This is China! blog

The Zhejiang city of Wenzhou has been having a bad run in the media lately, both domestic and international. ‘Wenzhou has the reputation in China of having been first and most successful out the gate when economic liberalization began thirty years ago, and of having the most millionaires per capita of any city in China that makes cheap stuff like plastic cigarette lighters, of which the city has some 80-percent of the world market sewn up, or some such. It’s fortune seems to be waning, however.

Most recently, a Jiangxi-born businessman based in Wenzhou jilted his workers of their wages, selling the factory’s equipment one evening and escaping with his girlfriend to his hometown in Jiangxi. It’s unclear whether his girlfriend was also from Jiangxi. The workers called the cops, who quickly caught up with him, according to the China Daily. As early as the end of the summer, according to the Wall Street Journal, Wenzhou companies were suffering from a dearth of lending from the national banks as Beijing continued to tighten lending to curb inflation in the country. Dozens of businesses have been closing, ever since. The problem has only been exacerbated as material inputs have increased, salary pressures have been eating away at profit margins and buyers in the West are unable to buy more stuff because of the global economic slowdown. Wenzhou has been fertile ground for a vast shadow banking system that profits from illegal loans to local businessmen, according to the Financial Times. Some Wenzhounese, though, tried to cheat their way through the bad times, but recently found out crime doesn’t pay.

Sixteen Wenzhou executives, ten local government officials and eleven others were found guilty last week “for graft, embezzlement, illegal distribution of State assets and bribery”, according to another China Daily report:

Ying Guoquan, a founder and former president of Wenzhou Cailanzi Group, was allegedly involved in graft, embezzlement, illegal distribution of State-owned assets and bribery, involving more than 400 million yuan ($63 million). Wenzhou Cailanzi Group is the largest enterprise for food production and processing in the city, supplying 98 percent of the vegetables, 80 percent of the soybean products and 60 percent of the seafood, according to the group’s official website.

The most remarkable aspect of the case, according to the China Daily article, was that, “The corruption case at Wenzhou Cailanzi Group was the most serious of its kind in the city in the past two years, according to Xinhua News Agency.”

Just goes to show, two years in China can feel like forever.

This past weekend Paul French came out to Suzhou to introduce his latest book to the Royal Asiatic Society. Midnight in Peking is a recounting of the true-life murder of a lovely British expat in 1937, just as the Japanese are about to sweep into the city. I interviewed Paul about the book and discussed with him his motivations for excavating the story and for trying to solve what has been a cold case for more than 70-years. The book has been top of the readers’ lists in Hong Kong and Australia for the past month.

Listen to the interview here.

Technorati Tags: bill dodson, china, detective, midinight in peking, murder, mystery, paul french, peking

A British mate of mine who has worked with Chinese supply chains since the late 1990′s told me he is seeing a sea change in domestic manufacturing. He’d worked in manufacturing in Britain for several decades before coming to China. The Chinese owners of the factories in China are beginning to reign in waste in their production processes. “Before, if they screwed up an order they’d just call in another hundred bodies for pennies, have them work overnight to remedy the situation, then let them go,” he told me. “Now,” he explained, “pay rates have gotten more expensive, material inputs are more expensive, and there’s not as much business to go around. So Chinese owners are beginning to look at how to improve their processes, get the orders right the first time the most efficiently they can. That’s another reason why some of them are looking into or investing in robots to do some parts of the job. Fewer errors.”

The former plant manager put the change into context for me. “It was the same in Britain in the sixties. We wasted a lot of material, made a lot of mistakes. Then, in the seventies, everything began getting more expensive to manufacture. We cleaned up our lines, our processes. Things like Total Quality and Lean Manufacturing came along. It’s a natural process. China’s not special in that way,” he added.

China’s going to find one day that economically, middle age sucks.

Technorati Tags: bill dodson, china, lean manufacturing, manufacturing, suppliers, supply chain, total quality

Paul French is giving a book talk in Suzhou this weekend, Sunday, at the Bookworm downtown. Penguin books just published his murder mystery, Midnight in Peking, in which he digs into the unsolved, real-life murder of a beautiful British expat, Pamela Werner, in Peking in 1935, days before the Japanese invade the city. It’s Paul’s 7^th book, his first historical fiction.

Apparently, Pamela’s body was horribly mutilated and dumped in a gully in the British legation. Though the mystery was never solved, Paul takes a crack at it based on the notes from the Chinese and British investigations, interviews with people who actually knew the girl (survivors are in the nineties, now) as well as the notes her father left behind in pursuit of the truth and justice. Orgies, drugs, booze and other unmentionable stuff (like the stuff I just mentioned) were apparently involved in the circumstances of the crime, making this an especially good read. A couple weeks ago the novel was the third best-selling book in Australia. The book will be on sale at the Bookworm.

The Suzhou Bookworm, Gunxiu Fang 77, Shi Quan Jie. 30rmb for students; 50 rmb for members; 70 rmb for non-members. Includes one glass of wine or beer. For more information, contact Bill Dodson at bdodson88@gmail.com.

Technorati Tags: bookworm, midnight in peking, paul french, royal asiatic society, suzhou

The New York Times recently had an article about the shrinking purse Chinese consumers have been suffering for the last decade. The article discusses how central government infrastructure projects and the resuscitation of the State-owned Enterprises (SOEs) has been at the expense of all but the well-connected and very rich.

Indeed, economists say this nation’s decade of remarkable economic growth, led by exports and government investment in big projects like China’s high-speed rail network, has to a great extent been underwritten by the household savings — not the spending — of the country’s 1.3 billion people.

This system, which some experts refer to as state capitalism, depends on the transfer of wealth from Chinese households to state-run banks, government-backed corporations and the affluent few who are well enough connected to benefit from the arrangement.

Inflation has its part to play, as inflation rates holding between 5-6 percent eat away at bank deposits that accreted only 3-percent interest. With not many other options in which to place their money, families have been squirreling away an increasingly larger portion of their income. With government strictures severely limiting purchase of additional residential property and overseas investments dramatically curtailed, families pretty much have three options: traditional banks or gray-market banks that promise stratospheric returns on interest. Or under the mattress.

James Kynge writes in an article in the Financial Times about the gray market for deposits and the extent to which the Beijing Consensus of central government interference in the economy and industrial policy has left the country with hidden debts of its own that leave the country unable to provide another adrenaline-jolt to the economy, in case the world goes into double-dip recession.

It’s no wonder the powers that be are increasingly concerned about placating the masses during eruptions of discontent.

image credit: eastsunrises.wordpress.com

Technorati Tags: bill dodosn, china, consumer, middle class, soes, state-owned enterprises, wealth

The Wall Street Journal recently published an investigation into the possible causes of the Hangzhou-Wenzhou train accident of July this year. The findings coincide with research I’ve been doing on pollution created by the manufacture of “green” energy solutions, like the polysilicon that goes into the production of solar power cells.

The WSJ writes:

The problem, these people say, is that Hitachi—fearful that Chinese technicians might reverse-engineer and steal the technology—sold components with the inner workings concealed from Hollysys. Hitachi executives say this “black box” design makes gear harder to copy, and also harder to understand, for instance during testing.

“It’s still generally a mystery how a company like Hollysys could integrate our equipment into a broader safety-signaling system without intimate knowledge of our know-how,” a senior Hitachi executive said.

The Washington Post reported in 2008 that Luoyang Zhonggui High-Technology Co in Henan Province, near the Yellow River, was dumping raw, unprocessed waste into the surrounding countryside, where villagers lived just hundreds of meters away.

About nine months ago, residents of Li’s village, which begins about 50 yards from the plant, noticed that their crops were wilting under a dusting of white powder. Sometimes, there was a hazy cloud up to three feet high near the dumping site; one person tending crops there fainted, several villagers said. Small rocks began to accumulate in kettles used for boiling faucet water.

It seemed that in its rush to build its factory and production processes based on German technology, Luoyang Zhonggui had all but cut out its waste management system.

The Luoyang Zhonggui factory grew out of an effort by a national research institute to improve on a 50-year-old polysilicon refining technology pioneered by Germany’s Siemens. Concerned about intellectual property issues, Siemens has held off on selling its technology to the Chinese. So the Chinese have tried to create their own.

A rush to construct with inadequate planning and preparation; incomplete technology transfer from foreign producers and a lack of understanding of what has actually been transferred; and a blatant disregard for the dangers to human life implementations offer have concocted an industrial base in China that is unsustainable in the long-run.

What other black boxes lay hidden in China’s modernization machine?

image credit: voidspace.org.uk

Technorati Tags: bill dodson, china, crash, Hanzhou, high-speed rail, innovation, pollution, solor power, technology, Wenzhou