This is China! blog

I type out this entry with index fingers. A few days ago a couple fingers got caught in a door that was closing too soon under absurd circumstances. Hence, I’ll be hunting and pecking the keyboard for at least another two months, three weeks, until finger nails grow back.

A recent Wall Street Journal article transported me back to the bandage-changing station at the Kowloon Hospital here in Suzhou. The hospital is privately owned by a Hong Kong group.

The nurse who changed my dressing was a battle axe, and managed to use the tweezers with which she was armed to such effect. She was heavy-set, with glasses, nearing the speed barrier of 40-years of age that seems to sour so many faces.

She was so barbaric in her attendance and devoid of empathy that I shouted at her through the pain she was uneccesarily inflicting to pay attention to what she was doing. She tore the bandages from my fingers without waiting for the peroxide to do its work, impatient to get back to text messaging on her mobile phone. One of the fingers began to bleed again.

I took the first new wrapping off myself, for her to redo, she had swaddled it so poorly. Admittedly, the doctor at the same hospital who had changed my dressings just two days before was careful and considerate, a real gentleman. The contrast could not have been greater.

The Wall Street Journal article discusses how China is suffering a dearth of skilled, educated labor able to manage in a service environment. Laurie Burkitt writes in the article: “In 2011, there were roughly 1.4 million more job openings than applicants, up from one million a year earlier, according to data from China’s Ministry of Human Resources and Social Security.”

A great deal of the problem has to do with rapid urbanization creating consumer markets for the few that should be staffed by the many who come from the countryside. Rural residents rarely have the opportunity to go to finishing school – anywhere in the world. So, job hopping and poaching are rife, while service levels remain relatively low across industries, including luxury, hospitality, and health care.

I devote an entire chapter of my book “China Inside Out” to the services dilemma in China. In my upcoming book “China Fast Forward” (Wiley, Spring/Summer 2012), I focus on the challenges the leadership has in staffing and training employees for the services outsourcing sector Beijing wants to grow.

And as for my demonic nurse: I hope – as Dante would have had it – she retires to the seventh circle of Hell, where former patients take turns changing dressings on her that reflect their own injuries, and changed in such a manner as she recalls the original incident. Again and again.

That’s how bad it was.

A Chinese associate recently invited me to high tea … in Suzhou, a lovely second-tier city near Shanghai. We drove to Jingji Lake, near the Suzhou Performing Arts Center, and parked by one of the many construction sites demarcating the city. The area is called Moon Bay, and is supposed to approximate a small European village – or what Chinese property developers believe will pass as a small European village to Chinese consumers: all low rises with peaked roofs and earthen exteriors loosely assembled around a vacant “town” square.

I have actually walked through the Potemkin village many times. It is usually empty, except for the photographers clicking portraits of young women in frou-frou dresses accompanied by their bored fiancées (who don’t understand they are actually in training on how to behave for the rest of the domesticated lives). The only viable businesses I’d ever seen operating in the square was an Indian restaurant – hugely successful with expats – and a resort-sized Chinese restaurant famous for its Suzhou cuisine, always packed with locals.

So imagine my surprise when my companion, an amiable Chinese sales director for a European logistics firm, opened the door to a Whittards of Chelsea tea shop and insisted I follow her down the brightly lit corridor. I had peered into the shop before, as an avid fan of tea in all its splendor, but had never seen anyone buying teas from the gaily lit shelves in the foyer.

The decor was straight out of an edition of House and Garden, with an emphasis on Garden. The drapes and upholstery were the sort of floral designs associated with the affluent in Anglophile countries, all framed with dark-stained wood. The place was packed with animated customers.

Tea has been a part of Chinese culture as long as there have been Chinese. Last year, according to the China Tea Marketing Association, China produced over 400 million tons of tea. Two-thirds of the production of the tiny leaf went on to become black tea. Most of the production of black tea, though, goes to the domestic market. Only about five-percent went on for export. “Stiff competition from other tea growing nations in terms of pricing and stringent quality controls imposed by importing nations have made life difficult for many Chinese tea growers,” according to the China Daily.

With the popular concern domestic consumers have about the integrity of foodstuffs grown and sold in China – including tea – international sellers have a window of opportunity to make inroads into the country with quality tea products. Once local vendors clean up their act, though, they’ll be doing their best to replicate the English tea experience.

Whittards of Chelsea is a famous English tea house and shop that for 125 years has been selling select teas, coffees and porcelain (china) to discriminating customers. According to the website of its Shanghai shop, “It offers more than 30 kinds of house teas, over 80 types of specialty teas, and around 40 varieties of fruit and herbal caffeine-free blends.” Increasingly affluent Chinese love that sort of product.

The greatest growth in individual income has spread beyond first-tier mega-cities like Beijing and Shanghai. Cities like Suzhou and Hangzhou are still seeing growth in income levels; however, not as much in third- through fifth-tier cities, like Chengdu, Yantai and Fuzhou.

The main tea area at Whittards-Suzhou had about ten tables, each of which could seat three to four individuals. Toward the back was a larger table that could seat upwards of ten customers in a semi-private area. “They have a club you can join,” my associate explained to me as we settled at our table. “It’s further back.” I asked her if she was a member. She said she was not.

The waitress passed us heavy menus. The young woman was dressed in a simple frock of floral design and wore a small cap that reminded of engravings of the bar maids of yore. I perused the generously illustrated menu. It was stocked full of teas from around the world. There were even some Chinese teas.

My companion asked me to order; she was already keenly aware of my enthusiasm for infusions. I ordered a pot of Earl Gray with oil extracted from the rind of the bergamot oranges grown in India. I looked around at the customers buzzing with light caffeine highs.

Every table was full in the place. 95-percent of the customers were women in their 30s. They dressed well, though not splendidly; at least, they were not the Gucci crowd. They clearly had disposable incomes and time to spare – likely husbands who worked at good jobs, not necessarily executive level.

My associate told me the place was popular with young people who were open to new experiences. And the price was right: for just over 100 rmb the polite and attentive waitress delivered us a strong pot of Earl Gray (no re-fills) and a three-tiered platter of finger sandwiches, tarts and biscuits, all freshly made.

After nearly two hours of conversation, nibbles and imbibing a fine brew, we still had left-overs of tart and cookies – an excellent value. Clearly, importing interpretations of tea into China at a price-point that made it accessible to the new middle class was a winning formula.

As we walked down the long corridor of the establishment to the exit a group of six university students piled into a dining room just off the hallway. They were dressed in jeans and inexpensive down coats and chattered excitedly with one another. Truly, this was a world their parents could never have known of at that young age.

An ancient brew continued to be the ambassador to the world for an entirely new generation of tea drinkers.

Technorati Tags: chinese middle class, globalization

A Canadian acquaintance and I recently had a discussion about the state of China’s animation industry as part of the services outsourcing platform China has been promoting to the world. Mark has been an animator based in China for more than twelve years, mostly for Western productions. This year he took up a long-term project with a Chinese production company, which is creating a 3D animated movie. Mark was seeing that the animation industry in China had almost completely turned to create productions for the domestic market. “Costs are simply no longer competitive,” he said, “The Americans are doing their stuff in-house, now.” Quality and sophistication of the animations, as well, has a long way to go. Don’t expect any animated films or television series on the order of the Japanese “Ghost in the Shell” from Chinese studios perhaps in this lifetime (for reasons that are just political as they are technical).

Now that I have a toddler of my own I find myself flicking through local Chinese TV stations to find children’s programming that’s interesting for ME to watch. It doesn’t exist – at least, the stuff that’s domestically made. It’s all South-Park style animation – flat, basic shapes put together with citrus-sliced smiles. South Park animators, though, draw their characters with affect. Chinese domestic animators, I think, don’t have the budgets or the delivery schedules or the skills or the technology or the patience to produce Japanese-style animations (anime). I think the best Chinese animators are working for the gaming industry, where they can copy World of Warcraft and other popular universes.

Of course, salary inflation in China and salary deflation in the West have rebalanced the flow of animation work, dealing a blow not just to animation as a services outsourcing industry, but also to software application development, back office administration and other long-distance support services.

Seeing Chinese services outsourcing for international customers on the same scale as Indian-style platforms is as likely as seeing a well-drawn children’s animated feature come out of China with international appeal. A very long shot at best.

In the years I’ve lived and worked in China I’ve visited likely over 70 economic development zones throughout the country. I do have to say the Chengdu Tianfu Software Park was one of the most well thought-out, professional zones I’ve ever surveyed. Top notch countries from around the world set up there own backoffices in the Park, with some creating data backup centers too. The back-offices take care of the routine data crunching every company has, albeit in the Park at a lower cost.

The staff in the marketing department of the management company that oversees the Park was professional to a T, and congenial as well. The management company has also created a sub-area specifically to incubate small software development start-ups with anywhere from three to five young and inspired souls fresh out of University, in some instances. The management company also has its own application development outsourcing outfit for companies within the Park, and its own lab to create embedded software for hardware companies.

For multinationals looking to secure their data, outsource their back-office routines, or develop software at a fraction of the cost of what’s available along China’s east coast or even in India, check out Chengdu before it too becomes a victim of its own success.

image credit: www-dev.aaxischina.com

“Did I select the correct button?” I asked the bank attendant in Chinese. I had come to a local branch of ICBC bank, near the administration center of Suzhou Industrial Park. ICBC is one of the Big Four state-owned banks in China. I had had to transact some business during in the middle of the business day, which I was dreading as a waste of time anyway. The slim, primly dressed young lady answered I had indeed. I had pressed the button in English that had read Personal Banking. It was a translation of the button opposite it on the flat-screen kiosk. The ticket the machine spat at me read B002.

A half hour of waiting and no B’s had appeared on the red digital panel to the right of the teller windows. As it was, there were only two windows open and nearly twenty people waiting. All the numbers called, though, began with A: A203, A204 and so on. I called the young woman over, asked her in Chinese if I had indeed selected the correct button; no B’s had been called yet. She assured me I had chosen the correct service. A middle-aged security guard came up behind the woman, who seemed to me less attractive than she initially had. The guard was likely a local, from before Suzhou Industrial Park became an industrial park. He had the dark skin and gnarly hands of someone who had known manual labor most of his life. He too assured me I had chosen the correct service.

Fifteen minutes later the red panel blinked B001. No one answered the call. I was sure I would be called next.

A210.

I walked to the service desk and asked the same young lady what was going on. I had waited more than 45 minutes and only once had a B-series been called; and it wasn’t even mine. I asked her in Chinese, “What does the ‘B’ stand for.”

She answered cheerily, “Oh, it’s our English language service for foreigners. But we don’t have many foreigners, so they don’t call the ‘B’ very often.”

“But you and I are speaking Chinese, aren’t we?” I asked through gritted teeth.

“Yes, we are,” she answered warily, unsure of where the conversation was going.

“Then why did you give me an English-speaking ticket that wouldn’t be called for at least an hour?”

She didn’t have an answer. Neither did the security guard, who had been hovering beside the young lady.

I said, still speaking Chinese,  “I’ll tell you what. I’m going to go out for a bite to eat. Give me a call when my number comes up.”

“But I don’t have your phone number,” the young lady quickly responded sincerely.

Exasperated, I said, “That was a joke,” and gave her the losing ticket I had nursed for nearly an hour. I turned and strode out the bank, stunned at the lack of connection the bank as an institution and the staff had with the reality of customer service. I unlocked my bicycle from the post, and slung my leg over to pedal as far away as I could from the place.

The guard came running out the door after me. He shouted, “They called your number!”

“Forget it,” I shouted over my back in English without missing a stroke, “I’ve got better ways to waste my time.”

The Shanghai Business Review recently reported the European Union Chamber of Commerce has raised further complaints about discrimination against Western companies in the Chinese marketplace. Much of the consolidation occurring in China industry, though, is premature, much like the American teenager who believes at age 15 he’s entitled to drive the family SUV because he’s all grown up. Many of the sectors that rely on extensive R&D and innovative approaches to technology application are wholly immature in China, however. In the September 2010 issue Eurobiz Magazine I write in my China Energy column that:

The overwhelming majority of Chinese engineers and the companies that employ them are quite literally without application knowledge of the technologies required to meet the conditions into which the wind turbines are thrust, especially in the rough conditions of offshore installations. More than a few European General Managers and CEOs have told me Chinese buyers for their components and chemical processes expect the vendors to educate the Chinese on the specifications their parts require. As the CEO of one Danish components maker expressed to me, “We ask them [Chinese buyers] for specifications and they ask us what the specifications should be, since we are ‘the experts’.” The lack of knowledge and experience of domestic wind power components makers of many of the domestic turbine and components makers is a constant theme in discussions with Western vendors. Vendors have found they have to provide additional training and longer sales cycles to potential and current customers in order to make and keep sales in China.

Check out more of the Eurobiz article here.

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.

I’ve been spending a fair amount of time in the luxury hotels of Shanghai on recently on various projects and found service levels in general quite high. International brands seem to be investing ever more budget into training staff in English communications, sales, and even complaint management. The service skills employees develop help the hotels to maintain competitive advantage in markets that have fast-become saturated at the high-end. With room supply outstripping demand and room rates falling the last three years, developing and strengthening relationships with customers is ever more important. “Employees need to understand that guests develop relationships with the individual, not with the hotel,” one industry trainer told me.

Of course, now that the labor market is heating up again, hotels have once again become recruiting grounds for companies in need of polished staff. Hotels themselves are learning to that employees are worth more than a one night’s stand.

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I was recently sitting in a Starbucks cafe one morning, sipping a ritual espresso, when I heard shouting outdoors. The raucous startled service staff, too. One of the barristas went outside to see what was the clatter. He returned to report it was the staff of the Taiwanese Chamate restaurant/tea house exercising and chanting before the start of work. The cheer leading went on for several minutes more, during which I just had to see for myself. A single line of green-uniformed staff faced a huddle of employees in which members were trying to outshout each other. Dark-suited big bosses watched on in pride. Eventually, winded, exhausted the huddle broke with a great “hurumph!” and applause.

I returned to the Starbucks, where staff was still talking about the din. I told them that despite not doing calisthenics every morning, chanting and marching, I believed Starbucks still had amongst the highest, most consistent service delivery across the dozen or so Chinese cities in which I had sipped a demitasse of their espresso. I left the last Chamate – in fact, the very one in front of which staff had been gleefully cheering – in disgust after being chased out by six year old kids who were literally dancing on the tables, nary a mother nor service staff to set limits on behavior and ambiance. The Chamate staff simply waited for a big boss to say or do something, which one never did. In Starbucks, on the other hand, on numerous occasions in numerous locations, staff have directly and politely and assertively told ignorant customers they couldn’t smoke in the place.

One day Asian business will figure out that treating staff like grunts will only elicit the same level of guttural thinking and service.

Google’s decision to pull back to Hong Kong to stage Chinese queries on its search engine has highlighted an unsettling sentiment: American companies are finding China a frostier place in which to do business. The American Chamber of Commerce in Guangzhou recently released the results of its latest investor survey to reveal American enterprises have found that having investment opportunities restricted in various industries, a business environment still thick with intellectual property theft, domestic

Further reading: FT

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