Commerce is a serious business, but EF aim to make their English courses fun as well as relevant. Fluency is achieved through role-playing and dialogue designed to be useful, real and entertaining. Although grammar and theory are very important, the maximum time in class is spent using the language rather than simply talking about it. And vitally, the EF business English teachers have real-world business experience, as well as teaching qualifications.

A variety of different types of course are available. The main business courses are taught over 72 hours in three months, and at four different levels – ‘keystage’, ‘waystage’, ‘threshold user’ and ‘independent user’. At the first level, a speaker can convey and understand meaning in basic situations, and begin to understand the gist of simple conversations. By the time you reach the fourth level, you will have a general effective command of the language, be able to use a range of sentence structures and idioms, and write texts on familiar subjects with a good degree of accuracy. In a business context, you could conduct a meeting or sales negotiation in English, or make a simple presentation in English.

Shorter specialised modules are also available in five topics – telephoning, meetings, negotiating, recruiting and banking/finance. These last 18 hours, over two weeks.

Another important service offered by EF is testing for the TOEIC examinations – the Test of English in International Communication. This measures a non-native speaker’s ability to understand English in typical international business situations, and has been legally approved for use here by the Chinese government.

Although EF has four centres in Shanghai, where your staff can attend classes, EF can also come to your factory or office to deliver the courses. Class sizes, wherever they are held, will not be greater than 16. You could even have one-to-one training, too. This might be suitable if you are an advanced student and need to master specific skills, such as a specialized vocabulary or writing complex technical reports.

EF’s aim is to enhance global understanding through the exchange of words and ideas. A greater insight and appreciation, through the English language, of your customers’ needs will also help your success in global trading.

Q: In what condition is office space leased?
A: Although it varies slightly from building to building, generally office space is leased in raw condition. This means that only the ceiling grid (T-bar, ceiling tiles and lighting), HVAC (heating, ventilation and air conditioning) and emergency systems (smoke detectors and sprinklers) are installed (based on open layout). All other work in the space is the responsibility of the tenant. Occasionally, if second generation office space is leased, the leasehold improvements from the previous tenant can be reused but generally these will have been removed.

Q: Who pays for the leasehold improvements?
A: Although it is usually possible to negotiate some rental abatement (free rent) to offset the cost, leasehold improvements are almost always paid for by the tenant.

Q: Are there restrictions on how leasehold improvements are constructed?
A: All leasehold improvements must be approved by the landlord and the relevant local authorities (including district re service bureau, tendering bureau and quality bureau) before construction begins. The tenant is responsible for providing formal construction plans to the landlord for this purpose. Landlords usually require that tenants use their designated contractors for any work affecting the buildings HVAC, electrical or emergency systems. Some landlords charge a construction supervision fee at a rate of RMB8-15/sq m (gross) of the tenant?s total leasehold improvement cost.

Q: How much time is needed to complete leasehold improvements?
A: The length of time required for the design and construction of leasehold improvements varies according to the size and complexity of the project. For a typical project, allow six weeks for design and approval of drawings and eight weeks for construction, (not including tenant?s planning and tendering work).

Q: Who manages the design and construction process?
A: Typically, tenants hire one company to handle the design and construction of the leasehold improvements. Until recently, independent project management was not readily available in Shanghai. The role of a project manager is to ensure that all aspects of the leasehold improvement project run smoothly and that the tenant receives good value for money.

Project management includes technical reviews of building systems, aggressive negotiation of construction costs and onsite construction supervision. We recommend project management to all of our clients especially for large projects.

Other facts about leasehold improvement projects:
Labor is not unionized.- Currently there are no major shortages of building materials although importing items can cause delays.- Generally, HVAC systems are either Variable Air Volume (VAV) or Fan Coil Unit (FCU).- Electrical power enters the building at 380 volts, 3-phase, 50 hertz then transformed for use by the tenants to 220 volts, 2-phase, 50 hertz.- Tenants are generally provided with 60 watts of power per square meter leased with additional power available on request.

At the signing ceremony on the agreement to establish the new corporation, Matti Alahuhta, head of Nokia’s Cell Phone Division, said that “China already is and will continue to be one of Nokia’s major manufacturing centres globally as well as a major centre for Nokia’s global research and development”. He added, ” the move to begin local manufacturing of CDMA handsets would not only allow us to broaden the products we offer to Chinese consumers, but also allows the new company to capture opportunities in China’s growing CDMA market.” The new corporation will be headquartered in Beijing, with affiliates in Dongguan, Guangzhou, and Suzhou.

Goldman Sachs, Nokia’s investment bankers for the deal, said that for Nokia clients, the integration of its manufacturing JVs will help Nokia improve its operation efficiency and overall competitiveness. The shareholders of the new corporation are Nokia, Beijing Capitel Co., Ltd., Dongguan Nan Xin Industrial Development Co., Ltd., Shanghai Alliance Investment Ltd., and Beijing Hangxing Machinery Manufacturing Corporation.

The new name and board of directors will be announced after approval has been received from the authorities.

Will it allow you to say goodbye to your low salary, routine work and difficult boss? That sounds really fantastic.

But, according to some employers, taking an MBA course can be a mixed blessing, because the expected high salary is likely to be “a castle in the air”. To make matters worse, people who used to work for you could be promoted while you are still on the job market after your graduation. Before making your decision about an MBA, listen what some HR experts have told us.

The average annual income of an MBA graduate is RMB 70,000 – 80,000, relatively high compared to that for ordinary graduate or Ph. D. However, don’t be too optimistic! According to our survey, some HR managers are not inclined to hire expensive MBA graduates, although they may do if average salaries drop.

Miss Lu, an experienced HR manager tells us, “the salary of an MBA graduate is much lower than several years ago. Some of them can only get RMB 4,000 per month. That may satisfy the undergraduates but not the MBA graduates, considering the high tuition fee.” Mr. Wang, an HR supervisor from a leading private textile company says, ” I don’t tend to employ MBA graduates. I don’t fi nd them useful at all. The senior managers are usually drawn from the outstanding staff in our company, who are much more familiar with our routine business.”

Ms. Kornelia Wijaya, another senior HR director who has been working for multi-nationals for the past 10 years, told us, “an MBA is not everything. Selection will be done based on the match with job requirements, and motivation fi t for current and future jobs.”

Ironically the most obvious competitive edge of an overseas MBA is their language profi ciency, rather than a lot of managerial expertise. “Since our economy is in transition, up-to-date managerial knowledge doesn’t seem to benefi t our local fi rms, which are much more complicated and involve more procedures when handling some problems,” says Miss Liu, a HR specialist from Lucent Technology Co., Ltd.

Speaking of those local MBA graduates, Miss Liu adds, “their working experience is superior to their MBA degree. If they manage to combine their theoretical knowledge with work experience, that’s perfect. In Lucent, we usually have an annual review giving general managers an assessment of their employees, which is conducted from two perspectives, one is their performance and the other is their ability, and the latter involves their management level, working skill, potential and MBA degree.

Holding an MBA degree is not the decisive factor but we will take that into consideration. If a MBA graduate fails to possess excellent work experience, their salary won’t be very high. However, we usually send outstanding staff with great potential to take MBA courses, and an MBA is a qualification for most senior manager positions”.

With respect to the salary gap between MBA graduates and non-MBA graduates, Ms. Wijaya says, “the pay depends on the position, past performance and the person. The gap is on the third factor, which is the person. Other than the job price, and the person’s performance, the third factor takes into account the person’s expectation, their name and reputation, and the next possible career path related to one’s potential.”

So we can conclude that an MBA is not everything, and only when you have managed to upgrade yourself in all around respects can you wish for a satisfactory salary.

Going a step further, let’s have a glimpse at the current MBA market.

There are so many MBA graduates now! Some MBAs did not do well in their undergraduatecourses. That gives an unfavourable impression and a sharp reminder for HR managers as well. It has dawned on the managers that not all the MBA graduates are first-class – all that glitters is not gold! Too many unqualified institutions have cultivated too many unqualified MBA graduates, reducing the value of the degree. HR managers should choose the right person who is worth the high salary.

So, is the market saturated with MBA graduates? The answer is: yes, it’s saturated with inferiors MBAs, but is not yet, and may never be, with real highly-qualified MBA graduates.

Ordinary MBA graduate are reluctant to accept a salary of RMB 5,000 per month, but in the end have to accept it because no employer are willing to offer more. However, quality counts. The IMBA graduates from Fudan University have an average of three satisfactory job offers this year. Those from Fudan University and CEIBS got an average salary of RMB 120,000 and RMB 200,000 per year respectively. Graduates from many prestigious institutions, such as Fudan University, CEIBS, Qinghua University and Peking University are highly sought-after in the job market, and many of them go to some worldrenowned companies such as Citibank Group, HSBC, GE, HP, and the like.

Why is the salary gap so large? There could be a great many reasons. The prestigious institutions deliver first-class students with great potential and high IQ. Talented people are always in great demand on the job market even if they do not hold a MBA degree. Second, according to our survey, it is the brand-name companies that demand MBA graduates. These companies prefer to enroll MBA graduates from famous institutions rather than less famous ones. Other MBA graduates may go to smaller enterprises. However, such companies are not inclined to employ MBA graduates, and on this market supply exceeds the demand, so salaries tend to be lower.

While the numbers of MBA graduates are mushrooming, skepticism about them are also apparently on the rise. If, unfortunately, the unqualified institutions have no intention of improving the quality of their graduates, it is unlikely that salaries for MBA graduates will rally. HR managers definitely have the right to say “no” to all the inferior candidates.

Statistics show that at the end of July 2002, China’s unsold housing space totaled 120 million square metres, up to half of which remained unsold for over one year, resulting in over RMB257 billion in non-performing capital. This leads all other industries in terms of bad assets.

The scale of real estate construction in many cities appears to be being cut. Real estate development in Beijing has, all along, been testing the limits, surpassing Shanghai’s housing real estate boom in almost all aspects. Cranes towering over dusty construction sites dot the skyline of the capital city and many large office and residential towers are shooting up. The result: many high-end apartments remain unsold. Beijing’s total investment in the real estate industry in the first half of this year rose 42% to hit US$2.66 billion.

According to data released by the Guangdong Provincial Department of Construction, the province’s investments in real estate development rose sharply in the first half of this year, but the pace of growth in housing sales slowed down. Between January and June, housing sales increased by 13%, down 18% from that of the same period last year, although total area of land development and the area already under construction jumped 128% and 38% respectively. The scenario was similar in Shenzhen, where more than 70% of the real estate developers are eyeing the top 5 to 15% of the consumers, despite the fact that their purchasing power is nonetheless limited. The average housing price last year stood at RMB6,921 per square metre in Shenzhen and this rose further this year away from the mainstay consumer group, the average wage-earner who earns about RMB3,000 a month. Beijing faces the same problem. If the cycle for real estate development is calculated at four to six years, then 2002 should have been the year for Beijing to reach the ceiling in real estate supply. If sales continue to lag behind, the market will have to make adjustments to housing prices.

Wuhan’s housing market also reached historic heights recently. On top of several records set last year, investment in real estate development grew 27% to reach RMB9.5 billion. As much as 85% of the investments went to housing construction and the amount of floor space in housing under construction, newly started housing projects, and completed housing projects soared to new limits.. The total area covered by completed housing shot up 34% to hit 5.1 million square metres. Meanwhile, housing prices in Wuhan rose by more than 10%. Suzhou has also been affected by the overall increase in housing prices, which have risen to around RMB500 per square metre in the new region or even RMB1,000 in some of the hottest areas.

In 2001, China’s housing prices increased 2.2% from the year before and in the first half of 2002 grew a further 3.6%, staying within a reasonable range. According to surveys of 35 mainland cities, only five of the cities reported that the average prices per square metre were at or above RMB3,500. The ratio of housing prices to average disposable incomes stood at five to 14 times, in contrast to 6 times to 12 in the developed countries.

The Central Bank released a report recently on the implementation of the country’s monetary policies in the second quarter of this year. The report points to possible adjustments in the real estate industry following several years of rapid growth, a forecast that should arouse people’s attention. As to the contribution to the nation’s GDP growth, that of the real estate industry has been obviously far too high. According to estimates, real estate investments contributed directly to 1.3% of China’s GDP growth in 2001and indirectly between 0.6 and 1.2%. In total, the real estate industry contributed to between 1.9 and 2.5% of the country’s GDP growth last year. This is a clear indication that China’s GDP growth has been too dependent on the real estate industry.

The most important factor behind the real estate boom has been the country’s reforms in the real estate system and particularly the housing system that started in 1998. One can see an obvious watershed from the statistics over the years.

The Chinese economy started its rapid growth in the early 1990s and peaked in 1993 to 1994. This was followed by the central government’s drive to tackle the overheated economy, which led to downturns in both investments and the scale of housing construction. After hitting the bottom in 1996 and 1997, starting from 1998, the real estate industry began to experience an almost straight-line increase, which peaked before the end of the year; with total housing investments and new housing projects exceeding those of 1994. The Chinese economy continued to grow in 1999 and 2000, and the area covered by newly started real estate projects topped 200 million square metres in 2000. On top of that, 2001′s investments in real estate projects expanded by another 30%.

The rapid development, therefore, started in the wake of the 1998 reforms in the country’s real estate system. The real estate industry has so far been the driving force behind the development of the overall economy, and the reform has contributed dramatically to this. If the latest real estate fever is no bubble and all the demand seen so far is real, then the question is what will happen in the future? If the high-end market continues its expansion, a real estate bubble would be very likely, as there is no way of predicting where the market will turn.

China experienced a very dangerous real estate bubble ten years ago, which triggered two-digit inflation rates and led to mounting loans, that the banks could not recover, from speculative investments in the real estate industry. Such worries are again starting to haunt China.

This followed the initiation in early 2001, by the United States of a procedure under Section 201 of the US Trade Act 1974, which imposed a three-year tariff quota restriction as well as 8-30% tariffs on imports of major steel products. In this international steel trade dispute, the European Union, Japan, and the Republic of Korea (ROK) have, one after another, adopted protective measures to shield their domestic steel markets from an import impact. Initially, in order to prevent surplus steel products from flooding into the Chinese market, the Chinese Government introduced temporary safeguard measures on imports of some steel products. From May 24, 2002 it imposed tariff quotas on imports of nine kinds of steel products, namely ordinary medium plate, ordinary sheet, silicon steel, stainless plate, coil rod, section, seamless tube, and billet, for a period of 180 days.

Thanks to the introduction of these measures and the general pick-up of the macro economy, steel prices on the Chinese market rebounded strongly and steel enterprises reported a better performance. Despite a 50-% profit decrease, the iron and steel industry earned in RMB18 billion in profit in the first nine months of 2002, up 10% on the previous year. These temporary safeguard measures expired on November 24, 2002. New “final safeguard measures” were then introduced by MOFTEC. This followed a six-month investigation and two hearings, and is in accordance with China’s industrial policy guide, the development trend of the iron and steel industry, and current supply and demand on the domestic market. China has introduced these new measures based on WTO rules. Although free trade is the ultimate aim of the organisation, if a WTO member country suffers damage to a certain industry or products, it may legitimately adopt necessary measures to safeguard its rights and interests. Being able to introduce such safeguard measures on steel imports is arguably the greatest benefit China has achieved since its WTO entry. Instead of being severely affected, as previously anticipated, China’s iron and steel industry has available the same, legally-based methods of self-protection as other trading nations.

The final safeguard measures will create a comparatively relaxed environment for China’s iron and steel industry, in which it can complete its industrial restructuring. China plans to construct several plate production lines during the “10th Five-Year Plan” period (2001-2005) to produce quality hot-rolled and cold-rolled sheets, including plate for cars and household electrical appliances, container plate, cold-rolled silicon sheet, cold-rolled stainless plate, and galvanized sheet. Many new production lines are coming on stream in China at present. These include the sheet production line of Tangshan Steel; the second-phase plate production line of Handan Steel, the hot-rolled plate line of Wuhan Steel, the second cold-rolled production line of Anshan Steel, the second cold-rolled line of Benxi Steel, and the cold-rolled and hot-rolled plate production lines of Baosteel and Hualing. The market needs time to digest these capacities. China’s WTO entry has certainly lowered the threshold for similar foreign quality steel products to enter the country and to pose a competitive threat to the development of the iron and steel industry. Therefore placing steelmakers under the protection of these “safeguard measures” has won time for the industry to adjust its product mix and seek development in the future.

Steel prices, as a whole, are expected to stabilize after the “final safeguard measures” are introduced. Prices of plate products on both domestic and international markets are currently high. Meanwhile, the tariff quota for plate products has been used up, the imports are decreasing, and supply of various plate products is growing tight on the domestic market. Therefore the measures will bring new tariff quotas, which will release imported plate products now stockpiled in ports and bonded zones. This will help ease the tension between market supply and demand. Market prices of steel products put under the “final safeguard measures” may drop in the short term. But from the long-term point of view, plate products will be in short supply in China due to brisk development of car, machine-manufacturing, shipbuilding and real estate industries. Furthermore, plate product prices on the international market are unlikely to drop.

Although medium plate and sections have not been put under safeguard measures, the small import proportion has meant that their prices will be mainly subject to domestic market fluctuation. As the downstream industry develops strongly, market prices of medium plate and sections may remain stable for a period of time. As construction in North China has entered the slack season, a price drop of construction steels is reasonable and does not have much relation to the safeguard measures. Meanwhile, fuelled by brisk market demand and high prices of plate products, the price drop should not last long.

More recently, the government has further modified these measures by exempting a number of from 1 February, 2003, following further discussions with the iron and steel industry. However, it goes without saying that foreign-made iron and steel products will in the future enter the Chinese market freely, without trade barriers. China has to meet the requirements of trade liberalization advocated by the WTO. That is why the” final safeguard measures” last for only two and a half years. Chinese steel enterprises should make use of this short period of time to accelerate development, otherwise they will lose the battle in the future.

Consumer credit, with fixed risk has in recent years, become more and more accepted by Chinese residents. People are now starting to use this mechanism. The Shanghainese seem to be the leaders in the number of people using consumer credit, accounting for 13% of those surveyed, followed by Chengdu at 7%, Guangzhou at 6% and Beijing at 4%. The three hot spots are in personal housing mortgages, loans for durable consumer goods and car loans

Currently, seven forms of personal loans are available in China – housing loans, durable consumer goods loans, student loans, housing refitting loans, deposit certificate small mortgage loans, Lulutong personal consumption loans, and car loans. Among those surveyed, people who have borrowed or plan to borrow money from banks mostly require housing loans, durable consumer goods loan and car loan. Very few have applied for the other forms of loans.

Housing loan is the main personal loan issued by banks in Shanghai, Guangzhou, Beijing and Chengdu. More than 40% of consumers in these cities have bought houses in this way. Guangzhou and Shanghai rank top among the four, with the Guangzhou topping 83%. People take out housing loans ranging mainly from RMB50,000-100,000, accounting for 43% of the total, and RMB200,000-500,000, 26 % of the total. Second-hand houses with prices at about RMB100,000 and new houses with prices at more than RMB200,000 are the most popular types of property. Durable consumer goods loans, like housing loans, have snatched a big share of the loan market reaching 40% in Beijing, much higher than the other three cities.

Motor loan trade has also developed steadily in the four cities. Beijing leads in granting motor loans, accounting for 20%, followed by Guangzhou, 17%, Chengdu, 14%, and Shanghai, 13%. The high percentage of motor loans being issued in Beijing is attributed to its flexible car purchase policy, well-developed roads and transportation facilities.

Only a dozen Chinese banks can provide loan service. The survey shows that three banks, the Construction Bank of China (CBC), the Industrial and Commercial Bank of China (ICBC), and the Bank of China (BOC) dominate the market, providing 84% of loan services. The performance of the three banks varies in the four cities.

In Beijing, each of them has a 20% share of the loan market. In Shanghai, CBC and ICBC have 53% and 27% of the share respectively, leaving BOC, 13%, far behind. In Chengdu, CBC leads the others with the market share standing at 43%, followed by BOC, 29%, and ICBC, 14%. In Guangzhou, ICBC snatched 33% of the market share, while the other two each hold 17%. The above figures show, CBC is the market leader, especially in Shanghai and Chengdu. ICBC has also performed well according to the survey.

There is a big difference in the types of loan business done by the various banks. Housing loans are concentrated in CBC, accounting for 67% of the total, while ICBC has 17% of the total, and the Agricultural Bank of China, 10%. BOC has a 39% share in durable consumer goods loans, while ICBC and CBC, each account for 21%. ICBC and the Communications Bank of China have dominated the market of motor loans, with ICBC holding about a 65% share. Customer satisfaction is also generally high. The survey also demonstrates that more than 60 of those surveyed speak highly of their performance. The banks are now competing with each other to improve quality and increase the variety of services.

The survey also studied repayment ability and second-time application for loan. The survey shows that RMB100,000 personal loans are most favored by consumers. More than 80% of the borrowers say that they are competent to repay the loan, and only 20% felt that they might find it difficult to do so. About 50% say that they plan to borrow money again in three years. The development of the consumption loan market therefore shows great potential.

According to World Bank estimates, the logistics cost makes up 16.7% of China’s GDP. Such estimates demonstrate the potential of the market. Looking at projected figures and allowing for the fact that China’s GDP in 2000 is RMB 8,900bn, the goods flow cost would be RMB 1,335bn if the cost is just taken at a cautious 15% of GDP. It could also potentially be as much as RMB 1,780bn if the value is derived from a more speculative 20% of GDP.

According to the 1999 survey by the China Warehousing Association the total spending on logistics by a third party is about 10% of their total costs. The survey cements the impression of opportunity and future fluidity which surrounds the logistics trade, highlighting that 45% of the 450 questioned enterprises would choose new goods distributors within one or two years and 75% will opt for new types of goods distributors instead of the original warehousing and transportation enterprises. Allied to this, on a contractual level, 60% of the enterprises would hire out integrated goods flow to new types of goods-distribution providers.

According to executive vice-president of the China Goods Flow and Procurement Federation Ding Junfa, China’s logistics industry will enter a period of rapid development because it is impossible for the national economy to realise a shift from extensive operation to intensive operation without development of the logistics market.

With WTO entry moving ever closer, the domestic challenges brought by foreign logistics giants are being increasingly felt. The following agreements between China and the US and EU have helped open the door and accelerate foreign investment with regards to goods flow:

* China has agreed for the first time to give foreign companies the authority to distribute goods here, and has cancelled the existing laws which previously stopped this. This lifting of restrictions will give foreign companies the right to undertake goods distribution, whereby international companies may distribute both imported products and products made in China within three years of the WTO entry. This will be executed in wholesale, transportation and service trades, in which there are currently the most stringent controls with regard to distribution.

* China promises that after an interim period, almost all the limitations on foreign stock rights of all the logistics service industries will be cancelled. China will lift all the restrictions on foreign service-providers and allow them to enter the current market, without any hindrances with regard to market access or market activities. This will allow all the service industries to step into the existing market and take part in its activities. Similar commitments have also been made in the auxiliary distribution service, such as leasing, express delivery, warehousing, goods cabin, technical analysis and packaging services. Restrictive measures in these areas will be lifted in 3-4 years. Consequently during the period, foreign service-providers may build wholly-owned subsidiaries or operational organisations.

This future challenge will come not only from foreign countries but also the domestic buyer market. It is, therefore, perceived as pragmatic for Chinese enterprises to lower logistics costs to improve their viability.

The impending fracture of the logistics market will also offer developmental opportunities for Chinese logistics enterprises. The prospect of having to interact in an international marketplace after China’s entry WTO will enhance motivational levels, product awareness and the tempo of construction.

From a structural angle, the intensification of competition will make Chinese ports become modern logistics centres. With the evolution of the modern logistics industry, the ports will have to increase transit goods centres, transportation and warehousing facilities to replace the traditional loading and unloading and stockpiling practices. Using the establishment of the ports to develop storage and logistics services can be regarded as one way to demonstrate the future ports’ competitive power.

WTO entry will of course be the foundational stimulus with the influx of foreign capital and the development of imports and exports nurturing logistical demand.

The first signs of progression can already been seen within the Chinese goods distribution industry. The Shanghai Custom house has already built an international express mail regulation centre at the Pudong international airport, which is the largest and most advanced in China, and has the ability to handle 7,500 pieces of express mail an hour. China’s EMS has also offered a series of new services. There is, however, still a long way to go before Chinese logistics enterprises are able to compete squarely with foreign giants.

“We are regularly asked to compare the Pearl River Delta with the Yangtse River Delta”, admits Galpin. Both regions are what he calls “growth engines” for China and are suitable “bite-sized chunks” for potential foreign investors to understand. “China is just too big for people to get their head round otherwise,”, he warns.

So what is his feel for business sentiment in Hong Kong and its surrounding region ? Galpin is optimistic, despite the apocalyptic headlines in early April, “The people we talk to are generally bullish about the medium-term,”, he says, adding that for all the problems, “the fundamentals are strong”. He expects 2003 will be another “very busy and successful year for foreign investment here”. The local media often cause him – and others – to “despair” with their continual focus on doom and gloom. However, he does offer one note of caution – Hong Kong must watch its costs. “We must not become uncompetitive and price ourselves out of the market.”.

Posed the oft-asked question on comparing Hong Kong with Shanghai, Galpin notes that “neither operate in a vacuum”, and that they are different. Shanghai is focussed more on manufacturing, and has been driven by the state controlled economy. Hong Kong, on the other hand, specialises in services and consumer goods, and is driven by the private sector. At a regionally economic level, the Pearl River Delta is also bigger than the Yangtse River Delta (see comparative in related ‘Cover Story’ in this issue).

This attractiveness is why Hong Kong continues to enjoy significant success with foreign companies looking for a home in Asia. In 2002, InvestHK successfully attracted and assisted 117 firms to set up or expand operations – the highest number ever. Overall these projects generated total investment of more than US$174m and created over 2,070 jobs.

HK’s FDI in 2001 is larger than the combined total for the next four Asian markets of Singapore, Japan, Taiwan and Thailand. As Galpin says, “Hong Kong remains foreign companies’ launch pad of choice for international brands and new products, and their preferred Asian base to tap the huge potential of the mainland China market.”.

However, Galpin admits there is a “Shanghai fever”, and that the city is now demonstrating “a tremendous confidence”, having achieved much in a very short time. Everyone is trying to “ride the boom”, and InvestHK is no exception – the department established a Shanghai office in summer 2002, to attrract business from the east coast city and the neighbouring provinces of Jiangsu and Zheijiang.
During 2002, InvestHK hosted two mainland Chinese private sector delegations to Hong Kong, and held investment promotion seminars in Jinan (Shandong), Chengdu (Sichuan) and Nanjing (Jiangsu).

Hong Kong needs to retain a competitive edge, of course, and to find its new role post-1997. What should this be ? First of all, says Galpin, it should “be the route for foreign direct investment into the Pearl River Delta”. Secondly, Hong Kong can offer particular skills to Chinese small and medium-sized enterprises (SMEs), for example those who wish to “go global”. Hong Kong, as a modern Western city in China, can offer a good stepping stone to the rest of the world, and value-added services like branding, marketing and efficient distribution.

These sort of ‘soft’ skills are how Hong Kong should help Shanghai businesses, argues Galpin. Finally, Hong Kong can benefit from its extremely advantageous geographic position, with superb international air connections, to be a bridge between North-East Asia and South-East Asia and the base of choice for Asia-Pacific regional headquarters (RHQs) for multinationals and SMEs other large firms.

Galpin notes that 96 of the existing RHQs are in fact mainland Chinese, as well as 170 regional offices and 290 local offices, out of about 2,000 other mainland companies in Hong Kong.

But what about the other way around – what can Shanghai offer Hong Kong ? “Put simply, market entry – Shanghai is a more inward looking market than Hong Kong,”, says Galpin. And investment, too, of course – Hong Kong accounts for about 48% of all external investment in China, while the mainland accounts for about 31% of direct investment in Hong Kong.

The relationship between Shanghai and Hong Kong is, and will continue to be, “a close and productive one”, concludes Galpin. “Our slogan is ‘Hong Kong means business’ and I am delighted to see that Shanghai does too ! Long may that continue”.

Q: Could you firstly tell me a little about yourself and how you first started working with Hyatt International?

I found that very useful as it helped me to understand the lower ranking staff of the hotel business. I was then very lucky and moved up fast. I was given the chance to open two new hotels in the following years, in Cheju, Korea and Taipei, Taiwan, and then in 1996 I came here to Shanghai, to prepare the opening of this hotel. I was also put in charge of the development and operation of all the hotels in China (includes the region of Taiwan).

I think what was very important is that I was given the opportunity to open three hotels, which is quite unusual in our industry. I think in the hotel business, you have to have it in your blood. In many ways the financial reward does not correspond to the effort put in.

Q: Grand Hyatt Shanghai has a reputation for giving its guests the ultimate in 5-star treatment. In what ways do you distinguish yourselves from other luxury hotels?
A: I think first of all, we are blessed with superior hardware, being inside the tallest building in China and also being the highest hotel in the world. It’s almost like a place to see, rather than just a hotel. Not only do we have the most spectacular views overlooking the entire city, the environment and facilities in which to enjoy the views are superb – besides the luxurious accommodations, our 12 restaurants and bars are some of the best in the city – the highest pool and bar are both landmark places of the world. As a hotel built for the new millennium, our advanced technology includes wired and wireless broadband internet access, interactive TV and a technology butler at your service 24 hours a day.

On the service side – the software in the hotel – what we want to do is firstly, to exceed expectation, and secondly, to provide services before the guests ask for them. We also try to always give a very warm welcome and to make people feel at home. We want to be proactive. One of the things about Hyatt is that we have never wanted to be the largest hotel chain. We want to be the best hotel chain. Our emphasis is on quality rather than quantity.

One of the other things we concentrate on is value for money. Whatever we do, we don’t want people to think that because we’re a prestigious hotel, we sell everything for far too much. For example, the cost of a Coca-Cola is about RMB2. Traditionally, everyone charges RMB25 for cola. But I asked my staff why we charge RMB25 when it only cost us RMB2, so our Coca-Cola only cost RMB12 in room service.

If we are expensive, then let’s put it in the room rate and let that be what you expect to pay. I think all of these little things add up to a lot. We give people a sense of welcome, a sense of safety, a sense of warmth, and value for money.

Q: Having been here for a few years now, how do you feel about the energy in Shanghai, and particularly in the Pudong area?
A: I think it is really amazing. I came in April 1996. When I first arrived, people often quoted the saying: “I’d rather have a bed in Puxi than a house in Pudong,” and they asked me why we had picked a location in Pudong, thinking that we were crazy. At the beginning, I was worried, but now I see that our company made a very wise decision. With the support of the government, Pudong has simply transformed overnight.

It is amazing the amount of infrastructure that has changed, and the speed at which it has changed. I think that there are two things that have really brought Pudong alive. Number one is the opening of our hotel here in Jin Mao Tower. So many people come and visit here simply because they love to come and see the view. The second thing is the removal of the tunnel toll. I think for this reason that the Shanghai government is extremely smart.

Although they lost revenue there, they made people realise that Pudong and Puxi is actually one city. There was a sudden influx of people moving here, which in turn brought revenue for the government in land and property taxes. I think that now Puxi has become a bit stale. If you talk about newborn energy, you can see a more vibrant feeling in Pudong than in Puxi. I definitely think that Pudong will be the centre of Shanghai in the future.

Q: How do you feel the presence of the Grand Hyatt has affected the profile of the Pudong area in Shanghai, and Shanghai as a whole?
A: It’s definitely had a large influence. An example is the Fortune Conference in 1999. At that time, the Fortune Conference was the largest ever, with a total of about 250 CEOs out of the Fortune 500 companies. About 200 of them stayed with us, including Michael Dell [CEO of Dell Computers] and Jerry Yang [co-founder of Yahoo!].

Considering all these VIPs were staying at the Grand Hyatt, the government decided to take away all the areas that were not so developed around the building: to clear the space, and to make some park areas around. And that was the result of the Fortune Conference.

An interesting quote from one journalist has been, “With the opening of Grand Hyatt Shanghai, Pudong has suddenly become chic,” because prior to our opening, nobody wanted to come to Pudong. It was mainly countryside, and people didn’t often come here, but now it’s become a statement to say “I’m going to the Grand Hyatt.” The Grand Hyatt has definitely brought a lot of people over. It really represents the development of Pudong and Shanghai, and is the epitome of it’s future.

Q: Having mentioned how the hotel has affected business in the Pudong area, conversely, has the continued development and commercialisation of Pudong affected business at the hotel?
A: Definitely, to a large extent. Most of our business comes from Pudong. Of course, many of the Fortune 500 companies are located in Pudong, for example Intel and Coca-Cola. There is also the German Centre, newly created, which will bring in many German companies. The list goes on and on. So definitely, with the ultimate growth of Pudong, the scope of which is massive, we will benefit.

Q: Do you think the opening of the Shanghai Global Financial Centre in Pudong, to be built by the Mori Consortium, along with the planned opening of a luxury hotel at the top of the building, will affect business in your hotel?
A: Well, Mori is still considering which hotel may be put in the building. I don’t really think this will have a massive effect on our business. I know for sure that the new hotel will be relatively small. If they open, then there will certainly be competition, but by the time they open in 2005 or 2006, I hope that the supply will be big enough so that everyone has enough business.

Q: What plans does Hyatt International have for future hotels within Shanghai, and also for future hotels around China?
A: Remember that we are more a quality-concerned hotel company rather than worrying about quantity. I think that now, with Grand Hyatt Beijing open, we have a hotel in all the must-have places within the entire Asia-Pacific region. But when we start to think about having a new hotel, the first thing to consider is location. The second is the owner’s mission, which must be similar to ours. Finally, we have to consider the market, which is a very important factor.

We are not planning to have hotels everywhere in China. The current plan is, by 2005, to have 12 hotels here, whether in operation or under construction. Of course, we currently have hotels in Beijing, Shanghai, Xi’an and Tianjin. The Hyatt Regency Hangzhou should be open by the middle of this year, and we also have a project in Chongqing which should be opening in 2003, so that will makes six hotels within China.

One thing for sure is that we will have one more hotel each in both Beijing and Shanghai. For the final three hotels in China, we would like to have one resort, and the perfect place for that would be Hainan Island. I think Chinese people are now ready to go to resorts, and Hainan is the only place in China that one can say has a true Hawaii-style climate. The other cities that we may like to be in are cities such as Kunming, because of the unique culture, and maybe Chengdu, Guilin, Guangzhou, Shenzhen, Xiamen or Dalian.

Background
Edward Tai is the General Manager of the world’s highest hotel, the Grand Hyatt Shanghai, located in the top 35 floors of the magnificent Jin Mao building. He is also the Regional Director for the China region of Hyatt International, the worldwide luxury hotel chain.