership role if the U.S. were

to withdraw more from the global

stage?

I think China would want to tread very

lightly there. To step up would be to con-

firm fears of people in the region about

China really wanting hegemony in the

region. I also don’t think Donald Trump

is about leaving the Pacific. He’s about

a different deal with allies in the region,

but he’s been pretty clear that the U.S.

needs to be there, maybe with a more

enhanced naval presence in the Pacific.

I don’t think you’re going to see the U.S.

departing from the Pacific, even if there

are some adjustments in its alliances. I

believe the U.S. will remain very engaged,

both in terms of security and in terms of

economic affairs and trade.

With the TPP all but dead, might there

be something to replace that with?

The TPP, as called the TPP, is dead.

It’s not politically viable. Does that mean

some sort of trade agreement in the fu-

ture is not viable? No. I think what you’re

going to see is a tough line from the pres-

ident-elect in relations with China in the

first 12 to 18 months of his presidency.

Then you’re going to see willingness or

openness to explore new kinds of trade

arrangements, perhaps not only with

China but with the array of countries in

Asia. They may look a little different. Per-

haps they will have different provisions

for workers and others who might be

hurt by those free trade agreements, but

I think the nature of the global economy

and the pressures on the President to

produce economic welfare argue in favor

of continued agreements. And what you’ll

see that is different is perhaps new U.S.

government policies to offset those who

may lose from those agreements. I

POLICY PERSPECTIVES

22

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Two-Way Street:25 Years of U.S.-China Direct Investment

American companies have been

active in the Chinese economy

throughout the post-1979 reform

period, investing hundreds of billions of dol-

lars. In the past decade, Chinese investors

have begun to expand their U.S. presence

as well, turning the FDI relationship into

a two-way street with multi-billion dollar

flows every year. This change has important

economic and political implications, and

has turned FDI into a first-order priority in

the bilateral relationship.

It is essential that our discourse about

FDI — to the greatest extent possible — be

data-driven. However, current FDI statistics

of both the U.S. and Chinese governments

are compiled with the primary goal of analyz-

ing balance of payments-related questions;

they are subject to significant distortions due

to tax optimization and other shorter-term

considerations; they have long delays and

many gaps; and they do not offer the granu-

larity necessary to analyze many policy-rele-

vant questions. This study sets out to create

greater transparency on U.S.-China direct in-

vestment flows to facilitate a fact-based and

more productive policy debate.

u.S. fDi in ChinaSince the 1970s, U.S. multinationals were

key proponents of normalizing the rela-

tionship with China, and their operations in

China have been central to ties between the

two countries. Over the past quarter century

these firms have transferred technology,

created jobs and helped reshape the Chi-

nese economy.

The most commonly used official esti-

mates of the U.S. FDI stock in China suggest

a modest value, reflecting the methodolog-

ical shortcomings of balance of payments

statistics. The U.S. Bureau of Economic

Analysis puts the stock of American FDI in

China at US$75 billion as of 2015. China’s

Ministry of Commerce counts $70 billion of

cumulative utilized FDI from the U.S. to that

date. Both datasets have limited utility for

analyzing two-way FDI flows. We offer an al-

ternative perspective on the scope and pat-

terns of U.S. FDI in China, by introducing a

new transactions-based dataset created by

identifying, qualifying and counting every

single FDI transaction over $1 million since

1990. We count nearly 6,700 American in-

vestments in China with a combined value

of $228 billion. Our dataset includes more

than 1,300 U.S. companies that have built

significant operations in China, 430 of them

investing more than $50 million and 56 with

billion-dollar bets.

We also provide details on a variety of

other policy-relevant metrics not available

in official statistics. For instance, we can

discern that more than 71% of total U.S. FDI

by value went into greenfield projects, the

majority of them small- and medium-sized.

We describe investment patterns across

industries over time, illustrating how the fo-

cus has shifted from exploiting comparative

advantage in light manufacturing to serving

local consumers and customers. Finally, our

data indicates that American investment in

China peaked in 2008 and has been largely

flat since, with a declining trend since 2012.

Chinese fDi in the u.S.Official statistics are similarly problematic

for describing the scale and patterns of Chi-

nese FDI in the U.S. Official U.S. estimates for

the stock of Chinese FDI range from US$15

billion to $21 billion. Official Chinese numbers

put the figure at $41 billion, more than twice the

U.S. estimates. Rhodium Group has maintained

a transactional dataset on Chinese FDI in the

U.S. since 2011. For this study, we have updated

this catalogue to include investments back to

1990, to provide a fully comparable count of

Chinese FDI in the U.S. for the past 25 years.

For the entire period of 1990 to 2015, we count

more than 1,200 individual transactions with a

combined value of $64 billion.

Our transactions data also clarifies details

on the structure and patterns of this Chinese

investment. We show that Chinese market

entry in the U.S. was dominated by acqui-

sitions rather than greenfield FDI, and that

Chinese companies have expanded their

presence from urban coastal economies to

a great number of U.S. states. Another im-

portant finding is that Chinese investment in

the U.S. is now increasingly driven by private

sector activity (an average of 77% in the past

three years), and that the investor mix has

lately evolved from large multinational cor-

porations to include private equity firms, ven-

ture capitalists and other financial investors.

ConclusionsWe have demonstrated that the com-

mercial stakes on both sides are two to four

times higher than commonly used statistics

suggest. Our data show that while some

Americans are eager to talk about imposing

reciprocity requirements for inward Chinese

FDI, the cumulative value of U.S. FDI trans-

actions permitted in China to date is four

times than that of China in the U.S. Similarly,

while many Chinese complain about the

lack of American openness, our data show

that the U.S. is open and welcoming to Chi-

nese investment, and that Chinese compa-

nies are now investing more in the U.S. an-

nually than American companies in China.

These observations emphasize that both

sides need to reconsider the data before

staking out new policy positions. I

By rhodium Group

This excerpt is from a larger report by the Rhodium Group and the National Committee on U.S.-China Relations, with support from AmCham Shanghai and the Chinese General Chamber of Commerce-USA. The full report is available for download at www.rhg.com and an interactive website is available at www.us-china-fdi.com.

Grow Your Business With Members Enquiry: Zoe Zhang (86 21) 6279 7119-5667 zoe.zhang@amcham-shanghai.org

Delta regards AmCham Shanghai as a key partner and appreciates the opportunities it provides to promote our brand in the U.S.-Shanghai business community.

- Wong Hong President - Greater China, Delta Air Lines

The experience of being AmCham Shanghai memeber

is great. It provides a platform to help companies innovate

in the Chinese market.

- Jeroen De Groot President,

Metro

100+ years of service

3,500+ members

1,500+ companies

The experience of being

an AmCham Shanghai member

is great. It provides a platform

to help companies innovate

in the Chinese market.

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24

Stars Sponsor platinum table Sponsors

Stripes Sponsors

AmCham Shanghai’sFifteenth Annual ShanghaiAppreciation Dinner

AmCham Shanghai yesterday celebrated the long-

standing partnership among the Shanghai Municipal

Government, the U.S. business community and the

U.S. government at a dinner with U.S. Ambassador to China

Max Baucus, U.S. Consul General Hanscom Smith, Shanghai

Vice Secretary General Sun Jiwei and more than 260 guests.

AmCham Shanghai members were joined by 70 other high-

level government officials from Shanghai Municipality and

representatives from the Jiangsu and Zhejiang provincial gov-

ernments. The Shanghai Municipal People’s Government Com-

mission of Commerce, Foreign Affairs Office, Shanghai Customs

and many other departments sent representatives to discuss

Shanghai’s economic and commercial development, interact

with AmCham Shanghai members and learn more about U.S.

companies in the region.

Shanghai Vice Secretary General Sun Jiwei expressed ap-

preciation for AmCham Shanghai’s contribution to the devel-

opment of Shanghai. The event highlighted the ongoing coop-

eration between the United States and China, which the Vice

Secretary General called “The ballast and stabilizer of the U.S.-

China relationship.”

Ambassador Baucus emphasized the importance of the

U.S.-China relationship and the large and growing menu of

Right: President of North Asia for Archer Daniels Midland Donald Chen

U.S. Ambassador Max Baucus (at the podium), L-R: AmCham Shanghai President Ken Jarrett, Shanghai Vice Secretary General Sun Jiwei, U.S. Consul General Hanscom Smith, AmCham Shanghai Board of Governors Chair Ker Gibbs

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Movers and shakers

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MEMBER NEWS

interests that the two countries share. He also said that U.S.

companies had been at the forefront of this relationship, cre-

ating jobs for millions of people.

AmCham Shanghai 2016 Chairman Ker Gibbs spoke about

the Chamber’s advocacy role and also referenced the recent

U.S. election result and the need for the Chamber and others

to continue making the case for free trade. He praised both

the Shanghai government’s continuing efforts to transform

Shanghai into a global city and the benefits that U.S. compa-

nies have brought to China.

“American businesses enjoy the benefits of China’s ac-

complishments every single day. We make good use of

China’s infrastructure, talent and markets. As a result, the

majority of American businesses are doing well here. Despite

the challenges we are growing, and we continue to invest.

We are major taxpayers and creators of good quality, highly

skilled jobs. That’s good for China, it’s good for America, and

it’s good for peace and stability everywhere,” said Gibbs.

The dinner was sponsored by several longtime AmCham

Shanghai members including Stars Sponsor Honeywell, Stripes

Sponsors TE Connectivity and United Family Healthcare, and

Platinum sponsors ExxonMobil, Federal Express and Nu Skin. I

Corporate table Sponsors

L-R: Partner of Markets Strategy for KPMG David Frey, President of B&L Group Phil Branham, AmCham China President Alan Beebe

Left to right, AmCham Shanghai President Ken Jarrett, Shanghai Vice Secretary General Sun Jiwei, U.S. Ambassador Max Baucus,

U.S. Consul General Hanscom Smith, AmCham Shanghai Board of Governors Chair Ker Gibbs

U.S. Ambassador Baucus mingles with AmCham Shanghai

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26

Member Focus

Virginia Moore manages a project logistics com-

pany, YN Logistics. Originally focused on imports

for international engineering, procurement and

construction companies, the company also tran-

sports equipment for projects worldwide.

When and why did you first come to China?

I came to China as a carefree youth in 1990. It seemed like there

would be a lot to understand here. And having heard Ronald Rea-

gan’s Evil Empire speech about communism, it seemed like some-

thing one ought to experience. I went back to America for one year

in 1992, but I have been here since.

How did you get into the shipping industry?

China’s shipping industry was opening up in the early 90s – or at

least the solid wall of domestic monopolies had a chink. Also, my

partner was a graduate of Shanghai’s Maritime University. I had to

learn contract terms for shipping in Chinese and English simulta-

neously. Shipping has its own language. There are lists. The thing

about shipping is that there are many moves to each step. But

people think it’s just a ship.

YN is a highly specialized logistics and shipping company. Can

you describe some of your more difficult past projects?

My favorite project was for a woodchip plant up the Yangtze

River in Hubei, in an area where the path of the river was too un-

steady to have permanent terminals for berthing of vessels. We

had to build a temporary terminal to discharge the cargo that was

brought in from Singapore. But the real challenge was that we

were competing with the Three Gorges project for the equipment.

It took a while to realize what the problem was because no one

really wanted to say.

The most fun operation we had was bringing a Chinese barge

owned by a division of the Shanghai port to Masan, Korea to pick

up an 800-ton piece for a job in Caojing Development Zone in the

outskirts of Shanghai. The Chinese barge had not been in interna-

tional waters before and it did not have computerized automatic

ballasting. It had already taken six months to negotiate the project

but now the insurance company didn’t think the barge had enough

pumps aboard. The Chinese thought they did. It took another three

months to resolve. The two pumps only cost US$100 each.

In the meantime I was getting more and more pregnant, and it

frightened all the barge people that someone so pregnant was

running the operation. But I now have a lot of credibility with the

Shanghai port authorities.

You ship very large industrial products. Does that create spe-

cial customs clearance needs?

Many of the projects are duty exempt because they are cap-

ital equipment. Customs regulations regarding duty exemp-

tions have been tightening incrementally for the past ten years.

Whether the cargo can be exempted depends on the description

of the cargo in the shipping documents. This can be difficult to

explain to an overseas supplier who is used to describing their

product on their own terms.

We once shipped an entire ThyssenKrupp steel plant from Germany.

The mill was from the 1930s or around then and a private Chinese steel

mill purchased the entire thing in 1998. Then the government took a

harder look at such old plants and such projects stopped.

Recently, as the regulations for second））-hand equipment have loos-

ened, we have found that most of the cargo is being imported into

inland destinations. And those inland factories are terrified of clearing

customs in Shanghai. Again, we need to get them in the habit of creat-

ing immaculate documentation to present to Shanghai Customs.

Given that you have to negotiate with local authorities to

Assembly required

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Movers and shakers

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MEMBER NEWS

move traffic lights, electric cables, etc., how many months

in advance do you begin the planning to move a large piece

of machinery?

For cargo that is over six meters in height there are often a lot

of serious obstacles. Those jobs usually require six to eight weeks

planning with the local authorities to set up a date. But usually

we need to start planning once the equipment specifications are

proposed — because some cargo cannot be moved on the road at

all and we need to survey the obstacles to let the engineers know.

However, as everyone’s eyes are on these big pieces, they usually

give time for planning. Our biggest problems arise when there is

some small part missing on a site and someone makes an order

for overnight delivery.

What else do you ship besides large industrial machinery?

We have invested in a shipping company that ships cement and

steel products. Most of our logistics customers are in engineering,

procurement and construction. One of our big customers manu-

factures port equipment and that equipment often needs parts so

we also ship parts.

You are a Western female entrepreneur in China working in

an industry traditionally dominated by males. How have you

succeeded?

I was in charge of sales for many years. I think I relied on in-

spiring fear of Chinese regulations, which are based on the So-

viet model and therefore onerous and tedious. If you want to

import things into China you have to do a lot of planning. So I

was frequently trying to explain to people that if you don’t un-

derstand those regulations, you’re not going to get your cargo

in. Regulations trump womanhood. I would suggest that more

women in general should spend more time at the Chinese

ports. Wide open spaces. Usually with views. And stevedores

are generally willing to comply with shrill voices nagging about

lashing [lashing down cargo properly to a vessel]. That has al-

ways been my experience.

Has the shift away from heavy industry to services impacted

your business?

China has become an exporter of equipment. Our business has

moved from imports to exports around the world. I think the bigger

impact is about global projects in mining, power and oil and gas

which have been halted.

Many of your clients are foreign multinationals. Do you also do

projects for Chinese companies?

We do face some difficulties competing with the state forward-

ers. And yet, we are also able to get business assisting those same

forwarders in their overseas business, again by providing detailed

technical plans.

What is your company’s competitive advantage?

We follow international best practice for movements of oversize

cargo. We have people monitoring each stage of a movement.

And for customs regulations, we ask overseas suppliers nicely if

they can describe their cargo in more detail. People value our per-

sistency. And belief that customs issues can be settled before the

cargo arrives.

You have been managing a team of local Shanghainese for

some years. What advice would you give to an expatriate who

has been freshly posted here?

I had a discussion with a women’s group about this issue some

weeks ago. One woman had been sent here with a clear mission

from headquarters: to make the organization think more strategically,

to look more to the future. That was her role, and to her it all made

sense. In order to grow you have to do things like change a product.

However, each of those things was actually challenging to peo-

ple here in the organization, but she was puzzled by why the or-

ganization wasn’t accepting these ideas. The real issue was that

you have to know where people’s interests lie — that whole Chi-

nese thing of “you are where you sit.” You need to really appreciate

that systems that exist here have a lot of traction. You also have

to know how deeply people may feel, how cautious they may be.

If I am back in St. Louis, in my own culture, we do this automati-

cally without thinking. We know all of these issues, and we know

them deeply, and our minds are already thinking about how to get

around them, how to corral people.

Also, there’s the issue of you coming in from the United States.

This is not someone coming in who is going to work up from the

bottom. You are coming in from on top or from the side. I came

here when I was young so I have been part of the processes that

now need re-examining. Changing things requires understanding

why a process was previously done differently. Being here has

taught me to ask those questions of myself and to accommodate

other ideas, because they can actually contribute to the process.

You first joined AmCham in the early 1990s. What would you

like us to do more of?

I am impressed by all the recent initiatives. I guess I would rec-

ommend anything that expanded the reputation of what American

business stands for. I

No, it’s not an ICBM

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28

GoVernorS

MEETING ATTENDANCE

Governors: Ker Gibbs, Mike Crotty (by phone), Cecilia Ho,

Tim Huang, Aina Konold, Ning Lei, Nancy Leou, Glen Walter,

Helen Yang, Vincent Yang, Eric Zheng,

Regrets: Jimmy Chen, Gentry Sayad, Cameron Werker

Attendees: Ken Jarrett, Helen Ren, Titi Baccam, Ian Driscoll,

Patsy Li, Jonathan Shyu

Ker GibbsChinaBio

Cecilia hoInternational Paper Asia

ChairMan

ViCe Chair

Jimmy ChenFedEx Express

michael CrottyMKT & Associates

timothy huangBank of America Merrill Lynch

aina e. KonoldGAP Inc.

ning Lei Lei & Company

Glen WalterCoca-Cola

helen Ching-hsien YangDuPont

Vincent YangILE

eric ZhengAIG Insurance

Board of Governors Briefing

Highlights from the November 22, 2016, Board of Governors Meeting

Chair’s repOrt

Chairman Ker Gibbs noted that he recently visited AmCham China

and met with the President and Chairman-elect, Bill Zarit. He also

attended the World Internet Conference in Wuzhen. The Chair

also said that he met recently with a group of former AmCham

Chairs to exchange views on the Chamber.

presiDent’s repOrt

According to Chamber President Ken Jarrett, the Chamber had already

received 452 votes in the BOG elections, surpassing the 20% partici-

pation rate, a new high for the Chamber. Jarrett said that he would like

the votes to reach 25% and believes that the Chamber will reach this

goal. He also reported on the Chamber’s efforts to fill the Vice Presi-

dent of Operations position. Finally, he provided an update on the Rho-

dium Group’s project on U.S.-China two-way investment flows that the

Chamber is supporting. He participated in the launch events for the

report in Washington D.C., New York, Shanghai and Beijing.

StrateGiC plan upDate

The President provided the Board with an updated version of the

three-year strategic plan for the years 2015-2017. The changes add up-

dates for 2017, providing details on the implementation plans for next

year. The plan is an essential part of the budget preparation.

nanJinG Center upDate

YRD Center’s Jonathan Shyu briefed the board on the Nanjing Center’s

progress. The Center was launched in March 2016, and the basic ele-

ments are now in place. It has an advisory council, an online presence,

and has conducted 20-plus events. The Center is focused on impro-

ving programs, increasing membership, and stabilizing operations.

neW ChaMBer WeBSite

Communications and Publications Director Ian Driscoll reported on the

Chamber’s new website, which he estimated would launch in late Ja-

nuary. It will be a modern website and there will be cohesion among all

of the various Chamber websites (TIC, Suzhou, Nanjing and the main

website). The current Insight website will be folded into the new website.

The AmCham Shanghai 2016 Board of Governors

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29

MEMBER NEWS

Event Report

tWo-WaY Street: 25 YearS of u.S.-China DireCt inVeStMent

On November 17, AmCham Shanghai held an event for Two-

Way Street: 25 Years of U.S.-China Direct Investment – a new

report from Rhodium Group and the National Committee on

U.S.-China Relations (NCUSCR), with support from AmCham

Shanghai and the China General Chamber of Commerce-USA.

Steve Orlins, president of the NCUSCR, said that the deeply in-

tertwined investment relationship of the two countries should

now influence wider policy choices. Daniel Rosen, founding

partner of Rhodium Group, added that policy decisions around

investment flows and trade have taken on a new urgency fol-

lowing the U.S. election. The report gives policymakers a

clearer, more fact-driven understanding of FDI flows.

Thilo Hanemann, director of Rhodium Group’s cross-border

investment practice and lead author of the report, presented

the findings. Rather than looking at financial flows (as does the

U.S. Bureau of Economic Analysis), the report uses a new trans-

action-based approach that analyzed nearly 8000 transactions

dating back to 1990. Using this method, the report concludes

that total American investment into China from 1990-2015 was

US$228 billion – three times the $75 billion reported by the U.S.

government. While investment flows in the opposite direction are

a newer phenomenon, the report shows 30-40% average annual

growth over the past five years, reaching a total of $64 billion.

Rosen concluded the presentation with a list of policy impli-

cations. First, the deepness of integration makes it important to

consider the consequences of a tit-for-tat trade war and who will

suffer. Secondly, in an era of globalization it is important to view

the U.S.-China relationship in a multilateral context, not just bilat-

eral. Finally, Rosen stressed that the data revealed how complex

the issues of symmetry and reciprocity are.

The session closed with a business leader-led Q&A discussion.

Cecilia Ho, president of International Paper Asia, and Aina Konold,

vice president & CFO of Gap Inc. Greater China, discussed their com-

panies’ histories of investment in China. Calven R. Wong, deputy gen-

eral manager of public affairs for Fosun Group, talked about Fosun’s

US$8 billion of investment into a variety of sectors across America.

Ceo SerieS With keVin akeroYD: hoW Data-DriVen

COmmuniCatOrs will earn tOmOrrOw’s CustOmers

On Friday, November 18, Kevin Akeroyd, CEO of media commu-

nications management company Cision, spoke at a morning mem-

bers gathering at the Portman Ritz Carlton Hotel.

Among Akeroyd’s messages was the idea that today’s buyers get

more of their information from online influencers and third-party sources,

and put less weight on company messaging, promotions and advertis-

ing. They are far more willing to trust the recommendations of friends

and family than other sources. He cited a survey that showed, among

other things, that 88% of consumers claim to be resistant to advertising.

Marketing technology, observed Akeroyd, is becoming increasingly

sophisticated with companies having to take account of demographics,

psycho graphics and social graphics. Improvements in data analytics

means that companies can now target 30-40 different versions of ad-

vertising at different audiences. Advances in data interpretation are also

leading to what he called a “shift from vanity metrics to an attribution

model.” However, he stressed that maintaining a consistent messaging

and strategy across the various mediums available today was essential.

After sharing his thoughts on earned media being one of the most

effective tools and the next wave of innovation in marketing technology,

Akeroyd took questions from the audience. While most questions fo-

cused on data’s role in targeting consumers, Akeroyd also spoke about

how Cision has been created out of several existing companies and the

challenges and opportunities of the acquisition process.

panel DiSCuSSeS future of u.S.-China relationS

On November 22, AmCham Shanghai hosted a panel of experts

for a discussion on the future of U.S.-China relations following the

election of Donald Trump to be the next President of the United

States. AmCham Shanghai President Kenneth Jarrett moderated a

panel that included Bill Powell, Asia editor/chief international corre-

spondent for Newsweek magazine; James McGregor, chairman of

APCO Worldwide’s Greater China Region; and Song Guoyou, profes-

sor at Fudan University’s Center for American Studies.

The panelists discussed the implications of the election of Donald

Trump and what his presidency could mean for U.S.-China relations.

All of the panelists agreed that regardless of what type of president

Donald Trump is, there will inevitably be changes in the U.S.-China

relationship. Much of his agenda could depend upon whom he ap-

points to various cabinet positions and how well his team works with

the leadership on Capitol Hill. The panel also talked about how they

expected Chinese President Xi Jinping to deal with President Trump

and what types of negotiations could be expected. I

Two way street: Daniel Rosen discusses investment flows following the U.S. election

Three wise men mull Trump’s ascendancy

AmCham Shanghai

Official from Hangzhou Bay New Zone delivers remarks at an Industrial Park Series Event

Curious citizens discuss live election results

during the presidential election viewing party

AmCham Shanghai hosts the Kunshan Municipal

Appreciation Luncheon

Psephologists ponder the future

at the presidential election viewing party

AmCham Shanghai Month in Pictures

A panel discussion on how Trump’s presidency

will affect future U.S.–China relations

AmCham Shanghai celebrates the Fifteenth Annual

Shanghai Appreciation Dinner

Former AmCham Chairman Bob Theleen questions

panelists about the future of U.S.-China relations

U.S. Ambassador Max Baucus networking with members

at AmCham’s 2016 Shanghai Appreciation Dinner

A panel discusses 25 years of U.S.-China direct investment

Professor Jeffrey W. Legro explains

how emerging nations are shaping a changing world

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32

Committee Chair’s Corner

A Chat with Ningling Wang

Ningling Wang is managing partner at Finnegan,

Henderson, Farabow, Garrett & Dunner, LLP.

She is the co-chair of AmCham Shanghai’s

Legal Committee.

What basic advice would you give to foreign companies

bringing valuable IP to China?

It is important to have IP protection. Foreign companies

should file their patent applications with the State IP

Office in China and their trademark applications with the

China Trademark Office. Once they get IP protection, they

can then talk about enforcement. Historically, foreign

companies aren’t comfortable with the IP enforcement

system in China so they ask “why bother?” It’s critical for

them to file patent applications in China and gain patent

protection at the same time as they are exploring market

opportunities in China.

Foreign companies have historically been the strongest

champions of IPR law reform in China. But is demand

for patent protection from Chinese companies and

entrepreneurs driving changes to IPR protection laws

in China?

Yes, especially in the last five years. The Chinese

government is now promoting innovation and aims to

provide stronger IP protection for Chinese companies.

Many domestic Chinese companies are asking the

government for stronger IP protection and enforcement

in China. For example, Huawei, Alibaba and ZTE are

leaders in the high-tech industry. With these Chinese

companies leading the way in worldwide competition,

more and more domestic Chinese companies realize the

importance of having strong IP enforcement in China, so

they can use this system to protect their business. This is

a good trend and promotes more rules and regulations

to make sure the environment is good for both business

and innovation.

What is the most significant legislation the Chinese

government has passed to strengthen IPR protection

in China?

It’s hard to tell which one is the most significant, but

the patent law plays an important role in strengthening

IPR protection in China. It will be revised soon. Last year,

the Chinese government published a draft of the Fourth

Amendment of the Patent Law for public comments. The

draft includes, for example, some provisions regarding

monetary damages. The low amount of compensation has

been the weakest link in patent infringement cases, because

normally in China, when you file a patent infringement case,

you might not get a very high monetary damage award.

The government realizes that’s probably the reason why

people think the IP/patent system is not that strong. So the

government has included provisions in the draft to increase

monetary damages especially for willful infringement

(meaning you know there’s a patent, yet you still infringe

the patent).

What is the most interesting case you’ve had to deal with

in regards to patent litigation/IP/licensing?

The most interesting one is when we helped a foreign

client implement IP enforcement in China. It’s interesting

because the product is a luxury baby stroller. It’s a very

famous brand outside of China, and it has become popular

in China for those who can afford it. And we found a lot

of counterfeit products. It’s not a traditional counterfeiting

case—some copycats use the same trademarks as our

clients, some of them use their own brands. In addition

to trademark infringement, we also dealt with patent

litigation. We further worked with customs to seize certain

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33

MEMBER NEWS

counterfeit products leaving China. The infringed products

were being exported to foreign countries, and that’s how

our client found out about the infringement. In fact, the

counterfeit products were manufactured in China whereas

the real products’ key parts were manufactured outside of

China.

How do you view the recent merger between Australian

law firm Mallesons and China’s King & Wood?

It’s a very interesting joint venture. And actually, there’s

a more recent one with Dacheng and Dentons. But, they’re

different. For King and Wood, it’s more of an international

merger because they now work together closely as one

firm, and they also changed the firm’s name. This might

be a trend — Chinese law firms seeking collaboration with

international law firms. With Dacheng and Dentons, the joint

venture is looser. They formed an alliance but they’re still

operating separately.

Foreign law attorneys cannot practice in the courts in

China. I think if the Chinese government opens up its doors

more, that may be a welcoming change. In the economic

zone in Shenzhen, attorneys from Hong Kong can practice

law and foreign law firms can form joint ventures with local

law firms. The national regulation right now is still pretty

restrictive, but you never know what will happen in the next

five years.

What is the best business decision you’ve ever made?

Establishing Finnegan’s Shanghai Office. The firm decided

to open a representative office in China in 2008, and I moved

to Shanghai from headquarters based in Washington DC. It’s

been an interesting journey for me, and it’s been eight years.

There have been lots of opportunities and exciting cases,

interesting experiences and challenges in China. It’s not

easy but it’s been exciting.

Why did you transition from a chemical engineering

background to law? Did you know you wanted to be a

lawyer?

Having a technical background is a unique perspective of

being a patent attorney. At Finnegan, an IP-specialized law

firm, we have about 380 attorneys - 90% of our attorneys

have technical backgrounds. We went to undergraduate

schools majoring in science and engineering, and then we

went to law school before we joined Finnegan.

In China, getting a law degree starts with undergraduate

studies, but I was in a “science and technology”

undergraduate degree and did not think of becoming an

attorney. After I graduated from college, I was looking for

a job. At that time, China’s job market had just started to

become more open and job fairs were a new phenomenon.

I went to a job fair near where I lived for fun. And at the fair,

there was an IP specialized law firm hiring graduate students

who had master degrees in science and engineering. I was

very lucky to be accepted, although I just had a bachelor’s

degree. That law firm where I got my first job is Liu, Shen &

Associates, which is now the top IP specialized law firm in

China. I worked there for a year, but then I still wanted to do

research, so I went to the U.S. for a PhD program in chemical

engineering at Virginia Tech. Later, I realized it would be

better for me to do IP law. I ended up getting a JD degree

after three years in graduate school.

If you were not a lawyer, what would you like to be?

When I was young, I wanted to be a medical doctor. But

now, I would want to be a professor. I’m currently teaching

patent law courses for various law schools in China, and I

enjoy interacting with young students.

Have you encountered any hurdles in the legal industry

as a woman?

Personally, I didn’t have any hurdles. In other words,

Finnegan is pretty good in terms of diversity. The firm has

good policies to encourage female attorneys to grow with

the firm. For example, the firm provides generous maternity

leave benefits. It’s also important for female attorneys to

have mentors. I personally benefited from the mentor

program at Finnegan. I am grateful to Finnegan for its

promotion of diversity. When I came to China, sometimes

I felt there were some stereotypical views against women

attorneys. And attorneys in general as a profession are not

well respected in China. But I hope, with our efforts, China

can become a better country. I

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Esoterica

Adhering to a long-held tradition, this

month’s Insight concludes with a brief

listing of the some of the birdbrained,

bewildering and sometimes bri l l iant

things the citizens of China have done

to make the news more amusing this

past year.

free falling Crocodile

In August, a Sichuan grandmother

awoke to discover a live crocodile in her

back garden. As the garden was walled

off, the woman was rightly perplexed by

the animal’s presence. Had it fallen from

the sky, she apparent ly wondered?

Neighbors later revealed that a family on

the fifth floor of her building kept croco-

diles, and that at least one family member

was a gastronome with a taste for exotic

foods. Dinner had escaped, fallen almost

50 feet onto the roof of a shed, and all

without injury. The crocodile was later

carted off by wildlife authorities.

naked ious

According to the Nandu Daily, Chinese

university students this year took to up-

loading nude photographs onto online

lending platforms. The reason: the photo-

graphs act as collateral for loans. While

most loans are capped at RMB15,000, stu-

dents at prestigious universities can ac-

cess even more cash, albeit at weekly in-

terest rates of up to 30%. Which is where

the photographs come in. Students who

fail to pay off their loans face the ignominy

of having their nude photos splashed

across the web.

Climbing your own Great firewall

Earlier this year Fang Binxing, one of

the architects of China’s Great Firewall –

which blocks internet users in China from

accessing much of the web’s content lo-

cated outside of China – gave a speech

on internet safety at the Harbin Institute

of Technology. In a comical twist of fate, a

website Fang attempted to load produced

a message all too familiar to those resid-

ing in China: “Page not found.” In a move

that surprised the live audience, Fang

then opened a VPN in an attempt to es-

cape the confines of the firewall that he

himself created. Worsening the situation,

his VPN dropped its connection twice,

prompting him to give up and instead

search for screenshots of the desired

webpage on Baidu.

in flagrante Delicto

Two scintillating celebrity extramarital

affairs exploded onto the Chinese internet

this year. In the first, beloved actor Wang

Baoqiang, nicknamed “Baobao” by his

fans, went straight to social media to air

his dirty laundry. In a statement released

on Weibo, he descr ibed his wife Ma

Rong’s affair with his agent as having “se-

verely hurt the marriage and destroyed

the family” and thus he was filing for di-

vorce. Fans obediently attacked the guilty

female party. Months later, a second

bomb. Beloved bad-boy badminton

champion Lin Dan was caught on camera

canoodling in a hotel room with mod-

el-slash-actress Zhao Yaqi while his wife,

Xie Xingfang, also a badminton champion,

was pregnant with their child. Lin Dan

made a brief apology, Zhao Yaqi made a

teary apology, and, like a script for a jilted

politician’s wife standing by her man, Xie

Xingfang released a statement saying she

would support a “man who takes respon-

sibility for his actions and is willing to cor-

rect his mistakes.”

no Monkey Business

What would you do to retrieve your hi-

jacked taxi from a monkey? That’s the

question a taxi driver in Qingdao had to

ask in September when, reported the

People’s Daily Online, a monkey almost

caused an accident after he leapt across

the cab to take control of the steering

wheel. The animal’s trainer (and director of

the local circus) could explain: the monkey

can ride a unicycle, and thus cannot resist

the urge to jump on wheels of all kinds.

The police became involved when the

trainer and his monkey refused to exit the

taxi, and the pictures went viral on Weibo.

“Monkey King,” one user commented. “You

are so naughty.”

to new heights

The Transit Elevated Bus (TEB) was

surely China’s leading engineering accom-

plishment of the year. Almost 70 feet long,

25 feet wide and 15 feet tall, the ‘bus’ is de-

signed to maneuver through traffic by rising

above it, not nudging, pushing or violently

speeding past it. Greeted with a mixture of

adulation, surprise and doubt, the TEB runs

on a track. So as the Wall Street Journal

helpfully pointed out, “it’s a train.” And each

train is estimated to cost US$4.5 million, so

it’s not a cheap bus (or train). Doubts about

the bus were voiced soon after its trial run.

“This may create some psychological pres-

sure for motorists,” said Zhang Jianwu, a

professor at the Institute of Automotive

E n g i n e e r i n g a t S h a n g h a i J i a o t o n g

University, in an interview with the China

Youth Daily. Still, the TEB puts to bed the

long-held myth that Chinese companies

can only copy the best of the West. The

bus’s designer, Song Youzhou, is thinking

way outside the box. I

MEMBER NEWS

By amCham staff

Wait till you see it levitate

He scores again

Amusing ChineseInternet Stories

from 2016

Amusing ChineseInternet Stories

from 2016

Amusing ChineseInternet Stories

from 2016

35

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Movers and shakers

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