Silk Road International Blog

Flying from HK to LAX is just like going to the moon. American in general, and LAX in particular is like visiting a miniature UN, a fat farm, and a shock-therapy treatment center all in just a few hours.

First person off the plane that I talk to is the customs agent. He asks me about living in China, how long I’m back in the US for; all the typical questions. He wonders why I’m home for the holidays without my wife (she’s already here). He then lets me go with “You can come back and live here forever, you know.” I’m sure my parents paid him to say that.

But things go downhill from there. In the next 3 hours, all while still in LAX, my luggage gets lost, found, lost and then found again. As I try to check in for my domestic transfer, I find out that Delta won’t accept luggage over 50lbs from international flights other than Delta flights. No exceptions. 62lbs means another bag or $50. What ever happened to an “overweight” tag? I guess all the Delta flight attendants are wearing them on their butts. Anyway, I repack my bag into the extra duffel I brought and not so politely inform the desk agent that I have a choice with whom I fly and I no longer will chose to fly Delta. You’d think that during a well publicized hostile takeover the service would be better than average rather than worse than usual.

Then, joy of joys, I get selected for screening and set off the security screening alarms not just once but twice. “Male Assist. Double Alarm.” They offered me a private room for the impending pat down—really! Then my shoes register some chemical residue and have to be completely wiped down, re-x-rayed and check by a supervisor. I get “wanded” twice and then patted down. After that every single piece of electronic equipment (watch, camera, phone, mp3 player, computer, extension cords, portable hard drive, jump drive) gets wiped down and tested for chemical residue. Of course everything is unpacked and I’m unzipped and standing spread eagle in the hallway by the time we’re done. One more “beep” from the wand and I’d be naked—they told me that. Next time I’m taking the private room.

Now, I’m glad that someone is helping us be safe, but honestly, wouldn’t it suck to work for TSA?! I mean, there is no one that is happy to be selected, is there? These TSA people have to deal all day with people who are basically pissed off that they’re just doing their jobs. Cudo’s to Fernando Jr. for being polite the entire time.

So now, finally, I’m at the gate. Delta announcer says: “This is a beverage flight only. You still have a few minutes to run and get some food to bring on the plane if you want.” Are you kidding me?! While air service is getting better and better around the world, why does it seem to be really digressing in the US? Security delays aside, why is flying in the US such a pain now days? Flying in the US today means poor service, rude air hostesses and fees for everything. FYI: it costs as much to fly one-way from LAX to SLC as it does to fly roundtrip from Hong Kong to Bangkok; but HK-BKK flight is longer, uses a bigger planes with more passengers per flight, flys out of the biggest airport in the world, offers a full meal each way and I get great service to boot!

It took me three hours just to get from terminal 3 to terminal 5! At least I got to people-watch and didn’t miss my flight. And, since I have time while I’m waiting to board (zone 9, of course) I can say that after 6 years in China, I love that American is more and more (obviously) multicultural each time I come back. The security guards in customs were African Americans, the customs agents seemed to be all Asian or White Americans. The baggage guys were all India(n) Americans. The Delta employees were all old White or Asian American women wearing way too much makeup. The TSA people were all African or Hispanic Americans except for the supervisors who where all white—everyone. The “missionaries” outside were African American while the Salvation Army people were all old Whiteladies. The counter workers in every one of the shops were Hispanic Americans—I stopped into a few extra shops just to make sure I wasn’t just over generalizing. And, just so I’m not called a racist—remember, this is just what I saw waiting and waiting and waiting in LAX.

Finally, EVERY ONE REGARDLESS OF RACE IS GROSSLY OVER WEIGHT!! We obviously need to start exporting more food to Asia—let’s balance out the trade deficit and drop some lbs at the same time, eh?

Welcome to America.

Tags: Book Reviews by david
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I was out of Guangdong Province last next week making some factory visits on behalf of clients. I was in Jiangsu, Anhui, Shanghai, Zhejiang and Fujian visiting with about 10 different manufacturers over a 7 day period. So this is a good time to make some general observations between the different locals and cultures.

Five observed differences between North/South China.

1. Demographics of the labor force. The labor force is much older in the North than in the South. It was obvious in each and every factory that we went to that Guangdong has gotten the lion’s share of the youth—mostly 18-25 year old women. My unscientific guesstimate is that the average age difference is 10 years.
When I mentioned this age difference to one factory owner he told me “yes, our workers are older, but they are also more experienced.” At least I’m not as concerned about child labor.
I found that this age difference was also apparent in Fujian Province too. Hardly a “Northern” province, Fujian lies just to the north of Guangdong and makes me think that this demographic shift may be Guangdong specific. I know that other provinces where I’ve worked/visited also have an older demographic: Hubei, Shandong, Chongqing/Sichuan, Guizhou, Jianxi.

2. % of State owned factories. The percentage of factories that I visited that were state owned goes up dramatically as I went further north. We worked with one factory that owned more than 150 other local factories including a tradeshow center, a couple of very large/modern hotels and numerous KTV bars.
Some of the most interesting aspects of working with these state owned factories includes their network of associated companies. Everything that we’ve ever produced they have someone that is currently manufacturing the same types of things. Another interesting aspect is the tax/price situation. State owned factories typically own their own land or have special tax incentives that allow them to offer lower prices.

3. Size vs. experience of factories. The difference in the North (Yanzi river) and South (Pearl river), in very broad general terms is that Shenzhen started in the manufacturing business in 1980 and Shanghai/Zhejiang area didn’t really get into the act until the middle ‘90’s. That doesn’t mean that the Yangzi river delta is 15 years behind, in fact the fact that they weren’t the earliest entrants means that they have some of the more modern factories in the country. In fact, for very large factories I believe that the North is ahead of the South. For mid-sized production capacity though, the South is the place to find more options.
The fist time I went to visit factories in Zhejiang I was turned off by the lack of mid-range options. It seemed to me that there were either huge multi-national JV’s or small Chinese start ups. Really nothing to compete with Guangzhou/Dongguang/Shenzhen. But all that is changing—and very quickly too. There still seems to be more mid-sized options in the South, but the newer factories are in the North.

4. Manufacturing Costs are location dependant—this is East/West more than North/South. No secret here—labor costs are always cheaper the farther you get inland—or even much farther south, like Vietnam. Factories are going up in Guizhou, Guangxi, Hunan, Hebei and Henan. Land costs, incentives to move inland, labor costs, and other advantages are combining to make inland China more and more attractive. Shenzhen’s advantage in years of experience becomes a disadvantage when you factor in the cost of a more experience labor force, limited land and even some taxes are more expensive than inland.

5. Language. Cantonese/Mandarin in the South and English/Mandarin in the North. It’s always an interesting experience to go to and factory for qualification/inspection and speak English the entire time. Work in Guangdong, for me, is in either Mandarin or Cantonese. I rarely if ever speak English at factories down here. But on this trip every factory in Jiansu, Anhui and Zhejiang had very competent English speaking staff. Only in Xianmen did I speak Mandarin again.

Tags: Business by david
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I don’t usually don’t find cross-cultural nuggets on ESPN, but I couldn’t pass up this one. Let me set the stage for you: Sunday night Yao totally destroyed Shaq and then both were interviewed after the game. The game itself is a big story here in China, but I think the comments of the two men are even more interesting than the game. The full story is here.

From the article:

“Shaquille O’Neal was dominated, but he wasn’t impressed. Yao Ming won his match-up with O’Neal, finishing with 34 points and 14 rebounds Sunday night to lead the Houston Rockets to their fourth straight victory, 94-72 over the Miami Heat.

“He’s pretty much the same, just big, 7-6,” O’Neal said. “He’s just doing what he’s supposed to do.”

Yao scored 20 points in the second half, when Houston outscored Miami by 25 points.
“My only chance against Shaq is to keep him on the run,” Yao said. “Shaq is much stronger and bigger than me. My only chance on beating him is to keep running and running against him. Every time I score on him I was happy like a kid, like a kid getting candy on Halloween because it’s really too hard to score on him, too hard. He’s just great.”

I have to say that sometimes I’m embarrassed that those of us from the US culture find it so hard to complement the achievements of others, especially “foreigners.” It’s almost like success is a zero-sum game—other people’s victories translate into our losses.

As the world becomes more and more international this is going to be a position that is harder and harder to defend. Rabid “made in the USA” supporters are going to find their base increasingly eroding as manufacturing of almost all goods shifts to international locations—as it should, in my opinion. There is nothing “wrong” with manufacturing jobs, but the US economy is much more an information economy than say, China, Mexico, Vietnam, India, etc. Why would we want to pay more to have the goods manufactured in the US? I understand the personal impact of job (even industry) loss and have, like most, experienced it first hand. But temporally saving a few thousand domestic manufacturing jobs that will eventually be lost due to overwhelming international economic forces flies in the face of reality and personal growth and economics.

Like Shaq, who’s pride can’t allow him to give credit to Yao, there is often a mentality in the US that does not agree with the changing realities of international economy—whether it be sports or economy or military strength. The world, it is a changing and we need to be educated/experienced enough to deal with it rationally.

By the way, if you don’t think that China is going to dominate the 2008 Olympics you’ve got another thing coming!

Tags: Uncategorized by david
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SRI welcomes our newest team member to China–Tyler Hooper. Tyler will be in charge of project management for current client projects while here in China.

Tyler comes to SRI with a degree in Business and Chinese. He’s worked in Taiwan as well as in the Banking/Finance industries in the US. He also comes married to Andrea, his wife of 4 years.

SRI is proud to include them in our family. 欢迎!

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We’ve had a couple of clients come to us with some serious production difficulties in the last few months. As I listen to their dilemmas and try to figure out how they got where they are and what we can do to help them, I keep coming back to a couple of general themes.

Westerners do business, and indeed live their lives, with a couple of unconscious cultural assumptions influencing their expectations, business decisions and the way they then interact with their Chinese counterparts. While everyone obviously carries their own unconscious baggage, Western assumptions are often inaccurate or even completely wrong in a Chinese environment.

These 4 assumptions are by no means exhaustive and are not meant as a critique of either Western or Chinese culture. But these assumptions do represent personally observed and reoccurring themes in Western/Chinese interactions.

First, Westerners assume that all people are innocent and honest until proven otherwise. The Chinese, on the other hand, believe that anyone outside of immediate family is probably dishonest and will treat them as such until proven otherwise. I am not saying that Chinese are dishonest. I am saying that generally Chinese believe that all other people are not honest and are not to be trusted until a serious and confirmable connection/relationship has been established—in other words, there is guanxi.

The innocent/honesty mentality fundamentally changes the way that Chinese and Westerners view the world and interact with people. For example Westerns assume (and expect) that employees are basically honest, government officials will do their jobs and that services will be meted out more or less evenly. Chinese assume that employees are dishonest, government officials will not do their jobs unless paid off and services are given only to those with special connections. The consequence is that Westerns will hire the best qualified applicant while the Chinese will often hire an adequately qualified family member or friend (this is a generalization, of course). Westerners are frustrated that official stamps, registrations and procedures are constantly changing, never clearly defined and seem to depend more on who is in the office than the specifics of the case. Chinese assume inequality and corruption are standard and find a connection to overcome the differences. James McGregor in “One Billion Customers” states that foreigners “often come to China with too much trust” to work effectively.

The second assumption afflicting foreigners in China is the assumption of equality: “All men are created equal.” I personally believe the truth of this statement, but foreigners must know that Chinese society does NOT support this belief. Chinese society is not horizontal (non-hierarchical) as much of the West is. China is very vertical—everyone has a place and a role. The Chinese language is marked for social hierarchy (English has one word for cousin while Chinese has eight terms reflecting maternal/paternal and older/younger of each individual). Titles and specific names are much more important to Chinese than they are to Western companies where everyone is a “manager” of something.

This is not just anthropological mumbo jumbo. The Chinese government, that vanguard of the proletariat, has codified at least two different levels of citizens in the hukou system (house registration)—urban and rural—with the rural at a significant disadvantage socially, economically, politically and in every other way. This inequality is not just a product of the recent socialist system either. Historically relationships in China (most of East Asia, for that matter) are vertical and clearly defined. And just because this is the 21st century does not mean that things have changed socially. Modern relationships between boss-employee, rich-poor, white collar-blue collar, junior staff-senior staff are noticeably unequal. Specifics of gender inequalities are different than in the West but are also disproportionately favor males over females.

The abundance mentality is the third mindset that Westerners bring with them to China. Most Western managers are from the middle to upper-middle class of the richest countries in the history of the world. Having lived their entire lives in the most prosperous 50 years in history they come to China—a now huge booming economy—with an engrained abundance mentality that is wholly foreign to most Chinese and all of Chinese history.

In direct opposition to the wealth of the West, the last 50 years, indeed the last few hundred years of Chinese history are marked by extreme poverty, war and politically induced starvation and failure. Chinese mentality is scarcity, not abundance—there is a limited supply of money/resources and you better get yours while the getting is good. Chinese have been (wisely) taught to get as much as they can for themselves and their families whenever the opportunity arises. I am not saying that Chinese are greedy. I am saying that they are opportunist and certainly fatalistic in their understanding of opportunity and resources. China may have a long memory and even longer history but business relationships are notoriously sacrificed for personal profits on a one time deal over long term consistent buying.

What this means for business is that time is not money in China. There is always enough time and usually enough people to do whatever it takes. Money and other resources are seen as being in limited supply. Solutions to problems in China are often solved with people/labor rather than technology or money. Some individuals in China see the opportunities to pad expense accounts as an extension of the opportunistic strategy—I’ve been told more than once that not padding your expense account is just “stupid.” The sale of counterfeit “fapiao,” official receipts that can be used for business reimbursements is rampant in every city in China.

The fourth piece of baggage that foreigners bring to China is a set of absolute ethical standards. The Chinese, due to historical opportunism, political turmoil and corruption (among other things), are much more situational in their view and application of moral standards and ethics. Since China is not governed by the rule of law, but still a rule by law (i.e. powerful men) where you stand depends on where you sit. For most Chinese, offending officials is still dangerous, even deadly.

In business this means that Chinese typically don’t feel guilty about lying or charging different people different prices. This is how negotiations are conducted. Instead of guilt, Chinese feel shame if they are caught in a lie—a loss of public face is more important than any eternal standard that would guilt them into compliance with universal standards.

Tags: Business, Culture by david
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