Lauren Hilgers | Out of Shanghai

From the March ‘08 issue of Insight Magazine

Managing Risk in China’s Market

By Lauren Hilgers

For companies around the globe, from all markets and disciplines, the draw of China has become increasingly magnetic with each passing year. That glare of opportunity, however, can be blinding. In addition to being one of the world’s most promising markets, China is a maze of the heightened cultural, regulatory and structural risks that are signatures of most of the world’s emerging markets. Transparency is at a minimum and corporate governance is a concept still in its nascent stages.

Experts say the situation is fertile ground for abuses of the system, and while China’s regulators struggle to improve the situation, the burden of managing risk lies on companies themselves adopting best practices and making sure to do their homework. “You’ve got to know what you’re getting yourself in for,” says Jean Roux, a partner in PricewaterhouseCoopers Investigative Forensic Services.

The process is easier said than done in a market that moves at such a breakneck pace—every lost second could mean a lost opportunity. Risk management tools have become more sensitive to China’s market environment, but many newcomers find that extensive due diligence would slow them down too much. The consequences of ignoring the risks, however, can be crippling. (more…)

It poured in Shanghai on Saturday. Where I was in the old part of town, hail battered the windows and rain drops blew horizontally. To dilligent parents outside the high school near my house, however, the weather meant nothing.

Weilding umbrellas and mutturing to themselves nervously, parents blocked traffic on the street, waiting for their kids to get out of Shanghai’s college entrance exam. Their number steadily grew for about an hour before the students came out, parents whipped out ponchos and reserve umbrellas, and the crowd dispersed.

Car horns erupted on the street today and they started up the city siren system for the first time since I’ve lived here. Everyone on the street stopped for a moment and bowed their heads in deference to the victims of the Sichuan earthquake.

The difference between the silence on the sidewalk and the rucus coming from the cars was marked, but no matter how, it seemed everyone was participating.  Even the chefs appeared from the back of our neighborhood restaurant to stand outside for three minutes.  Store owners from down the block brought out their frightened dogs.  CCTV is now showing photos of government officials standing solemn around a conference table while car horns go off around them.

Here’s some footage of today’s three minutes of mourning around China.

This appeared in the December edition of Newsweek Select.

Business
Tough to Swallow

Tightening regulations are changing the face of China’s pharmaceutical industry.

By Lauren Hilgers (Shanghai)

At the junction of three major rail lines outside of Beijing at Shijiazhuang, China’s pharmaceutical row, warehouses are pumping out antibiotics and pain medication. Assembly-line workers bottle endless rows of traditional Chinese medicines, and neighboring Western clinical laboratories test their products on an equally ceaseless stream of Chinese people. “It’s where all the companies go,” says Shao Hui, senior vice president of China Aoxing Pharmaceutical, which has a sprawling 300-acre facility in the area. (more…)

Some genius children in Shanghai have come up with a modernized version of rock-paper-scissors and I caught them at it this weekend.  Pantomimed scissors, two fingers awkwardly stretched out and clamped together, have been replaced by the infinitely cooler finger guns in what is now called “guns, money and the old thief.”

The old thief, a thumbs up, steals the money, which is illustrated by rubbing thumb and forefinger together. The money, of course, buys the guns and the guns kill the thief.  Shooting the old thief with the finger guns is clearly the highlight of the game.

When I was covering business in L.A., I had the chance to report on how the movie studios were doing financially. Disney’s growth was almost always generously padded by how well their theme parks were doing. It makes sense, then, that a market like China would merit two Disney theme parks.

But does it make sense to put the happiest place on earth on Chongming Island, the home of the as yet unfinished greenest city in China? The island is slated for eco-tourism. Which, up until now, I have never associated with Disney. Or theme parks in general, really. No factories are allowed on the island and a city is under construction that is expected to be entirely sustainable. The northern part of the island, however, is set aside for theme parks.

The park isn’t expected to be built until after the World Expo in 2010, so who knows if Disney will actually end up on Chongming. If it’s got to be a theme part on that part of the island, maybe Disney offers the best chance at eco-friendliness? It always seemed cleaner than the other California theme parks, but that really isn’t saying much.

I somehow ended up in a TV studio in Shanghai this Wednesday afternoon, auditioning for a small role in an English newscast on Chinese TV. After having been slathered in makeup and literally pinned into a pink suit jacket, I was standing in front of the dark box of a studio camera, grinning back at myself on five or six different screens.

My task should have been simple: I was to summarize, from memory, a selection of five headline news stories that I had picked out that day, give a quick introduction to the program, and say a quick goodbye. I, of course, had little time to prepare and spent the taxi ride over writing down notes on Iran’s nonexistent nuclear weapons program. My lack of preparation, however, was nothing to the fact that I, apparently, cannot stand and talk at the same time without bouncing. Yes, I bounce. From the knees. (more…)

A few days ago I was trying to explain the story of Thanksgiving to a group of non-American friends–some Chinese, some French.   I was halfway through the story, momentarily off-track in an argument about the role Native Americans played in the first feast, when a Chinese friend piped up that she knew the story perfectly well.  She had seen it in cartoon form.

She then recounted the generally accepted version of the story–hungry pilgrims, helpful Indians etc.  The story was familiar right up until she reached her conclusion.  “They were happy that America was such a rich place,” she said.  “They had food….and they had GOLD!! They were eating… and they were digging for GOLD!”

I have to say, I kind of like her version better.

My language tutor here in Shanghai is soon to quit her job at one of the local Mandarin schools. The school is about to be sold off, and my tutor is fairly sure that she doesn’t like her new boss.  There is also some chance that her current salary may drop abruptly.

None of the tutors working at this school are contracted, which is, technically, illegal.  In China, particularly among migrant workers, lack of a contract is fairly common.  My language tutor’s salary is determined on a month-by-month basis.

All this is supposed to change on January 1st, when China’s new labor law comes into effect. Contracts will be required, firing employees will be harder and workplace environments more tightly regulated.  Whether or not the law will be enforced everywhere is anyone’s guess, but people around here are certainly well informed about it.

Another friend, when asked about the law, recited the mandatory allocation of paid days off for employees depeding on how long they’ve been with the company.  My tutor, however, is not waiting around to see what happens.  She’s looking for a better job.

Out to coffee last weekend, one of our Chinese friends took advantage of a pause in conversation to turn to Taylor, my boyfriend, with a wild-eyed look.

“Do you invest?” he asked. (Completely ignoring me, of course.)

What followed was a discussion of A and B share stocks in China, and a display of utter disbelief that Taylor had not yet gotten in on the action.

This is not the first time we’ve had this conversation, nor will it likely be the last. Living in Shanghai, buying stocks seems like a national pasttime. Down the street from our house is an extension of the Shanghai Exchange, where crowds of people sit on benches and watch their shares change in value on large screens. Buying bus tickets recently, the teller switched his computer screen back and forth frantically from the schedule to a black-background graph, with jagged red and green lines running up and down. The same screen can be seen at a corner shop for printing and faxing.

“It’s no good,” said the fax woman this morning. “Everything is going down.”

When Taylor asked if he could take a look at the screen, the woman got that same sparkle in her eye, like he might share in her passion for watching the market.

“Do you invest?!” she asked.