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.
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.
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)
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.