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I recently had the opportunity to take part in the annual summit of the China Entrepreneur Club, an extremely selective group of Chinese business leaders (59 in total) chaired by Jack Ma, the Founder & Chairman of Alibaba. The summit, which took place in Tianjin on April 21-22, 2018, showcased an impressive panel of top Chinese business leaders – from Jack Ma to Liu Chuanzhi (Founder and Executive Chairman of Lenovo Group) and Ma Weihua (former Chairman of China Merchants Bank). Topics discussed ranged from CSR to AI, blockchain, IoT, retail innovation and internationalization strategies of Chinese companies.

Here are my 4 main take-aways from the summit:

  1. There is a new, vigorous top-down push for Corporate Social Responsibility in China
  • The theme of this year’s summit, “The Age of Smart Business: High-Quality Growth and Value Creation”, clearly emphasizes the shift in priorities from “economic growth at all cost” to growth that focuses on innovation, respect for the environment and keeping a lid on debt.
  • The opening panel was about “Impact Investment”, during which Ma Weihua, former President of China Merchants Bank (China’s first national joint-stock commercial bank), who is now Chairman of the China Global Philanthropy Institute, was joined by a panel of major Chinese business leaders to talk about the importance of impact investing, and its related opportunities and challenges.
  • The closing speech, by Jack Ma, emphasized companies’ responsibility vis-à-vissociety, both in China and globally, across generations.
  • This is the first time that I hear such a strong, consistent top-down emphasis on CSR from some of China’s top leaders. I expect this trend to continue.

2. Global leadership in AI is continuously emphasized as a national Chinese priority

  • One of the most interesting panels of the summit included 3 Chinese entrepreneurs focused on AI (from Horizon Robotics, Mobvoi and Beijing Unisound).
  • As could be read between the lines of the panel, China seems innovative in terms of applying AI at a software level, but still lags behind at the hardware level (e.g. chips). The travails of ZTE – a leading Chinese telco equipment provider which, when threatened of being banned from importing critical components from the US, ceased operations in early May 2018 – is a case-in-point.
  • Chinese leaders are now acutely aware of this. In July 2017, the Chinese government set a goal of making China the global leader in AI by 2030, and listed AI chips as one of eight key technologies.
  • As such, significant investments will keep being poured into this field.

3. China is questioning how its tax system affects its economic competitiveness and labor costs

  • During the summit, one of China’s most senior tax officials expressed that one of the heaviest burdens on Chinese companies is high labor costs – induced by high personal income taxes rather than high salaries. Xu Shanda, the Former Vice-Director of China’s State Administration of Taxation, stated that the maximum 45% personal income tax rate for employees is too high and should be lowered to 25%.
  • Mr. Xu also mentioned that tax reform in China is made all the more pressing by the Trump administration’s reform of the US tax system (signed in December 2017), which lowers federal tax rates for companies and most individuals.
  • The remarks were made during the launch of the “Sino-Foreign Corporate Tax Burden Comparison” research report, put together by the SEEC Research Institute in collaboration with the China Entrepreneur Club.
  • While in other developed countries, there is sometimes a lingering perception that China is still a “low-cost country” (even though that is decreasingly true), it was interesting to hear that Chinese authorities believe that labor costs in China are too high and that global competition is definitely felt in China – not just the other way around.

4. Lastly, for all the talk about Chinese companies going global, there were only a very limited number of non-Chinese summit participants – reflecting the challenges of corporate China’s internationalization. Therefore, people who can act as bridges between the two cultures will continue to play a key role in Chinese companies’ strategy and development abroad. 

 

Written by Laura Blanco (Shanghai), China, June 2018

 

Laura Blanco Ph.D. Is APAC Business Developer ( 亚洲业务发展经理) for North American Hoganas (Shanghai)

 

The Asia Environmental Daily