Walter Hutchens’ Blog

Last week I led a class in Shanghai for Smith School MBA students.

The course was titled Doing Business in China. Its main focus was China’s financial sector, including China’s banking, insurance and and securities markets. We also explored general themes of doing business in China and looked specifically at foreign direct investment (FDI) in China’s manufacturing sector.

We met with a number of insightful people, including those listed below. (The list is arranged by topic, not quite chronologically.)

General Themes of Doing Business in China

Patrick Cranley, managing director of Asia Media, a communications company in China.

James Golsen, a representative of the U.S. Foreign Commercial Service.

Alick Sun, China manager for Schering-Plough, an agricultural biotech company (and Maryland MBA).

Prof. Zhou Dunren, a former Fudan University faculty member who now works for the Pudong Institute for the U.S. Economy.

Xiang Wang, an attorney with Jones Day who specializes in IP law.

Banking

Julia Wu, a deputy general manager for Deutsche Bank in China.

(Stephen Green of Standard Chartered also discussed banking).

Insurance

Dean Cowan, a senior manager and insurance specialist with BearingPoint who has been stationed in Shanghai for over a year.

Terrence Cummings, an actuary with the American International Assurance (AIA).

Michael Yu, a vice president of AIU in China.

Both Mr. Cummings and Mr. Yu spoke to us at the headquarters of American International Group (AIG) in their old building on the Bund.

Securities Markets

Situ Danian, a senior research fellow at the Shanghai Stock Exchange.

Li Gang, a Shanghai-based managing director of China International Corporation (CICC), the leading investment bank in China.

Stephen Green, senior economist with Standard Chartered in Shanghai and author of China’s Stockmarket.

Foreign Direct Investment & Manufacturing

Qiu Xiangrong, a deputy director of investment promotion in the Pudong New Area department of commerce. Ye Fan also joined the discussion and helped with translation.

Officials from the Suzhou Industrial Park.

Zou Qin, a vice president of Black & Decker, in charge of their Suzhou Industrial Park factory which we were able to tour.

Natalie Annmitoraj, a vice president for quality with Shanghai General Motors (no photo). The SGM factory tour was interesting, and we were grateful for the chance to see first hand what may still be the largest FDI project in China. SGM’s speaker gave us a brief presentation about the JV, including statistics about its booming sales (from 20,000 to 500,000 cars in 6 years). However, her expertise was mainly in operations, and I think for this group of MBA students it might have been even better to hear from someone who worked with finance, management, law or some other “corporate” department. The speaker was unable or unwilling to answer many of the students questions.

These meetings were all held during a single tightly-packed week.

Prior to arriving in Shanghai, the class met for nine hours in the U.S. These pre-departure meetings, spread over three Sunday afternoons, were designed to give the students initial context for what they would experience in Shanghai. I lectured about Chinese language, culture and history. It was radically truncated, but it did at least give them some highlights. I didn’t have to persuade them of the relevance of history; between our first and second meetings, anti-Japan protests erupted across China, making the relevance vividly clear.

In the final U.S. meeting students made group presentations. I had divided them into teams and assigned each team to one of the main topics we planned to explore in Shanghai (general themes and issues, banking, insurance, securities markets and FDI/manufacturing). Each group gave the entire class a preliminary briefing on its respective topic. This allowed a subset of the students to become conversant with a particular area and enabled the entire class to gain at least one exposure to some of the vocabulary they would be hearing in China (NPLs, SOEs, SAFE, CSRC, CBRC, CIRC, etc.).

Besides providing an initial briefing, each group was asked to post material to a course blog while we were in Shanghai. The idea was that they would cover our activities in China related to their topic, providing a journalistic account of what we did in Shanghai along with some analysis and links to other resources relevant to each group’s respective topic.

I think the pre-departure group presentations were helpful, and I think the idea of a course blog is generally a good one. But there is substantial room for improvement in the execution of the course blog assignment. I’ll write about that separately.

Overall, I though the course was successful. Many of the students were, predictably, captivated by Shanghai. They could feel the momentum, and they saw the physical transformation the city has already undergone. Like many visitors, they became convinced that what is happening in China is profoundly important for the future. The could feel it, which is something classroom-based education doesn’t always inspire. However, I was pleased that, along with being seduced, they also heard about some of the real difficulties of doing business in China and some of the enormous challenges the PRC faces.

I assigned the book Mr. China to the entire class. It is not a theoretically rich work, but its stories about how some Western business people lost enormous sums in China and were sometimes defrauded by their Chinese partners is sobering.

Once there, the students heard a lot about infirmities in China’s banking system and stock markets. They also got a sense of some of the regulatory hurdles that many foreign investors face. Thus I think they got a relatively well-balanced exposure to the enormous opportunities and challenges confronting those who do business in China.

Many of these students will probably return to China on business. Even if they do not, what happens in China is likely to affect their lives and careers. These students will be equipped with some very helpful background for grappling with that aspect of their future.

One delight of this trip for me was that I didn’t have to fret about logistics. The Maryland China Center, a quasi-state agency of Maryland based in Shanghai, provided great support, as they have for each of the last three years when we’ve offered a Smith School of Business course in China. Above I am pictured with MCC staff members Karen Sun and Jim Curtis, our minders for the week. When I took a group of undergraduate students to Hong Kong in January, I didn’t have such help and personally made dinner reservations, booked buses and counted noses at each stop to be sure we didn’t leave anyone behind. All that was exhausting. The MCC relieved me of all that, so I was able to concentrate on structuring the course and other purely academic dimensions of the trip. Moreover, they helped not only with “logistics” but also with the substantive content. Having worked in China before, I had contacts in the sectors I wanted the class to focus on, but the MCC arranged meetings with many high-level people whom I didn’t know. They made the course much better than it would have otherwise been, and I am very thankful for their hard work and valuable help.