This is China! blog

A couple times in the past month I’ve eaten delicious bowls of noodles at local Master Kong Chef’s Table. Master Kong is a brand owned by the Taiwanese food maker Ting Hsin International Group . The brand is best known in China for its instant noodles and muffins. Both its noodles and muffins completely dominate the shelves of hypermarkets like Walmart and Carrefoure in China, and convenience stores like the Ting Hsin-owned chain Family Mart.

The Group has been extraordinarily successful at leveraging its noodle brand image Master Kong (Kang Shifu – Master Healthy – in putonghua)  into highly successful service sector businesses with reputations for quality and attentive staff.

The first Chef’s Table restaurants opened nearly six years before in Shanghai. The Chef’s Table has only just opened in Suzhou, with at least two locations of which I’m aware: downtown Suzhou at Guanqian Jie and the Suzhou Industrial Park, at Xinghai Square. The establishments are consistently awash with customers and clamor, a testament that the Group has got its formula for China market entry right.

In Shanghai last year October the Group opened the first eatery to meet the needs of low- to middle-income professionals. The formula for pricing the low-end noodles is half the amount of the average hourly wage. That would place a bowl of rice and a drumstick at around six rmb, or the cost of a bowl of noodles at a neighborhood hole-in-the wall. Chef’s Table prices hover around 30 rmb for its noodle soups and dishes.

The Chef’s Table restaurants are bright and cheery, and the staff of young people quick and attentive. Though portions could be more generous, the recipes are delicious – especially the spicy beef noodle soups that are the flagship products. The decor is set in warm reds and yellows framed with dark wood furniture.

The successful launch of the restaurant chains presents lessons for all would-be foreign investors into the China market:

- Leverage off whatever brand awareness your business has already created in the F&B space;
- Chinese are highly value conscious – identify your niche and price accordingly;
- Go for comfort foods with localized tastes that offer sustenance and flavor;
- Create an environment in which customers feel somewhat intelligent, instead of like cattle being herded through a corral.

Oh, and unless you’re well-practiced at slurping noodles, be sure to wear a bib.

Technorati Tags: bill dodson, china, f&b, food & beverage, food and beverage

Michael Dunne, president of Dunne & Company, a Hong Kong-based consultancy specializing in Asian car markets, wrote a nice piece in the Wall Street Journal recently about the explosive growth in the luxury SUV automotive sector. He writes:

Chinese consumers will buy an estimated 310,000 luxury SUVs this year — spending, on average, more than $80,000 a pop — according to forecasting group LMC Automotive.

Before going any further, let’s do the math on that: The cash that Chinese will spend on luxury SUVs this year alone is enough buy all 20,000 homes currently for sale in Detroit (median price; $94,000) and still have $22 billion dollars left over.

In 2011 J.D. Power and Associates conducted research that revealed that more than 90% of luxury SUV purchases are settled in cash.

Conspicuous consumption is playing a greater driver in the motivations of the nouveau riche, as they want to announce their status to the world. Dunne writes:

“When we buy a luxury car, we’re telling the world that we’re rich,“ Cai explains. “But with a luxury SUV, we’re saying look at me: I’m rich – and different and powerful. I drove a friend’s Mercedes M Class recently and I could feel the people looking at me.”

Mercedes, especially, has benefited from the high-end market. The company sold 848 SUVs in China in 2005; in 2011 they sold 54, 016, nearly double what they sold the year before.

European brands overwhelm the segment with two out of three SUVs sold in China made by Audi, BMW, Porsche and Mercedes. Cadillac, Lincoln, Infiniti and Lexus are working over-time to cash in on some of the largesse of the new class.

Read more: WSJ

Technorati Tags: automotive, bill dodson, branding, china, consumer behavior, lifestyle, luxury

A British friend who works at a European lifestyle luxury brand maker in China told me how sales for their top of the line wares are not taking off the way they are in other countries in the Asia-Pacific region. Sales have been through the roof in South Korea, Japan and Thailand. China, though, is so-so.

“The problem,” my friend told me, “is the Chinese with money read the label and see ‘Made in China’. If they’ve already bought one of our products, they return it; if they haven’t bought it yet, they return it to the shelf.

“They simply don’t trust the quality of products made in China, and don’t understand how something made in China could be so expensive.” My friend went on to tell me that despite the designs being cutting edge and the highest quality fabrics used in clothing lines and the best materials in their appliances, the company is struggling to reach the sort of tipping point in purchases amongst China’s nouveau riche as they have in other Asian countries.

As I write in my upcoming book (Wiley & Sons, due out early summer 2012), “China Fast Forward: A Blueprint of the Technologies, Green Industries and Innovations Driving China’s Future”, Brand China has come to be associated in international markets with cheap, chintzy and unaccountable. Apparently, the Chinese think so, too.

I write in “China Fast Forward” how the most successful Chinese companies seeking their fortune in overseas markets actually remake their Made In China image into something Western, international-sounding, and bland; that is, innocuous. Others want to associate themselves with a strong Western national-brand image.

The Financial Times recently published an article about the growing haute couture business in China. Now, some high end domestic products aspiring brand-hood are designing clothes in Shanghai and having them manufactured in Italy. Just so they can have attached to them the Made in Italy label, with all the sense of style and attention to detail the image entails.

Of course, we don’t know where in Italy these wares are manufactured. An Italian neighbor of mine in China told me there are villages in Italy whose economies have been based for centuries in textile manufacture. “Now,” she told me, “there are more Chinese than locals in many of these villages.”

National brands in these days of global supply chains just aren’t what they used to be.

Technorati Tags: china, globalization, haute couture, made in china

My (Chinese) wife eagerly pointed at the leather bag on the sofa in our living room. The pattern on the over-sized purse was a soup of multi-colored D&Gs jostling against one another like microbes in a petri dish washed with the blandest agar. If my wife hadn’t pointed the bag out to me as I was on the way out the door I wouldn’t have spotted it on the neutral fabric of the couch.

She said conspiratorially, “That’s the ayi’s bag. Do you know how much it cost?” Our ayi comes in three mornings a week to help with the cleaning. My wife giggled at the prospect I’d guess very wrong.” I shrugged. It was an ugly handbag and I didn’t much care our housekeeper had blown a month’s salary on fake couture. Besides, I was late getting out the door.

“It cost more than 10,000 rmb,” she announced. 10,000 rmb is nearly US$2,000. I frowned. I’m used to her conjectures, mostly deigned from the neighbors, the local television news and internet forums. “Impossible. It’s fake,” I retorted, hurriedly slipping my shoes on. Besides, the ayi, a young woman, was more disposed to wearing jeans and sneakers than touting haute couture.

She shook her head, smiled broadly. “It’s not fake, it’s real,” she said with genuine excitement. “One of the people the ayi works for gave it to her.”

“Gave it to her?” I said irritably, “Why would someone give the ayi an expensive purse?” It also bothered me the confounded thing was so ugly, in a baroque, ostentaious sort of way. It rubbed against my sense elegant simplicity – not that I’m either.

My wife said excitedly,” The woman who the ayi works for has a rich boyfriend. The man is already married, and has a lot of money, the ayi told me. He bought an apartment for the woman. He gave the woman the purse as a gift. The woman said it was ugly, and gave it to the ayi.” I could believe someone else thought the bag unattractive.

I nodded, paused a moment. At least the story made sense, given what I’d heard about the spending habits of the nouveu riche in China. Certain circles of society in today’s China are awash with so much money men can afford second wives and hideous bags that are hideously expensive.

The woman was likely annoyed at the man – probably bacause he also had to pay attention to business and to his wife – and was so spoiled she thought nothing of giving the bag to an ayi. I’m sure she was looking forward to replying to the man when he would one evening ask, “Why don’t you ever bring that purse along that I bought you? You know the one: that lovely Dolce & Gabana bag.”

Then she would respond, “Oh, I have too many purses; I gave it to the ayi.”

“You what?!” he’d splutter, spitting out his Cuban cigar.

She would flash a faint smile.

Ah, love in the fast lane.

Technorati Tags: china, middle class

Chiang Kai Shek: the Early Years
Saturday, March 17, 5pm – 7pm

Come celebrate the first anniversary of the Suzhou chapter of the Royal Asiatic Society (RAS) with a talk by Jonathan Fenby on the early life of Chiang Kai Shek, followed by a reception hosted by the RAS. Mr. Fenby will trace the rise of Chiang from 1911 to 1937, against the backdrop of a country torn apart by feuding warlords, ruthless gangsters, greedy colonials and pugnacious political parties.

Mr Fenby is the author of the newly released “Tiger Head, Snake Tails: China Today, How it Got There and Where It Is Heading”. He is also author of a biography of Chiang Kai Shek and of “The Penguin History of Modern China: The Fall and Rise of a Great Power, 1850-2009”. You can read what the Wall Street Journal had to say a couple days ago about his books on China here.

He has served as the Editor of the Observer, the South Morning Post and Deputy Editor of the Guardian. He was named a Commander of the British Empire (CBE) in 2000 and a Chevalier of the French Order of Merit in 1991.

Saturday, March 17, 5pm – 7pm. The Suzhou Bookworm, Gunxiu Fang 77, Shi Quan Jie. Purchase of Literary Festival ticket required for entry (50rmb); includes a glass of beer or wine.

RAS membership applications available at the reception, so be sure to collect your pennies to join!

Technorati Tags: china, expat life

Frank Langfitt, the Shanghai correspondent for the America’s National Public Radio, assured me a couple days ago the weekly radio program “This American Life” had expanded its profiles from – as called it – old white guys with gravelly voices (usually doing some sort of manual labor or intensive craft, I might add) to a younger set, Americans in their twenties and thirties. Apparently, the demographic of the listening audience (1.7 million, at last count) had shifted dramatically, predominantly to a younger age range with university educations and relatively liberal views. Good, I told him, pointing at myself: I hardly fit the OWGGV image (nor am I in my twenties or thirties … keep counting). Nevertheless, the two-hour long interview in a Shanghai bistro was great fun.

We ranged over topics that involved the shift in China’s industrial policy for foreign investors over the last ten years, with peppered with personal stories; the change in attitudes in Chinese society toward expats; innovation with Chinese characteristics; whether the ascendance of China means the descent of America; as well as my own plans for my future in China.

I’m not sure if and when the program will air to the million-seven that apparently listen to the weekly profiles on American radio; however, it was indeed an honor to have been asked to interview nonetheless.

Technorati Tags: china, expat life

I recently had a conversation with a young(er) American expat who has been living in China nearly ten years. I had told him about the talk – The Warlord and the Engineer – the Royal Asiatic Society (Suzhou branch) had hosted a few weeks before. The remarkable thing about the talk was how the Danish Engineer Robert Christensen and adviser to the warlord Zhang Zuolin had meticulously recorded his life in journals while he lived in China during the 1920s, had cataloged hundreds of photos and had captured the times on film, as well. The expat and I agreed those of us living in China were experiencing a special period in its history – call it “The Goldilocks Time”, when wealth seemed to flood Chinese streets. One day, the rapid-development period will all be a distant memory. Who amongst us will be the chroniclers of this time?

The expat admitted he had desperately few photos of himself and his time here in China, despite a decade’s worth of experiences. I personally have a bunch of photos, the blog, the books I’ve written. And now that I have a son, recording the ordinariness of our lives here has become more important to me.

I told the expat that for me, while watching the photos and film footage of 1920s Mukden (Manchuria), what interested me most was not the foreigners frolicking in the foreground, but the locals toiling in the background against backdrops that are gone forever.

It’s tough to gauge just how precious one’s everyday existence may be to future generations.

Technorati Tags: china, expat life

The past month here on the ground in the Yangtze River Delta has seen activity that runs counter to macroeconomic measures in the property development sector. By all accounts, construction sites are supposed to be grinding to a halt and new projects deferred indefinitely. Instead, what I and Western friends are seeing is an acceleration of construction activity. Where for the last two years we’ve only had to bear incessant noise, dirt and dust from sunrise to sunset, now we are hearing construction activity 24/7 the past three weeks (whenever I became conscious in the shift of pace of construction). And new development projects are continuing to sprout up around us in a region that theoretically is economically mature. It seems a near-impossibility to escape the din of construction machines punching the ground or stamping steel or crunching concrete.

One building that friends and I were talking about in the Suzhou Industrial Park is still having floors stacked on its skeleton frame of concrete and steel while construction workers fix mirrored-windows to lower levels of the same structure.

We’re not entirely sure of why construction activity has accelerated recently; however, we’re sure it has to do as much with uncertainty about what the government will do next with the property sector as much as uncertainty about the Chinese economy in general. Some of the questions likely at the forefront of the minds of developers include: will the government end bank loans to developers completely at the end of the year? will they end all construction projects for and indefinite period of time? and will they be able to find buyers for their residential projects and renters for their office property?

One thing, however, is certain: the accelerated pace of construction does not fill me with any greater sense of security in the integrity of the finished structures.

Technorati Tags: bill dodson, china, construction, economy, infrastructure

FinanceAsia recently reported that officials in the northern province of Jilin were fired for permitting construction teams to fill bridge with garbage instead of with concrete.

China has fired at least 10 railway officials over a sub-standard Rmb2.3 billion ($360 million) construction project that involved bridges filled with trash instead of concrete, and builders without any relevant experience, including one team led by a cook.

I wrote about this sort of padding two years ago in an article for CHaINA magazine, when there was a rash of bridge collapses. Though officials were censured and construction companies fined, seems old habits die hard. Of course, the last thing the nation’s leaders need is for this to be found on their coveted high-speed railway.

Nevertheless, the company responsible for the garbage bridges, China Railway Material Commercial is pushing ahead with a Rmb14.7 billion ($2.3 billion) IPO in Shanghai.

A migrant worker who helped build the bridges said to Chinese media, “I wouldn’t dare to take the train once it’s finished.”

A wise man indeed.

Technorati Tags: china, infrastructure development

This past weekend I had the pleasure of introducing Simon Gjeroe to local Suzhou residents interested in hearing dramatic tales from the China’s warlord period. We had gathered for a monthly Royal Asiatic Society (Suzhou branch) talk on Chinese culture and society. Simon is proprietor of Beijing Postcards, which sells reprints and books of photos taken by foreigners visiting China in the 1800s and early 1900s.

The warlord period in China took place during the roaring 1920s, when warlords shifted sides and assassinated each other as often as they changed concubines, and when the majority of expats in Northeast China lived in the lap of luxury. Simon gave us all a unique peek into the life and times Zhang Zuolin, one of the mightiest warlords in China during the chaotic 1920s, as chronicled and photographed by the Danish arms dealer and adviser to Zhang, Robert Christensen. He also showed a 25-minute long documentary about the era, all of which was made up of photos and film footage taken by Christensen himself.

Simon revealed that five years ago Chinese were universally embarrassed by the photos taken of the country in the late 1800s through mid-1900s. “Why,” they would ask him, “do you want to look at old photos of how poor China was?” Now, Simon said, the Chinese make up the majority of his customers in Beijing. I was astonished when Simon pointed out that nearly all the old photographic and film images of China are from foreigners. The Chinese have little idea of what their lives really were like during the end of the Qing and warlord periods.

That is, not beyond the latest rounds of soap operas on Chinese TV.

Listen to my interview with Simon here .

Technorati Tags: beijing postcards, bill dodson, china, history, robert christensen, simon gjeroe, warlords