Corporate Visits China Trip 2003

Corporate Visits U.S. Embassy (Commercial Affairs Division) (March 10, 2003) International Monetary Fund (March 10, 2003) American Chamber of Commerce (March 11, 2003) Johnson and Johnson (March 13, 2003) Liz Claiborne (March 13, 2003) KPMG (March 14, 2003)

U.S. Embassy (Commercial Affairs) Role of Commercial Affairs A division of the U.S. Department of Commerce Helps U.S. firms’ exports to China to help increase U.S. employment Brief Overview of China Dynamic place to do business Substantial and sustained growth Planned economy with an average growth rate of 7 to 10% annual growth Issues of WTO Olympics 2008

Key Concerns Intellectual Property Rights Political Issues—Taiwan Issues of Accounting and Reporting Lack of sound legal system

International Monetary Fund Role of IMF Economic Surveillance Macroeconomic policy advice No lending operations Technical assistance, such as budget reform, banking reform Training of local bankers on international practices and bank management

Outlook for China for % growth with low inflation Export growth could slow due to slow global economy Problems with the quality of statistics Need to follow international standards on data collection Mixed signals for growth National Bureau is doing surveys

WTO Implications Reducing tariffs Eliminate export subsidies Remove quota restrictions and entry restrictions Improved environment for FDI Benefits whole of Asia due to supply chain links

Key Vulnerabilities Banking weaknesses Poor SOE performance Risks to Govt. Budget Fixed Exchange Rate

AMCHAM Role To facilitate communication between members of AMCHAM and Chinese Govt. Does not provide consulting services Supports American businesses doing business in China through –Supply of information –networking

Information Several publications that include white papers also Chapter by chapter look at different industries Advice and suggestions to Chinese govt. on how to improve business environs for U.S. firms Reports are carefully drafted to keep good relations International Business standards Local manufacturers also benefit and try to bring their product to WTO standards Report Card on China—WTO implementation Process U.S. govt. causing more problems for U.S. businesses in China than Chinese Govt.

Networking Events with speakers from different industries Events with speakers from U.S. government Events with speakers from Chinese government Set up meetings with Chinese government so that govt. can provide explanations Smaller manufacturers can walk in and network with high officials

Problems Problems in education, especially in Western China—no real infrastructure SOEs—almost impossible for them to become WTO compliant IPR Advice—Different Business Model

Johnson and Johnson Introduction to China as a market Welcome change for a better future Background of J&J Examples of FDI—penetration of Chinese markets—different strategies for different divisions of J&J

Jeffrey Lu (finance manager) Chinese economy Financial career in china Financial management at J&J Opportunities in China WTO More Demand due to expanding markets Globalization Highly education and experienced expertise

Challenges in China Different style of doing business Cultural differences Lack or ambiguity of laws and regulations People management

Issues in human resource management China Labor Market Integrated Human Resource Management System Talent Management Career Path Challenges in Human Resource Management in China –Attracting and Retaining Talent –Linking rewards to performance and moving away from entitlement –Leadership –Identifying and developing emerging leaders

Liz Claiborne Overview of Chinese Market Northern Western Eastern—most advanced economically and well educated Southern Shanghai office of Liz Claiborne in 1985 Full service operations Product Development Fabric Development Product Management QA center and mini QA centers Shipping MIS Liz Claiborne does not own a factory, but works with manufacturers to monitor quality standards

Why China for Liz Claiborne? Excellent price value relationship Product development possibilities in fabrics Short production lead times Flexible mindset—management style Embellished, bended, high labor- intensive product

Weak issues Inefficient manufacturing Lack of sophisticated management Product development skills –Must understand market –Must travel –Invest money in new products Work safety and labor conditions

KPMG Shanghai—massive infrastructure provides the impression of a modern city, but Poor banking facilities Poor tax environment Does not really facilitate multinational business—at least not there yet Emerging market—big competition among the big four accounting firms Audit is a big product

China is big geographically, but the market is segmented Multinationals in the market demand top tier quality service Middle (about 1200 Firms listed) don’t really have the need for top quality consulting Makes it very difficult to operate in this kind of market

Markets are also segmented within service providers Big four Local accounting firms –90% not quality operations, mainly in tax filing Tax evasion a big problem Labor shortage High growth market Mobility is a problem in China Highly volatile Poor business ethics—example of Pharmaceuticals