This is China! blog » Economic Trends

No Guangdong Redux in Suzhou

Bill :D — Mon, 28 Jun 2010 06:02:46 +0000

The Financial Times recently published two articles about the increasing number of protests in China after the Foxconn suicides and Honda plant shut-downs spotlighted employee dissatisfaction with salary levels and working conditions. I had written a few posts back how some smaller Western companies in the Suzhou area are being affected by the confidence-building actions down South; however, the FT’s coverage indicates something slightly different afoot in Suzhou’s industrial actions.

“Workers born after the 1980s and 1990s are concerned not just about pay but about safety, rights and respect,” Dong Baohua, professor of law at East China University of Politics and Law, told the FT. A strike leader at Suzhou NSG said “That strike is about pay, ours is about safety conditions,” referring to discontented worker actions in South China. I would go so far as to proffer that Suzhou is also one of the first manufacturing centers in China to upgrade its industrial policy to attract higher-value manufacturing, R&D and outsourcing services. It began those efforts as early as five years ago: one of the reasons for the outbreak of green algae on Lake Tai (Taihu) – Suzhou pushed lower-end manufacturing westward – to cities like Yixing and Wuxi – which would take the dirtier, more labor-intensive industries like textile and plastics manufacture. Suzhou industries typically have workers with far less education levels than higher-value producers and service sector offerings. Hence, a greater focus in the Greater Shanghai region on quality-of-life aspects of work.

Interestingly, a feature protests in the Yangtze River and Pearl River Deltas share is an extreme distrust workers have for the Party-sponsored and controlled unions in the companies. The trade unions are more a function of Party control and monitoring in the Party’s interests than in either advocating employer or employee concerns. “Low union credibility is contributing to unstable industrial relations, labor analysts say, adding that more disputes are inevitable.”

Of course, further protests are inevitable for plant managers who insist on keeping their heads buried in the sand, instead of acting proactively to address possible worker concerns.

Cleaning Up My Act in Beijing

Bill :D — Tue, 22 Jun 2010 10:29:46 +0000

I’m in Beijing this week attending the Clean Energy Expo China, one of the highest profile shows for foreign and domestic companies that want to throw a spotlight on what they’re up to in the clean and renewable energies sector in China. Just having come off the Offshore Wind Power China Trade Show in Shanghai, the Beijing Show will be another opportunity for one of my colleagues and I at TrendsAsia to catch up with old friends and make new contacts in the industry. While in Beijing we’ll also be interviewing movers and shakers in the industry – Chinese and foreign – same as we did at the Shanghai show a couple weeks ago.

You can hear my interview with AVN Energy CEO Tom Weiling in this podcast. AVN Energy specializes in components for pitch hydraulics, hydraulic braking and cooling solutions, rotor locks, and hatch opening systems. Tom spoke with me about educating the Chinese buyer, many of whom have a long and steep learning curve ahead of them as the industry matures.

You can hear other podcast interviews on the downloads page of the TrendsAsia blog, ChinaEnergySector.com.

Enjoy!

China’s Jobless Recovery

Bill :D — Mon, 14 Jun 2010 07:16:43 +0000

Recently on the local Chinese TV news a reporter interviewed a young female university graduate who was at her wits end trying to find a job. She had graduated last year. The story was rather ironic, in that China’s economy is booming. Isn’t it? Of course, for most of those following the economic news it’s well known that most of the nearly US$4 trillion that went flew out of bank doors in China went to the State Owned Enterprises and local governments (through the aegis of “dummy” corporations they set up specifically for the purpose of fleecing the banks). Money that actually flowed into the economy went into heavy industry and big infrastructure projects like roads and damns and railways. Though China is always inclined to put a lot of people on projects, in this instance the economies are just not labor intensive enough to absorb the bright young things graduating from the universities. Last year some 7 million fresh graduates flooded the labor pool. At the time, nearly thirty percent of the graduates from the previous year still had not found jobs.

Now, with a flood of new graduates and graduates from last year and even the year before competing in a tight marketplace, salary levels for entry level staff will be depressed even more. The downside of all the competition, however, will be perfectly good candidates who don’t know how to play the employment game well enough and will be shouldered aside. Some will commit suicide at the futility of the sacrifices they and their families made to get them into and through university.

What a terrible waste.

Chinese Workers Extorting China Operations

Bill :D — Thu, 10 Jun 2010 03:12:36 +0000

An American friend recently told me that a Western GM he knows had two of his operators openly revolt. The GM’s plant is in China, and is not very large: it only has a couple operators to run its machines. The operators wanted a huge salary increase, or, they threatened, they would walk out. My American friend, who’s lived and worked in China more than ten years now, suggested to the GM he let the operators walk. “Or, to show them who’s in charge” my friend added, “sack one guy and give the other guy a pay raise.”

Chinese over the past ten years of their boom time have been quick to play the “resignation card.” The couple times it’s been played on me as a China operations manager I’ve simply responded, “When will you be leaving, then?” Of course, they typically over-estimate their value in the organization, and are heart-warmingly shocked when their manager has not only accepted their resignation, but is helping them out the door. Usually the kind of people that play that sort of extortion card are the ones that were not very helpful in the company to begin with.

It’s inevitable that more employees throughout China will attempt to stagger their employers with walk-outs, real and threatened. The Taiwanese and Hong Kong investors deserve it: they have a terrible reputation in China for low paying, low-lying bamboo ceilings that keep Chinese staff static in an employment crouch. The Japanese and the Koreans have slightly better reputations – but only just so. The Western companies are in better stead, because they predominantly pay their workers better than their Asian counterparts and provide better working conditions in general. However, Chinese workers in general are quick “when given a nose, to take the face” – as the Chinese saying goes. Western companies, then, need to do their due diligence on market rates for staffing levels. And hold tight to them.

China is Cracking Up

When Anger Explodes

Managing the Return to Normalcy

There’s No Place Like Home: Worker Shortages

Building the Ethical Corporation in China

Bill :D — Mon, 31 May 2010 03:19:24 +0000

Paul French recently interviewed me for a piece he was doing on the kick-back business culture in China. Paul is Chief Representative of Access Asia and author of several books on China, most recently Through the Looking Glass. He is also China Editor for the magazine Ethical Corporation, based in the UK. Ethical Corporation is “an independent company providing competitive intelligence for business sustainability.” They publish the leading Responsible business magazine. They also sponsor conferences on Corporate Social Responsibility. Paul saw my Eurobiz article titled “Kicking the Kick-back Habit”, in the April 2010 issue of the Magazine. Paul recorded our conversation and saved it as a podcast, which you can listen to or download at: Bribery and Corruption: Fighting kickbacks in China

Enjoy.

Kicking the Kick-back Habit

Corruption Rules

China’s Fantasy Football

Warlords in Suzhou

When Journalism Made a Difference

China Producing “Silicon Sneakers”

Bill :D — Wed, 12 May 2010 14:01:38 +0000

It doesn’t take long when you live and work in China to realize that altruism seldom fits into Chinese business calculations. As far as the renewable energies manufacturing sector is concerned, the Chinese government and entrepreneurs see the potential for riches to be made from the manufacture of equipment that captures, transforms and distributes energy from sources other than coal and oil. One source with whom I talked at the recent SNEC Photovoltaic Conference and Exhibition in Shanghai said her company had commissioned a market study in 2008 on the largest manufacturers in China of photovoltaic cells, as used in solar panels. The study turned up 130 companies that matched their criteria. A year later 50 of those companies had simply disappeared. “It was clear many of the [Chinese] investors saw an opportunity, had some money from other businesses, and thought they’d try their luck.”

It’s important then, in this media-appointed “race” between China and the US in the renewable energy sector to look more precisely at the numbers being quoted, the sources and the time frames from which the numbers are being taken. Bruce Usher, an executive in residence at Columbia Business School, recently wrote in a New York Times Op-Ed piece that, “Bruce Usher, an executive in residence at Columbia Business School, in a 2004 analysis, the World Bank determined that China accounted for a mere 5 percent of clean-development projects globally. But by 2008, the most recent year for which annual data is available, the bank reported that China’s market share had climbed to an astounding 84 percent.” But the same can be said of so many other industries in which America once held predominance and manufacture shifted off-shore: sneakers, TV sets, video recorders, and the like.

Issues of quality are even more difficult to articulate. One maker of equipment that automates the transfer of silicon sliced into wafers told us one of the reasons for Chinese interest in his equipment is that the majority of Chinese production is done on manual lines that yield 16.3% efficiencies in the solar cells. Some American buyers require 16.7% efficiencies from makers, creating a hidden barrier to unfettered Chinese domination of the American market. Though non-renewable energy may not be a national policy on the order of China’s, I do believe American companies continue to refine energy technologies and invest in R&D that will turn up ever more efficient means of producing clean, renewable energy.

So, let China continue to churn out the solar equivalent of “cheap sneakers” for the world. By the time international buyers have to replace less efficient Chinese copy-cat technologies, more efficient products and perhaps even completely new approaches to powering the world will be available.

Great Scott! Insights into China’s Baby Trafficking Business

Bill :D — Mon, 10 May 2010 03:06:51 +0000

My friend Scott Tong, Bureau Chief for Marketplace, a business program on the American radio network NPR, told me a couple days ago he was finally able to get his piece aired on the relationship between baby traffickers in south China and adoption agencies in the States. It took a bit of to-ing and fro-ing, he had told me weeks ago, since producers were concerned the article would rattle the cellophane sensitivities of NPR listeners who themselves had adopted children from China. As interesting as the radio report is Scott’s background article on the meetings he had – or didn’t have – with agency buyers, middlemen and government officials. It all makes for an insightful media treat. And reading from the comments on the page, listeners appreciated Scott’s effort in getting at the heart of an opaque bit of business in China.

Find the report here.

Living in a High-strung China

Bill :D — Tue, 04 May 2010 03:27:24 +0000

Chinese forums and blogs last week were abuzz about the latest spate of violence in children’s elementary schools here in China. Much of the anguish and anger seem to be targeted at the accelerating income gap in the society, exacerbated by corruption and nonchalance by local government officials. I have my own theory: China has become high-strung.

Just a couple days ago I experienced a perfect example of the degree to which the society has become anxious to the point of breaking, this past Sunday, during the May Holiday festival. Most countries take time off in the first week of May to celebrate May Day. Theoretically, the Chinese masses are supposed to relax during the three day weekend. (translation: shop till you drop, and eat and drink with abandon). Instead, I found myself awoken at 6am on the second day – a Sunday – by the incessant construction of a new collection of high-rises next door to my own. The construction went on until 8pm that evening. (and started up again the third day of the holiday). A bit sleepy during the afternoon, I sought to take a snooze – half-hour would do it, I figured. Instead, fifteen minutes into the nap the canon-booms of fireworks launched me from the comfy sofa. Newlyweds were arriving at their freshly appointed home, and felt the need to frighten away the same evil spirits that had apparently been be-deviling a different set of newlyweds at noon, just a couple hours before.

Literally minutes later a hydraulic drill began carving into the cement walls in the apartment the floor above our own, a common enough occurrence most days of the week. But this was a Sunday afternoon! We called the compound guards to apprehend the offenders, but they were unable to find the culprits, whose timing was immaculate: they stopped when the guards came into the building, and started up again minutes later. I bade my wife farewell in the hopes of spending a couple hours outdoors with mates over a few pints of beer.

While waiting for a taxi at the entrance to the complex of apartments I witnessed a fender-bender between two cars – a small bump, with nary a scrape – after which the drivers of the two cars emerged to begin punching each other. The twenty cars waiting to get past them on the road were not impressed with the display of misplaced testosterone, and blared their horns. The stalled chain of cars were immobilized by the raised barrier along the median, and by the tall wall keeping the cars out of one of the multitude of new construction sites that sliced the thoroughfare into a single lane. Most residents in most cities throughout China find traffic daily frustrated by construction that literally appears overnight, but takes weeks to evaporate.

The rate and massiveness of modernization in China is fraying nerves and sensibilities. Mainland Chinese are stressed beyond comprehension: stressed with change, with catching up with the rest of the world – with each other – and with simply staying in place in a world of accelerating reformation. A culture that for four thousand years has trundled along, metaphorically, at the speed of an ox cart suddenly finds itself ripping through time and space at supersonic speeds. Few individuals or groups can withstand such inhuman stresses without the occasional gripe. Or grisly deed.

Ferrari Explodes in Singapore

Bill :D — Wed, 28 Apr 2010 12:04:22 +0000

I had just walked out of the luxurious Raffles City Mall in Singapore when I saw a great black plume of smoke sucked into the sun. As it’s my first visit to city-state, I wasn’t sure if fires in busy intersections were a regular occurrence. A car had exploded curb-side; actually, not just any a car: a Ferrari, low slung, previously banana-peel yellow and, now, charcoal grey. The fire had started in the engine, at the back of the car. The boot completely had melted, most of the engine was ash. The tires had completely melted down, so the chassis rested on the scorched tarmac.

One of the things I have realized during my first visit to Singapore is that it is a society on the go. It fared the Global Recession relatively well, and has been liberalizing its economy, and enlivening its notoriously dull society. As one Singaporean university student told me, “The government isn’t controlling things as much as it used to. Just a few years ago, there was only one art school. Now there are three. The government doesn’t direct us to certain jobs any longer; now we can have more possibilities.” I recall a couple years ago the Singaporean’s concern at the dearth of entrepreneurial talent; it had been directing its best and brightest to careers in government and nationalized enterprises.

I like Singapore. As one British expat who’s lived in Singapore 13 years and raised a family here told me, “It’s easy to knock the government. But things work here.” He described to me what a dream it is to come off an international flight at the Singapore airport and be through passport control and customs in less than twenty minutes. Just a few minutes more with little wait at the taxi stand, and he’s home.

It seems a safe city. I’ve seen only one police cruiser. Most of the uniforms I see are of school students who club together after class, chattering, fooling around, teasing each other, sharing after-school snacks. School days, though, are clearly long, with students heading home after 5pm.

Though business brought me to the nation state, I’ve made the time to walk some of its boulevards and side streets. Despite its small size, the diversity of the population is a breath of fresh air after more than a year of not having traveled outside China. Ethnic Malays, Chinese and Indians pretty much socialize within their own groups, but work together at government and service jobs. It’s also nice not to be pushed and shoved – as is the rule, rather than the exception in China – to queue in line without complaint; to hear (and say) “sorry” when crossing too close into someone’s personal space, or even bumping into them; and no loud hocking or spitting on the sidewalks. Though it would be nice to chew a stick of gum now and then, I’ve gotten over it. Singapore makes an extreme effort to put the “civil” into civilization, something Chinese society on the Mainland has a long ways to go in its wen ming campaigns.

But then again, Chinese leaders are more concerned with keeping the momentum of economic growth roaring at Ferrari-like speeds. We know, though, what can sometimes happen to overheated engines – no matter how finely tuned.

Shown the Money

Bill :D — Fri, 23 Apr 2010 01:46:24 +0000

Three new high rises are set to be built next to the two whose shells sit expectantly next door to my Suzhou flat. The last two apartment buildings went up a floor a week, to finish a year ahead of my expectations. I expect the next three to go up just as rapidly. BMWs and Mercedes seem to be breeding in the area (all of it in-breeding), while expensive boutiques and beauty spas abound – many of which still seem empty of the volumes of customers they need to realize a return on investment. Stories abound in South China of Chinese customers walking into mega-stores with suitcases of cash to buy flat screen TV’s so large they have to have the rooms built around them to be watched.

These are China’s glory days, when cash is sloshing around the economy at levels unprecedented in the country’s modern history. And inflows are not about to slow down, according to Arvind Subramanian, senior fellow at the Peterson Institute for International Economics and Centre for Global Development. Instead, he explains in the Financial Times, the West’s anemic recovery and the relatively rigid financial controls and narrow band of currency valuations will see yet more cash flow into Asian economies as investors bet that Asian governments – especially China’s – will have to re-valuate their currencies and loosen financial controls to keep yet more and larger bubbles from inflating prices in their economies. Subramanian suggests the Asian countries coordinate their fiscal policies to keep speculation from bulging out one economy or another, potentially destabilizing the region in other, unexpected ways. China, especially, can take up leadership in this respect in the region to coordinate economic policies.

But then again, the few watching life on those newly purchased mega-screens may find down-sizing to accommodate the masses unbearable. Tune in for the next episode.

The Mother of All Bubbles

The Bubble Cometh

If it Looks Like a Bubble and It Smells Like a Bubble …

A Look Under the Hood at China’s Economic Engine