Recruiting in China

Star has appointed Dr. Jack Gao as its CEO of Star China. Gao will officially join Star in November 2006, and will report to Star CEO Michelle Guthrie.
Based in Beijing, Gao will be in charge of Star's overall business interests in China. He will be responsible for developing strategic and business directions while also overseeing Star China's day-to-day operations.

Gao has also been appointed VP of News Corporation and will assume the position of chief representative of the News Corporation Beijing representative office, responsible for running News Corporation's activities in China, informs an official release.

Commenting on Gao's appointment, Guthrie said, "Jack's insights to the China market, combined with his wealth of networking and business experience, and a proven track-record of success, make him a unique fit to lead our businesses and growth initiatives in China. We are fortunate to have attracted him to join us."

"Bringing on someone of Jack's caliber to lead our China operations underscores Star and News Corporation's commitment to this important market. As we expand aggressively into the digital media space, Jack's technology background and experience in running businesses for multinationals such as Microsoft and Autodesk in China will serve as important assets in taking us to the next stage of our development in China," Guthrie continued.

Gao said, "With China poised for sustained and strong economic growth in the years ahead, a tremendous number of opportunities for dynamic and progressive companies such as Star and News Corporation will continue to open up. I am thrilled at the opportunity to apply my experience in China to Star and News Corporation's businesses and look forward to working with Michelle and the rest of the talented team at Star and News Corporation in seizing growth opportunities in this exciting marketplace."

Prior to joining Star, Gao served for more than three years as Apac Emerging Geography VP for Autodesk Inc., where he was responsible for strategy, marketing and sales, product research and development, government and public relations, investments, human resources, finance and administration operations in Greater China and India. Before that, Gao was general partner of Walden International, a leading venture capital firm in the USA. Between 1999 and 2002, Gao was president and general manager of Microsoft (China) Co. Ltd. Prior to joining Microsoft, Gao spent five years with Autodesk, as regional director, Taiwan, Hong Kong and Mainland China, the release adds.

Gao holds doctorate, master and bachelor degrees in engineering from the University of California, Los Angeles, and Harbin Institute of Technology in China.

Trade unionists in the US and elsewhere have long argued that there is no labor movement in China. They rightly point out that Chinese workers lack even the most basic human rights protections, including the rights to strike and join an independent union.

But there's more to the story: Ten years ago, according to the China's Minister of Public Security, there were on average 10,000 large-scale collective protests each year. By 2004, the government recorded 74,000 large-scale protests. Late last year, the Minister of Police announced protests had increased to 87,000 last year, involving well over four million workers.

Four million workers! In the US we celebrated the birth of a new global social movement when 60,000 people showed up for the 'Battle of Seattle' in 1999. In China there is now more than enough evidence of continual worker self-organization outside of official trade union channels to put to rest notions that 'there is no labor movement in China'.

According to Robin Munro, research director of China Labour Bulletin, '[W]hereas 10 years ago I think you could have said China did not have a labor movement, that is no longer really the case- there is no freedom of association for workers, but hitherto, people have tended to think that, therefore, there is no Chinese labor movement. I think the scale of worker unrest nowadays is so great, you can go to almost any city in the country now and there will be several major collective worker protests going on at the same time.

So China now has a labor movement.This is an important point to just put there on the table and recognize. It is not organized. It is spontaneous, it is relatively inchoate. But then so were labor movements in most Western countries before trade unions were permitted. We have basically a pre-union phase of labor movement development in China today. It also has great potential, I think, for becoming a proper labor movement.'

In the years before the passage of the National Labor Relations Act - known as the Wagner Actor 'Labor's Magna Carta' - there was no legally enforced right to organize, bargain collectively, or strike in the United States. But US workers who were denied these rights responded with their own "pre-union" phase of struggle. Thousands of workers were arrested or beaten and scores shot dead for trying to exercise these rights. For example, in 1934 alone there were three general strikes and a huge national textile strike - all marked by substantial violence.

Largely in response to this upsurge, in 1935 the Federal government passed the Wagner Act hoping to legalize the labor movement and divert it into more moderate channels. According to a recent study by labor law historian James Gray Pope, the massive sit-down strikes and factory occupations of the following year cajoled the Supreme Court into reversing its own precedents and accepting the Wagner Act as constitutional.

American workers did not get their rights by waiting for the government to provide them; rather, they began asserting rights they believe they were entitled to, and thereby forced the Congress and the courts to acquiesce.

One innovative labor strategy that is being encouraged by CLB as a way to relate to the new emerging Chinese labor movement is the CC-2005 Campaign or Collective Contract 2005. (According to CLB staff, the Campaign's name is "a slightly cheeky designation, thinking in terms of SA-8000" and other Corporate Social Responsibility (CSR) standards.)

Under existing Chinese labor law, where there is no union presence in a factory, workers are allowed to elect their own representatives to negotiate and sign a collective contract.

With the ACFTU holding only 30% representation outside the government sector, CLB is trying to take advantage of this legal 'loop-hole' by urging multi-national corporations that operate in China 'to pressure their supplier factories into allowing the workers to negotiate a proper collective contract in the workplace.' The innovation of this approach is the use of existing Corporate Codes of Conducts to negotiate binding collective agreements with enforceable rights. CLB views the CC-2005 campaign an opportunity to create a basic organizing space that is legally protected in the private sector.

As Han Dongfang, Director of CLB, explains, 'What we want to do is get this collective contract regulation connected, with a code of conduct, a corporate social responsibility kind of thing, which they have been trying to work out for more than 10 years but have never worked out. Now we try to put it together as a new program. We make the corporate social responsibility, the Code of Conduct document, which has no teeth, and make them, together with Chinese law, have teeth, in particular with the workers' participation, workers' representation.'

CC-2005 has three major strategic objectives:

To mobilize workers to participate in collective bargaining, so that they can play an active role in protecting their own rights; To achieve real implementation of China's labor laws, trade union legislation and the relevant standards of the International Labour Organization; To provide a new and effective means by which multinational buyers can realize their commitment to the principle of social accountability.

The massive number of wildcat strikes occurring in China shows that Chinese workers are not waiting for official unions to reform themselves. Instead, they are fashioning new ways to improve their lot. So the challenge is for the US and the other labor movements to find ways to reach out and encourage new independent workers organizations in China. We might want to start by supporting CC-2005 campaign.

[Brendan Smith, Jeremy Brecher and Tim Costello are co-founders of GlobalLabor Strategies, a new resource center working to assist labor and other social movements make the connections and develop the strategies needed to function effectively in the global economy. Read their blog at www.globallaborblog.org.]

SHANGHAI, Oct 9 (Reuters) - Minutes after news he had quit as chief financial officer of KongZhong Corp. (KONG.O: Quote, Profile, Research), J.P. Gan took a call from a headhunter.

On offer was a top spot at a venture capital-backed Chinese company with plans for an overseas initial public offering.

CFOs and top level executives are in high demand across the globe as cash-rich investment firms put their money to work buying companies, changing management teams, and growing the businesses.

In China the effect is amplified. Young, western-savvy CFOs who have language skills, regulatory knowledge and international experience are highly sought after and hard to find. "Talent is limited, in general. That's just the way things are in China," said Jixun Foo, a Shanghai-based managing director at venture capital firm Granite Global Ventures.

Aggravating the shortage is the flow of western-educated executives out of the the corporate and investment banking sectors and into private equity firms and hedge funds.

To name but a few: HSBC China investment banking chief Huan Guocang joined Primus Pacific Partners. Dennis Zhu left JPMorgan to join Oaktree Capital Management while Bain Capital recently hired away Morgan Stanley China chief executive Jonathan Zhu.

Mark Qiu -- former CFO of CNOOC Ltd. (0883.HK: Quote, Profile, Research), last year left the top Chinese offshore oil producer to set up a private equity fund.

"Understanding the people-risk factor may be one of the most important things an investor needs to know before coming here," Foo said.

Buyout firms have invested more than $4 billion in China this year, compared with only $723 million in 2003, according to market data firm Dealogic.

While talented chief executives are in demand in China, many investors view equally talented CFOs as more significant and harder to find, given the increased accounting demands required by global securities markets.

Chinese companies need CFOs who can put in place or modernise their financial infrastructure to satisfy investors and regulators.

That means establishing proper billing procedures, cleaning up books, creating budgets, and setting up legal and compliance departments -- areas either neglected in many existing companies or not yet formed in young start-ups.

"There is a great demand for the CFO position," said Gan of KongZhong, who from 2000 to 2005 was Carlyle Group's director of venture capital investments in China.

Gan is leaving KongZhong, a $250 million Chinese wireless services company, for venture capital firm Qiming Venture Partners in Shanghai. He said he knows at least 10 venture-backed companies hunting for CFOs right now.

One key executive requirement is solid English skills.

With Wall Street investors and outside regulators increasingly involved with corporate China, English is seen as essential, especially for CFOs who handle the bulk of calls from such people.

A CFO of a foreign-listed or Hong Kong-listed Chinese firm can expect to earn anywhere from $150,000 to $500,000, plus options, said several people interviewed for this article, with CEO's earning slightly more.

That is well short of what some U.S. and European executives make, but it is more than many non-listed, old-style Chinese companies would pay.

Also fuelling CFO demand is a string of successful new China listings, which have sparked a rush to the initial public offerings market.

Peter Mok, President and CEO of KLM Capital Group, an investment firm specialising in Asia, says the real talent search action goes on among companies going for IPO.

"They are looking for someone who understands GAAP (Generally Accepted Accounting Principles) and who can connect with Wall Street," he said. "They need a guy who is dynamic and who is going to stay up late to talk to New York."

Beijing — After two years of slashing jobs at home, Nortel Networks Corp. has revealed another big increase in its engineering staff in China, accelerating a trend that has seen it shifting to lower-cost countries for its manufacturing and R&D.

Nortel disclosed Thursday that its R&D staff in China has grown by almost 30 per cent in the past year. The company now has about 1,800 research and development employees in China, compared with about 1,400 last year. This means that China now accounts for 15 per cent of Nortel's worldwide R&D jobs, up from 12 per cent last year.

Canadian politicians have criticized Nortel for shifting jobs overseas. The company announced in 2004 that it was cutting 950 jobs in Canada, including a large number at its R&D headquarters in Ottawa. It announced another 1,900 job reductions worldwide this year, and some of those job losses will be in Canada.

Four months ago, in another cost-cutting move, Nortel shifted its procurement office from Ottawa to Hong Kong. And within three years it plans to buy 80 per cent of its components and materials from low-cost countries, primarily in the developing world, compared with 30 per cent last year. The company has announced that it is adding about 800 new jobs in two low-cost countries — Mexico and Turkey — by 2008.

“China is becoming much more important for Nortel — not just in revenues but also in employment, as an R&D centre,” Nortel chief executive officer Mike Zafirovski said Thursday at the official opening of its new China headquarters in Beijing. “We have more and more operational responsibilities for all of Asia now being handled out of Beijing. It's a very good commitment to China but also very smart from a Nortel perspective.”

He would not rule out the possibility of further job cuts in North America as the company focuses more on opportunities in the developing world.

“We are not as competitive as we need to be,” he said. “Our costs are not at world-class levels, but they will be. Nothing will stop us in our pursuit of being the most competitive enterprise out there.”

Most of the planned cost savings, however, are likely to be from efficiencies such as better on-time delivery and improved systems, rather than shifting jobs to low-cost countries, he said.

The state-of-the-art office in Beijing is an example of the trend toward low-cost countries. With 180,000 square feet of space in the high-tech Wangjing industrial zone, the gleaming glass-and-steel campus is making it easier for Nortel to recruit China's new generation of R&D engineers. About 1,000 of its 1,800 R&D staff are based at the new Beijing campus, which was built as part of a $200-million investment announced in China in 2003.

China is also an increasingly important centre for Nortel's operations in Asia. A growing share of its Asian executives and R&D staff are based in China with a mandate to serve all of Asia. “We're utilizing the skills here for the benefit of Asia,” said Michael Pangia, president of Nortel's Asia division.

As it expands its operations here, Nortel is hoping for steady revenue growth from China, which accounts for the biggest share of the Asian division that now provides almost 14 per cent of Nortel's global revenue. China is also likely to benefit from Nortel's plans for greater investment in Asia.

“China would be a logical place for that to happen,” Mr. Zafirovski said Thursday. “We view China to be a major growth opportunity. We'd love to be twice as big in China.”

BEIJING, Oct 9 (Reuters) - Global news and information company Reuters Group (RTR.L: Quote, Profile, Research) opened a development centre in China for key products such as its 3000Xtra desktop terminal and said it expected to triple the operation's staff to 600 in three years.

The centre, located in the capital's technology hub of Zhongguancun, will also input data related to mergers and acquisitions, company financial reports and forecasts, and economic data for markets in China, South Korea and Japan, Reuters said in a statement on Monday.

It gave no figure for the amount invested.

"This investment underscores our commitment to China and our desire to participate in its future as a global leader in technology and financial markets," Chief Executive Tom Glocer said in the statement.

BANKERS and lawyers who operate in Beijing came down to earth with a thump last week. For months, they were the kings of town as they bunkered down to prepare the record $US21.9 billion ($28.46 billion) listing of Industrial & Commercial Bank of China.
With the job done (for shared fees of $US400 million), the advisers find themselves lower down the pecking order: behind important visitors such as African heads of state, 48 of whom arrived for the weekend's China-Africa "summit".

To allow African delegations easy movement, Beijing's authorities closed major roads and much else, creating traffic that has trapped bankers (and yours truly) in jams across the city. While the importance of advisers may have dropped, the share prices of Chinese banks continue to defy gravity.

The stock prices of ICBC, Bank of China, China Construction Bank and China Merchants Bank have all risen handsomely since floating, as shareholders gamble that lenders have reformed and will benefit from continuing double-digit economic growth. But how long before investor optimism falls?

China's largest banks have listed in near-perfect conditions, against a backdrop of record global liquidity. On the mainland, corporate profits are high, inflation is tame and economic growth is stable. In spite of the reforms, banks face little real competition and enjoy juicy spreads between deposit and lending rates.

It was only two years ago that bad loans at ICBC represented 21 per cent of the portfolio. Only gigantic re-capitalisations and loan write-offs by the state have enabled the large banks to become solvent.

Imagine the scale. ICBC runs 18,000 branches nationwide, some with managers friendly to the capital requirements of local industrialists. Investors are betting that banks' internal risk management culture and systems have, overnight, become sophisticated enough to stop poor lending or downright fraud.

In the words of Hong Kong governance activist David Webb, China has taken out the bad loans but has it taken out the bad lenders? Investors got a reminder of the not-too-distant past yesterday when it was announced that the former head of China Construction Bank had been given 15 years' jail for taking $US500,000 in bribes to arrange loans.

Zhang Enzhao abruptly quit in June 2005, four months before CCB became the first of China's big state-owned lenders to list in Hong Kong.

In short, it is remarkable that China's biggest banks have raised tens of billions of dollars from international and domestic investors, given that their recent trading history has been so abysmal and the banking sector is so immature.

The banking system remains deficient in several key respects, such as proven risk management. The banks have entered a new world, where they also have to tackle market risks such as foreign exchange and interest rate volatility.

China's legal environment is not mature enough, with huge improvements required in areas such as classification of property rights. The country has no independent ombudsman to adjudicate on consumer banking disputes.

Corporate governance within banks is largely untested, despite their efforts to hire independent non-executive directors.

While the banks have indeed been listed, the state retains about 80 per cent of the stock in each company. Will the state be a passive or active investor?

The Government wants banks to cool lending to prevent over-investment. But what if the banks have a commercial desire to create shareholder value by expanding lending?

Inside each bank is a Communist Party-controlled committee whose role is largely opaque. Banking executives claim that the chief role of the committees is to help enforce "discipline" among staff. Investors will have to take their word for it.

There is also a need to improve training, attract fresh talent and introduce performance targets and incentive schemes.

There is little doubt that the banks have made huge improvements compared with just two years ago. They have not felt ashamed to summon outside help, be it from McKinsey or foreign strategic partners such as Bank of America and Royal Bank of Scotland.

However, investors are either ignoring the risks in the rush for a fast buck or calculating that they can sell at the first sign of a slowdown.

Hong Kong-based Jing Ulrich, JP Morgan's star China equity-watcher, remains bullish on Chinese banks - in the short term. She says cash-rich global investors remain desperate to increase their China exposure.

But she also says many fund managers are judged on a quarterly basis and so could hardly miss out on the likes of ICBC. Quite.