Bits and Pieces From This Week in China

1. Factories out the Wazoo!

I’ve been in 7 different factories in the last 10 days.  Factories making everything from furniture to molded metal office suppliers, from clothing to candle holders, and from offset printing to silk screening.  Despite their different industries/products they all had a few things in common.

One, they all had over 100 and under 300 employees—about ½ of what they all claim to have had this time last year.  Two, they were all working at way under capacity—two of them doing nothing but our orders this week.  Three, they all had some version of the same story: western client XYZ didn’t pay/canceled order/can’t take delivery—do we want to buy their product?

I was really amazed that there really wasn’t more anger.  They were all very matter of fact about it, though many were hurting.  I suspect that more than one of them will not be in business this time next year.  They were all still fishing for export orders and didn’t plan on looking for more domestic clients.  I asked if the domestic orders had increase at all and to a man they all said they had gone down as well.  They didn’t see the local market being able to step in and offer any significant replacement orders.  Just read this on CLB about Chinese stereotyping too.

By far the weirdest comment I heard last week was from one manager who claims that the US will soon start a war with China so that it doesn’t have to pay back any of the debt that China has purchased over the last two decades.  He told me wars were generally good for the economy and a war with China would be doubly good (for the US) since the US could stimulate the economy and write of billions of dollars in debt at the same time.  He was serious about it too.

I responded as politely as possible and shared a couple of jokes to try to lighten him up a bit—I told him that (thanks to the Vizzini the Sicilian) Americans know to “never get involved in a land war in Asia” and that two countries with McDonald’s had never fought a war.  More seriously, I tried to explain that our economies are too interdependent and that the physical, human and economic costs of these two huge economies going to war was a far greater loss than not paying back the whatever hundreds of billions in treasury debt that the US owes China.  He responded by saying that of course I would that, I’m doing business here.  But then left me with the oft-heard chilling factoid “China would win because we have more people and we don’t care about going back for the dead bodies” I was left with little room to respond.

2. Reading about China

While I travel back and forth from factories I have a lot of time to read.  I finished a couple of books about managing organizations/people in China this month and have a few thoughts that I think are important apart from the forthcoming reviews of the books themselves.

First, “entrepreneurial” and “innovative” are not the same thing.  I agree with Jack Perkowski that “the Chinese are among the most entrepreneurial people in the world,” but I add that they have not yet shown the same successes in innovation.  Can they?  Yes, certainly.  Will they?  I don’t know, but I surely wouldn’t bet against them.  The larger point really is that in many books (especially by Chinese themselves) the two concepts are used as synonyms.  Which they are not.  If they were, I wouldn’t have a job and Chinese brand names and/or new products would be seen much more in world markets.  Indeed, at least 50% of my time in China is spent putting out fires and solving problems (another 40% is spent setting and enforcing standards).  Creative and effective solutions to problems are by far the most valuable and rare commodity to me in China today.

One of the reasons, and the second important idea here, is that there isn’t a single locally-educated manager (MBA) with more than 15 years of experience in China today.  The first MBA program was only just started in 1991.  Think about what that means for any company in China—either your management team are all under 40, or they are foreigners or they were western educated, or they simply don’t have the education that most international business expect.  (I do not mean that without an MBA there are no great managers in China over or under 40.)  How many millions (?) of Chinese companies are just doing things “their own way,” or “like they’ve always been done,” or by will of the owner’s personality?!  This is a big part of the reason why it’s so hard to get international standard product on a regular basis from domestic level factories.  Perkowski says that “China has a shortage of more than seventy-five thousand “globally competent” managers.” And “the need for local managers is only going to increase.”

Great take on the current Chinese comments on world economics on Jack Perkowski’s blog today too.

And a couple of good articles on Taiwan and the continuation of corruption in China.

3. Chinese traffic and Hospitals, part 3,476.

I have a friend (overseas Chinese) who, over the weekend, fell while getting off the bus.  (It’s tough for most people, especially ladies in skirts and high heels, to get off a lurching vehicle that’s supposed to be stopped.)  She fell and was hurt pretty badly and had to be taken to a local hospital.  The bus company admitted responsibility.

She had some people help her check in and see an MD at the nearest hospital.  First MD says that she has a broken pelvis and a broken femur and will have to stay in the hospital in intensive care for at least a week (with expensive meds) and then have bed rest with hospital care and physical therapy for another 3-4 weeks.  She decides that although she is in pain she wants a second opinion.  The bus company wants her to get a second opinion too, they don’t want to pay for all the time in the hospital.  By the way, any guesses what the bus company’s compensation for a hospital stay is?  50RMB a day.  Since my friend was a “housewife” that is her official economic value–$7.32 per day.

So she goes to a second hospital and gets a second opinion, this time with x-rays.  Final prognoses?  Bruises.  She’s sore, at home and walking now.  No broken bones, nothing but standard pain meds.  No physical therapy necessary.  Just sit on a pillow and move slowly for a few weeks.

Like you’re doing with your factories here— bring your own translators and double check everything.

Car Crash

Next (believe it or not), I saw another dead body on the way to a factory in Panyu.  The accident was on the Guang-Shen Expressway at the Chang An off-ramp about 8AM Saturday.  There were not yet any police or emergency vehicles on the scene yet.  The bus I was on drove by just minutes after it happened, before traffic was even backed up much.  Don’t know exactly how it happened, but the car had been smashed by a bus.  It looked like the driver’s side had been hit by the front right corner of the bus.  Which probably means the lady driving the car didn’t check her blind spot (what blind spot?!) when changing lanes.  As we drove past we could see her neck at a bad angle, no airbag and lots of blood on her face.  Really sad.

So, like last time, just be careful.  That’s the point here.  (If you comment on this part of the post, your comments will not be posted—so there!  ttthhhbbbbtt)

F4

And so we don’t end this section on a bad note, here is a much nicer bit about cars and faces.  Ferrari F4 for sale here at a show in Coco Park.  Asking price?  About $500,000 USD.  Not sure where you could safely drive an F4 here.  It seems to me that owning one in China would be like being the Far Side deer with the bad birthmark.  (“Bummer of a birthmark, Hal.)  But I’d much rather have these faces stuck in my head than the other one!!

4. Thailand–bad and getting worse.

Not only is it bad in Thailand but it was twice as bad in February ‘09 as it was in November ‘08.  Ouch!  At least the government is taking measures that will help both now (investment monies) and later (re-education/training), unlike the US which is spending money that won’t help now or later!  And an interesting look at how factory closings are affecting individuals.  And another bit on increasingly bad bank loans this year too.

I guess it’s time for me to suck it up and go to Phuket and see what I can personally do to help stimulate the local economy.  Anyone else up for sacrificing a weekend in the name of global altruism?  I really think that it’s the least we can do.

6 Responses to “Bits and Pieces From This Week in China”

  1. I don’t quite see your point about the lack of local MBA graduates:

    Many successful German and Japanese companies employ few or no staff with MBA degrees. Didn’t hurt their business prospects, it seems to me.

    In general, I don’t quite see the value-added of many MBA programs. Lots of strategic blah, and little in terms of hard skills.

    Plus, 15 years of work experience after getting a degree is plenty of time to learn how to manage a company. And you don’t have to be 25 when you get the degreee: Plenty of Americans get an MBA when they are already 30 or 35. And if you never got around to doing an MBA, you could always pick up a couple of good books, and learn the rest on the job.

    Having said all that, of course it is true that China has a shortage of experienced “management talent”…

  2. I’m in partial agreement.

    I don’t have an MBA, and neither to millions of others who run SME’s; but we’re small and so I think that it’s manageable to do without. Certainly you don’t need an MBA to do business, but that’s not the point.

    The point is that there is a culture of and educational commitment to management in the “West” that is not yet fully developed in China. This affects the quality of both local talent available to individual companies and the standard of management within individual companies across industries.

    Individually, companies with local only often have issues with HR, forecasting, international standard accounting, managing through difficult times and meeting international standards. MBA’s by themselves don’t solve these problems, but an educated business culture gives you resources to draw from.

    The affect of this lack of individuals with significant international experience is very apparent in China MNC’s have major issues with and spend tons on re-training ‘the best and the brightest” that they’ve hired because they don’t meet their needs yet. Companies without MBA’s are, well, they are whom the rest of us work with regularly and we know they are not (for the most part) well managed at all.

    Until the generation that started graduating from college in this decade arrived the legacy of most managers and anyone with higher education in China was SOE’s and marxist education. Only those who have graduated after ’00 have had 20 years of consistent exposure to markets and capitalism and better quality (in the cities) education.

    It makes a difference.

  3. I’ve heard the war thing far too often over the last decade – more so at the end of the 90′s than I’ve heard recently. This has always struck me oddly. I’ve also tried to counter it with some realities, though never with much success. I have brought a few to pause by mentioning that a few strategic strikes of national railroad lines would throw China into a major food crisis within 2-3 days. Last winter’s storms were a fine example of what can happen when a few trains stop. When food is brought into the equation, you usually get more of the war arguer’s attention, though anyone who is bent towards war usually doesn’t have much of a realistic sense of a future, even 2-3 days ahead. And they’re usually not very hungry for education, either.

  4. A few weeks ago one of the participants on the television program 头脑风暴 (Brainstorm) predicted that war with China and within the next few years was the inevitable consequence of the US economic crisis; the comments by the factory manager may be bizarre but not unusual. A people living under a controlled press serving a single authority who casually rank Japan and the US as their greatest enemies, one as recent historical example and the other as a jealous and declining rival, may be expected to have weird notions of what constitutes common knowledge.

  5. USA (or NATO) went in war with Serbia, although, first McDonald’s in East Europe was open there. Same MD that was the first restaurant to reach million servings per years. So, MD is not warranty for peace with USA

  6. So you learned when you were 12 years old “it is common sense that country A will avoid war with B, as it can endanger their investment, except in case of ‘securing’ investment.”

    You call this fallacy “common sense” and repeat it but that is not proof of argument and is demonstrably false as contrary historical example shows again and again and again and again. Also, Germany’s wish for more colonies did not precipitate WWI; the Great War was not a war for or about colonies.

    Please read with understanding, “economics does not trump all other considerations when one nation decides to war against another or against itself (civil war).”

    I’ll let you have the last word. Go ahead.

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