Almost two months ago to the day my son was born. My first child. Now, my first ISBN was born; or, rather, the ISBN for my upcoming book, China Inside Out: 10 Irreversible Trends Re-shaping China and its Relationship with the World.

ISBN: 978-0-470-82643-0. How cool is that? I want to memorize this number. And now, whenever I walk down the streets of Shanghai or Suzhou and someone greets me, I want to reply, “ISBN: 978-0-470-82643-0″.  Actually, it was one of my nephews back in the States who twigged me onto the fact the book just became available for pre-order on Amazon. (Yes, he pre-ordered it – he said – good nephew). Except the book still lacks a cover (come on, you graphic designer!), so the Amazon page is not very attractive. You’ll find a full description of the book on the Amazon site, and on the publisher’s site at John Wiley & Sons. The John Wiley page for the book has a little tab behind which you can read the Table of Contents. I didn’t see anything like that on the Amazon site. The Asia edition of the book should be out in October-ish; the UK/USA edition the end of December (just in time to miss Christmas).

So, should you surf over to either the Amazon or the John Wiley sites to read a summary of the book, consider pre-ordering it – just takes a click of the mouse button. And a credit card. And a line of credit. I promise you it’ll be a good read.

And if you can’t recall the name of the book. Remember: ISBN: 978-0-470-82643-0 …

The China expat website eChinaCities recently interviewed me on how difficult it was for foreigners to set up and run a business legally in China. I’ve been doing it for years here in China, without having paid graft or taken kickbacks or making shady side deals with government officials. Part of the reason for that is I don’t have the time or patience to mess around with these kind of relationships: the times during which I’ve indulged someone through guanxi, I’ve regretted it. So I now rationalize even that very Chinese way of doing business. Also, though, it helps our business is based in the Suzhou Industrial Park, which has a very strong influence from the Singaporean government. The Singaporean government itself is based on the colonial British model of efficiency in government affairs.

Shanghai has improved greatly in the manner in which it treats foreign investors; however, the brand corporations with deep pockets of course receive much greater assistance in wending through the maze of policies, regulations and bureaus than do tiny companies. Outside the close orbit of Shanghai, though, and setting up and managing companies requires far greater due diligence of the area, its regulations, and the departments that affect the investment. Localities throughout China are notoriously parochial, so new enterprises need to spend extra attention on the relationships that will supposedly facilitate approvals and audits. The relationships can cut both ways, with locals’ expectations for the business way out of wack with the Westerners’. The further away from Shanghai foreign investors venture, the further back in time the enterprise travels, back to where the rule of man is far more important than the rule of law.

And always have an exit strategy. Local governments that believe themselves the only game in town for a foreign investor inevitably become sloppy and demanding. Companies need to be sure they know how they will extricate their project from a location with minimal damage to the image and bottom line of the mother company. Though China has become a more straight-forward environment in which to do business, the shifting tides of domestic interest in foreign adventures in China is on the wane, depending on the industry. Experienced local governments that support “pillar” industries like automotive, renewable and clean energy, and aerospace will facilitate approvals and business transactions for investors; whereas foreign invested companies that want to set up in discouraged industries like textiles and toys will find a gauntlet of unpleasant restrictions with which to deal; in which case, China may not even be the right place for the enterprise.

Read the article.

Related posts:

Kicking the Kick-back Habit

Corruption Rules

Eurobiz Magazine recently interviewed me for an upcoming article on salary pressures on China operations and CSR-related activities companies may be investing in to retain staff and brandish their image in the local community. The same day as the interview Foxconn saw its 10th suicide of an employee. Keili Stremel, Deputy Editor of Eurobiz, asked me what my take was on the suicides. I told her I believed Chinese employee expectations for their lives had altered radically in ten years: in 2000, migrant workers in the millions worked at back-breaking jobs 12- to 14-hours a day 10-days a week, with a day off. They made a pittance, worked for the most part in squalid conditions, and saved most of their meager salary to send to the family remaining in the hometown. Chinese ten years ago could tolerate this condition because life on the farm was far worse and made even less money.

Now, young people of the same age but different generation have seen what the good life has to offer. And, frankly, they are in no more a rush than anyone else in this high-strung society to take their slice of all modernity and a consumer lifestyle promise to offer. However, modernity in China has become a relatively expensive commodity, and obtaining so much of what they see on the streets and on TV frustratingly far off. In a society in which the highest values an individual can obtain involve desiring stuff, acquiring stuff and showing the stuff off – NOW! – the dehumanization of the assembly line is like an emotional lobotomy. Even if a Chinese employee has a white-collar job, so much of what he or she should be able to acquire materially while they’re still young seems so much further off than before; especially that dream home where bride and baby make three – and grandmas and grandpas make seven – a great financial weight to carry, indeed. A cognitive dissonance has arisen in which people have to want things in order for the society to work; however, they have to want the policy-acceptable things that do not present a threat to any authority figure, in business or in government.

Mind you, all of this is happening at head-snapping warp speed, 24/7, with no sense of rest or reflection.

In other words, Chinese society is cracking up – not from an infrastructure point of view – but from a humanistic one. Anyone know a good shrink?

Related posts:

China Shudders

The Learning Organization

When Anger Explodes

Don’t Mess with Spring Festival

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.

Related posts:

Kicking the Kick-back Habit

Corruption Rules

China’s Fantasy Football

Warlords in Suzhou

When Journalism Made a Difference

• A Tectonic Shift: What Will China’s Role be in the World’s Future Financial Set-up?
• The China Price is Unsustainable, an interview with the author of the book, “The China Price”
• Monetary Flows:  Chinese Foreign Investment – How Much and Where (Part 2 of 3)
• Place Your Bets, about China’s real estate bubble

It’s a timely and relevant issue well worth checking out.

Keep up the good work, Shanghai Expat.

A point several of the students seemed dismissive of was that Chinese industry would one day be as innovative as the South Korean and Japanese. Incredulous, they pointed out issues such as the continued culture of IPR violations and a color-by-numbers education system.

Of course I agreed with their assertions, as one cannot argue with the numbers nor with the anecdotal evidence. Still, other trends are impossible to ignore: the increasing number of IPR-violation suits that Chinese companies are bringing against other Chinese companies (implying the Chinese themselves are beginning to develop products and approaches worth protecting and fighting for); the establishment of more R&D centers in China by multinationals; the fact that China has been posting amongst the highest numbers of patents in the world, rivaling the States itself.

I made the point that one of China’s greatest assets is the huge size of its increasingly rationalized marketplace. Compared with the higgledy-piggledy Indian economy, the speed and depth with which China is normalizing its information, transportation  and logistics infrastructures as well as its commercial protections is breath-taking. Also dizzying is the pace of its adoption of technology at all levels of social strata: whether TVs, washing machines, mobile phones, computers – China is intent on becoming a nation of savvy consumers.

Most of the R&D centers that Western manufacturers and IT outfits are establishing in China are to meet Western design requirements. Increasingly, though, I’ve met GMs in China who are excited at the potential of a well-trained R&D staff adapting Western-born technologies to use in the Chinese marketplace.

“A fundamental difference between America and China is that China has too many people in too small a space with too few natural resources,” I offered the George Fox group. “Meanwhile, America has relatively few people in a relatively large space with an abundance of natural resources. It’s a truly challenging environment into which technology is being channeled in today’s China, and in which the technologies are being adapted.”

“Now,” I went on to say, “once China has overcome those barriers of a rote-based education system and rampant copying so it reaches a threshold of innovative design and implementation – just as the Americans had eighty years ago, the Japanese forty years ago, and the South Koreans twenty years ago – and has become comfortable innovating to meet its domestic demands, its will begin exporting technologies to a world that increasingly has…” I ticked off on my fingers, “…too many people, too little space and too few natural resources.”

Though ten or even twenty years off, the world needs to prepare itself for China’s Innovation Blowback.

The reporter was curious about how SIP has changed over the years, and especially how it is faring during the economic downturn. I organized my thinking around three main trends: administrative, economic, and business.

Salient points I made about administrative revolved around the warm welcome SIP administrators – Chinese and Singaporean – gave to investments just after SARS; how the couple years until the economic meltdown they’d become very picky about who they would take into the Park and who they would help in times of trouble; and how much more pliant and accessible they’ve become since the downturn. I postulated that instead of deterring SIP’s (and Suzhou’s) plans to become a high-tech hub that the downturn would actually accelerate their efforts. Already, companies that had been purely manufacturing in SIP are considering or are actually implenting transition plans to perform R&D in the area.

The economics of SIP – and of Suzhou, at large – has been criticized in Beijing think tanks. The “Suzhou model” of attracting export-driven (albeit cleaner and more sophisticated than Dongguan, for instance) has resulted in a donut-effect: the Chinese transplants that have come to take the engineering and middle-management positions have raised the cost of living in the area without the foreign companies investments really benefitting the pocketbooks of the average Suzhounese. One Suzhou lawyer I talked with said part of that was just the Suzhounese Way: historically the Land of Fish and Rice has always been pretty well off. Suzhounese have always managed a lifestyle that they found comfortable, without the manic need work harder and longer hours. Still, it is a fact that Suzhou has reaped huge benefits the last ten years, and has grown out of all proportion to everyone’s expectations. However, with factories pulling back on production, thousands of operators have returned to their hometowns and recent university graduates are finding it tough to land a job. Salaries are substantially depressed from even a year ago, and rental prices have dropped precipitously.

Though local businesses are still coming and going apace, businesses that relied on expat salaries have taken a hit. I’d estimate Suzhou has seen 30% to 50% of its expat population evacuated back to their home countries. Landlords clearly don’t like the trend, and neither do restaurant and bar owners who depend on foreign tastes. The South Korean population, I understand from teachers at international schools, have taken the biggest hit. Of the Westerners, perhaps the Americans.

One of the more interesting impressions I drew from the interview was that the Singaporeans are still smarting over the supposed slight of nearly ten years ago, when the Singaporean investors accused the local Suzhou  government of directing potential investment projects to the Suzhou New District, a large economic development zone on the west side of the city.

“Get over it,” I wanted to say to the journalist’s readers, “This is China!”

It seems almost every month now Western friends are leaving Suzhou, re-patriated from whence they came. Timing’s everything, they say, and the Times have forced companies to dramatically re-think the way they use expats in China. In one instance, a friend’s Australian company – in the household goods manufacturing industry – just simply doesn’t exist any longer. For another mate, the early retirement package the company offered is far greater than if he just continued working in Suzhou another two years and then retired as a matter of course.

In the March 2009 issue of Eurobiz Magazine I write about succession matters in companies in China, and why it’s important for Western companies to plan for and cultivate talent that will eventually assume the role of General Manager of a company:

Robert, the British GM, also stated that succession Matters ultimately come down to an issue of trust. “It is important for Chinese managers to establish credibility with Western managers abroad.” Without trust there cannot be effective, transparent communications between two sides separated by vastly different value systems.

And trust, we all know, is a precious commodity in the business world.

The Indian government is continually having difficulty rationalizing a business sector capable of capitalizing on the outsourcing services in its own backyard…

Certainly, two things I’ve been struck by in the global financial downturn is the sheer number of Chinese IT service providers that keep on keeping on: they have made it plain they are not going to close shop any time soon. Though far smaller than their Indian counterparts, they are eagerly moving up the customer-service learning curve while keeping costs low.

The other interesting point is the very reason behind the staying power of Chinese IT-service vendors: they have a domestic market that is increasingly becoming rationalized. Rationalized in this context means that local regulations, transportation and information infrastructures, staffing levels and more are well enough mature in China that IT services companies can actually get to and support customers in a somewhat timely and effective manner.

Until India has this kind of domestic customer base, it will always be at the mercy of the international markets that have caused massive layoffs of staff at their outsourcing facilities, salary deflation and customer flight to competing countries – like China.

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