This is China! blog

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Recent articles have helped me better understand how Chinese migrant workers can work twelve to fourteen hour shifts, seven days a week at the four construction sites within 15 minute’s walk of where I live: they’re sexually repressed, according to Zhang Feng, director of Guangdong provincial commission of population and family planning. Guangdong recently announced through a survey it had performed on the sexual habits and reproductive health of migrant workers that 36 percent hadn’t had sex in a very long time. Meanwhile, another 30% hire prostitutes, while yet another third said they have many sexual partners.

China’s residence permit laws make it near impossible for a migrant worker’s entire family to follow him or her to a new city. City administrations do not provide social services such as healthcare and education to the out-of-towners. Migrant workers are also amongst the first to be forced out of cities during high-visibility events like the Beijing Olympics and the PRC’s birthday.

Though the national government is considering a liberalization of the residence permit laws, and some cities, like Shanghai, have recently made it easier for migrants to change their residence permit, most men and women who leave their hometowns for work in larger cities will still find the going tough without their families. Perhaps the 100 million condoms the Guangdong government will dispense to workers will help relieve a bit of their anxiety.

Further reading: Reuters, China Daily

If adopted and enforced, legal scholars said, the regulation would represent an important shift in the government’s attitude toward the rights of individual property owners. Homeowners would be entitled to obtain market price compensation for their dwellings on state-owned land and be allowed to file suit, if necessary, to forestall demolition.

More than a few contests have turned into life and death struggles. In 2008, one couple climbed onto the roof of their Shanghai house and lobbed a Molotov cocktail at a bulldozer, giving up only when the bulldozer demolished a wall of their home.

The regulation would ban the use of violence, illegal coercion and the cutoff of water and power to uproot homeowners. It also says government officials should hold public hearings or take other steps to solicit public opinion about development plans.

Further reading: NYT

When we guys first discover how handy a hammer is, everything looks like a nail.

Beijing has unearthed hammer diplomacy. Angry that the United States is selling Taiwan a dozen missiles, the Chinese leadership has threatened to boycott the companies involved in the sale. Beijing, though, risks over-stepping legal boundaries and business prudence in such a precipitous move. The WTO could slap the country down over discrimination against foreign suppliers of civilian equipment, in which case China’s own exports could become sanctioned for the value of the loss of business to US companies.

Commericially, China could shoot itself in the foot by smacking around the very company that is helping it develop its own aircraft industry: Boeing. China will not be in a position to oust the foreign air-devils until 2020, when it releases its own jumbo jet. Boeing and rival Airbus are instrumental in the development of the turbine-driven albatross.“They’ll probably rap [Boeing’s] knuckles for six months, order 20 Airbuses and then let it all die down,” one aviation executive told the Financial Times.

As Beijing gets the lay of the diplomatic land and learns to separate government from business, it will gradually stop blurting out its “displeasure” with this and that country and company and divine how  to balance the increasing number of interests it will of necessity have to pick up as it gains clout – and responsibility – on the world stage.

China needs a toolbox. And it needs to pry its grip from the hammer it found so handy hundreds of years ago.

Further reading: FT

I just received my electricity bill for the last couple months of winter. Whoever said coal-generated power in China was cheap hasn’t lived in Greater Shanghai. Now I really understand why so many Chinese south of the Yangtze River don’t even turn on their heating, even in the depths of winter. Save money!

Western countries seem to be standing aside and allowing China to capture the cost-effective end of the renewable energies market. According to the New York Times, China already produces the most solar panels and wind turbines in the world. “Yet many Western and Chinese executives expect China to prevail in the energy-technology race,” the Times writes. Domestic subsidies to buyers and energy producers (as well as the occasional diktat) the society already investing in less-polluting sources of energy than America and Europe. The sheer size of the market serves to further drive prices down. Of course, little is said about the processes and energy-efficiency of the manufacture of the renewable energy devices.

Now, from a global markets point of view, the country seems to be able to export the products to countries that have been politicking about investing in low-cost energy alternatives. But, as Ma Lingjuan, deputy managing director of China’s renewable energy association notes, “Every country, including the United States and in Europe, wants a low cost of renewable energy. Now China has reached that level, but it gets criticized by the rest of the world.”

My, aren’t we sensitive.

Further reading: NYT

A couple years ago I had a conversation with a Chinese scientist in the pharmaceuticals industry who had worked in the USA for nearly 15-years. He and a Chinese partner had started their own lab to produce drugs in America, but were frustrated by the lack of funding available. He planned to set up a lab in Zhejiang province, where Wenzhou entrepreneurs were interested in diversifyng their investment interests.

This same scientist may now be part of a major trend that sees China having increased the number of peer-reviewed scientific papers more than 64-fold since 1981,according to Thomson Reuters. America with more than 300,000 papers still published more than three-times the number of papers as China in 2008; however, according to the research company, China could be the largest producer of scientific knowledge by 2020.

The Financial Times article that discusses survey findings sites that nearly 10% of the Chinese papers were co-authored with scientists in the West. A substantial source of the papers recently generated come from Chinese scientists who have lived in the West for several years, and who now spend part or all their time in China with the support of government subsidies intended to bolster scientific research in China.

A genuine telltale of China’s scientific development is a check of references the papers cite. When Pareto sees 20% of the references of papers worldwide refer to researchers schooled and based in Mainland China, and when Western graduate students in the sciences come to China to study and to conduct research, then the world may see a genuine tipping point in the quality, uniqueness and kind of knowledge China is contributing to the world.

Until then, the country is just manufacturing facts.

Further reading: FT

The Chinese rocket scientist Qian Xuesan once asked, “Why does China produce so many clever people, but so few geniuses?” He died last year at the age of 97, since when a plethora of answers have been bandied about in cafes, bulletin boards and social networks. Still, it’s said Bill Gates once quipped, “If a genius is one-in-a-million, then China has more than a lot geniuses”.

So why haven’t all those clever souls and unsung geniuses not created a more innovative Chinese society? China, it’s true, excels at innovation, but not disruptive Innovation. “Small i” innovation is about patching and work-arounds – the work of clever people. “Big I” Innovation is about changing the course of markets and even of societies – the work of genius. Chinese culture and history have always been supportive of “small i” innovation, due to the capricious nature of local government policies and decisions; and due to dramatic turns of events – revolts, revolutions, banditry, dynastic dissolution – that quickly destroy the fruits of labor. Hence, the tendency of so many constructions and creations in Chinese society to be just “good enough”; after all, who knows how long such works will be able to stand?

The Chinese government throughout the ages has not supported disruptive innovation in the vein of the Western style. Western entrepreneurs look forward to upsetting the apple cart (Americans, in general, more than Europeans); Chinese rule throughout history has not inculcated the Western sense of Innovation through its laws (meant to maintain stability); arbitrary application of the laws (meant to maintain local control as conditions change); or through the value it places on copying/memorization in education (meant to “harmonize” thinking and behavior).

The current government trend toward absorption of parts of the private sector (guojinmintui) by the State does not bode well for Innovation in China; nor does the march toward heavily bounding the internet from international flows of information. Increasingly, any Chinese Innovation will first of all develop from the requirements of the country’s home market; the technology and information walls the government is putting in place will severely inhibit Innovation applicability in international markets.

Now that’s just plain dumb

Read more:  NYT

A lot of experienced expat managers of late have been telling me kick-back stories. I don’t know if the incidence of corruption in China operations is on the increase, or if the stories just make for good entertainment. Chinese managers – usually in purchasing and HR – are usually the culprits. One Chinese purchasing manager at an American company had asked a local European company for a commission to get a project. The European GM called the American GM and told him of the incident. The American enterprise promptly fired the purchasing manager. An internal auditor from the home office told me he had come to China for a month to see how systemic the corruption was in the American company. Another company saw the purchasing manager rake in such a mother-lode of kick-backs that he owned two houses in Greater Shanghai, and two in Beijing. Even if the company catches him with his hand in the till and fires him, he still gets to keep the houses.

In another instance, a Western team of experienced expats was sent into a Western company to investigate corruption. Team members began receiving death threats about their intrusion into the inner workings of the company. One of the group simply quit: someone cheating the system simply was not worth his life.

Over espresso a few days  ago  at a Shanghai Starbucks a Western recruiter-friend named Franz (not his real name) told me the worst seemed to be over in the local jobs market. “Multinationals last year stopped making decisions. Our company also works with small- and medium-sized companies, so we were ok in placing staff last year.” This year, though, the multinationals are only looking to place Western expats in China at the highest levels of the organization. “Otherwise, companies want locals in those positions, or expats that want to live in China.” Franz said, “the expat packages now are nowhere near what they used to be – unless a Westerner is at the executive level of a very big company. Now, expats that make their lives in China are offered local packages that have good salaries, but none of the perks of the old packages: healthcare, housing, a couple trips back to the home country each year.”

Still, there is life after the Great Recession.

I’ve grown fond of drinking milk imported from South Korea. It’s quite tasty, pasteurized and safe to drink. The French and New Zealand brands sold in Chinese supermarkets tend to be of the irradiated sort that can stand preserved on a shelf for a very long time. The China melamine scandal of the Fall of 2008 put me off drinking local milk, just when I had decided to go back to drinking the stuff. The last two weeks, though, and I’ve not been able to buy the South Korean brand because of an embargo China has placed on the stuff. I think the embargo has to do with the fierce competition the Chinese dairy industry still faces after its meltdown in the Fall of 2008, but I could be wrong – Koreans in China seem unclear on why their dairy isn’t getting across the border.

It seems the Chinese dairy industry is up to its old tricks again. Authorities in various provinces such as Guizhou, Sichuan and Jiangsu have swept market shelves clean of the brands, all of which hail from east-central to north China: Shanghai, Liaoning, Shandong, Hebei. According to a spokesman for the industry, melamine-tainted products were still available in the supply chain after the 2008 crackdown. A relaxation of oversight as well as graft contributed to the scandal after-shock.

The lack of transparency in regulation and enforcement compounded with government collusion with business interests puts a great many supply chains in China in jeopardy. The close social relationships between suppliers and producers amplifies knock-on effects in the same way a megaphone amplifies a whisper. If Western companies in China that rely on supply chains whose operations and inter-relationships are opaque, companies need to aggressively revisit suppliers and put in place systems and controls that keep operations above-board.

It does no good to get caught up in the backwash of someone else’s greed.

Further reading: NYT, China Daily

See also:

Managing the Message

Eating Their Young

Managing Black Dragons

Thar Be Black Dragons in China

The Black Swans of China

The People Made Me Do It

Finally, in My Backyard

Follow up:  China Begins Emergency Check of Dairy Products (NYT)