Thanks to the combined energy of over six hundred enthusiastic alumni, a dozen insightful HBS faculty members, and a score of respected experts, the 1997 Harvard Business School Global Alumni Conference, "Greater China: Myths, Realities, Opportunities," was one of the most successful in HBS history. The excitement traditionally generated by these annual events was further heightened this year as participants gathered in Hong Kong, the gateway city to China, which on July 1 will revert from British rule to Chinese sovereignty. The organizing committee, chaired by Robert P. Piccus (MBA '59), spent the better part of the last two years planning and preparing for the early April event. Held in the Hong Kong Convention and Exhibition Center and the adjacent Grand Hyatt Hotel, the meeting included two days of intense discussion and debate on China, Hong Kong, and the East Asian economic miracle. Professor David B. Yoffie served as informal moderator and faculty chair.

Global Gathering

Early in the opening session on April 6, conference chairman Robert Piccus and HBS Dean Kim B. Clark welcomed the international group, which included representatives from 6 continents and 46 countries. Noting that nearly 40 percent of the alumni present had graduated from HBS since 1980, Piccus predicted a lively exchange of ideas between dynamic business professionals and some of the School's leading academicians.

"This is an historic time," noted Clark. Citing the School's emphasis on leadership and problem solving, he told the gathering, "It is important to recognize that what we are doing here in Hong Kong is a hallmark of the School. We bring together important people to work on important problems. This is an opportunity to build relationships."

Over the next two days of the conference, a variety of distinguished panelists and participants tested myths, inspected realities, and questioned opportunities. Rafael Hui, Hong Kong's secretary for Financial Services, delivered an upbeat presentation on Hong Kong's future after the switch to Chinese rule. Hui predicted stability and continuity. "A smooth transition will be accomplished," the veteran government official vowed.

Hui noted that the long-term future looks bright as well: trade with the mainland, now Hong Kong's biggest trading partner, has been growing at an astounding 29 percent a year over the last two decades. Today, 98 percent of Hong Kong's exports involve China either as a source or market, and 60 percent of the total investment in China is channeled from the territory. In addition, he said, Hong Kong is an outward-looking economy that serves a wider role in the Asia-Pacific and global context. Hui noted that, in the "Basic Law," Hong Kong's post-handover charter, the territory's global position is constitutionally mandated and remains a special administrative region.

Professor Ezra Vogel, director of the Fairbank Center for East Asian Research at Harvard University, focused his remarks on China's chaotic dynamism. China's economy, he reported, has been growing at a rate of over 10 percent a year in this decade, on a scale the world has never known. China's chaos stems from the lack of preparation before reforms began - including a lack of trained personnel, an inadequate legal system ("It will take several decades before an effective system of rules will govern China"), the burden of bloated state firms, and lack of experience with a market economy. Yet the mainland giant is likely to "continue to grow rapidly for the next two to three decades," he said.

Shanghai-born author Lynn Pan had her own reality check to offer. Director of the Chinese Cultural Center in Singapore, she debunked the lumping together of all Chinese on the assumption that they are somehow linked to each other simply because they are Chinese. The supposition that there exists an international network of Chinese fuels fears of Chinese expansion, Pan alleged, particularly in business circles. She said the practice of guanxi, or relationship-building, is no different from the West's "old boy network." Pan cautioned Westerners not to make generalizations regarding Asian business practices and urged them to understand and respect the complexities inherent in the culture.

Striking, too, were the gaps between myth and reality that emerged at a number of the forum's concurrent panel discussions. At HBS associate professor Debora L. Spar's first-day seminar - "Infrastructure in Asia: A 'Megabucks' Gold Mine or Nightmare?" - speakers were clearly of the "gold mine" persuasion. Billy Lam of the New Airport Projects Co-ordination Office wowed the audience with his numbers. The new Chek Lap Kok airport, which is to open in April 1998, and the related infrastructure projects, such as a 1,377-meter suspension bridge and an express railway link to the central business district, represent a $20.1-billion investment. Two-thirds of the funds are coming from government, Lam noted, while the remainder is being sourced from the private sector.

Philip L. Yeo (MBA '76), chairman of Singapore's Economic Development Board (EDB), amazed the audience when he described how his country is building massive industrial townships in China, Indonesia, and Vietnam. "If [building infrastructure] were a gold mine, I would not be here; if it was not a nightmare [for investors], I'd be out of a job," Yeo quipped. But the EDB chief made the projects sound simple enough - nothing that Singaporean efficiency could not solve. Fellow panelist William Liley, managing director of Asian Infrastructure Fund Advisers Ltd., which manages the Asian Infrastructure Fund, said, "The risks in Asia are no different than elsewhere." The opportunities, particularly in China, he said, were immeasurable.

On the Ground

The distinctive realities of doing business in China and East Asia were discussed at two packed panel discussions. On the second day of the conference, MBA Program Chair Professor Steven C. Wheelwright led a discussion on "War Stories: Success Criteria for Business in Greater China." On the panel were several veterans of the Chinese commercial battlefield. "I believe the future is in China," said a solemn Thomas Kirkwood, director and CEO of China General, Ltd., and founder and chairman of Cowboy Candy Corporation, a wholly owned candy, ice-cream, and snack food manufacturer in Shenyang, a city in northeast China.

Coming from a towering, Cambridge-educated, Mandarin-speaking American wearing a black ten-gallon cowboy hat, Kirkwood's message clearly had an impact. But he had a shoot-from-the-hip warning: finding success in China was tough. The country may be huge, Kirkwood advised, but in an elephantine market, it was best to "be a grasshopper." And when it came to payments and accounts receivable - forget credit - "cash equals quality." Joining Kirkwood on the panel were Gao X-Qing, Prof. Law School, University of International Business and Economics, Beijing, and Daniel Ng, founder-chairman, McDonald's Restaurants (HK), Ltd.

But what about all those intricate family connections and networks that have made Asian entrepreneurship legendary? Professor Howard H. Stevenson and Assistant Professor Tarun Khanna led a session titled "Entrepreneurship and the Asian Family Enterprise," which brought together three scions of top family corporations in Hong Kong, the Philippines, and Indonesia.

Ronnie Chan, chairman of the successful Hong Kong property-based conglomerate Hang Lung, suggested some of the challenges faced by family businesses. "There can be problems," he said, noting that family businesses sometimes do not move with the times and can be slow to adjust to new competition. However, Chan's copanelist Jaime Augusto Zobel de Ayala II (MBA '87), president of Ayala Corporation, a sixth-generation business, said it is possible for enterprises such as his to adapt to change. "The issue is flexibility and being able to diversify," he advised. Speaking from his company's experience, Zobel said that family businesses had to leap at opportunities when they appeared. "The concept of entrepreneurship is imbedded in the structure of the family."

Cherie Nursalim, manager in the corporate strategy and planning division of her family's Gaja Tunggal Group, a major Indonesian conglomerate with extensive interests in banking, industry, and trade, observed that family connections have inherent advantages and disadvantages. "Younger generations might have a different set of values [from their elders]," which can lead to conflicts when running a business. On the other hand, said Nursalim, blood ties can mean instant trust.

Hong Kong for Lunch

The link between China's potential and Hong Kong's future was underscored at each of the conference's two luncheons. On the first day, delegates were treated to fish and lobster sauce, as well as a tour-de-force presentation by Victor K. Fung, a former HBS faculty member with a master's degree in electrical engineering from MIT and a doctorate in business economics from Harvard. Fung is one of Hong Kong's most prominent businessmen, serving as chairman of Prudential Asia, the Asian investment management subsidiary of the Prudential Insurance Company of America, as well as chairman of the Li & Fung Group, a leading regional trading company. Fung is also an outstanding ambassador for Hong Kong in his role as chairman of the territory's Trade Development Council.

"The transition is going as well as anybody expected," Fung said. "The economic numbers are good, and there is absolutely no evidence of capital flight. If anything, asset prices have been going up." Fung ran through a list of positives: Hong Kong won't be governed under Chinese law but will retain its common law system; its status as a separate customs and immigrations territory will continue; and the Hong Kong dollar will remain independent and freely convertible.

In the 1970s, Fung explained, Hong Kong was merely a manufacturing center for low-end products. "Frankly, we were becoming increasingly uncompetitive. The opening up of China in 1979 was a godsend." One delegate asked how Fung saw Hong Kong competing with Shanghai. "Overall," Fung replied, "the two cities will be very different parts of China. Shanghai will be a Chinese city, while Hong Kong will be international." Another questioner, Donald Bongami Mkhwanazi (59th PMD), chairman of the National Empowerment Trust Investment Fund in Durban, South Africa, wondered whether Hong Kong's Basic Law could be changed.

The document, Fung said, was a creation of China's Parliament. While it could be changed by amendment, the process was not that easy. It was important to appreciate that, whatever disagreements there were about how the charter should be interpreted, at least nearly everyone in Hong Kong accepted the concept of the constitutionality of the Basic Law itself.

Fung admitted to having one serious worry about the future. When asked by Victor A. Faux (MBA '72, DBA '82) if there was anything that dampened his optimism, Fung responded, "Our economic bedrock is absolutely crucial." Should a trade war develop between China and the United States, the territory's two largest trading partners, Fung said, "Hong Kong will be affected." One fear: the possible cancellation of China's most-favored-nation trading status by Washington. "We are very concerned about it."

The luncheon speaker on April 7 was Hong Kong's Financial Secretary and Acting Chief Secretary Donald Tsang, who challenged some myths surrounding Hong Kong's 1997 handover. The word going around, he said, was that the rule of law would no longer prevail in the territory after China resumed sovereignty. Not so, Tsang insisted. "The law does rule in Hong Kong, and it is in no one's interest to renege on this success. Hong Kong's continued success will become a point of national honor for the Chinese government," he concluded.

Staying Competitive

But 1997 is one reality and Hong Kong's long-term economic competitiveness another. With China on the rise, Shanghai could turn out to be a formidable rival. HBS professor Michael E. Porter, an expert on competitive strategy, doffed his jacket to deliver an animated lecture on "The Competitive Challenges in Greater China and Asia." He put the East Asian miracle under the microscope. Again, myth and reality were tangled. "Clearly the last fifteen years in Asia have been extraordinary," Porter said. "The rising tide in Asia has lifted almost all boats."

But the real issue, Porter explained, was how Asia would cope with the emerging global economy, because the ingredients of success were no longer the same as they were a decade ago. "Asian wages are rising rapidly," Porter said. Other nations are restructuring their economies and offering an alternative to Asia as an outsourcing location. The key today is productivity - "creating more value per day of work to justify the higher Asian wages."

Asian companies will need to move beyond OEM production and adopt real strategies involving unique ways of competing, Porter asserted. They will have to compete in more sophisticated ways, and the national business environment must evolve to support more innovative strategies. "Few Asian countries have done this," Porter commented, citing chronic problems such as inadequate infrastructure, skilled human resource shortages, deficiencies in science and technology, and lingering monopolies that have driven up costs. Asia, he warned, also has to start looking after the environment and the quality of life if it is to stay competitive.

Building Global Bridges

Dean Clark's Sunday afternoon address outlining his vision for the School in the 21st century complemented the conference's global theme. Addressing a crowded auditorium, Clark described a mission clearly designed not just to maintain the School's position as the premier institution for business education in the world, but also to broaden the outlook of the leaders it trains and, as an intended consequence, bridge gaps among cultures and nations.

"We're really at a turning point," Clark explained. To stay ahead in an increasingly competitive, global economy, the Business School has to continue its tradition of excellence, he said. That means ensuring that the faculty are close to practice, the School cultivates its powerful alumni network, and new technologies are incorporated into teaching and student life. "Think about our mission," Clark invited the attentive audience, "and think about this world. Our mission is to educate leaders for that world."

To accomplish this, Clark explained, the School is pursuing three important initiatives: a wider use of information technology (IT), an expansion of entrepreneurial studies, and the "globalization" of the School. One of the most important results of the IT initiative has been the development of a high-speed intranet to link students, faculty, staff, and alumni. Clark encouraged graduates to log on to the new HBS alumni Web site and to activate their new lifelong e-mail forwarding addresses. Noting that a large portion of HBS alumni are entrepreneurs, Clark said it was important to "bring entrepreneurship to the center of what we do."

Concluding his talk, the Dean reiterated that as businesses become more global, so must HBS. "To be effective, we must be close to practice. We need to be in the field." As part of this global initiative, in January 1998, the Business School will launch a new executive program for global leadership that will include a three-week segment in Singapore, as well as a stint back in Boston. There are also plans for HBS research and education ventures in key regions of the world. "We are talking about taking the School to a different level of involvement with the world," said Clark.

On to Chicago

HBS Alumni Association president Catherine A. Connett (MBA '79) began the closing session by thanking host Robert Piccus and his colleagues for organizing the Hong Kong event and by introducing William S. Lear (MBA '68) of the HBS Club of Chicago, the host of next year's global conference. Lear presented a video to promote the Windy City and invited delegates to make plans for next June to discuss "Innovation and Entrepreneurial Leadership for the New Millennium." Faculty chair David Yoffie then offered some summary remarks. It is clear that times are changing, he said. Yoffie noted that many of the conference sessions underscored the duality of modern China. China offers growth, abundant resources and human capital, economic openness, a limited but widening acceptance of the rule of law, and a clear sense that there is no return to orthodox Communism, he observed. Yet it also suffers from uneven economic development, a lack of leadership and management prowess, lumbering state enterprises, rising prices, an underdeveloped legal system, and volatility in its equity markets.

This dichotomy, Yoffie surmised, is an unmistakable sign that something is afoot - as he put it, "a paradigm shift" - glimpsed by conference participants as a world in-between, where myth and reality mix. Power is shifting from one side of the ocean to the other but has not yet made it even halfway across. The East Asian economic miracle is only the beginning of the story. The challenge for businesspeople working in the region is to get through the next several chapters.

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