Our first company visit in Shanghai was the American Chamber of Commerce. The organization is non-profit and considers themselves the “Voice of American Business” in China. With 3,000 members and 1,500 companies, they are considered the largest American chamber in the Asia pacific. They are a separate entity from other chambers of commerce however. The organization works to build relationships but also provide services such as visa services. They also maintain relations with US government and are active in advocacy.
One of the presenters, Daniel Rechtschaffen, came to China in 2011 to work while receiving his bachelor’s degree with a minor in Chinese. After he graduated, he moved back to China and received his master’s in China studies. Interestingly, he inadvertently ended up working for a corrupt government official when he first came to China. During traffic, the official pulled out a police siren and used it to get to his destination quicker. The other presenter, Chris Chen, works for PNC which is one of the company chamber members. He helps corporate clients do business in China by setting up entities or bank accounts. He’s been here for 4 years.
Something unique that happened is that the Ambassador was visiting while we were there. We were supposed to be in a larger room, but they said they needed that room for the ambassador. During the presentation, the ambassador was walking through the hallway and there were flashing lights from cameras going off. He had his own paparazzi. It’s also IPR, intellectual property, month in AmCham. They work on IPR infringement and they are currently putting out publications about it.
A main method of payment here is Alibaba or WeChat. People use apps to scan QR codes to pay for items. It’s so popular here that when we give bills to pay for items, they rarely have change. I learned that this system of payment is not unique solely to China. They got this idea from a project in the United States a couple years ago. But we also learned that there are reasons why QR code payment hasn’t taken off in the US. Banks get revenue when we swipe our cards, so if we transitioned to QR codes they would lose this revenue. Another reason is that customers would lose out on incentivized rewards that they would get do they used a store card. It’s a different ecosystem shaping the dichotomy on how payments are made.
The phrase China’s economic miracle is used to describe China’s economic growth in the past 40 years. The economy is a free market with a lot of different private controls. China’s share of the global GDP has risen from 1.7% in 1989 to 19.6% in 2018. The spur of growth is fascinating to me. When we walk down the streets of Shanghai, it’s surprising to me that the buildings were only just recently built. By 2023, it’s estimated that China will account for 20% of the world’s economy and take over the GDP share. With all this infrastructure growth, we learned it comes with a price: government debt. The government makes its money from corporate and land taxes. Now it’s become a question of whether or not they can repay it. There are several ways that the government controls resources. One of these resources they control is the number of cars on the streets. To get a license plate, an individual must pay 200 RMB each month to be placed in the lottery system where they have a 4% chance of winning. If they win, they must pay $12,000 USD for a license plate. Another way they place constraint on public resources is depending on where you live, you can only use certain public resources: hospitals, grocery stores, schools. The system that determines this is called Hukou. This system is associated with communist China.
Dr. Li grew up with this system. He recounted having to carry around the Hukou book with him when he went to buy groceries. The book limited the amount of food a household can buy. However, you don’t need the book anymore to buy groceries.
A big influence on China today is Xi Jinping. He is the General Secretary of the Communist Party. A lot of his ideologies come from his research into the Soviet Union. China becoming a large global leader has become a relatively new goal under Xi Jinping. China shifted from a revolutionary party to an economic party.
Our second company visit in Shanghai was Horiba. Horiba provides instruments and systems for various industries; automotive test systems, process and environmental; medical-diagnostic, semiconductor, and scientific are the five industries that they participate in. The biggest portion of their sales comes from the automotive market, and their second highest sales come from their semiconductor market. Their employees are mostly Japanese (38%). They are dominant in market shares as well with 80% from them in global emissions measurement systems and they make up 100% of the market shares in domestic automatic blood cell counter. With them being vertically integrated, I was worried they’d lose out on innovation since they do not interact with the market as much. However, they divert 7-8% of their revenue to research and development which is a lot more than the average of 4-5%. This is because they are doing more customized products. An interesting point brought up during the company visit is that Japanese companies do not engage in marketing a lot because it’s not in their business culture. I find this interesting because marketing is a huge aspect of American business and people even study it in school. We toured their facility and I had not seen the inside of a factory before, so I found it fascinating. I might not be an engineer, but I could appreciate the complexity of what they were doing.
