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Contemporary Economic & Business Issues in China Laura Yang Shanghai University of International Business & Eco

Contemporary Economic & Business Issues in China Laura Yang Shanghai University of International Business & Economics May, 2013. 1. Transition into Modernization. “ I don’t care if the cat is black or white as long as it catches the mice.”

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Contemporary Economic & Business Issues in China Laura Yang Shanghai University of International Business & Eco

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  1. Contemporary Economic & Business Issues in ChinaLaura YangShanghai University of International Business & EconomicsMay, 2013 1

  2. Transition into Modernization

  3. “Idon’t care if the cat is black or white as long as it catches the mice.” Deng Xiaoping (1904–1997), head of China’s Communist Party and pioneer of “Socialism with Chinese characteristics” Background Time’s1978 Personof the Year

  4. Started from 1979 Economic reform towards Market Economy, reduce government interference Opening up to outside world 4

  5. Economic Achievements Source: MOFCOM 5

  6. China’s GDP Growth • China surpassed Japan to be world No. 2 economy in 2010 SOURCE: World Bank 6

  7. Import and Export of China Total foreign trade increased by 85 times from US$ 20.6 billion in 1978 to US$ 2972.76Billionin 2010. China became the world largest trading power in 2012 (according to US Department of Commerce). 7

  8. Foreign Economic & Trade Relationships of China 8

  9. Bilateral & Multilateral Trade Relationships APEC (Founded in 1989 and China became a member in 1991) • Trade without discrimination WTO Mainland ECFA Taiwan Sept., 2010 HK Macao 1/1/04 1/1/04 Freer trade ASEAN Jan. 2010 Free Trade Predictability CEPA Encouraging development and economic reform 9

  10. Multinational Companies in China? over 400 of Fortune 500 have invested in China Nearly 60% of China’s exports are processing trade by foreign companies investing in China 1990-2005, foreign investors’ profit remittance from China totaled $280 billion 10

  11. Selected Largest Exporting FIEs (2006) Enterprise Export Volume ($mill.) Enterprise Export Volume ($mill.) Motorola (China) Electronics Ltd 6,174 Suzhou Samsung 1,686 Nokia Shouxin Mobile Telecomm 5,912 Kingston Tech (Shanghai) 1,646 Samsung (Suzhou) Semiconductor 4,076 Wuxi Sharp Electronic Component 1,495 Hangzhou Motorola Mobile Telecomm 3,789 Maxtor Tech (Suzhou) 1,441 Beijing Sony & Ericsson Putian Mobile 2,822 Toshiba Info Machine (Hangzhou) 1,307 Intel Tech (China) 2,770 LG Electronics (Tianjin) 1,164 Dell (Xiamen) 2,306 Shenzhen Samsung Kejian Mobile 1,038 BenQ 2,157 Fuji Xerox 1,016 Tianjin Samsung 2,054 Canon Zhuhai 1,000 LG Electronic (Huizhou) 1,850 LG Philip LCD (Nanjing) 996 Source: http://www.fdi.gov.cn/pub/FDI_EN/Statistics/AnnualStatisticsData/AnnualFDIData/FDIStatistics,2006/t20071008_85470.htm 11

  12. China Market

  13. Opportunities in China market

  14. Opportunities in China market • If current trends continue, nearly one billion people will live in China's cities by 2025. • The urban population will grow by some 350 million people-more than the population of the United States today. • Some 240 million of China's city dwellers will be migrants. • China will have 221 cities with more than one million inhabitants-compared with 35 in Europe today-of which 23 cities will have more than five million people.

  15. Characteristics of Chinese Consumers

  16. Functional buying factors dominate

  17. Pay for safety

  18. Characteristics of Chinese Consumers

  19. Characteristics of Chinese Consumers

  20. Economic reform & market economy provided ground for entrepreneurship in China • Breaking of the “Iron Rice Bowl”: allow employment freedom • Increased market opportunities：provide the “soil” for cultivating SME • More entrepreneurs encouraged: greatly help the employment in the long run

  21. Local Entrepreneurs Traditional Chinese Western Best Practices Objective: • Serve the family • Serve the stockholders Financial data: • Private and secretive • Transparent and audited Financing source: • Family and friends • Investment bankers, stock exchanges Longevity: • Not for sale; family obligations • Mergers, consolidations, battles for control Sales: • Based on family networks • Based on building brands Executive recruitment: • Nepotism (with approval by patriarch) • Professionals rewarded based on merit Time horizon: • Long-term view for family prestige • Quarterly profits for stockholders When Business is All in the Family* *Source: Ming-Jer Chen, Inside Chinese Business: A Guide for Managers Worldwide (Harvard Business School Press, 2001) http://www.quickmba.com/mgmt/intl/china/

  22. Local Entrepreneurs (Cont’d.) Name Wealth US$mill. Company Industry Yang Huiyan 17,500 Country Garden Real estate Peng Xiaofeng 5,300 LDK Solar Solar panel components Zhang Guiping 3,000 Suning Universal Real estate Kong Jianmin & family 2,200 KWG Property Real estate Xiong Xuqiang 2,000 Yinyi Group Real estate Ding Shizhong & family 1,900 Anta Sports apparel Xian Yang 1,850 Hidili Industry Coal and coke and coal-related chemicals Lin Li 1,850 Liye Group Insurance Xian Yang 1,850 Sanlian Group Coke Zhu Linyao 1,800 Huabao International Fragrances & Flavouring Gao Yanming 1,700 North China Shipping Shipping Chen Yihong 1,600 China Dongxiang Sports apparel Chen Tianqiao 1,300 Shanda Online Gaming Mo Feng 1,300 Transfield ER Group Shipping Ou Tongguo 1,300 ITAT Textile Retail Ren Yuanlin 1,200 Yangzijiang Shipbuilding Shipbuilding Li Zhaohui 1,100 Haixin Group Artificial textile and knitwear Wu Yajun 1,050 Longhu Real estate China’s 2007 Billionaires* *Source: http://www.hurun.net/listreleaseen25.aspx

  23. Local Entrepreneurs (Cont’d.) Example: Shanda Interactive Entertainment* Founded in 1999 with family and classmates, sold “massive multiplayer online role playing games” (MMORPG) to become China’s largest entertainment company 2003, Japan’s Softbank and Cisco invested $40 mill., sold its 20-25% shares on NASDAQ in 2004 for $100 mill., became one of the Nasdaq’s biggest success stories Introduced EZ Pod TV set-top boxes to deliver movies, music and content online … but heavily regulated and little broadband for coach potato audiences 2005, switched from “come-pay-stay” model to “come-stay-pay” (CSP) platform where gamers play for free but pay for virtual accessories or expansion packs Stock crash caused founder and CEO Chen Tianqiao to lash out at Wall Street analysts for not understanding Chinese market When sued by S. Korea game developer, SNDA bought its parent Over 500 mill. registered accounts and 1/3 China’s market, 2007 revenues around $300 mill. with market growing 30%/year through 2011. *Source: http://www.businessweek.com/magazine/content/04_46/b3908040.htm;http://english.people.com.cn/200312/03/eng20031203_129569.shtml;http://www.financeasia.com/article.aspx?CIaNID=61660;http://www.forbes.com/markets/2007/05/15/shanda-entertainment-closer-markets-equity-cx_jl_0515markets16.html; http://www.forbes.com/markets/2007/08/28/shanda-online-gaming-markets-equity-cx_jc_0828markets01.html;http://seekingalpha.com/article/23375-investing-in-china-s-online-gaming-sector; http://thechinablogger.blogspot.com/2006/09/wsj-article-on-shanda-i-think-if.html

  24. Thank You！

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