Counterfeiting and IPR protection was the subject of a dinner forum held by the European Chamber in honor of EU Customs and Taxation Com-missioner L¨˘szl¨® Kov¨˘cs at the Sofitel Hy-land Hotel in Shanghai on November 15. Kov¨˘cs, arriving from the first meeting of the newly formed EU-China joint Customs Cooperation Committee (CCC) with leaders in Beijing, addressed Chamber members on the importance of "intensifying coop-eration" with Chinese customs authorities on IPR protection.

Kov¨˘cs noted that counterfeits have undergone a fundamental "qualitative change" from mainly luxury goods to more sophisticated products such as auto and aircraft components, pharmaceuticals and toys. More than simply threatening Euro-pean business interests, he said, this new phenomenon "endangers the health, the safety, and sometimes even the lives of our citizens." He referred to the counterfeiting problem as a "modern plague".

Commissioner Kov¨˘cs had positive im-pressions from his Beijing meeting with Vice Premier Wu Yi and Customs Minister Mu Xinsheng, saying that they showed "a great deal of openness and promise" for collabo-ration on customs-related matters. Kov¨˘cs said that a spirit of partnership, marked by patience, tolerance and empathy would be a better way to deal with China than what he called the "schoolmaster approach". He particularly stressed the need for closer con-tact between Chinese and European ports and airports, and an exchange of expertise on risk management and best practices.

Members in attendance chimed in with their concerns on customs and IPR enforce-ment issues. Katherine Wang of the Chamber's Pharmaceutical Working Group illustrated the complexity of controlling counterfeit-ers, pointing out that fake medicines are not shipped in the complete packaging, making it difficult to prove that they are fakes. "The burden of proof has been very much placed on the rights owners," she said.

Inauguration of the Tianjin Chapter

The European Union Chamber celebrated the opening of its Tianjin Chapter on December 1st, 2005. Over 100 companies attended the ceremony in the Sheraton Hotel which marked the bridging of the city of Tianjin with Europe through this new office.The Mayor of Tianjin, Mr Dai Xiang Long, met with the Head of the Delegation of the European Commission in China, H. E. Ambassador Serge Abou, the Chairman of the European Chamber, Mr. Serge Janssens de Varebeke, the Executive General Manager of the European Chamber, Mr. Giorgio Magistrelli and the Tianjin Local Board, in-cluding the Chairman, Juan Silvestre.

The ceremony began with the traditional "Ribbon-Cutting", announcing the start of the symbolic successful new age for the Tianjin Chapter, as the fifth Chapter of the European Chamber in China.

Ambassador Serge Abou highlighted in his speech that the European Union and China were continuing to build on the strong economic relationship that has been formed after 30 years of diplomatic relations. Tianjin has great platforms for de-velopment, and Bin Hai New Area is now developing at a tremendous speed. At pres-ent, more than 900 European companies are invested in Tianjin, and the total investment amount is more than US$4 billion. It is predicted that the trading amount will reach US$8 billion in Tianjin this year.

Mayor Dai Xiang Long also spoke about the increasing trade relations between Eu-rope and China. Total trading between Chi-na and Europe reached US$170 billion last year. It is predicted that the trading amount will be more than US$200 billion, in which the European Union Chamber of Com-merce in China plays an important role. Tianjin Mayor Dai Xiang Long also said as Bin Hai New Area has been absorbed into China's development plan it is a very good opportunity for European companies to invest in Tianjin, and it is also an appropriate time for the Tianjin Chapter to take a proac-tive role in representing European business there. The government indicated its support of this new Tianjin Chapter and is looking forward to further cooperation with Euro-pean countries to strengthen the economic development of Tianjin.

For more information about the Tianjin Chapter please email tianjin@euccc.com.cn

Too Few Hands

China's shortage of skilled staff is worrying and salaries are rising, SME seminar hears

By Mark Godfrey--------

A shortage of qualified staff is driv-ing up wages in China, according to Christian Doeringer, a director at the Chinese offices of HR services mul-tinational Hewitt Associates. More than 70 percent of China-based companies recently surveyed by his firm complained of talent shortages, said Doeringer, who spoke at a seminar on HR organized by the Chamber's SME Working Group, on November 22nd in Beijing. Chinese companies are becom-ing more professional said Doeringer, and an influx of regional headquarters and call center businesses into China has exacer-bated talent shortages, he added.

Salary increases for Chinese executives, which had remained stable at seven to eight percent over the past five years, had climbed 8.4 percent year-on-year in the second quarter of 2005, according to the Hewitt survey of 351 corporations in Chi-na. Pay rises for top management exceeded 9 percent. Large pay increases can't be sus-tained, warned Doeringer, noting the gap between pay and inflation has widened to an "unusual" degree in China, though this will ease in 2006. Salaries in China now sit in the middle of Asia-Pacific rankings, be-low Japan, Hong Kong and Korea but above Malaysia and Thailand.

The gap between wage costs in China's first- and second-tier cities is narrowing as multinationals widen their location choices, said Doeringer, but employee turnover is "skyrocketing" in all regions, with the vol-untary turnover rate in Beijing running at 12.3 percent. Turnover is particularly high in pharmaceuticals and semiconductor indus-tries, revealed Doeringer. Especially worry-ing is the rise in mid-management turnover, he said, suggesting that turnovers of 15 to 20 percent in management now common-place in China were "terrible." Companies can respond with competitive salaries and inspirational leadership, said Doeringer, but rather than simply offering more pay, they should also offer the right company image, work environment and opportunities to re-tain staff. It is also important to focus on pre-venting key talents from leaving.

Advising on Chinese labor law, Luka Lu, a partner at Capital Associates, said at least half of all labor disputes in China stem from badly drafted employment con-tracts. Chinese labor law errs on protecting employees, thus before terminating poorly performing employees management must first offer training. Non-competition claus-es have to be carefully drafted, warned Lu, with a reasonable and separate compen-sation package provided for the period of time in which staff are restricted from join-ing a competing firm. "Have non-competi-tive clauses with key staff, but provide a few months salary in compensation," advised Lu. The sum should be paid in installments, she suggested, to avoid non-compliance.


Personnel Problems

Chamber holds first-ever conference on human resource challenges

By James Roy -------

Can turnover be a good thing? It can be, if it is for the right reasons, con-tended Vivian Jiang, HR director of Deloitte Touche Tohmatsu in Shanghai at a panel discussion of personnel experts on employee retention held at the Howard Johnson Hotel on December 8th.

"It may be that an industry that doesn't have much turnover ˇ­ does not have much growth, or doesn't have much opportu-nity for people," Jiang said in her remarks. However, she added, people that leave a company amicably and move on to another firm might become future clients.

The forum was part of the Chamber's first-ever conference on human resources, titled "HR Challenges 2006". The full-day event provided representatives of compa-nies an excellent opportunity to hear expert opinions on solving personnel difficulties as China's applicant pool evolves, and also included an expo in the lobby at which at-tendees could network with associates from prominent HR consultancy firms.

The seminar on employee retention fea-tured guest panelists Jiang from Deloitte, Gray Chang from Hercules Incorporated and Daphne Xiao from Tetra Pak, and was hosted by Stella Hou of Hewitt Associates. The panelists each presented their own slant on how to motivate and develop promis-ing employees, and concluded the seminar with questions from the audience.

Chief among the issues touched on were appropriate yet attractive compensation packages, employee training, instituting a system of accountability by which employ-ees know how they are performing, and creating a more personal working environ-ment.

"A lot of retention problems start with day one ˇ­ but [are only] tackled on the last day," Hewitt's Hou said, noting that managers tend not to pay attention to the factors that typically lead to an employee's resignation.

Tetra Pak's Xiao talked about special considerations about differences between Chinese and western culture. Whereas western managers might see leadership po-tential in a candidate's presence and public communication skills, she said, an effective manager of Chinese employees might lead by implicit rather than explicit example, a difference executives from the home office could easily overlook.

The conference continued with a semi-nar on localization moderated by Stephen Green of Deloitte, and a workshop geared specifically to the personnel needs of small and medium enterprises was held after lunch.


Nanjing HR Working Group News

The Human Resources Working Group (HR WG) has created a simple chart that indicates the different stages of an employee's working life from recruitment to termination and retirement.

This valuable tool is for HR Working Group participants to visualize which period of the employee's working life they are focus-ing on, and the link to the topic discussed.

Creation of HR Subgroups The HR Working Group in Nanjing has discussed different topics such as hiring employees, career development and termi-nation of contracts. It has been highlighted that the right communication with employ-ees is fundamental to all these aspects.

But in addition to these discussions, HR Working Group participants have expressed the wish to go further with the creation of common tools, useful to the entire group. To achieve this, HR subgroups have been established.

The Subgroup "Employee survey", under the leadership of Mr John Sun (Atlas Copco), will look into methods for improving the way companies carry out their internal surveys. More specifically, it will create a template for such a survey that can then be adapted according to each company's needs.

The Subgroup "Training", under the leadership of Mrs Bareth Terese (ZF Steer-ing), will look into how common trainings, regrouping several companies, can be orga-nized in Nanjing. The amount of trainings offered by service companies in Nanjing is quite limited, and companies often have no other choice but to send people to Shang-hai. By understanding each company's training needs, it will then be possible to carry-out common trainings in Nanjing.

The Subgroup "HR Corporate Social Re-sponsibility", under the leadership of Mrs Cheng Min (Basf-Ypc) & Mrs Wei Xiaohong (DSM) will provide a benchmark for com-panies to create and improve their own policies.

Due to the increase in participants (about 25 people each month) and the develop-ment of the HR Working Group, a Code of Conduct is necessary to keep the spirit of solidarity, fair play and trust. A good at-titude makes possible such common proj-ects. A special Subgroup called "Code of conduct" under the leadership of the HR Working Group Chairman Mr Hans-Chris-tian Marxen (Basf-YPC) has been created to define this Code of Conduct.

New Chairmanship Due to the expansion of the HR WG activi-ties and the creation of the Subgroups, the chairmanship has been changed. The new Chairman is Mr Hans-Christian Marxen (Basf-Ypc) and the Vice-chair is Mrs Huang Xiaoqin (Diehl Controls) from January 2006.

of Conduct is necessary to keep the spirit of solidarity, fair play and trust. A good at-titude makes possible such common proj-ects. A special Subgroup called "Code of conduct" under the leadership of the HR Working Group Chairman Mr Hans-Chris-tian Marxen (Basf-YPC) has been created to define this Code of Conduct.

New Chairmanship Due to the expansion of the HR WG activi-ties and the creation of the Subgroups, the chairmanship has been changed. The new Chairman is Mr Hans-Christian Marxen (Basf-Ypc) and the Vice-chair is Mrs Huang Xiaoqin (Diehl Controls) from January 2006.

More than the Olympics Vice Mayor Lu Hao shares Beijing's problems and priorities at Chamber lunch By Mark Godfrey Beijing will become a decentralized city of satellite zones where service and IT industries will be "vigorously developed," Beijing's Vice Mayor Lu Hao told a luncheon hosted by the Chamber. Services now accounts for 70 percent of the capital's economy, the largest such figures in China, Lu told the December 12th gathering. And while the 2008 Olympics will bring oppor-tunities in IT and cultural industries Beijing won't suffer the 6 percent drop in GDP that Seoul did after hosting the Games in 1988. "China is at a different stage of development. The country's continuing economic develop-ment will bring continuing opportunities to Beijing," he said, pointing out that foreign trade in the first nine months of 2005 reached US$120 billion, exceeding expectations and climbing 40 percent on the figure for all of 2004. Whereas previously the city attracted US$1.2 billion per year in FDI, the figure for the first ten months of 2005 was US$3.4 bil-lion. "I don't see this as stimulated just by the Olympic Games," said Lu.

The current stage of Beijing's development makes comparisons to London and Tokyo unfeasible, said the Vice Mayor. "We should not set our expectations too high. Beijing has only an eighth of these cities' per capita earning power." China's huge popula-tion was a "unique feature" in the city's problems, said Lu. Moving the city's Capital Steel east to the coast would mean a cut in 60 percent of Beijing's SO2 gas emission, but more than 70,000 workers would have to be given new jobs. Similarly, closing more than 400 illegal coalmines in the municipality means finding jobs for workers often lacking in alternative skills. Many of the city's prob-lems, said Lu, are related to an aging and often poorly educated population.

Beijing's future growth, said the Vice-Mayor, will be assured by the Pan-Bohai economic region, which the central government is intent on establishing, said Lu. Beijing, he predicted, will play the pivotal role which Guangzhou and Shenzhen enjoy in the Pearl River Delta. Assuring the audience that "sensible suggestions" from dialogue with foreign chambers of commerce were communicated to the Mayor, Vice Mayor Lu encouraged European execu-tives to read official publications, such as the Beijing Daily, more regularly to keep in touch with future policy and tender announcements.

One Billion Customers Be broadminded when entering the China market, says author and businessman James McGregor By Mark Godfrey Management is the Achilles heel of China, according to former Wall Street Jour-nal China bureau chief and successful venture financier James McGregor, who offered insights on his twenty-year relationship with the Middle Kingdom at a breakfast seminar hosted by the Chamber. A journalist-turned-businessman based in Bei-jing for the last 15 years, McGregor combines accounts of business deals and personali-ties with practical lessons for conducting business in China in his new book "One Billion Customers: Lessons From the Front Lines of Doing Business in China".

Drawing from his book, McGregor advised executives at the November 17th seminar to take a layered management approach that mixes foreign and local staff at all levels. He compared typical Chinese management structures to dumplings: "The boss is in the middle, surrounded by dough boys from their own geographical or ethnic background." Cautioning against excesses of what he called the "slobbering CEO syndrome," Mc-Gregor warned executives not to be "bamboozled by China's marketing shtick". Companies enthralled by a local emphasis on China's 5,000-year civilization often spend dispropor-tionate amounts of time seeking audience with top leaders. But likewise, said McGregor it remains politically incorrect to be making a lot of money in China. Many foreign compa-nies are doing very well here, said McGregor, but are "justifiably" cautious about publiciz-ing this because of fears that "bureaucratic pickpockets" will show up at the door.

China's development mirrors that of the USA, said McGregor, only much, much faster. Still, while China is getting richer it is "psychologically confused." The rest of the world can help China define itself. "China doesn't know what it should be, but it knows it doesn't want to be what it was," said McGregor, who added that China also needs to brand itself better abroad. "People can portray China as they want because China doesn't portray itself."