On the evening of December 23, 2005, the Central Hall of Minghua International Convention Center in Shenzhen Shekou Industrial Zone was fraught with enthusiastic atmosphere. Students coming from CEIBS EMBA04 Beijing and EMBA05 Shenzhen gathered with CEIBS alumni from southern China region to discuss management strategy of the headquarters of  modern large-scale conglomerates with Dr. Qin Xiao, Board Chairman of the China Merchants Holdings Co., Ltd.

Professor Zhang Weijiong, Vice President and Co-Dean of CEIBS made welcome address and introduced Dr. Qin Xiao. Mr. Qin is a senior economist with Ph.D. degree in Economics from University of Cambridge, and the incumbent board chairman and Secretary of the CPC Committee  of China Merchants Bank Co., Ltd. He was a member of the 9th National Committee of the Chinese People's Political Consultative Conference and the 16th Central Committee of the Communist Party of China. Before joining China Merchants Group he served as president and vice chairman of China International Trust & Investment Co., and chairman of China CITIC Industrial Bank. He was adviser on Foreign Exchange Policy to the State Administration of Foreign Exchange (SAFE), and vice chairman of International Chamber of Commerce, China and has tremendous experience on managing large-scale enterprises. He also served as chairman of APEC Business Advisory Council (ABAC) for the year 2001 and vice chairman for year 2002.

Dr. Qin Xiao first expatiated on the neoclassical perception of the "production functions" of enterprises from the economic point of view, and reviewed the developing process of modern large-scale enterprises, and then further explained the corporate essence with modern enterprise theory. Dr. Qin Xiao focused on the analysis of the problems existing in Chinese enterprises, and summarized them into the 3 following points:

First, the diversified capital structure of non-correlated business had formed breadthwise. Such structure was neither the internalized market transaction, nor could it generate synergetic effect. Instead, it had simply increased the costs of internal coordination and administration.

Second, the multi-level corporate organizational structure had been derived. All levels in corporation were basically profit centers, or even investment centers, which not only lengthened the management chain, but also increased management costs. Even more, distorted bodies of interest had formed inside the company, which weakened the authority and capability of the headquarters to allocate resources and coordinate internal transactions. Actually the already internalized transactions were once again marketed, and the enterprises were bearing the double costs of internal management and market transactions.

Third, the market mechanism was excessively introduced into the internal motivation and resource allocation of the enterprise, damaging the function of the organization in allocating resources and coordinating transactions instead of the market.

In Dr. Qin Xiao's opinion, the core of the problem lay in that "The functions of headquarters of large enterprises hasn't been correctly and effectively positioned, resulting in ineffective exertion of the functions of headquarters." If a theoretical framework was to be set up for the functions of headquarters of large modern enterprises, the large modern enterprise should be a "substitute function" instead of a "production function". Dr. Qin Xiao divided the independent variables into four major categories, namely the kernel variable (including the corporate strategy, resource allocation, and transaction coordination), the institutional variable (organization structure pattern, allocation of the decision-making power and the management power, policies, regulations and procedures, and corporate culture), the resource variable (human resources, the information system, and intangible assets), and the management style variable (the budget and operation plan management, the risk control and crisis management). By studying the functions of the head office of large modern enterprises, Dr. Qin Xiao had put forward that "the function of the headquarters is to realize the maximum substitute net effect through the power allocation with subsidiary enterprises, especially the separation of strategic decision making and the operational decision making".

After the thematic speech of Dr. Qin Xiao, the alumni and students actively asked questions and made comments. Sufficient in-depth communication and the collision of the sparkles of thinking unlocked new directions of thinking. The humorous language and unique annotations of Dr. Qin Xiao won continual applause. In the end, Vice President Dr. Zhang Weijiong presented a gift to Dr. Qin Xiao on behalf of CEIBS.

On December 24, CEIBS students visited the museum of the Merchants Group and also the Shekou Industrial Zone, and played a golf game of friendship. CEIBS EMBA04 Beijing and EMBA05 Shenzhen, and CEIBS alumni from southern China regions participated positively, and at the same time won strong support from the Shekou Industrial Zone of the Merchants Group. The students indicated that they had benefited a lot from such activities aimed at enhancing the communication between students from different regions, which not only increased the friendship between them, but also enabled them to share the success experience.