I are a China ExPert!

May 16th, 2008

China Success Stories was kind enough to acknowledge the trauma of my more recent China adventures by re-publishing a blog article I’d written a couple weeks ago. I’m grateful they accepted my stumbling response and convoluted rationalization to an unfortunate incident in the spirit of professional development to be shared by all interested.

“A simple taxi ride from Shanghai to Suzhou put me very much in mind of developing contracts with Chinese – even the simplest of contracts. Very seldom in business do Chinese adhere to the Letter of the Law, while they exorcise its Spirit at their earliest convenience. And if the agreement is verbal, then watch out!”

Enjoy the syndication!

Strategic Tectonics in China Investment

May 16th, 2008

The meltdown of the economy in the United States has been reflecting itself here in China in odd sorts of ways. The downward pressure on the value of the dollar; the housing loan crisis, even who will be the next President of the United States, has been compounded by rising costs of doing business in China – especially for exporters. All this has been forcing American companies to re-think their positions in the China. The big multinationals like an IBM, an Intel or a Chevron are simply heading to the second- and third-tier cities. They have the deep pockets to overcome many of the obstacles to investing in China’s interior that smaller companies cannot afford.

For Small and Medium Sized enterprises (SMEs) matters have been a bit more complicated: many SMEs have substantial investments in China supply chains while others have invested in factories in the Mainland. Overwhelmingly, the investors came to China with the plan of exporting most of their product to the States and then selling more product domestically as they learned the ropes of doing business in the country and as the domestic economy matured. However, the same forces that are buffeting multinationals are downright punishing many SMEs.

Those of us that make our lives here in China and have been here at least five years see the manifestation of Corporate’s lack of certainty as to how to manage the dynamics of the China market. We see that companies are simply confused about their China strategies. They are centralizing more decision-making back in the States and effectively hollowing out management in China.

Outside of the Shanghai municipality, Suzhou has the most American investment in manufacturing in China. What my friends who are General Managers (GMs), Production Managers, New Product Development managers and other leadership positions have been experiencing is nothing less than dramatic – if not a bit traumatic.

One former manager of the new product division of an American company with an operation in Suzhou one day logged onto the company HR section of the company website have a look at openings in the company worldwide. He noticed that all of the positions that involved new product development were in the Philippines. He had a strong suspicion HQ in the States was shifting New Product Development for the Asia-Pacific to the Philippines. His suspicion was born out after political maneuverings and subsequent denials on the part of HQ. He left the company after more than 15 years service, staying on in Suzhou to work for another American company.

A friend that had been hired late in 2007 to be Vice President of New Product Development for an American company that had been sourcing components in China for more than five years was suddenly fired a couple months ago. The company had originally considered setting up its own operation in China. After its China-based trading partner increased prices 20% on all components, the executives State-side decided it wasn’t a good time to venture further into China: domestically their market had sickened its worst in some twenty-five years.

A British expat that works for an American company put it to me this way: many of the companies that are invested in the region are pretty settled now. Many have been able to find Chinese talent – even if imported from other countries – to manage many of the operations. Expats are expensive, he said. Add to that the uncertainties back in the States, and “some of us who have made our lives here may not be around in a couple years.”

China may in the future be richer; but it will certainly be less colorful with the loss.

Earthquake in Suzhou

May 14th, 2008

I missed the earthquake in Suzhou this past Monday afternoon. I was in Hangzhou at the time, dozing in the front row while one of the other speakers was going about the China BPO industry (it was mid-day, after all). A friend of mine was climbing a nearby mountain at the time. No one I knew in Hangzhou felt a thing at the time.

One of the colleagues with whom I’d traveled to Hangzhou told me at the end of the conference that day that everyone in our office building had evacuated just a couple hours before. The building was swaying. One of our co-workers was in the men’s loo when the walls of the stall in which he had been comfortably situated began swaying and the water in the toilet bowls began sloshing. He said he began to feel ill with the disorientation and eventually figured out he should haul butt, as it were.

During the ride back to Suzhou from Hangzhou we would learn about the tragedy unfolding in the epicenter, near Chengdu, in Sichuan province. Our company, Asia Base, as a Danish company, is encouraging other Danish and European companies based in China to contribute to relief efforts in the area. Contact me for more details.Dezen-Shira is also promoting a fund “Care For Children Sichuan Earthquake Appeal”.

Please help.

Challenges to Investing in China’s Provinces

May 9th, 2008

The American Chamber of Commerce in Shanghai has released its annual Whitepaper, which provides policy makers in China and the United States perspectives, experience and recommendations for improving the regulatory and investment environment across a variety of industries in China.

Check out the section entitled, “Provincial Investment Environment,” which is industry independent. The overview of the section in particular is a well-written, succinct and insightful piece that maps out the economic and social fissures that make it a challenge for foreign companies to move from investing in first-tier cities to x-tier cities. Localized city and region reports follow the overview, with specific issues written up by company representatives on the ground.

“The net result of the FDI inflows, as well as government investments in fixed assets throughout the country, is that cities across the Chinese landscape are becoming wealthier, with double-digit annual growth rates that match the nation as a whole. With increased growth, though, comes a host of nuanced policy-development and enforcement issues that administrators at every level of government in China need to address.”

Eurobiz Column on Safety in China Operations

May 8th, 2008

The latest installment of my column “Challenging China” for Eurobiz Magazine came out in the May issue. The article is about dealing with safety issues in China operations. The column starts with this tragic tale and relates others that seem downright surreal:

“A friend building a factory in the deep interior of China recently called me with tragic news. One of his Chinese operators had been killed in the machine the worker was tending. It seemed it all happened within ten minutes: the victim’s work partner had gone off to get some materials; when the partner returned the machine had eaten the operator’s shirt, and strangled the operator; twelve minutes later, they were in the hospital, doctors in attendance, but the operator could not be saved.

My friend could not understand how the accident had happened. In the twenty years the machine had been in use in the West, there had not been one accident, leave alone a fatality.”

Read more of the column here.

Different Yolks for Different Folks

May 8th, 2008

A recent visit to the Philippine island of Cebu and a small discovery there set me to thinking about the course China has set itself to become a Business Process Outsourcing (BPO) powerhouse. I had gone on a company trip for team building and other activities to the small subtropical island. Our hotel had been booked in the city – not at a resort on the beach, as we had all expected – and my room was not ready for me to move into yet. I did what I normally do when I’m in a city anywhere in the world with which I am unfamiliar: I took a hike. As the hotel seemed parked in the middle of a major thoroughfare there were just two directions in which I could walk: up the street or down the street. Either way, the view was pretty much the same: brightly colored chitneys stuffed with sweaty people shoulder to shoulder on their way to wherever the non-existent public transport system could not take them; open-faced motorcycle coaches careening through anxious knots of traffic; and lots of cars. Sidewalks were broken or nonexistent, and, despite the steamed heat, dust and mud abounded in equal proportion. It was on this first trip to the Philippines I gathered just how poor this Polynesian island chain really was.

As I headed back to the hotel after venturing out a bit more than a couple kilometers I passed by an extremely clean and well-kept avenue. I decided to take a jaunt down the side road and soon after discovered a bright, whitewashed building with two stern looking guards at the entrance. A bright blue sign hanging over the entrance asked the question, “Do you want to work in a Call Center?” I had been reading of late that the Philippines had become a destination for Call Center Outsourcing: nearly every Filipino under the age of sixty seemed to speak English; and nearly every Filipino singer in China I had ever heard sing seemed to have flawless American accents in performance. Why when suited with a white collar wouldn’t they be able to perform in the same flat, nasal-pitch of the most pedestrian American from the Midwest?

Just behind the Filipino call center was a small complex of adobe-style banks and Western-style venues: a bar-b-que shack, a café, a small Western-style supermarket. Three young Filipinos – a man and two women – dressed in business casual ware with security nooses round their necks strolled back to the Call Center from their break. It was all rather inspiring to find, really, amid the clamor and pollution of the main street.

And therein lays the rub: China is fast-developing its infrastructure, but the English-language skills as well as Western acumen are woefully behind that of a country as small and fragmented as the Philippines. The Philippines has the people with the language talent and cultural affinity, and it certainly has the economic desire to develop IT-based industries. However, the Philippine government is severely afflicted by in-fighting, nepotism and corruption, with no clear plan to develop the economy of its country to the same degree as China. The Philippines, in a way, is an India in the miniature: talented but constrained by self-serving systems of governance.

Who knows, instead of Filipino singers, China might one day be importing Filipine speakers with American Midwestern twangs to work in its Call Centers.

May Speaking Engagements

May 6th, 2008

As the warm winds of summer begin to roll in I heat the air a bit more through my speaking engagements in May. Here’s a round up of where I’ll be and what I’ll be talking about. If you’re around and are a reader of my blog, please come up and introduce yourself.

Monday, 12 May 2008, Hangzhou, Hangzhou Services Outsourcing Forum. Topic: “Hangzhou Pioneering Spirit and the Development of China’s BPO Industry”

Monday, 19 May 2008, Shanghai, George Fox University EMBA program. “China Society, Economy and Business.”

Thursday, 22 May 2008, Shanghai, China Supply Chains Go West. Topic: The Challenges of Investing in China’s Interior - Case Studies.

One Point Four Billion Divided by Two

May 6th, 2008

A British friend told me last week the only problem he has with the Chinese protests against the French supermarkets Carrefour and Auschan is the protests are erratic and sporadic. Reason is: the stores are empty during protests, making it just that much easier for him to shop without the constant press of people that can make shopping even for a carton of soymilk a trial at best. On the other hand, if the protests were scheduled more properly, he would be able to shop with the ease and convenience he’s used to in the UK. (I don’t think though he was aware of the hapless American who had been caught up in the troubles outside a Carrefour in Wuhan; poor soul was mistaken for a Frenchman and rather severely beaten.) In other words, my friend is looking for consistency in Chinese thinking.

What my friend said though put me in mind of double-think of the modern Chinese in his perception of his relationship with the rest of the world. And I don’t just mean THE WEST. It’s pretty much with anyone not of Mainland China.

David Shambaugh in his opinion piece in yesterday’s International Herald Tribune, China’s Competing Nationalisms, discusses this schism precisely.

“Chinese society embodies both types, reflecting a deeper dualistic set of identities: one xenophobic type rooted in past indignities experienced by the Chinese people, the other more cosmopolitan version taking shape along with globalization and China’s integration into the international community.”

But, Shambaugh points out, lets not place on the blame for China’s double-think about the world just on history:

“As a Chinese colleague recently pointed out to me, the current hyper-nationalism is also fueled by the deep feelings of discontent and resentment currently gripping large sectors of Chinese society - wage arrears, stagnant incomes, unemployment, inflation, corruption, severe class disparities, environmental deterioration, moral vacuum and a deep sense of losing ground in China’s Hobbesian economy.”

Something the Powers That Be in China seem not to get yet as make their entrance onto the world stage of opinion is that the audience is taking notes:

“If Chinese nationalism continues to show its insecure rather than its self-assured side, other nations will adapt their China policies accordingly, and instead of winning the world’s respect, China may bring upon itself exactly the kind of “containment” policies it regularly denounces.”

Check out the piece: well worth the read.

The Latest Olympics Track and Field Event: Getting a Visa to China

May 5th, 2008

hurdle.jpgAn American friend just back from Guangzhou told me how ridiculous security is becoming in a run-up to the Olympics, heavy-handed and inconsistently applied. He and his Chinese assistant/interpreter as well as a Chinese business associate had flown down from Suzhou to Guangzhou to attend the world-famous and very lucrative Canton Fair.

His first encounter with security precautions and the lazy attitude of administrators was at the Wuxi airport, where the check-in attendant discovered one letter misspelled on his plane ticket. Despite the passport number on the ticket matching that in his passport, the attendant would not issue him a boarding pass. Arguments with security and with airline management got him nowhere. He missed the flight.

Eventually, the party arrived in Guangzhou to have the Chinese accompanying him denied entry to the Trade Show. “They need to show their passports,” Security said blankly. Orders had come down from the Ministry of Defense. This was no drill, either. So, not just my friend’s Chinese staff and associates were unable to get into the Show, but neither were thousands of other irate Chinese who had traveled to the Show to wheel and deal. My friend tried to incite a riot by arguing in public with Security that the Chinese government itself Chinese people were not deemed worthy enough to enter the Trade Show; only the foreigners, which, of course, was wholly unfair. He told me the crowd’s righteous indignation got them nowhere. Eventually, he relented, and chose to sit out the Exhibition.

Of course, the Chinese government in the run-up to the Big-O wants no slip-ups. They’d rather see the GDP dip a bit over the next months than to have another attempt at Separatization [sic]. Witness the new visa policies that make it very very difficult for travelers – on business or not – to receive multiple-entry visas. Even out of Hong Kong. Businessmen that typically travel to the Mainland through Hong Kong are no longer able to gain their visas to China as easily as they had been in the past. One businessman who had recently been in China told me the office was even closed when he had gone to renew his visa – a sort of impromptu bank holiday.

And further abroad: a British friend told me his girlfriend in London was one of the few lucky applicants to receive a visa to China, to travel here in May. People had been waiting in the line for five hours before the application window opened. The girlfriend had broken down in tears in front of officials and was able to convince embassy administrators she was not a terrorist. I know of other westerners who have put their holiday plans for China on hold for after the Olympics. I guess they figure they have better things to do than jump government sponsored hurdles.

Book Review: A China Hand’s Story - Something to Crow About

April 24th, 2008

carl-crow.jpgPaul French doesn’t drink coffee. He figures it’s a waste of time. French is author of Carl Crow – A Tough Old China Hand: The Life, Times and Adventures of an American in Shanghai . “We don’t really drink coffee, do we?” the tall British author continued, “We smell it.” So, in other words, why bother? Though we were at a fashionable corporate cafe in Shanghai near the historic Bund district, and as much as I wanted to “smell” the espresso, I myself also chose against drinking a coffee. “You Americans like drinking things with funny names – like ‘smoothies.’ They’ve got smoothies here.” He elongated the “ooo” so my American-English attuned ear would more clearly understand what he was saying. We both ordered smoothies and sipped them at a low table seated in chairs from an Apple iPod catalog. It seemed impossible for me to get comfortable on the small stools; I imagined it was even more difficult for French, whose legs always seemed to wind the wrong way from the minimalist furniture.

In reading his Carl Crow book, it’s easy to see why French eschews anything that would seem to be a time drain. Carl Crow is one of the most detailed biographies and histories of China I’ve ever read. I asked him, “How did you manage to gather and write so much detail? Well,” he told me once, “I don’t play silly games like golf and I don’t watch TV; huge waste of time, TV.”

Carl Crow was a prolific author and successful businessman based in Shanghai for 35 years, during some of the most tumultuous scenes in Chinese history. Born in 1883, Crow made landfall in Shanghai in 1911, with the fall of the Qing Dynasty. With the exception of a couple years spent back in the States, he would make China his home until the Japanese attack on Shanghai in 1937 would force him back to America, with little more to show for his twenty-five years than a suitcase of clothes.

Crow was author of the famous book 400 Million Customers, about the consumer habits of the Chinese people. Part cultural odyssey, part business book in the modern vein, 400 Million Customers was given to American troops that made landfall in China at the end of World War II. “Crow’s book is still the best book about China there is,” French said matter-of-factly. Crow also wrote other books: an automobile guide in the AAA-mold for driving through 1920s China; a book about Philippine culture and geography; The Great American Consumer; Japan’s Dream of World Empire; and the popular The Chinese Are Like That, another cultural odyssey.

Crow was also founder and manager of a highly successful and lucrative advertising business based in Shanghai. Indeed, it was Crow that promoted the image of the modern, cosmopolitan Shanghai woman through the posters and calendars that proliferated through the day. He worked for the American government as an intelligence agent, writing reports on Japanese movements and strategy during World War II. He died of cancer just months before the Japanese surrender at the end of the War, in 1945.

I asked French about the proliferation of China books in publishing channels today. He answered, “The number of books that are on the market now about China are actually only about half of what was on the market during Crow’s time, [in the 1920’s and 1930’s]. Interest about China at the time was huge. And China’s importance in the world back then was even greater than it is now. Now, China is just an economic story. Back then, it was the focal point of all the major powers; what happened in China would affect the rest of the world.”

Long after the interview, I thought about what French said about China during that chaotic period in the early 1900s. Eventually, I preferred to think what happened during Crow’s time was really just the preface to a new era in China. Now, we’re just getting to the cruxt of the story.

Time to wake up and smell the coffee.