Silk Road International Blog

SRI’s 2007 Year-End Blog

First, Happy New Year!

I guess that I should have called this the SRI 2008 New Year Blog, but I started it on the 31st and then went out to celebrate and didn’t get back to it until now. Anyway, whatever it’s called, I hope that 2008 in China is notable for the Olympics and not for pollution, a crash in the stock market, fakes or more recalls.

Second, welcome to our new blog. Enjoy; and say thanks to Dan at CLB if you like it. There are some changes to come, but it’s good to start the new year with the new page and a new post–all at the same time.

Now, for the new or uninitiated.

The goal of the SRI blog is to share experiences, success and frustrations of a small, independently owned US business working with small to medium sized factories in China and SEA. There are a lot of blogs and books on how big business works here–but not much for the SME. Enter SRI.

What makes me think that I can share anything of value? Well, I’ve been living and working in Thailand, Taiwan, Hong Kong and China for almost all of the past 18 years. I’ve cut my teeth in Chinese SME’s and managed projects ranging from a couple thousand to a couple hundred thousand USD in multiple countries and in multiple languages.

More importantly we’ve had great response from readers, other bloggers and some other major outlets. 6 original articles from SRI were published both online and in print form by two different international organizations. More than 20 of this last year’s blogs were also featured on other blogs. I was able to read and review more than 30 books on China as well.

2008 will be more of the same—more book reviews. More published papers (some already requested and others in the works). More thoughts, insights and experiences from working with SME’s in China. Next year will also have more updates from Southeast Asia as we do more projects in and invest more time and money into Thailand, Vietnam and maybe a couple other places too. I’ll keep you posted.

I appreciate your patronage and hope to keep you interested and informed during the next year. I hope that you enjoy the blog and look forward to your feedback.

Thanks,

DD

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I went to Macao for the NBA’ China Games 2007 last night. The game featured the Orlando Magic and the China All-Star Team from the CBA. Most of the Chinese team were the same guys that play for the Chinese National Team, minus Yao and Yi. They also added 3 foreign players from the CBA (China Basketball Association).

Basically, China was completely outclassed. Not surprisingly, since they don’t do very well against the US even when they have Yao and Yi. But there were some bright spots for them despite being behind by more than 20 points for most of the game.

First, I don’t know why Wang Zhi Zhi isn’t playing in the NBA. He was certainly better than the three (Outlaw, Foyle and Gortat) back up centers that the Magic played. He outplayed Howard in the first quarter and was the leading scorer for the Chinese. He is a smart player with skills at least as good as most of the back up centers in the NBA now.

Second, after getting burned three times in a row buy the faster Chinese guards the Magic’s Arroyo took the game into his own hands and completely schooled the younger, smaller Chinese guards. By the way, Arroyo and Wang were easily the best players on the floor. How is this a bright spot for the Chinese team? Well, they need to believe that they have good guards that are fast and can shoot—but just don’t yet have the attitude to compete for the full game. The guards themselves need to believe this—they obviously were scared or embarrassed or both after Arroyo took over. But that’s something they can learn with more international experience. Also, Arroyo has torched just about everyone, including Team USA, in the past. The fact that the Chinese guards got into his head at all means that he wasn’t ready for how good they could play. Backhanded to be sure, but a complement nonetheless.

Finally, the Chinese can shoot better than and are faster than the Magic. So why didn’t they run and gun?! Why did they continually try to post up their three big foreigners against the obviously better Orlando big men? This was absolutely the coach’s fault. When the Chinese were running and shooting outside they lead. When they slowed down and decided that they could play NBA style power ball they went from up 9 to down 10 in about 5 minutes. Shooting guard Sun shot and dunked over the Magic 2 guards just about every time the ball didn’t get dropped down low.

Now a word about the fans and venue. It’s very odd for me, as an American to go to a game and have the crowd cheer for both teams as well as the time-out acts. The fans loved the experience more than the game as many of them had no clue what was going on on the floor. To be sure there were a lot of Chinese NBA junkies there but it appeared to me that most of the people there were just folks with money rather than a basketball Jones.

But the Venetian was awful!. The security was a joke, the crowd control non-existent, the food bad and the line horrendously long. If you got there early you were required to check your camera and bag. I couldn’t do it. There was no security at the camera check desk, just an open desk in the main hall that was soon packed waist deep in expensive cameras—I’m sure that many were stolen—no way they couldn’t have been; I personally reached over and took my own bag after I had second thoughts about checking it. If you got there late you had to wait in huge lines. The security were so overwhelmed by game time that bags, cameras and people without tickets were all getting into the arena. There were at least 5 people in my little section that had cameras with telephoto lenses and scores of others around the arena. People were posing for photos with mascots and the only security I encountered was a guy telling us that we could have cups but not bottles of pop in the arena even though they were both for sale at the top of the stairs!

The game was fun despite the venue and the score. I got some great pics too!

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I don’t usually don’t find cross-cultural nuggets on ESPN, but I couldn’t pass up this one. Let me set the stage for you: Sunday night Yao totally destroyed Shaq and then both were interviewed after the game. The game itself is a big story here in China, but I think the comments of the two men are even more interesting than the game. The full story is here.

From the article:

“Shaquille O’Neal was dominated, but he wasn’t impressed. Yao Ming won his match-up with O’Neal, finishing with 34 points and 14 rebounds Sunday night to lead the Houston Rockets to their fourth straight victory, 94-72 over the Miami Heat.

“He’s pretty much the same, just big, 7-6,” O’Neal said. “He’s just doing what he’s supposed to do.”

Yao scored 20 points in the second half, when Houston outscored Miami by 25 points.
“My only chance against Shaq is to keep him on the run,” Yao said. “Shaq is much stronger and bigger than me. My only chance on beating him is to keep running and running against him. Every time I score on him I was happy like a kid, like a kid getting candy on Halloween because it’s really too hard to score on him, too hard. He’s just great.”

I have to say that sometimes I’m embarrassed that those of us from the US culture find it so hard to complement the achievements of others, especially “foreigners.” It’s almost like success is a zero-sum game—other people’s victories translate into our losses.

As the world becomes more and more international this is going to be a position that is harder and harder to defend. Rabid “made in the USA” supporters are going to find their base increasingly eroding as manufacturing of almost all goods shifts to international locations—as it should, in my opinion. There is nothing “wrong” with manufacturing jobs, but the US economy is much more an information economy than say, China, Mexico, Vietnam, India, etc. Why would we want to pay more to have the goods manufactured in the US? I understand the personal impact of job (even industry) loss and have, like most, experienced it first hand. But temporally saving a few thousand domestic manufacturing jobs that will eventually be lost due to overwhelming international economic forces flies in the face of reality and personal growth and economics.

Like Shaq, who’s pride can’t allow him to give credit to Yao, there is often a mentality in the US that does not agree with the changing realities of international economy—whether it be sports or economy or military strength. The world, it is a changing and we need to be educated/experienced enough to deal with it rationally.

By the way, if you don’t think that China is going to dominate the 2008 Olympics you’ve got another thing coming!

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Following up on yesterday’s blog regarding US immigration policy and the so called China Threat, I found this article in the NYT very apropos. Click here.

For 4.1 million college graduates in China this year there are approximately 1.5 million jobs. Most Chinese college graduates are from technical or vocational colleges with only a small percentage coming from the social sciences.

This seems to me to be a tailor maid opportunity for the US. With the US economy needing an increasing number of technical workers and Chinese wage expectations below US minimum wage couldn’t the US allow a greater number of these students into the US for work experience? This is a great opportunity for the US to fulfill its own needs and strike a great public relations coup too—when was the last time that the US was seen as a benevolent benefactor?

Another uniquely disturbing situation is the well published gender in balance in China rising generations. As Chinese are limited to one child, or stiff penalties for subsequent births, the number of males in China greatly outnumber females. Now, I’d be the first to admit that college grads would be more “marriageable” than their lesser educated counterparts. I don’t know what % of these men are or will soon be college graduates, but it has to be at least a small percentage, right? If we combined the numbers of under and unemployed Chinese graduates with the estimated 30 million Chinese bachelors that have not opportunities to marry (due to Chinese desire for male offspring) the US could foster the creation of generations of Chinese American citizens with close personal ties to the US.

While this latter appendix may be more amusing pondering than realistic option, the premise is realistic—The US has multiple opportunities to improve its relationship with China. Many options could improve both economies and the personal ties that bind the two nations.

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I’ve actually been told by other Americans that I’m “helping the enemy” by living and working in China. Are Americans really that insecure or really that stupid?

I’m by no means in love with China, but by the same token, China is no threat. In my opinion, the biggest threats facing America today are our collective lack of international education, our debt and our entitlement mentality. North Korea, maybe. But not China.

I’m convinced that increased engagement is the best international policy that the US can take. International exposure and competition can’t hurt the US and will only increase our ability to continue to project influence into the foreseeable future. In the light, China is an opportunity that Americans can either profit from now or pay for later.

News reports regularly confirm that the most competitive US companies are doing what the US government will not—participate in Chinese growth. While Congressmen continue to argue over Taiwan (do you really think that we step into a cross straights fight at this point?), currency devaluations, security and piracy, other US companies are plowing ahead and solving problems or eliminating conflicts on their own—and making billions in the process. These companies are making it financially painful for either the Chinese or US governments to have any type of military conflict.

Whatever your thoughts about Wal-Mart’s labor history are their growth in China is another example of the codependence and financial sense of the US/China relationship. Wal-Mart will have 80 stores in China by the end of the year and would be the China’s 5th largest trading partner if it was a country. Other visible US companies that are “aiding and abiding” include Visa, McDonald’s, Coca Cola, Pepsi Co. (KFC, Pepsi, Pizza Hut), Starbucks, Buick—these are just the ones you can see everywhere, everyday in China. And AmCham says that the growth of American business in China will double this year—smart money! Next year I expect to add scores of US and foreign banks to this “visible” companies list.

The fact is that China is a great opportunity for anyone in the world, but especially the US. US and Western European educated professionals can, according to one recent news report, have their pick of jobs while 65% of graduates from Chinese universities will be un or under employed this year alone. The ascension of China to WTO standards will only bring more opportunities for US companies who are already WTO compliant by nature of US business/governmental standards.

But the US government and educational systems continue to shackle the US and its future generations. Why do we still only get Spanish, French and German offered as foreign languages in high school? WWII ended 60 years ago—get over Western Europe already! US business is innovative and adaptable; that’s what’s made it us the biggest economy in the history of the world. So why is the pre-collegiate education system so archaic? Why is it that most US students can’t find China on the map but Chinese students can name the US president, and typically read some English by Junior High?

Not only are we generally under internationally educated but the restrictive visa policy of the US makes further contact, professional exchange and even legal immigration more difficult than necessary. The US government is bad for US businesses—unless you are your senator’s pet pork project. So much for free trade.

To those who think China is a growing threat to the US (and can actually find China on a map), I just have a couple of questions. First, how does a strong Chinese economy hurt the US? It doesn’t—rich Chinese people buy US production and travel to the US. More Chinese businesses use more Western developed tech and buy more Western materials/goods. US companies wish the rest of the world would grow as fast as the China market.

Second, is a balance of military power more or less likely to force a confrontation? If history, even recent history, is a forecast of the future, we are more likely to head back to the Middle East as the loan super power than the Eastern Asia in a “balanced” world. And the dirty secret of cold wars is they can be financial and technological bonanzas for participating economies. If the European Union was growing at 10% a year would be scared because Italy and Germany and some former Soviet republics are members? Besides, what country, the US included, doesn’t want to be more “powerful” and have more influence?

China is growing fast but it is not a physical or financial threat to the US today. Nor will it be in the coming decade. But, China is a threat to people in the US that are scared of change, are scared of competition or are undereducated. The US needs to get over it’s self.

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