This is China! blog

David Pilling writes in his column in the Financial Times about the confusion China’s policy of “non-interference” in the affairs of nations – including its own – is beginning to create both at home and abroad. It’s workers in other lands are increasingly becoming marks for disgruntled guerrilla fighters, greedy warlords and merciless pirates. Keeping out of the domestic frays that are typically the cause of the seizures is becoming difficult for China’s leadership. One day, the country may just have to send in the marines, as an increasingly vocal citizenry is demanding.

Life outside the Great Firewall is about to become a lot more complicated than two thousand years of collecting tribute from neighbors ever prepared it for.

Technorati Tags: globalization

The central government may actually be coming to the realization that infrastructure development efforts of the past couple years at least have simply been unsustainable from a quality and quantity point of view. The bullet train accident on the Hangzhou-Wenzhou line this past weekend  as well as problems on the Beijing-Shanghai line have clearly shown up the faults in such a muscular approach to modernization.

However, the probability of additional incidents occurring has increased as government authorities have sent out a directive to media channels to focus on the rescue efforts; journalists are to avoid reporting on the causes and repercussions of the crash, according to the Wall Street Journal. Of course, all manner of cover-ups will likely ensue, as the problem with the trains is systemic – the train accident was symptomatic of a wider web involving ignorance, arrogance and corruption.

The incident has seen the shares of the listed train companies involved in the accident plummet, and governments once interested in purchasing Chinese “re-innovated” train technology are reconsidering their options. World opinion about Made in China, however, has remained on a par, however.

Little short of a long stretch of miracles as far as the eye can see will convince the world China’s investments overseas are about little more than a resource grab or money-for-crap schemes.

Technorati Tags: china, economic trends, globalization

The Wall Street Journal recently ran a piece about Western companies putting together contingency plans in case China falls to pieces or explodes or does both. It’s not a bad bit of advise. Within the eight short years I’ve been based in China I’ve seen multiple instances of the society rejecting foreign-direct investment the same way a kidney-replacement patient’s body rejects a new organ.

Interestingly, most of the rejection has been of Asian companies; expressly, Taiwanese (Foxconn) and Japanese (most recently the car plants in the south whose workers went on strike while Foxconn staff was suicidal; and the rampant protests in Chinese cities against the Japanese in 2005). Mostly, Western companies, which in general tend to pay their workers more than their Asian FDI counterparts and – again, generally – tend to treat their staff with a bit more respect  than Asian investors – have gotten off with little more than job-hopping youngsters who will quit and join another company for a 50 RMB raise in salary.

Still, that’s not to say that Western companies should be complacent about social upheaval in China that could affect their operations. Recall the boycotts of French brands and retailers in 2008, when the French government made gestures that drew the ire of Chinese hardliners: Carrefoure and Auschan had a tough time of it while thousands of Chinese protesters all but ransacked the hypermarkets. American businesses must remember the ritual stoning of the American embassy in 1999 (oops, we bombed which embassy?) and then again in 2001 (spy planes like us).

As I write in my book, I am of the mind that the Chinese leadership has the ways and means to completely shut down the Chinese internet  and blackout all communications for the entire country in the way it had during the Xinjiang protests of 2008. It was months before communications was restored to an entire province.

That was just a warm-up.

Is your company prepared for a real performance?

image credits: moebesart.com

Technorati Tags: china, globalization

One of the most interesting classes I took in University was about the Peloponnesian War, during which Athens and Sparta went after one another throats with a vengeance (yes, it was ONE course). Great stuff; really got the imaginative juices roiling.

Well, how about a New York Times article in which one of my favorite wars is actually used as a parallel with China’s rise within the context of a world dominated by a single superpower: the USA. David Sanger makes the point that

“What made war inevitable was the growth of Athenian power and the fear which this caused in Sparta.”

Sanger called the misconceptions both sides nursed The Thucydides Trap, after the author of the history of the Peloponnesian War. The length of the conflict, the casualties on both sides, and the economic toll, it could be argued, made it easier decades later for a true outsider – Philip II of Macedon – to pick up all of Greece.

Technorati Tags: china, economic trends, globalization

Janet Carmosky writes in her most recent Forbes online column:

Here is my best summary of the real attitude of China on the question of wanting to take over the USA: We “Don’t want to, don’t need to, kinda busy, and respect and need the USA way too much.”

The upshot is that China’s leadership has way too much on its hands to rock the boat too much, and understands the relationships within a polarity more clearly than America does (which always seems to need some external bogey man to buck itself up). Good, insightful reading.

And check out her previous article in the same venue on Peak Stuff:

Most everyone who follows energy knows “Peak Oil” as the moment when even the optimists can no longer postpone confronting the limitations of fossil fuel supply. Today I’m writing about “Peak Stuff”, a term I coined about 5 minutes ago to describe the point after which humanity realizes it cannot afford, does not need, and is better off without what can simply be called “Stuff.”

I absolutely love the term and it has stuck in my brain ever since reading it a couple weeks ago. I’m always looking for opportunities to lob the expression at someone in conversation.

Keep up the good work.

Technorati Tags: china, economic trends, globalization

An American friend who works with software development teams around the world gave me a sobering assessment of how talent in the IT sector has moved around the world. She told me over coffee a few days ago, “The Indians have peaked. They’re not as sharp as they used to be. They’re mediocre.” She should know; she’s married to an Indian and ran her own IT outsourcing shop on-the-ground in India. I asked her what she thinks happened to the talent.

She answered, “They sharpest ones took their money and left. And the country hasn’t cultivated the rest.” She was enthusiastic about the Dutch, who are producing some “amazing” technologies, she said. She’s also working with a Finnish team. “The Finns are doing some cutting-edge stuff,” she added. So what else is there to do during those long, cold, dark winter days, I wanted to quip (but didn’t). I asked her about the Chinese software team she had been working with six months ago.

“They were so-so. Nothing really sparkling. And now, because the economy in the States has been so bad, American developers are now costing me about the same price.” She gave me an example. “A Chinese team leader quoted me a price of 300 rmb per hour for a programmer. That’s more than $20 and hour: I can get a really good American programmer for that price – and we’ll have a cultural affinity that I’ll never have with the Chinese, even though they may just be a fifteen minute drive down the road from me (in Suzhou).”

Who knows, perhaps one day American Born Chinese will man call centers from the States to support customers in Mainland China.

Technorati Tags: china, economic trends, globalization

China’s huge population and vibrant marketplace has been the lure for thousands of foreign companies that wanted a piece of the prosperity that China promised. The attraction is nothing new: British merchants three hundred years ago relished the thought of adding an inch of cloth to the sleeve of every Chinese at the time. Imagine the profits!

Germany’s Siemens AG and Japan’s Kawasaki Heavy Industries Ltd. licensed their high-speed train technology to China to gain their slice of the Chinese pie. Now, China wants to sell on the technology to the state of California, which is planning a high-speed rail network of its own. Though the trains China promises to sell on to California are less expensive than the German and Japanese models, the Germans and Japanese licensed the technology to the Chinese on the condition that the Chinese use only the technology within China, according to the Wall Street Journal.

The car company BYD, in which Warren Buffet had invested US$230 million, is running into the same IPR issue in its efforts to enter the American market through California’s own short-sighted mercantile tender. The electric vehicles BYD is offering the Americans run on lithium-ion technology, which is un-proven and not even theirs. The highly labor-intensive and expensive processes involved in making the lithium powder are not even theirs to give to others. BYD has said it is licensing another lithium powder, to get round the export restrictions. Of course, that calls into question the source and quality of the product they are using in their batteries, then.

The train makers – essentially Chinese State-owned Enterprises – are jumping through hoops of semantics to convince potential buyers that the IPR they licensed for use in China undergoes an alchemical transformation that renders it free of legal obligations. They call the alchemy “re-innovation”.

Expect more IPR shenanigans as Chinese companies use double-standards and outright misdirection to break into international markets.

Further reading: WSJ

Technorati Tags: china, economic trends, globalization

The Wall Street Journal last week put it’s finger on just why the Chinese government has been reluctant to make its currency, the yuan, convertible; that is, so institutions and central banks can by and sell the currency and countries can keep reserves in it, too.

Capital account convertibility for the yuan would subject Beijing’s policies to the judgments of individual investors at home and abroad capable of contributing to large capital flows, including highly temporary and speculative gushes. It would put China’s economy much more at the mercy of global financial forces.

Mind you, it’s understandable after the Asian Financial Crisis of 1997 that the powers that be do not want to expose the yuan to Homerian struggles. Hong Kong, though, might prove the launch pad for a scheme that with time might build China’s confidence that it can effectively manage potential flights from its currency under market conditions:

This can best be accomplished in the short run by creating an offshore market for yuan financial instruments that foreign central banks and investors can trust. China’s latest move to create an offshore market in Hong Kong for yuan-denominated Chinese government bonds does just that. While the first step is very small, it might mark the beginning of a scheme to provide opportunities for central banks and investors to store capital in a secure, tradable and liquid form of yuan deposits.

Technorati Tags: globalization