China is different now? Really? How?

It’s be more than 20 years now since my first work experience in Asia, 15 years this month since I first came to China.  So much is different, so much is so new, so much is much more developed.  Buildings are new, technology has not just made it here, but taken over.  Cars, shopping, manufacturing, education and income levels—it’s almost a different planet than the China of 1995.  Almost.

Whenever my Utopian vision of what Asia is pops up (yes, I still have dreams of Shangri-La) it’s usually quickly beaten down a few times with the baseball bat of reality.  Here are a few of the most recent bruisers.

1. Conversation at a factory: “You know how fake LV is much cheaper than real LV?  It’s like that.  It looks the same.  The quality isn’t too bad.  But it’s much much less expensive.”

This is the analysis from a factory manager (800 people, 11 years in business in Shenzhen, over 80% of their volume goes to the US/EU).  He also confided in me that they can buy any testing certification their customers need for about $150 per item—ANY ONE HE NEEDS!  That’s RoHS, LHAMA, ASTM, CPSIA 2008, TRA.  You name it, it’s for sale.

Wasn’t China supposed to have significantly improved enforcement of things like this?  I usually agree with Dan, but I’m not seeing ANYTHING different today than 10 years ago.  Maybe we disagree on the definition of IP, but it’s not getting a lot better down here in the trenches.

2. Comments from a conversation with a group of about 10 men, all working for large (VERY LARGE) multinationals:

“Let’s just say that my company will never build another plant in China.”

“I can’t tell you what’s next, but “next” for us isn’t China.”

“We have too much here already for how risky it still is.”

3. Conversation with a newspaper reporter about China vs. Vietnam.  He asked me about the increasing preference for doing projects in VN.  Me: “Sure Vietnam has cheaper labor.  But the supply chain and infrastructure are so much less developed.  Unless I can get the components, packaging and fulfillment all done in the same city there, it’s still faster, more convenient and about the same price to do things in Guangdong.”  And even though I love Pho, I have to have more than coffee and bread shops to break up a week long trip there.

4. Conversation with a QC manager working in Zhejiang.  “I hate working in Zhejiang.  It’s 10 years behind factories in Guangdong.  No one understands that contracted quality standards really do need to be met.  It’s a nightmare.”  I guess it’s all relative, huh?

5. Conversation with a local in a bar after the US beat Algeria in the World Cup last week: “How come the US can get to the elimination round but China can’t even get in?!  We have 1.3 billion people, a national program for football and it’s our favorite sport.  America is only 300 years old and American’s don’t even like football.”  I had this conversation in 2006, 2002, 1998, and 1990 in Asia.  Remember when students were jumping out of dorm windows in 1996 as China tried and failed to qualify for the 1998 world cup (they lost to Korea and complained about the population then too).

Quick side note on China a soccer performance:

My theory is that collectivist cultures deny the development of most of the great individuals that they would otherwise have and that are necessary to win.  China’s Olympic medal haul in so many individual sports may seem to contradict this, but if you look at what they won it does not.  They only won in sports that they specifically targeted because there was no great Western presence.  They picked unpopular sports that the West didn’t care about so they could win the gold medal count.  So my theory still holds— they themselves know that they could not create the greatest athletes in the most popular sports.

6. In our church group of about 150 foreigners here in SZ, 4 families (total of 20 people) are moving out within the month.  Either business is not as good, opportunities are better elsewhere or factors of health/safety/education have prompted them all to move to other countries.  8 years ago there were less than 20 people, in 2007 there were about 200. Now it’s down to a buck 25.  Not sure why I included this one.  I thought it was interesting.

7. Money: I was passed counterfeit money twice in the last week; once in a taxi and once at restaurant.  I can’t believe that I didn’t check either time—I’m obviously not getting any smarter either.

8. My phone didn’t work with the new software upgrades this last week.  I took it to the “Official Apple Retail Store” in our local “International” shopping mall where I bought it.  They charged me 100RMB, spent about 15 minutes with it plugged into a “jailbreak” program (yes, it said “jailbreak” in English and Chinese right on the overhead screen in the shop in the middle of the mall) and now it works fine.  Of course, Apple won’t register it and they tell me it came from Australia.

9.  Of ten new projects/orders started in the last two weeks 7 of them had price/component issues because what was spec’d out in signed contracts and approved in samples and what was “meant” by the factory for production were two different things.  No, none of the 7 changes made any of the orders cheaper.  But thanks for asking.

10. We have an English teacher in our apartment complex whose English is so, um, accented that none of my kids can understand her (or my wife when the teacher speaks English).  I can usually figure out what’s being said only because I speak Chinese and so have learned the art of simultaneous language deconstruction (“If I say that sentence word-for-word in Chinese, what does it mean?”).  15 years ago, a high school English teacher asked me the same mis-spoken question over and over again while translating a much more interesting conversation back to her friends.

11.  After my last triathlon in Bali (50 minutes faster and 4kg lighter than the first one last year, thank you very much), I had my wife bring my bike back into China while I was updating some paperwork in HK—she was stopped at the border for 2 hours (and was furious with me).  I’ve crossed the China/HK border with the same bike, in the same box (and unboxed too) more than 15 times—never stopped once.  I’d love to be able to say that the US border is different/better.  But it’s not.  It’s worse.  My father in law said the most accurate thing I’ve heard to date about the US bureaucracy, “At least with the Chinese government, if you pay some one you get what you paid for!”  I can think of very few things I hate more in life than having to deal with the US govt (IRS, TSA, Immigration, Embassies, etc.).

12. This is what’s officially happening in China: labor laws are impacting workers and wages, RMB valuation is change prices, labor shortages are stretching out lead times and raising costs, inflation and raw materials prices are rising, factories have still not recovered from the lowest points of 2009 so fixed costs are still higher per order, new international express mail rules are making it much more difficult to send samples out of China.  You’d think that China would be running pell mell from the Obama method: tax, spend and make it hard to do business.  Nope.

Finally, GE boss Immelt on the current situation in China:

Mr Immelt acknowledged the importance of the Chinese market, which contributed $5.3bn to the group’s revenues last year, but declared GE was encountering its toughest business conditions there in 25 years.

The more things change, the more they stay the same.

9 Responses to “China is different now? Really? How?”

  1. Interesting article.
    I was surprised with the “new international express mail rules are making it much more difficult to send samples out of China” part.
    What is going on with intl. express mail?, I didn’t hear anything about that in the past months.

    Regards

  2. UPS/FedEx have both told us that starting July 1, all sample packages sent from China must included the Chinese tariff codes (the Chinese version of the US HTS numbers). For products completely spec’d out and re-orders, this won’t be much of a hassle. But for partial components or unfinished materials codes for samples could be different than codes for finished/packaged goods. Not a huge deal, but certainly something that you have to throw time/people at for every package that leaves now.

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  4. Ironically even though I reread it a number of times I don’t fully understand your 10th topic though overall I enjoyed this post a lot.

  5. David,

    All I said was that the dollar damages from counterfeiting are overstated. I did NOT say that counterfeiting is on the decline.

  6. Charles, Not sure what you don’t understand either. ha ha ha.

    Maybe my practice of reverse translating? I just try to go back and make the sentence they are saying “Chinese” to see if it makes sense. Then I can personally answer the “meaning” that I get from that–it usually works.

    Maybe it was the two unrelated English teacher stories–they just both reminded me of each other, so I though it fit the “things ain’t changing much” motif.

    Or, maybe my English just wasn’t clear–wouldn’t be the first time.

  7. Dan,

    I still disagree. I think that there is TON’s of “small” counterfeiting that goes under-reported and so the dollar amounts are never included in figures. I don’t know how anyone can estimate “projected losses” accurately regardless, but I’d be shocked if the totals are less than what’s been published. Sure, maybe the software and entertainment industry numbers are inflated, but how many millions of other customers do OEM or ODM projects in China each year with small to medium sized factories who then take either part or all of their molds and make their own products and sell them to different markets. Small buyers who are in only a single country or two would never know that their product had been ripped off. I get offered products like this all the time!

  8. Sad, but true story.

    I am surprised a lot that your kids are still trying to understand anyone. My kid is in IGNORE mode the last few years.

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