MNC leaders share Shanghai growth stories, hopes for future progress 
2019-11-06
HOME to more than 700 regional headquarters of multinational companies, Shanghai has long been a city with the most regional headquarters and foreign-funded research and development centers of such enterprises on the Chinese mainland.
In the first nine months of this year, the number of new foreign-funded projects launched in Shanghai jumped 40.2 percent year on year to 5,192, further evidence of the city’s ever-growing popularity among foreign enterprises.
Shanghai Daily recently invited senior executives of three multinational companies (MNCs) which have been operating in the city for at least 15 years to share their experiences about the progress the city has made with its business environment reform, and how this progress has impacted their local development.
They are Jean-Paul Agon, chairman and chief executive officer of L’Oréal; Gianpietro Belotti, chief executive officer of Santoni Shanghai; and Yves Laurent Longueville, general manager of IDI Composite Material (Shanghai) Co Ltd. The latter two are this year’s Shanghai Magnolia Awards winners.
Q1: Why did you choose Shanghai to host your business and how would you comment on your company’s development so far?
Agon: As a pioneer in implementing opening-up policies, Shanghai has always been at the forefront of administration innovation and consumption trends. And consumers in Shanghai have always been among the first to enjoy the most brands and the best products from all over the world, the first to have access to the latest retail innovations, and the first to set trends in consumption upgrades, social consumption and sustainable consumption in China and worldwide.
Driven by the strong growth of China, which achieved a 14-year record-high growth of 33 percent, APAC became the biggest zone market for our group in the first quarter of 2019. Our amazing adventure in China would not have been possible without our most important ingredient in success: the people. When I created L’Oréal’s Chinese subsidiary in 1997, I did it with a team of 10 Chinese people and now our L’Oréal China team exceeds 10,000 people.
L’Oréal also regards China as an innovation hub for the whole group. We have seen unlimited inspiration and innovation from China: in product formulation, in digital marketing, and in new retail converging both online and offline channels.
Belotti: The company evaluated the opportunity to delocalize in China at the beginning of 2004 and the reasons motivating the decision were linked more to the market explosion projections rather than the cost competitiveness.
Among the many options available in China, the one to land in Shanghai was automatic and influenced by the easy, transparent legislative and administrative system we found here. From the operational point of view we valued the proximity to the biggest logistic hub of China, the high-standard supply chain available here, and the entire vocational system.
Longueville: Shanghai is China’s economic, financial, trade, shipping, scientific and technological innovation center and lots of foreign companies have set up their branches in the city. At the beginning of the 21st century, Shanghai and its neighboring Jiangsu Province are famous for the automotive industry.
More and more local Chinese businesses attracted IDI to set up our factory here in 2003. With its convenient location for both import and export, Shanghai is the best choice for us to develop our local business. Looking back, we believe our decision to start our business here is very successful.
Q2: China’s newly drafted foreign investment law will go into effect next year. How do you expect it to influence your plans for future development here? Any specific content of the law that has impressed you the most?
Agon: The passing of the foreign investment law is another clear signal for China to further reform and open up, and optimize the business environment, making us more confident in further development in China with an increasingly open, fair, predictable and favorable business environment protected by legislation.
This will definitely help MNCs develop with lower cost and more efficiency, so that we can reinforce our focus on research and innovation, quality manufacturing, consumer service, local talent development, sustainability and accelerating product launch.
Belotti: Definitely the new foreign investment law is a good step forward to guarantee an equal and safer competitive environment. My only recommendation is to further strengthen the upgrading of IP regulation to stimulate and protect the investments in innovation and research. The stricter and simpler the regulation will be, the higher the investment, and of course with it, the higher the value added for the city and the citizens.
Longueville: Given the size and structure of our company, the new foreign investment law may not impact our business directly. The changes, such as a clause to protect the IP of foreign investment, may be helpful for our partners, our customers and suppliers and encourage them to invest in China.
We believe that this will bring us business opportunities as the more benefit they get, the more they will support IDI to develop our business.
Q3: What are the major changes you have perceived in the overall business environment of Shanghai?
Agon: Every time I visit Shanghai, the city presents a new look as it is transforming into a world-class city in terms of business environment, consumption destination and global citizenship. It has risen to become the world’s No. 2 shopping city, boasting over 1 trillion yuan in retail sales of consumer goods, with 90 percent of the world’s well-known high-end brands in 2019.
Behind this marvelous success is the constant efforts made by the city to activate the consumption market and push for innovation at the administrative level, with a clear goal to promote the “Shanghai Shopping” brand.
Shanghai has been leveraging the positioning of the China (Shanghai) Pilot Free Trade Zone to pioneer a series of innovative policies like reforming non-functional cosmetics access to streamline and accelerate market access of international products.
And the China International Import Expo hosted in Shanghai has provided another platform for the city to share opportunities in consumption with the whole country and the whole world.
Belotti: In these years Shanghai changed its skin, its image, but kept its soul. I loved the city since my arrival because of the safety, the inclusiveness, the dynamism, the ambition, the openness, the reactiveness and the overall happiness of its citizens and its business players. And these values are still there. Shanghai was a 3D city when I came: based on diversities, dynamism and dreams. Now it became a 4D city as it added digital development.
I don’t think many other cities in the world (with the exception maybe of few other mega cities of China) experienced the same development. The commitment of the city to become better, first and recently the “smartest among the cities,” absolutely pushed us all to overcome any imaginable limit.
Now the overall environment is faster, more efficient, professional and reliable. The race toward artificial intelligence can be seen everywhere, the appetite for innovation is all over, the highest level of education is available from the public to the private sector. Mobility eliminated distances and improved the connectivity either physical or virtual. In such an environment, the competitiveness of the corporates became more and more unchallengeable.
Longueville: Government policy regarding the overall business environment is very positive on the company’s development. We feel fairly treated. The local government has an open mindset for service and is always listening to and offering support for companies.
Q4: Any personal suggestions that you would like to make to help Shanghai become a more business-friendly city for foreign players?
Agon: We believe that the day when Shanghai realizes its goal to become an international consumption metropolitan with worldwide impact is not far, and Shanghai can definitely play a greater role in leading the future of consumption at home and abroad, becoming a role model in building a well-rounded culture with increased wellbeing for all.
In my view, a closer win-win cooperation between the government and leading MNCs under a more open, fair and predictable business environment can accelerate progress toward this future. IBLAC and CIIE’s Hongqiao International Economic and Trade Forum have set a very good example in this regard, and I hope more constructive advice raised in these gatherings of world-class think tanks could be adopted and effectively put into practice.
Belotti: It is very difficult to recommend something to a multicultural city committed to keeping introducing the most advanced service-oriented approach to its residents, no matter where they come from. In a global rhetoric pushed more and more by nationalisms, the right approach is the one based on equalitarianism.
Eliminating barriers, privileges and discrimination is a highway toward the coexistence of diversities. A city like Shanghai needs to continue to seek the harmonious integration of diversities to keep its march toward the top of the world. International oriented activities can take place in any directions.
Longueville: So far it is so good. Please continue to do what you did.
Q5: China has recently made a series of efforts in opening up further. As a foreign company operating in China for some time, how would you expect that to affect your industry and how will your company respond to that trend (opportunities/challenges)?
Agon: L’Oréal has long been a witness, contributor and beneficiary of China’s reform and opening-up. I have never seen a country where the authorities are so supportive and welcoming. Our work is only possible because we know that we can count on their support. Their spirit of partnership, their constant willingness to open up and help, never fails to impress me.
We have been reinforcing our focus on research and innovation, quality manufacturing, consumer service, local talent development, sustainability, and accelerating product launch to make more contributions to Chinese consumers and the market. Today, we are more confident than ever in developing and seizing opportunities in China. Our ambition is to serve over 500 million Chinese consumers and we are committed to being an even more active participant supporting China.
Belotti: The global geopolitical scenario of the past few months added volatility, uncertainty and dropped some doubts. These are definitely bad factors for any business decisionmaker, especially when investments in long-term resources have to be done.
Luckily, the central and local governments reacted fast to the change in scenario and restored optimism over the future economic development of the country with some effective actions. On both, short term corrective action and long-term development strategy we feel confident on the direction set and we are convinced soon will start benefiting.
Longueville: Keep opening is a big opportunity to us. Committed to the industry on the long term, we are ready to invest money and technology to catch up with this potential growth.
Q6: Regarding China’s further opening-up, are there any specific policies or measures that your company would like to see?
Agon: We are expecting the establishment of a more effective platform with a systematically integrated administration and committed leading companies to facilitate the development of more market-oriented and meaningful policies.
We also look forward to a further streamlined administration to help companies increase their operation efficiency and respond more promptly to the fast-changing market demands.
We expect that local taxes, fees and intellectual property protection systems can be further aligned with international practices so that companies can share these benefits with consumers through more innovative and aspirational products, services and consumption experiences powered by disruptive technology at more favorable prices.
And regarding sustainable consumption, we expect increased partnerships with the government to motivate more local consumers to practice green consumption and advocate it as the newest trend.
Longueville: I got the “green card” at the beginning of this year. It allows me to be more stable in China. It is like a guarantee that supports our company, having long-term stability for our management as well.
We would like some policies to be more optimized to the industry based on the facts and experience, instead of the dogmatic paperwork.
