Chinese President Meets with U.S. Tech Giants on Cyber Issues

Chinese President Meets with U.S. Tech Giants on Cyber Issues

LA JOLLA – Chinese President Xi Jinping stopped in Seattle on the first leg of a state visit to the United States to meet with America’s technology giants and underscore China’s cooperation with U.S. companies as well as its emphasis on Internet security.

Mr. Xi attended a China-U.S. business roundtable on Sept. 23 with 15 executives from 15 companies from each country. Among the U.S. executives at the meeting were Berkshire Hathaway’s Warren Buffett, Amazon’s Jeff Bezos, and Apple’s Tim Cook.  Joining them were executives of Chinese tech giants Baidu, Alibaba and Tencent. The 15 Chinese companies represented at the roundtable have a total worth of US$1.2 trillion of market value, about one-eighth of China’s GDP in 2014. Another focus of Mr. Xi’s Seattle visit was the 8th U.S.-China Internet Industry Forum co-hosted by Microsoft and the Internet Society of China.

These cyber events, which attracted global attention, come as China’s Internet and high-technology industry are burgeoning. China now has 700 million Internet users and its high-tech industry is growing more rapidly than any other sector. The IT industry and technology generally are stimulating consumption as a crucial driving force for continued economic growth in China. Mr. Xi’s agenda in Seattle reflects this reality. As a result, some Chinese and U.S. technology companies have established cooperative partnerships, for example: Baidu will replace Bing as Microsoft’s search engine in China, and Tencent and Legendary Pictures will work together on upcoming motion pictures.

 

China’s corporate giants at Seattle business roundtable

World’s largest search engine in Chinese Mandarin
$71.4 billion market cap
Ranked #11 among innovative companies by Forbes
President Zhang Yaqin, former Microsoft corporate VP

Online and mobile commerce company
$145 billion market cap
IPO on the NYSE in September 2014
Executive chairman Jack Ma Yun, ranked #7 richest person in Tech by Forbes

 

Online social network, e-commerce and games
$181.1 billion market cap
Founded in 1998
Chairman and CEO Ma Huateng, ranked #11 richest person in Tech by Forbes

 

Computer hardware
$16 billion market cap
Acquired IBM’s personal computer business in 2005
CEO Yang Yuanqing

 

Ranked world’s largest bank for three consecutive years (2013 – 2015)
$278.3 billion market cap
Founded in 1984
Chairman & Executive Director Jiang Jianqing

 

Ranked world’s 4th largest public company by Forbes
$199.1 billion market cap
Founded in 1912
Chairman Tian Guoli

 

List compiled by Diying Wu, Institute of the Americas

China boasts about its Baidu, Alibaba and Tencent (BAT), and sees U.S.’s Google, Apple, Facebook and Amazon (GAFA) as its counterpart, though Google and Facebook are currently banned from China. After its noisy exit in 2010 against the backdrop of Chinese censorship, Google is actively preparing to re-enter China with a limited Google Play Store for Android devices as the majority of the software innovations in China are carried out on the Android platform.
Facebook is also working to regain its share of the China market, and its CEO Mark Zuckerberg has made personal efforts towards this end. Zuckerberg’s wife, Priscilla Chan, is of Chinese descent and he learned Mandarin to better communicate with her family. Now Zuckerberg is taking great advantage of this skill to push for Facebook’s reentrance into China. On Sept. 23, after having a brief conversation with Chinese President Xi in Mandarin at the Internet Industry Forum in Seattle, Zuckerberg posted on his own Facebook page that “this was the first time I’ve ever spoken with a world leader entirely in a foreign language. I consider that a meaningful personal milestone”. In fact, as early as October 2014, Zuckerberg visited Beijing’s Tsinghua University and delivered a speech in Mandarin, which greatly impressed the audience and the Chinese media.

U.S.-China Business Roundtable with 15 U.S. CEOs and 15 Chinese CEOs as part of Pres. Xi’s visit to Washington state. Photo via Paulson Institute

The GAFA success story in China is Apple. Its iPhone sales in China increased over 75% in 2014, and more than 25 percent of its latest quarter’s revenue came from China. An iPhone 6s sells at 5,288 RMB (US$830) in China, higher than the retail price in the U.S. It is considered a luxury purchase for most Chinese consumers. Yet Apple products still managed to take over market share and create trending crazes in China. In 2012, a 17-year old teenager from Anhui province sold his kidney to buy an iPhone and iPad2.

Qualcomm, based in San Diego, California, is another U.S. technology company with recent operations challenges in China. In February, Qualcomm was fined $975 million dollars according to Chinese anti-trust regulations. This is the highest fine of its kind in China’s history. China’s National Development and Reform Commission (NDRC) launched its anti-trust investigation against Qualcomm in late 2013 and the investigation lasted more than a year. The company accepted the penalty in exchange for access to the Chinese market. “We end up better-positioned as a company in China as a result,” Qualcomm CEO Steve Mollenkopf said in an interview to Bloomberg. Qualcomm’s recent episode has much to do with Chinese government’s “indigenous innovation” policy, introduced as national strategy in 2005 aiming to encourage technology innovation by domestic companies.

Interactive Timeline of China-U.S. Tech

 Timeline created by Diying Wu, Institute of the Americas

On September 23, Boeing signed a deal with Mr. Xi to sell China 300 airplanes for US$38 billion and to establish a 737 jet-completion and delivery center in China. The Chinese companies involved in the deal are China Aviation Supplies Holding Company, ICBC Financial Leasing Co., Ltd., and China Development Bank Leasing. Boeing estimates that in the next 20 years, China will be its biggest market for commercial aircraft. The company projects that China will need 6,330 new airplanes with a total worth of US$950 billion. As the Chinese middle class grows, more tourists will travel by air. According to China National Tourism Administration, in 2014 there were more than 109 million Chinese tourists travelling abroad. China’s largest low-cost airline Chunqiu said its revenue on international lines increased by 63.13% in 2014.

Interactive Timeline of Boeing and China

Timeline created by Diying Wu, Institute of the Americas

How Much Time do We Have? Climate Change, Energy Efficiency and Renewables in California and Mexico

How Much Time do We Have? Climate Change, Energy Efficiency and Renewables in California and Mexico

How much time do we have? This question posed by lunch keynote speaker, Dr. Veerabhadran Ramanathan of the Scripps Institution of Oceanography was a clever way to get everyone’s attention as to his presentation length and seriousness of the topic. In wide-ranging remarks delivered at a California-Mexico energy workshop, Dr. Ramanathan shared his groundbreaking research on climate change, solutions and the importance of broad, global engagement on the topic. On this latter issue, he was particularly enthusiastic about his work with Pope Francis and the Pope’s history-making encyclical that confronted the issue of climate change head on from a health and social welfare vantage.

On August 19-21, a delegation of Mexican and California energy officials and industry representatives convened in San Diego to share lessons learned on energy efficiency and renewables, as well as the overarching urgency of climate change. Together with the California Energy Commission, UC San Diego and Mexico’s Energy Secretariat (SENER), the Institute of the Americas was one of several partner organizations that organized the technical workshop and site visits across San Diego.

The workshop, a direct output of the Memorandum of Understanding (MOU) signed in July 2014 between the California Energy Commission and SENER, featured presentations by officials and practitioners from both sides of the border. The MOU was signed during California governor Jerry Brown’s trade mission and visit to Mexico City and set forth a series of goals focused on encouraging cross-border renewable energy investments and research and development.

The workshop highlighted best practices in grid management, and the success of microgrids at UC San Diego and in the small desert community of Borrego Springs, as well as the broader policy prescriptions for enhanced efficiency measures and renewable deployment. The policy elements were particularly relevant for the Mexican delegation as the country rewrites its energy laws and launches a new electric sector, wholesale market and regulatory tableau this year.

Given the nature of the very public drought facing California, the water energy nexus also figured prominently in discussions and presentations during the workshop.

But the show-stealer in many ways was transportation. More specifically, the increasingly important role that the transport sector will play in both Mexico and the United States’ efforts to decarbonize their energy matrices, as well as the implications for the electric sector and grid management.

By one estimate, if California’s approximately 30 million automobiles all transitioned to electric vehicles it would require an additional 180,000 MW of electricity supply, or approximately 3 times the state’s peak load today. Meanwhile, Mexico will also see a significant boost in the number of automobiles across the nation which demands a policy debate over the intersection of emissions, fuel supply and vehicle type.

Interestingly, Dr. Ramanathan never precisely answered his question as to how much time we have. But for the crowd gathered in San Diego in mid-August, furthering effective and sustainable energy policies are a key way to confront the ticking clock.

Lorenzo Servitje founder of the Grupo Bimbo Passes Away

Lorenzo Servitje founder of the Grupo Bimbo Passes Away

En nombre del Presidente del Instituto de las Américas y su Junta Directiva, lamentamos profundamente el fallecimiento de Don Lorenzo Servitje, fundador del Grupo Bimbo. Además de ser un orgulloso Mexicano que construyó un negocio reconocido globalmente, Don Lorenzo se caracterizaba por ser un hombre humanitario y visionario. De hecho, Don Lorenzo apoyó la iniciativa del Embajador Ted Gildred, fundador del Instituto de las Américas, de ser miembro de la Junta de Gobernadores Fundadores del Instituto.  “Aún hace 33 años, Lorenzo tenía clara la importancia de fortalecer los lazos entre los países y las economías de las Américas… él tenía la convicción de que servímos mejor a nuestras comunidades y ciudadanos a través de mayores alianzas y colaboración”, relata el Embajador Gildred.
Nuestras sentidas condolencias para la familia y amigos de Don Lorenzo, así como para el Grupo Bimbo.

On behalf of the Institute’s President Jamal Khokhar and its Board of Directors, we are profoundly saddened with the passing of Lorenzo Servitje, founder of the Grupo Bimbo. Beyond being a proud Mexican who created a globally recognized business, Don Lorenzo was known for his humanity and vision.  Indeed, Don Lorenzo took up the invitation of Ambassador Ted Gildred, founder of the Institute of the Americas, to serve on its Founding Board of Governors.   “Even 33 years ago, Lorenzo understood the importance of bridging the countries and economies of the Americas…he stood for that vision that we serve our communities and peoples better through deeper collaboration and partnerships”, recounted Amb Gildred.
Our sincerest condolences go out to Don Lorezo’s family, friends and Grupo Bimbo.

Chile’s Energy Agenda One Year On

Chile’s Energy Agenda One Year On

Under smoggy skies and against the backdrop of a persistent drought, the Institute of the Americas convened its Chile Energy Roundtable on June 23 in Santiago.

Almost one hundred attendees from across the Americas and Europe gathered in Chile to take stock of President Bachelet’s “Energy Agenda” one year after its launch. The principal themes of energy efficiency, interconnection of Chile’s two power systems, as well as with its Andean neighbors, and the need for improved dialogue and policies for community and energy project development made for robust discussions.

A panel focused exclusively on the issue of energy efficiency underscored the long path to finding common ground among the many disparate players. Panelists also drew attention to areas beyond the electric sector, with transportation and heating inefficiencies cited as the most urgent cases. Moreover, the need for an interdisciplinary approach across the entire value chain and policy making infrastructure was abundantly clear. The role for advancing an appropriate efficiency strategy and law should include all segments of the economy and government.

During his keynote address, Energy Minister Maximo Pacheco lauded the progress the government and his ministry has made over the last 12 months on the goals of the Energy Agenda. Specifically, 11 new projects totaling 2000 MW have been approved and added. A major imperative of the Energy Agenda, reducing energy prices had been achieved according to Minister Pacheco. Indeed, the latest power auction saw a 17 percent reduction in bid prices. Additionally, the long-awaited interconnection of Chile’s SIC and SING electric grids has been contracted and should be completed before the end of President Bachelet’s term.

But during the discussion, the minister too was quick to emphasize that the electric sector is not the sole target of the aims to reduce energy consumption and increase conservation. Indeed, he emphasized that energy efficiency is not synonymous with electric efficiency. He highlighted the role of biomass and transport in the government’s efforts. Minister Pacheco indicated that the government’s energy efficiency law would be finalized and submitted to Congress before the end of the year.

The minister further underscored the need to improve the government’s efforts when it comes to the national discussion of energy issues, not just on the topic of conservation but also vis-à-vis community concerns and the so-called issue of “asociatividad” in Chile. Communicating on energy matters, insuring equitability and making them clear and understandable for all stakeholders is a challenge that the government will continue to confront, he said.

ENAP General Manager, Marcelo Tokman, closed the event with a detailed update on the strategic outlook and role for the national oil company. Tokman discussed the efforts to recover the financial viability of the company, as well as progress on unconventional resource drilling and development in the Magallanes region and its significance for the company’s reserve replacement and that region’s energy supply.

But it was the affirmation of the strategic role for ENAP in terms of Chile’s natural gas and liquefied natural gas market, as well as its effort in power generation that underscored the progress made in line with the role for ENAP as set forth in the Bachelet government’s Energy Agenda.

Oil Price Volatility and Energy Security Questions Dominate La Jolla Conference

Oil Price Volatility and Energy Security Questions Dominate La Jolla Conference

In the lead up to this year’s La Jolla Conference, the energy world was rocked by the return of volatility in international oil markets. Promising to course through all of the agenda topics at the conference, the price of oil was indeed on the minds of attendees.

But the specter of lower oil prices that seemingly threatened to overshadow all other energy trends in 2015 has not entirely played out. The US shale revolution bubble has not burst nor does it appear that price issues alone will seriously undermine Mexico’s Round One oil and gas auction. And renewable energy projects are not being mothballed.

Dropping rig counts in the United States has not led directly to corresponding declines in production, and exports of liquefied natural gas are set to plug the US into the global gas market beyond North America. The debate over US crude oil exports rumbles on, more a victim of the political calendar than oil prices.

Experts and panelists at the Institute of the Americas’ XXIV La Jolla Energy Conference on May 20-21 underscored Latin America’s relative competitiveness in spite of the current downturn. Several speakers were quick to emphasize that this is not your father’s oil price collapse.

On the other hand, there is surely near-term uncertainty facing the region’s outlook, but also several fundamentals that point to significant potential in the medium and long-term. Indeed, many panelists cautioned that in Mexico and other parts of the region, patience remains a virtue. In addition, how the region embraces and adapts the lessons from the US unconventional revolution, particularly in terms of cost and efficiency figure importantly into the mosaic of opportunities for the region’s investment and production outlook.

Whether due to the oil price downturn or not, the discussions that surrounded the understanding of the regional energy context and what could perhaps be called the aura of competition across several key energy markets were intriguing. The newly installed head of Colombia’s regulator, ANH, minced no words when he noted that Colombia had to do a better job competing for and retaining investors, particularly as Mexico moves forward with its Round One auction.

Representatives from Mexico, which was a bit maligned at the conference for its increasingly bureaucratic implementation of the nation’s energy reform, also made great efforts to highlight the interest and attractiveness of the three calls offered to date. A representative of the country’s hydrocarbon commission, CNH, also spoke to efforts to redress pervasive complaints over contract stipulations and terms, revisions due out only days after the La Jolla Conference.
But beyond oil prices and competition, it bears noting that energy security has become more important than ever in the region. Countries are focused on efforts to refine domestic energy markets through offshore exploration, unconventional resources, efficiencies in power generation, and revitalized and improved energy integration.

Additionally, confronting above ground or non-technical risks that stem from environmental and community concerns and institutional weaknesses have quickly ascended the list of priorities for policy makers and industry.
Beyond the uncontrollable element of international oil prices, if countries in Latin America are able to address many of the aforementioned issues and other concerns, there will be no shortage of opportunities for energy players and the region’s outlook should command attention. To keep a glass-half-full outlook, it is useful to recall how a panelist from US-based equity fund Carlyle Group described the potential for Mexico’s energy investment future: mind blowing.

 

Building a Sustainable Electric Market in Mexico

Building a Sustainable Electric Market in Mexico

The need for flexibility, sustainability, certainty, patience and international best practices were oft-repeated refrains by panelists at the Institute of the Americas’ Mexico Electricity Roundtable.

Almost one hundred attendees from Mexico, the United States and Central America convened on April 9 in Mexico City to discuss the outlook for the electric sector and where Mexico’s energy reform measures stood. Discussions of the draft wholesale electric market rules, the evolving regulatory framework and the role for renewables and natural gas featured prominently.

Sounding much like a management class syllabus, a deeper dive reveals that flexibility, sustainability, certainty, patience and international best practices are a useful summation of the challenges and opportunities in Mexico as it rewrites its electric rules.

The need for flexibility will become ever more apparent as the government refines the market rules over the coming months. And as one former California regulator suggested, “flexible compliance” is a concept that should inform the rules’ implementation once they are set in place on January 1, 2016.

Further, insuring that not only the first several months and year under the new rules are successful will require that the market fosters competition and thus provides sustainability.

Investors’ desire for certainty was perhaps one of the most oft-repeated intonations over the course of discussions, and with good reason. When making significant long-term investments, companies and firms desire predictability and certitude.

On the other side of the coin is the need for patience, particularly in the Mexican context of overhauling 75 years of a statist approach.

But while patience is a virtue for all involved, it should also provide the opportunity for Mexico to redouble its analysis of international best practices. What has worked and what pratfalls to avoid from across the globe should continue to inform the development of the electric market in Mexico. That is to say, continuing to move Mexico up the electric sector learning curve is crucial.

Mexico continues to make international headlines as it strives to overturn years of state control of its energy sector for a market-oriented structure. Many arguments in favor of the reform focused on the role it will play in enhancing Mexico’s competitivity and, perhaps most relevant for the general public, reducing energy costs, specifically power bills across the country.

Without a doubt, the draft market rules announced in late February have unleashed much debate and analysis. The Mexican government has provided assurances that the process is open to feedback and will represent a transparent evolution to find the most balanced and appropriate approach. The next version will be unveiled later this year and the market goes into effect on December 31.

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