Silk Road International Blog

I was told in once in a sales course that if you can name the game you don’t have to play it.  It’s just as true in China as it is in the US, although the Chinese version I was told this week “Doing business in China you always play the games or they will eat your weakness” seams a bit more vicious.  Here’s how we played the game with a factory this last week.

First, we’re working on a rather large project that involves more than 10 different suppliers and testing for countries on three different continents.  So of course we had contracts (in Chinese) and NDA’s and had spent a few months getting both preliminary testing and correct samples from everyone.  And of course, prices, timelines, quality standards, et al were all approved and agreed to.  We had worked with suppliers to confirm with their sub suppliers that they’d have enough materials in advance too.

But now that the order is placed, the molds are “more difficult” than they expected and the price is going up—about 200%.  Funny thing is, we were told that after our meeting to confirm the spec’s of the CAD drawings the molds had already been started!

Of course both the facts that we were told something that was not happening and that the price is changing was completely (expected) unacceptable.  So we said no—but how we said no was the key to the game.

We said no and reminded them, politely that we had a contract.  They said that if we didn’t pay they would have to return our money.  So we said, “Fine, we’ll pay you 1000RMB for your time and you give us the rest of the money back.”  Then we stopped talking to them. Within a day they had returned with a much lower price increase and a newfound willingness to complete the project.

About two weeks later, after we had confirmed that the molds were started (we went to see them this time), they called us again.  Again, they wanted more money.  This time the problem was that our products “were not typical” and so the molds were more expensive than previously estimated.  We told them, again, that we had gone over the CAD details and that the contract stated that the mold price was fixed.  They said that we could keep the same contract and just increase the payment per piece to cover the additional mold costs.  Of course we said no.  And they responded with the “if you don’t pay we won’t work with you any more” ultimatum.  We said we were sorry they felt like that and we would compensate them a few thousand RMB for their time and efforts and they could return the product deposit and the balance of the mold costs to us and we’d find someone else.  Then we stopped talking to them and waited.

They called us back a couple days later, said they had a new engineer and some better “skills” and would continue the project for us.

This happened again too, and we resolved it the same way.

This is a very simplified version of what happened.  In real time, there were behind the scenes arguments about what we should do, if they were lying or telling the truth, what other options we had, etc.  And we’ve had this scenario happen to us over and over again over the last 10 years in Asia.

While negotiations are often different in their specifics negotiations like these are often quite similar in general and there are a number of lessons that can apply across the spectrum.

1. Sometimes the request for money is true—and that’s both why you call the bluff and have a back up prepared at the same time.  If you call the bluff and you don’t have a back up, you’re in a worse position then you were with them asking for money as you now have no credible supplier.

For example we molded a new PP product for a client this last year and found that the specifics of the design required a skill set that was not common at many of the factories that typically built this kind of product.  When our chosen supplier called to tell us that the prices would be going up, we expected it—we negotiated the amount but kept them as our primary supplier and paid them to keep the project going.

2. There are times when it is indeed worth it to pay the new costs and keep the same supplier.  This is different than #1—sometimes the request for money is not based on a true increase in costs, but you want/need/like the supplier (or don’t have any other options) and so making a payment is valuable to you.

3. Delays often mean that either they are stealing your money, they can’t do it and won’t tell you or they have price issues they are trying to outsource themselves without telling you.  In the first case above, they couldn’t do what they had contracted for and were trying to not let that cat out of the bag.

4. When the offer to pay more comes, and it will, you can offer to cancel the project and send bank info then wait.  If they are bluffing they price will come down, you can then make a counter offer, wait and repeat.  If the price drops you know it was a ruse to get money.

If he returns your money, he’s telling the truth, they can’t do it.

5. If you pay each time they ask, they will keep asking until you are so far down the line that you can’t back out and you’ll get screwed (a la hostage payments to release goods).

6. Nominate only one person to talk with the factory.  Tell the rest of your staff to NOT talk with them.  Anyone that is not the point can only take calls and say thank you and then goodbye.  Why?  Because, even if staff says something as simple as “I’ll talk with so and so about this,” that means that there is room to negotiate.  Be strict and tell them to respond when asked about The Point person, “We can’t find so and so. Sorry.”

7. Always talk direct with the factory and the boss that can make decisions—remember, they’re playing the same game you are.

8. On the bright side, the request for money is not always a bad thing. Tie some additional quality standards or dates to any new payments to make.  If you didn’t have before, now you can get a legally enforceable Chinese contract signed, for example.

And, if the money shows up you know three things.  1. What the cost of good should be within a small %.  2. What the mold costs really are.  3. The factory is honest—so if you can’t find anyone else you can go back to him and pay more and get it done right.

9. The exact same words do NOT mean the same thing to you as they do to your Chinese counterparts, so be careful and consult with some trusted bilingual staff.  For example, one time the factory told me, “If I have time, I’ll return your money.”  My staff was really offended while I thought it meant that they get to it as soon as they could.  Our Chinese negotiator knew though that this meant that the factory boss was fighting with himself—do it or don’t do it?  Turns out he later came back and negotiated to keep the project going.

10. If you let your supplier “win” the first time they ask for money you will never know if you can trust them or if they will do it again or what your real costs/prices are.

11. No matter what, you can’t make your Chinese counterpart lose face in public (unless you calculate it very carefully).   Once he’s lost face, he’s lost all desire to help you out, maintain civility or even complete the current project.

12. Your Chinese supplier has to retain hope that there is more business coming or there is no reason to keep the current deal going.  If they think that this order is dead they will fight for all they can get now.  You play the game too—Tell them if they want the order next time and you’ll give them 2% more. “Next time I’ll let you make more profit.”  You need to act as if you’re trying to help them as much as you possibly can.

13. Never tell them, before you place the order that you’re going to place the order.  You cut the prices and lead them along, get them to cut the price and then place the order.  If you tell them “I’ll place the PO tomorrow” you know the factory will raise the price tonight.

Tags: Business, China, Culture by David Dayton
1 Comment »

“Sorry it is not the same as the sample.  We hope that you’ll accept it anyway.”

“Your QC is too strict.  No one can expect to be 100%.”

“This is still within tolerance levels.”  (No tolerance levels were ever given.)

All three of these comments were said to me this last week in discussions about active projects in China.  All three of the suppliers then moved to the dreaded show-down level of negotiations: “We won’t make it again.  You can accept this standard or cancel (part of) your order.”

I’m not sure how this type of brinkmanship helps establish long-term relationships or encourages buyer-confidence—which is what every Chinese supplier I’ve every worked with has told me is their goal.  I’m also not sure how anyone would deal with this if they were not in China with the ability to sit down with the factory and have face to face discussions about the issues.

Here’s what we did in each of the three cases.

1. “Please accept it any way.” This was the weakest of the three positions and really more of a pleading than a demand.  The factory knew and admitted that they we wrong and were hopping more than demanding that we would help them out here.  Now of course there are some things that we really can do to help out.  Sometimes the colors aren’t exactly right, sometimes there are other nonessential components that can be less than 100% and the product will be still meet the overall standards demanded.  But sometimes, as in this case, the fact that production was significantly different than the sample components was completely unacceptable.  This is both a rather important component and a costly piece—I understand why they don’t want to do it over again.

So when we didn’t agree with their request and rejected the product they had no other option but to force the issue and they went straight to “Fine, if you won’t cooperate with us, then we won’t do it all.  Either accept the product as is or cancel your order.”

This is a pretty risky position for them to take, considering that the deposit that we paid does not cover the amount of time/money they’ve already invested into getting the order to this point.  They were banking on us caving in on either quality standards or additional monies to redo it (or both!).  They assume that we don’t know what their position is.  They are also assuming that since we’ve placed an order with them we’re committed to them and only them.  They think that now that we’ve paid we’re so involved that a price change, a delay, a change in product standards will result in us freaking out but then eventually agreeing (because, what choice do we have?!).

So we called their bluff.  We do indeed have a second factory option, though we’d rather not use them unless we absolutely have too.  We do have approved samples from this other supplier too.  We just didn’t place the order with them (this time it was price, sometimes it’s quality, sometimes it’s the ability to work/communicate easily).  And, mostly likely, if we do have to move it will mean that we would lose our deposit, but that’s better than getting crappy product rejected by a client who then wouldn’t pay.

So as we assumed, they backed down, and found an excuse for why it was wrong the first time (a manager, whom we never met but was in charge of our project (?!?), has just been fired).  They saved face, we get our product (re)done correctly and the exchange was relatively pleasant and not too confrontation, all things considered.

Of course they ended this round of negotiations with “OK, but next time the price has to go up.”

I love that cooperation in China means that buyers accept less than what they contracted for.  It’s never the other way around, though.  Factories never add more into their production costs then they originally contracted for.  Yes, sometimes you’ll get suppliers to agree to do additional things for you.  But if they do, then you know that one of two things has already happened.  One, they knew the expectations even though it was not spec’d out—remember they do these same things for hundreds of buyers every day.  They know what you want, probably more than you do.  So they included everything that is usually expected in the bid—then they wait for you to bring up each and every item in your spec list.  Or, two, they are adding more to the final price and won’t release your goods until you pay up.

2.  “We didn’t really believe you when you said you were going to be this strict.” Yup, we get this all the time.  I think that only two times in the last decade have I been out “QC’d” by a factory—I can remember specifically each time too.  It almost never happens.  This time, we did exactly what we said we would do (use approved samples for production QC) and told them that we expect them to be able to do the same thing (namely, match the sample standards in production).

When we did QC and in all discussions afterward, we stuck to the same position, “match previously approved sample standards.”  But production was NOT up to snuff and they didn’t want to redo it.  So they went to “we can’t do it any better than this” and “your QC is just too strict.”

Whenever we hear this our questions are always the same, 1. If you can’t meet this standard in production, why did you sign a contract saying you could (and why did you repeatedly tell us you could)?  2. How come you can do it for a sample but not for production (and if it is a different process, why did you bid on one process but plan on using another)?

Unfortunately, the answers are never what we want to hear.  And the bottom line is they either don’t think they can do or just flat out don’t want to do what they’ve committed to.  This of course, is unacceptable for us.  We expect to get what we’ve contracted out for.

This time we invested in some additional in-line QC, helped them to fix the molds (we brought in an engineer friend from another factory).  It will take us at least 2 extra weeks to do this right, but we will do it right and for no more additional cost than our time.

3. “Oh, by the way, our machines/engineers can’t physically meet the requirements that we’ve discussed with you for the last three months and that we agreed to verbally 100 times and that we just signed off on in our contracts.” Yea, I figured as much.  But, really, if you knew that you had predefined tolerances and you knew that we were going to very strict in QC, why didn’t you inform us of your tolerances (and why did you contractually agree to our higher standards)?  To me this is actively dishonest—which is significantly different from just honestly finding out about or having issues later on in production.

There are honest physical limitations that can’t be exceeded, I know this.  I’m thrilled when factories tell us about these limitations too—in fact, we ask for this type of info from each factory before we ever do a project.  But before we pay the deposit we usually are just told “no problem.”  Of course, after we pay the deposit factories usually find “new” limits that apparently didn’t exist before.

For this problem there were two solutions left to us.  One, we change our standards (not really an option).  Two, we switch factories.  We picked #2.  We had a back up, but our back up couldn’t meet the standards either.  So we had to find a third, and eventually a fourth factory before we had what we wanted exactly—price, quality, timing, communications, etc.

This time is didn’t cost us anything.  We got our deposit back and were able to move on.  Sometimes this means you sacrifice your deposit if you leave or your standards if you stay (which is the goal of the supplier in the first place).  This is bait and switch at it’s worst—they know what they can’t do but want the order and are banking on the fact that they can either a) get close enough that you won’t know or will accept it anyway, b) will get far enough down the road that you can’t back out, c) will either get you to agree to lower standards or pay a deposit and then leave without taking product.  Few and far between are the factories that admit that they over estimated their abilities and will admit it and give you your money back—if you do find one of these, keep their number handy.  You can never know enough honest suppliers.

Tags: Business, China by David Dayton
4 Comments »

I’ll be the first one to admit that I just don’t get face.  My wife would certainly confirm that as well.  After I graduated and for my first few years working in Asia, I thought I knew what was up.  But as the years have passed and I’ve learned what the Chinese words I’m saying actually mean to Chinese people, I realize more and more that I have a long way to go before I’m fluent in Chinese Culture.

I’ve heard some people simplify dealing with face into “just be polite and you’ll be fine.”  This is certainly part of it, but has nothing to do with things that you can’t say in Chinese that are perfectly acceptable to say in America.  And how do you politely and professional discuss lies, broken contracts, sub-standard samples, non-disclosed changes in production and unapproved production locations (sub suppliers)? Even if you can manage to speak like Pollyanna you’re going to be nailing someone’s keister to the wall, canceling contracts, changing ship dates (enforcing late penalties) or rejecting thousands of dollars worth of product all in a second language or through a translator.

Face is not just being polite, it’s more than that.  It’s complicated.

We’ve had two factories in the last year try to change out approved product with cheaper un-approved product after we’ve had testing completed.  In both cases the tested product was clearly marked in sealed boxes, wrapped in shrink-wrap, labeled (in Chinese and English) and set aside.  Yet somehow the factory “mistakenly” used part of our product for someone else and then “replaced” what they used with substandard, un-approved inferior product.

When asked about it, there is always an excuse.  And we of course, since we live in the PC 21^st century, we listen to all BS politely.  But even if we could agree that it was an honest mistake, how do we not get notified about a problem this large after 6 months of stringent testing?  How do the sealed boxes get “re-sealed” with our special tape?  How does our signature over the seals get copied?  How does product get replaced just coincidentally the day/night that we pass the tests?

One of the tricks to working in a very face-conscious culture is to let others know that you know their lying without actually saying as much.  You have to show that you know more than they realized without publicly pointing fingers.  Even when you’re in the right, you have to give them a way out and you have to keep your cool.  It’s a VERY tall order.  Sometimes too tall for me to deal with.

I’m reminded of Jim Gaffigan’s comedy routine when he laments that ethnically he’s “nothing.”  He claims that if you’re a Latino and you get mad it’ll be said that you have a “Latin Temper.”  But if you’re white and you get mad then you’re just a “jerk.”  The same is true here.  If you’re Chinese and you say “Chinese people lie” it means you understand your own culture and you’re being street smart.  If you’re a foreigner saying it, you’re a racist bastard (trust me here; personal experience).  If you’re Chinese and you’re angry and threatening to foreigners in China it’s because you’ve been offended and oppressed for 1000 years.  If you’re foreign and you’re angry it’s because you have no culture/class and you’re making yourself and others lose face.

Over the years I’ve gone ballistic more than once when I’ve been straight-out lied too.  Sometimes we plan the fights, sometimes I can keep it cool and sometimes it’s like a 2×4 to the side of the head—out of the blue and almost deadly.

Sometimes people get fired, relationships are damaged beyond repair and all the previous work is lost (worst case scenario).  Most of the time, there is a big fight, a show, a reconciliation and then things move on.

Yet with all these pot-holes in the cultural landscape, what amazes me is that sometimes after what I consider a fight, a single phone call can “solve” it all.  For example, we had a supplier that decided that since we tested his product, we had no choice but to order from him despite the contracts (written by a Chinese lawyer in Chinese) he’d already signed. Other than one cultural unacceptable outburst in which I had a few choice words for him, I calmly laid out all reasons why he couldn’t raise the price (contracts in China and the US, personal agreements).  He responded that he had “invested” a lot of time into the sample process and needed to recoup his costs.  I then outlined the mistakes and problems in the sample process that he was responsible for.  Of course, being the boss, he had no clue what had actually gone on in the trenches during the 6 months of samples—he’s only been shown the bills and been told that we were locked in due to the testing we’d done.  But instead of helping, my phone calls and emails that pointed out all the details about his employee’s mistakes made him lose face.  We went from “best friends” to “we will never do business” with “foreigners like you” in two emails.  But one call and it was back to “we are businessmen, that’s how we talk” and “we’ll just work on the future not the past.”

While everyone is polite now, and we still have the same price as agreed, my professional issues with the processes were never addressed.  Of course, a factory employee has probably been dressed-down, but how do I know that anything has been taken care of?!  And worse case scenario, what if the anger has just been transferred to the employee who will now sabotage things later?  This is where having a savvy and trusted Chinese employee is invaluable.

When dealing with heated and potentially face-losing situations and their aftermath, just remember,  just because you’re paranoid, doesn’t mean they aren’t out to get you.  Sure, fear is irrational but it’s usually based on some actual previous experiences—in my case 10+ years of these kinds of experiences.

Face is public, but retaliation is private and discrete.  Problem solving “western-style” is completely unacceptable in Asia—confrontations, “open” discussions about the merits of various plans, brainstorming, finger pointing for problems and praising individuals for success, email trails with names and dates, etc.  In short, personal accountability in a collective face-conscious society is not something you should expect to encounter.  (I know, I’m a racist bastard for saying this.  Oh, well.)  But hey, now you know and so you can prepare for it.

Tags: Business, China, Culture by David Dayton
12 Comments »

We’ve been involved in the sample and testing processes for 4 different clients and about 18 different SKU’s of product for the last year and a half.  Why has it taken so long to get the testing done? you might ask.  And I’d be glad to tell you, if you did ask, that CPSIA is a huge pain in the butt.  A complete racket from every angle.

First the rules are a complete burden to US businesses.  Well, a burden to everyone except for testing companies, that is.  We have one client that has closed down specifically because of the onerous requirements of CPSIA on their small start up company.  We’ve had at least three others (that I know of) that have changed design and/or target markets and/or components so as get out from under the CPSIA regulations.  The regulations are real nightmare.

Second, the actual testing process is a complete scam too.  You can only use a testing company from a US govt approved list—and of course, those on the list charge more for their certification than companies who are not on the list.  In addition to that, some large box stores also “strongly suggest” that if you want to place product in their stores you have to use a specific testing company.  Why the hell should it make any difference?!  That’s like forcing everyone that sells to you to deliver their goods in Ford trucks even though Chevy, Audi, Toyota, Buick, VW, Honda and BMW (wow, can you tell I live in China?) all have legit truck options too.

Three clients switched testing companies after products failed their first round of tests.  ALL three had the exact same products pass the tests after they switched to a different testing company!!  (And they all switched in and out of the same two testing companies!)  We pulled and sent all the SAME samples for ALL three clients and mailed them ourselves to the two different testing companies so I can personally testify that NOTHING changed in the samples between tests.  But the results were different—radically different.

When testing, the responsibility is on whomever requested the tests to make sure that everything is done correctly—and really, how in the world can you know if it was done correctly or not?!  Unfortunately, the reality is that if there are problems in the methodology, you’ll never be told about it.  We have one client with a personal connection to one of the testing companies US sales office and they were able to get some inside info and some help.  The other two?  Paid for everything twice (or three times).

FYI: If there are problems with the testing methodology you can get the tests redone for free (at least that’s the policy of the two companies that we’ve been working with).  The problem is, unless you get them to admit themselves that there is a mistake/problem, you’ll never know that maybe you could have either passed the tests or you could have your stuff retested again for free.  This is significant when testing for a single item can cost thousands of dollars.

Third, despite what our suppliers told us before we started samples and testing, CPSIA standards and the strictness of the processes that must be followed are not fully understood here in China.  The fact that we’d be testing both before and during each and every production run was seen as unnecessary.  The fact that we would still test production when suppliers already had other clients that they were sure had already passed testing was again not understood.

One Taiwanese/Chinese supplier, who has been exporting to the US in this industry for more than 25 years, was advertising “CPSIA CERTIFIED” at a trade show in the US this year and last.  But when called, not only did his factory/staff not know what CPSIA standards were, they had NEVER testing anything.  He had sold one item to a customer in the past who had told him that he had passed CPSIA tests, and apparently that was enough for him.  Despite the fact that this supplier has hundreds of different products made from different materials and with different processes, he was selling his “certification” as a done deal based on the hearsay from one clinet.  He did have some testing doc’s from the EU, but no CPSIA.  Over 50% of the product that we tested from this supplier failed tests (at two different testing companies).

When called on this fact, his answer was this:

“There are more than 300 colors and patterns available in XX. No one would send all to test CPSIA one by one. You may find tens [suppliers] in China, who can show you 300 certificates of XX? Who will prepare 300 kinds of XX material any time to be tested by CPSIA?”

Stupid me!  Why should I think that if he advertised as being “certified” that he actually was?!  Obviously, no one in their right mind would ever spend that kind of money!  Duh?!

Without exception, the fact that we are actually testing our own products when suppliers could either buy fake certificates of completed tests (ANY test you want: LHAMA, RohS, CPSIA, ASTM, etc., 1,500RMB) or just change the dates on older tests (“It’s all the same materials.”) was completely not understood either.  In fact, the idea that we would be testing and were tying payments to test results made more than one factory very nervous.  We had one back out completely and two others expressed concerns along the lines of, “But we’re not sure if we can control all the materials.  What do we do if they don’t pass the tests?”  Which is precisely the point—you need to “control all the materials.”

For us the processes usually goes something like this.  Contract out with the supplier for the testing sample process—these means that we pay for what is often free, but we get agreements (in Chinese) that we can enforce later when we have to make sure that production matches 100%.  Pull our own samples, send to independent third party testing company, sign new contracts and initiate PO’s with suppliers and then pull, test and repeat.

While suppliers might not understand the necessity of strictly following the testing standards they know how to work the process. Where it gets really frustrating for us is either just before the PO’s are placed or just after testing of actual production samples is completed.  We sign agreements before we start because we know what’s coming—suppliers realize after we’ve spent $10k or more and taken 6 months to test (and re-test) that they now have the upper hand.  Since they are now “legit” they figure that can raise the price as much as they want (and request copies of our testing results) to release any goods.

Usually the new price requests result in a pretty big argument since we’ve already completed contracts in the US months before and contracts in China to ensure against this very thing with the suppliers too. This type of problem is difficult, but usually resolvable; even though getting past these changes and into actual production can sometimes cost a lot (time, money, face, emotion).

What’s not resolvable is when a factory decides that they need to save money (aka: make more profit of this one order) and change either some of the raw materials or change part of the already approved production processes.  If either of these things happens when doing both pre-production and in-line testing the supplier is going to get caught almost every time–but it still happens, often.  Of course, now the entire production run will be rejected.  And if you didn’t have a fight on your hands before, you most likely will now.

If you can get correct production and pass the tests, the question, if you’re not in the factory 24/7, still is: “Am I getting the product that I tested?”  If you can ship to a secure 3^rd party storage facility without paying the balance before the testing is completed, I encourage you to negotiate that—but we’ve never been able to do that.  Usually we seal and sign all boxes to make try to minimize the chances of “replacements” being shipped to us after testing has been completed.

After having gone through this process over the last 18 months with 4 different clients in completely different industries, I would be completely shocked if all the product in the US that is “CPSIA Certified” really is, in fact, certified.  There are just too many tantalizing options for individuals in the process to cut corners and take a huge one-off profit; there are too many people that just don’t understand how important testing standards are; and there are just too many people involved that will NOT be held accountable if, in 5 years, some component is found to not comply with the standards.

Tags: Business, China, Culture by David Dayton
3 Comments »

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.

Tags: Business, China, Culture by David Dayton
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