For the October 2008 edition of Newsweek Select.

China’s Bush Years
The US Ambassador to the PRC recalls the administration’s challenges and triumphs

Only one sitting US president has ever attended an Olympic Games’ opening ceremonies (clue: it was Beijing’s), and only one US president has visited China more than once during their time in office. As the US looks back at 30 years of diplomatic relations with China in January, so too does it look back at George Bush’s presidency.

Food and product safety scares, trade deficits and disputes, disagreement on currency value and human rights violations have remained issues for American critics of the Bush administration, but Chinese scholars have roundly given the 43rd president of the United States decent marks for his cultural deference, tough talk on Taiwan and mostly hands-off approach to markets. Here, Randt speaks about Bush’s China legacy. As told to NEWSWEEK SELECT’S Megan Shank.

If one takes a long view, the relationship (between the US and China) has improved dramatically. I first visited China in 1974. I would try to approach people on the street and practice Chinese, and their eyes would widen; they’d turn and run from me. It used to be dangerous for Chinese to talk to foreigners. Chinese citizens were concerned about one another; they had weekly sessions to report on one another.
I’ve been here for most of President Bush’s term. I arrived to my post in Beijing in July 2001, after the EP-3 incident landed in President Bush and Jiang Zemin’s laps. Five days after my arrival, Secretary Powell came. Considering the potential for difficulty, I think it worked out very well. We’ve been moving in a positive direction ever since.

I attribute that to several things, among them President Bush’s personal attention to and interest in China. I think it’s noteworthy to mention that before President Bush, no sitting US president had come to China more than once during their terms; and some of them also had eight-year terms. President Bush has come four times; he’s also met with Jiang Zemin and Hu Jintao in the US. Just this year, Bush will have 19 to 20 face-to-face meetings with these Chinese leaders because they’re also meeting in multilateral conferences, for instance, the G8. Moreover, Bush and Hu have frequent telephone calls and exchanges of letters; there’s really a very robust, candid and straightforward communication–the president understands that with high-level political relationships, it’s personal.

I can assure you that from Bush’s inauguration onward there has been a deep commitment on his part to work on a candid and constructive relationship with China; he made this mission clear to me in the instructions he gave to me on my first day on the job. The depth and breadth of the US-China relationship has expanded dramatically. You can’t think of a US government agency that doesn’t have some sort of relationship or exchange with China. Last year, there were over 355 visits from officials at the deputy assistant secretary level on up. I can’t imagine any embassy getting more attention.

In working with the Chinese, they frequently tell me that the core issue in our bilateral relationship is Taiwan. In any sort of high-level bilateral meeting, it’s a staple. Clearly, we understand it’s a very sensitive issue. And I think no sitting president has been more consistent or firmer in our one-China policy than Bush. He had no secret agenda; he told them in a very straightforward way what was on his mind.

Also, I think his coming to the Olympics, which he understood was a big sporting event and of utmost importance to China, showed great respect to the Chinese people. Despite a fair amount of domestic and international criticism, he came. I think that’s proved to be a good thing for our relationship.

Of course, we still have trade disputes with China and a big deficit, but I think we should point to our Strategic Economic Dialogue, which Bush initiated and appointed Secretary of the Treasury Henry Paulson to lead. It’s held twice a year — once in China, once in US. In Washington, President Bush personally participates and meets with the delegation members, as does President Hu when it’s held in China. It’s really unprecedented to have the presidents that directly involved in the economic dialogue. The context given to given to our relationship by the strategic economic trade really had a stabilizing effect on our trade relationship. But, as people say, if you don’t have any trade disputes, you don’t have any trade. With more than $360 billion in two-way trade last year, of course there are going to be disputes. We’ve cooperated to resolve the issues and are trying to go forward to smooth the way for increased trade. We firmly believe trade, as long as it’s fair trade, is beneficial to people of both countries.

Bush placed a great deal of emphasis on human rights and religious freedoms. In every face-to-face meeting I attended with the Chinese leaders, he would raise that issue. We’re very proud of the fact that during our first two years, the administration, with the help of Congress and NGOs, had more prisoners of concern released than our predecessor did in eight years. We had a hiatus recently, but now the human rights dialogue with the Chinese is back on track. While there’s still difficulty in registering religion–some church groups still have difficulty — the registered churches, both Catholic and Protestant, are enjoying rapid growth. When I first visited in 1974, the cathedrals and churches were all boarded up and used as storage. We believe China should make changes not as a favor for us, but because we think it’s genuinely good for them –that China will be a greater and even better nation.

If we thought we could do something better than what we’re doing now (in regards to diplomacy), we would probably change it now. We think we’re doing pretty well, and the next administration should continue what we’re doing. In fact, I think the basic diplomatic policy has been the same for seven administrations. My sense is the Chinese leaders are not too worried that the fundamental policy would change with a new president.

The Strategic Economic Dialogue will continue, as will military exchanges where we’ve had a huge growth. The nature of those exchanges and the quality is much better now — from visiting US commanders visits to China to PLA leader visits to Washington. We’ve had Secretary of Defense Robert Gates here in Beijing, and Admiral Michael Mullen, now Chairman of the Joint Chiefs of Staff. But we’ve also tried to institute an exchange among non-commissioned officers and junior officers and defense universities. Recently, in search of more transparency and mutual understanding on sensitive but important topics, we started a successful session of strategic nuclear dialogue. Our militaries have also discussed how we can work together in disaster relief effort and tsunamis.

That China wants a modern military is hardly surprising. But it’s for what purpose? If it’s a stabilizing influence and can cooperate with us to provide a peaceful stable environment, that’s a good thing. If they have other ideas, we’d be interested. We think the more we talk to them and visit and understand the different programs, why they have this or that, the more comfortable we’ll be with one another.

Also, in communications we’ve made progress. After the EP-3 incident, we couldn’t get anyone to answer the phone in China. Now we have a hotline. After the EP-3 incident, we had several years where we didn’t have any military exchanges, zero. For the past two years, however, our programs have doubled every year. I should note too, when I arrived at the US embassy, its offices and agencies had roughly 500 people. When we move into our new offices shortly, we’ll have 1,100. There were 12 or 13 agencies in 2001; now there are approximately 26. The FDA never had an office overseas before; now they are going to have eight people in China.

One of the great stories in our relationship has been that, the thought that we would one day be cooperating with China to work constructively on a hot spot or a situation in a third country wouldn’t have occurred to us. First in South Asia, China played a very constructive role when India and Pakistan were looking at each other in very disturbing fashions back in 2001 and 2002. These are two nuclear-armed states, so it was a very dangerous situation. Of course, China also famously assisted in the six-party talks in Iran, voted for the three sanctions resolution on Iran, and just recently cooperated with us as part of the nuclear suppliers group to have an exception to the non-proliferation treaty, which brings India into the regime.

This January will mark the 30th year of US-Sino relations. As Qian Qichen (former Chinese foreign minister) once said, “Sometimes our relationship is good, sometimes our relationship is bad.” We’ve had our ups and downs, but now we’ll look at what lessons are there for the future, for the next 30 years.

For the October 2008 edition of Newsweek Select.
Pilgrim’s Politics
First- and second-generation Asian Americans seek representation
By Megan Shank
Shanghai

With hard work and increasing equality, even the son of interned immigrants can achieve the American dream, Mike Honda a California congressman and vice chair of the Democratic National Convention said in his speech on day two of the DNC.

For Honda, a Japanese American, and other first- and second-generation Asian Americans, part of that American dream has been to serve their country as elected officials. When Barack Obama became the first party-nominated black presidential candidate, it set political precedent. But for the past several decades, Asian American politicians have also slugged their way from the school boards to the Senate.

On January 3, 1957, clad in a Western suit with unbound thick wavy hair, 58-year-old Dalip Singh Saund, an Indian-born Sikh, strode into the US Capitol to take his seat as the first Asian American ever voted into federal office, where he served as a member of the House of Representatives for California for six years.

Soon, Japanese Americans, delayed in part due to oppression from Japanese internment and its lingering racism, also arrived: Senator S. I. Hayakawa and US Representatives Robert Matsui and Norm Mineta. Mineta was eventually appointed by president Bill Clinton in 2000 to serve as the United States Secretary of Commerce, becoming the first Asian American to occupy a presidential cabinet post; later he served in George Bush’s administration as Secretary of Transportation.

“Norm Mineta truly led the way for us; he helped us see we Asian American politicians could reach the national stage,” Honda tells NEWSWEEK SELECT. “He helped us understand that people will respect good work, honesty, rigor and principles, no matter what your ethnicity.”

According to figures from the U.S. Equal Employment Opportunity Commission’s 2005-2006 report, Asian American and Pacific Islander workers make up 6% of the total federal government workforce, but only occupy 3% of its management positions. This summer, the Equal Employment Opportunity Commission held a hearing on July 22 that focused on discrimination against Asian Americans and Pacific Islanders in federal employment. At the level of state and local government, Asian Americans and Pacific Islander make up an even smaller portion of total positions–3%–but there is also less of a gap between their share of the labor force and management roles — of which they occupy 2%. In some regions, Asian Americans are more prominent in local politics than others. In Santa Clara, California, a county just south of San Francisco, there are five cities with Asian American mayors. Four of them were born overseas.

Like many American politicians, Mineta, Honda and others began as elected officials to school boards and city councils.

William Tong, now the first Asian American to be elected to the state level in Connecticut’s history where he serves on the Connecticut General Assembly, was born the son of Chinese immigrants. He watched his mother and father operate a Chinese restaurant in order to send him and his four sisters to school.

“They worked themselves sick,” says Tong. “They’re an inspiration; watching them struggle is part of the reason I wish to serve. We ask immigrants in this country to make unreasonable sacrifices. If I can in any way serve them and make their lives better, I will have done my job.”

In serving these communities, it’s oftentimes about addressing the little things. Susan Lee, a member of the Maryland General Assembly, and New York City council member John Liu, introduced bills providing recognition for Asian Lunar Year and enforced holiday parking hours. Mike Eng, now on the California State Assembly, kept Asian-language books on the shelves when he was on the library board in Monterey Park, California. Still others have fought for the continued existence of Asian wet markets or to adjust the shelf life dates of moon cakes.

But as Asian American politicians celebrate their successes, they must also beware of ghettoizing their issues.

“As I rose through the ranks and achieved good reviews, it became a source of pride among Asian American communities nationwide,” says former governor of Washington Gary Locke, a Chinese-American and the first Asian American to serve as governor in that state. “I was invited to speak across the country, to be a minority speaker at a variety of banquets, but I refused because I thought I could do more for people of color by being an effective, responsible governor for everyone in my home state, not just Asian Americans.”

Still, even while Asian Americans promote mainstream agendas, prejudice lingers. Matt Fong, a leading Republican activist and former state treasurer of California, grew up ringing doorbells with his mother, March Fong Eu, former Democratic California secretary of state. Despite his family’s commitment to politically serving the US, Fong says race remained an issue in his failed 1998 Senate bid against popular incumbent Barbara Boxer. When Fong, a United States Air Force Academy graduate was invited to a local newspaper’s editorial board meeting, “They asked me, ‘if you’re in the Senate, and China and America go to war, whose side will you be on?’” Later, a San Diego television station asked Fong the same question.

“How much more do you have to do to prove your patriotism? Your family has been here since the gold rush, you were in the military academy, and these questions were asked in San Francisco and San Diego!”

Aspiring Asian American politicians must also overcome the disbelief of their parents and communities. Jan Ting, a professor of law at Temple University, says when he was growing up, law and politics were avenues for Asian American children who wished to rebel against parents hoping for doctors and engineers. Fong recalls an incident when, as vice-chairman of the California Board of Equalization, he was to meet with Chinese representatives. Upon entering the room, the Chinese delegates rushed forward to shake hands with Fong’s chief of staff, a Caucasian man.

Fong has undertaken mentoring projects “so younger leaders don’t get wacked in the head like I did.” Currently, he’s advising Van Tran, a Republican member of the California State Assembly.

“Being a minority elected official, you have to work doubly hard,” says Van Tran, “You must work harder and have more funding and your credentials have to be better.”

Citing Bobby Jindal, the Indian American governor of Louisiana elected in 2007 after a failed first attempt in 2003, Van Tran adds, “Success in running for office has everything to do with timing and opportunity.”

For Asian American politicians, conditions for both look good. As the United States creates an increasingly interdependent relationship with China and its surrounding nations, these politicians may serve as cultural bridges, providing keen sensitivity and understanding of the issues, promoting healthier trade and stronger diplomatic ties. “This is the Pacific century,” says Fong.

Democratic California State Controller John Chiang, perhaps thus emboldened, recently made national news after taking on Governor Arnold Schwarzenegger who wanted to make drastic pay cuts to state workers; Chiang, a Taiwanese-American, has also mentioned a future run as governor.

Clearly, Chiang, Jindal, and other newcomers to the national stage won’t be saying “hasta la vista” anytime soon.

For the October 2008 edition of Newsweek Select.

Mayor Potential

As a Taiwanese immigrant and New York City’s first–and only– Asian American councilmember, John Liu can identify with 2008 Democratic nominee Barack Obama’s unconventional American story and has championed the candidate in recent months. But after November’s battle is fought, many tasks remain for Liu, who has announced a run for an as-yet-unannounced citywide office — mayor has been mentioned. Although Liu won’t confirm, some close to him hint at plans to take on incumbent Mayor Michael Bloomberg. Here, he speaks with Newsweek Select’s Megan Shank about his Asian roots and his American patriotism. Excerpts:

You were originally a Clinton fan, right?
The Asian American community nearly universally loves Hillary. We felt loyal to Hillary and guilty when she lost. Still, I believe the Asian American community will come around for Obama. America is about to realize its full potential, which is not a limited one.

It seems Chinese Americans are split down the middle for John McCain and Barack Obama.
Asian American voters have, in the past, been split down the party lines. In New York City 20 years ago, you saw a lot of people registering to vote but not choosing one of the parties. Among those that did register, they were split between Democrats and Republicans. Today, there’s far more party registration going on, and it’s generally for the Democratic party. I think the Asian American Finance Committee Obama set up will help. We will be out there registering voters and empowering people, which has always been Senator Obama’s message.

Would you vote for an Asian American even if you didn’t agree with his or her platform?
We need more Asian Americans to run for office, but that doesn’t mean I would support any Asian American running, and, in fact, I have not. In Flushing, we had a Jewish guy running against an Asian guy a few years ago, and I supported the Jewish guy. Why? The guy grew up in Flushing. The Chinese guy was an immigrant who didn’t even live in Flushing. The Jewish guy had been active with many years of experience in government and service here. The Asian guy had not. The Jewish guy had a son whom he had raised in Flushing, who happened to be three years older than my son. I had so many things in common with that candidate and nothing in common with the other candidate, except for the fact that he and I are both Asian. I used to say of the Jewish candidate, “Yeah, he’s not Asian, but that’s not his fault!” (Laughs.)

You voted for a non-Asian candidate in part because you value experience. Does Obama have enough experience?
I think he’s not as entrenched. People come behind him because of the change he has promised. Barack Obama has already included millions more people in this race who have never been included before; Asian Americans want a piece of this.

You’re meeting with some students today. Do you counsel kids on what good leadership is?
I tell them they’re already good leaders because there are lots of other Asian youths out there hanging out on the street, smoking, doing whatever. Leadership is what you take upon yourself to do.

You’ve mentioned a citywide run in 2009 — possibly for mayor?
I would love to serve in a citywide capacity, but this year’s elections aren’t even finished, so does anyone on the street care about which office Liu runs for? Not a single person.

Citywide offices are tough roles to break into.
Why? None of this is rocket science.

But there’s an established order.
Democracy is not corporate. This is not about rising through the ranks. People today will vote on several different factors that go into an individual’s ability to serve and how others perceive them of being capable.

You’ve raised more than 3 million for your 2009 campaign. Who are your main supporters?
I haven’t run analysis on my contributors; I’m sure much of it comes from Flushing, though nowhere near a majority — probably 25%. There is no concentration of one group.

The majority of donors donating more than $4,000 are also first-time campaign donors.
I’m proud of the numbers so far. I’m proud that the people that have contributed to my campaign haven’t contributed to anyone else. (Laughs.)

What’s your biggest goal in heading into a campaign for citywide office?
I’d love to be the face of New York and bring my ideas to make this government more efficient, more open to everybody and make it a true capital of the world, which means including people who don’t speak English well. I’d start with the school system by recognizing the need for transitional bi-lingual education. This (Michael Bloomberg’s) administration has espoused immersion. I was only 5 when I came to the States, so it worked for me, but it doesn’t work for 15-year-old kids. It’s keeping them behind in other subject areas while you’re forcing them, cold turkey, to learn English. There would be many changes to make.

How do you think your presence in politics transmits a message of inclusion to Asian Americans?
I’ve always spoken out very clearly that we’re Americans. The beauty of America is being able to put input into the system. That means voting, electing people, having a say and a seat at the table. Right now we have many people registering for the first time. I take every chance I can to speak about my experiences and to inspire others to think of public service as a fulltime endeavor — to run for office themselves and to allow others to see the process firsthand. It’s still about getting some measure of respect and due process as well as a basic level of understanding about who Asian Americans are.

July
Enterprise Q&A

In China, 3M products may be as ubiquitous as the water one drinks or the air one breathes, but they’re also just as easily taken for granted. That is until the Sichuan earthquake in May, which threw even the expectation of basic necessities into sharp relief. Within the week of the quake, 3M donated vital respirators and water purifying systems. Suddenly, 3M products were all over the news–with a grim backdrop. It’s hardly the way Kenneth Yu, the managing director of 3M’s operations in greater China , envisioned promoting his company’s brand image. Despite its 25 years in China, 3M’s greatest challenge, Yu says, is getting their various brands on the radar. Still, he’s hardly disheartened. Robust and engaging, Yu says he’s happy for the company’s solid growth in China – sales of more than USD $2.4b, but what thrills him most is his team’s developments in technology and innovation. He speaks with Newsweek Select’s Megan Shank. Excerpts:

You said this tragedy is actually a sort of opportunity for 3M. What are the pitfalls associated with that kind of thinking?
Of course we’d rather no tragedy happened at all. It is fortunate that many of our products are helpful for rescue relief efforts. Business opportunities as a result of such factors are fine, but they are not the reason why we do what we do. After all, additional sales of such products represent only a very small part of 3M’s total portfolio.

I understand the donation of water purifying systems was the result of an initiative from a subordinate. What does that say about 3M’s work culture?
It’s not just 3M China. At 3M the organization is very flat, and it is very easy even for entry-level employees to speak with the leadership freely — be it via our in-house same time messaging service or office visits.

With a staff of more than 5,000 employees, how do you communicate?
For example, for the past two years, I’ve written an internal blog where I publish articles to teach my staff. You know, with young people, if I send you an e-mail, they may not read it. They get hundreds of e-mails every day. But with a blog it’s different. I try to make the stories short and sweet. It’s light-hearted and bilingual.

Can you give an example of an instructional blog post?
There’s an article I wrote about disposable diapers. When my first son was born, the hospital wrapped his bottom with a disposable diaper — a very famous brand. My wife used the brand religiously for the first year and kept heavy inventory at home. One day, she went to supermarket to replenish the inventory, but that brand was out of stock. She reluctantly bought another brand and discovered the new one was just as good. From that point onward she was on brand number two until the baby was out of diapers. Now let’s say you are the marketing manager or the product manager of brand number one. You can spend money on advertising or improve your products like there is no tomorrow. But you ain’t gonna get my wife’s business any more. The only time you might have a chance is if the brand she’s using is out of stock. Moral of the story? Thou shalt not run out of inventory. Stories like this are best told through a blog.

What kind of hits do you get on these internal blogs?
(Scrolling on his blog.) On average about 3,000 to 4,000 hits per post; look at the hundreds of comments.

How do you encourage your staff to innovate?
You cannot make people innovative, but you can provide an environment that promotes innovation. That means supporting people, encouraging people when they’re moving in the right direction. For example, we have a researcher who was obsessed with the ability of the lotus flower to repel anything from sticking to it. He came out with a coating that is almost as good as the lotus flower, except that it would wear off after two days. Up to this point, the story seems interesting but not rewarding–regardless of its innovative origins, a failure to achieve its original purpose. The next part of the story is entrepreneurship and innovation in marketing. One of this researcher’s colleagues said, “what if you put this substance on the inside surface of a miner’s face piece or a surgeon’s goggles and prevented them from fogging? You would make their work safer and more effective.” And the nice thing about something that doesn’t last that long is that a customer has to buy more of it. Not bad at all!

How do you retain the kind of talent that’s driving these products?
You have to pay competitively. We also provide training opportunities. But most importantly, we make sure that people who do the right things are appreciated

What’s your greatest challenge? It doesn’t seem you have an iconic product here, as you do in the United States.
Right, we have struggled with brand awareness and been painstakingly trying to improve brand equity for the past seven years. We focused too much on business-to-business campaigns; now we need to focus more on consumer awareness. Because we’re such a diversified company and because most of our products are not those that can be seen or touched by consumers, it’s hard to get on the radar with people. We’ve made some headway, but we’ve still got a lot of work to do. The fortunate thing is that Chinese believe in brands probably even more than Americans. In China, many products are coming up simultaneously, so people see everything as being more or less equal. What tips the balance is brand.

So Chinese consumers care more about brand than price?
It is impractical to generalize all Chinese consumers. However, it is safe to say that Chinese consumers have demonstrated far more loyalty to brands than most suppliers have expected, especially in the bigger cities. But lower price points do appeal to a broader consumer base.

How do you compete with local companies here?
We’ve been growing at about 25% for the past five years. Because our products are so diversified, we have no “biggest competitor,” per say. We don’t’ fall for the false idea, however, that Chinese products are all cheaper and of poorer quality. These Chinese competitors are growing very strong. Right now about 70% of everything we sell in China has been made with localized content, and we don’t do much export at all.

How does 3M develop products that are specific for the market?
Telecommunications systems are a perfect example. Every country has its own system. So our R&D people develop products to fit, and then we source components locally–China is rich in raw materials–to manufacture at good price.

One of the biggest challenges China faces is how to facilitate economic growth while protecting the environment. What are 3M’s emissions standards?
We are a pioneer of pollution protection. We’re not talking about international standards –that’s generally too low. We either use the country standard or the industry standard–whichever is higher. Take China: there’s no way to regulate Volatile Organic Compound emissions. As long as your chimney is tall enough that your neighbors don’t complain, you’re ok. But back in 1995, for example, when we had a factory that made tape, we installed a thermo-heat oxidizer–basically a burner–that eliminated the VOC. No one else was doing this at the time.

What was the incentive?
To be a good company. It’s just part of our core values. And the incentive is becoming more of a monetary one as our customers become more green.

But has there been any conflict between pleasing shareholders and staying loyal to principles?
Do not assume that pollution prevention costs money. Take the VOC burners for example. Many of the 3M tapes are not using the VOC system any more. We’re using water-based systems now. And it actually cuts costs. It seems to cost money in that there’s an upfront cost because it forces you to come up with a better way, but in the long run you’ll save. And, as customers are demanding more of companies, the one that has the better reputation is going to win out in the end.

June
Enterprise QA

China’s most recent tragedy in Sichuan has left untold thousands dead or injured, but each year in China, scores more Chinese die from otherwise preventable illnesses. In addition to donating over 10 million Renminbi and medical supplies to the earthquake victims, Glaxo Smith Kline has also provided life-saving vaccines and medicine to China during its eight-year presence here via its four manufacturing plants and two R&D centers. Of course, no company can be accused of being entirely altruistic – China’s pharmaceutical market is set to be the world’s fifth largest by 2010 and vice president & area director of GlaxoSmithKline China/HongKong, Amy Huang tells Newsweek Select’s Megan Shank they intend to have their dose of that market. Here, they discuss the company’s opportunities, responsibilities and strategies.

The recent foot and mouth disease epidemic has killed more than 40 children here. So many diseases Chinese suffer from don’t have the same impact in areas where there is better product availability. What’s the moral implication of this lag?

The speed of mainland product availability is a huge challenge and has been one of my greatest commitments to improving. How can I live with myself if babies in Hong Kong have vaccinations for various diseases, but the mainland baby remains vulnerable to diseases largely preventable in the modern world? And especially when something like a vaccination is only a one-time thing, affordability is not really the essential part of the equation.

You talk about affordability, but one of the criticisms of big pharmaceutical companies in developing nations is that they seek to bully out cheap generics.

There is a balance you need to consider. Do you want innovation? If you do, it’s expensive. Innovation requires continued investment and risk. When there’s a product, there’s a period of protection, or a patent, but after that it’s not a problem for generics to enter the market. The government and industry must work together to make health care affordable for everyone. Maybe it is through some funding from government or from industry.

How receptive are Chinese to brand name drugs? Have you found them willing to pay the steeper prices?
Quality for generics is not consistent, and they know that. And because those standards mean something to them, they’re willing to pay for products they can trust.

But even brand labels in China have recently faced difficulty in ensuring quality – companies with excellent monitoring processes.
We have a quality management system for not only the manufacturing process, but also for the product’s commercial chain, ensuring high quality delivery of our product. We’ve had no major problems, though we have a system for recall if we discovered anything had gone wrong. We audit our providers daily.

And what about counterfeiting problems?
GSK has encountered counterfeiting problems with prescription and OTC products in the China market. Export of counterfeiting GSK products to other countries has been a serious issue as well. It’s not easy to quantify the adverse commercial impact to our business given the increasing sophisticated nature of this criminal activity. We have a team working with the government on how to tackle this issue. The government will continue to increase resources to coordinate law enforcement while we work on the public awareness side of things.

How do people know if they are buying real GSK versus counterfeit products?
We have a kind of technology to differentiate our product from counterfeit, but the general public doesn’t have a way of knowing. We need to establish a system to collect samples from the market and check it. I’m thinking about how we should sell to distributors, but I don’t have a solution yet.

Can consumers trust if they buy it at a legit distributor that the product is safe?
I don’t think our distributors have been trained on how to detect or to help or to assist us in handling counterfeit products, so this is an area I am thinking we need to address. But it’s also a bit tricky, between the pharmacies, between the distributors, there’s some big system we don’t know about.

In China, hospital pharmacies take a 15% profit cut from medicinal sales. What responsibility does GSK have to ensure there is no unnecessary drug pushing?
GSK is doing business as ethically as possible within the limits of the current system. It’s important for hospitals to separate the truly sick from those with minor ailments and provide the correct treatments instead of the profitable ones.

But what about GSK’s role?
We educate our people on a code of conduct, and the integrity of our staff is core to our company.

What about GSK’s commitment to the environment? Pharmaceuticals have traditionally been a highly polluting industry.
We make environmental awareness an essential part of our training. We are also very in touch with and concerned for our employees’ health, safety and security. So if you’re talking about a big and more noticeable problem like the environment, it’s pretty clear that we’re going to take care of it. We don’t allow someone we care for to keep suffering from the sniffles, much less allow pollution of an entire town’s river.

Dealing with It
MNCs learn to cope with the Labor Law
By Megan Shank
Shanghai

Last year, several multinational corporations, such as Microsoft and General Electric, fought a clause of the Labor Law that made it difficult to fire workers. The Labor Law, which went into effect January 1 this year, shifts power and rights from the employer to the employee and grants labor unions greater agency. Among several objections from multinational companies was that to a clause stating a worker’s probation period for a one-year contract should not exceed two months. Although MNCs lost the battle–that clause and many contended others stuck–they’ve gained coping strategies that have turned out to be less painful than previously conceived, while smaller companies that can’t adjust are leaving.

Centaline Property Agency human resources manager Jiang Yifan says if the firm has incurred any new costs from the Labor Law it has come from investing money and time in a stronger HR department. “In the past, business managers only had to think about performance. Thinking about human resources was a secondary consideration,” says Jiang, whose HR management costs have increased by 5% in the past six months. “The Law has made them equally important.”

Although some smaller companies have explored the option of firing entire staffs and then rehiring people with new contracts, most MNCs, already plagued with HR issues, don’t have the time or inclination to take this route. Instead, Jiang says in regards to hiring and promotions, the company won’t take old talent for granted or new prospects lightly.

Stephen Maloy, general counsel of Asia-Pacific General Electric, concurs: “The labor law reduces probation periods, which forces management to make an earlier decision. This may make managers more risk averse.”

Some companies are loath to comply whatsoever; in recent months, citing the Law as a major factor, 200 Taiwanese firms left Dongguan, and 5 percent of Korean firms in China were preparing to leave with an additional 25 percent considering it. The Federation of Hong Kong Industries predicted that in the Pearl River Delta alone, as many as 10,000 companies plan to shut down or scale back. An American Chamber of Commerce and Booz Allen Hamilton survey reported one fifth of foreign-owned or foreign-invested companies operating in China plan to move some or all operations out of the country, and more than half of companies surveyed reported believing that China is losing its competitiveness to other low-cost countries.

Good riddance, says Liu Cheng, a law professor at Shanghai Normal University who helped craft the Law. He says there’s still tremendous room for companies to profit, but “some industries here just want to run sweatshops here.”

MNC representatives admit to Newsweek Select that, despite some firms’ claim of as much as a 40% spike in operational expenditures directly due to the Law, in reality, inflation and appreciation of the RMB have been greater factors in rising costs. “We’ve not seen that great of an impact (directly due to the Law),” says Sony vice president of human resources Liu Wushuyun.

General manager of Fayat China Machinery Limited Jania Zhao adds that while smaller companies have traditionally cut corners and saved on “luxuries” like social services and fair wages for employees, most major corporations with long-term commitments to China already had such expenses built into their contracts. Although Zhao says her company has seen a 20 to 30% increase in operational costs this year, “there has been no direct increase due to the Labor Law, and we’ve not had to make great adjustments.”

Indeed, at the time of writing, no significant authoritative evidence has yet revealed a recent MNC flood into surrounding nations or news of any major multi-national corporation’s departure from China in direct response to new costs invoked by Law.

Daniel Harris, founding partner of Harris & Moure, a boutique international law firm, and author of the award-winning website, China Law Blog, says the companies that are shutting down are those based on a model no longer viable in China: “A lot of these businesses seized an opportunity that will never be available again – pollute like hell and pay really cheap prices. They’re shutting down because their businesses essentially operated illegally.”

Dongguan municipal government numbers back that up–as of April, an investigation found that of approximately 6,000 companies inspected, nearly 1,000 hadn’t signed labor contracts with workers. Not only will the departure of such companies from China end this treatment, Liu Cheng says, it won’t hurt the overall market.

Harris says the most important adjustment companies can make to the new law is to do what they should have already done: sign contracts with all workers and create an employee policy manual.

For companies operating at the fringes, severance pay might be a new concept, but Christina Yu, communications and human resources director at Dow Chemical, says it’s old hat to most MNCs who instead must only make minor contractual adjustments. “Our separation process is through performance or job reviews, and we never make a decision to lay off an employee simply because the contract is up. If we do, we pay severance regardless of contract status. ”

Liu Wushuyun of Sony says other necessary housekeeping includes, “going through and making sure all existing contracts without existing end dates are provided with such.”

Big companies must also take the initiative to develop the resources to monitor smaller JVs. In April, the All-China Federation of Trade announced it would advise the labor department and law enforcement department to punish Xiamen Topstar Lighting Co. Ltd., a joint venture of GE and Xiamen, for employee working hours and payment schemes that violated the Law. Local reporters first encountered the story in March via a report by Policy Matters Ohio, an American watchdog NGO, which claimed GE was enforcing gratuitous overtime without compensation. GE sent a team of 11 investigators to the Topstar facility where they spent a week interviewing more than 120 randomly selected employees and inspecting the operations and facilities, says Maloy. They found no infringement, and no legal action has been brought against GE, but such scrutiny will doubtless keep corporations on their toes.

Companies with strong CSR programs may find it easiest to adapt. Nike, one of the few Western companies to resist joining last year’s fray between American lobbyists and Chinese policymakers niggling on Labor Law clauses, has been cited by Chinese labor activists as being a stand-out among Western MNCs. The company’s website provides a comprehensive resource for those seeking to understand the Law. Although it does not own manufacturing plants, Nike discloses the names and addresses of those it uses and provides transparent monitoring. The company began holding educational seminars last June and continues to do so as the situation develops.

“There continues to be a lack of clarity on what exactly the new regulations mean for factories and what the requirements for implementation are. We can help bridge that gap by providing training and other education programs,” says Hannah Jones, Nike’s vice president of corporate responsibility. “As the government further clarifies how the rules should be implemented, we will continue to work with our contract factories to help them comply.”

In addition to the promise of a growing local market, access to China’s developed infrastructure, logistics and supply chain ensures companies will stick around despite the new costs from the Law, inflation and appreciation of the RMB. But as China slowly moves its manufacturing capabilities up the value chain — a trend the Law has not instigated as much as supported — companies must likewise gradually readjust their strategies.

Harris adds that not only do companies need to appreciate this new perception of China, they also need to understand where they fit into the picture.

The American Chamber of Commerce, in cooperation with the U.S. consultant firm Booz Allen Hamilton, released a report in March that prescribes use of such practices as postponing customization on mass-produced goods, tailoring business streams and tightening up sales and operation planning. Moreover, companies must think of their China operations as a fundamental element in their globally integrated whole rather than as merely an emerging market.

To be an essential part of the world — it’s the reality for which China has been striving since opening up nearly three decades ago.

With Sarah Chen (Shanghai)

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Sidebar
Pyramid Scheme
A recent report prescribes a new approach to China’s new business environment

By Megan Shank

The American Chamber of Commerce, in cooperation with the U.S. consultant firm Booz Allen Hamilton, released the China Manufacturing and Competitiveness in 2007-2008 Survey and thus prescribed methods to deal with the changing economical landscape. The results, presented in a pyramid, are as follows:

(base)
Global Integration
China should be viewed as a web of capabilities rather than just as an emerging market. The nation is a core part of global strategy by integrating sourcing and sales-centric models in China.

(next)
Postponement/Late Customization
Companies seeking to make an integrated process should create the ability to produce large volume of products with the correct pause prior to customization in order to meet future customer needs – for example, creating language specific manuals for a product at the last minute.

(next)
Tailored Business Streams and Segmentation
This level takes advantage of Chinese capacity for large-scale, cost-efficient manufacturing yet retains levels of differentiation for various clients – for example, customizing computers for specific orders.

Footprint and Network Modeling
Managers determine plant strategies on this level and identify market risks and client’s needs.

Sales & Operation Planning
Businesses coordinate efforts and communication among departments in order to quickly and fluidly move products whenever such demands arise.

Lean Practices
Companies must take a systematic and global view of their China operations and build up from there, tightening logistics and shop-floor operations as well as communications via the foundation of lower layers.

Behind Tom Cook’s placid Midwest American countenance beats a heart that quickens for silicone innovation. As Greater China President of Dow Corning, the U.S.-based silicone company that’s been in China for 35 years, Cook has overseen projects such as producing rust-proofing material for support pillars on the Hangzhou Bay Bridge–the world’s longest trans-oceanic bridge. He speaks with Newsweek Select’s Megan Shank about the China market, ways to broaden innovative thinking and the joys of earth-friendly pants.

Megan Shank: Your company reached a plateau from the mid-1990s to the early 2000s. What propelled it upwards again?
Tom Cook: The way we had gotten most of our success was through new product innovation, which drove a lot of our growth. But we realized we had to think more broadly than just product innovation. We could also focus on service needs or solutions to problems pulling on a broader skill set and a broader set of knowledge.

For example, we began to offer our products with no after-sales service–an option some of our clients wanted because they already knew our product, knew how to use it and didn’t want to pay for service. Also, if any customer wants to move from the U.S. to China, we could help them sort out the regulations and even manufacture things temporarily until they established their own capabilities. You need to think about what your customers need, not what you sell. When you think of it that way, it changes your whole view of the world.

Last year, over half of Dow Corning’s sales revenue came from regions outside the U.S. What part did China sales play in that figure?
We don’t release China-specific numbers, but in the past six years, Dow Corning sales have doubled, in China, sales have more than doubled, which means China sales are above the corporate growth rate.

What’s made that happen here?
Silicones go into many different industries, many of which are growing here. The automotive industry, cell phones and personal care products all use silicone. There’s huge opportunity for our product. Our primary driver is not low cost manufacturing to ship to other regions but to reach out to the market here. We need that made-in-China ability to have better responsiveness to our new customers.

Have you had problems with IP infringement?
We’ve had problems with counterfeiting our sealing products. I don’t think it’s quite the issue that it was for a number of years. We went out to the streets to find the source of it and work with the source as much as possible.

So you didn’t legally pursue it?
No, we did it in a more business-oriented way.

How do you protect your IP in China?
The Chinese government has taken some steps to protect IP, but they need to keep working in that direction. We have a strong emphasis on educating employees on corporate values, code of conduct and what is intellectual property. And only people who need to know are given privy to the IP, and even for them, we split it up across jobs and roles so no one individual has too much information.

You’ve spoken about giving back to China and remaining loyal to innovation. Where do these two concepts meet?
There are one billion pairs of jeans made every year worldwide, and half of those are made here. There’s a lot of water and energy being used to produce them. In mid-2007 we introduced a granulated textile softener that’s aimed at the Chinese government’s priorities –how can we help improve the environment and energy usage.

This product reduces the manufacturing steps necessary and reduces the water used by 30 to 50 percent — about 15 less liters of water for each pair of jeans. It comes out to 7.5 million tons of water per year that’s not dirtied. Also, one of the key things is that when you’re making the jeans and you’re processing all that water by heating it, so we’re also talking about using 30% less energy as well.

Who knew silicones could be so sexy?
(Laughs) Innovation brings to life what we’re all about — the impact on the environment, the improvement of quality of life. I think everyone knows that where the environment is at in China, well, we just can’t continue in the same way. We’ve got to get to a point where it’s more sustainable.

You’ve also said a company should ask itself what keeps its customers up at night. What about your sleep?
I think one of the challenges we have here is making sure we hire the best people that we can and develop future leaders. I believe our company should be run by the Chinese — someone who can understand the culture and the language, etc. The sooner we can get our company here to be run by a native Chinese the better.

Might put you out of a job though.
I’ll find something else to do. It’s a challenge to find the right people because of China’s history — there wasn’t really business exposure here 30 years ago, so we’re slowly training people.

International cosmetics companies cream the market.

by Megan Shank (Shanghai)

On a recent sunny day, 26-year-old Anne Li and 27-year-old Amy Lei browse Shanghai’s Huaihai Middle Road Sephora store during their lunch break. The two epitomize the Chinese cosmetic market’s coveted consumer–both are highly educated only children born into China’s affluent modern era, products of homes where they are rarely denied little luxuries and members of a work force where competition demands any achievable edge. Not only does it feel good to pamper themselves, they say, giggling into milk teas, good grooming is a way to set oneself apart. “It never hurts to be beautiful,” Lei says. “If you give them a lovely impression, people will remember you.”

They’re not the only ones looking to make an impact. Once the realm of domestic giants like Shanghai Jahwa, China’s oldest and most profitable cosmetics company, the high to mid-end cosmetics market has witnessed foreign companies enter en masse in recent years and form limited partnerships with local companies. By now, foreign brands are estimated by marketing research firms here to dominate as much as 50 to 80% of the market’s profits.

Individual companies have been posting remarkable numbers as well. L’Oreal’s China sales grew more than 30% last year, compared with North America’s 4.8% dollar revenue growth. Its Maybelline lipstick, represented by newly scored spokeswoman Chinese actress Zhang Ziyi, snagged 33% of the market. Competitor Estee Lauder has also seen sustained double-digit growth for the past five years. Sephora, retail chain and cosmetics line, celebrates three years on the mainland market this spring and has opened 33 stores. Today average sales per square meter at its Chinese stores are nearly equivalent to that of its stores in France. If current growth continues, experts estimate the Chinese cosmetics market to value at USD $3.8 billion by 2009, eclipsing even the U.S. market.

However, international cosmetics companies face a challenge on the way to reaping their market share: first they have to create the market.

“These women might know a little about skincare, but nothing about make-up or perfume,” says Thierry Jaugeas, Sephora’s Asia Managing Director and China President. “In the U.S. or in Europe it’s a little easier because girls get the training from mother or grandmother, but in China, this is the first generation so deeply discovering make-up products or skin care products.”

That make-up-ignorant generation also makes up these companies’ hires. Cosmetics companies send their new employees to crash-test beauty schools where they are taught how to entice customers into interacting with the products. Sephora, for example, uses a “beauty bar.” Customers perch on stools and attendants swarm with powder puffs and silkening spritzers. Estee Lauder holds free basic make-up seminars at universities throughout China and gives out samples afterwards. During update training sessions, employees also report customer feedback–a sort of reconnaissance marketing–to their bosses who bring it back to corporate.

Perhaps it’s this attentiveness and adaptability to the market that has allowed these companies to thrive. Company CEOs universally proclaim the adjustment here a radical one. Unlike Europe, where perfume generally makes up 60% of total cosmetics sales or the U.S. where 50% of those sales are generated from make-up, in China, it’s all about what’s already there.

“Skin, skin, skin. It’s an Asian mindset,” says Carol Shen, China’s managing director of Estee Lauder. “Asians believe natural beauty is real beauty–you’ve got to take care of your skin.”

Paying attention to what concepts complement China’s cultural ideology translates to success. So does selling culture itself. “The whole ‘Chineseness’ is a growing thing,” says Matthew Crabbe, co-founder and director of Access Asia, a marketing research firm that just released the report “Women in China 2008: Women as Consumers”. According to the report, “enhancement”–or how to better something that already exists–is a primary goal for the office ladies to whom cosmetics companies market their products. And, “if you’re marketing a product, if you can make it more Chinese, it will give you an advantage. It used to be that to be like the Western woman was the aspiration — but now women would rather be their best Chinese selves.”

This sense of self-celebration has been picked up by brands that increasingly seek a more “Chinese” look through advertising. Olay and L’Oreal favor actresses who have risen to fame in the West like Maggie Cheung, Gong Li and Zhang Ziyi, whereas Estee Lauder’s MAC brand uses radiant Chinese girl-next-door types. Revlon is also currently considering Chinese models for use in upcoming campaigns.

Using native models makes beauty seem more achievable for Chinese women, but it’s also important to understand the limitations culture places on any market. Shen notes in Japan or Korea a woman’s skincare routine is eight or nine steps, but Chinese women average only three or four steps — and might never push past that. As with skin, it’s vital for companies in the market to work with the natural grain. Estee Lauder’s Clinique products, which incorporate a three-step cleansing and moisturizing process developed by dermatologists, neatly fits within Chinese women’s existing culture and customs.

But it takes more than adaptation to profit in China — it also takes branding strategy. Most aggressively, L’Oreal has worked fast to acquire and create partnerships with local companies and enter new distribution channels. In late 2003, L’Oreal acquired MiniNurse, a domestic skincare company, upgraded existing products and created new ones. Within a few months, the company took a similar tactic with another local brand, Yue Sai,which has become a radiant success. Most recently, L’Oreal has expanded its distribution channel to include pharmacies where it sells its Vichy skin products.

Other companies have approached growth more conservatively. Estee Lauder has ensured each of the brands under its flagship reaches the correct market by carefully hand-selecting retailers and customizing brand awareness approaches. Instead of advertising the benefits of ultra-luxe Lumiere, or even making information widely available about where in China one can find it, Estee Lauder relies on word-of-mouth power among the upper class to bring in more clients while maintaining the brand’s exclusive “DNA,” as Shen puts it. Even more basic in its approach, Revlon tries to entice younger consumers with flashy new Asian skin friendly colors while selling at a higher market level than in the West, where the brand is not considered a luxury product.

Despite these different tactics, one mutual challenge for companies thus far has been the limited range of customers — most brands peg their consumers at ranging from 25 to 35 years old with an average monthly income of 4,000 RMB. Although Chinese cultural standards are relaxing, it’s unlikely teenage girls will start wearing make-up to junior high school, as is found in the West. Instead, it would behoove companies to look at the upper age brackets, say industry analysts.

“Products aimed at older Chinese women would be a great market,” says Crabbe. “Things are starting to slip and sag and wrinkle up a bit. You might adapt the product, the brand and the colors for these women who have savings, whose kids have graduated. These women might want to travel abroad and have some fun.”

Back in the Sephora shop on Huaihai Middle Road, however, 24-year-old Xiao Zhou seems to be enjoying herself much more than her middle-aged mother, who declined to speak to Newsweek Select’s reporter. Xiao Zhou alternately rushes from the perfume wall to the beauty bar to the full-length mirrors spritzing and brushing and fluffing in a frenzy of uninitiated joy.

“Aren’t you done already?” Her beleaguered mother asks, wearily following her daughter now applying blush to the beat of rap music bumping from the store’s speakers. “We’ve almost been here an hour, and this place is giving me a headache.”

It seems beauty is still in the eye of the beholder.

Again, this story originally ran in Newsweek International, and then I supplemented a Chinese angle for a March 2008 run. You’ll notice how this is definitely for the Chinese reader now — I’m even explaining common English phrases. I also took the portrait to illustrate this story, which I’ll link to later.

You Called For Me, Sir?
Demand for butlers is booming. Anybody can drive a Rolls. But today’s tycoon needs a household COO.
By Mac Margolis, Megan Shank

In English, the phrase, “to give someone a shirt from one’s own back,” describes a person’s munificence. Recently, at the Shanghai St. Regis Hotel, a similar metaphor was demonstrated with shoelaces. A project manager for an American software firm who often travels to Shanghai for work and lived 10 months of the past year in the hotel discovered his shoelaces had worn thin during one stay. When he notified his personal butler about the problem, the butler immediately removed the shoelaces from his own shoes and gave them to the guest. “They were too short, so I still had him go out to the mall to get me some new ones,” the project manager recalls, “But it was extraordinarily touching.”

Quaint as it sounds, the butler is back. Thanks to unprecedented sums of money sloshing around the international economy, the run on high-end household help has grown frantic. “The demand is huge, and we just can’t keep up,” says Charles MacPherson, whose eponymous firm trains top-tier domestic help. Insiders reckon there are some 2 million butlers padding down the world’s finest corridors, a quarter of them serving in England alone. Yet increasingly, butling knows no boundaries. Recent postings on GreycoatPlacements.co.uk ask for help in the Alps and the United Arab Emirates, where the required talents include fluency in Russian, mastery of haute Japanese cuisine and tending an “Italian Scented Garden.” “There are more millionaires and billionaires than ever, and they’ve reached the stage in their lives that they want to live like millionaires and billionaires,” says MacPherson. “They are acquiring planes, ski chalets, summer homes. But who’s going to manage them?”

In China, home-based greycoats may be slightly more rare, but many five-star hotels offer butler service. At St. Regis, all guests–not just those on executive floors–may enjoy butler services. “We focus on a personalized experience,” says Even Lu, the hotel’s assistant marketing communications manager. “For example, some of our guests are art appreciators. Our butlers help them contact artists, art studios and galleries. Then they arrange trips to bring the guest to meet the artist and provide translation service.” The Westin’s butlers also take guests on trips to the local fabric market or to shop for luxury goods. Sometimes there are more peculiar requests, such as the Hong Kong kung fu movie producer who requested a butler assist him find, buy and arrange safe return of fake kung fu weapons.

Indeed, minding the rich has never been more demanding. “The butler no longer carries the pistols at dawn,” says Jane Urquhart, the principal of Greycoat Academy, which grooms butlers. Instead he-and, increasingly, she-is the domestic answer to a chief operating officer who can cook, chauffeur the kids and press a French cuff as well as negotiate with contractors and keep the books balanced, preferably on Microsoft Excel. Greycoats in China have likewise gone high-tech. At the St. Regis, butlers answer to E-mail requests and at the Westin to an electronic any-call service. Net surfing would-be butlers can post their resumes and find training information and a space to share tips on the “Butlers, Chinese Style” website(guanjia360.com).

As the expectations for butlers have soared, so has their pay scale. Forget about those dowdy widowers who toiled like chattel and slept in the basement. Today a starting butler in western countries can earn $50,000 a year, while veterans command up to $120,000-plus perks and a pension. In China, “Butlers, Chinese Style” recommends a monthly salary of over 3,000 RMB ($420). Although the five-star hotels won’t disclose their butlers’ salaries, those butlers Newsweek Select spoke with said they were well provided for. “I’m very lucky to have this job because there are new things to learn every day,” says Mahtilda Liu of St. Regis, which provides weekly trainings for staff butlers. Other hotels and residences, such as the Four Seasons and the Narada Property Management Company in Hangzhou have likewise invested in their butlers with fly-in training programs by prestigious groups such as the International Butler Academy.

In a Chinese market where good employees are hard to find and even harder to keep, making employees happy to serve is a win for clients and greycoats alike.

One of the things we do quite often at Newsweek Select is take Newsweek International content and then “localize” it. That is we supplement the article with a local angle and local people. In recent months, as I’ve been working on a lot of planning aspects for the magazine, we’ve been concentrating our efforts on this kind of work. It gives the reader the international angle they crave, but it also provides the reader with a connection to their own culture — a starting point. I don’t put all the work that I edit or write on this site, but since I haven’t been here for awhile, I’ll go ahead and throw up a couple articles where we’ve supplemented work that has already run.

For example, I reshaped this article, which originally ran in the international edition Oct. 2007 under the headline, “Visitors Wanted Now,” for our March Enterprise section and renamed to fit within the section. The original article didn’t mention China, but you’ll notice I inserted it.

Brand New Nations

Creating a brand identity is hard. Being honest is the first step.

Christian Caryl
With Sonia Kolesnikov-Jessop In Singapore and Megan Shank in Shanghai

China may be an export powerhouse, but it has a serious problem when it comes to exporting the right message–even as it heavily promotes campaigns of peace and prosperity. Advancing into its Olympic year and already preparing for its 2010 World Expo, the country is looking for ways to entice guests with a solid image–especially after last year’s food and toy scandals and drug scares.

Creating an effective brand identity for a company is difficult. Doing the same for a country is an even more formidable challenge. Simon Anholt, founder of the Nation Brands Index, argues that a country’s “brand” is nothing less than the sum of its politics, culture, religious traditions, business practices, landscape features and natural resources. “The reality is that most governments never really have an opportunity to think in a strategic kind of way,” says Anholt, whose clients include Botswana, Iceland, Bhutan and Latvia.

The first step for governments is to understand how outsiders view their nation.

“Newcomers to China only like what they consider to be Chinese elements — for example Chairman Mao, pandas, Tiananmen, the Great Wall, jasmine blossoms, and the Three Gorges Dam,” says Gu Zhenqing, Editor-in-Chief of Visual Productions, a bi-lingual national art monthly, and formerly curator of the Shanghai Duolun Museum of Modern Art, “but these are only outside symbols of China.”

For a country like China with its long history and years of turbulence, there are so many different dimensions that, “there’s a danger of being stereotypical or cliché and appealing to a common denominator instead of displaying diversity or richness of a culture,” says Kel Hook, the Shanghai General Manager of Wieden + Kennedy, an international advertising firm best known for its work with NIKE.

Countries from Australia to Israel have mounted image-makeover campaigns in recent years. Israel has been promoting bikini-clad beachgoers and Tel Aviv nightlife rather than its contested holy sites. Uganda prefers to advertise that it’s “gifted by nature” instead of plagued by a brutal past.

Although reframing seems effective, the best way for a country to generate a good image, Anholt says, is not by conducting clever ad campaigns alone but by implementing good policies. “The most important thing is to tell the truth.”.

Or get others to do it for you. Countries ranging from Costa Rica to Morocco have burnished their national brands with clever public-relations offensives that eschew the pictures of pristine beaches in favor of visitors telling their stories. Singapore’s “Uniquely Singapore” campaign, which officials cite as one of the reasons tourism has grown dramatically in the past few years, included TV spots that featured foreign visitors describing their trips to the country in their own words. The Singapore Tourism Board also created a $6.5 million program to subsidize international film and TV production in the city-state. “We believe that movies and TV are an excellent way of creating more awareness of Singapore and generating buzz in a competitive tourism market,” says Lim Neo Chian, deputy chairman and chief executive of the STB.

CCTV has likewise coupled television and foreigners for ad campaigns. For the past several years, the station has run a spot in which people of various nationalities say “Welcome” in their own accented Mandarin before a young Chinese girl finishes off the ad with her own crisp tones.

The quirkier the campaign, the better. Tim McColl Jones of M&C Saatchi in Sydney was one of the architects of the Australian national tourism bureau’s “So where the bloody hell are you?” campaign, which shows Australians extending a characteristically blunt but friendly invitation to tourists to check out the country’s natural wonders. His agency, says McColl Jones, conducted research suggesting that many outsiders’ picture of Australia was “stagnant,” and the campaign therefore aimed at “disrupting attitudes.” It certainly did that–government censors in Britain found the ad’s language offensive rather than cheeky, and threatened to ban it. Though unintended, McColl Jones says, the controversy did help to generate “tens of millions of dollars in free PR” and sparked debate within Australia, as well. “It’s certainly stirred up enormous interest and discussion, both locally and overseas,” he says.

That’s no accident. Experts say that no one should expect to shape a national brand without taking into account the people who live in the country. “In the end it’s the Italian people who brand Italy, and they do it so damn well,” says Anholt. “And the countries that haven’t quite succeeded are the countries that don’t quite love themselves.”

Gu agrees that any country must first respect and understand itself before it can sell itself. That means abandoning easy tactics of relating, such as copying or simply putting forth what others expect.

“The cartoon figures used in the Beijing Olympics and now for the Shanghai Expo, for example, seem to be more Japanese than Chinese,” says Gu. “Another thing is that a lot of designers working on campaigns like this are always thinking about the market and asking themselves questions like, ‘what is American taste?’ What are you doing spending time thinking about that? What do you like as a Chinese? That’s what you should ask yourself.”

Gu’s challenge comes at an interesting time, as international sporting events provide an excellent opportunity to show off a nation’s message. In 2006, German government and industry used the World Cup to showcase their country with a branding campaign emphasizing Germans’ openness and friendliness. It all helped to make the Cup an undisputed success, but the main beneficiaries may have been the Germans themselves. “The Germans made a huge step forward after the World Cup,” says Anholt. “They suddenly felt what it was like to be Italian–to have a healthy love of your own country.”

As China develops its national pride, it concurrently increases confidence in presenting itself to the world. That confidence will certainly be palpable in Beijing this summer. Self-autonomy rather than reliance on others to define it will be the driving force to define China’s “brand” in the modern world, says Gu.

As part of that pride, in preparation for international events, Beijing and Shanghai have undertaken campaigns encouraging politeness, civic responsibility and environmental awareness. Perhaps, the best way to turn a country into an attractive destination for visitors is to make it a place you’d like to visit yourself.