Days 24, 25, 26, & 27: Gateway to China

We are officially coming down the home stretch as far as my MS Commerce degree goes!
We've been having so much fun in Hong Kong and I want to share it with all of you.

On Sunday, we landed on Lantau Island and drove for about a half hour to Hong Kong Island which is what people generally think of when they think Hong Kong because it has all the sky-scrapers and the central business district.  However, Hong Kong, the special administrative region, is much bigger than just Hong Kong island.  It actually reminds me a lot of San Francisco because it has so many bridges and huge buildings that are nestled against small mountains and peaks.

Because we are essentially right on the water, the views from our hotel rooms are unobstructed and amazing.  We're staying at the island pacific, which is very close to the business district or central as the locals call it.

This is just part of central. You would not believe how dense these sky scrapers are.  It's a sight:

We settled in and went out to experience the town.  We had dinner and drinks in Soho and caught up with another fourth of our class who had been travelling in mainland china for the last month.

Monday, we got up and started our day with a visit to the US Consulate where we talked with someone from the Commercial Service and with an economist.  We learned all about Hong Kong and how the US manages relationships between HK and the US and also the US and China.  As you may know, HK was a british colony until 1997 when it was handed back over to China and it became a Special Administrative Region.  This essentially means that HK can govern itself and remain free and open for at least the next 50 years while also being part of China.  It is called the One Country, Two Systems policy.  Here's some quick facts about Hong Kong:

Geographic size:  ~1,104.4 sq. kilometers

Population: 7.097 million

Currency: Hong Kong Dollar (HKD)

Exchange rate: 1 HKD =  .1282 USD

GDP: $224.1 Billion

GDP per capita: $31,709

Annual growth rate: 6.8%

Trade:  $820 Billion ($388.6 imports,  $431.4 exports)

Natural resources: Deepwater Harbor

Unemployment: 4.3%

Government type: Special Administrative Region of the People's Republic of China

Governing party: All officials are endorsed by the Central People's Government of the People's Republic of China

Ethnic Makeup: Chinese 95%, Other 5%

Languages: Cantonese and English

Religions: 90% are either Buddhist, Confucians, or Taoist while the other 10% vary from Catholic, Protestant, Sikh, Muslim, Judiasm, and Hindu.

Here's a picture of the US Consulate building:

After our meeting with the consulate, we went to Ernst and Young's building where we had about five hours of lectures and discussion with various E&Y people.  We had an overview of the Asia Pacific region where E&Y gave us a sense of what trends they see as most important in this region and how it will affect global business.  We learned about 5 trends:
1. The move of capital flows from west to east and north to south
2. The great demographic shifts
3. The pressure placed on scarce resources by the incredible growth
4. How the relative power of countries are changing
6. Who will likely become the next emerging markets to pay attention to
After that, we had a lecture on capital markets in Hong Kong and mainland China.  We also extensively discussed the IPO market in Hong Kong because as many of you know Hong Kong is the world's largest IPO market.  We learned that most of these IPO's are mainland chinese companies that are seeking access to the global financial markets.
Next, we had two Transaction Advisory Services partners discuss investing in China.  It was really interesting to learn about the challenges and opportunities available to foreign investors in China.  We learned that to be successful in China, you must have a global brand because Intellectual Property laws are so lax.  We did two case studies, one of an IPO and one of an Acquisition that were examples of how it can go wrong and how it can go right in China: Anheuser-Busch InBev and Longtop Financial Technologies.
It was so cool to be right in E&Y's office building because we were right in the international financial center where the view was truly amazing:

We went straight from E&Y to the Hong Kong Club to visit with local alumni, thank them for their support, and share our impressions of Asia.  The Hong Kong Club was really neat and we had a great turnout for the event.  Here is what the building looks like.  It is a gathering place for many people, especially the ex-pat community:

Tuesday was all about finance in Hong Kong and China.  We met with the head of Investment Banking and M&A for the Asia Pacific Region for J.P. Morgan.  He shared his thoughts on how to be successful in this market and the financial sector in general.  He also spoke to the challenges of doing M&A work in Asia.  He focused on four things: a different language, a lack of legal framework, the due diligence process isn't as developed, and the reputational risk involved.
Next, we had the Director of ZBI Asia speak to us about the Private Equity climate of Asia.  He spoke about how important it is to recognize and overcome your psychological biases when investing.  He also said that he believes that his firm is so successful because it has a longer term focus and because they understand that it is not about stock market behavior.  Rather, it is about blocking out noise, opinions, and emotions and focusing on what really drives things.  He explained how you need scale in the PE game and how you have to have a "black belt" in accounting because there is more information asymmetry here.
Then, we had the CFO of Asia Global Banking for Citibank who spoke to us about strategy in the Asia Pacific Region.  He spoke to us about understanding market trends, monitoring the competitive landscape, assessing your firm's capabilities, and then identifying and prioritizing investment opportunities.  He shared how Citi tends to strategize and some of the challenges Citi has faced in these markets as a foreign bank.
Finally, we were able to meet together as a group to try to make sense of the financial landscape of this region.  We spoke about how the lack of trust in the financial system leads to less participation which in turn leads to an underdeveloped financial market that lacks both depth and liquidity.  Without a sophisticated financial market, capital cannot be efficiently allocated and growth is stifled.
After quite a long day, we hiked up Victoria's peak, or just the peak as locals call it.  It was night and the view was unreal:

On Wednesday, we had the CEO of Walmart Asia and a consultant speak to us about the challenges and opportunities in mainland China.  China is such a complex topic that is even more confusing when you try to make sense of Hong Kong's relationship to China and the US's relationship with China.  I have a lot of thoughts on this issue now (happy to share them with anyone and everyone when I have more time) but the bottom line is that China is so important and influential and just plain big that it dominates most people's thoughts when they consider this region.  As one of our speakers said, it's not just a country--with over a billion people, it's a continent!

We then had the wonderful opportunity to have a panelist of UVa alums speak to us about living and working in Hong Kong.  We had three recent graduates and two not so recent graduates who shared their stories about getting to Hong Kong.  They ranged from people who just up and moved here after visiting to people who ended up here almost by chance.  The work the alums did ranged from private equity to investment banking to entrepreneurial activities to research.  It was exciting to hear about how adventurous people can be.

That night we took the tram out to Happy Valley where there are horseraces every wednesday night.  It was pouring rain but we had a ton of fun betting on horses and getting to hang out with some ex-pats, alum, and some of our professors.  We then headed out to LKF, which is the center of Hong Kong nightlife.  Here's a picture of what the Happy Valley races look like:

One more blog post coming (probably on Sunday) about my final days in Hong Kong!
Can't wait to be back in the US to tell you all about it in person.
Thanks for reading,
Maddy