annual meeting of the new champions 2008

Report

Annual Meeting of the New Champions 2008The Next Wave of GrowthTianjin, People’s Republic of China 27-28 September

Tianjin_2008_Report_6:Tianjin_report 14.11.2008 16:31

World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744E-mail: [email protected]

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REF: 141108

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Tianjin_2008_Report_6:Tianjin_report 14.11.2008 16:31

Executive Summary

Page 6

Managing Risks

Page 8

Drivers of New Global Growth

Page 12

Technology and Innovation: The Next Wave

Page 14

China as a Global Player

Page 16

The WorkSpace

Page 18

Acknowledgements

Page 19

Mentors of the Annual Meeting of the New Champions 2008

Contents

Tianjin_2008_Report_6:Tianjin_report 14.11.2008 16:31 Page 1

2 | Annual Meeting of the New Champions 2008



Executive Summary

The second Annual Meeting of the New Champions wasthe first major global gathering after the financial marketsworldwide were roiled following the collapse of LehmanBrothers, the largest bankruptcy in US history, and the USgovernment’s rescue of AIG, the world’s biggest insurancecompany.

Nearly 1,200 business, government and civil societyleaders from more than 80 countries convened to discussthe near and longer term impact of the unfolding crisis aswell as the next wave of growth that would be necessaryfor the recovery of the global economy. China was theappropriate setting in this context. The Binhai New Area ofTianjin offered participants a glimpse into China’s greatpromise despite the economic turbulence taking placeoverseas. The message was clear: in times of extremepressure, a long-term perspective is critical.

This has after all been a year of great difficulties and greatsuccesses for the Chinese – devastating winter weatherwas followed by a major earthquake in Sichuan Provincejust weeks before the nation hosted the Olympic Games inBeijing. “We have overcome difficulties one after anotherand maintained the momentum of steady and fasteconomic growth,” said Chinese Premier Wen Jiabao in anaddress that struck a chord with participants. Wenunderscored China’s determination to maintain sustainedhigh growth as its contribution to global stability.

The strong presence and lively engagement in thediscussions of CEOs from over 200 Global GrowthCompanies, enterprises that are emerging as powerfuldrivers of global growth and value, was also inspiring, asource of welcome optimism that belied the newspaperheadlines. “Listening to the voices of these NewChampions is to see a path to the future,” remarkedMayor Huang Xingguo of Tianjin. Added Robert Greenhill,

Managing Director and Chief Business Officer, WorldEconomic Forum: “A very important part of this forum isbringing together the present and the future.”

Just how critical it is to look forward and seek newopportunities was underscored by the presence of threeother World Economic Forum communities in Tianjin:Technology Pioneers, Young Global Leaders and YoungScientists. These groups underscored the fact that thenext wave of growth will come from innovations intechnology and science, as well as the emergence ofChina and other fast-growing, large emerging economiessuch as India and Brazil to take a leading role in variousareas, from green business to global governance.

The discussions did not dwell on the dramas playing outon Wall Street and the world’s financial markets. Instead,participants reflected on the wider implications of thecrisis. “We are too tied together in a globalized world,”remarked William R. Rhodes, Senior Vice-Chairman,Citigroup, and Chairman, President and Chief ExecutiveOfficer, Citibank NA, Citi, USA. Significantly, there wasconsensus that the expected economic slowdown mustnot lead to friction and protectionism, but rather shouldpull the international community together to collaborate onglobal solutions such as the adoption of internationalaccounting standards and regulatory norms. “What wemust have is international cooperation,” stressed LiuMingkang, Chairman of the China Banking RegulatoryCommission.

This report on the Annual Meeting of the New Champions2008 is centred on four essays linked to the programme’sthemes: Managing Risks; Technology and Innovation: TheNext Wave; China as a Global Player; and Drivers of NewGlobal Growth.

“This is probably the firsttransformational crisis of our globalizedage. Many things will change.”

Klaus Schwab, Founder and Executive Chairman,World Economic Forum



Managing Risks

Globalization has made the assessment andmanagement of risks difficult.

• The proliferation of risks ranging from contagion infinancial markets to looming environmentaldegradation has made it difficult for business andgovernment leaders to plan for the long term and tocoordinate their responses, even though cooperativeglobal approaches have become necessary.

• The unfolding financial crisis has shown that thepopular assumption that fast-growing emergingmarkets such as China have somehow “decoupled”from the US economy was premature. In fact, theinternational liquidity crisis and the collapse in financialmarket confidence from Iceland to Indonesia haverevealed the deeper and broader interconnectednessof the world.

• China has pledged to contribute to global stability bymaintaining strong growth which reflects the Chineseperception that the key to mitigating risk is to take along-term view, continue pursuing necessary reformsand focus on achieving sustainable growth.

• Companies should not reduce their corporateengagement in society as they build the capacitywithin organizations to approach the future in a morestrategic, holistic and systematic manner.


The ranks of the New Champions – the dynamic GlobalGrowth Companies and the nimble emerging economies– will continue to grow and are in a good position to takeadvantage of opportunities created by the adverseeconomic conditions.

• The retreat in liquidity will reduce the availability ofcapital at a time when governments and businessesare looking to finance major infrastructure projects.

• Emerging economies that have large foreign exchangereserves are set to become major sources of liquidityand investment capital, particularly for the developingworld.

• These fast-growing economies must quickly developcapital markets to distribute efficiently the neededinvestment capital to budding enterprises or promisingprojects.

• While the US may offer buying opportunities for thosewith large amounts of capital, investor interest will bethematic rather than geographic. The focus will be onsectors linked to the global drive towards urbanization.The growth of cities and the migration of people tourban areas will continue to fuel feverish growth intransportation, financial services, education, greenbusiness, infrastructure development and the supplyof raw materials.

“I hope to see some light at the end ofthe tunnel at the end of next year.”

Yoshihiko Miyauchi, Chairman and Chief Executive Officer, OrixCorporation, Japan

“Listening to the voices of these NewChampions is to see a path to the future.Their views have been profound andimaginative.”

Huang Xingguo, Mayor of Tianjin, People’s Republic of China



Technology and Innovation: The NextWave

Two critical drivers of future growth in the global economywill be the development of technology and the promotionof scientific innovation.

• Old competitive models of knowledge protection willincreasingly yield to cooperative models of sharingresearch across borders and even between rivalcorporations because of the critical need to deliverresults faster and cost effectively.

• National governments will have to allow their best andbrightest researchers to collaborate more freely, giventhat international cooperation is essential to thesuccess of large-scale research projects.

• The private sector can be a major driver of basicscientific advances that may prove commerciallylucrative.

• Where business cannot or is unable to take the lead,partnerships with government and civil society can beeffective, particularly in areas such as the developmentof clean energy technologies.


China now stands as a haven of economic stability at atime when the US and other industrialized economies areengulfed in financial turmoil and threatened by prolongedrecession. The long-term economic prospects of Chinaappear strong, underpinned by an expanding middleclass and growing investment in technology.

• China must manage outside expectations about theextent of the help it will be able to provide the rest ofthe world as the global financial crisis unfolds.

• While many in the international community have calledfor China to take a more active position in globalgovernance institutions, the Chinese leadershipremains reluctant to do so, given the major challengesit faces at home, including the income gap betweenurban and rural areas and the need for strong socialsecurity safety nets. Still, China’s monetary authoritiesare playing their part, often unnoticed, in monitoringand addressing the volatility in the financial markets.

• China is considered a global player by the rest of theworld but the question remains as to how eagerly itwill embrace this role in coming years.

• China is beginning to take steps to wean its economyoff its reliance on exports and encourage the growthof domestic consumption.

• The Chinese government aims to boost China’scapacity to innovate and the country has emerged asa preferred destination for global R&D investment.

“Decoupling is not a reality. What ishappening in the markets in the US isaffecting the credit markets worldwide.There is just no confidence in financialinstitutions in the market.”

William R. Rhodes, Senior Vice-Chairman, Citigroup; Chairman,President and Chief Executive Officer, Citibank NA, Citi, USA

“The most important thing for China ishuman intellectual capital. In thecoming 10 to 20 years, we will have totransform to an innovation-drivengrowth model.”Guo Shuqing, Chairman, China Construction Bank, People’sRepublic of China



When confidence in markets crumbles and trust ininstitutions once thought to be indomitable disappears,what is left is fear – the dread of dangers that couldmultiply beyond control. And if they do: panic. During adebate on the risks to global growth in the WorldEconomic Brainstorming session at the close of theAnnual Meeting of the New Champions 2008, someparticipants went so far as to raise the prospect that apanicky world could be thrown into utter disarray if theunfolding liquidity crisis spreads and deepens.Comparisons to the Great Depression were not taken ashyperbole. This crisis is different from recent ones, manyargued.

“This is probably the first transformational crisis of ourglobalized age,” reckoned Klaus Schwab, Founder andExecutive Chairman of the World Economic Forum.“Many things will change.” In Tianjin, the sense that theglobal economy is drifting in uncharted and choppywaters was widespread. The complex interconnections inthis world are not unlike the structured financialinstruments that are now much maligned. The multiplicityand opacity of all the links make it difficult to assess whatis going on – or what could go wrong. “It’s not easy tosee the risks, not easy to manage them,” said FuChengyu, Chairman, Chief Executive Officer andExecutive Director of the China National Offshore OilCorporation (CNOOC). While the price of oil is closelyrelated to the value of the dollar, who can predict wherethe greenback will be in six months, he asked plaintively.

Risk management therefore has never been trickier.Companies are hampered from taking long-termperspectives because of volatility in the markets, makingit harder to pinpoint trends and predict the prices ofcommodities, components, or the value of currencies,and more importantly to plan ahead. The food crisis atthe start of the year stirred unrest in many countries andsparked fears of inflation, catching many governments offguard. This revealed how quickly food security might becompromised. Increased interconnectedness may meanthat changing consumption patterns in one region could

have significant and sudden negative effects on anotherpart of the world. Yet globalization clearly brings with itbenefits to offset its costs. It is a catalyst for increasedtrade, which in turn results in lower food prices thatultimately benefit the poor.

The uncertain way ahead prompted nervous speculationamong participants that somehow the world has trippedinto an inflection point. “Uncle Sam will save Wall Streettoday but who will save Uncle Sam tomorrow?” askedZhu Min, Group Executive Vice-President of the Bank ofChina, referring to the US$ 700 billion financial rescuepackage that the US Congress was putting together atthe time of the meeting. The downturn in the US anddeveloped economies, some feared, could lead to a risein trade friction and protectionism. Others, however, werenot ready to accept the notion that the United States wason the wane, given the prospect of fresh leadership inWashington in 2009, the size of the US economy and theconsiderable military and financial power that it stillpossesses. “People understand that the US will come outof this,” said Sayanta Basu, Chief Executive Officer of theDubai Financial Group. “In hindsight, people will lookback and say it was a great buying opportunity.”

A major lesson of the crisis is likely to be that those whoargued that dynamic emerging markets had decoupled

Managing Risks

“If a CEO is just about numbers and profits,the business will not be sustainable. It’sabout building sustainable businesses insustainable communities. What you doshould be part of your core businessstrategy. You do it because it’s good foryour business not just because it makesyou feel good.”Samuel A. DiPiazza Jr, Chief Executive Officer,PricewaterhouseCoopers International, PricewaterhouseCoopers,USA



from the US economy were wrong. “Decoupling is not areality,” declared William R. Rhodes, Senior Vice-Chairmanof Citigroup and Chairman, President and Chief ExecutiveOfficer, Citibank NA, Citi, USA. “What is happening in themarkets in the US is affecting credit markets worldwide.We are in a crisis of confidence.” Indeed, the decouplingtheory now appears incompatible with globalization, which byits definition implies more, not fewer, linkages that are notonly more profound but also less fathomable on the surface.

Participants typically offered two general prescriptions formitigating the risks proliferating in these troubled times.First, if you were doing the right thing, now is not the timeto stop. Second, this is the time to go for quality andsustainability over all-out profit. In this new context,South-East Asia, for example, should continue efforts tointegrate their economies, as they seek to build acommon market by 2015. For China, staying the coursemeans pursuing sustainable growth and economicreforms designed to de-emphasize exports and boostdomestic consumption. Liu Mingkang, Chairman of theChina Banking Regulatory Commission said that the crisiscould lead to China’s economic growth moderating from11% to 9%. “This is good for China,” he concluded.“China doesn’t need speed first; China needs quality first.”

In the opening plenary, Chinese Premier Wen Jiabao tookpains to stress that “the most important contribution” that

Value of the Dollar

Source: Reuters

Steady erosion in the value of the dollar since 2003, particularly against the euro

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100

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60

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China can make at this time is to “maintain themomentum of sustained growth and avoid ups anddowns.” This was the same sober approach that theChinese leadership took a decade ago as the Asianfinancial crisis spread ruthlessly through neighbouringeconomies. For its resolve and steadfastness, Chinagained in international stature and earned the gratitude ofonce wary South-East Asia.

For companies aiming to make their mark by pursuingthe opportunities offered by the crisis, the advice fromveteran executives was to keep a long-term view andremain committed to social responsibilities. “If a CEO isjust about numbers and profits, the business will not besustainable,” said Samuel A. DiPiazza Jr, Chief ExecutiveOfficer, PricewaterhouseCoopers International,PricewaterhouseCoopers, USA. “It’s about buildingsustainable businesses in sustainable communities. Whatyou do [to engage in society] should be part of your corebusiness strategy. You do it because it’s good for yourbusiness not just because it makes you feel good.” In hisclosing remarks, Klaus Schwab, Founder and ExecutiveChairman of the World Economic Forum, remindedparticipants that ”when we face a crisis, corporate socialresponsibility and corporate global citizenship should notbe put on the back burner.”

Energy and Metals Commodity Prices

Source: IMF; US Bureau of Labor Statistics; PwC analysis

Prices for most major extracted commodities have risenmore than three-fold in real terms since 2003

600

500

400

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Oil*

“Frontier markets mean something between the known andunknown, and compared with emerging markets, there aremore risks and uncertainty but also more opportunities.”

Wang Jianzhou, Chairman and Chief Executive, China Mobile Communications Corporation,People’s Republic of China

“It’s not easy to see the risks, not easy tomanage them.”

Fu Chengyu, Chairman, Chief Executive Officer and ExecutiveDirector, China National Offshore Oil Corporation (CNOOC),People’s Republic of China




Even though the turmoil in the global financial marketshad broken only weeks earlier, participants in the AnnualMeeting of the New Champions 2008 agreed that thedownturn offered many opportunities, many of themChinese in the making. For it is in China and otheremerging markets where current account surpluses, largeforeign exchange reserves and big populations withbulging middle classes are fuelling an economicdynamism that is creating a new cast of agile players ableto capitalize on current conditions to go global.

Even the most pessimistic forecasts for global growth stillinclude robust projections for China, India, the Gulf, Braziland Russia. Growth companies there, or that invest there,are in a good position to weather the storm. Smallercompanies that have avoided relying on debt, moreover,can take advantage of the turmoil to open new marketsand seize a bigger slice of existing ones. Concluded JackMa Yun, Chairman and Chief Executive Officer of China’sAlibaba Group: “These days everybody worries aboutthings, but there are a lot of opportunities.”

Global Growth Companies are typically adept at pursuingopportunities. According to a study by consulting groupAT Kearney, companies from developing countriesincluding China, India, Malaysia, Russia, the United ArabEmirates and South Africa concluded 19% of the M&Atransactions – 421 out of 2,168 deals – betweendeveloped nations and developing countries in 2007.

But in the current climate, even the deal-making zeal ofthe New Champions will be severely tested. Much of thespectacular growth in emerging markets in the pastseven years has been the result of unprecedentedamounts of cheap capital. But the days of easy moneyand conspicuous consumption are over, at least in theUS. “We’ve got to get used to living in a slower growthenvironment where the emphasis is not on the quantityand speed but the quality and balance of economicgrowth,” said Stephen Roach, Chairman, Asia, at MorganStanley in Hong Kong. The ability of the Americanconsumer to keep borrowing to buy imported goods hasbeen crippled, perhaps permanently. “There will be greatconsequences for other nations who like to sell things toAmericans that they don’t need and can’t afford,”reckoned Roach.

“We’ve got to get used to living in aslower growth environment where theemphasis is not on the quantity andspeed but the quality and balance ofeconomic growth.”

Stephen Roach, Chairman, Asia, Morgan Stanley, Hong Kong

SAR

Global Growth Forecast

Source: PwC; IMF

Growth among oil exporters, along with China, India and Russia,expected to dwarf growth in developed markets

10%

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The retreat in liquidity is also likely to reduce theavailability of capital to the developing world at a timewhen governments and businesses are looking to financehundreds of billions of dollars in infrastructure and otherprojects to support growth. As the global economyslows, moreover, deals financed by projections of cashflow are likely to be jeopardized. Emerging economiesthat have been supplying much of the world’s newinvestment opportunities will now have to supply agreater share of the world’s investment capital as well.“We need them to be sources of liquidity, of demand, ofinvestment, of confidence in the global economy,”declared Peter Mandelson, Commissioner for Trade at theEuropean Commission.

Contributions to Global Growth in 2008

Source: PwC forecasts

China to represent one quarter of global GDP growth this year

France

Korea

UK

Japan

Brazil

Germany India

Russia

United States

ChinaOther countries

Helping to fill the financing void represents a bigopportunity for those with the capital and expertise. Fromyears of accumulated export revenues, many export-driven economies are enjoying enormous surpluses.Energy-rich Gulf States alone added US$ 215 billion totheir stock of foreign assets last year, according to theInstitute of International Finance. Their total assets,including those of their central banks, sovereign wealthfunds and high net-worth individuals, are estimated atUS$ 1.8 trillion, with some estimates going as high asUS$ 2.4 trillion. East Asia including China, Japan andKorea has more than US$ 3 trillion at its disposal.

While much of that money has been funnelled intodeveloped markets, more Middle Eastern investors arelooking to seize opportunities in emerging markets likeSouth-East Asia. China’s investors, meanwhile, arebecoming important players in financing commodity-related infrastructure projects. Indian companies arescouring the world for new acquisitions. Despitespending the past decade recovering from its ownfinancial crisis, Japanese banks are now in a strongposition to step in with billions of dollars of publicsavings.

“We are looking now to the larger,faster-growing economies to take upthe slack. We need them to be sourcesof liquidity, of demand, of investment, ofconfidence in the global economy.”

Peter Mandelson, Commissioner, Trade, European

Commission, Brussels

“These days everybody worries aboutthings, but there are a lot ofopportunities.”

Jack Ma Yun, Chairman and Chief Executive Officer, Alibaba

Group, People’s Republic of China



One urgent task facing most export-oriented economiesis to develop capital markets that can rapidly andefficiently distribute this capital to budding enterprises,especially the fast-growing companies aiming to goglobal. Emerging financial markets are stillunderdeveloped and companies have tended to relyinstead on larger, deeper, more sophisticated markets likeNew York and London. In particular, aspiring financialcentres such as Dubai, Mumbai and Singapore will needto accelerate the development of bond markets to keeplocal companies well financed. “You can’t have sustainedeconomic growth without a well functioning debt market,”observed Ziad Makkawi, Chairman and Chief ExecutiveOfficer of Dubai’s Algebra Capital.

Emerging markets appear to be well positioned toaddress future financial needs. China, flush with exportrevenues, has recapitalized its banks. And India, with alower reliance on export income, has been bolstered byremittances and investments from overseas Indians. As aresult of exports of food and commodities, many LatinAmerican countries are in a relatively strong position,

Foreign Reserves

Source: IMF

Chinese and Russian currency reserves each surpass those of the US and Europe combined

$1,000

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particularly pro-market economies such as Brazil, Chileand Colombia that have built strong trade links withChina and other economies in East Asia. Even sub-Saharan Africa appears to be somewhat insulated, havingimproved governance and used debt relief in recent yearsto bolster public finances.

All of these markets represent growth opportunities tocompanies and investors that are willing to risk theircapital. Participants were also quick to note that even theUS will offer bargains once the panic in financial marketshas abated. Some of the biggest medium- and long-termopportunities, however, will be thematic rather thangeographic. Urbanization, for example, is a major globaltrend likely to be unaffected by the financial crisis.Infrastructure demand related to urbanization will remainstrong, financed by cash-rich governments, as well asdemand for investment in securing supplies of rawmaterials.

“You can’t have sustained economic growthwithout a well-functioning debt market.”

Ziad Makkawi, Chairman and Chief Executive Officer, Algebra Capital, United

Arab Emirates

“What’s happening in America isspreading to other parts of the world.This is turmoil of a tsunami scale andwill impact Asia, including China. Theconventional wisdom is that over thenext few years China’s exports will beaffected. To increase growth, it needs torefine the export model and growthderived from domestic consumptionmust be accelerated.”

Victor L. L. Chu, Chairman and Chief Executive Officer, First

Eastern Investment Group, Hong Kong SAR



Environmental sustainability needs, mainly linked toclimate change, will also drive investment demand intransportation, financial services and education. Greenbusinesses are expected to flourish. All thesedevelopments are opening opportunities to deliverproducts and services catering to the poorest segmentsof emerging economies, where incomes are growingfaster than anywhere else.

Excelling in the leaner funding tight-credit environment willrequire changing the status quo in the developing world.Governments will have to become more serious abouteconomic reform, sustainability and equitable growth.And companies will have to demonstrate to potentialinvestors and employees that they are no longer followerswhen it comes to good governance, risk management,corporate social responsibility and sustainable bestpractices. As China’s Premier Wen Jiabao told the CEOsof the Global Growth Companies gathered in Tianjin, “Ifyou wish to remain or become New Champions, youmust be innovative and take the lead.”

Business Con�dence Worldwide

Source: Moody's Economy.com

Con�dence in Asia-Paci�c remains high

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“According to my research, investment contributes 37% toeconomic growth, domestic consumption 39%, net export 34%, soif you want to keep the economic growth rate above 8%, we haveto strengthen these three driving forces.”

Cheng Siwei, President, China Association for Soft Science Studies, People’s Republic of China



Technology and Innovation: The Next Wave

“Distant water will not put out a fire close at hand,” goesthe Chinese proverb – a reminder that the urgent will easilyovershadow the important in the time of crisis. For companiesgrappling with decreased lending and declining consumption,the benefits of scientific research and development mayseem far too remote. Such an outlook should be rejected.While terraforming Mars or disproving the Higgs mechanismin particle physics may seem like lofty, far-off goals, sciencewill drive future growth. Investors and governmentsabandon or ignore scientific research at their peril.

The United States, Europe and Japan led technologicalinnovation throughout the 20th century. The scientificcommunity has become increasingly decentralized in justthe early years of this century. To nurture the new globalscientific ecosystem, stakeholders should focus on threegoals. First, while national security and intellectual propertyremain legitimate concerns, knowledge and talent must flowmore freely across borders. Second, whenever possible,private enterprise should fund new science. Finally, theprivate and public sectors should partner to ensure regulatorystructures that enable innovation and sufficient financingfor long-lead research. This is particularly true whenresearch addresses collective global concerns like cleanenergy and our common stewardship of the environment.

Science and Engineering Graduates

Asia produces 43% of the world's science and engineering graduates

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EU non-EUEurope

NorthAmerica

LatinAmerica

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Rest ofAsia

700

600

500

400

300

200

100

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Old competitive models of knowledge protection willeventually yield to cooperative models of sharing researchacross borders and even between corporations. This hasstark implications for the existing intellectual propertyrights regime. “The bad news is that intellectual propertyis no longer protectable,” said Neil Gershenfeld, Directorof The Center for Bits and Atoms at the MassachusettsInstitute of Technology. “The good news is that intellectualproperty can still exist, but it will not be based on controlof scarce resources.” Companies will be compensatedbased on their abilities to add value rather than on tightcontrol of intellectual property, Gershenfeld argued.

National governments must also allow the world’s bestand brightest researchers to collaborate more freely.“There is a genuine worry in the scientific community thatwe can’t communicate with everyone that we’d like to,”said Brian Cox, Royal Society University Research Fellowat the University of Manchester. Scientific development inthe US and United Kingdom have suffered because ofmore stringent visa requirements, especially since 9-11,that make it difficult for foreign researchers to work inthose countries.

International cooperation is vital to large-scale researchthat is not driven by commercial interests. The largestscientific experiment in history, the Large Hadron Collider(LHC), aims to recreate the conditions at the beginning ofthe universe. This project would not have happened wereit not for cooperation among 86 countries and funding ofits US$ 9 billion price tag. While the US has reduced itsfunding for the space programme, the InternationalSpace Station keeps humming thanks to 16 othercountries that contribute to its operation. China may soonadd its expertise and capital to the project. After asuccessful space walk mission that took place at thebeginning of the Annual Meeting in Tianjin, China is likelyto follow the US by landing a spacecraft on the moon.

While governments and foundations will fund most long-term research, the private sector can reap rewards frominvesting in new science, as capitalism is efficient atdeploying capital to create value. If harnessed to scientificresearch, it can also be an effective promoter of new

“Thprogoocanon c

Neil GMass



technologies. Businesses that invest in biotechnology andnanotechnology are enjoying superior returns oninvestment. Globalization, after all, has helped expand themarket for life science products. Developing countrieswith little or no pre-existing medical infrastructure canmore quickly integrate healthcare advances thancountries in the Western world where, too often,insurance companies impede medical progress.

Even space exploration can be made profitable. A WorldEconomic Forum Young Global Leader, Space AdventuresPresident and Chief Executive Officer Eric C. Andersonbrings private citizens into orbit and sees the cosmos asa fertile vineyard. Mineral companies might one day mineasteroids; pharmaceutical companies harvest crystals inzero-G; and transportation companies use sub-orbitalflights to slash intercontinental travel times. “It is in ourcollective interest to bring the solar system within oureconomic sphere of influence,” said Anderson.

Where the private sector cannot or will not drive researchand development, or where it threatens to use sciencerecklessly, government and civil society must take thelead. While the market for products using nanotechnologywill exceed US$ 833 billion by 2011, environmentalconcerns threaten to keep that science from reaching itsfull potential. And despite the staggering consumer

Biotechnology Stocks

Source: Yahoo! Finance

Biotech returns outpacing the S&P 500 in 2008

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100

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S&P 500

success of products like Toyota’s Prius, the private sectorhas been slow to fund clean energy research.

Over the long term, nanotechnology will enable greenerliving, but as the technology develops, “regulation has totake an important role,” conceded Technology PioneerJoe Brodd, Chief Executive Officer of Cima Nanotech.Markets reward transparency, but at the momentconsumers are largely ignorant, and increasingly wary, of thenanocomponents of the products they buy. Yael McGuire,Co-Founder of ThingMagic, who is also a TechnologyPioneer, suggested a common database based on theWikipedia model where companies and consumers wouldlist all of the nanocomponents in products.

Finally, governments and foundations will play a vital rolein developing and propagating clean energy technologies.Globally, investment in such technologies has trebled inthe last three years. But much more needs to be done toreduce reliance on fossil fuels, which still generate over80% of the world’s energy. Governments can provideincentives such as tax breaks and subsidies to jump startinvestment in emerging technologies, but such solutionsrequire careful consideration as unintendedconsequences often follow from such decisions.Government support for biofuels, for example, hasgenerated concerns about food and water security.

Source: New Energy Finance

Renewable Energy Investment, by Sector

$125

100

75

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20052004

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20072006

Biofuels

ServicesE"ciency

Other renewables

Solar

Wind

Wind and solar represent two-thirds of clean energy investment

“The bad news is that intellectualproperty is no longer protectable. Thegood news is that intellectual propertycan still exist, but it will not be basedon control of scarce resources.”Neil Gershenfeld, Director, The Center for Bits and Atoms,Massachusetts Institute of Technology, USA

“There is a genuine worry in thescientific community that we can’tcommunicate with everyone that we’dlike to.”Brian Cox, Royal Society University Research Fellow, Universityof Manchester, United Kingdom




Thirty years ago China launched economic reforms thatwould transform the country and its place in the world. Ata speed no one could have predicted even a decadeago, the nation has re-emerged as a global player onmultiple fronts.

Consider China’s progress in technology. As the AnnualMeeting of the New Champions 2008 was gettingunderway in Tianjin, a Chinese astronaut was making thenation's first-ever space walk. On the diplomatic front,Beijing’s hosting of the 29th Olympic Games in Augustwas regarded as a major success, despite some criticaloverseas coverage at the outset.

But it is in the arena of economics that China’s gains aremost apparent. Prior to travelling to Tianjin to deliver theopening address at the Annual Meeting of the NewChampions, Premier Wen Jiabao spoke before the UNGeneral Assembly in New York of China’s ongoing effortsto fulfil the Millennium Development Goals. “China hasbrought down the number of people in absolute povertyfrom 250 million to 15 million in less than 30 years,” hesaid.

With its economic achievements well certified, China nowstands as a haven of economic stability at a time whenthe US and other developed economies are engulfed infinancial turmoil and entering what could be a prolongedrecession. More important, its longer term economicoutlook appears strong, underpinned by an expandingmiddle class and growing investments in technology.

China’s export-led economy is certainly not immune to aglobal slowdown that originates from the US creditcrunch and liquidity crisis. Liu Mingkang, Chairman of theChina Banking Regulatory Commission, predicted GDPgrowth could slide from 11% to 9%. However, even ifexports fall, Chinese firms can expect to profit from thecountry’s growing consumer market. One of Beijing’s toppriorities in recent years has been to wean the economyoff its reliance on exports and encourage the growth of

the domestic market. As Alibaba Chairman and ChiefExecutive Officer Jack Ma Yun said, “the future of Chinais domestic demand and consumption.”

The government is also seeking to transform China froma country best known for its low-cost manufacturing toone respected for its innovative capacity. “The mostimportant thing for China is human intellectual capital,”said Guo Shuqing, Chairman of China ConstructionBank. “In the coming 10 to 20 years, we will have totransform to an innovation-driven growth model.”

China has already emerged as a preferred destination forR&D investment, both foreign and domestic. Beijing hasset a goal to increase national spending on R&D from1.4% of GDP in 2005 to 2.5% by 2020. Domestictechnology leaders predict that in the next decade, Chinawill for the first time create globally relevant technologystandards.

China’s sturdy economic fundamentals and highambitions are all the more striking against the currentbackdrop of financial turbulence in the West. In light ofthe nation’s nearly US$ 2 trillion in foreign reserves and itsUS$ 200 billion sovereign wealth fund, it is no surprisethat some foreigners perceive China as a potentialeconomic saviour amid deepening global troubles.

Indeed, one near-term challenge for China will bemanaging international expectations about just how much

“What China can do is maintain themomentum of sustained growth andavoid ups and downs. That would beour most important contribution toglobal stability.”

Wen Jiabao, Premier of the People’s Republic of China



help it will be able to provide to the rest of the world. Itsown leaders view China still as a developing country thatneeds time to mature – a nation hardly prepared toassume the mantle of global leader. They are also wary ofthe political blowback that can come with any attention-grabbing moves. But those who point to China’s rapidascent up the global economic rankings are less patientas they see the country as possessing characteristics ofboth an industrialized and developing economy.

There is perhaps no better indicator of China’s growingclout than the recent calls for it to become more active inglobal governance institutions. “I think with this flat worldin which we live, China has a bigger role to play in linewith its current position as one of the leading countries ofthe world,” said Publicis Group Chairman and ChiefExecutive Officer Maurice Lévy. Some have gone so faras to argue that China risks becoming a “free rider” onthe international stage, reaping the benefits of its growinginternational influence without playing as active a role inshaping the global financial and geopolitical agenda as itshould. That said, the Group of Seven economies has yetto expand its roster to include on a permanent basis majoremerging economies such as Russia, Brazil, India and Chinain its regular deliberations on global economic governance.

Yet there also remains a strong consensus amongChinese elites that the nation is not yet ready to take upthe responsibilities of the developed world. In their view,maintaining stability at home remains top priority.Presiding over the next stage of reforms in this highlycomplex and diverse country is task enough for now.“What China can do is maintain the momentum ofsustained growth and avoid ups and downs,” saidPremier Wen Jiabao. “That would be our most importantcontribution to global stability.”

Chinese policy-makers already have to attend to adaunting list of challenges that include narrowing theincome gap between urban and rural areas, creating astronger social security safety net to prepare for anageing population and promoting economic growth in thenation’s poor central and western areas.

But, as much as China may prefer to concentrate onpressing needs at home, it will undoubtedly faceincreasing pressure to be more involved in solvinginternational problems. Climate change is a case in point,as China’s impressive economic growth has also givenrise to record levels of carbon emissions. Some questionwhether their country has a larger responsibility to curbits energy use, while others acknowledge a need for thecountry to be much more energy efficient. Its policies onenergy security and climate change continue to shapeperceptions about China’s role as a global player. “Withinthree to five years, climate change will become the mostimportant issue shaping the future of US-China relations,”said Kenneth Lieberthal, Professor of BusinessAdministration at the University of Michigan. He reckonedthat the issue could become either an example ofcooperation between the two countries or a source offriction.

Given the sheer scale of its population and its increasingeconomic might, China’s impact on global issues will onlyincrease. Ready or not, China is now perceived to be aglobal player by the rest of the world. The question ishow it will choose to act in this role.

China's Foreign Reserves

Source: IMF

China's foreign currency reserves are greater than thoseof Russia, India, Brazil and the Eurozone combined

$1,000

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“The current financial crisis allows us tolearn how to regulate the modernfinancial system.”

Zhang Xiaoqiang, Vice-Chairman, National Development andReform Commission, People’s Republic of China

“Within three to five years, climatechange will become the most importantissue shaping the future of US-Chinarelations.”

Kenneth Lieberthal, Professor of Business Administration,University of Michigan, USA


The WorkSpace at the Annual Meeting of the NewChampions 2008 gave participants the chance to thinkoutside the box, stretch boundaries and explore “TheNext Wave of Growth” in a series of 10 highly interactivesessions. In a variety of collaborative exercises, leadersfrom business, government, academia and civil societywere encouraged to think of new ways to approachsome of the most pressing issues.

Collaboratively, participants discovered insights on criticaltopics as they consider going global and planning fortheir next stage of growth:

• The infrastructure, investment and policies required todeliver and support sustainable urban mobilitysystems

• Successful strategies for building and sustaining aninclusive workforce

• The outlook on national and international financialregulations, sources of funding and financial innovation

• The future of the Web and mobile technology• Emerging business opportunities linked with the needs

and interests of an ageing population• Entrepreneurial opportunities targeting base of the

pyramid markets• Design principles that can be applied to adapt and

strengthen organizations and help turn challenges intoopportunities

• Accelerators and inhibitors of global growth

Two WorkSpace sessions were held in Mandarin Chineseand facilitated the exchange of ideas and experiencesamong Chinese leaders. The sessions explored two ofthe topics that concern them most:

• Ways that organizations can be better prepared toanticipate and handle risks

• Successful principles of different leadership models

For session summaries, photos and graphics go onlineto: http://www.weforum.org/newchampions/workspace

T h e W o r k S p a c e– the workshop with a difference – draws out the collective intellect and creative capabilities of participants to explore concrete

opportunities for improving the state of the world.




Acknowledgements

The World Economic Forum wishes to recognize the support of the following companies as Partners or Supporters ofthe Annual Meeting of the New Champions 2008:

Strategic Partners

ABBABN AMRO BankAccel PartnersAccentureAlcoaAMDAmerican International Group (AIG)Apax PartnersArcelorMittalAT&TAudiAvayaBahrain Economic Development BoardBain & CompanyBarclays PLCBasic ElementBill and Melinda Gates FoundationBombardierBooz & CompanyThe Boston Consulting GroupBPBTCAChevron CorporationCisco SystemsCitiClayton, Dubilier & RiceClifford ChanceThe Coca-Cola CompanyCredit SuisseDeloitteDeutsche BankDeutsche Post World NetDogus GroupDubai HoldingDubai WorldDuPontElectricité de France (EDF)Emirates GroupErnst & YoungFedExFluor CorporationForbesGoldman SachsGoogleHeidrick & StrugglesHPHSBC HoldingsHubert Burda MediaInfosys TechnologiesIntel CorporationInvestorJPMorgan ChaseKPMGKudelski GroupLehman BrothersLenovo Group

ManpowerMarsh & McLennan Companies (MMC)McKinsey & CompanyMerck & Co.Merrill LynchMETRO GroupMicrosoft CorporationMorgan StanleyMubadalaNASDAQ OMX GroupNestléNikeNYSE EuronextThe Olayan GroupPepsiCoPricewaterhouseCoopersReliance IndustriesRenault-Nissan AllianceRoland Berger Strategy ConsultantsSatyam Computer ServicesSaudi Basic Industries Corporation (SABIC)SiemensSilver LakeSK GroupStandard Chartered BankSwiss International Air LinesSwiss ReThomson ReutersTravelportUBSUnileverVimpelComVolkswagenVTB BankWPPXenel GroupZurich Financial Services

GGC Partners

Brightstar Corp.Etihad AirwaysFinancial Technologies (India)International Bank of AzerbaijanInternational Personal FinanceMoser Baer IndiaNeusoft CorporationQIAGENTIBCO SoftwareUnison Capital

Service Providers

Ogilvy Public Relations WorldwidePhoenix Satellite Television, Host BroadcasterTCL CorporationTianjin TV, Host Broadcaster



Mentors of the Annual Meeting ofthe New Champions 2008

A select group of business leaders with extensive international experience in building global businesses from theWorld Economic Forum’s Partners and Members

Peter Bakker, Chief Executive Officer, TNT NVSamuel A. DiPiazza Jr, Chief Executive Officer,PricewaterhouseCoopers InternationalThomas Enders, Chief Executive Officer, Airbus SASFrank Ning Gaoning, Chairman, COFCO LimitedKhalid Abdulla-Janahi, Chairman, Ithmaar BankJiang Jianqing, Chairman of the Board, Industrial andCommercial Bank of China LimitedJames H. Quigley, Global Chief Executive Officer,Deloitte

William R. Rhodes, Senior Vice-Chairman, Citigroup;Chairman, President and Chief Executive Officer,Citibank NA, CitiJames S. Turley, Chairman and Chief Executive Officer,Ernst & YoungRuben K. Vardanian, Chairman of the Board and ChiefExecutive Officer, Troika Dialog GroupYang Yuanqing, Chairman of the Board, Lenovo



Contributors

André Schneider is Managing Director and Chief Operations Officer of the World Economic Forum. JeremyJurgens is Director, Global Growth Companies. Lee Howell is Senior Director, Head of Programming, andSenior Adviser on Asia. The Annual Meeting of the New Champions was under their direct responsibility, withDenise Burnet, Director, Head of Events, and Laura De Wolf, Meeting Coordinator.

The report writers, Wayne Arnold, Alejandro Reyes, E. Benjamin Skinner and K. C. Swanson, worked withSamantha Tonkin, Senior Media Manager, and Nancy Tranchet to produce the report.

The World Economic Forum would like to express its appreciation to the summary writers for their work at themeeting. Session summaries are available on the World Economic Forum website (www.weforum.org).

Associate Director, Editing: Nancy Tranchet

Design and Layout: Kamal Kimaoui, Associate Director, Production and Design

Photographs: Doug Kanter


This publication is also available in electronic form on the World Economic Forum website at the followingaddress:

Annual Meeting of the New Champions report:http://www.weforum.org/pdf/summitreports/newchampions2008 (HTML)

The electronic version of this report allows access to a richer level of content from the meeting, includingphotographs, session summaries and videos of selected sessions.

The report is also available as a PDF:http://www.weforum.org/pdf/summitreports/newchampions2008.pdf (PDF)

Other specific information on the Annual Meeting of the New Champions 2008, Tianjin, People’s Republic ofChina 27-28 September can be found on the following links:

KnowledgeConcierge http://www.weforum.org/newchampions/knowledgeconciergeParticipants http://www.weforum.org/newchampions/participantsProgramme http://www.weforum.org/newchampions/programmeSession summaries http://www.weforum.org/newchampions/summariesInterviews with participants http://www.weforum.org/newchampions/interviewsWebcasts http://www.weforum.org/newchampions/webcastsWorkSpace http://www.weforum.org/newchampions/workspaceMembers' area http://www.weforum.org/ncprivatePhotos http://www.pbase.com/forumweb/tianjin2008


The World Economic Forum is an independentinternational organization committed to improvingthe state of the world by engaging leaders inpartnerships to shape global, regional andindustry agendas.

Incorporated as a foundation in 1971, and basedin Geneva, Switzerland, the World EconomicForum is impartial and not-for-profit; it is tied tono political, partisan or national interests.(www.weforum.org)


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