In January 2010, four representatives from the Yangpu District Government of Shanghai arrived in the Bay Area for a three-month educational program at San Francisco State University. While in the Bay Area, they also attended programs with SVB Financial Group. The visit follows Silicon Valley Bank’s addition of a representative office in Yangpu and Yangpu’s commitments to two new investment funds to be managed by SVB Capital — two important steps in SVB’s initiative to build a China-based banking platform focused on technology and life science companies.
On February 21, SVB spent time with the members of the delegation. The resulting interview provided many insights into the initiatives of the Yangpu District Government, the purpose of the group’s visit to the Bay Area, and the visitors' impressions of the U.S. The Yangpu team is led by Jin Ni, Deputy Director of the Financial Service Office of the Yangpu District. Other members of the team include Del Zhu, Division Manager of the Financial Service Office, Juan Du, Deputy Director of the Research Office of the Yangpu District and Ling Zhou, Deputy Mayor of the subdistrict of Wujiaochang.
Note: The following interview was originally conducted in Mandarin by Jason Liou of SVB Capital.
Click to jump ahead to any of the following key questions:
SVB: Tell us more about what you hope to accomplish during your stay in the Bay Area.
Jin: Sure. I’d like to frame this discussion by sharing a few facts about the Yangpu District. There are three characteristics that have set Yangpu apart from other districts in Shanghai in recent history. First, Yangpu has been a center for manufacturing for over 100 years. Its major industries in the past have included textile production, papermaking and shipbuilding. In the 1950s, the industrial output from Yangpu accounted for 5 percent of China’s national GDP and 20 percent of Shanghai’s GDP.
Yangpu is also home to 14 universities, some of which have existed for over a century. These comprise more than half of all the universities in Shanghai and include Fudan University, Tongji University, Shanghai Ocean University and the Shanghai University of Finance and Economics. Relative to the rest of Shanghai, the educational resources and supply of human capital in Yangpu are first-rate.
Third, Yangpu has been a focus of urban development since the 1930s, and many architecturally important structures have been preserved over the decades. The area has undergone tremendous growth, and many government offices and major companies have their headquarters there today. The concentration of government, education, R&D activity and industry has given Yangpu many advantages over other districts and is a springboard as it looks to the future. As such, Yangpu was a natural choice for the government to propose in 2003 and 2004 a series of initiatives to enhance the development of innovation- and knowledge-based industries in the area.
There are a number of key innovative industries that the government will commit to support. These include information technology, clean technology, educational services and modern design (as it relates to architecture, urban design, etc.).
Since this plan came into effect, over 3,600 technology-focused small- and medium-size enterprises (SMEs) have been established in the area. However, these firms have not yet made a significant contribution to Shanghai's economy from a GDP perspective. Manufacturing continues to account for a large part of the local economy, but the government has emphasized that the activities of high-tech SMEs will be crucial to future growth. As the district government works to make Yangpu into an internationally competitive, high-tech center, it has partnered with leading multinational firms such as Siemens, B&Q (a British retailer), Continental AG and, of course, SVB.
The Yangpu District Government continues to look for ways to encourage the growth of local SMEs — especially those with plans to expand internationally. One of the primary and most difficult questions that we’ve dealt with relates to how these 3,600 enterprises can best acquire investment capital.
In pursuit of this goal, Secretary Chen Anjie of the Yangpu District Party Committee, Chai Yaoxun, Deputy Governor of the Yangpu District and other high-level secretaries have participated in a variety of exchanges with leading Bay Area firms, including SVB. Through discussions with business leaders such as Ken Wilcox, president and CEO of SVB Financial Group, and Greg Becker, president of Silicon Valley Bank, we’ve come to the consensus that it's often not enough for government to set up SME-focused support offices or bank loan guarantee programs for emerging companies. Rather, we’ve discovered that it’s very important to have a network of venture capital firms that can invest in and contribute towards the growth and development of these enterprises.
SVB was the perfect partner for Yangpu because it has a long history of providing diversified financial services to emerging technology companies. In fact, SVB's mission coincided closely with what Yangpu was looking for. Both Yangpu and SVB have now been working together for two years. During this time, there have been further high-level exchanges that have led to several recent and positive developments.
One of the most concrete outcomes has been the successful opening of SVB’s representative office in Yangpu, which took place last year. In addition, SVB Capital, the funds management division of SVB Financial Group, will be managing two venture capital funds on Yangpu’s behalf. These funds will target small- and medium-sized companies. We are excited about these milestones that have resulted from our cooperation with SVB.
Now, let’s get back to why are we spending three months in the Bay Area. There is a lot that we can learn from SVB and its experience serving companies in Silicon Valley and beyond. We’re interested in learning more about public policy issues and the financial market environment in the United States. We want to understand how banks and other financial firms operate on a day-to-day basis and about the operational and strategic challenges they may face.
We've been in the Bay Area for almost two months and are taking a special class through a professor at San Francisco State University. Our curriculum covers topics such as public policy, urban planning, environmental and sustainable development and the development of SMEs. We're now starting a module focused on finance and investment topics. We will soon be meeting a lawyer who will give us insights on the legal issues that entrepreneurs and medium-sized enterprises commonly face.
From a venture capital standpoint, we are studying how banks and venture capital firms evaluate potential portfolio companies and how venture investment leads to economic development. Finally, we will study examples of ways that government entities, such as ours, collaborate with the financial sector to advance development across different economic sectors.
Del: Yangpu has gradually become more international in its outlook, and this has been exemplified by our growing partnership with SVB. During our time in the Bay Area, we’d like to get a firsthand look at what conditions are truly needed to nurture entrepreneurs and young high-tech companies. For example, how can entrepreneurs and CEOs of small companies minimize their risk profile in the marketplace? With so many high-tech enterprises based in Yangpu, we really need to learn about how investment firms can advise or support their portfolio companies and help them adapt to market risk — for example in areas related to intellectual property protection and valuations.
In essence, we need to develop a good understanding of the needs of the government, investors and entrepreneurs. From a governmental standpoint, we want to determine the ways that the Yangpu District can develop specific economic and financial policies that encourage the growth of SMEs. For investors and a financial firms, we’d like to study the conditions that exist in the U.S. that have helped young companies to thrive and that enable investors to deploy capital to help them grow. Do we have the right conditions as well, and if not, what can we do to replicate them as closely as possible? For entrepreneurs, we want to know what keeps them up at night and what concerns they might have over their growth plans or on risk, especially in the long term.
Jin: Right. Our goal is to spend time with SVB and learn from its experience in navigating various financial and public policy matters. We hope to bring this knowledge and these experiences back to Yangpu and share ideas about how the district can accelerate its development and reach its maximum potential.
SVB: Have you noticed any differences in corporate culture between the United States and China?
Jin: We haven't really had the chance to work firsthand in a U.S. company, let alone a U.S. financial institution, so I can’t provide a direct comparison between corporate life in the U.S. and China. So far, though, we’ve been able to visit companies such as Oracle, Google and a few law firms and have begun to understand how employees interact with each other.
The working environment in China seems to be a little more fast-paced and intense compared to the U.S. The typical organizational structure in a company is also different. In China, there is greater emphasis on hierarchy. Each individual’s role appears to be more defined, and working relations outside of one’s own division is fairly limited. For example, an engineer in a Chinese high-tech company would spend the vast majority of his or her work on engineering-related projects and only with his or her own team. This seems to be less true outside of China. I’ve noticed that, in the U.S., there’s more of a focus on cross-functional teamwork, and there’s more blurring across job roles. People tend to communicate more openly here, too.
Ling: I agree. Let me give you an example. In China, employees tend to communicate with colleagues that are immediately above and below their reporting level and less so with those at their own level. In the West, I notice that people often spend time with colleagues outside of their own team or division. It’s interesting that see employees in large U.S. companies often do not hesitate to send project-related e-mail announcements to different teams across the organization.
Jin: In other words, communication styles are more direct in the West. For example, SVB has several business units, and there is a lot of cross-team communication; you don’t have to go through so many layers to reach someone, from what I hear. Teams prioritize the sharing of information across different groups, and they do it in a way that’s less formal than in China- where there's more of an emphasis on interacting and building relationships with those closest to your level.
SVB: What impressions have you had so far about living in the United States?
Ling: I’ve been impressed by the open-mindedness and cultural diversity of the Bay Area. I think that the environment here is very supportive of new ideas, and I now understand why Silicon Valley has been such an important center for innovation. The Bay Area is similar to the Yangpu district in that Yangpu also boasts a concentration of high-quality, educated professionals and entrepreneurs. Our government’s goal is to continue to nurture the general environment so that innovation can thrive.
Jin: Both Yangpu and the Bay Area are special, in that each place embraces people from different walks of life. In San Francisco, we see people of Japanese, Chinese, Mexican and Russian descent residing comfortably with each other, and this makes the city a beautiful and friendly place.
A few weeks ago, we came across a plaque at San Francisco’s city hall that displayed a few thoughts from a former mayor of the city, though I can’t remember his name. That mayor had stated that, as a city, San Francisco does things in a way that leaves a strong and positive impression on its visitors. Residents of San Francisco celebrate diversity, and these qualities make the city special.
I think that Yangpu shares many of the same attributes. We’ve got a set of great universities and a large supply of entrepreneurs. Smart students and people with innovative ideas come from all over the country and all over the world. Many of our high-tech firms were founded by entrepreneurs who arrived from overseas, and a good portion of them are returnees as well. The Yangpu district is getting better at nurturing innovation. We hope this trend continues.
SVB: Besides Oracle and Google, what other companies have you visited on this trip?
Juan: In the past few weeks we’ve had the opportunity to visit the offices of Innovalight (a nanomaterials firm), Draper Fisher Jurvetson, IDG Ventures, and several law firms. These trips have been arranged by San Francisco State University, SVB and other contacts. Such experiences have really broadened our horizons and given us great insights into how Americans work and live. Not only have we made many friends, we’ve also been moved by the quality of the environment, such as how clean the air is in the Bay Area.
SVB: Can you describe what you mean?
Juan: Well, I think that the U.S., during its period of economic growth, learned some important lessons regarding environmental protection. As China modernizes, the country has faced many serious environmental problems that are not only impacting people’s everyday lives but also have serious consequences for future generations. I think that our government needs to keep paying critical attention to protecting the environment, even as it moves full speed with economic growth.
In my opinion, our government’s efforts are still not enough. There should be a stronger consideration around the idea that, as the country moves forward, humankind and nature should grow together in harmony. In line with the government’s current science-based approach towards solving the country’s problems, we think that, during these critical years, China should draw lessons from the experience of the U.S., especially as it relates to environmental issues and sustainable development.
SVB: What other impressions do you have of the U.S.?
Del: I think that San Franciscans are friendly and show great enthusiasm when they’re around other people. The people I work with at SVB have been very hospitable in organizing events for us. This is something we greatly appreciate, especially as our English isn’t very good. On one occasion, our driver went out of his way to show us interesting places around the Bay Area, even though these places weren’t on the itinerary. There was another time in which we asked a lady for directions and were surprised when she not only pointed us the way, but also took out a map from her purse and very happily gave it to us.
Jin: As first-time visitors, there are a lot of things we’re not familiar with. I feel that people here are ready to help each other in different situations. Those who haven’t been to the U.S. often think that Americans are rather proud and won’t go out of their way to help you. But in fact, we’ve found Americans to be very friendly and welcoming to newcomers.
This is also true in China, but to a different extent. Shanghai, like San Francisco, is also a cosmopolitan city. Residents of Shanghai are quite used to visitors from elsewhere, whereas in other parts of China, it’s not as common for people to meet foreigners. I think the idea that people who live in urban areas tend to be more open-minded is true in other countries as well.
SVB: What has been the best experience you’ve had during your stay?
Ling: Recently we had the opportunity to attend a corporate event at the headquarters of SVB. It was a good opportunity to get an inside look at how employees interact with each other in an American company. It was a great experience for me. I think it’s important for us to understand the culture in American companies and way of doing things so that we can go back and share these insights with others in our own organization.
Jin: My best experience so far has come not from a business standpoint, but from the interactions I’ve had with others during various events. On one occasion, we spent a day visiting four companies, including Draper Fisher Jurvetson, Focus Ventures, a law firm and a small technology company. That night, we were treated to a tennis match that featured Andy Roddick. It was a very rewarding day for me because it was a good opportunity for me to improve the way I interact with people who are not Chinese.
I discovered that Americans exude a lot of confidence when they interact with others. People seem excited to talk about their own backgrounds, and it seems to be something that is important to them. In China, people will simply chat about who they are and what they do. Americans, on the other hand, get excited when they talk about their achievements or the experiences they’ve had. Sometimes they’ll go into detail about things that they’ve done. This has been an interesting experience for me. I’ve promised myself that, whenever I communicate or meet with Americans in the future, I’ll be sure to talk enthusiastically and in detail about my own background, even as I ask about theirs. I’m really beginning to have a better understanding of the way Americans communicate, as it can be very different from what I’m used to!
Del: That’s true. In China, people tend to speak more modestly about their background or their achievements, or not even mention them at all. It’s not a bad thing or good thing, though; it has more to do with our culture and way of doing things.
SVB: Is there anything else that you really want to experience before you return to Shanghai?
Del: I would love to understand American culture more deeply. I want to know what Americans are like at a most basic level. I’m very curious about American customs and etiquette. For example, do people pay special attention to social status? Are there customs specific to gift giving, as there are in China? For me, I have a difficult time knowing whether to dress formally or informally when I receive an invitation to a social function. In the end, how do I know whether to dress in a suit or show up in jeans? This is something I would like to get better at.
Ling: I agree with Del about customs related to giving gifts. For example, when I send a small gift to someone, they might exclaim, “Wow, this is such a nice gift!” But what I really want to know is, does this person really like that gift, or are they just being polite? To me, it’s difficult to understand what people are really feeling in such occasions.
Jin: In China, gift giving is a very important custom, and many long-term foreign residents still struggle to understand what’s appropriate and what’s not. I’m curious as to how complicated this practice is in the U.S., and what attitudes people have with gift giving. Is it just a simple custom, or are there often hidden meanings behind what people give to each other? This is something I really want to know!
SVB: Thanks to each of you for sharing your insights!
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