Wharton Journal

Issue date: 11/20/06 Section: News

Last Friday (November 10th 2006), over 380 students and professionals gathered at the Park Hyatt in Philadelphia for the 12th Annual Wharton Asia Business Conference (WABC). The conference is one of the premier student-run business forums in the U.S with a focus on Asia. A unique feature of the WABC is that it draws upon the talents of both Wharton MBAs and Undergraduates to successfully organize the event; this year's conference was organized by over 60 student coordinators and volunteers. Since its inception, the conference's main aim has been to chart Asia's dramatic economic rise, which has created tremendous wealth and raised millions out of poverty. This year's theme of "Defining Asia in Transition" focused on Asia's transformation into a global powerhouse as witnessed through its rising middle class, and the region's rapid shift from a manufacturing to services-based economy.

Opening keynote speaker Noel Kullavanijaya, Managing Director and Head of Asia-Pacific Financial Institutions at Citigroup, kicked-off the conference by emphasizing the need for financial services firms to have a local presence in markets they aspire to attain a market leadership position in, especially in China where there are three to four competing banks on any one street corner. Dow Kim, Executive Vice-President and President of Global Markets and Investment Banking, Merrill Lynch, expanded on this idea by addressing how the current global liquidity boom has helped satiate Asia's thirst for capital to fuel its economic activities.

In the Capital Markets panel that followed, panelists generally agreed that this is Asia's golden era, where new mega IPO's such as the $20 billion listing of ICBC signal the birth of a vibrant capital market. This theme was carried on in the Local vs. Global panel, where discussion centered around the ability for successful Asian corporations such as Samsung to establish a global footprint, as well as the ability of multi-national corporations to profitably compete in Asian markets. Private financing was the main topic covered in the Entrepreneurship panel, where panelists highlighted the abundance of venture capital opportunities available, while also drawing caution that Chinese entrepreneurs view their start-ups like their babies and often find it difficult to share control.

Lunch keynote speaker Chang Sun, Managing Director, Warburg Pincus Asia, kicked-off the afternoon session by highlighting that strong fundamentals are leading to the PE "bulls," with a total of $17 billion under management, to charge into the "China shop." After that, Jin Roy Ryu, Chairman and CEO, Poongsan Corporation, spoke on the importance of driving profit from the core, alluding to his company's ability to leverage its strength in the mass production of copper-based alloys to transform Poongsan into a $1.5 billion conglomerate.

The afternoon panel on Private Equity was lively and focused on the uniqueness of investing in Asia, and panelists gave a glimpse into the life of a private equity professional in the region. The last panel on Telecommunication, Media, Technology (TMT) stressed the importance of these industries for Asia's transition into a services-oriented economy. Closing keynote speaker Jay Chang, International VP Asia-Pacific for Johnson & Johnson, summarized the WABC 2006 conference succinctly when he reaffirmed Asia's vast growth potential, which is driven by his confidence in China's ability to emerge as a global economic power.

The two key ideas that emerged from WABC 2006 are highlighted in more detail below.

1. Rising Middle-Class

Substantial accumulation of wealth has ushered in a new wave of wealthy citizens. Dow Kim highlighted that the number of High Net Worth (HNW) individuals from Asia have more than doubled, growing from 4.5 million in 1996 to 8.5 million in 2005, with their share of total wealth doubling from $16.6 trillion to $33 trillion. Noel Kullavanijaya observed that a decade ago, Parisian luxury stores used to have instructions in French, English and Japanese. Walk into the same Parisian store today, and you will have instructions in French, English, Chinese, then Japanese.

Increased economic growth has also trickled down to other segments of Asia's society. The rise in the middle class has also occurred at a phenomenal pace; the urban population in China with significant disposable income has surpassed 200 million people, and opportunities in retail banking are merely at the tip of the iceberg.

2. Global Leadership from a Position of Strength

Asian companies have increasingly moved towards expanding globally, as we have seen with Haier's $1.3 billion attempt to acquire Maytag. Going global means much more than exporting - companies need market savvy, innovation, management capabilities and an overseas footprint to compete and extend their presence internationally. Fred Young from True Product ID mentioned that the biggest challenge for Chinese companies to expand in USA is anti-Chinese sentiment -sinophobia. The number one impediment is the public's view of Chinese goods as "cheap, poor value and unsophisticated." Possessing a quality brand is necessary to succeed overseas, and Asian companies will have to start investing in their own brands or acquire established Western names.

Page 1 of 1

Article Tools