A worker raises a lantern in a restaurant overlooking Shanghai that's popular with younger Chinese execs. AP
They're China's next generation — the first real crop of younger, Western-trained executives to assume top posts at Chinese companies.
The shift includes elite China-born managers taking the helm of big foreign units in China.
These mostly under-50 honchos often have MBAs from top U.S. universities. They're bringing a global spin and advanced managing techniques to companies like China National Oil Co. (CEO), and Web travel firm Ctrip.com (CTRP). Some are women climbing China's traditionally male-centered business ladder.
The changing of the guard impacts corporate strategies, accounting, shareholder relations and other areas. Chinese companies are getting better at issuing Western-style earnings reports, cost cutting and marketing. Analysts hope the new executive class will lead to more global Chinese players that resemble Fortune 500 companies.
"Western-educated Chinese executives can play a very important role in corporate governance, strategic thinking and investor communications. They can bridge the gap between East and West," said Jane Jie Sun, Ctrip's 40-year-old chief financial officer.
According to China's state news agency Xinhua, about 1.4 million Chinese have studied abroad in the last 30 years. About 37% went to the U.S.
'Sea Turtles' Return
Many stayed overseas after receiving degrees. But an elite group known as "sea turtles" are returning and going to work for local Chinese firms and the government. (In Chinese, the words for "returnee" and "sea turtle" are pronounced the same way.)
Officials say about 370,000 foreign-educated Chinese have returned since 1978 — the year Chinese were first allowed to study abroad. Most major in the sciences, engineering and business. Nearly 180,000 Chinese studied overseas in 2008.
Thomas J. Manning is a Hong Kong-based advisor who serves on the boards of three Chinese companies. He says most big Chinese firms are actively recruiting from this tidal wave of returnees. Of the top 50 Chinese companies based on revenue, Manning says most, if not all, have globally trained execs at the board or top management level.
Analysts say new China execs differ from their predecessors. A decade ago, Chinese business was still dominated by older managers, now in their 60s, who cut their teeth in China's initial shift to a market economy in the 1980s.
China, at the time, was ruled by older party leaders like Deng Xiao-Ping. Deng, a veteran of China's 1949 revolution, favored tough, self-taught pragmatists to run the nation's first state-owned enterprises.
Few had formal business training. Many were politicos tied to China's Communist party. The challenge of finding skilled managers was underscored by the fact that China's education system had been largely destroyed by the Cultural Revolution of the 1960s and 1970s. Few Chinese were formally educated during the upheaval in which extremists purged society of so-called counter-revolutionaries.
Ctrip’s Jane Jie Sun is strong in corporate governance issues.
Many first generation execs received on-the-job training as China's economy gathered steam. A few studied overseas. Some even attended U.S. government-funded training programs in China.
"They were the seeds that were planted in the early 1980s. Now, they're (handing over their roles) to Ivy League MBAs," said Ying Yeh, a Beijing-born exec who oversees U.S. industrial process provider Nalco's (NLC) China-based unit.
Yeh, 59, was hired by Naperville, Ill.-based Nalco in May to sell "green" tech that makes China's water, heating, power and other industrial systems more efficient.
She says older Chinese execs groomed their successors, allocating corporate funds so younger execs could attend top business schools in the U.S. and elsewhere. China's government also paid for the effort.
The new batch is now firmly entrenched and Yeh says demand is rising for foreign-trained execs as Chinese firms make foreign acquisitions.
"Executives with Western style thinking and training helps Chinese enterprises to be more attuned to the world and the global sector," Yeh said.
Elite Group
Ctrip's Sun is a good example of China's next-generation exec. Sun was born in Shanghai and spent decades studying and working in the U.S. "Almost half my life was in the states," Sun said.
Fluent in English, she has a B.A. in business administration from the University of Florida and an undergraduate law degree from Beijing University.
Before joining Ctrip, she worked for nearly a decade at U.S. chip gear maker Applied Materials (AMAT) where she oversaw SEC and external reporting. She's also worked for KPMG in Silicon Valley.
As CFO, Sun is bringing clarity to Ctrip's earnings reports and can explain company data in English to Wall Street analysts.
James Liang, Ctrip's co-founder and chairman, is a 39-year-old Georgia Tech graduate who also worked for Silicon Valley firms.
Younger, better-trained execs are also coming on line at oil and gas explorer CNOOC and other companies says David Pietz, a China expert and director of the Asia program at Washington State University. "Many are Chinese with Harvard MBAs," Pietz says, adding that Chinese schools are also churning out professional managers.
CNOOC's Yang Hua, who was promoted from CFO to CEO in February, has an MBA from the Massachusetts Institute of Technology. He replaced 60-year-old Zhou Shouwei who never studied abroad.
Nalco’s Ying Yeh helps U.S. companies understand Chinese angle.
Pietz credits CNOOC's Western trained execs with making the company more sensitive to issues like shareholder rights.
Nalco's Yeh says many U.S. companies tap Chinese execs to crack the multifaceted challenge of doing business in China.
"I can understand Chinese culture, the way Chinese speak and think, and I can help my U.S. bosses with the Chinese angle," Yeh said.
Yeh is a U.S. citizen. She was educated in Taiwan and worked as a U.S. diplomat and headed up Eastman Kodak's (EK) China operations before assuming her current post. (See Q&A this page.)
Her years in China give Yeh a good window on changes at Chinese firms.
She says Western-born execs sent to China have a tough time decoding the dense politics that rule all levels of China's government. They also have trouble grasping how local politics impact foreign units .
One hurdle is mastering the interplay between local and central government officials in opening new plants or signing contracts in China.
Yeh points to a flip side to China's next generation. She says there's a small, but growing number of foreign-born execs who are familiar with China's culture who go to work for Chinese firms. They include Americans, Britons and other non-Chinese.
Yeh says the ranks of such foreigners will swell as Chinese firms do more overseas M&As. The government says nearly 180,000 foreigners were working in China at the end of 2006 in all types of jobs.
The trend will resemble Japanese companies who hired thousands of foreign managers in the 1980s after they launched U.S. and European acquisitions.
PC maker Lenovo was the first Chinese company to acquire a large group of foreign managers when it purchased IBM's (IBM) PC unit for $1.25 billion in May 2005.
By DOUG TSURUOKA, INVESTOR'S BUSINESS DAILY
Posted 09/25/2009 07:22 PM ET