This article discusses structural reforms needed in China to address challenges from its changing demographics. The One Child Policy has led to an aging population and fewer young workers. This is exacerbated by a lack of social welfare programs. The article argues China needs to reform its social security system, healthcare system, and raise the retirement age to deal with these issues impacting its economic growth. Reforms are urgently needed to sustain China's rise.

1. BUSINESS
ASIA
ISSUE NO.7, Fall 2012
ASIA
In Reform

2. THE BAJ TEAM
EXECUTIVE BOARD EDITORIAL
Editor-in-Chief Zhi-Yen Low Erica Boorstein
Director of Design Yanbin Feng Jonathan Dawson
Co-Presidents Jill Seong Kevin Hua
Stella Zhang Denis Hurley
Director of Marketing Mingxia Zhu Ajay Kailas
Director of Finance Madeline Culkin Mingming Koh
Ken-Ji Low
University of Indonesia Maria Marcia
DESIGN ASSOCIATES Advai Pathak
An-Chi Dai
Jiting Wang
Arthur Teng
Cover Photo Source: CONTACT US:
http://www.catholicbridge.com/ BusinessAsia.Journal@gmail.com
http://msnbcmedia.msn.com/ www.cubusinessasia.com
2 Business Asia

3. EDITOR’S LETTER
2
012 has been a year brimming with uncertainty- with European
leaders struggling with mounting national debt, the recent U.S.
Presidential Elections, and China’s leadership transition. Our
previous issue welcomed the Year of the Dragon, bearing bright hopes
and expectations for the future of Asian economies. Today, the seventh
issue of the Business Asia Journal welcomes the new leaders that aspire
to guide us there.
These are challenging times to be a leader. The growth of
powerhouse economies China and India is beginning to falter, exposing
deep structural fault lines within their governments. For all their
newfound wealth, these economic giants are now experiencing acute
growing pains. Our writers touch on current reform efforts in India, and
the effects of technological development in Indian cities. China grew
at breakneck speed for a decade, but growing dissent and an urgent
need for financial reforms threatens future stability. China partly owes
its economic decline to its One Child Policy-inflicted demographic
imbalances and rapidly aging populace. The burgeoning Chinese fast-
food industry is set to perpetrate widespread socio-cultural changes
and increased obesity rates throughout the country, whereas the recent
Sino-Japan territorial dispute has also cast dark clouds over an already
fragile global economy.
The future is not all gloomy, however. Our writers point to South
East Asia as an alternative investment destination, with Indonesia leading
the region’s growth with its high domestic demand. Also of huge growth
potential is the field of microinsurance in Asia, of which large regions
still remain untapped. Both of these articles highlight the potential to
translate economic growth into the alleviation of poverty. Additionally,
Tata Motors’ acquisition of Jaguar continues the trend of strategic direct
We would like to investment in the developed west by emerging third world markets.
thank the following Western fashion capitals are looking eastward, with influential Asian
designers taking center stage at major global fashion weeks. Developed
sponsors for their countries now face a changing landscape in their smartphone markets
generous support: due to the recent onslaught of intellectual property battles.
Business Asia has matured as a publication since its inception
four years ago. I would like to express my deep gratitude to the Editorial,
Design and Marketing teams for investing so much time and effort in
the production of this publication. Also, a very special thank you goes
to our former Editor-in-Chief, Yun Qi Mok, for all of her dedication,
mentorship, and for believing in me.
Finally, thank you to you, dear readers, for your continued
support. We value your opinion greatly, and would like to hear your
thoughts. If you have any comments, suggestions, or would like
to contribute to future issues of our magazine, please contact us at
BusinessAsia.Journal@gmail.com.
Sincerely,
Zhi-Yen Low
Editor-in-Chief
Fall 2012 3

4. TABLE OF CONTENTS
India: Going Forward
12 2 The BAJ Team
in Reform 3 Editor’s Letter
POLITICAL ECONOMY
6 The Microinsurance
Revolution
by Maria Marcia Tj.
A brief history and education
18
on the field of micro finance and
Hu’s out, Xi’s In: its significant role in reducing
poverty
Times Ahead for Xi Jinping
9 A Case for Structural
Reform
by Advai Pathak
China’s demographic imbalances
and rapidly aging population
has serious repercussions for its
economic growth
12 India: Going Forward in
Reform
by Mingming Koh
An overview of the Indian
Congress Party’s proposed
9
economic reforms
A Case 16 Sino-Japan Islands Dispute: A
Potential Threat to Economies
for by Jiting Wang
Territorial conflict over the
Structural Senkaku/Diaoyu Islands creates
protests and friction between
Reform China & Japan
4 Business Asia

5. TABLE OF CONTENTS
18 Hu’s out, Xi’s In: Tough Times Ahead
for Xi Jinping
33 Asian Designers are the Future
of Fashion
by Zhi-Yen Low by Erica Boorstein
As newly anointed chief of China’s Western fashion capitals looking
Communist Party, Xi Jinping has tough eastward for up and coming Asian
reform challenges ahead designers
GENERAL BUSINESS TECHNOLOGY
21 Looking Beyond Chinese 35 iLitigate
by Denis Hurley
Borders: A G.E.M. Within Samsung, Apple, and the
Southeast Asia Wave of IP Suits Changing the
by Ken-Ji Low Smartphone Market Landscape
Exploring South East Asia as an
alternative strategic investment
destination
INTERVIEW
24 Cyberabad
by Ajay Kailas 38 Interview with Sean Hu
by Stella Zhang
An inside look into the growth and Sitting down with Sean Hu, Managing
flourishing of India’s Silicon Valley Partner of Bionest Partners to hear his
insights on U.S. healthcare consulting
26 Revival of the Big Cat
by Advai Pathak
Exploring cross-border M&A’s through
Tata Motor’s acquisition of Jaguar
LIFESTYLE
30 Super-Sized China: Burgeoning
Chinese Fast Food Industry
by Kevin Hua
Socio-cultural changes and the
growing fast-food industry are major
contributors to Chinese obesity rates
Fall 2012 5

6. POLITICAL ECONOMY
The Microinsurance
by Maria Marcia Tj. | University of Indonesia Revolution
I magine this. You’re a farmer in
Rajasthan, a northern Indian
state near the Thar desert. You
We all have heard the term
What is microinsurance?
microfinance – especially after
ance serves as a safety net. With
microinsurance, they don’t have
to worry about falling into abject
have been taught a new technique Muhammad Yunus and Grameen poverty when they try new tech-
of irrigation that can conserve wa- Bank received Nobel Peace Prize niques to increase their income.
ter and boost crop yield. Would you in 2006 for their efforts to cre- The International Asso-
implement the new technique? ate economic and social develop- ciation of Insurance Supervisors
As an undergraduate busi- ment by pioneering microfinance (IAIS) defines microinsurance as
ness school student, I thought in India. Lasting peace can be “protection of low income people
the answer to be simple and log- achieved through the eradication against specific perils in exchange
ical: Yes –since increased yield of poverty and microfinance is for regular premium payments
would also mean increased in- one of the many ways to do that. proportionate to the likelihood
come. On the other hand, that For the Rajasthan farm- and the cost of the risk involved.”
may not be the logical answer ers, microfinance is a helping The main challenge here
for low income individuals. Why? hand for them to buy new seeds is low income individuals. How
Farmers are risk averse – crop or equipment. But what about do we sell insurance to someone
failures for them would mean the crop failures? This is where who has never heard of the con-
a disaster that could push their microinsurance comes in. For the cept? How do we convince them
families into abject poverty. Rajasthan farmers, microinsur- to pay for something they cannot
6 Business Asia

7. see, touch, or feel? More impor- claims handling processes that in the world, cover 80% of the
tantly, how do we make money can prevent misunderstandings. global microinsurance market,
out of policies with the premi- sixty percent of which is in In-
um at just a few dollars a year? dia. However, the growth of cov-
Low income individuals do ered risk in Asia is not limited to
The reach of microinsurance
manage their risk. They save, re- Approximately 83% of these two countries. In The Phil-
in areas of Asia
duce expenses (sometimes even by
withdrawing their children from
school), borrow emergency cred-
it from relative or money-lenders,
Approximately 83% of people
and sell whatever assets they have. l
­iving in Asia are classified as low
These existing risk management
practices work, but they make low i
­ncome, making Asia the center of
income people very risk averse
and thus, may halter development.
m
­ icroinsurance development.
Insurance is not high on
their list of risk management artil-
lery, but that may be because of the people living in Asia are classified ippines, 14.2 million low income
underdeveloped state of insurance as low income1, making Asia the individuals have microinsurance.
culture. Nevertheless, supplying center of microinsurance devel- Bangladesh and Pakistan are also
something that is new and perhaps opment. In 2011, there were 350 showing significant growth, while
not trusted requires investments to 400 million insurance holders Cambodia, Indonesia, and Sri Lan-
in market education about wheth- covered in Asia.2 China and India, ka are beginning their journey.
er such a product is necessary. the two most populous countries According to Microin-
To make money out of mi- surance Compendium Report,
croinsurance, simplicity is a must. there are several reasons why
The small premiums and claims Asia is ahead on the microin-
surance trend: large and dense
1 World Research Institute – The
require low transaction costs for
populations, interest from pub-
Next Billion (2007)
both the insured and the insur-
ers. Low transaction costs means lic and private insurers, proper
2 Microinsurance Compendium,
efficient products, policies, and distribution channels and active
government support, for example
Protecting the Poor Volume 2.
through subsidies. The countries
Published by ILO and Munich Re
in Asia that offer the greatest im-
Foundation (2012)
mediate potential for microinsur-
The World Economic Pyramid (2006)
ance are India, Indonesia, China,
The Philippines, and Vietnam.
India has well-developed
microfinance institutions, so mi-
crofinance and microinsurance are
often sold as a one package deal. In
Indonesia, there are state restric-
tions that impede market develop-
ment for microinsurance, but pilot
schemes are already underway.
There is also potential for Takaful
(Islamic) insurance in the country.
Microtakaful, also called Sharia
microinsurance, can increase the
reach of insurance to low income
groups, who may hesitate to buy
conventional insurance out of re-
Source: Thematic Research Highlights by Generation Investment
Management, 2007
Fall 2012 7

8. nels. These new products are
helping microinsurance to reach
Estimated Outreach of Microinsurance in the World
more people than ever before.
Microinsurance coverage
is growing substantially over the
years and the demand is too. To-
tal demand is growing more than
10% every year, with premium
increases outstripping those in
developed markets. Commercial
insurers have also seen the mas-
sive opportunity of microinsur-
ance and entered the low-income
market, creating economies of
scale. At least 33 of the 50 largest
commercial insurance companies
in the world now offer microin-
surance, up from only seven in
Source: Microinsurance Compendium, Protecting the poor Volume
2005. The MicroInsurance Centre
2. Published by ILO and Munich Re
ligious considerations. China, like ance. In 2009, the number grew estimates there will be one bil-
Indonesia, has state restrictions to 135 million people. As of this lion policyholders in the world by
that may hinder the market devel- year, nearly 500 million people 2019. With the number currently
opment of microinsurance – but are covered by microinsurance. at 500 million policyholders, that
in the short term. In The Philip- Technology develop- number looks quite achievable.
pines, there are concessions in ment is one of the factors that The goal of microinsur-
place for microinsurance. Compa- support the growth of microin- ance is to end the poverty cycle,
nies are also lobbying government surance. Cell-phone providers but it cannot possibly lift poverty
to exempt microinsurance from and local minimarket chains, by itself. However, it is a valuable
taxes. In Vietnam, income distri- despite being non-traditional, tool to break the cycle and the po-
bution is weighted to the urban can be intermediaries for mi- tential growth of microinsurance
poor rather than the rural poor. croinsurance, making it easy to business is massive. This may just
For microinsurance to reach by low income individuals. be that one area of promising busi-
grow, it needs to be tailored to Climate change, popula- ness to get into without having to
the countries’ specific needs, tion growth, and rapid urbaniza- choose between charity and profit.
situations, and opportunities. tions have the greatest impact
on the lives of low income peo-
ple, who have the least ability
to adapt. These increased un-
Potential Growth of
In 2007, four billion peo- certainties have positive im-
Microinsurance
ple in the world are classified as pact on insurance culture in
low income. They have combined developing countries, helping
annual purchasing power of USD microinsurance market to grow.
5 trillion. They are eligible for mi- According to the Micro-
croinsurance and severely under- insurance Compendium Report,
served. According to Lloyds Mi- there have been many innovations
croinsurance Report in 2009, 1.5 in the field of microinsurance
billion of low income individuals over the past years. New prod-
want and are able to pay; but are ucts covering a variety of risks
without access to microinsurance. have been piloted and distribut-
In 2007, there were 78 million ed to poor households through
people covered by microinsur- an increasing diversity of chan-
8 Business Asia

9. POLITICAL ECONOMY
A CASE FOR CHINA’S
UNSTOPPABLE
STRUCTURAL REFORM ECONOMIC GROWTH
Advai Pathak, Cornell University ‘15, School of Industrial and Labor Relations
A
merican hysteria regard- lem China must confront is its facing neighbouring BRIC India),
ing her seemingly irre- rapidly changing demography. China’s demographic changes are
versible decline seems to Introduced in 1979 under now having widespread secondary
inevitably reach fever-pitch when Deng Xioaping after years of offi- effects.
China is introduced into conver- cial policy waffling by the Chinese The population structure
sation. China’s unstoppable eco- government, the One Child Poli- has drastically become extremely
nomic growth over the past two cy has had significant and drastic top heavy as a result of the unnat-
decades has led to almost univer- effects. It was instituted to steady ural and sudden changes in birth
sal acceptance of its assured path China’s ballooning population in rates imposed by the One Child
towards hegemonic status. Yet, un- an age of concern over its ability to Policy. Whereas the American
derlying China’s sparkling growth effectively feed itself and has been fertility rate remains around 2.1
figures are significant structural estimated to have reduced China’s (considered an acceptable replace-
issues that threaten its future suc- population by 300 million people ment rate to maintain a stable
cess. Aside from its shocking level over its first two decades. Though population), China’s has dropped
of state debt and the sheer number in general it has been considered to a national average of 1.56. At
of political demonstrations na- successful (bearing in mind the this level, China’s babies are failing
tionwide, the most serious prob- enormous population challenges to replace their parents, leading to
Fall 2012 9

10. POLITICAL ECONOMY
a steady decline in population. By a comprehensive pension plan and
2060, China’s population is pro- the incomplete program currently
jected to drop below 1 billion. in place has an unfunded liability
The most obvious issue worth about 150% of its GDP al- China’s growth over
raised by these statistics is that ready. In keeping with traditional
China’s population is ageing and Confucian values of filial piety, the past half century is
it is doing so at an unprecedented China’s younger generations will
rate. Its current median age is 34.5, be expected to save and provide
certainly remarkable.
close to America’s 37 and that of for their elders but this will place How it manages that
other wealthy countries in general. them under enormous pressure.
However, because of their contrast- China’s youth is facing what has growth and whether
ing fertility rates, China is ageing become known as the “4-2-1 Phe-
much more rapidly than America. nomenon” - 4 grandparents and
it is able to sustain
By 2050, China’s median age will 2 parents being provided for by its growth will be the
be 49 compared to America’s 40, a just a single worker. The level of
level of demographic change that support afforded by the state in story of the next 50
is entirely unprecedented. An age- support of pensioners will rapid-
ing population isn’t dangerous in ly become a very serious issue for
years.
and of itself. Many countries that young Chinese in years to come. es, currently appreciating between
are currently in the post-industri- China’s second major con- 10-20%. Employers are finding
al stage of demographic transition cern is that its workforce is pro- the labor market an increasingly
also face the same issues. However, jected to shrink drastically over competitive arena and are being
China’s issues arise from the fact the next half century. Having re- forced to respond to higher wage
that it hasn’t the resources to sup- lied on mass urbanization to pro- demands. In addition, the gov-
port its ageing population in the vide for its enormous labor force ernment has increased minimum
same way that Germany and Japan over past decades, China will now wage restrictions but workers re-
do. The biggest fear demographers have to deal with a decreasing re- main restless and discontented.
have regarding China is that it will serve of able bodies to call upon. Labor strikes and violence have
age before it has the wealth to sup- One consequence of this decreas- increased over the past decade as
port its old. China currently lacks ing labor supply is increasing wag- workers have sought higher-pay-
10 Business Asia

11. ing and less monotonous work. costs of labor, fierce competition conductors, will require an ex-
The Chinese youth have far high- amongst employers, and the threat tremely high level of precision and
er aspirations than their parents of a discontented workforce, ro- intelligence. They will also need
did; jobs in the service industry botic production is an increas- to be flexible - the electronics in-
are seen as far more desirable than ingly attractive option. Although dustry is constantly evolving and
those in manufacturing. These the upfront costs of robots are changing. Unlike in car manufac-
calls for progression to better, daunting to many Chinese man- ture, robots used in the electronics
more advanced jobs will only in- ufacturers, their performance has industry will need to be as highly
crease as social pressures to pro- been proven in Europe and the advanced as their creations. Chi-
vide for ageing families continue Americas over the past decades na faces significant challenges if it
to increase. and their initial capital outlaw is is to continue on its path towards
With a future consisting of usually repaid within 3-5 years. economic hegemonic power. Im-
fewer, better-paid workers, China Managers who have already ad- plementation of automated man-
will need to provide an infrastruc- opted automated production are ufacturing across industries is one
ture for greater productivity per now reaping the rewards. Auto- strategy that might prove fruitful.
worker. This will come into con- mated plants need far fewer work- However, to effectively address its
flict with its current growth model ers whose work is mostly to su- demographic concerns the gov-
driven by low-wage manufacture, pervise the machines. By driving ernment will need to implement
investment, and exports. Due to down labor costs so dramatically, strong national measures. One
rising labor costs, outsourcing these factories have boosted prof- would be the loosening of the One
manufacturing has already begun it margins spectacularly. By tak- Child Policy’s strict enforcement.
shifting to lower cost countries ing on some of the more tedious Creating exemptions like allowing
like Vietnam and Cambodia. Al- and unappealing tasks Chinese rural families a second child would
though China has acknowledged workers have been complaining increase the national fertility rate
that it seeks to shift towards an about, robots also certainly alle- by a reasonable margin. The gov-
economy based on greater domes- viate some work-related pressure. ernment also needs to formulate a
tic consumption, it is still far from Greater productivity afforded by plan to care for pensioners within
attaining that goal. Average in- robotic manufacturing will also its budgetary means. To succeed,
come per head remains far lower allow greater numbers of Chinese this plan will also have to take into
than in developed countries and, to seek jobs in other pressing sec- consideration the future strain
short of drastic wage increases, tors like nursing and healthcare. on a smaller workforce facing the
this seems set to remain the case The main area of concern dual pressure of having to pro-
for some time. that leads most analysts to favor vide for ageing parents while also
As a result of these fac- the irreplaceability of the Chinese being encouraged by the national
tors, Chinese manufacturers are worker is in the electronics indus- government to increase domestic
beginning to seriously consider try, a key area of Chinese manu- consumption. China’s growth over
automated manufacturing plants. facturing. Unlike industrial robots the past half century is certainly
Employers are struggling to re- used in say, Detroit for automobile remarkable. How it manages that
cruit workers and exports remain manufacture, those building and growth and whether it is able to
slow in the current state of glob- assembling precise components of sustain its growth will be the story
al economy. In the midst of rising cell phones, computers, and semi- of the next 50 years.
Fall 2012 11

12. Activists protest over a government decision to open up India’s retail market to foreign companies.
India:
Going Forw

13. By Mingming Koh,
Cornell University ‘15, College of Arts and Sciences
T
he myth of India’s seemingly inexhaustible economic potential
has begun to wane. As the Indian economy faces its most severe
slowdown, fear and uncertainty has abounded amongst foreign
investors in India as well as within Indian corporations. Accustomed
to an annual growth rate of 10%, today’s rate of 5% seems meager
in comparison – even though 5% already represents an extremely
impressive achievement, especially in present circumstances – and
those with vested interests in the Indian economy are beginning to
fear for their future prospects.
Such sentiments have reverberated all the way to the upper
echelons of the Indian political machine, as the Indian Congress Party
revealed its latest – and most drastic – series of economic reforms
aimed at hauling the Indian economy back on track. This set of reforms
touch on previously taboo regions such as opening up the multi-brand
retail sector to foreign investment, slashing diesel subsidies by a huge
margin, and finally permitting foreigners to hold a stake in key Indian
corporations and industries. Experts widely agree that such reform
measures are long overdue, but anyone familiar with the economic
history of the Indian growth machine should be familiar with the
process of achieving reform in the world’s largest democratic system:
reform is never considered – let alone carried out – until a crisis arises
and the situation begs it. The boom of the Indian economy has allowed
its policy makers to remain in a voluntary state of oblivion with regards
to the loopholes within the economy. However, the current slowdown
Source: latimes.com has forced India’s leaders out of their denial as the economy struggles
to meet the huge expectations that have been thrust upon it.
Unfortunately, not everyone agrees with the extent of the reform
measures – some even question the fundamental need for reform. A
key ally of the Indian Congress party, the Trinamool Congress headed
by Sonia Gandhi, withdrew its support from the government in
protest against the proposed reforms. Although this move does not
threaten the power or stability of the Indian government, it highlights
ward in Reform
Fall 2012 13

14. POLITICAL ECONOMY
that plague the economy from
within, India has been and still
is embroiled in deep societal
conflicts that continuously
threaten to disrupt her economy.
Racial and religious conflicts are
still an extremely potent fault
line within the Indian society, as
evidenced by an exodus of tens
of thousands of northeastern
immigrants working in major
cities. This exodus was sparked
by an ongoing conflict between
Muslims and the indigenous Bobo
tribe in the northeastern state
of Assam. This incident of mass
hysteria only begins to underline
the complicated and sensitive
issue of ethnic tensions in Indian
society. Up to this point, the
Manmohan Singh, India’s Prime Minister and key advocate of reform
Indian government has managed
to suppress and quell – often only
the existence of key forces within abruptly captured the full and temporarily and superficially –
the Indian politics and society that panicked attention of the now such conflicts, but it has become
oppose the much-needed reform. disillusioned government. increasingly difficult to forcefully
Such opposition forces are far separate Indian society and
from novel in the Indian political economy to avoid the negative
arena. Previous attempts at Apart from structural spillover effects of an ethnically
economic reforms have often been divided society.
problems that plague
compromised, and in some cases While the economic
even completely derailed by forces the economy from
reforms that have been proposed
deeply interested in preserving within, India has been are certainly welcome, more
the status quo. Manmohan Singh, and still is embroiled in needs to be done in order to
India’s Prime Minister and key deep societal conflicts truly guarantee the continued
advocate of economic reform, that continuously upsurge of the Indian economy.
has often been criticized as weak- Fundamental and structural
threaten to disrupt her
willed and overly compromising. issues need to be resolved in
As a result, his earlier attempts economy.
order to clear the path for the
at reform, though well-meaning, economy to reach its full potential.
have had little success as he gave Fortunately, most of these larger
way to said forces. This time, These reforms are certainly problems are concentrated
however, it seems unlikely the promising and steer the Indian within the Indian society. Indian
opposition forces are going to economy toward in a lauded politics have actually achieved
get their way. Sonia Gandhi has direction. However, some are a remarkable level of modernity
thrown the weight of the ruling doubtful of their effectiveness given its status as a developing
party behind these economic in guaranteeing the continued country. As the world’s largest
reforms as incontestable signs of growth of the Indian economy. democracy, the Indian political
serious economic slowdown have Apart from structural problems system is believed by many to be
14 Business Asia

15. capable of supporting a much
more advanced and sophisticated
economy. The giant head start of
Indian politics on her economy is
an important factor in the analysis
of India’s economic potential, but
India’s social problems constantly
impede this gap from being
bridged.
Solving India’s social
problems is a Herculean task
and nobody expects a simple set
of reform measures to become
a panacea. Manmohan Singh
and Sonia Gandhi are definitely
Solving India’s
social problems is a
Herculean task and
nobody expects a
simple set of reform
measures to become a
panacea.
moving in the correct direction,
with the correct understanding of
the necessary chronological chain
of policy events for improving
India’s situation in general:
reforming the economy first,
then tackling wider social issues
later with the enhanced resources A Walmart Retail store in India
from stable economic growth. The
validity and effectiveness of this
At this point in time, economic reforms is the correct
path has similarly been recognized
we applaud Manmohan Singh thing to do. Whilst we undertake
by the Chinese leadership, who
for taking on a tougher attitude that task, it is important not to
are funneling the majority of the
in pushing through economic conveniently forget that successful
nation’s resources into economic
reforms. It is certainly not easy, economic reform is by no means
growth for the ultimate goal of
especially with a population the ultimate goal – there is much
improving the Chinese society.
of 1.2 billion and the very real more to be done to push India into
This step-by-step approach to
worry of severe stagflation. But the class of developed nations.
national advancement requires,
going forward, adopting genuine
above all, time and patience.
Fall 2012 15

16. POLITICAL ECONOMY
Sino-Japan Islands Dispute:
A Potential Threat to Economies
Jiting Wang, Cornell University ‘16, College of Engineering
T he recent territorial dispute
between China and Japan
over the Senkaku/Diaoyu Is-
tween China and Japan is hurt-
ing the Japanese economy. Last
month, large scaled anti-Japanese
affected by the recent anti-Jap-
anese sentiment. Japanese auto
brands have long taken a consid-
lands in the East China Sea has protests broke out in several ma- erable share of the Chinese auto
drawn the world’s attention to jor Chinese cities, causing prop- market because of their low prices
East Asia. Since the 1970s, both erty damage and closure of many in comparison to their European
countries have made bold sov- Japanese-owned businesses. Ac- and American competitors. How-
ereignty claims over the islands, cording to Bloomberg, Fast Re- ever, Toyota, Honda and Nissan
located equidistant from Taiwan tailing has closed 42 of its Uniqlo have recently reported decreasing
and Ryukyus. With Japan’s most stores in China, and Aeon shut numbers of dealerships in some
recent attempt to “buy over the 30 of its 35 outlets in Guangdong provinces and have consequent-
islands”, it was no surprise that a and Shandong. Electronic man- ly closed their plants in these re-
huge uproar was triggered across ufacturers Panasonic and Sony gions.
China. While most agree that an shut down several of their pro- Scholars and experts
imminent war is unlikely to break duction plants in China as the around the world are now voic-
out between the two Asian giants, recent strikes have damaged their ing concerns regarding the pos-
there have been concerns that the facilities. The auto manufacturing sible economic consequences of
Sino-Japan tension, if aggravated, industry is another sector of the the dispute between China and
could cause irrevocable damage Japanese economy that is hugely Japan. One widely debated ques-
to the already fragile global econ-
omy. Meanwhile, top Japanese
automakers including Toyota,
Honda and Mazda have already
seen a 2% drop in their car sales
in China because of the recent
boycott against Japanese prod-
ucts by the Chinese. As China’s
Vice Minister of Commerce Jiang
puts it, “the battle over the own-
ership of the island chain will
inevitably have a negative im-
pact on the Sino-Japan economic
ties,” it seems that the possibility
of a potential damage on the two
countries’ economies is real.
In the mean time, signs
Two Japanese activists landed on an island at the centre of a bitter dispute with
are showing that the conflict be- China on September 18.
16 Business Asia

17. tion is that whether the impact on put themselves at a disadvantage the implication on their econo-
two of the world’s largest econo- on the global stage as their close mies will be short-lived. Despite
mies will be destructive and long rivals in Europe will take the drawing wide international atten-
lasting. Assessing the current sit- chance to catch up very soon. As tion, the recent boycott that hap-
uation, I think the answer is no. the Japanese car sales decreased pened in China is more a reflec-
in the past few months, Europe- tion of public anger rather than
Severing Trade Hurts Both Na- an automakers have quickly tak- an attitude adopted by the state.
tions en up larger shares of the Chinese The impact of such movement
First of all, as China and auto market. Based on market driven by public sentiment is sel-
Japan are both obtaining mutu- research conducted by the China dom long lasting. Similar boy-
al benefits from their economic Association of Automobile Man- cotts have previously taken place
relationship, it is unlikely that ufacturers, sales of car brands in China in 2005, when disputes
either party will choose to hurt from other foreign countries such over the content in a Japanese his-
its opponent at its own expense. as Germany, US, South Korea and tory textbook led to a nationwide
With the global economy still in France are up 25%, 19%, 12%, 4% demonstration in China. Never-
gloom, China and Japan now rely respectively in the same period. It theless, China’s imports from Ja-
on each other for their economic is logical to deduce that the same pan surged over 15%, almost tri-
One widely debated question is that
growths more than ever before.
whether the impact on two of the world’s
Currently, China is Japan’s largest
largest economies will be destructive and long
export market while Japan is Chi-
na’s largest importer. The value
lasting.
of the bilateral trade between the
two countries amounts to $350
billion, accounting for almost 5%
of each country’s annual GDP.
Jeopardizing their economic ties,
especially given the current eco- situation is likely to happen in pling the previous growth rates.
nomic situation, is unsound for other sectors of exports if China Public sentiment will eventually
both countries. As demand in and Japan decide to restrict trade calm down and commercial ac-
Europe drops due to the present with each other. tivities between countries will ul-
debt crisis, China and Japan need timately return to normal in the
each other to sustain their devel- Limited Effect on the Economy end.
opment. As China and Japan are Although the current
Furthermore, by sever- not likely to really play out “the territorial dispute between Chi-
ing trades China and Japan will economic card” on each other, na and Japan may not cause any
serious threat on the countries’
economies, the world is still wait-
ing for leaders from both sides to
come up with an agreement as
soon as possible. With the Euro-
pean debt crisis and the downfall
of the global economy as a whole,
the world needs the Asian pow-
ers to help us out of the econom-
ic quagmire the world is stuck in
right now.
Fall 2012 17

18. POLITICAL ECONOMY
Hu’s out, Xi’s In:
Tough Times Ahead
for Xi Jinping
By Zhi-Yen Low,
Cornell University ‘14, College of Agriculture and Life Sciences
18 Business Asia

19. T
o echoing applause and ac-
clamation in the Great Hall
of the People, the world’s
second-largest economy was
handed over to seven dark-suit-
ed men upon a red carpet before
a 2200-strong crowd of delegates.
Now at the helm of China’s ruling
Communist Party and economic
reforms is Mr Xi Jinping, who will
head the new Politburo Standing
Committee, the nation’s peak deci-
sion-making body, for the next five
years. The moment inked a mile-
stone in the party’s history, being
only the second peaceful transi-
tion to take place since it came to
power more than fifty years ago.
The November 15th de-
cision announced that on top of
stepping down as the Communist
Party’s general secretary, Mr Hu
reform are pressing him to reduce down to them, despite a decade
Jintao would also be relinquish-
the privileges of state-owned en- long spurt of economic growth.
ing his role as the head of China’s
terprises, which include meager China has prospered greatly under
army in favor of Mr Xi. Despite
interest rates on loans from state Hu Jintao and Wen Jiabao’s pursuit
holding China’s two most signifi-
banks and government-directed of prosperity, but the disparity be-
cant positions of power, ironically,
investments. With the capital fire- tween the rich and the poor has
it seems likely that Mr Xi may not
power of government safes behind dramatically widened under what
wield much in the way of control
them, state-owned enterprises some see as a paternalistic leader-
at all. His two predecessors, Mr
dominate China’s economic land- ship approach. Ordinary Chinese
Hu and Mr Jiang, still maintain a
scape by taking over private com- watch frustrated as the authori-
significant clout over the remain-
panies that can no longer put up a tarian governance fill the pockets
ing six members of the Politburo
fight. As a result, the hard-earned of the country’s party members,
committee. The selection process
savings of citizens are being fun- 2.7 million millionaires, and 251
of China’s incoming leaders still
nelled into a massively inefficient billionaires, while 13 percent of
remains shrouded in mystery, but
public sector. Extensive financial China’s 1.3 billion population still
ultimately, it is Mr Xi that faces the
reforms will be needed to cor- lives on below $1.25 USD a day.
uprising of angry voices calling for
rect these social inefficiencies for Land should be given out to farm-
change from below.
a more competitive playing field ers in order to empower to boost
among public and private sector productivity.
Calls for Reform firms. The issues surrounding
Deng Xiaoping first led Land grabs by local offi- wealth are especially sensitive
China on the path to prosperi- cials are also fuelling discontent now, due to the scandal and po-
ty when he ascended to power in among throngs of farmers and an litical purge of former Chongqing
1978 with his vision for economic expanding middle class, who feel party head and Politburo member,
reform. Today, Mr Xi’s term begins that too little of the country’s new- Bo Xilai, who has been accused
in tumultuous times- advocates of found wealth has been trickling of corruption, abuse of power,
Fall 2012 19

20. and abetment in the cover-up of a of microblogs, blocking search tainable growth, Mr Xi needs to
murder. More recently, media re- terms, and monitoring users’ ac- cope with these challenges he in-
ports put together by foreign and counts to bottle up public dissent. herited from his predecessors.
Chinese journalists from public Today, dissatisfaction and com- China is no longer the same blaz-
sources suggest that the families plaints proliferate across the coun- ing economic powerhouse it was
of Xi and Wen have amassed vast try via China’s relatively new social in the past- its stellar growth is
amounts of wealth, sparking a na- media pipelines. Reports and im- starting to lose steam. Implement-
tional uproar. In his speech afterages are shared instantly. To cope ing any broad changes to the po-
being appointed, Mr Xi only al- with these public protests, party litical system will require a very
luded very briefly to corruption as
leaders have taken to respond- bold leadership and strong back-
one of challenges that the countrying to public discourse without ing from his Politburo Commit-
faces, apart from becoming “di- the connotations that come with tee members. For starters, Mr Xi
vorced from the people”. The latter
traditional propaganda, in or- should start loosening the Com-
challenge is certainly true, as mi-
der to steer online conversations munist Party’s vise-like grip on
croblogs, such as Sina Weibo, haveand opinions to safer waters. Zhu the economy. Its state capitalism
been mushrooming across the na- Huaxin, the managing editor of model, at the heart of the Chinese
tion, spouting cynicism about the Online Public Sentiment journal, economy, may have propelled the
government’s concerted propa- asserts that each member of the country to unprecedented growth
ganda surrounding the leadership Communist Party understands under Deng Xiaoping’s rule. How-
transition. the magnitude of consequences ever, for China to continue thriv-
that result from social change, yet ing, Mr Xi needs to gain the sup-
“The Emperor Wears on official occasions, media only
reports good news. “Ordinary
port of his people, and to do that,
he has to begin his own reforms
No Clothes” people like us all know the emper- from the ground up.
In the past, Chinese gov- or is not wearing any clothes”.
ernment officials used censorship Given the current unsus-
20 Business Asia

21. GENERAL BUSINESS
LOOKING BEYOND
CHINESE BORDERS
KEN-JI LOW ‘14, COLLEGE OF ARTS
A G.E.M. WITHIN SOUTHEAST ASIA & SCIENCES, CORNELL UNIVERSITY
An Overview of the Southeast Asian Looking beyond China and into Its
Economy ‘Backyard’
S
outheast Asia, with a population of 610 mil- Slowing economic growth and inflationary pressures
lion, makes up one of the fastest growing Global in China have created difficulties for its policymakers.
Emerging Markets (G.E.M.) today. The region is Inflationary pressures in China’s real estate market
a collection of 10 countries - Malaysia, Singapore, In- have resulted in the implementation of government
donesia, Vietnam, Philippines, Cambodia, Thailand, restraints. While there has been some success in re-
Laos, Myanmar and Brunei, 4 of which are among ducing the rise in housing prices, China’s economy
the only 13 countries that have sustained economic has begun to lose momentum. Its GDP growth had
growth of over 7% over the last 25 years (including already slowed to 9.2% at the end of last year from
China and Brazil). This sustained economic growth its double-digit growth of 10.1% in 2011, as exports
has raised countries like Malaysia from an agricul- continued to slump amid weaker demand from both
tural and commodity-based low-income economy to Europe and the US.
a successful middle-income economy. Rising local wages have also made it harder
Like many emerging economies, strong eco- for Chinese exporters to compete with cheap labor
nomic performances have helped support advances in other emerging economies. China’s continued fix-
in education, healthcare, infrastructure etc. Some ations on control over some of its largest enterprises
countries have been very successful in translating have received much criticism as strikes among work-
rapid economic growth into meaningful reductions ers become increasingly common. It is a well known
in poverty. For example, in countries like Malay- fact in economic theory that a state capitalist system
sia, economic growth has been accompanied by a does little to encourage innovation. While govern-
near-eradication of hardcore poverty, which fell from ment directed investments can be vital for research
6.9% in 1984 to 0.9% in 2010. In human development and development, it is very difficult for state officials
terms, there are no countries in Southeast Asia where to value assets and allocate resources efficiently. Con-
the development picture is as poor as that found in stant support from the government will inevitably
Sub-Saharan Africa. All these collectively are strong debilitate firms’ innovation.
indicators of growing political and economic stability China’s current growth figures fell to 7.4%
within the region. in the third quarter and are now at its lowest levels
since the beginning of 2009. Analysts have forecast-
ed slowing growth in China down to 7.7% this year
Fall 2012 21

22. GENERAL BUSINESS
(from 8.2% in May). Furthermore, the risks to China ture are already taking measures to strengthen do-
from Europe are large. Given China’s exposure to Eu- mestic demand.
rope, its growth rate could experience an abrupt drop The overall outlook for the region remains
if the Euro area experiences a sharp recession. The largely positive. Economies like Indonesia are like-
channels of contagion would be felt mainly through ly to lead the region’s growth to maintain its strong
trade with knock-on effects to domestic demand. It is momentum owing to Indonesia’s high domestic de-
estimated that China’s growth would fall by 4%. mand. Malaysia is also set to face robust growth pros-
China’s signs of economic slowdown and in- pects in the medium term due to its positive start and
flationary pressure may work well in Southeast Asia’s its government’s persistence of its Economic Trans-
favor. Investors have been turning towards the re- formation Program (ETP).
gion, once dubbed as ‘China’s backyard’. Growth of
the 6 major Southeast Asian economies, Indonesia, S.E.A. FOCUS: MALAYSIA’S ETP
Malaysia, Philippines, Singapore, Thailand and Viet
Nam is projected to be about 5.6% through 2016, AND INDONESIA’S MP3EI
which is a solid growth performance in comparison Malaysia has achieved significant econom-
to other sluggish economies. ic progress since its independence in 1957. Amid a
Traditionally, the region has been heavily constantly changing global economy, the Malaysian
reliant on external demand. However, we are likely government has realized the need for a fundamental-
to see a change as the regional economy moves to- ly new economic model in order to achieve its goal to
wards more balanced growth. The regional economy become a high income nation by World Bank stan-
will rely more on domestic demand which should in- dards. It founded the Economic Transformation Pro-
crease economic resilience to external shocks. Coun- gram as an initiative to turn its economy into a high
tries like Indonesia and Philippines that are making income economy by the year 2020. Consistent with
significant investments in transport and infrastruc- the regions’ need to move towards balanced growth
and greater reliance on domestic demand, the ETP is
22 Business Asia

23. designed to focus on key growth engines which cap- formation at every stage from the agriculture indus-
italize on some of Malaysia’s competitive advantages. try to knowledge based and science based sectors.
The model will rely heavily on the private sector-led Acceleration of economic growth will be driven by
growth. Successful implementation of the ETP will all the nation’s components i.e. State Owned Enter-
see Malaysia’s economy undergo significant changes prises, local, and foreign companies.
to resemble other developed nations.
The ETP has been regarded as a bold approach EVALUATION
to grow the economy. The model will essentially be While the outlook for the region appears to be
led by the private sector with the government pri- very positive, investors should still be mindful of sev-
marily playing the role of facilitator. Approximately eral factors. The economic disparities between each
92% of the funding will come from the private sector country within Southeast Asia remain very wide,
with the public sector serving as a catalyst to spark each with vastly different political structures, making
private sector participation. Progress of the ETP is it difficult to integrate as a trading bloc. At this stage,
closely monitored by the Performance Management it is still questionable whether the region can truly
Delivery Unit (PEMANDU), an agency under the rival an economic powerhouse like China in terms
Prime Minister Department of Malaysia. of size and importance. However, government initia-
The Indonesian government is not far behind tives like Malaysia’s ETP and Indonesia’s MP3EI sug-
with its MP3EI program. The central idea behind the gest that potential growth within the Southeast Asian
MP3EI is to accelerate economic transformation and region is imminent. With China’s stellar growth start-
expand growth to all regions as well as to ensure that ing to dwindle, perhaps investors should begin to set
Indonesia is locally integrated and globally connect- their sights further southeast of familiar Chinese ter-
ed. Additionally, innovation and technology are set ritory.
to be developed in an effort to push economic trans-
Fall 2012 23

24. GENERAL BUSINESS
Ajay Kailas, Cornell University ‘13, College of Agriculture and Life Sciences
Cyberabad
I ndia has been primarily recog-
nized as a third world country
by various development indexes.
ly, since it is located at the inter-
section of North and South India,
it has a host of different cultures
Even the formerly qui-
et Gachibowli district has been
transformed entirely-Gachibowli
However, for the past few decades and food, with Hyderabadi Biry- is now a central business district
India has been trying to change ani being one of the most famous as it is home to ICICI’s headquar-
this label and has been developing dishes in the city. Hyderabad has ters (the country’s largest office
at an alarming rate. Greater focus many places of interest such as building), UBS, Bank of Ameri-
on infrastructure and proper uti- Chowmahalla Palace, Charminar, ca, and Wells Fargo. Rent in the
lization of the country’s educated museums, gorgeous malls, and area used to be 25-30 rupees per
labor force has helped steer the multiples galleries. square foot. Now, current residen-
country in the right direction. No- It was during the 2000s tial prices have reached as high as
ticing this drive, many large infor- when Hyderabad underwent a 3000-4000 rupees per square foot.
mation technology firms such as drastic change: the Information
have made their way to heart of a Technology revolution. Countless Above: the Buddha Monolith stands in
few Indian cities. companies streamed in to set up the center of Hussain Sagar, the city lake.
One example of such a their operations in the city. Names
city is Hyderabad--the capital of such as Microsoft, Oracle, Yahoo!, Below: Hyderabad Information Tech-
the state of Andhra Pradesh. Hy- Dell, and IBM have established nology Engineering Consultancy City in
derabad is a sprawling area which call centers, business processing Hyderabad, Andhra Pradesh, India.
houses 6.8 million people, making outsourcing firms, and central
it India’s 4th most populous city. corporations. By providing stable
Hyderabad is a major hub for ed- jobs for the highly educated pop-
ucation as it is home to thirteen ulation, the economy received a
universities and business schools. large amount of revenue which
Furthermore, it is home to the helped turn Hyderabad into a
Telugu film industry, colloquially major bustling service sector that
known as Tollywood. Additional- packs quite an economic punch.
24 Business Asia

25. This change has been one of the panies operating out of this area. abad one of the best cities to work
quickest the region has ever seen The IT/ITES corporates combined with, proving that Indians have
before. with better infrastructure, excel- what it takes to meet the demands
Hyderabad has undergone lent connectivity to the remaining of the Western world. During the
a 48% increase in the price for of- parts of the city, express access to 2008-2009 year, the IT exports
fice space rental. There is a large the airport, reputed schools in the surmounted to 4.7 billion dollars.
increase and demand because vicinity, network of hospitals, en- These numbers have been project-
businesses are booming and try- tertainment zones has made this ed by statistical experts to increase
ing to get as much space as they location a hot spot for investment,” each and every year by as much as
can. In Gachibowli, prices range chimes Pochendar Shenigarapu a 3-5%. The development of a town-
around 3500 rupees per square CEO of a business in the area. ship called HITEC has helped
foot per month. This is an incred- It is evident that the IT build new relationships that have
ible increase from the 35 rupees it transformation has shocked all of brought even more companies to
cost a few years ago. Hyderabad and revolutionized the the area, like Facebook. It is no
“Gachibowli, in turn, Hy- city by catapulting it into a strong wonder Hyderabad is referred to
derabad has been put on the global place in the world economy. The as the Silicon Valley of India.
map because of the IT/ ITES com- World Bank Group rated Hyder-
“The World Bank Group rated
Hyderabad one of the best cities
to work with, proving that Indians
have what it takes to meet the
demands of the Western world.”
Fall 2012 25

26. 1961 JAGUAR E-TYPE
BY: ADVAI PATHAK
CORNELL UNIVERSITY ‘15, INDUSTRIAL AND LABOR RELATIONS
REVIVAL OF THE BIG CAT
“Tata’s purchase of Jag-
uar is just one example D escribed at its launch by Enzo Ferrari as “the most beautiful car
ever made”, the 1961 Jaguar E-type is widely acknowledged to
this day as Jaguar’s greatest creation. 51 years later, the iconic British
of a growing number brand has finally released a successor, the 2013 F-type. The release of
of cross-border M&A this long anticipated follow up epitomizes Jaguar’s current revival and
deals involving com- serves as a major coup for Tata Motors who were chastised globally fol-
panies from the devel- lowing their acquisition of Jaguar Land Rover in 2008. Tata’s purchase
oping world acquiring of Jaguar is just one example of a growing number of cross-border
M&A deals involving companies from the developing world acquir-
established western
ing established western brands. Despite the initial fears of knowledge
brands.
“ and technology drain (which ultimately proved entirely unfounded),
26 Business Asia

27. Ratan Tata’s plan was
ludicrously simple and
remains so.”
the immense success of Jaguar ny record. This represents a major from British Business Secretary,
under Tata’s ownership suggests turnaround for a company that Lord Mandelson, and in spite of
this trend is mutually beneficial to never once earned an operating widespread criticism that he had
both foreign and domestic brands profit in its 19 years under Ford overcommitted to a dying brand,
and that, certain variables permit- ownership. Tata should, and has Tata raised half a million pounds
ting, it is one that is set to contin- been, lauded as the main driver of commercial finance to maintain
ue. of this success. Calamity struck production facilities and poured
Lumped with another directly after the deal for JLR was £1 billion of Tata’s cash into JLR’s
marquee British brand, Land Rov- concluded in the wake of the 2008 R&D. In the wake of a drastic and
er, and packed together for a rel- financial crisis. Ratan Tata, chair- global drop in demand for luxury
atively paltry $2.8 billion, Jaguar man of the Tata Group, was forced vehicles, it seemed a suicidal gam-
is estimated today to be worth to seek financial assistance from ble.
around $14 billion. Its last annu- the British government to keep Yet Ratan Tata’s plan was
al report stated Jaguar Land Rov- the brand afloat and maintain its ludicrously simple and remains
er earned £1.51 billion profit on three British factories. After re- so. He is much admired for build-
£13.5 billion of revenue, a compa- jecting a condition-laden proposal ing and exploiting brands as val-

28. GENERAL BUSINESS
ue. Aware of the brand value of automaker Chery Intl will open
JLR, a factor he described as “ir- JLR’s first production plant in
resistible”, and of the quality of the Chinese mainland, helping to
employees he would gain, from cope with the excessive domestic
high-value factory workers in Chinese market.
its British plants to senior work- That the new Jaguar
ers like famed Head of Design F-type will be the first model re-
Ian McCallum, Tata has made leased by Jaguar to be conceived
few changes in JLR’s corporate and designed entirely under Tata
structure. His only major ap- ownership makes it extremely
pointments have been Carl-Peter significant. In 2011, Tata Motors
Forster, the former boss of GM pledged £5 billion over the course
Europe, as Tata Motors’ CEO, and of 5 years to Jaguar for R&D in an
Ralf Speth, formerly of BMW, as attempt to bridge the chasm be-
JLR’s chief executive. Tata Motors tween itself and the German lux-
has therefore successfully trod a ury trio of BMW, Mercedes-Benz,
thin line between publicizing its and Audi. Up till now Tata Motors’
association with JLR for prestige share prices have risen 80%, mak-
purposes and avoiding encroach- ing it the top-performing stock of
ing upon Jaguar or Land Rover’s any global automaker. Now, as the
established brand image. excitement of major investment
Maintaining the quintes- and well-received new mod-
sential “Britishness” of the two els settles, investors are waiting
brands has been of primary im- for clear indicators of long-term
portance - all three production growth and stable development.
centers in England have contin- Showcased in September 2011 as
ued to run and Jaguar has actually the prototype CX-16, the F-type
managed to increase its workforce, represents the first of what Tata
in spite of the current economic hopes will be a number of excit-
malaise, to a total of 23,000. This ing and ground-breaking new
is a statistic that is likely to please products.
Jaguar will position the F-type in
the British government. Projects The augmentation of Jag-
competition with currently pop-
that were indefinitely postponed uar’s fleet of vehicles will be the
ular and powerful brands like
under Ford due to cash restric- most crucial step in attempting
Porsche, Maserati, and Aston
tions have finally seen the light to seize market share from their
Martin. Given that Jaguar already
of day. Both the Jaguar XF and XJ German rivals. As speculators
Nam saloons as well as the Land Rov- press for a lower-market car to
has a well-performing sports GT
in the XK, it does not represent a
ut er Evoque have been met with an compete with the popular BMW
diversification in its range either.
enormously positive reception 3-series, Jaguar seems, initially,
However, Ratan Tata has made no
massa from both critics and consumers to have taken a step in the wrong
secret of his desire for Jaguar to
alike. Most importantly, Tata has direction. The release of the
turp- sought to project the JLR brand F-type, an expensive two-seat-
recreate its sporty image in keep-
ing with the era of the E-type. This
is, ac into growing markets like China er sports coupe, is not going to
release is widely acknowledged
and Russia and this more than boost Jaguar’s bottom line fig-
to be an attempt to embellish
blan- anything has explained the enor- ures. The market for sports cars
Jaguar’s range as a whole with a
mous growth in sales. A recently is about 0.1% of global car sales
dit concluded tie-up with Chinese and it is enormously competitive.
sportier feel, overturning current
beliefs that it is geared towards
justo.
28 Business Asia

29. eign direct investment in the de- in workforce cuts at all levels.
veloped west by the third world. Public perception of these
The reasons for this are varied. deals is mixed. Most westerners
For one, most developed coun- fear losing their biggest assets
tries are running current account to foreigners that might seek to
deficits, whereas many develop- move production away from the
ing economies have surpluses. home country, draining knowl-
Cross border investment is just edge and technology while allow-
one method of utilizing these vast ing the purchaser to add jobs in
sums of money. The fact that the its own domestic economy. There
three nations with the most M&A is almost certainly also an un-
activity in the developed world derlying fear of anti-colonialism
are China, United Arab Emirates, that the emerging market media
and Singapore correlates with this has gleefully exploited. Ratan
logic. Just like firms from the rich Tata himself has acknowledged
world, foreign MNC’s like Tata the value of increasing national
are seeking to continue growth prestige with these cross-border
through access to new markets acquisitions. Despite his enor-
and production techniques. Un- mous outlay and the subsequent
like American corporations that disappointment of Corus, he pos-
seek a more ‘organic’ method its that losing that bid would have
of accessing local market share left India disappointed as a whole.
through establishment of lo- Despite these undercurrents of
cal factories and offices, MNC’s distrust, the British Government
from abroad prefer acquiring too has been very grateful and
well-known western companies. supportive of Tata’s involvement.
This offers the quickest method Jaguar has added over 8,000 jobs
of gaining a foothold in a foreign to its British workforce and is
market, exploitation of the ac- considering opening a new en-
quired brand, and other benefits gine factory at a time when most
like technology sharing. Western other industries are struggling.
an older generation. The Tata
firms also usually benefit from The harmony between Indian
Group is renowned as a company
increased investment that they finance and British engineer-
for taking a long-term view of its
might otherwise have lacked un- ing that Ratan Tata has been so
investments. With deep pockets
der a frugal western boardroom, careful to create and nurture has
and one of the best management
as Jaguar did. The biggest issue proved bountiful and could well
teams in the world, it is prepared
for emerging market companies prove a successful model for fu-
to help Jaguar surpass its 1960’s
is that they often pay excessive ture cross-border M&A’s.
zenith and establish itself as a
sums for western firms (a premi-
major global automaker. To this
um for market entry) - Tata Steel’s
end, a smaller saloon car and a
purchase of Anglo-Dutch giant,
crossover are currently in design
Corus, is an example in which
to widen Jaguar’s appeal and are
emerging market FDI has thus
expected to be unveiled later this
far proved unsuccessful. Corus,
decade.
now known as Tata Steel Europe,
In attaining Jaguar, Tata
has seen profits drop substantially
has continued a recently bur-
and it has been forced to engage
geoning trend of strategic for-
Fall 2012 29

30. Super-Sized
China: T he modern fast food industry in China began to
take off in the 1990s, some twenty years after the
Burgeoning Chinese country’s reforms and opening up in 1978. The cur-
rent lifestyles of white and blue collar workers de-
Fast Food Industry mand not only cost effective and on-the-go foods,
but also the luxury of choosing from a wide variety
of cuisines. Although China’s food service indus-
try is roughly half the size of the U.S. market, it has
Kevin Hua experienced tremendous growth over the new mil-
lennium. The industry is estimated to be about $300
Cornell University ‘15, billion in 2009 by economist estimates and is expect-
College of Engineering ed to grow 12% a year to over $500 billion by 2014.
Although two fast food giants, KFC and Mc-
Donald’s, dominate the western fast food market in
China, 70% of the overall fast food market
share is still occupied by Chinese fast food
enterprises. KFC and McDonald’s at-
tempt to assimilate to the local culture
and cater to Chinese taste buds with
traditional dishes; KFC includes thou-
sand year egg with pork congee in its
morning menu and McDonald’s has a
dim sum menu. On the other hand, the
local fast food chain scene usually has
a repertoire of dim sum, steamed buns,
Cantonese barbecued food, and various
meat dishes with rice. According to a KFC
Consumer survey, up to 44% of Chi-
nese consumers plan to spend
more on fast food rather
than traditional restau-
rants due to their added
convenience, taste, and
cost.
C onsumers’
steady move towards
higher calorie diets and
excess consumption of
sugar, salt, and fats cor-

31. LIFESTYLE
relate with increasing risks of obe-
sity and other health conditions.
A study led by researcher Janet
Currie in 2009 found correla-
tion between a fast food restau-
rant within 0.1 miles of a school
and the probability of obesity in-
creasing by 5%. Interestingly, the
number of restaurants within 0.1
miles of a school does not affect
the probability of obesity. The re-
sults of the study are significant
enough to suggest that fast food
establishments such as KFC and
McDonald’s as well as new ur-
banization where people migrate
from the countryside to the city,
together contribute to the China’s
growing obesity rate. The mass
industrialization efforts in Chi-
na after 1978 spurred a need for
young workers and brought many
people from the rural countryside
closer to the city. In only two de-
cades, the urban population of the
total population rose from 25% to
50% in 2011. In Beijing, which
has one of the highest fast food
chain densities per capita, 27.8% cuisine that is familiar to Ameri- major contribution to the obesity
of children are heavier than stan- can taste buds, such as hamburg- rate in metropolitan cities in Chi-
dard weight guidelines set by the ers, fries, fried chicken, and ice na.
Chinese Health Ministry. Official cream. Furthermore, the U.S. has How is this different from
Chinese government statistics es- had a fairly long history of using the lifestyle and diet choices in
timate that more than 100 million automobiles and mass transport the U.S? China’s booming econo-
people were obese in 2011, a five systems which both reduce the my and never-before experienced
fold increase from 2005. necessary daily exercise from massive spending power allows
walking. Not long ago in Chi- consumers to buy fried foods,
na, the streets of big cities were western hamburgers, snacks,
Catching Up with the Unit- streaming with cyclists and pe- take outs, and many other cal-
ed States? destrians. However, more people orie-dense foods. Major metro-
Although it is tempting to now have access to the luxury of politan areas in China have also
compare the trend between fast taxis, cars, and motorbikes. Only recently adopted mass transit
food and obesity in China to that in the past recent decades has systems with increased automo-
of the U.S, PBS journalist Ray Su- work in China has shifted from a bile sales, completion of subway
arez asserts that obesity problems manual labor economy to a ser- and train systems, and mass bus
and their solutions are unique vice and institution-based one. A transit systems. All of these new
to both countries. The fast food majority of people are employed changes contribute to a terrify-
menus in the United States offer in sedentary work in the office—a ing reality: an increasing obesity
Fall 2012 31

32. months. The Chinese government
finds these methods promising
and is collecting more data such as
weight, height, and waistline mea-
surements from patients undergo-
ing current weight loss treatment.
Furthermore, private and public
fat camps are available for teen-
agers and young adults in China,
where they are sent for months at
a time to a recreational center to
exercise and follow a proper diet.
They lift weights and do aerobics
for months, as well as train and eat
like an athlete to lose weight.
rate at 30 to 50 percent annually. come more readily available on
This is very different from the U.S’s the table. Weight Watchers China
slow adaptation to an obesity-con- director Shan Jin suggested that
tributing environment. The large Chinese meals should adopt more
influx of calories and low amounts of a Western style, with one plate
of physical exercise in the Chinese per person portioned out to pre-
population are recent and fast, vent overeating, and with smaller
requiring more immediate regu- portions for individuals on a diet.
lations and changes to tackle the With a communal eating habit
problem. where everyone shares from dish-
Another major factor es in the middle, it is much easier
that makes china’s obesity prob- for individuals to overeat.
lem unique is the cultural factor.
Over the past century, China has Slimming Solutions
suffered from droughts and polit- Given how quickly the
ical overturns that led to periodic obesity epidemic has infected
famines. But with modern living China’s population young and old, Though China has no sig-
conditions people can afford more controlling obesity for health ben- nificant regulation that cuts down
food and eat more generously. efits is a major issue at hand. Some on calorie-dense fast food con-
Children in China have a unique of the current remedies for fight- sumption or manufacturing, the
case of a “six-pocket syndrome”- ing obesity are prescribing tra- government is launching cam-
they do not have siblings and were ditional Chinese medicine, such paigns in high schools aimed at
born at the very beginning of the as “huang quin” (Baical skullcap raising awareness about health
one-child policy. Therefore they root) and “shanzha” (hawthorn risks associated with obesity.
have two parents and four grand- fruit) to reduce patients’ weight Though drugs, treatments, and
parents who have nothing really to and fat buildup. Other methods raising awareness may be effec-
spend on besides that single child. include acupuncture and medi- tive in controlling obesity, it still
Furthermore, it is a common prac- tation. Chinese researchers claim requires a big part of every indi-
tice in Chinese culture that most that treatments can result in vidual’s self discipline in order to
meals are shared from dishes in weight loss of more than 5.8 ki- achieve their desired goals of los-
the middle of the table. Over the lograms over the course of four ing weight.
past decade, more food has be-
32 Business Asia