Chindia Biz

Call for Papers

2011-05-17T07:40:00.000-07:00

INTERNATIONAL CONFERENCE ON ECONOMIC AND BUSINESS ISSUES

December 19 and 20, 2011

Hotel Hans, New Delhi, India

After a very successful first conference at the same venue in 2009, IJEB and Serials Publications, New Delhi are happy to announce the next meeting in 2011.

To be Invited Speakers: Dr. Subramanian Swamy, Ex- Union Minister of Commerce, Government of India and Harvard Professor of Economics, Dr. Bimal Jalan, Ex-Governor, Reserve Bank of India, Dr. Y. V. Reddy, Ex-Governor, Reserve Bank of India and many other eminent scholars, academicians, business leaders and researchers. Invited speakers may address Luncheon meetings on the India specific topics.

Paper & abstract submissions: Deadline: May 1, 2011 and early submissions are encouraged. Full paper submission deadline: October 15, 2011. Registration deadline is October 31, 2011.

Electronic submissions may be emailed to kulkarnk@mscd.edu, and /or to any other Track Chairs listed below:

Economics Track 1: Dr. Kalyan (Kal) Chakraborty, Ph.D, Associate Professor (Economics)
http://www.emporia.edu/~chakrabk/
Department of Accounting Information Systems, School of Business, Emporia State University,1200 Commercial Street, Box 4057, Emporia, KS 66801
Phone: 620-341-5913(Office) 620-341-6346 (Fax) e-mail: kchakrab@emporia.edu

Economics Track 2: Dr. Debasish Chakraborty, Professor, Department of Economics
Central Michigan University, Mount Pleasant, MI 48859

Phone: (989) 774-3870 (office), (989) 835-6794 (home) e-mail: dchak@yahoo.com or chakr1d@cmich.edu.

Operations, Supply Chain and Information Systems Management Track: Dr. Vinod Lall, Professor of Operations and Supply Chain Management, School of Business, Minnesota State University-Moorhead, Moorhead, MN 56563.

Phone: (218) 477-4648 (Office), (701) 388-9604 (Mobile) e-mail: lall@mnstate.edu

Marketing Track: Dr. Ruth Lumb, Department of Marketing, School of Business, Minnesota State University-Moorhead, Moorhead, MN 56563.

Phone: (218) 477 -4652 (Office) e-mail: lumb@mnstate.edu

Finance Track: Dr. Bansi Sawhney, The Harry Y. Wright Distinguished Research
Professor of Economics, and Editor, Indian Journal of Economics and Business, Merrick School of Business, University of Baltimore, 1420 N. Charles St., Baltimore, MD 21201.

Phone: 410-837-5049 (Office) e-mail: bsawhney@ubalt.edu.

All paper submissions should follow guidelines listed on the journal website http://www.ijeb.com/InstructionsForAuthors.htm . Selected papers will be published in the refereed conference proceedings or a special issue of the journal.

Please send registration fees and inquiries to:

Dr. Kishore G. Kulkarni.

Editor, Indian Journal of Economics and Business, (visit www.ijeb.com),

Campus Box 77, P. O. Box 173362

Metropolitan State College of Denver

Denver, CO 80217-3362, USA.

Tel: 303-556-2675. Fax: 303-556-3966

Local arrangements in New Delhi are handled by Serials Publications, New Delhi. Please contact Mr. Vijay Kumar at serials@satyam.net.in, if you have special needs. Please call New Delhi number: (011) 2324 5225 or cell phone 098503-73248.

Participants are expected to make their own travel, living and health insurance arrangements.

Conference Registration fee: US $350.00. It includes cost of all lunches and receptions on December 19 and 20^th December, 2011. Persons who have submitted registration fees before June 1, 2011 will get free 2011 subscription to IJEB. Registration fee after June 1, 2011 to October 31, 2011 is $400.00. Make checks payable to “IJEB”. Registration fees for participants from India are substantially lower, but are consistent with Indian standards. Please contact Serials Publications for registration from Indian addresses. Please refer to www.ijeb.com for further announcements.

A Broad Vision of U.S.-China Relations in the 21st Century | Hillary Clinton

2011-01-14T13:12:00.000-08:00

Inaugural Richard C. Holbrooke Lecture on a Broad Vision of U.S.-China Relations in the 21st Century

Remarks

Hillary Rodham Clinton
Secretary of State

Benjamin Franklin Room | Washington, DC |January 14, 2011

SECRETARY CLINTON: Thank you. Well, this is a bittersweet moment for me personally to deliver this first inaugural lecture. I want to thank Kurt for that introduction and for reminding everyone that you are a tough act to follow, my friend. (Laughter.) Along with Deputy Secretary Jim Steinberg, Kurt and his terrific team here at the State Department have brought intellectual heft and vision to our diplomacy in Asia. And wherever I go in the region, people always have a Kurt Campbell story to tell, and some of them are even flattering. (Laughter.) So thanks to my great team here at the State Department – Jim, Kurt, and everyone – for all of your hard work and leadership. And it is a special honor to welcome my colleague, Foreign Minister Bildt, along with so many distinguished ambassadors, including Ambassador Zhang, to this inaugural Richard Holbrooke lecture here at the State Department in the Ben Franklin Room.

For nearly half a century, as a young Foreign Service officer in Vietnam, as the tireless negotiator of the Dayton Accords, as the Special Representative for Afghanistan and Pakistan, Richard Holbrooke grappled with some of the most difficult and important challenges of American foreign policy. And he left an indelible mark on this Department, on our country, and on the world. Because of his efforts, America is more secure, millions of people around the world have had the opportunity to live up to their full God-given potential. And we are honoring Richard’s legacy in many ways, and this afternoon, many of us will gather at the Kennedy Center to share stories and remembrances. And one of the ways we have chosen is this new lecture series, which reflects Richard’s passion for serious policy questions and his conviction that they deserve serious discussion.

Richard had a hand in nearly every crucial foreign policy challenge of the last 50 years. If he was not invited to have a hand, his hand was there anyway. (Laughter.) And I look around this room not only at Americans, but at many of our friends from across the world, and many of you know what I’m talking about. He was tireless, he was relentless, he would not take no for an answer, because I would give him no over and over again, and it was not the answer he wanted. He worked with many of us on these important issues. And today, I would like to focus on one that he knew well and that is on everyone’s mind as we prepare for the important arrival of President Hu Jintao: the future of U.S.-China relations.

As the State Department’s youngest-ever Assistant Secretary of East Asian and Pacific Affairs, Richard was, as Kurt has said, a key player in the brokering of the opening of formal diplomatic relations with China in 1979. Later, he served for many years as the president of the Asia Society. Throughout his career, Richard understood that a strong U.S.-China relationship would bolster stability and security in the Asia-Pacific region, and he was also clear-eyed about the many obstacles to our cooperation. Most of all, though, he saw that the success of the relationship depends on its ability to deliver positive results to the people of both our nations, first and foremost, but also to the rest of the world.

These insights remain just as relevant today. And we heard them underscored this week by Secretary Gates in Beijing and by Secretaries Geithner and Locke here in Washington. Three decades after our nations first opened the door to engagement, our relationship is marked by great promise and real achievements, but also by significant challenges as one would expect. And more than ever, we will be judged on the outcomes that we do produce for greater peace, prosperity, and progress in our own countries and throughout the world.

America and China have arrived at a critical juncture, a time when the choices we make – both big and small – will shape the trajectory of this relationship. And over the past two years, in the Obama Administration, we have created the opportunity for deeper, broader, and more sustained cooperation. We have seen some early successes and also some frustrations. And moving forward, it is up to both of us to more consistently translate positive words into effective cooperation. It is up to both of us to deal with our differences, and there will be always differences between two great nations. We need to deal with them wisely and responsibly. And it is up to both of us to meet our respective global responsibilities and obligations. These are the things that will determine whether our relationship delivers on its potential in the years to come.

Now, we have already come a very long way since the first tentative steps of the diplomatic opening in 1979. After many years of virtually no contact, we have had three decades of intense engagement. In the beginning, our relationship was almost exclusively focused on the common threat posed by the former Soviet Union. And during the 1990s, we began to engage on broader regional issues. And I remember with great fondness the trip that my husband and I and our daughter took to China as part of that intense engagement. Today, our relationship has gone global. We debate and discuss nearly every major international issue in both bilateral dialogues and multilateral meetings. And these are on issues that we have concerns together on, and these are on issues on which we have fundamental disagreements such as human rights. The breadth of our engagement will be on full display next week when President Obama welcomes President Hu to the White House.

These three decades of relations between our countries have also been three decades of impressive growth for China. When Richard Holbrooke and his colleagues first visited China, its GDP barely topped $100 billion. Today, it is almost $5 trillion. Trade between our two countries used to be measured in the hundreds of millions of dollars. Today, it surpasses $400 billion annually.

China’s transformation, made possible primarily by the hard work of its people and the vision of its leaders, was also aided by an open and dynamic global economy and by the American power that has long secured stability in the region. It has lifted hundreds of millions out of grinding poverty and now helps drive global prosperity. The United States has welcomed this growth, and we have benefited from it. Today, our economies are entwined and so are our futures.

But despite its progress in the past 30 years, China still faces great challenges. When I speak with my Chinese counterparts, they often talk to me in passionate terms about how far their country still has to go. Because even with all that growth, China’s GDP is only a third of the size of America’s with nearly four times the number of people. And our trade with the European Union is still greater than our trade with China. As Secretary Geithner noted this week, China has a lot of work to do to move from a state-dominated economy, dependent on external demand and technology, to a more market-oriented economy powered by domestic demand and innovation. More of its people are also seeking greater respect for their cultural and religious beliefs. They’re seeking more opportunity for improved working conditions and for legal recourse for injustices.

Understanding these strengths and challenges is essential for us and others to understand today’s China, and it provides important context to the country’s changing role on the world stage and to the future of the U.S.-China relationship.

History teaches that the rise of new powers often ushers in periods of conflict and uncertainty. Indeed, on both sides of the Pacific, we do see some trepidation about the rise of China and about the future of the U.S.-China relationship. Some in the region and some here at home see China’s growth as a threat that will lead either to Cold War-style conflict or American decline. And some in China worry that the United States is bent on containing China’s rise and constraining China’s growth, a view that is stoking a new streak of assertive Chinese nationalism. We reject those views.

In the 21st century, it does not make sense to apply zero-sum 19^th century theories of how major powers interact. We are moving through uncharted territory. We need new ways of understanding the shifting dynamics of the international landscape, a landscape marked by emerging centers of influence, but also by non-traditional, even non-state actors, and the unprecedented challenges and opportunities created by globalization. This is a fact that we believe is especially applicable to the U.S-China relationship. Our engagement – indeed, I would say our entanglement – can only be understood in the context of this new and more complicated landscape.

I said when I first went to China as Secretary of State early in my tenure that there was an old Chinese saying that when you’re in the same boat you have to row in the same direction. We are in the same boat, and we will either row in the same direction or we will, unfortunately, cause turmoil and whirlpools that will impact not just our two countries, but many people far beyond either of our borders.

This is not a relationship that fits neatly into the black and white categories like friend or rival. We are two complex nations with very different histories, with profoundly different political systems and outlooks. But there is a lot about our people that reminds us of each other: an energy, an entrepreneurial dynamism, a commitment to a better future for one’s children and grandchildren. We are both deeply invested in the current order and we both have much more to gain from cooperation than from conflict.

Now, that doesn’t mean that we will not be competitors. That’s the nature of human endeavors. It is who we are as people, but there are ways of doing it that are more likely to benefit than not. A peaceful and prosperous Asia-Pacific region is in the interests of both China and the United States. A thriving America is good for China, and a thriving China is good for America. Our friends and allies across the Asia-Pacific region would agree. They also want to move beyond outdated, zero-sum formulas that might force them to choose between relations with Beijing and relations with Washington.

So all of this calls for careful, steady, dynamic stewardship of this critical relationship, an approach to China on our part that is grounded in reality, focused on results, and true to our principles and interests. And that is how we intend to pursue a positive, cooperative, and comprehensive relationship with China. Now, I am sure you will hear that phrase quite a bit over the next week: positive, cooperative, and comprehensive relationship, because that really does capture our hopes for the future, and that is how our two presidents have described this relationship.

But you cannot build a relationship on aspirations alone. That is what makes this a critical juncture. As I said at the outset, the choices both sides make in the months and years ahead and the policies we pursue will help determine whether our relationship lives up to its promise, and it is up to both of us to translate high-level pledges of summits and state visits into action, real action on real issues. To keep our relationship on a positive trajectory, we also have to be honest about our differences. We will address them firmly and decisively as we pursue the urgent work we have to do together. And we have to avoid unrealistic expectations that can be disappointed. This requires steady effort over time to expand the areas where we cooperate and to narrow the areas where we diverge, while holding firm to our respective values.

As we build on our record of the past two years and shape the future of our relationship, the Obama Administration is pursuing a strategy with three elements that all reinforce one another. We are practicing robust regional engagement in the Asia-Pacific, we are working to build trust between China and the United States, and we are committed to expanding economic, political, and security cooperation wherever possible.

Let me start with regional engagement. The United States, by the blessing of our geography, is both an Atlantic and a Pacific power, and we are committed to our relationships through both of these great oceans. We are firmly embedding our relationship with China within a broader regional framework because it is inseparable from the Asia-Pacific’s web of security alliances, economic networks, and social connections.

In doing so, we will maintain an appropriate perspective on this relationship. Today, it is as important as any bilateral relationship in the world, but there is no such thing as a G-2. Both of our countries reject that concept. There are other key actors, allies, institutions, and emerging powers who will also work with us to shape regional and global affairs.

Over the past two years, the United States has reaffirmed our commitment to be an active participant and leader in the Asia-Pacific. As I said in Hawaii this fall, we are practicing what we call forward-deployed diplomacy, expanding our presence in terms of people, programs, and high-level engagement in every corner and every capital across the region. America has renewed and strengthened our bonds with our allies – Japan, South Korea, Thailand, Australia, and the Philippines – and we have deepened our partnerships with India, and Indonesia, Vietnam, Malaysia, Singapore, and New Zealand.

We are taking steps to ensure that our defense posture reflects the complex and evolving strategic environment in the region and we are working to ratify a free trade agreement with South Korea and pursuing a regional agreement through the Trans-Pacific Partnership to help create new opportunities for American companies and support new jobs here at home. Those goals will be front and center when we host the Asia-Pacific Economic Cooperation Forum in Hawaii later this year.

We’ve also worked to strengthen regional architecture in the Asia Pacific, including signing the ASEAN Treaty of Amity and Cooperation and attending the East Asia Summit for the first time and increasing engagement in the Pacific Island Forum. A more robust and coherent regional architecture in Asia benefits all of us, especially the United States and China. It helps ensure that every nation and point of view is heard. And it reinforces the system of rules and responsibilities, from protecting intellectual property to ensuring freedom of navigation, that form the basis of a just international order. In these multilateral settings, responsible behavior is rewarded with legitimacy and respect, and we can work together to hold accountable those who take counterproductive actions to peace, stability, and prosperity.

Our regional engagement places this relationship in the appropriate context. The second element of our strategy is to focus on building bilateral trust with China. We need to form habits of cooperation and respect that help us work together more effectively and weather disagreements when they do arise. The most notable example of our efforts is the Strategic and Economic Dialogue, which brings together hundreds of experts from dozens of agencies across both of our governments, not only to discuss an unprecedented range of subjects, but to inculcate that ethic or habit of cooperation across our two governments. Secretary Geithner and I are looking forward to hosting our counterparts this spring for the third round of the S&ED.

This is a good start, but I would be the first to admit that distrust lingers on both sides. The United States and the international community have watched China’s efforts to modernize and expand its military, and we have sought clarity as to its intentions. As Secretary Gates stressed in Beijing this week, both sides would benefit from sustained and substantive military-to-military engagement that increases transparency. We need more high-level visits, more joint exercises, more exchanges from our professional military organizations, and other steps to build that trust, understanding of intentions, and familiarity. This will require China to overcome its reluctance at times to join us in building a stable and transparent military-to-military relationship. But we think it is so much in both of our interests, and we will continue to raise it and work on it with our Chinese friends.

But building trust is not just a project just for our governments. Our peoples must continue to forge new and deeper bonds as well. In classrooms and laboratories, on sports fields and trading floors, our people make the everyday connections that build lasting trust and understanding. That is why we have launched a new bilateral dialogue on people-to-people exchanges and new initiatives such as the 100,000 Strong program that is sending more Chinese – more American students to China. Those students are on the front lines of charting the future of our relationship. And I saw this for myself firsthand at the Shanghai Expo, where we were delighted to have 7 million Chinese visitors come to our expo, and they were all greeted by American students speaking Chinese. And it came as quite a surprise to some of our Chinese visitors that we had so many American students who had studied Chinese and were excited about being part of such a tremendous international effort as the expo.

The third element of our strategy is expanding our work together, along with the rest of the international community, to address these shared challenges. Global recession, nuclear proliferation, terrorism, piracy on the high seas – these are threats that affect all of us, including China. And China is joining us in confronting them. So we continue to encourage China to help us do even more together, to work more actively with us to solve these problems. We have a wide-ranging agenda, a number of areas where we will ultimately be able to judge whether our relationship is producing real benefits.

On the economic front, as Secretary Geithner discussed earlier this week, the United States and China do need to work together to orient our economies to assure strong, sustained, balanced future global growth. In the aftermath of the global financial crisis, the United States and China worked effectively through the G-20 to help spur recovery. Can you imagine where we would be economically if either China or the United States had failed to work together so constructively? It almost is a frightening prospect to imagine.

We must build on that cooperation, and in his speech, Secretary Geithner noted that Chinese firms want to be able to buy more high-tech products from the United States, make more investments here, be accorded the same terms of access that market economies enjoy. Now, at the same time, U.S. firms want to ensure that the $50 billion of American capital invested in China creates a strong foundation for new market and investment opportunities that will support global competitiveness.

We can work together on these objectives, but China still needs to take important steps toward reform. And in particular, we look to China to end unfair discrimination against U.S. and other foreign companies or against their innovative technologies; to remove preferences for domestic firms, and measure that – and any measures that disadvantage foreign intellectual property. We need to open up more opportunities for American manufactured goods, farm and ranch products, and services, as well as allowing currency to appreciate more rapidly. These reforms, we believe, would not only benefit both our countries, but contribute to global economic balance, predictability, and broader prosperity.

And we also need to work on some of the global strategic issues that confront us. Take climate change, for example. China and the United States are the world’s two largest emitters of greenhouse gases. Our cooperation at the UN Climate Conference in Mexico was critical to the conclusion of the Cancun Agreements. Now, we must build on that progress by implementing the agreements on transparency, funding, and clean energy technology. There is no time to delay. And the United States and China, working with other partners including the EU, Japan, and India, will set the pace and direction for the world to move rapidly toward a clean energy future.

On international development, we could make a significant impact by aligning our investments and coordinating projects. We would ask that China embrace internationally recognized standards and policies that ensure transparency and sustainability. I often, in my discussions with China’s leaders, hear them say that their country speaks for the developing world because of their extraordinary progress. But their development practices in Africa and elsewhere have raised serious concerns. And we welcome the commitment to development, but we would like to work more closely together to have common standards and approaches.

On security issues, there is also room to work more closely and constructively.

On Iran, for example, we’ve made progress, but now we have to follow through. As a permanent member of the United Nations Security Council, China helped enact tough sanctions, and now we are working together to implement them. And we look to China to help the international community send a clear message to Iran’s leaders to cease its illicit nuclear activity.

And let me go onto a problem that has vexed us over the last two years and particularly in the last several months, namely North Korea. The United States and China both understand the urgent need to maintain peace and stability on the Korean peninsula and to achieve the complete denuclearization of North Korea.

For our part, America will continue to stand with our allies, South Korea and Japan, as they contend with their belligerent neighbor. And, as Secretary Gates said this week, North Korea’s nuclear and ballistic missile programs are becoming a direct threat to the United States itself. So this is not just about peace and stability in Northeast Asia, nor standing with our allies; this is becoming, unfortunately, more of a national security challenge to our own shores.

From the early months of our Administration, the United States and China, along with our partners, South Korea, Japan, and Russia, joined together to condemn North Korea’s provocative missile and nuclear tests. And with China’s support, last year we adopted enhanced sanctions in the Security Council. These efforts showed clearly that when China plays a very constructive part, we can produce results together that send an unequivocal message to North Korea.

And we have emphasized to our colleagues in Beijing that China, as a country with unique ties with North Korea and chair of the Six-Party Talks, has a special role to play in helping to shape North Korea’s behavior. We fear and have discussed this in depth with our Chinese friends, that failure to respond clearly to the sinking of a South Korean military vessel might embolden North Korea to continue on a dangerous course. The attack on Yeongpeong Island that took the lives of civilians soon followed. That shelling brought into even sharper relief the acute threat posed by this kind of reckless behavior.

As the result of intense engagement in recent weeks, including a conversation between President Obama and President Hu, we have begun to work together to restrain North Korea’s provocative actions. We are building momentum in support of North-South dialogue that respects the legitimate concerns of our South Korean ally and that can set the stage for meaningful talks on implementing North Korea’s 2005 commitment to irreversibly end its nuclear program. It is vital that we work together with China. We need to make it clear to North Korea that its recent provocations – including the announced uranium enrichment program – are unacceptable and in violation of not only Security Council resolutions, but North Korea’s own commitments in the 2005 joint statement. Until North Korea demonstrates in concrete ways its intention to keep its commitments, China, along with the international community, must vigorously enforce the sanctions adopted by the Security Council last year.

On Taiwan, we are encouraged by the greater dialogue and economic cooperation between the Mainland and Taiwan – as witnessed by the historic completion of the cross-Strait Economic Cooperation Framework Agreement. Our approach continues to be guided by our One China policy based on the three joint communiqués and the Taiwan Relations Act. In the period ahead, we seek to encourage and see more dialogue and exchanges between the two sides, as well as reduced military tensions and deployments.

Finally, and crucially, on the issue of human rights, a matter that remains at the heart of American diplomacy.

America will continue to speak out and to press China when it censors bloggers and imprisons activists; when religious believers, particularly those in unregistered groups, are denied full freedom of worship; when lawyers and legal advocates are sent to prison simply for representing clients who challenge the government’s positions; and when some, like Chen Guangcheng, are persecuted even after they are released.

Now, I know that many in China, not just in the government, but in the population at large resent or reject our advocacy of human rights as an intrusion on sovereignty. But as a founding member of the United Nations, China has committed to respecting the rights of all its citizens. These are universal rights recognized by the international community.

So in our discussions with Chinese officials, we reiterate our call for the release of Liu Xiaobo and the many other political prisoners in China, including those under house arrest and those enduring enforced disappearances, such as Gao Zhisheng. We urge China to protect the rights of minorities in Tibet and Xinjiang; the rights of all people to express themselves and worship freely; and the rights of civil society and religious organizations to advocate their positions within a framework of the rule of law. And we believe strongly that those who advocate peacefully for reform within the constitution, such as the Charter 08 signatories, should not be harassed or prosecuted.

We believe also that when China lives up to these obligations of respecting and protecting universal human rights, it will not only benefit more than one billion people. It will also benefit the long-term peace, stability, and prosperity of China. For example, an independent, impartial judicial system and respect for the rule of law would protect citizens’ property and guarantee that inventors can profit from their ideas. Freedom of expression for everyone, from political activists to academics and journalists and bloggers, would help foster the open exchange of ideas that is essential to innovation and a creative economy. A vibrant civil society would help address some of China’s most pressing issues, from food safety to pollution to education to health care. This promise is already apparent in the work of individuals and NGOs who volunteered after the Sichuan earthquake. The longer China represses freedoms, the longer it will miss out on these opportunities and the longer that Nobel Prize winners, empty chairs in Oslo will remain a symbol of a great nation’s unrealized potential and unfulfilled promise.

I know that China’s leaders believe that political reforms could shake the stability of their country and get in the way of its continuing essential economic growth. But we have seen nation after nation, from South Korea to Indonesia to many parts of the world, where once they realize that denying people the right to express their discontent can easily create more unrest, while embracing reforms can strengthen societies and unleash new potential for development. It is clear that we cannot paper over differences; nor should we try to do so. But the future of our relationship can be strong if we each meet our responsibilities as great nations.

The world is looking to China, and there’s a lot of excitement about this, because we think that there are ways that China can be a unique leader in the 21^st century. Embracing the obligations that come with being a 21^st century power will help to realize a future that will give the Chinese people even more, in fact, unimagined opportunities. But that means accepting a share of the burden of solving common problems, abiding by and helping to shape a rules-based international order.

The United States first emerged as a true world power nearly a century ago. And there were times when, frankly, we resisted taking on new obligations beyond our borders. There’s a strong internal position that goes back in our history where we just want to tend to ourselves and let everybody else worry about the future. But whenever Americans turned inward, attempting to avoid accepting that responsibility, events intervened and we were summoned back to reality. Our leadership in the world and our commitment to tackle its greatest challenges have not drained our strength or sapped our resolve. Quite the opposite. They have made us who we are today: A force for peace, prosperity, and progress across the globe.

This is a critical juncture, yes, but I would say to my fellow Americans, this is not a time to fear for the future. The world has never been in greater need of the qualities that distinguish us – our openness and innovation, our determination, our devotion to universal values. The world looks to the United States for leadership to manage the changing times, and to ensure that this juncture leads to greater stability, peace, progress and prosperity. That is what we have always done. It is what we will always do. That is what America is all about. And we have a tradition of moving beyond past problems and conflicts. It is sometimes hard to imagine that in the lifetime of my mother the United States was involved in two world wars, a terrible depression where we sent many of our best young people off to war in far off places, and yet we have forged close relationships with former adversaries.

Today, we have a positive relationship with China and the chance for a very positive future. The United States welcomes China as a rising power. We welcome China’s efforts not only to lift their own people out of poverty, but to export prosperity and opportunity. And we look to China to join us in meeting the challenges of today and tomorrow. We look forward to a time when our future generations can look back and say of us: They didn’t just talk about a positive, cooperative, and comprehensive relationship. They made the right choices. They worked together. They delivered results. And they did leave us a better world. That is our vision and that is our commitment for this most important relationship.

Thank you all very much. (Applause.)

Webinar | The Indian Life Sciences Industry in 2010-2011: Opportunities between the United States and India

2010-12-01T12:03:00.000-08:00

Date: Wednesday, December 8th, 2010

Time: 9:00 AM (Eastern Standard Time) and 7:30 PM (Indian Standard Time).

Webinar Registration: Register here.

Information: Phone: (513) 369-4900 Email: information@iusbn.org

Organizers:

India-US Business Network

2200 PNC Center, 25^th Floor, 201 East 5^th Street, Cincinnati, OH 45202

Ph: (513) 369-4900

www.iusbn.org

JEKEM Vol. 2 Publication Notice

2010-11-01T08:30:00.001-07:00

The Journal of Emerging Knowledge on Emerging Markets has just published
its latest issue at
http://www.icainstitute.org/ojs/index.php/working_papers.

Journal of Emerging Knowledge on Emerging Markets
Vol 2 (2010): Journal of Emerging Knowledge in Emerging Markets Second
Edition
Table of Contents
http://www.icainstitute.org/ojs/index.php/working_papers/issue/view/3

Articles
--------
Foreword
Jagdish Sheth

Editor-in-Chief's Note
Ashok Roy

How Emerging Market Firms Compete in Global Markets
Rajaram Veliyath, Lance Brouthers

International Trade as an Engine of Economic growth Revisited: A case of
Egypt
Galen Smith, Kishore G. Kulkarni

The Nano Controversy: Peasant Identities, the Land Question and Neoliberal
Industrialization in Marxist West Bengal, India
Sarasij Majumder

Fractals: A More Dynamic & Multidimensional Approach to Business Analytics
Priya Roy

Understanding Brazil’s Oil Industry: Policy Dynamics and Self-Sufficiency
Erjia Guan

Turkey: Another $1 Trillion Emerging Economy?
Murat Doral

Hong Kong and the Pearl River Delta: The Emergence of a Super Zone
Carola B Ramon-Berjano

India’s Emerging Technology Commercialization Policy: Lessons From The
American Model
Roop Singh, Sonali Tare

Flying Towards the Successful Skies:The Emerging Region Multinationals
Roli Nigam, Zhan Su

Economics and Psychology: Exciting Interface in the Emerging Market Milieu
Sudhanva Char, Cherry A. Collier

________________________________________________________________________
Journal of Emerging Knowledge on Emerging Markets
http://www.icainstitute.org/ojs

Call for Papers | ASIA-USA Partnership Opportunities

2010-09-23T07:07:00.001-07:00

Symposium on ASIA-USA Partnership Opportunities (SAUPO)

April 8, 2011 Friday

Call For Papers and Presentations

Topic Areas

All areas of arts and humanities, business, information sciences, education, social sciences are invited

Purpose of the Call for Papers and Presentations:

The Kennesaw State University (KSU) Asian Studies Program announces the Call for Papers and Presentations on a new global interdisciplinary “Symposium on Asia-USA Partnership Opportunities.” The goal of this conference is to share ideas in a unique format which addresses the interests of scholars, practitioners, and administrators in working together between the USA and Asian countries such as China, Japan, Korea and India. This symposium will serve as a platform for governments, universities and corporate entities to address critical strategic needs of the businesses they intend to serve in Asia and the U.S. Speakers from multinational companies with operations in Asia and the USA will be present, as well as academicians to discuss both domestic and global concerns between these nations. Diplomats and policy makers from China, Japan, Korea, India and the U.S. will be present at the conference as well. Dr. Jagdish Sheth, renowned scholar and world authority in the field of marketing, will be the featured dinner keynote speaker.

The theme of the 2011 conference is: Globalization and Asia-USA partnership

Consistent with the theme of the Conference, the submitted papers and presentations are expected to address the following questions:

Given the future global political, business and cultural climate, what changes in common business and operational processes and practices are required to create and sustain a competitive advantage for Asian-owned companies in the USA?
What are the challenges and opportunities American businesses need to pay attention to when doing business in Asia or with Asians?
What do companies need to understand about the interplay among governments, politics, cultures, and business practices in Asian societies?
What actions should be taken by businesses, academic institutions and governments to be more proactive as well as responsive to the complexities characterized by this Globalized Era?

The following represent some of the paper and presentation topics of interest:

Identification of current opportunities, challenges, and threats in creating and sustaining competitive advantages
Exploration of processes and practices of managing multinational corporations
Examination of governmental policies toward businesses and specific industries
Knowledge and skills of intercultural practice in successful business relationships
Theories and emergent research on the interplay between businesses, governments, and politics
Corporate Social Responsibility in American and Asian contexts
Opportunities for non-profit organizations between Asia and the U.S.

Abstract Submission Guidelines:

One page abstract of 250-300 words to be submitted by 1st December, 2010.
Abstracts should be sent to asianstudies@kennesaw.edu.
Subject line of the email, indicate “2011 SAUPO Conference Paper Abstract – X” where “X” stands for the letter that specifies the primary theme or category for your paper as described below.
Primary theme or category for your paper and presentations (choose one):

Opportunities, challenges, and threats in creating and sustaining competitive advantages
Processes and practices of managing various sized businesses
Governmental policies toward businesses and specific industries
Intercultural communications in successful business relationships
Theories and practices on the interplay between businesses, governments, and politics
International or global education
Other Emphasis

Selected papers from the conference may be eligible for publication in a special issue of the Journal of Emerging Knowledge on Emerging Markets (JEKEM). If you would like to have your paper considered for publication in JEKEM, please submit the full manuscript of the paper by 15th January 2011. Manuscripts must be prepared by SMA Style Guidelines. Manuscripts will be double-blind reviewed for acceptance according to JEKEM procedures. Please indicate in the email submission of your abstract if you would like your manuscript to be considered for publication in JEKEM.

Note:
At least one author of each accepted paper (abstract) must attend the conference and present the paper.

The location of the conference at Kennesaw State University, located outside Metro Atlanta, Georgia, serves as an ideal venue for such a gathering of this momentous scale.

Questions regarding the Call for Papers may be directed to:

Dr. Leila Borders (aborder4@kennesaw.edu, Dr. Sarasij Majumder (smajumde@kennesaw.edu), or Dr. Guichun Zong (gzong@kennesaw.edu), Co-Chairs of the Program Committee

More information about the conference can be found at www.kennesaw.edu

Call for Copy Editor Positions

2010-06-22T11:04:00.000-07:00

The Journal of Emerging Knowledge on Emerging Markets, an ICA Institute Publication invites volunteers for the role of online Copy-Editors for the upcoming issues. All core tasks of the Copy-Editors may be accomplished online.

Responsibilities:
The following comprise the major tasks of a copy-editor ( who will be responsible for roughly, 3-5 articles per issue; two issues per year)
1. Critical evaluation of the quality of text (argument-building, writing style, coherence, sentence structure, grammar, formatting and spelling)
2. Suggesting suitable titles, captions etc., if needed
3. Coordinating with authors on the improvement of articles
4. Delivery of the finally formatted articles to the journal for publication

Qualifications:
1. Strong English language and grammar skills
2. Background in literary/technical/news writing preferred; but not required

Benefits:
We are unable to provide any monetary compensation. Profiles of the appointed copy-editors shall be featured on the ICA Institute's website. Also, the appointed persons shall be mentioned in the respective issues of the journal. JEKEM strives to grow as a globally leading working papers journal in the domain of international business, economics and policy. The team members shall be the preferred candidates for several other exciting roles that may come up in future in JEKEM or at ICA Institute.

Interested persons may send a short profile mentioning relevant experience and qualifications (a professional resume is not required). Writing samples would help (could be a blog/website/email attachment). Please correspond through email only: prashant.das@icainstitute.org. Email Title: "Copy Editor".

Prashant Das
Associate Managing Editor
Journal of Emerging Knowledge on Emerging Markets
India China America Institute

A New Avatar of Outsourcing

2010-04-16T10:54:00.000-07:00

Recent trends suggest a new wave of outsourcing opportunities that Americans may end up falling in love with. The “Global Outsourcing 2020” event co-organized by the ICA Institute in Atlanta spurs this debate on “Reverse Outsourcing”.

Prashant Das

Co-Editor

India China America Institute Newsletter

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A janitor in an empty American office answers a phone call: “I’m the only one left. They have outsourced…everyone else”. This is a snapshot from a series of cartoons that two University of Missouri professors analyzed in their research (2009) titled “Funny Business: Public Opinion of Outsourcing…” What started as a cost-cutting measure by US companies during Y2K era later became a hot topic of discussion in several disciplines including Information Systems, Business, Policy and Political science. While “outsourcing” and “off-shoring” created immense job opportunities in emerging economies (India and China) in particular, they also became huge socio-economic issues for Americans.

Several experts argued that companies that outsource for short-term goals are short of vision. These arguments strengthened with increased service costs of the outsourcing companies. Simpsons and other American satires vehemently reflected the public sentiments about outsourcing by showing the menaces of job-losses, poor customer-care service and communication (language/accent) issues.
In the meanwhile, the “outsourcing” companies kept expanding: in size, revenue, geographic foot-print, and product breadth & depth. With time, outsourcing seems to have become an integral part of the global business environment. Have a look at the Google Search Volume Index for the keyword “outsourcing” [Fig-I].

With time, the interest about outsourcing seems to have gone down. Now, look at the historical stock price trends of top Indian IT-off shoring companies [Fig-II] which tell an entirely opposite story. Surprised to see the contradiction? Don’t be. The anomaly is, perhaps, because outsourcing has become so integral to business-processes that people are not much amused by this concept any more. A similar contradiction lies in the Google Search Volume Index for the term “Reverse Outsourcing” [Fig-III]. As the curiosity about “outsourcing” decreases, internet-surfers worldwide have been showing greater interest in learning about “Reverse Outsourcing”.
We, at India China & America Institute, canvassed expert opinions on this emerging trend during our recent conference titled “Global Outsourcing 2020” in Atlanta. As a series of distinguished speakers including diplomats, academics and business-leaders shared their insights, there seemed to be a consensus about the changing global business landscape: both in terms of the workforce and emerging technologies. Dr. Jagdish Sheth (a world authority in the field of marketing) pointed out the emerging trend of “Reverse Outsourcing”. Although reverse-outsourcing has multilateral, globally dispersed stakeholders, US, India and China remain the focus of our discussion. Interestingly, the interest about outsourcing among the India-China-America (ICA) triad seems to exhibit historical harmony. I analyzed the Google search pattern about “outsourcing” in the ICA triad since 2004 and discovered statistically very significant correlations between them (USA-India: 0.9; USA-China: 0.2; India-China: 0.2).

As the trends on “reverse outsourcing” have started building up; there seems to be numerous schools of thought about what exactly it means. Search the internet about “Reverse outsourcing”, and you will only be more confused; as all interpret this term in their own ways. I do not want to conduct a semantic discussion. Yet, here is our take on “reverse outsourcing”: it is the reversal of outsourcing pattern between two markets consisting of businesses and workforce.
What follows is a discussion on three types of business-models projected as “reverse outsourcing” on different sources. Their interpretations might be correct in their own right; yet, I take the liberty to name two of them otherwise; and identify only one of them as “Reverse outsourcing” in its “true sense”. Please note that the discussion is in the context of US, India and China only.

Non-Core Diversification:
Some large American companies start selling their non-core competencies to other companies (mostly, within a geography) who may not be their conventional clients. A classic example is Amazon, primarily a book-selling company which, in 2006 formed Amazon Web Services to provide IT Infrastructure services in the ‘cloud’ to a new set of clients. Earlier, they were providing e-Business solutions to their non-conventional customers such as Borders. Another example is Walmart Realty, a division of the retailing behemoth Walmart stores, Inc. which provides real estate services to its clients. In contrast to Walmart’s conventional customers (retail buyers), Walmart Realty serves an relatively non-conventional customer base: businesses and stores.
Walmart might have considered outsourcing its real estate practice, a non-core business activity. Instead, they retained this practice within their own organization structure; and later leveraged on the built-up competencies to diversify their product portfolio. Is not this about “prevention” or outsourcing as opposed to “reversal”?

Job-Pooling:
Recently, several non-American companies (and individuals) have been hiring American individuals to do smaller chunks of work. Websites like guru.com, odesk.com and elance.com act as matchmakers between individuals with specific skills and employers with relatively smaller, yet skill-specific tasks. ABC TV-channel recently reported that American freelancers made around $15 millions from non-US companies through this model.
“Retailed-outsourcing” would probably be a more appropriate name for this business model. The job-takers could very well be from India and China as much as from the US. “The reversal” of outsourcing, again, does not clearly manifest in this model.

Reverse Outsourcing:
Viola! The Reverse outsourcing happens when a foreign (say, Indian, Chinese or Brazilian) outsourcing company hires American employees. Motivations are multiple: cutting the travel and visa costs of employees from home countries, better understanding of the American markets (reducing the cost of “reworking” caused due to poor understanding of client requirements), higher client penetration in the American markets, and diversification of talent pool. A Chinese company, for example, is reported to have hired Lakota Express Inc., a small company owned by American natives to accomplish “proof-reading” tasks of their deliverables. An Indian minister recently claimed that between 2004 and 2007 US earned around $105 Billion through jobs provided to Americans by companies with Indian head-offices. Indian IT giants such as TCS, Infosys and Wipro have been expanding (or plans to) their American employee-base in Cincinnati, Dallas and Atlanta respectively. These development/delivery centers are managed and trained by Indians. Here lies the reversal of outsourcing trends in its true meaning!
Apart from serving the business needs of the foreign companies, Reverse outsourcing may also help in improving public sentiments in the US about outsourcing. In fact, some thinkers believe that through the reverse outsourcing models, companies headquartered in emerging markets have contributed towards the economic recovery of the troubled US markets.
Reverse outsourcing is yet to define sustainable business practices for itself. Both American and foreign-parties need to leverage on each other’s respective capabilities. The equity of roles of both parties will have to be ensured so that not only is the optimal blend of workforce achieved, the two markets (US and foreign) are well understood and tapped.
In an ABC channel video a panelist was educating the American workers on how to set up a “personal connection” with their Indian clients. “…We work in different continents; but we are all part of this small world…” she urged. For sure, Reverse outsourcing has a promise to yield the best of the two worlds.

The Kumarajiva Expedition

2010-03-30T09:46:00.000-07:00

The Expedition
Retracing Kumarajiva’s travels, the expedition will undertake a complete circuit of the Taklamakan desert in Xinjiang Uighur Autonomous Region of China, travelling in a Landcruiser convoy over 6000 km and exploring the ancient cities, caves, crafts and flora on the Northern and Southern Silk Routes. This unique journey-- starting and finishing in Urumqi, China-- from 3 to 28 September 2010, coincides with 60 years of Sino-Indian diplomatic relations.
Background
Kumarajiva was a Buddhist scholar (344-413 A.D.) whose father was Indian and whose mother was a Chinese princess from Kucha, Xinjiang. He studied both Hinayana and Mahayana Buddhism and was renowned as 'the Great Translator' for his translations inter alia of the Diamond Sutra and the Lotus Sutra from Sanskrit into Chinese. He studied in Kashmir and then travelled the entire Silk Route from India to Yarkand and thereafter to Turfan and Dunhuang. Incidentally, the Diamond Sutra is the first ever complete printed work (Dunhuang 868 A.D.), well before Gutenberg’s invention in Europe.As a Buddhist, Kumarajiva was a universalist, venerated nature and was spiritual, but also a great traveler, scholar and diplomat. He learnt Chinese during a short spell in captivity, well enough to communicate and ultimately to translate, and rose to high office as Imperial Guru.
Expedition Theme and Purpose
The Silk Route symbolized globalization and universality at its earliest, and Kumarajiva likewise the spirit of learning, enquiry, brotherhood, goodwill and peace. Today, when India and China---two ancient civilizations—are reinventing themselves as modern and developing States, Kumarajiva’s example and values are particularly important. With India and China celebrating 60 years of diplomatic relations in 2010, the expedition is thus relevant and timely.
Kumarajiva Expedition Members
The 7 persons constituting the expedition team (details below) live in different parts of the world, and are highly regarded for their contributions in their own fields of endeavour. They are well-traveled global citizens united in the pursuit of the expedition mission.

Ravi Bhoothalingam: Psychologist, company director and former corporate CEO, with an abiding interest in China and High Asian civilizations. Knows Mandarin, and is deeply involved in Sino-Indian business and cultural initiatives.

Sushama Bhoothalingam: Linguist and practitioner in natural childbirth and geriatric care. Her main focus on the journey will be on women’s issues.

Jay Dehejia: Former high-powered telecommunications expert and global multinational senior executive, now active in social entrepreneurship and education.

Vidya Dehejia: Professor at Columbia University, New York and an authority of world repute on Indian art, art history and archaeology. A complete list of her publications and academic contributions is available on google.com.

Jenny Halsey: Having spent 25 years travelling the world as a UK Foreign Office wife, she was able to indulge her passion for garden design and botany –even in the deserts of Saudi Arabia--and looks forward to the Taklamakan.

Surjit Mansingh: Professor at the American University, Washington D.C. (formerly of the Indian Foreign Service and Jawaharlal Nehru University, Delhi), she is a recognized authority on international politics and foreign relations.

Neeta Premchand: Paper has been her passion. She spent several weeks in Japan learning to make it and has since written a book, having visited almost every place where it was made by hand, except Khotan, now on the Expedition route.

Outputs
The members on their return will make presentations and write articles in newspapers, magazines and learned journals, lecture and hold photographic and other exhibitions in prominent learned Societies and cultural organizations, and give TV and press interviews.
Every member undertakes to advance in his or her unique way, international understanding and knowledge through this special and unusual venture.
Sponsorship
The Kumarajiva Expedition welcomes sponsorship, encouragement and support from those who share its goals. Particularly welcome would be assistance which will facilitate members in the following:(i) free entry to all major cultural relic sites in Xinjiang, and viewing of original sites and artifacts (rather than replicas);(ii) free photography therein;(iii) free access to reserved areas such as the Loulan mummies;(iv) access to media and TV.

Contact and further information
Ravi Bhoothalingam (Kumarajiva Expedition leader)
TeL: +91-124-2396448, (mobile): +91-9811112666

email: sush.ravi@gmail.com

BRIC Vs Chindia VS Chimerica

2010-02-06T20:10:00.000-08:00

Prashant Das

ICA Institute

China's Housing Bubbles

2009-12-25T17:12:00.000-08:00

Dexin Zhou

PhD Researcher (Finance)

Emory University - Goizueta Business School , Atlanta

Contact Info: zhou.dexin [At] gmail.com

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Dwelling Narrowness, a recent Chinese TV series, has attracted considerable attention from the public. The TV series vividly depicts the hardship of a family to purchase an apartment in Jiang Zhou (a fictitious city that resembles Shanghai). Many young urban residents see the remarkable parallel between their lives and the story in the TV series. The Chinese tradition urges them to own a piece of property in order to settle down. However, the apartment prices remain unaffordable.
A Chinese who once worked in Tokyo was surprised by the apartment prices in Shanghai, where he later relocated. He says that the apartments in Shanghai are almost as expensive as the ones in Tokyo, even though the GDP of Tokyo is greater than that of Shanghai. The median salary of a college graduate in Shanghai was 2,567 RMB in 2008, roughly 380 dollars and the average deposable income is 8,113 RMB per person. The average apartment price is over 22,000 per square meters (more than $32,000) per square foot as of this December. A college graduate has to spend almost 9 months of his salary and an average Shanghai family needs a whole year’s disposable income to purchase only a square meter of an apartment.
An increasing number of analysts and policy makers are expressing concerns on a growing bubble in China’s property market. If the housing prices are indeed caused by excessive liquidity in the market, the central bank can make adjustment by tightening up the monetary policy. However, the problems may lie on the structure of the economy, which cannot be solved by simply changing monetary policies. I will introduce two newly emerging views on the causes of the high housing prices.
He Keng, the vice chairman of the Financial and Economic Affair Committee at National People’s Congress, says that the local government has the incentive to inflate the real estate prices. Specifically, this is a result of the disparity of interests between the central government and the local government. The tax revenue sharing arrangement in 1994 has introduced an asymmetry in the government power and the government revenue. The percentage of local government tax revenue declined from approximately 80% in 1993 to roughly 45% after 1994, while the proportion of local government fiscal expense increased from 68% in 1990 to 75% in 2004. This arrangement has given the central government a huge fiscal war chest and has left the local government to deal with the fiscal gap. The land-transferring fee becomes a natural source of non-tax income that mitigates the fiscal gap. In the recent three years, the land-transferring fee has become one of the major financial resources for big cities like Shanghai. Shanghai’s land-transferring fees in the first three quarters of 2009 reached 65.2 billion RMB, while the total fiscal revenue of Shanghai (January to August’ 2009) was 174.48 billion RMB. Thus, the local government has the incentive to inflate the housing prices in order to gather enough financial power. He Keng believes that there is a twin-bubble in the real estate market. The local government tries to inflate the land prices in order to increase their fiscal revenue and the individuals are speculating on the housing prices.
Larry Lang, a lecture professor at Hong Kong Chinese University, provides another structural explanation for the high real estate prices. He attributes the high housing prices to a structural imbalance in the public sector and the private sector. According to Lang, the deteriorating return on investment and the excessive productivity in the private sector (Lang cites the stunning 30% failure rate in the Guangdong Manufacturers as an evidence of the declining ROI) are inflating the housing prices. A huge amount of liquidity that should have gone to the manufacturing sector and other parts of the real economy has instead gone to the stock market and housing market and are pushing up the residential real estate prices. He says that simply tightening up the monetary policy will prick the bubble, but the whole economy will suffer from the consequences. He also thinks that the only way out is to improve the investment opportunities.
The heated residential real estate market has already brought the attention from the top policy makers. Moreover, they seem to have considered addressing some of the structural problems in their policy proposals. The standing committee of the state council recently identified that the housing prices in some areas are increasing too fast and the government will take on this issue by four means – an increase in the supply, differentiating the terms of credit to the residential purchases and the investment purchases, strengthen the housing market regulations and increase the support to provide affordable housings to the low-income families. In fact, the property tax is already under test-run and is expected to be introduced in the near future. The introduction of the tax is likely to have a cooling effect on the market. He has proposed a more radical approach that aims to stem off the ill incentive of the local government to generate revenue from the land transferring fee. He proposes to let the central government take over the land transferring fee revenue. While this solution is not difficulty in the technical sense, it will inevitably face resistance from the local government. Finally, no matter whether his proposal will be adopted, the housing market probably does not have much upside. Wang Shi, the CEO of the biggest residential developer, has prepared his firm for the burst of the housing bubbles. The speculative buyers may need to take a leap of faith to jump into this market.

Sign up for free access to the ICA Institute's new online publication, Journal of Emerging Knowledge on Emerging Markets at www.icainstitute.org/ojs

2009-11-09T06:16:00.000-08:00

JEKEM publishes innovative works-in-progress to contribute knowledge relating to the rise of emerging economies, particularly, but not limited to China and India. Scholars, thought leaders and professionals address issues and trends regarding global market dynamics, global resource development and distribution, and shifts in geopolitical influence resulting from diverse forms, levels and frequencies of engagement within and among emerging economies, as well as with developed economies. JEKEM is published twice annually, in the fall and spring.

www.icainstitute.org/ojs

Inaugural edition: November 15, 2009
Online access to early research on emerging markets is available or planned in the following topic areas:
Agriculture and Food Sciences

Corporate Social Responsibility
Education
Emerging Markets
Energy
Environment & Conservation
Global Compliance and Global Transactions
Healthcare and Life Sciences
Information and Communication Technology
Innovation
Logistics & Transportation
Manufacturing
Media and Entertainment
Policy Analysis
Retail
Security
Strategic Sourcing
Trade & Finance

Is India Ready for REITs?

2009-10-30T12:19:00.000-07:00

Vivek Sah, Ph.D.
Dr. Vivek Sah is an Assistant Professor at Burnham-Moores Center for Real Estate, University of San Diego. Sah’s primary research interests are in the areas of REITs, Real Estate Mutual Funds, and Behavioral Real Estate.

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The talk of launching REITs in India in a structure similar to what exists in the United States has been going on for many years. What should be realized, however, is that many aspects of real estate in India must be addressed before one could even think of introducing such a product to the investment community.

As straightforward as the question may seem, the answer is not a direct “yes” or “no.” Rather, it requires a careful consideration of the characteristics of the Indian real estate industry, what it lacks and what needs to be done to develop a mature real estate market capable of sustaining a structure such as REITs.
REITs are a unique blend of Main Street and Wall Street. They are securitized real estate vehicles, in which a group of investors pool money to buy assets, mainly income-producing real estate. REITs were created to help the retail—vs. institutional—investors participate in the broader real estate market indirectly.

Because real estate as an asset class is a capital-intensive investment, many retail investors had not been able to include it in their investment portfolios before the creation of REITs. To encourage retail investors to invest in this asset class, REITs were created in the United States as part of special legislation that allowed them to be incorporated as companies without being taxed at the corporate level, provided they followed a set of rules and regulations. One of the main regulations is the distribution of 90% of their income to their investors as dividends. This created a pass-through entity that investors benefited from as they received a consistent income flow, unlike stocks, which may or may not pay dividends.

Like stocks, however, REITs are part of the overall capital markets/Wall Street. REITs thus invest the pool of money sourced from their investors—the Wall Street part—into real estate markets, linking them with Main Street as well. It is important to emphasize the dual nature of REITs since the existence of a mature capital market is as important as the existence of a mature real estate market. The absence of one of these elements makes it impossible for a REIT market to function. The talk of launching REITs in India in a structure similar to what exists in the United States has been going on for many years. What should be realized, however, is that many aspects of real estate in India must be addressed before one could even think of introducing such a product to the investment community. The dual nature of REITs emphasizes their dependence on the real estate asset/physical space market. Without an organized real estate market, REITs can’t deploy the funds they raise. The model above shows the various components of an efficient REIT market and what India is lacking.

The model shows the absence of various aspects of real estate in India that would be required for the efficient functioning of REITs in India. The absence of even one of these elements could lead to an inefficient REIT market and trigger a collapse in the entire system. Rather than a failed attempt, it would be wise to build up each of the elements over time before initiating any discussion of REITs in India. A failed attempt would be a detriment to the globalization of REITs and discourage any foreign REIT, such as a U.S. REIT, from launching in India in the future.

A New Currency of Chindia and Latin America?

2009-10-02T09:19:00.000-07:00

Prashant Das

India China America Institute

http://prashant-das.com

prashant.pkd@gmail.com

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Long before the economic crisis spread its terror claws over the world (which has led to a sudden surge in talks about a new currency); experts in international business had started envisioning the possibilities of a new currencies. The happening of Euro proved that such ideas are feasible. Later, some experts felt that even China and India could consider coming up with their own currency.
However, the current public sentiments do not quite support the notion. The ICA Institute recently conducted an opinion poll among its newsletter subscribers soliciting their opinion on whether China and India will create a common currency of their own. Most respondents did not see a possibility. In fact, a majority of them out rightly rejected the idea.

However, the reason we conducted the poll qualifies to be discussed in the light of a series of recent financial developments.
During latter months of 2008, talks were ripe among the BRIC nations about a new gold-backed global currency. Days before the G-20 London Summit (March 2009) Zhou Xiaochuan, the Chief of Chinese Central Bank came up with his historic proposal for a “new” world reserve currency. In June, right before the historic BRIC Summit (Moscow) Russians, the hosts followed the suite by announcing that the idea of a “supra-national currency” could be on their agenda. The Russian proposal was to create a new global currency issued by an international financial institution. A few months later, in July, the Brazilian President Lula proposed the replacement of Dollar by another currency among BRIC nations. Earlier this month (Sep 2009), UNCTAD, an UN entity became the first multinational agency to come up with the idea of replacing Dollar as the world’s reserve currency. More recently, news agencies reported that UN is backing the plan to create a new global currency.

Conceptually, replacement of Dollar does not necessarily imply creation of a new currency. However, if the dominance of Dollar can be questioned, which other existing currency are we talking about? Perhaps, if the Dollar will be replaced at all; it will be by a brand new currency. But is it really going to happen? With this article, we try to answer this question. Signs of radical trade re-structuring manifest in the marriage of Chindia and Latin America. The new trade bloc that will thus form, as it seems at the first glance, may have all the capabilities, will and confidence to come up with their own currency.

To dig deeper, we interviewed with experts in International Business at J Mack Robinson College of Business at Georgia State University-Atlanta. The panelists were Professors David Bruce and Pedro Carrillo (founders of the US-Latin America Trade Program at IIB-GSU). The discussion led to some interesting insights.

“I do not doubt that the (common) currency will happen sometime in future… but it has challenges and it will be an expensive idea”, says Pedro. He also points out at a larger emerging world: “The list of emerging economies is large; and includes more nations than just BRICS: South Korea, Vietnam, Turkey, Ireland…”

Certainly, Imagining a new world where all the new economies will collaborate may sound fascinating to the policy-makers of the emerging world. However, this calls for a comparable interest in each other from all the parties. That clearly does not seem to be the case; as Pedro points out , “Compared to India, Chinese have been smarter and more open when it comes to foreign policies and Free trade agreements with Latin American nations; more Latin American nations are signing up with China”.

David’s opinions are not much different: “The idea that China and India (and, maybe, Brazil) shall come up with their own common currency cannot be out rightly rejected. It is possible; but not in very near future”. He describes the pros and cons of a new currency that we list below:

Upsides of countries creating a common currency:

A big surge will happen in the flow of exports and imports between those countries because they will have eliminated exchange-rate risk and will have reduced the transaction costs.

Several issues related to international business and trade could be mitigated for some countries. For example, if China created a currency that would become a major hard currency and/or a reserve currency, then when Brazil trades with China it will only have to worry about the exchange rates risk between the new currency and its own currency rather than going from Brazilian Real to US Dollars to Chinese Renminbi. This would also reduce transaction costs (e.g., bank fees).

Downsides

Nations who have a good deal of trade outside a common currency bloc would not be able to use exchange rates as a cushion to external shocks.

It will also affect the internal economic system of the nations. To have a common currency, countries will not be free to print money without the agreement of the other countries in the bloc. This restricts actions to foster liquidity when needed. Fiscal policy also needs to be mutually agreed upon. In those circumstances, smaller nations would probably have less influence on common policy (money supply, interest rates, spending, deficits, and taxation) than will the larger countries in the bloc.

“Will third party nations value the new currency and will they want to keep this new currency in their foreign reserves are some pertinent questions that would come in the way of a new currency," he continues, “The benefits of a new currency will initially be related to trade between the members of that currency bloc”.

Quoting David would sum this discussion up, “the future landscape of world economy is unclear. We do know that the Euro has become important but it is a long way from replacing the Dollar as the world’s reserve currency. Thus, a new currency could offer advantages to the nations that develop it but it will be a long time before such a currency becomes central to international commerce”.

China-India Trade: Can It Overcome Its Logistical Stupidity?

2009-09-25T08:48:00.000-07:00

Insights on how China and India could create a stronger trade bloc by solving border issues.

-Dr. Nik Dholakia
(Nik Dholakia is Professor of Marketing and International Business in the College of Business Administration at the University of Rhode Island (URI). He is a founding member and Fellow of caQtus collaborative, a global poststructural research group created and based at the University of Texas – Pan American (UTPA) Email: nik@uri.edu Website: http://www.cba.uri.edu/faculty/dholakia/)

Imagine this scenario. United States and its largest trading partner Canada decide that they will not permit any border crossings for trade or tourism. All trade will happen only between the East coast ports in Canada’s Maritime Provinces and U.S. ports such as Galveston, Texas and Long Beach, California – using a long and circuitous shipping route. Sounds like a ridiculous way of doing business, doesn’t it? But this is about the way China and India carry on their burgeoning trade.
China-India trade – while still small by standards of massive neighborly trade flows such as those across USA-Canada, USA-Mexico, and Germany-France – has grown exponentially in the past decade. Trade between China and India is expected to cross $60 billion by the end of 2009, from a level under $20 billion five years ago. Yet, India and China have no easy way to send merchandise to each other.
As a kid, when I did something that was straightforward and simple, but in a stupid and cumbersome way, my father would say: “You can touch your nose with your fingers in a straightforward way, but instead you are wrapping your arm behind your head to get your fingers to reach your nose.” The logistics of the trade between China and India has a character akin to this stupid way of touching one’s nose.
China of course has ocean access only on its eastern side, and the crossover from the Pacific Ocean ports of China to India’s ports on the Indian Ocean is a long haul, through the very southern Straits of Malacca. This long and circuitous route is what the Chinese and Indian vessels have to use to reach each other’s markets.
China has financed the massive modern port of Gwadar in the Baluchistan Province of Pakistan, and built a highway through the Karakoram mountains to bring Chinese goods to this strategic port at the lucrative junction of the Arabian Sea, which has the best ports of India, and the Persian Gulf – with its oil wealth as well as commercial dynamism of Dubai. The Gwadar port, however, sits mostly idle. Geopolitical conflicts have made it very difficult to send convoys of goods via unstable, terror-ridden parts of Pakistan to this port. The Baluch, who are simple and friendly tribal people and not extremists, resent the Chinese-Pakistan incursions into their lands. They see Gwadar and its feeder highway as a Punjabi imperialist move by the ruling powers in Islamabad. Baluch people are in fact very happy to maintain the traditional trade routes with India and the Middle East, via the port of Muscat in Oman, just a dhow ride away across the narrow Persian Gulf.
Indian Military analysts argue that the current mission of these ports may be commercial but such ports could easily be converted into Chinese naval bases. So, under such conditions, alternate sea-based trade routes between China and India are difficult to create.
What, then, about the massive common land border between India and China? It is true that the over-2000 miles long border runs through the difficult high-altitude terrain of the Himalayas. But that should not be a challenge given the available technology. In fact, China now boasts the world’s highest highway – to Lhasa in Tibet – a highway that is over 18,000 feet in elevation at some points. India also has built good high altitude roads, but for military purposes.
The only significant border crossing between India and China is at 14,000 feet elevation, at Nathu La. Connecting India’s Sikkim state to Tibet, this high altitude pass was closed for over three decades after the India-China border war in the early 1960s. Nathu La is now open, but there is no vehicular road. It is basically a route for mule trains, like the ancient Silk Road. The Nathu La connection between China and India is not like the smooth alpine highways of Europe, using which trucks roll from Germany all the way to the Mediterranean. The technology exists to build alpine style highways, perhaps even rail links, but the political will does not.
The basic issue is the contested border between India and China. During the British colonial times on the Indian subcontinent, the border was defined by the British as the Johnson Line Today, India claims Aksai Chin as a historic part of India’s Ladakh, and China claims India’s Arunachal Pradesh state as part of China and Tibet.
The rational solution – and it is very difficult to achieve, given the military and nationalistic stances on both sides – is for India to forgo its Aksai Chin claim and for China to accept Arunachal Pradesh, with its free and democratically elected state government, as India’s territory. This is the de facto situation, anyway, and its acceptance should solve almost all border issues between these two Asian giants. Would this happen? It is not clear it will, any time soon. There are moves towards rapprochement, and then there are acrimonious and threatening border moves. It is indeed amazing that countries with $60 billion and growing mutual trade are in a state of conflict at their borders.
Of course, a new strategic level understanding between China and India could result in cultural dividends for both sides. The whole majestic Himalayan range, stretching from Aksai Chin to Arunachal Pradesh, could become a vibrant global site for Buddhist learning and spiritual renewal and herbal healing. Environmentally safe highways, railways and tunnel systems could be created at selected border passes, with large swaths protected as nature preserves on either side of the border, and including nations of Nepal and Bhutan. The situation could be analogous to the American Rocky Mountains. Trade and travel routes, highways and railways, cross from East to West but the best wilderness stretches in the U.S. and Canadian Rockies are preserved as pristine nature parks. China and India could also select, carefully planned, low impact trade and travel routed through the pristine Himalayan ranges.
Perhaps a start toward such goals could be made by launching voluntary organizations that connect people, common citizens – especially the youth of India, China, Nepal, Bhutan, Pakistan and Burma – with interests in preserving the common natural and spiritual heritage of the majestic Himalayas rather than in fighting wars or hurling angry political and diplomatic invectives.

Recovery and Real Estate: A Tale of Three Nations

2009-09-18T09:41:00.000-07:00

Real estate markets in India, China and America exhibit different characteristics. Yet, they have gone through the same, globally spread credit crunch. This commentary compares the scenarios in the three nations.

-Prashant Das

India China America Institute
prashant.pkd@gmail.com

http://www.prashant-das.com/

Photo courtesy: Dr. Zhifang Wang

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The ubiquitous economic crisis did not come as a surprise to several nations- China and India in particular; two emerging giants whose largest trade partner is the US. The American Real estate shares a two-ways culprit-victim relationship with the ailing economy. The situation is complex and the form of this complexity varies drastically between China, India and the USA. This article takes a short peek on those contrasts. I came across these interesting quotes from recent newspaper articles that give you a snapshot of the contrasts:

“…the young (cab) driver (in Fort Myers, Florida) volunteered that he had just bought his first house, paying $65,000 for a foreclosed property…that last sold for over $250,000” -a Wall Street Journal columnist; “Yes, the housing market has rarely looked better”; Wall Street Journal, Sep 02 2009
"We used to talk about monthly price growth, but recently, it's more about daily change." -a Chinese real estate broker; “Real estate goes through roof in China”; UPI.com; July 03 2009
“This (India) is a country with very large government debts…You cannot start to expect China-style packages” -a sovereign credit analyst at moody’s, Singapore; “India’s stimulus package: more help needed”; Business Week, Dec 09 2008

Journey from the Bottom of the Market
Present is dark and the future hazy for US real estate. While the stakeholders of this market continue mourning at the dire lack of market liquidity, the “south” is gearing up for business take-off. Real estate investors in the middle-east are ready with their blue-print to immediately start new ventures in China and south-east Asia. Australia, already boasting of a stable real estate market, recently eased the foreign ownership laws and introduced attractive exchange rates. Chinese are, therefore, eyeing the Australian luxury real estate markets. What was named as the “Bestest” (superlative degree of ‘best’) syndrome among middle-eastern developers a few years ago is nowhere visible in the approach of Chinese developers. That this modesty is due to credit crunch would be bad argument to describe the phenomenon. Here are some eye openers: In the first seven months of 2009 Chinese property sales grew 60%. In 2010, the Chinese real estate market is to grow by 30%.

The world must face it: Chinese approach towards real estate is more strategically planned; not only at the business entity level; but at the national policy level too.It hardly surprised the world when the China Investment Corporation (CIC), a $300 billion sovereign-wealth fund, decided to buy American distressed assets. The wisdom of this decision manifests in the fact (among others) that CIC will buy assets in both forms: securities backed by real estate assets as well as direct ownership interest in buildings. Remarkably, CIC’s recent stakes in biggies like Morgan Stanley has only led to losses (forcing several to believe that the decision to buy stakes were hasty) so far. China is, however, optimistic about using their knowledge in facilitating smart investments. CIC’s one-month investment in 2009 in global financial markets (around $5 billion) equaled its annual investment in 2008! By 2014 this investment is said to grow up to $20 billion.

The story of contrast (from the US) is not limited to China; Indian real estate has started showing signs of improvement as well while the American market is yet to touch the bottom. The burgeoning Indian middle class and increasing number of foreign enterprises are less affected by the credit crunch and have been creating demand continuously. The trend has dampened a bit; yet heavy investments are expected to start pouring into the Indian real estate market by 2010. Developers have already started chasing the target of 2 million affordable homes.

Rescue- Rescue Everywhere!
Victory over opposition’s strong hue and cry on President’s Obama’s stimulus plan seems to have done little to improve the cash-strapped real estate market of the US. On the other hand, a $585 billion stimulus plan by Chinese Premier Wen Jiabao vastly routed the decline of Chinese real estate market. Some other remarkable key monetary efforts by Chinese central bank kept the economy immune from global recession. What more? Chinese real estate market actually had to get "alarmed" by the aggressive growth in the debt market; and expectations of growth in the equity market. Wall Street Journal reported in August that China Construction Bank, the second largest bank in China announced to cut its lending to curtail the sharp growth.

Traditionally, in both India and China, acquiring housing mortgage loan has not been as easy as in the US. Thanks to the rigorous underwriting process that involves strict scrutiny of eligibility and ability for repayment that the credit crunch is not indigenous to these markets. It is another thing that a vast number of Chindians are deprived of home-ownership due to lack of access to easy mortgage. This, in part, is also a good news for the world as Chindia is one of the few hopes for global economic recovery.

However, the state of real estate in India is not as hopeful as in China. It seems to have fared better than the US, though when it comes to the hopefulness of the market. Compared to colossal stimulus packages given away by the American and the Chinese counterparts, Indian government limited its package to just around $8 billion. The small sum was largely blamed at the fiscal deficit of the federal and state governments of India. However small, this stimulus package added to the government debt by 0.8%; as per Moody’s estimates. Of the package, only $1.5 billion was allocated to National Housing Bank; a FannieMae-type institution of India. The government has been trying hard to make up for limitations of fiscal policies by adequate monetary policy measures, though. Interestingly, the state governments have started issuing stimulus packages too, Punjab being an example.Indian efforts were somewhat similar to China’s: Interest rate cuts and going easier on banks’ cash reserve requirements, the typical monetary tools. These led to $60 billion of liquidity in the Indian banking system.

Primarily due to the stimulus packages by the government, Credit has grown easier in China boosting mortgage activity and, of course, home buying. This is a phenomenon which Americans are not even dreaming of today. Chinese stimulus plan helped real estate developers in two ways: first, they got access to debt and secondly, their customers felt empowered by mortgage finance availability. Results have not been as pleasing in India though. Indian real estate market is still struggling with lack of mortgage financing, diminishing rentals and interrupted development projects. Yet, things are changing fast (by the time this article is being finalized, indian newspapers have started reporting about how the housing sector in India is "shining again" with all the major players showing upswing in both sales and net profit during the recent quarter (June 2009). Indian Finance Minister is dogged not to curb the credit in order to maintain the pace of economic growth.

Anybody alive over there?
The American capital-market scenario is not much different: banks continue to keep their lending policies tightened up in spite of the stimulus plans implemented by the government. Disturbingly, the very loan demand has been shrinking. A WSJ columnist noted that the American real estate prices, nationally, are 30% lower from their 2006 peak. Panicked by the nightmare of liquidity crisis, the American policy makers came up with the much-talked “Public-Private Investment Program” (PPIP). PPIP is designed to let the US treasury share the risk with the private investor as a partner in ventures while purchasing distressed assets. This anxiety is equally visible in private American entrepreneurs who are desperately encouraging overseas capital to flow into the market . This demand has been backed by a hope that increased capital will stop further decline in commercial property values. The PPIP is, no doubt, aimed at foreign capital as the local investors are too careful.

Attitude towards foreign capital in the local markets has not been much different in the US and China: exhibiting intrinsic contrasts. Several Americans have historically disliked the aggressive Japanese and Chinese money coming into US real estate. When the government introduced PPIP, It was obvious that China would be one of the biggest to invest heavily in the US Real Estate through PPIP. As a result, a cap of 9.9% was introduced on the investment amount made by a single investor. In spite of such resistances, foreign money has been an important source of capital for American real estate; a painful truth!

Chinese have been equally wary of increasing foreign investment in the real estate sector. They revoked special tax status to foreign investors as early as 2007. More recently, foreign exchange, regulatory supervision and approval process for foreign direct investors were tightened up. As a result, the FDI figures slid by roughly 20%. However, Chinese too had to face the bitter truth: foreign investments can not be let gone just because they make you feel nervous. Although they do not have any counterpart of PPIP in place; the Chinese government did relax the controls on foreign investments recently.

Indian attitude does not exhibit such an ebb and flow. India has not been extremely friendly to foreign direct investors in real estate either; but it has constantly been growing friendlier. Several restrictions apply including a lower cap on land size, venture structure and a minimum capitalization. However, perhaps in the aftermath of the credit crunch, the relevant government departments are working towards easing the rules. Remarkably, the FDI targets also have been raised by the government.

So what?
These contrasts shall remain worth watching for a while. The reason being in spite of all the shortcomings, real estate models of the US are being adopted in India and China. It looks like the three heterogenous markets are trying to merge with as a global monolithic mass. The markets for mortgage based securities are flourishing in Chindia that had led to the disaster of the financial system in America (long ago, it seems). Real Estate Investment Trusts are being introduced in Chindia when the American REITs are suffering. Will this lead to the self-destruction of markets in China and India? Perhaps not, as the mortgage markets in these nations are not likely to be effective soon as it was in America five years ago. However, Chindia must learn from the American experience before implementing any ‘American-style’ financial system. American failures have a lot to teach.

BOOK REVIEW: Imagining India, Ideas for a New Century

2009-08-19T08:32:00.000-07:00

BOOK REVIEW

Nilekani, Nandan (2008) Imagining India, Ideas for a New Century, Penguin Allen Lane, London. 531 pages

Sudhanva Char, ICA Institute Editor of Academic Resources
Professor, Business Dept.
Life University

“Imagining India” is a fascinating potpourri of many facets of India - its economy, education, energy, environment, leadership, politics, global role, sociology, and what have you. It is what happens when an IT gets crossed with a fertile and roving mind that refuses to be confined to any one specialty. Obviously the motivation for writing a book of this nature comes from, inter alia, a deep adoration for one’s country together with easy access to an encyclopedic knowledge base about India and the world. That the author was still recently at the helm of affairs in India’s popular IT company Infosys comes out clearly. The book has perhaps instrumental in landing Nilekani his latest job as in charge of the Unique Identity Authority of India.

Nilekani, the co-founder with Narayana Murty of INFOSYS is prodigy unbound in these pages. He writes at times with authority, but most other times he is tentative, throwing up an idea just to get your reaction. As a matter of fact, that is the rationale for this book: “It (India) requires us to shape systems and policies that give the people the ability to travel in search of work, to educate their children, and to tap into economic growth, to recgonize how fully India is transforming itself.” (p.485). Nilekani like the youth of the country is brimming with optimism about India’s future. And so he has come with an imaginative narrative about where and which way his countrymen should take India to achieve its potentials despite the daunting challenges.
Tom Friedman is in high spirits about the book under review, saying Nilekani was the inspiration for writing The World is Flat . For one thing, he got his ‘flat’ idea of the competitive world from an interview with Nilekani some six years ago. In order to understand the chemistry of ideas that spawns Imagining India you have got to see first the acknowledgment section (p.511). You have here all the eminent and distinguished and professional literati such as Ramachandra Guha, Andre Beteille, Atul Kohli, Girish Karnad, Vijay Kelkar, Joseph Stiglitz, Jeff Sachs, Douglass North, Raghuram Rajan, Sam Pitroda and virtually dozens of others. Those names are not included here because I did not know those persons and what they are renowned for till I read the book.

The book has some 26 chapters with copious end notes for each one of them. The chapters themselves are grouped under four parts. The first part “India Re-imagined” contrasts the changes in opinions and perceptions that have occurred in the post-independence decades. One example is that though we still regard a large population is difficult to manage, it is no more regarded as a Malthusian bomb, but is spoken off more appreciatively in terms of “population dividends.” More obviously we jettisoned the socialist shibboleths decades ago and even Indian communists believe in giving a free rein to free enterprise. There is also for instance the generally accepted feeling that as the largest democracy in the world, we are closer to the West than to any statist or authoritarian model.

Talking about the milling crowds on Bangalore’s streets, on page 39 of the book Nilekani speaks about pirated editions of books such as Friedman’s The World is Flat. Unwittingly I bought a copy of Nilekani’s book from such a Bangalore hawker and soon realized Nilekani himself is pirated! I paid just Rs.100 when on the back cover the price mentioned is Rs.699. That is a problem Nilekani has to address himself even if I stop buying books on the City’s streets!
Nilekani has recently been appointed as the Minister in charge of the Unique Identity Authority of India charged with the task of issuing a bio-identity card to each one of the 1.2 billion citizens of India. In the background of the attack on Mumbai last year by persons looking like Indians, but actually from the neighboring country, this is perhaps the most strategically vital task Nilekani is asked to take up and his book even writes at length about it (pp. 367-74, 419). It is no exaggeration to say that the future of India has arrived and in order to know the characteristics of that, you must read the book. Not just that. You must react in writing if you want to be one of the dramatis personae in India’s future progress. Or you can choose to miss the bus!

US demand (Kauppapolitiikka)

2009-04-22T12:31:00.000-07:00

Latest from Dr. Dan Steinbock, ICA Institute Research Director of International Business:

In his new brief for Kauppapolitiikka, the prestigious bi-monthly of Finland's Ministry of Foreign Affairs, Dr Steinbock argues that "U.S. demand has collapsed, but not disappeared." True, American consumer is now anxious, indebted, and exhausted. Among the G7 nations, however, U.S. consumption is better positioned to thrive over time. In fact, he argues that "those who argue that export-led growth has disappeared or that the U.S. demand is now gone assume – mistakenly – that a recovery is identical with the death of the patient." Not only will U.S. population grow faster and be more populous over time. The nation will be more diverse racially and ethnically by mid-century. Certainly, it will be older as well, but – as long as the inflow of immigration will continue – graying demographics will not cause the kind of dislocations that are almost inevitable in Japan, Germany and Italy.

India's election (Talouselama)

2009-04-22T12:28:00.000-07:00

Latest from Dr. Dan Steinbock, ICA Institute Research Director of International Business:

Dr Steinbock is a regular contributor toTalouselama, Finland's leading national business weekly. In his new brief on India's election (Talouselama, Apr 10, 2009), he analyzes the new economic, political and security landscape in India. Amidst the ongoing global financial crisis, India's economy is experiencing a difficult decline, while security threats are increasing. India's government has already launched three stimulus packages of an estimated 85 billion dollar. Interest rates have been cut down to 5.0 percent. The month-long election process will begin in mid-April. "It is overshadowed by the concern for security, political divisions and economic threats," notes Dr Steinbock. "The next coalition government will be internally divisive. Still, it should steer the Indian economy out from the stormy waters. It is a difficult task." For now, India's National Congress Party is leading the election surveys, but the conservative Bharatiya Janata Party is not too far behind. Further, the "Third Front," with its communists and populists, will contribute to the national debate. After the terror attacks in Mumbai, uneasiness is rising. "Since September 11, 2001, Washington has balanced between New Delhi and Islamabad," writes Dr Steinbock. "In the coming months, this balancing act will be tested."

Export-led growth, regional integration (China Daily)

2009-04-22T12:23:00.000-07:00

Latest from Dan Steinbock, ICA Institute Research Director of International Business:

Dr Steinbock is a contributor to China Daily, China's leading English-language daily. In his new commentary, "Integration to take over export-led growth" (China Daily, April 15, 2009), he argues that Americans are no longer overconsuming but saving eight times more than only a few years ago. As a result, East Asia's export-led growth model has collapsed. The contraction of exports, as severe as it has been, does not mean the end of exports. "Take for instance the collapse of car sales in America," he argues. "If the current replacement ratio truly prevails, a typical car would have to last some 27 years. Such a ratio is simply not sustainable."

Despite the turmoil of Thailand, China-ASEAN cooperation is now moving to a new phase. Demonstrating leadership, China will establish a $10 billion China-ASEAN investment cooperation fund for infrastructure construction, energy production, information technology and communications. China also plans to offer $15 billion in credit to ASEAN countries during the next three to five years. "The longer-term challenge for Asia's export-heavy economies is to reduce dependence on wealthier consumers in the West," argues Dr Steinbock. "Surmounting legacies of colonialism and historical division, many Asian nations are now developing bilateral and multilateral free trade agreements. Regional integration is one way to achieve that objective and to compensate for decreases in external demand."

Rising cities helping to rebalance growth

2009-04-22T12:21:00.001-07:00

Latest from Dr. Dan Steinbock, ICA Institute's Research Director of International Business:

In his new commentary, "Rising cities helping to rebalance growth" (China Daily, April 7, 2009), Dr Steinbock notes that in the past few months, international media has made much about the collapse of exports from Asia, including China. However, conventional wisdom is flawed on two critical counts. With recovery, trade and investment will take off, over time. But China's growth does not depend on exports alone. "Given the stable and peaceful international environment", argues Dr Steinbock, "China's massive and evolving market will offer extraordinary growth potential for years to come - as evidenced by sustained urbanization."

In 2010 China's level of urbanization will be about the same as that of the US in 1910 and Japan in the late 1950s, notes Dr Steinbock. "In the US, that benchmark year heralded America's economic dominance in the world economy. In Japan, the benchmark year heralded beginning of the Golden Era of the Japanese economy in the 1980s." He adds: "In 2010, China may be where urban America was in the early 1910s and urban Japan in the late 1950s - at the eve of a great growth curve."

China Daily, established in 1981, is the only national English-language newspaper in China. The average daily circulation is more than 200,000, one-third of which is abroad in more than 150 countries and regions.

Global Financial Crisis: US Recovery and China's Growth

2009-03-25T08:35:00.000-07:00

Recently, Dr Steinbock, ICA Institute's Research Director for International Business, has been on a lecture/consultation tour in East Asia. The first destinations - Singapore and Kuala Lumpur - broke audience records.

Global Financial Crisis: US Recovery and China's Growth

The second lecture took place at the prestigious Institute of Strategic and International Studies (ISIS) Malaysia. The lecture attracted more than 300 government leaders, senior executives, chambers of commerce, and foreign ambassadors and consults. It was followed by a 2 hour long Q&A session. "I was intrigued by the insights of many commentators, including the Malaysian economists, the Lebanese, UAE and Chinese representatives, as well as the chair of the US Chamber of Commerce," said Dr Steinbock afterwards. "The presentation triggered much discussion on the state of the US and Chinese economies, and the US-Chinese relations," he noted. "Understandably, we also examined Malaysia's key concerns. Last year, exports accounted more than 91% of Malaysia's GDP," he added. "Until now, the country has technically not been in recession. But the future is cloudy. As a result, we talked about the prospects of export-led growth amidst the crisis and in the post-crisis environment, comparing the local status quo with that of the East Asian tigers, Baltic economies, as well as larger advanced economies, such as Germany, and large emerging economies, such as China."

The event was followed by intensive media interviews with Malaysia's leading TV channels, dailies and magazines. According to Malaysia's Business Times, Dr Steinbock said that "the revitalization of global growth will be based on US recovery, China's sustained growth and a stable international environment." He added, "If any of these are missing, other issues will arise."

According to The Star Malaysia, Dr Steinbock said that, "during a global financial crisis, export-driven countries like Malaysia should try to diversify their revenue sources to sustain growth." He supported the Malaysian government efforts to engage in deficit financing. "Now governments worldwide are engaging in deficit financing. In the long term, however, it is equally important to move decisively and rapidly, soon as circumstances so allow, from fiscal deficits to fiscal consolidation."

Global Financial Crisis, US and China

The third public lecture was hosted by the Singapore Finnish Business Council. "The lecture led to an intriguing Q&A session," said Dr Steinbock. "Along with Hong Kong, Singapore is the leading East Asian tiger. The demise of export-led growth has triggered a somber mood. On the other hand, Singaporeans are known for their cool under pressure, initiative and persistence. This crisis, too, will pass." Participants also included members of other Nordic and EU business councils.

After meetings with government representatives, senior executives, think-tanks and research organizations in Singapore, he visited Malaysia. In Kuala Lumpur, his first lecture, "The Impact of Global Financial Crisis," was an intimate event hosted by the Malaysian Finnish Business Council.

ICT Globalization from Europe to Asia: The Nokia Story

2009-03-25T08:33:00.000-07:00

Recently, Dr Steinbock, ICA Institute's Research Director for International Business, has been on a lecture/consultation tour in East Asia. The first destinations - Singapore and Kuala Lumpur - broke audience records.

ICT Globalization from Europe to Asia: The Nokia Story

Another lecture took place in Singapore's EU-Center. The lecture focused on success in the global mobile communications industry, as illustrated through the story of Nokia, Europe's leading technology company, and one which has thrived in Asia. Dr Steinbock also explored the impact of the global financial crisis on the ICT sector. The lecture attracted a record audience and led to interviews with the popular media empire ChannelNewsAsia, and Singapore's English- and Chinese-speaking newspapers. Along with the EU-Center, the event was hosted by the Finnish Embassy and Ambassador Satu Mattila. For the lecture news release and Kauppapolitiikka report, please see the enclosed attachment.

"In addition to certain positive contributions through EU contributions and the competitive Finnish environment, Nokia’s globalization was predicated on success in digital mobile (GSM), product segmentation and a flexible organization. At the firm-level, Nokia has excelled in global scale, innovation, brand, manufacturing and logistics, as well as distribution," said Dr Steinbock in the ChannelNewsAsia business news. "The global financial crisis is likely to strengthen the strongest players that can best adapt to the new environment. Nokia will have its share of challenges to overcome, but it is better-positioned than many of its rivals."

Dr Steinbock was also asked about the prospects of the emerging Chinese multinationals. "I believe that the landscape of multinationals will change substantially in the coming years," he noted. "One of the most important lessons of ICT winners is that, despite a large home base, it is vital to develop and sustain a global mindset. In the short-term, it is critical to invest substantially in innovation. On the other hand, Chinese multinationals may have a thing or two to teach about cost advantage."

Dissecting the Intricacies of US-China Economic Ties

2009-03-25T08:30:00.000-07:00

Recently, Dr Steinbock, ICA Institute's Research Director of International Business, has been on a lecture/consultation tour in East Asia. The first destinations - Singapore and Kuala Lumpur - broke audience records.

In Singapore, Dr Steinbock's lecture tour started at the prestigious Singapore Institute for International Affairs.

Dissecting the Intricacies of US-China Economic Ties

With the U.S. in its worst economic crisis since the Depression and at war on two fronts, the Obama administration must also demonstrate global leadership to re-ignite growth in the world economy. Focusing on the global financial crisis, the Obama administration's economic policy and US-Chinese relations, Dr Steinbock argues that America's recovery, China's steady growth and the stable international environment are intertwined. But the transition is wrought with peril. The presentation prompted a long Q&A session, primarily on the prospects of the US economy and the US-Chinese relations.

Globally Eminent Chinese Firms – Where Are They?

2009-03-11T10:33:00.000-07:00

The following brief paper was presented at China Goes Global, Harvard University, October 9-10, 2008 by Dr. S.V. Char, ICA Institute Editor of Academic Resources.

Globally Eminent Chinese Firms – Where Are They?

ABSTRACT
The main objective of this paper is to look into multidimensional factors that underlie globalization of Chinese enterprises. We seek answers to intriguing questions: why is it that Chinese enterprises in general continue to serve as ‘extended family’ of established non-Chinese corporations? Why have they not exploited to a fuller extent the enormous cost advantage they already have, to expand and strengthen their market sway especially in consumer goods by direct and independent marketing? What issues, cultural, commercial, political, economic, or any other, if any, hobble innovation and the ensuing business-to-consumer direct transnational effort especially in the post Deng liberalization period? Is there a dearth of visionary and risk-taking Chinese entrepreneurs who would instead prefer the intrapreneurial model that enables them to flourish in the large domestic market? Chinese enterprises that are framing business strategies for future market accomplishments would invariably have to answer these questions wisely.

INTRODUCTION
This paper has been written from the perspective of a typical American free market economy. While the facts (political, economic, social, and cultural) large as life, in China are not ignored, the global economy and a rational expectations outlook have provided the main viewpoint for this research paper. Given China’s Deng Xiaoping market reforms in1978 and China’s desire to pull up the standards of its people to more acceptable levels found in developed countries through such a market route together with political authoritarianism, the postulate of a global market economy is deemed relevant and valid. The other premise of rational choice in decision-making both on the part of China’s government and China’s corporations, is also justifiable and sound for purposes of this paper. Besides, there is hardly any other option to rational behavior, other than having to deal with a bewildering variety irrational choices that cannot always be conjured up here. Thanks to such a rational outlook, China has emerged as a robust and dominant economy and a superpower nation that is in more control of itself than most other nations. Therefore, it is reasonable to believe that the same thinking and policies have an excellent likelihood of being continued.

CHINESE PRODUCT WITH A GLOBAL BRAND
There is considerable research today about the transition of the Chinese economy from a command economy into a market economy, and further a second conversion from a regional or local economy of China into its national economy, meaning that corporations within China itself would grow and mature into much larger corporations catering to the entire Chinese economy. Examples of such national corporations are some of the heroes of Chinese business such as Haier in the supply of refrigerators and appliances, Lenovo in computers, Li Ning in sportswear, and Wahaha in beverages. (Meyer 2008.) Lenovo is in fact the erstwhile personal computer division of IBM and as such is not an original or real Chinese enterprise. Nevertheless, after acquisition in 2005, it is treated as such. More significantly, the acquisition helped Lenovo to advance along the learning curve in globalization much faster. This paper would like to take this discussion one level higher and discuss the potential and promise for (Chinese) business-to-(global) consumer (hereafter CBTGC) corporations on the world markets.

Direct marketing of a consumer good, such as for instance, a Lenovo computer or Wahaha, a typical Chinese concoction, that may be a health beverage, could definitely be manufactured at world’s lowest costs in China (or elsewhere) by a Chinese enterprise. It could be made (or bottled) and distributed by a regional company locally somewhere in the world or the USA. As a matter of fact, Lenovo catering as it does to both the Chinese and American markets, has had growth rates in shipments of around 20 per cent with gross margins of about 14 percent. It had revenues of $4.21 billion, 26 per cent of which originated in USA and 21 percent in Europe, the Middle East, and Africa. (Luk 2008)

That Lenovo is an outstanding instance of a globalized Chinese enterprise is brought out from the following comparative data pertaining to Dell and Lenovo, showing that with the exception of the percent of employees outside the home country, Lenovo is more globalized in certain respects than its competitor, Dell. The other Chinese computer, Legend, enterprise could perhaps borrow certain features of globalization from Lenovo.

FUEL AND EMISSION COSTS HOBBLE GLOBALIZATION
In terms of location, Weber’s transportation costs acquire a new significance in view of somewhat sudden and steep increases in shipping costs in the aftermath of sharp increases in fuel costs. To this calculus of escalation in supply costs, one would have to factor in any new costs of new stringent standards of carbon emission that are now being enforced, or likely to be enforced when countries such as China, India, Thailand and other developing countries accept standards under a new-fangled set of rules that may follow the Kyoto protocol. Greener supply policies could eventually mean less globalization and more intrapreneurship.

The stimulus for globalization may be moderated in the days to come because of these two factors alone. However, if the economic analysis for a globalization project is still encouraging, prima facie, there could hardly be any issues of a commercial, political, or social nature. Wahaha is successful profit margin-wise, raking up about 16-20 percent. However, the Paris-based joint venture partner, Danone Group has charged Wahaha with creating a parallel corporation that competes with Wahaha’s products and the deal between the two are under (Swedish) arbitration in Stockholm although a Chinese court has approved of Wahaha’s domestic marketing policy. (Areddy 2008, Ng 2008) But for this off-putting “divorce” aspect of the collaboration, and in particular the dispute about the transfer and ownership of the Wahaha trademark, it could serve as a useful case study in globalization of Chinese enterprise.

Given the vision and ingenuity of Chinese enterprise, Chinese products with a global brand are doable, and yet have not occurred with honorable exceptions such as the Lenovo and Wahaha. On the other hand, there is no dearth of American and other multinational corporations routinely going into China in pursuit of expansion and growth in any business area, directly even on a (American) business-to-(Chinese) (hereafter ABTCC) consumer endeavor. In the area of prescription drug for instance, the British drug company, AstraZeneka has gone into remote Urumqi, capital of Xinjiang province in China, hired local sales representatives to canvass doctors and hospitals and persuaded them to prescribe Zeneca products. This has “propelled Zeneca from the sixth place to No.1 in the Chinese market last year, ahead of much-larger rival Pfizer Inc. of New York.” (Zamiska 2008). What is particularly noteworthy is that among the top 25 major exporting corporations, just four are Chinese, the others being American or European. This has meant that though the country of origin of an exported product is China, in reality it is made in China by an American or European corporation, having gone there to take advantage of lower production costs. (Meredith 2007).

Cases of global consumer goods marketing of China-made products by Chinese corporations on the global market, as noted above, are exceptional and are more likely to be in the service areas of banking, insurance, shipping, tourism and travel. For instance, China Investment Corporation (CIC) was established in September 2007 with a view to better deploy China’s huge foreign exchange reserves. CIC aspired to move away from relatively low or nil return on US treasury bonds and diversify into more gainful assets. However, this has met with a stone wall in the host countries that seem to have apprehensions of massive Chinese investments in worthwhile companies. Political concerns in host countries have therefore led to tighter regulatory controls on such investments. (Ruan 2008) For purposes of this paper, the point is, if such an endeavor is possible in the finance and investment area, it is equally possible in other areas too, including in consumer goods. And so the instinctive sound out is: How come there are no dozens of eminent CBTGC enterprises in the world market?

LIMITED INTERNATIONALIZATION
American corporations compete with one another to get hold of markets, like Avon and Mary Kay, Coke and Pepsi, Dell and Hewlett-Packard, Burger King and McDonalds. Leave alone such rivalry, there is barely any Chinese business presence at all in the consumer goods or services area outside China. In China itself, mention should be made, however, of the television wars, camera wars, refrigerator and television wars in which local companies competed fiercely for China’s domestic markets. In this sense, in consumer goods, there is hardly any Chinese business of a truly global stature. This is both surprising, given the large number of globalized Chinese enterprises and also not paradoxically, not so surprising, given the fact that prior to the decentralization during the eighties, there was not much of a corporate private sector at all in China that was allowed to follow its vision and entrepreneurship even within the spatially divided Chinese economy, not to speak about global Chinese corporations of the CBTGC kind. The initial years after the 1978 economic liberalization signify a period of Chinese businesses launching out and realizing their potentials. Ever since, scores of Chinese enterprises, even of non-Chinese origin, have been successful in terms of:

a) Being a dependable supply source for a vast multitude of goods
b) Being an extended family of American business such as Wal-Mart or as a franchised unit of say McDonalds or Coca-Cola or Sony
c) Being cost-effective in the supply of an array of merchandise at perhaps the lowest prices
d) Self-correcting swiftly for supply of contaminated pet food or flawed dolls, or substandard merchandise.
e) Being able to operate in cross-national and cross-cultural environments very different from the standard Chinese environment they are accustomed to.

From this rapid growth and stunning success, albeit limited globalization, it would appear that there must be a modicum of enterprise resource planning (ERP) somewhere in corporate planning, enabling the convergence and integration of all global supply activity and management of associated people into a single well-coordinated China Inc entity. It would also appear as if the global organizations are also pressing into service some version of Web 2.0 and Supply Chain Management (SCM) 2.0 in order to fulfill contractual trade obligations. It is such success that triggers this discussion about why there is as yet not much progress in the emergence of truly multinational units that can take up the daunting challenges in the areas of consumer marketing.

BETA TESTING AS ‘EXTENDED FAMILY’ OF TRANSNATIONALS
While this record is impressive, the question remains as to what strategy for future growth is being put together for such transnational Chinese firms. Obviously, any future plan would not permit them to merely continue to bob in the trade backwaters as extended families of other non-Chinese corporations. An ingeniously drawn strategy would mandate new paradigms of global mainstream marketing that would serve as a surrogate to globalization of newly innovated products that are quintessentially as Chinese as china, chopsticks, electronic goods, gunpowder, noodles or pork. Could such globalization of Chinese Enterprises be confined only to Business-to-Business, Business-to-Government, Government-to-Government liaison and links? Would not global trends compel the emergence of CBTGC too, if not NGO (Non-Governmental Organizations) to consumers and perhaps, given the Chinese political set up, a whole new breed of PPP (Private-Public Partnership) too?

The transition of firms from regional or local companies to national companies in China itself could be regarded as alpha testing of venture capital capabilities. The building up of global consumer brands would demand a fundamental restructuring and reorganizing of the ‘extended family’ arrangement and architecture of Chinese global corporations. Currently, it looks as if Chinese corporations are beta-testing their capabilities in the challenging field of global marketing by first serving as extended family to American and other corporations, in the process acquiring some exposure to real consumer world so that subsequently they may launch themselves full steam into consumer goods. This possibility cannot be ruled out. This experience as global enterprises would be invaluable in consumer goods marketing.

With a view to resolve some of the intriguing questions raised above, it is helpful to take a look at the likes of multinationals like Baidu, China Mobile, China Telecom, China Air, Haier, Huawei Technologies Co. (Guangdong), Sinosteel, and other globally operating Chinese business firms. While they seem to be able to achieve their business rationale, some of them appear to be relatively small and perhaps undercapitalized, relative to global units already in the global market, and seem to lack the appropriate organizational infrastructure for global eminence, if not dominance. In this setting, in sharp contrast we have global corporations that come to mind by way of examples, if not as role models: Airbus, American Express, BMW, Boeing, Coca-Cola, Dell, Estee Lauder, Google, Honda, Hewlett-Packard, Infosys, IBM, Mattel, McDonalds, Mercedes, Nissan, Proctor & Gamble, Rolls-Royce, Sony, Starbucks, Toyota, Toys “R” Us, Yahoo, Westinghouse, Wipro and Xerox. These are global brand names popular and even trendy, in many countries of the world.

This raises an interesting question: Can global business skills acquired in serving as extended family of businesses such as Coca-Cola or Canon, Mattel or McDonalds stand in good stead in developing global Chinese corporations that would operate outside China? The obvious answer would be that such skills are not only transferable, but also, given a tweak or two, invaluable in business-to-consumer transnational business.

There are numerous successful Chinese business enterprises, albeit not necessarily of the Joint Stock company type of organization, that are financially and strategically eminent for their global exploitations regardless of the criteria for assessing their accomplishments, in particular as an integral part of the global supply chain for numerous manufactured goods from antibiotics and vaccines to cutting edge computers and electronics to rockets and space vehicles.

GLOBALIZATION SHORT-CIRCUITS S-SHAPED ADOPTION PATTERN
Apparently, it is one thing to be competent in terms of being an integral part of the global supply chain, especially for outsourced and franchised supplies, distribution, shipments and deliveries, and quite a different thing altogether to be at the cutting edge of product innovation and their commercial diffusion like in the case of Apple. China’s business reportedly is sold out on Peter Drucker’s emphasis on non-profit organizations and non-governmental PPP-type (Private Public Partnership) units as well as on innovation and marketing, rather than on profitability. Such organizations seem to provide a good fit for public policy in China. (Anders 2008)

Process or product innovation could be engendered by both basic and/or applied research, and at times even by serendipity. Marketing can give wings to innovation and could help innovations to take off faster commercially than otherwise, short-circuiting the Ryan-Gross S-shaped adoption pattern (Rogers 2003) Chinese corporations, ever since the economic liberalization two decades ago, have been busy going over the learning curve of international business. As we saw earlier, brandless growth is not conducive for growth even within China itself, with the different market groups such as Aspirationals, Established Money and others themselves putting faith in branded goods than in generic products. The demographics for consumer goods, as demarcated by Accenture are given later in this paper. It must however be conjectured that given the increase in technically qualified population, the S-shape curve is becoming more linear, with both the decrease in the initial resistance to adopt innovations and new products, as well as the straightening in the slope at the top of the S-shape.

China’s corporations have not had time yet to get into global marketing of Chinese branded goods. This cannot be interpreted to mean that they are perhaps taking up a form of Chinese marketing logistics of brand-less corporate growth. Corporations may survive, but not flourish on generics. Future growth therefore can only be based on branded goods, trade marks, logos and other artifacts of product identity. There would have to be innovation, product development, product differentiation and claims to quality superiority besides cost-effectiveness through advertising and publicity for developing global brands. The differences in environment in different countries and within regions of each country itself, can overwhelm the global market developer. There will come a time when markets coalesce, a global village would emerge and brands may get standardized. That could take decades or more. In the meantime there is no other option but to go out and launch one’s own branded product and blaze one’s own new trail.

It is not imperative that this or any particular pattern is followed. However, not to follow this path would be to opt for the only alternative of continuing to serve as ‘extended family’ of other global corporations. It therefore makes sense to strategize global marketing through innovation and branding, notching the branded product to the needs and tastes of geographical area it is proposed to enter, undertaking the tasks of marketing elaborated above and maintaining the right perspective of overall brand management.

IS BRANDING LOGISTICALLY CRUCIAL TO GLOBALIZATION?
Value-addition is the name of the game in modern business. Brands can serenade for the products they represent just like sales staff do. They earn consumer trust for the products and enhance entrepreneurial possibilities and opportunities. Business 101 teaches that strong brand names boost profitability. In contemporary business complete with internet brand web sites there is vendor-buyer two-way communications and e-commerce, contributing not a little to product upgrading and value addition.

That branding is essential is not lost on Chinese corporations. This fact was confirmed by a “worldwide study of brand building and marketing effectiveness, with special emphasis on China.” (Accenture 2008) Six consumer segments in China were identified by this study such as Young Royals with the highest disposable incomes of all Chinese, Aspirationals who are highly brand-conscious, in particularly brands that are affordably priced and a good value, Established Money consisting of older men and women that favor brands made in China, and Patriots who prefer Chinese products out of loyalty to their countries. The recent organized public display of anger against those that disturbed the smooth passage of the Olympic fire through different countries would confirm not just the reality of the Patriot group, but also the fact that many Chinese would prefer to keep going with the current political and economic order in China rather than change it. (For a more detailed discussion see Char 2008.) What this implies is that status quo in China would be a safe bet far into the future given the fact of material predilection of the majority of people. Chinese corporations will experience more impulse and inclination to attempt the third transition into marketing quintessentially Chinese branded things in the developed economies of the world.

UPBEAT FACTORS BOLSTERING BUSINESS TO CONSUMER MARKETING
Chinese enterprise would like to earn its colors in global marketing and prove that it is second to none. The manner in which the Chinese managed to wangle the hosting of the Summer 2008 Olympics in Beijing in the thick of intense global competition from some of the strongest contenders even a decade ago when the decision is made to award the Olympics, is a tribute to China’s vision, initiative and resourcefulness. It should not therefore come as a surprise if Chinese corporations come up with their own innovations, brand them and make them global brands.

There are numerous positive features that encourage this view:

1) There is very close live-wire association and links between the Chinese Government and Enterprise. This helps venture capitalists in China significantly in taking bold steps, and blazing new trails, so essential in global brand promotion.

2) What is least observed is the possible basic changes in cultural philosophy and folkways and mores of the Chinese people that have gone through some cultural revolution and much else under decades of atheism and agnosticism. Iconoclastic management helps to start with a clean mental slate without baggage. There is no significant political dissent to the point of building up into a critical mass. Focused and single-minded single party government contributes to speedier implementation of any project, be it the Olympics or the development of a global brand.

3) Douglas McGregor’s Theory X Management style appears to be conducive for faster and despotic rule, especially where time is short, and several decades of economic or societal development has to be telescoped into a decade or two. The scope for cost and time overruns in projects is very little.

4) Nothing succeeds like success: China’s size is a key factor that makes people sit up and take note unlike when you say Taiwan or S. Korea. China has been a quick study in picking up modern manufacturing processes in particular for businesses that wish to outsource their products to China, successfully becoming an integral part of the global supply chain. It is not just rumor that some 5000 ships set sail from Chinese East coast to America’s West coast laden with goods produced almost exclusively for Wal-Mart. China also has the ‘Factory of the World’ reputation. (However, high spirits about Chinese growth normally tend to ignore that about 60 percent of China’s exports are by enterprises not owned by the Chinese and such non-Chinese business export endeavor in relatively higher-priced electronic goods is a lot more significant at almost 90 percent (Pomfret 2008)) In this setting, how much more arduous would it be to be the purveyor of quality global branded goods? Steinfield (2002) asks questions pertinent to this discussion in his masterly analysis of Chinese Enterprise Development.

POTENTIAL ROADBLOCKS AND VULNERABILITIES
Chinese global organizations seem to believe in models of development that are more akin to domestic corporate growth models without emphasis on a global perspective in matters such as marketing, sales promotion, branding, logos, advertising and publicity. Some of the shortcomings that could hobble global brand possibilities are the following:

1) Management styles more resembling McGregor’s Theory X (listed above under positive features) has an off-putting aspect to it: it is not productive in terms of vision, strategic advance planning, innovation and patenting, and proactive initiatives – Contrast China’s environment with the freedom that executives in Silicon Valley companies enjoy. The flow of information and ideas, with all the attendant downsides, has to be free for the blossoming of even market ideas. There is considerable dismay that “King Fu Panda” is an American-produced Chinese box 0ffice hit movie. It is so thoroughly Chinese in matter and theme, and as such it should have been the brain child of some Chinese themselves.

2) Chinese corporations, by and large, are still on the learning curve for western management practices and technology. They are still small and young, steeped in ‘boiler-plate’ design and production practices.

3) Evidence shows that the sustainability of the (blistering 15%) rates of growth in China’s economy is in serious doubt. The cost of growth in China, in terms of pollution, is in the range of 5-6% of GDP, reducing the impressive growth rates by the same rate, and making the net growth rates, not as spectacular. China goes to any length to mitigate its resource scarcity that could also be one of the factors that inhibiting continued rapid growth and eventually impact global brand development. For a detailed discussion of this aspect of Chinese economic growth please see statistical projections in Char 2008.

4) Yet another factor that may make it more difficult for a Chinese global brand to emerge is China’s high and mighty foreign policy and diplomatic style that is more influenced by commerce, than by genuine promotion of peace and solidarity, including a cynical disdain for oppressed people as evident in acts such as arms shipment to Zimbabwe. Earlier it sold arms to South Africa at a time when that country’s Government practiced apartheid and continues to maintain a buddy-relation with the Government of Sudan accused of genocide in Darfur. Such acts create a rapacious image of China not contributing to a salutary brand image.

5) The momentum of an earlier start of American and other international companies could serve to preempt the development of a Chinese global brand.

6) The lack of western-style democracy veils problems and issues. For instance, there is now evidence that China has not been as fortunate in technology selection as India has been. Under the watchful eyes and carping criticism of corporate executives and a martinet of a government, Indian corporations have had no option but to cherry pick the relatively better of the technologies. In the absence of such disapproval at the selection stage, China has often ended up acquiring second hand or passé technology that is not as value-adding or not as cost effective. This could dampen innovation. India boasts of a smorgasbord diversity in technology due to micro-level decision-making at the unit level. Despite such diversity, Indian executives have demonstrated skills to integrate all operating units into a single system, another plus point of decentralized decision-making.

7) Chinese firms, even after transforming themselves into strong links in the global supply chain, are more business to business and thus do not perhaps experience the pressure to undertake the gamut of advertising, promotion, and other essentials of marketing. Ads as a percentage of GDP are negligible. Where such a policy is deliberate, it may be to save them from publicity that may not be needed and could even be disadvantageous. Steinfeld offers a clue by stating that there is some “localized nature of Chinese commercial networks” leading to inbreeding of thinking amongst manufacturers and suppliers, meaning that the producers and the their suppliers of inputs all seem to come from the same city or regions, thanks to the fragmentation of the Chinese economy. This could develop a somewhat ‘frog in the well’ mindset that is impervious to foreign influences, for the better or worse. (Steinfeld 2002)

8) There is no openness about Chinese corporations and their role or contributions. There is dearth of data regarding firms that operate globally and such privacy or concealment will do no good to their global products, if any. They also seem to be inhibited by a penchant for underplaying their own role. For instance there has been a significant increase in the purchases of resource endowments by China, in the energy area in particular, and yet organized and reliable information from the powers that be is not forthcoming, adding to enormous speculation in the derivatives market that resulted in the $11 dollar spike in crude oil prices on June 06, 2008. And search for data about China’s corporations is hobbled by the language problem too.
Here is an example. China’s Google is Baidu and not much search information is available on Baidu’s web page, except about its own investor data. There is also a link to YouTube and others for information about the earthquake, but nothing about what Baidu itself contributed to the relief effort. Google, Microsoft and IBM contributed to relief effort for the victims of the earthquake in China’s Sichuan province. Within five days some one half million times the search web site had been used. Microsoft helped develop a web site for the local government to help it make available its database of survivors and victims of the earthquake. IBM is installing an open-source software system for the city of Chengdu, Sichuan’s capital to serve as a database on some 50,000 refugees and manage relief efforts. In this otherwise detailed report, there is not a word about Baidu, the fifth largest website in the world according to rankings by Alexa Internet. What needs to be emphasized here is that Baidu brand of information searching is not available to people that do not know Chinese. But Google is not available either for Chinese language searches, the only difference being English is more universal than Chinese.

CONCLUSION
Some of the factors mentioned above have successfully inhibited Baidu and perhaps others such as Changhang, Konka, Haier, and Legend from going forth and offering their brands to the rest of the world and becoming truly global. Only then they would be true to their salt as global companies marketing global brands. Until then, Chinese corporations will continue to be regarded as small and undersized, despite all their accomplishments in wangling the Olympics, in acquiring hydrocarbon and mineral resources to meet their insatiable appetite for them, and their significant role in promoting their country’s rapid growth and pulling up hundreds of millions of Chinese out of poverty.

REFERENCES
Accenture 2008, Delivering High Performance: Focusing on emerging Markets, The Harvard Business Review, February 2008 (Matter gleaned from an Accenture ad )
Anders, George 2008 China Embraces Old-School Guru, Wall Street Journal, June 18, 2008, p.B2

Areddy, James T. 2008 Partners Fight Over Wahaha in China, Wall Street Journal, July 28, 2008, p. B1.

Char, S.V 2007 Is there an Incentive for Political Democracy in China? [Cited 10 Nov 2007] Available from URL: http://chindiabiz.icainstitute.org/

Char, S.V. 2008 Questioning the Power Shift: India, China and USA 2007-2017 [Cited 12 Mar 2008] Available from URL:http://chindiabiz.icainstitute.org/

Char, S.V. 1995 Bridging the Gap Between Aristotle and Acquinas – Kautilya’s Arthashastra, Indo Caribbean Review, University of Windsor, Canada

Dietz, Meagan, Orr, Gordon and Xing, Jane 2008 How Chinese Companies can Succeed Abroad, [Cited 13 May 2008] http://www.mckinseyquarterly.com/How Chinese_companies_can_succeed_abroad_2131
Fowler, Geofferey and Cheng, Jonathan: Technology Firms Come to China’s Aid, WSJ dated 06/10/08, p. B5.

Luk, Lorraine 2008 Lenovo Profit Leaps in Growth in China, WSJ, Aug 08, 2008, p. B5

Meyer, Marshall W. 2008 China’s Second Economic Transition: Building National Market, Management and Organization Review, 4:1 3-15, p.5

Meredith, Robyn (2007) The Elephant and the Dragon, WW Norton, 2007, p. 67

Ng, Michelle 2008 Danone’s Wahaha Appeal is Dismissed, WSJ, Aug. 06, 2008, p. B2

Pomfret, John (2008) A Long Wait at the Gate to Greatness, Washington Post [Cited 25 July 2008] Available from URL:
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/25/AR2008072502255.html?wpisrc=newsletter

Rogers, Everett 2003 Diffusion of Innovations, 5th Edition, Free Press, New York, pp 272-273

Ruan, Victoria. 2008 Nations’ Rules Deter Investing by China Fund, Wall Street Journal, 06/14/2008, p. B3

Steinfeld, Edward S. (2002) Chinese Enterprise Development and the Challenge of Global Integration, Innovative East Asia: The Future of Growth. [Cited 20 Nov. 2002] Available from URL: http://web.mit.edu/polisci/research/steinfeld/Steinfeld-EnterpriseDevelop.pdf

Zamiska, Nicholas. 2008 AstraZeneca Taps China’s Hinterlands, Wall Street Journal, 06/13/08, p. B1-2.

BOOK REVIEW: Made in China

2009-02-16T07:40:00.000-08:00

BOOK REVIEW

Sudhanva Char, Editorial Board – Academic Resources

Made in China (2009) by Winter Nie and Katherine Xin, with Lily Zhang, published by John Wiley & Sons, ISBN: 978-0470-82436-8

Made in China is an interesting book. It would grab the attention of any person desiring to connect one way or the other with China’s Business. Are you one of those that believe that China’s economy is basically government owned and controlled? You would be in for surprises after this book. You are more likely than not going to change your view of China’s business as being nothing more than a State-dominated sector of the China’s economy. More likely, you may start appreciating that it is more of a mixed economy than you would care to accept as true. Judge for yourself: the unexpected facts from “Made in China” are that Privately Owned Enterprises (POEs) account for about 50% of China’s GDP, or for about $3.5 T. Similarly, 52% of the investment in fixed assets in urban areas is made by POEs, and they also account for some 78% of the foreign trade, some 76% of the total national tax revenue and the same 76% of the total urban employment. Dramatically, their contribution to fixed assets formation has increased from 42% in 2000 to 60% in 2005, whereas the share of the State Owned Enterprises (SOEs) during the same period has declined from 50.1% to 30.6%. These and other statistics about the POEs beginning with this century are amazing!

The World of POEs
The book is all about native Chinese enterprises or POEs and their domestic strategies to be winners in business regardless whether the competition is from other domestic companies or from foreign companies. It is possible that immediately after China emerged as a nation in 1948 the State called all the shots and most of China’s growth was almost exclusively Government-driven or was due to SOEs. The book proves all that is history and in recent decades it is the POEs that are in the driving seat of the Chinese economy. It also proves that that American and European businesses do not always succeed in China, especially even when they are face to face with competition from POE. The deduction that seems to be obvious as one reads the book is that China’s home-grown businesses are a different kettle of fish in contrast with American or European Multinational Companies (MNCs) setting up business in China to take advantage of lower labor and production costs. POEs possess certain flexibility and dynamism that would make the MNCs look muscle-bound!

While one need not pursue their business models, leadership styles and market strategies, nevertheless, POEs seem to offer vital lessons for all business dramatis personae in all departments of Chinese business. POE founders made their first pot of gold in discovering the golden opportunities and going for them zealously. The western business model is one that is based generally on technology and innovation.
Environment Not one of the Success Characteristics
Everyone knows how in a short time of about two short decades China has telescoped a century of economic and industrial progress to emerge as the second largest economy in the world. It is a fact of life that it is difficult to do without products made in China. It has appropriately earned the moniker of “Factory of the World” exporting literally thousands of consumer and even some capital goods to almost every country in the world. However, there are serious concerns about the sustainability of such economic progress at a blistering tempo. The association of last year’s earthquake with the Three Gorges Dam, the poisonous melamine milk powder, or the sickening ginger or the pet food and other stories, the grim contamination of air and water, and other bye-products of economic growth has now instigated a “Don’t Buy from China” campaign. This book is not about any of these contentious issues, but strictly more about the “explosive” growth of about six million POEs, that constitute approximately 80% of China’s corporate enterprises. It is a mute point if some one would like to pick this up as a weakness of this book, that it does not discuss the role of POEs in the repairs and maintenance of the environment they operate in. That would, however, not detract from the merits of the book which is one of highlighting the business smarts of POEs. Hopefully, in the near future, environmental astuteness would also be one of the dynamics in the matrix of factors that contribute to success discussed in the book (P.171)

The Representative 20 POEs
The outstanding feature of the book is the tracking of the growth trajectories of 20 POEs (listed in Appendix B of the book), all of which had humble origins before they became the engines of growth all over China. In this basic task the SOEs are now relegated to a relatively back seat. For purposes of generating the data needed for the book the authors interviewed with each one of the 20 entrepreneurs.

The book’s pedigree is attributable to the intellectual pursuits of the distinguished authors: All three of them either teach or conduct research at the globally eminent business School IMD, in Lausanne, Switzerland. Winter Nie is professor of Operations and Service Management programs. Katherine Xin is also a professor at IMD and has had world-wide teaching and consulting experience. Lily Zhang is a Research Associate at IMD and she has had her salad experiences in two admirable economic and business publishing houses of Dow Jones and The Economist. They have also distinguished themselves by their exhaustive knowledge of Chinese corporate history, cultural and social factors that impinge on management styles and their impact on business outcomes, and by their thorough familiarity with individual corporations such as Alibaba, Taobao and Wahaha. Their insight into the workings and success of POEs comes from their long years of residing in China, teaching, consulting and researching there.

The book has eleven chapters over five parts, two appendices and a bibliography besides the index. The first part presents three case studies of competition between MNCs and POEs in China’s domestic markets. The three cases are those of Wahaha vs. Danone, Nice vs. Proctor & Gamble, and Taobao Vs. eBay. Danone Group has charged Wahaha with creating a parallel corporation that competes with Wahaha’s products and the deal between the two are under (Swedish) arbitration in Stockholm although a Chinese court has approved of Wahaha’s domestic marketing policy. But for this off-putting “divorce” aspect of the collaboration, and in particular the dispute about the transfer and ownership of the Wahaha trademark, it could serve as a useful case study in the success of Chinese enterprise at the cost of Danone. Nice, a typical POE won the marketing battle over P&G and also Unilever. Taobao, a unit of Alibaba, managed to carve out for itself, a substantial part of eBay’s market share.

The second part with two chapters deals with “Evolvement of Entrepreneurship in China.” This is a history of Chinese entrepreneurship. The third part is about the background of POE entrepreneurs and how their business models are different from American models. The last part with three chapters shows up the threats and opportunities for MNCs and for POEs and how they join hands for mutual benefit. The interview questions are listed in Appendix A and you have a list of the 20 companies in Appendix B.

There are a few strange expressions or presentations in the book that the authors could take care of in the next edition. For instance, on page 52 they say “In 2005, tax paid by POEs reached RMB 2 trillion and RMB 337.79 billion….” Do they mean RMB 2.33779 trillion? Secondly, it is somewhat self-evident that the book is more of a compilation of previously published material, at least part of it, albeit in reputed professional journals, and as such it lacks a strong linking thread with a common general idea relating to say, POEs. Third, one would also very much like to have a more detailed financial analysis of the millions of POEs both as a group or more desirably as individual POEs.

On the whole, in a global sense, the book is a valuable addition to the literature available regarding the private sector of one of the most socialist economics of the world. It is an eye-opener and has valuable hints for those wishing for meaningful business relationships with the world’s second largest economy. It is worth adding to your reference library.