This is China! blog

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

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

Last year in CHaINA Magazine I published an analysis of the implications of China building infrastructure too fast, with roadways crumbling and bridges collapsing. I wrote:

The new decade began tragically in China with the collapse of a newly constructed overpass to the new Kunming international airport, in Yunnan Province. The accident killed seven workers and injured 34. The central government has slated Kunming as a logistics entrepot between China and Southeast Asia, and between China’s east coast and its interior, with its airport positioned to be the fourth largest hub in the country.

The speed at which China is developing its road transport infrastructure is truly admirable. China currently has 3.5 million km (2.2 million miles) of road. More than half of that is low grade, according to Reuters.

Read an extended analysis note on the implications of infrastructure problems for business in “Infrastructure Quality Issues Present Hazards to Business” . (requires registration to access – free).

Technorati Tags: accidents, bill dodson, bridges, bullet train, china, collapsing, high-speed rail, infrastructure, logistics, roads, roadways, shanghai, subway

This has been an annus horribilis for China infrastructure. This year has seen wind turbines blowing up, bridges falling down, bullet trains crashing into one another and, most recently, a terrible accident on a Shanghai subway line I take several times a week. On hearing the news about the Shanghai accident my (Chinese) wife simply shook her head and said, “Everyone knows they’re building things too fast.” She told me of a program she had seen on Chinese national television in which engineers echoed the same sentiment. “I don’t want you to take the bullet train to Shanghai,” she said quickly, “and I don’t want you riding the subway in Shanghai, either. Ride your bicycle!” Of course, that’s hardly feasible with a 150 km to cover between Suzhou and Shanghai; leave alone the thought of navigating Shanghai traffic on a bicycle.”

Nevertheless, it was wise of the central authority to have slowed down travel on all the high-speed rail lines, and to order an audit. The official investigation of the Hangzhou-Wenzhou bullet train accident of the past summer was due out a couple weeks ago. Perhaps officialdom is hoping its citizens will forget they had announced they would publish the findings mid-September. The story that the signal system on the line had failed still stands. However, with the unexpected death a few weeks after the bullet train accident of the general manager of the design company charged with re-innovating and implementing signal technology on the high-speed railways, few dissenters will provide even a gentle reminder to the powers that be of their promise to disclose findings in a timely fashion.

Still, it is jarring that yet another, more stable showcase infrastructure project as the Shanghai subway system should also go off the rails so soon after the Hangzhou-Wenzhou incident. According to news reports, some time before the Shanghai accident subway staff was manually signalling directions to trains on the line because the system had failed. Seems a sort of retribution from beyond the grave.

Perhaps dead men can tell tales after all.

image credit: echinacities.com

Technorati Tags: bill dodson, bullet train, china, shanghai, shanghai subway, subway, subway accident, Wenzhou

At the end of 2010 Shell Oil produced two future scenarios of how the world might revert wholesale to renewable energy sources – Scramble and Blueprint – both of which take account of China’s new-found role as energy heavyweight. TrendsAsia extended the Scramble scenario into a third, grittier scenario called Skirmish.

The first, called Scramble, sees countries in a grab-fest for energy resources they stake out with gusto, cordoning off supplies for their own society’s consumption and perhaps – if there’s enough to go round – for their allies, as well. A lack of inter-governmental coordination and unfettered use and abuse of fossil fuels leads to a global slowdown around the year 2020, which catalyzes governments to place public and private strictures on the use of energy until, ten years on, the world has become green.

Read more at TrendsAsia.asia …

Technorati Tags: alternative energy, blueprint, china, energy, green energy, oil, scenarios, scramble, shell oil, skirmish

How can it be possible for China to build an Innovation Nation when it’s internet – the backbone of so much of 21st-century innovation – is so tightly controlled and filtered?

Listen here to the latest Hotpot Podcast in which I hold forth on the nature of innovation in China and discuss the writing project I’m working on now. (Running time: 9 minutes, 26 seconds.)

Technorati Tags: baidu, censorship, china, innovation, internet, sina.com

The Hong Kong edition of The China Daily recently invited me to contribute an article about China’s renewable energy development trends and the country’s relationship with southeast Asia. So I wrote about all the dams China is building in the south, southwest and west of the country it’s neighbors are unhappy with.The editor didn’t like the story. It might be Hong Kong, I was told, but it’s orbit is very close to Beijing’s, after all.

So I wrote another story, about how the subsidies for solar power in China will lead to even more (over-)production that will drive down the costs of photovoltaic technologies even further – a natural for archipelago nations like Indonesia, which have islands of people unable to hook into a national grid.

The editor accepted the sun-shiny story. entitled, “China may light up southeast Asia’s energy portfolio”. It’s a fine story; it’s just that it’s so … well, constructive. You’ll find it here, on page 14 of the HK edition.

Technorati Tags: bill dodson, china, electricity, energy, hydropower, indonesia, solar power, southeast asia, trends

Check out a recent Marketplace radio interview in which the intrepid Rob Schmitz interviews me during a National Public Radio report about how energy trends in China are impacting companies – foreign and domestic – doing business in the country.

Listen to the podcast report and read the transcript of the piece here.

Technorati Tags: bill dodson, business, china, energy, marketplace radio, national public radio

Katherin Hille writes on the FT BeyondBrics blog about the terrible way foreign media and then American diplomatic staff were treated as American Vice President Joe Biden began to speak during a formal gathering that included Vice Premier and heir apparent to the People’s Throne, Xi Jinping. Hille writes that just as Biden started talking about the economy, “Chinese security staff and foreign ministry handlers started pushing media out of the room, drowning Biden’s voice out with calls of ‘it’s over, it’s over, let’s go’.” American White House and diplomatic staff sided with the journalists and were themselves physically shoved out the door, as well. Meanwhile, ole’ Joe soldiered on through the kerfuffle with his speech, which sagely pronounced that the world’s economic stability rested on Sino-American cooperation. Which was sadly missing during the showcase basketball game between Georgetown and the Bayi Military Rockets, a local Beijing club. The basketball game ended with time to go because of an on-court brawl between all the players and some spectators, as well (video).

Vice President Biden missed that shoving match, though, as he had attended the Georgetown game in Beijing the evening before with another local team. Most Chinese in the weibosphere seemed embarrassed by the incident, the video footage of which censors wiped from Chinese cyberspace.

And likely no Chinese outside the impatient ministers in attendance at Biden’s speech knew anything of their leaders’ impoliteness to a foreign dignitary.

Nevertheless, the Georgetown players must accept as part of their introduction to Chinese culture and society that their unfortunate experience is pretty much a way of life for the average Chinese. Typically, though, foreigners have to wait several months before moving from theory to lab in the exhausting course called “The Chinese Way 101″.

I do have a sense, though, that come the hand-over of the keys to the throne next year, relations between the two countries will become increasingly fractious as China continues to signal just how much it has to learn about the world outside its borders, and about the nuances of detente and diplomatic relations.

The tone at the top is dissonant.

Technorati Tags: biden, china, georgetown basketball china, xi jinping