Archives 2006

Jack Gao appointed Star China CEO, News Corp. VP

Star has appointed Dr. Jack Gao as its CEO of Star China. Gao will officially join Star in November 2006, and will report to Star CEO Michelle Guthrie.
Based in Beijing, Gao will be in charge of Star’s overall business interests in China. He will be responsible for developing strategic and business directions while also overseeing Star China’s day-to-day operations.

Gao has also been appointed VP of News Corporation and will assume the position of chief representative of the News Corporation Beijing representative office, responsible for running News Corporation’s activities in China, informs an official release.

Commenting on Gao’s appointment, Guthrie said, “Jack’s insights to the China market, combined with his wealth of networking and business experience, and a proven track-record of success, make him a unique fit to lead our businesses and growth initiatives in China. We are fortunate to have attracted him to join us.”

“Bringing on someone of Jack’s caliber to lead our China operations underscores Star and News Corporation’s commitment to this important market. As we expand aggressively into the digital media space, Jack’s technology background and experience in running businesses for multinationals such as Microsoft and Autodesk in China will serve as important assets in taking us to the next stage of our development in China,” Guthrie continued.

Gao said, “With China poised for sustained and strong economic growth in the years ahead, a tremendous number of opportunities for dynamic and progressive companies such as Star and News Corporation will continue to open up. I am thrilled at the opportunity to apply my experience in China to Star and News Corporation’s businesses and look forward to working with Michelle and the rest of the talented team at Star and News Corporation in seizing growth opportunities in this exciting marketplace.”

Prior to joining Star, Gao served for more than three years as Apac Emerging Geography VP for Autodesk Inc., where he was responsible for strategy, marketing and sales, product research and development, government and public relations, investments, human resources, finance and administration operations in Greater China and India. Before that, Gao was general partner of Walden International, a leading venture capital firm in the USA. Between 1999 and 2002, Gao was president and general manager of Microsoft (China) Co. Ltd. Prior to joining Microsoft, Gao spent five years with Autodesk, as regional director, Taiwan, Hong Kong and Mainland China, the release adds.

Gao holds doctorate, master and bachelor degrees in engineering from the University of California, Los Angeles, and Harbin Institute of Technology in China.

China’s Emerging Labor Movement

Trade unionists in the US and elsewhere have long argued that there is no labor movement in China. They rightly point out that Chinese workers lack even the most basic human rights protections, including the rights to strike and join an independent union.

But there’s more to the story: Ten years ago, according to the China’s Minister of Public Security, there were on average 10,000 large-scale collective protests each year. By 2004, the government recorded 74,000 large-scale protests. Late last year, the Minister of Police announced protests had increased to 87,000 last year, involving well over four million workers.

Four million workers! In the US we celebrated the birth of a new global social movement when 60,000 people showed up for the ‘Battle of Seattle’ in 1999. In China there is now more than enough evidence of continual worker self-organization outside of official trade union channels to put to rest notions that ‘there is no labor movement in China’.

According to Robin Munro, research director of China Labour Bulletin, ‘[W]hereas 10 years ago I think you could have said China did not have a labor movement, that is no longer really the case- there is no freedom of association for workers, but hitherto, people have tended to think that, therefore, there is no Chinese labor movement. I think the scale of worker unrest nowadays is so great, you can go to almost any city in the country now and there will be several major collective worker protests going on at the same time.

So China now has a labor movement.This is an important point to just put there on the table and recognize. It is not organized. It is spontaneous, it is relatively inchoate. But then so were labor movements in most Western countries before trade unions were permitted. We have basically a pre-union phase of labor movement development in China today. It also has great potential, I think, for becoming a proper labor movement.’

In the years before the passage of the National Labor Relations Act – known as the Wagner Actor ‘Labor’s Magna Carta’ – there was no legally enforced right to organize, bargain collectively, or strike in the United States. But US workers who were denied these rights responded with their own “pre-union” phase of struggle. Thousands of workers were arrested or beaten and scores shot dead for trying to exercise these rights. For example, in 1934 alone there were three general strikes and a huge national textile strike – all marked by substantial violence.

Largely in response to this upsurge, in 1935 the Federal government passed the Wagner Act hoping to legalize the labor movement and divert it into more moderate channels. According to a recent study by labor law historian James Gray Pope, the massive sit-down strikes and factory occupations of the following year cajoled the Supreme Court into reversing its own precedents and accepting the Wagner Act as constitutional.

American workers did not get their rights by waiting for the government to provide them; rather, they began asserting rights they believe they were entitled to, and thereby forced the Congress and the courts to acquiesce.

One innovative labor strategy that is being encouraged by CLB as a way to relate to the new emerging Chinese labor movement is the CC-2005 Campaign or Collective Contract 2005. (According to CLB staff, the Campaign’s name is “a slightly cheeky designation, thinking in terms of SA-8000” and other Corporate Social Responsibility (CSR) standards.)

Under existing Chinese labor law, where there is no union presence in a factory, workers are allowed to elect their own representatives to negotiate and sign a collective contract.

With the ACFTU holding only 30% representation outside the government sector, CLB is trying to take advantage of this legal ‘loop-hole’ by urging multi-national corporations that operate in China ‘to pressure their supplier factories into allowing the workers to negotiate a proper collective contract in the workplace.’ The innovation of this approach is the use of existing Corporate Codes of Conducts to negotiate binding collective agreements with enforceable rights. CLB views the CC-2005 campaign an opportunity to create a basic organizing space that is legally protected in the private sector.

As Han Dongfang, Director of CLB, explains, ‘What we want to do is get this collective contract regulation connected, with a code of conduct, a corporate social responsibility kind of thing, which they have been trying to work out for more than 10 years but have never worked out. Now we try to put it together as a new program. We make the corporate social responsibility, the Code of Conduct document, which has no teeth, and make them, together with Chinese law, have teeth, in particular with the workers’ participation, workers’ representation.’

CC-2005 has three major strategic objectives:

To mobilize workers to participate in collective bargaining, so that they can play an active role in protecting their own rights; To achieve real implementation of China’s labor laws, trade union legislation and the relevant standards of the International Labour Organization; To provide a new and effective means by which multinational buyers can realize their commitment to the principle of social accountability.

The massive number of wildcat strikes occurring in China shows that Chinese workers are not waiting for official unions to reform themselves. Instead, they are fashioning new ways to improve their lot. So the challenge is for the US and the other labor movements to find ways to reach out and encourage new independent workers organizations in China. We might want to start by supporting CC-2005 campaign.

[Brendan Smith, Jeremy Brecher and Tim Costello are co-founders of GlobalLabor Strategies, a new resource center working to assist labor and other social movements make the connections and develop the strategies needed to function effectively in the global economy. Read their blog at www.globallaborblog.org.]

All star corporate talent a scarce resource in China

SHANGHAI, Oct 9 (Reuters) – Minutes after news he had quit as chief financial officer of KongZhong Corp. (KONG.O: Quote, Profile, Research), J.P. Gan took a call from a headhunter.

On offer was a top spot at a venture capital-backed Chinese company with plans for an overseas initial public offering.

CFOs and top level executives are in high demand across the globe as cash-rich investment firms put their money to work buying companies, changing management teams, and growing the businesses.

In China the effect is amplified. Young, western-savvy CFOs who have language skills, regulatory knowledge and international experience are highly sought after and hard to find. “Talent is limited, in general. That’s just the way things are in China,” said Jixun Foo, a Shanghai-based managing director at venture capital firm Granite Global Ventures.

Aggravating the shortage is the flow of western-educated executives out of the the corporate and investment banking sectors and into private equity firms and hedge funds.

To name but a few: HSBC China investment banking chief Huan Guocang joined Primus Pacific Partners. Dennis Zhu left JPMorgan to join Oaktree Capital Management while Bain Capital recently hired away Morgan Stanley China chief executive Jonathan Zhu.

Mark Qiu — former CFO of CNOOC Ltd. (0883.HK: Quote, Profile, Research), last year left the top Chinese offshore oil producer to set up a private equity fund.

“Understanding the people-risk factor may be one of the most important things an investor needs to know before coming here,” Foo said.

Buyout firms have invested more than $4 billion in China this year, compared with only $723 million in 2003, according to market data firm Dealogic.

While talented chief executives are in demand in China, many investors view equally talented CFOs as more significant and harder to find, given the increased accounting demands required by global securities markets.

Chinese companies need CFOs who can put in place or modernise their financial infrastructure to satisfy investors and regulators.

That means establishing proper billing procedures, cleaning up books, creating budgets, and setting up legal and compliance departments — areas either neglected in many existing companies or not yet formed in young start-ups.

“There is a great demand for the CFO position,” said Gan of KongZhong, who from 2000 to 2005 was Carlyle Group’s director of venture capital investments in China.

Gan is leaving KongZhong, a $250 million Chinese wireless services company, for venture capital firm Qiming Venture Partners in Shanghai. He said he knows at least 10 venture-backed companies hunting for CFOs right now.

One key executive requirement is solid English skills.

With Wall Street investors and outside regulators increasingly involved with corporate China, English is seen as essential, especially for CFOs who handle the bulk of calls from such people.

A CFO of a foreign-listed or Hong Kong-listed Chinese firm can expect to earn anywhere from $150,000 to $500,000, plus options, said several people interviewed for this article, with CEO’s earning slightly more.

That is well short of what some U.S. and European executives make, but it is more than many non-listed, old-style Chinese companies would pay.

Also fuelling CFO demand is a string of successful new China listings, which have sparked a rush to the initial public offerings market.

Peter Mok, President and CEO of KLM Capital Group, an investment firm specialising in Asia, says the real talent search action goes on among companies going for IPO.

“They are looking for someone who understands GAAP (Generally Accepted Accounting Principles) and who can connect with Wall Street,” he said. “They need a guy who is dynamic and who is going to stay up late to talk to New York.”

Nortel ramps up China R&D staff

Beijing — After two years of slashing jobs at home, Nortel Networks Corp. has revealed another big increase in its engineering staff in China, accelerating a trend that has seen it shifting to lower-cost countries for its manufacturing and R&D.

Nortel disclosed Thursday that its R&D staff in China has grown by almost 30 per cent in the past year. The company now has about 1,800 research and development employees in China, compared with about 1,400 last year. This means that China now accounts for 15 per cent of Nortel’s worldwide R&D jobs, up from 12 per cent last year.

Canadian politicians have criticized Nortel for shifting jobs overseas. The company announced in 2004 that it was cutting 950 jobs in Canada, including a large number at its R&D headquarters in Ottawa. It announced another 1,900 job reductions worldwide this year, and some of those job losses will be in Canada.

Four months ago, in another cost-cutting move, Nortel shifted its procurement office from Ottawa to Hong Kong. And within three years it plans to buy 80 per cent of its components and materials from low-cost countries, primarily in the developing world, compared with 30 per cent last year. The company has announced that it is adding about 800 new jobs in two low-cost countries — Mexico and Turkey — by 2008.

“China is becoming much more important for Nortel — not just in revenues but also in employment, as an R&D centre,” Nortel chief executive officer Mike Zafirovski said Thursday at the official opening of its new China headquarters in Beijing. “We have more and more operational responsibilities for all of Asia now being handled out of Beijing. It’s a very good commitment to China but also very smart from a Nortel perspective.”

He would not rule out the possibility of further job cuts in North America as the company focuses more on opportunities in the developing world.

“We are not as competitive as we need to be,” he said. “Our costs are not at world-class levels, but they will be. Nothing will stop us in our pursuit of being the most competitive enterprise out there.”

Most of the planned cost savings, however, are likely to be from efficiencies such as better on-time delivery and improved systems, rather than shifting jobs to low-cost countries, he said.

The state-of-the-art office in Beijing is an example of the trend toward low-cost countries. With 180,000 square feet of space in the high-tech Wangjing industrial zone, the gleaming glass-and-steel campus is making it easier for Nortel to recruit China’s new generation of R&D engineers. About 1,000 of its 1,800 R&D staff are based at the new Beijing campus, which was built as part of a $200-million investment announced in China in 2003.

China is also an increasingly important centre for Nortel’s operations in Asia. A growing share of its Asian executives and R&D staff are based in China with a mandate to serve all of Asia. “We’re utilizing the skills here for the benefit of Asia,” said Michael Pangia, president of Nortel’s Asia division.

As it expands its operations here, Nortel is hoping for steady revenue growth from China, which accounts for the biggest share of the Asian division that now provides almost 14 per cent of Nortel’s global revenue. China is also likely to benefit from Nortel’s plans for greater investment in Asia.

“China would be a logical place for that to happen,” Mr. Zafirovski said Thursday. “We view China to be a major growth opportunity. We’d love to be twice as big in China.”

Reuters opens China development centre, sees staff tripling

BEIJING, Oct 9 (Reuters) – Global news and information company Reuters Group (RTR.L: Quote, Profile, Research) opened a development centre in China for key products such as its 3000Xtra desktop terminal and said it expected to triple the operation’s staff to 600 in three years.

The centre, located in the capital’s technology hub of Zhongguancun, will also input data related to mergers and acquisitions, company financial reports and forecasts, and economic data for markets in China, South Korea and Japan, Reuters said in a statement on Monday.

It gave no figure for the amount invested.

“This investment underscores our commitment to China and our desire to participate in its future as a global leader in technology and financial markets,” Chief Executive Tom Glocer said in the statement.

Investing in China’s banking system requires act of faith

BANKERS and lawyers who operate in Beijing came down to earth with a thump last week. For months, they were the kings of town as they bunkered down to prepare the record $US21.9 billion ($28.46 billion) listing of Industrial & Commercial Bank of China.
With the job done (for shared fees of $US400 million), the advisers find themselves lower down the pecking order: behind important visitors such as African heads of state, 48 of whom arrived for the weekend’s China-Africa “summit”.

To allow African delegations easy movement, Beijing’s authorities closed major roads and much else, creating traffic that has trapped bankers (and yours truly) in jams across the city. While the importance of advisers may have dropped, the share prices of Chinese banks continue to defy gravity.

The stock prices of ICBC, Bank of China, China Construction Bank and China Merchants Bank have all risen handsomely since floating, as shareholders gamble that lenders have reformed and will benefit from continuing double-digit economic growth. But how long before investor optimism falls?

China’s largest banks have listed in near-perfect conditions, against a backdrop of record global liquidity. On the mainland, corporate profits are high, inflation is tame and economic growth is stable. In spite of the reforms, banks face little real competition and enjoy juicy spreads between deposit and lending rates.

It was only two years ago that bad loans at ICBC represented 21 per cent of the portfolio. Only gigantic re-capitalisations and loan write-offs by the state have enabled the large banks to become solvent.

Imagine the scale. ICBC runs 18,000 branches nationwide, some with managers friendly to the capital requirements of local industrialists. Investors are betting that banks’ internal risk management culture and systems have, overnight, become sophisticated enough to stop poor lending or downright fraud.

In the words of Hong Kong governance activist David Webb, China has taken out the bad loans but has it taken out the bad lenders? Investors got a reminder of the not-too-distant past yesterday when it was announced that the former head of China Construction Bank had been given 15 years’ jail for taking $US500,000 in bribes to arrange loans.

Zhang Enzhao abruptly quit in June 2005, four months before CCB became the first of China’s big state-owned lenders to list in Hong Kong.

In short, it is remarkable that China’s biggest banks have raised tens of billions of dollars from international and domestic investors, given that their recent trading history has been so abysmal and the banking sector is so immature.

The banking system remains deficient in several key respects, such as proven risk management. The banks have entered a new world, where they also have to tackle market risks such as foreign exchange and interest rate volatility.

China’s legal environment is not mature enough, with huge improvements required in areas such as classification of property rights. The country has no independent ombudsman to adjudicate on consumer banking disputes.

Corporate governance within banks is largely untested, despite their efforts to hire independent non-executive directors.

While the banks have indeed been listed, the state retains about 80 per cent of the stock in each company. Will the state be a passive or active investor?

The Government wants banks to cool lending to prevent over-investment. But what if the banks have a commercial desire to create shareholder value by expanding lending?

Inside each bank is a Communist Party-controlled committee whose role is largely opaque. Banking executives claim that the chief role of the committees is to help enforce “discipline” among staff. Investors will have to take their word for it.

There is also a need to improve training, attract fresh talent and introduce performance targets and incentive schemes.

There is little doubt that the banks have made huge improvements compared with just two years ago. They have not felt ashamed to summon outside help, be it from McKinsey or foreign strategic partners such as Bank of America and Royal Bank of Scotland.

However, investors are either ignoring the risks in the rush for a fast buck or calculating that they can sell at the first sign of a slowdown.

Hong Kong-based Jing Ulrich, JP Morgan’s star China equity-watcher, remains bullish on Chinese banks – in the short term. She says cash-rich global investors remain desperate to increase their China exposure.

But she also says many fund managers are judged on a quarterly basis and so could hardly miss out on the likes of ICBC. Quite.

US firms in China face skills shortage

BEIJING – A skills shortage has emerged as the top challenge for US companies operating in China, according to a report from the American Chamber of Commerce in Shanghai.

The 2006 China Business Report was released on Wednesday after the organization polled 274 member companies throughout China.

Charles Mo, who heads human resources at the Chamber of Commerce, said the skills shortage had, for the first time in five years, overtaken bureaucracy as the No 1 headache for US companies in China.

“The vast majority of US companies said their China operations were suffering from challenges in recruiting capable Chinese managers and retaining them,” Mo said.

They account for about 80% of those companies polled. The scarcity of entry-level and clerical staff has also had a negative impact on US companies.

“Controlling salary increases was also a problem for 82% of the companies,” Mo said.

Mo said the growth in operations in China had outpaced the supply of desirable staff.

“US companies have to fight for talent against international and domestic competitors,” Mo said.

Bureaucracy, lack of transparency and inconsistent regulatory interpretation were the second-biggest challenge facing US companies, the report showed. These challenges, along with other factors, are squeezing the profit margins of US companies in China, according to the report.

More than half of those firms polled said their China margins were threatened by price pressure from domestic competitors, price pressure from major customers, or changes in salary and wages in China. These factors have affected the bottom line of many US companies.

While half of those polled saw improved profitability in 2005 over 2004, most saw profit margins increase by less than 10%, and only a quarter reported higher margins for China than for their worldwide operations.

Nevertheless, US companies are clearly bullish about China, and the country is a priority for many. When describing their five-year business outlook in China, 94% of those polled were either “slightly optimistic” or “optimistic”. And 79% were more optimistic about their business outlook in 2006 than a year before.

(Asia Pulse/XIC)

EA Names New Asia President

Electronic Arts (Nasdaq: ERTS) China president Erick Hachkenburg resigned in early September, reports 21st Century Business Herald. The newly named EA Asia president Hubert Larenaudie will replace Hachkenburg. Larenaudie was the president of Vivendi Universal Games Asia prior to joining EA. According to rumors, The9 (Nasdaq: NCTY) is the front runner to license EA’s FIFA soccer due to Larenaudie’s close relationship with The9 during his tenure at Vivendi. [Some online versions of the report were missing a paragraph, which may lead to the wrong assumption that EA will license its racing game Tales Runner to The9. .ed]

Assistant Finance Manager

Company introduction:
Our company is dedicated to produce water conservation products that will be used in residential and commercial sectors. The company and its subsidiary brands enjoy the largest residential market of North America; and its market share of other parts of the world continues to increase with our top quality products, outstanding customer service and aggressive marketing effort.

Requirements:
1.College degree in Accounting (with minimum GPA of 3.0 Chinese equivalent), preferably with a professional certification
2.Min. 5 years experience in accounting (including 3 years as supervisor)
3.Very strong knowledge of both Financial Accounting (US GAAP & International Accounting Standards) and Cost Accounting concepts (cost flow assumptions, standard costing, variance analysis, costed bills of material, MRP & MPS, shift reporting, inventory control, etc)
4.Able to communicate well both in English and Chinese
5.Working experience of ERP systems and accounting software
6.Strong in MS Office products (Excel, Word, Powerpoint, Outlook, etc)
7.Very familiar with Chinese tax regulations and reporting requirements (including federal, local, and value-added taxes).
8.Experience in banking for WFOE, such as RMB accounts and foreign currency accounts; preferably with working experience with American or Sino-American companies in China
9.Meticulous and excellent with procedures (follow and update)
10.Honest, diligent, personable and team player

* Please send us your complete resume (both in Chinese and in English)to: ‘topjob_fi119sh@dacare.com’

Intel to train 1 million Chinese teachers

Chinanews, Beijing, November 3 ¨C Intel announced yesterday that it will help train 1 million Chinese teachers in the field of information technology to enable them to improve their teaching quality.

Intel has already helped with the training of about 72 thousand Chinese teachers and a large number of undergraduates.

This is Intel¡¯s biggest educational project ever, which will work as a supplement to its current educational cooperation program with the Ministry of Education.

Besides the training project, Intel will donate 10,000 PCs to schools in Chinese rural areas. With the help of Microsoft software and the effort of the MOE, all these PCs will be able to get access to the Internet before 2008. MOE will also provide courseware programs to these schools.

¡°Now our cooperation with the MOE is complete,¡± said Craig Barrett, CEO of Intel. Wu Qidi, Vice Minister of Education, was vocal in expressing China gratitude to the company.