Event Recap: 4th Annual Symposium for the BEST Alliance

(Deans from the BEST Alliance member schools: Ick Hyun Nam, Hongbin Cai and Kazuo Ichijo)

Oct. 31, 2015 (Beijing, China)- Peking University, Guanghua School of Management held the “4th Annual Symposium for the BEST (Beijing – Seoul – Tokyo) Alliance” at its Beijing campus.

As part of Beijing, Seoul and Tokyo governments’ “Trilateral Cooperation Vision 2020,” the BEST Alliance represents the co-operation of Guanghua, Seoul National University Business School and Hitotsubashi University ICS to strengthen the East Asian economies. “Guanghua is a pioneer in international education in China and…the BEST Alliance is a key international partnership for us,” said the symposium’s host dean, Hongbin Cai of the Guanghua School of Management. The symposium was attended by the deans of the three member schools, Hongbin Cai (Guanghua), Ick Hyun Nam (SNU) and Kazuo Ichijo (ICS), as well as faculty members, students and alumni.

This article outlines the core topics discussed during the two-day symposium: China’s economic slowdown, China’s “One Belt, One Road” initiative and the alliance’s key research projects.

(Keynote speakers: Dr. Mingchun Sun and Dr. Yabin Wu)

Understanding China’s Economic Slowdown | Dr. Mingchun Sun, Chairman and CIO of Deepwater Capital Limited

China’s economy is slowing down and Dr. Sun mainly attributes this to low investment demand. Investment, particularly fixed asset investment growth, is now growing at its slowest rate in a decade. The key factors in play include: negative growth in the property sector (which accounts for around 25% of investment) and slowdown in the manufacturing and infrastructure investment sectors.

In the past 18 months, the Chinese government has been pushing a mini-stimulus, mainly in the infrastructure investment sector, to offset this slowdown. However, the results have not been optimal. Further, local government officials are dis-interested in pushing infrastructure investment due to the anti-corruption campaign and change in incentive schemes.

This begs the question: Why is the investment demand so low? The answer, Dr. Sun argues, is overcapacity.

In the manufacturing and infrastructure investment sectors, overcapacity has resulted in four drivers of low investment demand:

1. Low ROI: A decade of aggressive investment has led to a different investment landscape. Investors, simply put, have difficulty finding investment projects that will produce a good ROI.
2. Decline in commodity price: Price competition is fierce. So, rather than improving profit margins, low commodity prices are being passed on to the consumer.
3. Rising labor costs
4. Depreciation costs for manufacturers

In the property investment sector, the overcapacity issue will occur within the next five years due to three core issues that similarly drive low investment demand:

1. Inventory of unsold properties: There are at 600 million square meters or about 6-8 months of sales in unsold properties in China.
2. Inventory of incomplete properties: There are 6.3 billion square meters or about five years of sales in incomplete property projects in China.
3. New property projects are estimated to be 1.8 to 2 billion square meters of floor space in per year.

While either of the aforementioned issues is not a significant issue, combined they create a significant oversupply in the market.

Low investment demand will be difficult to tackle for the Chinese government.  Thus, Dr. Sun argues that the slowdown will continue into 2016. However, government stimulus and policy will help the market pick up in the future.
“One Belt, One Road” Initiative and the “China think tank”| Dr. Yabin Wu, Guest Researcher of Peking University’s Political Development and Government Management Institute

Dr. Wu believes that China’s think tanks should play a significant role in the comprehensive understanding and implementation of the “One Belt, One Road” initiative. He raised four core issues that are significant to the success of the initiative:

1. How should China boost the credibility of the initiative in the international community? Thus far, critics of the “One Belt, One Road” initiative misunderstand its purpose in two core areas: the transfer of China’s overproduction to other countries and aid. At the heart of the initiative is the idea that all country participants of the initiative can co-develop and collaborate on an equal footing. While China is the initiator, it neither acts in an aid capacity, nor will it single-handedly control the process.
2. How will regional relations affect the initiative? The “One Belt, One Road” initiative is situated in a fragmented geographic area, in which regional conflicts, unequal development and political change poses significant risk to the initiative’s success. Think tanks should watch specific geographic regional relationship closely, as the initiative develops: India-Pakistan, Russia-Central Asia and Europe-United States.
3. How will competing interests between the local and central government affect the initiative? Local government and central government interests, many times, can be both competing and contradictory. As an initiative with 64 country players, how these competing and contradictory interests are resolved will be critical to the initiative.
4. How will specific projects be implemented? Specific projects need to consider the environment and political realities of each country in order for these projects to succeed.

The “BEST Alliance” Research Watch.

(BEST Alliance faculty give research presentations)

1. Short-sellers & the U.S. SEC Common Letters | Guanghua Prof. Zhang, Ran and SNU Bok Baik:  Are short-sellers targeting Chinese firms by U.S. SEC Common Letters? Guanghua Prof. Ran Zhangand Prof. Baik Bok are investigating the relationship between short sellers and the SEC common letters, as well as the effect that short sellers have on targeted firms.
2. Emotional Labor v. Gender Role Expectations | Guanghua Prof. Jack Chiang: Gender role expectations within the society determine what emotional expressions are acceptable for men and women. This is also the case in the workplace. Prof. Chiang’s research examines two core questions: how do leaders demonstrate their emotions in front of their subordinates? How does this emotion influence their subordinates.
3. NYSE-listed Chinese Firms and Compliance | SNU Sun Hyun Park: There are over 200 Chinese firms listed on the NYSE. They may have come for the funding, but NYSE has strict NYSE rules. At the core of Park’s research is a singular question: are these firms in compliance to the strict NYSE rules?
4. Country-related Affect and Foreign Brand Choice | Hitotsubashi University ICS Prof. Erica Mina Okada: What is the relationship between the extent in which you “like” a country and how this affects a person’s brand choice?

Conclusion. As East Asia continues to face immense opportunities and difficult challenges, it is key for alliances, like the BEST Alliance, to spur economic and educational collaboration and exchange.