“Don’t ever be famous person in China”
23/02/2011 UPDATE:
Full text of article that I wrote about Alibaba-Gate for Global Sources can be read here. Excerpts from my article and others’ articles about the issue are here.
And another piece by my friend and partner at CSIC, Mike Bellamy can be seen here and here.
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Some very interesting new stories over the weekend.
First, The firing and investigation of China’s Railway Minister for corruption here and here (subscription required). Fraud, gambling, corruption, contracts for favors, faked safety standards it’s all there. (And how about the money quote from the Japanese engineer?! Paraphase: The Chinese copied our technology, built it with inferior components and are running it (too) faster with fewer safety measures.) The longer I’m in China the more I think that the biggest threat to China is China itself. Sure it’s getting richer and we even saw Chinese shoes and refrigerators during the NBA all-star game this weekend, but until Chinese people learn to care about other Chinese “strangers” it’s never going to get past melamine-in-the-milk like situations and become a great power. The out-pouring of charity during the Sichuan quake was a great leap forward, but how many steps back has China taken since then?
Second, after reading about Alibaba today, I was torn between entitling this post: “Alibaba and the 40 thieves” or “Elvis has left the building.” No doubt a google search for either one will lead you to the same stories. Here are two. More on this below.
At their request, I wrote a piece for another site yesterday and will link to that when it goes up (or just post the entire thing here if they don’t use it).
Third, in case you, like I, still imagined that econ growth was going to be bring democracy to China some time soon, I offer up this gem from the WSJ:
The only sign of protest came from a young Chinese man who was detained by police after laying some jasmine flowers outside the McDonald’s and trying to take a photograph of them on his mobile phone, witnesses said.
The lackluster popular response, however, demonstrates how much harder it would be to organize a sustained protest movement in a country with a well-funded and organized police force, and with the world’s most sophisticated Internet censorship system.
So much for Engagement Theory (of which I have considered myself to be a strong believer for a long time now).
As always you can read the news in China in multiple ways. You can say about the train story, “See! Look how serious China is taking corruption–they even fire people that are high up.” You can read the Alibaba story and say, “How responsible of the CEO. He quit even though the company line is that he had nothing to do with it.” And you can read the protest story and say, “See how happy the Chinese are? Even when foreign trouble makes try to stir the pot, nothing really happens.”
Or you can read with the more jaded I’ve-been-in-Asia-for-20-years perspective. When I read some additional articles I find a few things that made me question the reality of the harmonious society.
1. The debt of the railway ministry is more than the govt can afford. To have a leader rack up this much debt and put other leaders and entire sections of the economy in trouble at the same time as the new trains are not being used as much as expected (too expensive) and you have more than enough excuse to sack the official and change the previously announced (grandiose) plans to more than double the total length of high-speed rails in China. Look for less, not more, railworks from China next year.
2. The “resignation” of the Alibaba CEO for 1100 fraudulent tractions the value of which was less than $1200 each is as ridiculous as Alibaba’s claim that they stand for values and “honesty online.” Anyone that has worked with Alibaba knows a couple of things: 1. Unless you visit the factory yourself, you have no idea with whom you are really dealing with–there is no way to know outside of Alibaba’s own “gold supplier” status since you can’t get complete supplier info without paying for it (or ordering). 2. If you are a supplier, you can BUY gold status as well as “factory” status even if you are just a trading company. 3. The membership fees payed by the fraudulent companies were worth more than 3 times what the fraud receipts totaled. So we can assume a) both Alibaba and others are making a ton of money off of these types of companies, b) it’s a safe bet that it’s happening a lot more than these 1100 transactions, c) the employee that caught these “problems” is probably scared for this life right about now.
Full Disclosure–A few years back I was asked by Alibaba to spend 6 hours a week to be a third party moderator in an online buyer forum on Alibaba. They asked me to work with buyers that had had problems with suppliers but were still interested in getting the problems resolved and completing their orders (as opposed to filing a formal complaint with Alibaba and/or suing the supplier). I got online once and was immediately overwhelmed with complaints from buyers that had been ripped off in some way. Not only did they all want some sort of immediate resolution but they assumed that I was part of Alibaba and expected me to both commit to getting their money back but also to censure the supplier in some way. I had no power to give them what they wanted, most of the buyers were furious at the lack of help from Alibaba (and me) and quickly removed my name from the list of moderators. That was 4 years ago and I still get emails from people that want my help with their Alibaba-introduced supplier problems.
3. The lack of protesters for this specific event doesn’t negate the reality that 2010 saw a huge increase in urban protests all across China for the same reasons called for at this time, namely: rapidly increasing food prices, inflated housing costs, under-employment for college grads and corruption by government officials and the nuvo-riche. Again, China raised the number of college spots available (good) but not the number of jobs for college grads (bad). Throw in the world recession and you’ve got millions of underemployed smart people. I’m very afraid that this won’t end well.
Talking about all of these stories with some Chinese friends over lunch on Monday elicited this observation: “Don’t ever be famous person in China.” Hearty agreement from the other Chinese present included these pearls: Money makes you a target. Success makes others jealous. Being famous can hurt your family and business.