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We’ve been extremely busy both before and after the CNY break.  As we get back into factories to do QC and project management some factories are more helpful than others scheduling visits. I’m sure there are a hundred versions of “we’re not ready for you just yet.”  These are just a few of the responses that we’ve heard from factories this last week or so.

“There really isn’t anything new to see this week.”

“Don’t worry, we’re doing it just like you asked/last time.”

“Maybe you should come next week to see finished product.”

“All of our staff have not returned from holiday yet.”

Regardless of the words used, my experience tells me that there are really only a few reasons that you can’t go into a factory to see your product for a scheduled QC visit (or any other reason):

1. They are not as far along as they should be.

2. They are not actually making the product.

3. They don’t want you to see how some part of the process is done.

4. They don’t want you to reject product or change processes.

5. They are busy and have schedule legitimate appointments with others on your requested day.

6. They are closed (no power?), have repairs/inspections/other issues that would not allow you to come see product on your requested day.

Maybe there are others.  But the point really is this: either there is product for you to see or they are booked and there will be product to see within 24 hours of your requested date.  Yes you should be understanding of legitimate conflicts, but you’re paying for it.   Unless they’ve contracted different standards with you before the order was started you should be able to see it anytime you want (within reason, not 3AM Sunday morning “anytime you want”).

In defense of busy suppliers, maybe there really isn’t anything different/new from last time.  But the point of QC isn’t “what’s new” as much as it is a confirmation that everything is still the same (quality) level as last time it was checked.  IP (In Process) QC already assumes that product isn’t finished anyway, right?  So just keep pressing to get into the factory as often as you want.

Side Note: IPQC does NOT mean one day of final QC on the same day as container loading. I’m constantly reminding buyers that QC is not for just finished goods—it’s also for processes.  What good is QC on finished product if you can’t reject it or they won’t replace it or you’re too late to have it re-done?

All but the scheduling conflict should make you worry.  Not freak out, but certainly worry and get back into the factory as soon as possible for new dates.

Specifically, if the supplier is late and not telling you you’re either going to get bad product (rush job), someone’s going to pay for airfreight, or both.  It’s much harder for you to reject things if you’re up against a deadline or when production is completed and factories know this.  They may just be busy but don’t discount the reality of them delaying your order because of “better” (more profit) projects or the very common belief that you can’t do much about it.

If they are outsourcing your project and not telling you then you may have a major problem on your hands.  The big question is “can you do QC at the other factory or not?”  If the answer is anything less than “Yes! Anytime you want” then you certainly are going to have issues.  One of the dirty little secret of Chinese business is not that projects are outsourced but that they are outsourced to “friends” (sub suppliers) that would be offended if a QC was sent in by the original factory.  We’ve negotiated special deals with factories so that we can send in our own people for other projects just so that the factory doesn’t offend their friends/sub suppliers.

Often times there are real issues that the factory can’t control like laborers not returning on time, rolling blackouts, accidents, etc.  But in the very least you need to get new schedules.  And it should be the factory that offers solutions to make up for lost time (since you’ve signed a contract and probably have ship dates that you have to meet). You can be flexible, but outside of “acts of god” you can reasonably expect the factory to be responsible to meet dates or make other arrangements for you.

To eliminate as much of this rigmarole, be prepared to roll with the punches, plan extra time into your schedule before you order and of course, spend as much time as possible in the factory.

This is at best an (educated) guess but at worse a lie–Apple did not admit this.  From the article:

The exact location of the factories has not been identified. Apple has factories which supply parts in Taiwan, Singapore, Thailand, the U.S., the Czech Republic, Malaysia and the Philippines, but most of its products are assembled in China.

Why does this article lead with China? Why not the US?  Or Taiwan or Thailand?  Not sexy enough?  Not “threatening enough?  Just another example of media bias that I talk about below.

Now we may find out that later on that this is all true.  Wouldn’t surprise me.  And since most of their products are made in China, odds are it is true.  But we don’t know for sure yet–so how can you lead with that?!  Yes, the article points out specifically that in CHINA there were cases of underpayment and chemical poisonings.  But we do NOT know if China used underage workers at this point.  Of course ‘using kids’ sounds really evil, and we need a new villain so that’s the lead in.

___________________________________________

Everyone that writes has a direction, agenda or angle that they are writing to prove.  My goal for this blog,for example, is threefold.  In 2004 when I started it, the goal was to share with family, friends and clients the work that I do over here.  Since then I’ve added more content directed towards people who ask questions, clients who have similar situations to other clients, and a general interest in recording what I experience in China on behalf of my clientele.  Of course, the third reason now is more exposure for my business.

I’m fine with blogs being average—Lord knows that that’s an accurate description of my witting skills.  The professional media though, should be held to a higher standard.  But from my perspective, on China they barely meet much of any standard at all.

When I’m in the office I always download articles to read later when I offline at a factory or traveling.  Here are a few articles that I read in the last month and stitched together as my commentary on Western Media covering China.  A couple of things before I get to the articles.

First, I think that the next Century is going to be characterized by an ever increasing Chinese presence in the world.  Get used to China being involved in just about everything.  It’s just too big not too.

Second, I think that the most important and currently one of the least well-managed international relationship on the planet is China and the US.  If they overtly tried too, could more people have done more stupid things over the course of the last 3 US presidents to damage this relationship?  Highly unlikely.  And just because the Americans are stupid doesn’t mean that the Chinese are not blameless in all this either.

Third, I do NOT think that China is taking over the planet nor do I think that the 21^st century is going to exclusively be the Chinese Century.  I’m constantly frustrated by media that claim that China is the next superpower/super villain.  They are big, they are growing, the change here is amazing.  But despite all that and the disaster that is the current US economy, China is still multiple decades of double digit growth behind the US—and their growth will slow down and their population will get smaller too.  Also, they do not have the ability to project power like the US does (but they are indeed getting regionally much much stronger).

Finally, I’m amazed at how many people in the US are “scared” of China for one reason or another.  Job loss, communism, human rights, pollution, censorship, holding our debt, etc. all add up to seem like a huge menacing red scare in the East—especially if you have no other source of information about China (which most people do not).  China is very very different, but it shouldn’t be scary.

First the good, then the bad, then the ugly.

Article #1.  Uncle Sam vs. The Dragon, Daniel W. Drezner.

This is a great piece that puts the relationship in perspective.  It rings the right warning bells for the US without being alarmist or exaggerating.  China is an incredible adventure, a poor country, an amazing story, a difficult nut to crack.  Everything that is politically difficult to manage has a counter part in business—it’s not like there are two completely different cultures that never meet at work in Chinese cities.  Remember, at least 30% of the Chinese economy is SOE’s and the bureaucracy in China is filled with engineers, technocrats and officials that are driven by monetary goals.

Article #2 The China Fix, James McGregor

James McGregor knows China.

1. The local people.

The pressures on Chinese President Hu Jintao and Premier Wen Jiabao are overwhelming. They are white-knuckling their way through their final two years in office, focusing on 8% or higher growth and crushing any dissent that could derail it. The Chinese people are generally pretty happy, but the Party leadership is terrified of their outsized expectations. People under age 40, the progeny of the one-child policy, didn’t live through Maoist poverty and upheaval. They are pampered, impatient and demanding. They consider exponential growth as a basic benchmark of life, and access to information to be a civil right. China’s rich are powerful opponents of further reform and opening. They made money the local way and are determined to block foreign competition so this can continue.

2. The foreigners

The foreign business community in China has deep respect and affection for the Chinese people and their hard-earned success. But more than a few foreign business leaders are asking themselves if they have been bamboozled by the system. Multinationals have been solid citizens in China, handing over heaps of capital, technology, training, source code, best practices and proprietary products to joint-venture partners they were forced into bed with. They have funded schools, orphanages, disaster reconstruction, overseas scholarships and all manner of poverty-alleviation programs. But now that the China market matters more to them, it appears that China couldn’t care less. Increasingly difficult China-market access is the immediate worry. But many are looking ahead and losing sleep over expectations that their onetime partners are morphing into predators — and that their own technology and know-how will be coming back at them globally in the form of cut-price products from subsidized state-owned behemoths.

3. On the ground situation.

At the same time, I have also seldom seen the Chinese government and business community more unsettled and uncertain. Theirs is an arrogance borne of insecurity. The global financial chaos and China’s rocketing global status threw off the meticulous national development schedules carefully crafted by the risk-averse and surprise-allergic engineers who run the Party.

4. The sad players in the int’l game.

So both Chinese and non-Chinese have legitimate challenges and understandable phobias.  …with the U.S. as the key negotiator for the West. It won’t be easy. China and the U.S. are past masters at blaming their domestic policy failings on outsiders. Finger-pointing politicians and chest-beating nationalists in the two nations will make rational discussion nearly impossible.

Yet it is time for leaders on both sides of the Pacific to lift their heads above overwhelming domestic concerns and fix China’s deteriorating relationship with foreign business and the developed world before things get out of control. One thing’s certain: they won’t find the answers through Google.

But I think that his conclusion is a bit off.  He said:

“Google is just a proxy in this intensifying dispute. It’s really about rebalancing the economic and political dynamic between China and the developed world…”

I disagree—it is that big of a deal.

Google is a global company but this isn’t a proxy for an international power struggle, It’s an argument that happens over and over every day in China—it just happens that Google gets a bit more press then most.  It’s the oft repeated story of a foreign company that has finally had enough of abusive policies in China.

If you think that this is about the US/Chinese balance of power, then I suggest that you talk with the French dairy products company, Dannon.

The world balance of power isn’t shifting as much as fear mongers in the US and the party in power in China would like everyone to believe.  With the US economy in tatters and China holding so much of the debt, China has decided that they can safely stretch their muscles a bit and the US won’t do much about it right now.  But is this really what the future of global politics is trending towards for the next decade?  How many decades has the decline of the US and the rise of China (or Japan before that) been predicted?  Would China be as cavalier if the US was not involved in two wars right now?  Or if Obama (less international experience than Ms. I-can-see-Russia-from-my-house) wasn’t president?  None of these situations are permanent—neither is China’s run of incredible (and exaggerated) growth.

People who watch China, myself included, often confuse news about China with news of global priority.   Google, if it does leave China changes what?  If they stay and force some sort of compromise, who else can match their level of influence?  Wal-Mart?  Microsoft?  Anyone else?  No one else will benefit from their ultimate decision (continued in article #3….).

Article #3.  The Chinese Internet Century, Adam Segal

The reality in China is that very few people within China care.  Most foreigners outside of China don’t care either.  This news affect a few hundred thousand of us who are obsessed with China and think, that everyone else should be too.

The fact is that the majority of Chinese simply don’t care, giving the government even less incentive to change its ways. Technologically savvy Chinese “netizens” — if that term even has meaning in a place like China — find ways to fan qiang (scale the “Great Firewall”), but most users, like their counterparts elsewhere, are more interested in entertainment gossip, pirated MP3s, and updates from their friends than missives from Falun Gong or the latest report from Human Rights Watch. U.S. State Department spending on proxy servers or technologies that hide users’ identities temporarily allow some Chinese greater access to information online, but won’t substantially change the underlying dynamics.

While the hacking of the accounts of individual human rights activists has garnered the most public attention, the primary objective of the cyberattack on Google was probably intellectual property theft. The Chinese leadership has a strategic view of technology development, and the cybertheft of corporate secrets is married to an industrial policy designed to promote “indigenous innovation” (zhizhu chuangxin). Through local content requirements, tax benefits, government procurement, and the development of competing technology standards for 3G mobile phones, Wi-Fi, and other products, China consistently seeks to free itself from dependence on foreign technology, particularly from the United States and Japan. In a few cases, China has backed down in the face of concerted pressure from more technologically advanced trading partners, but old policies were quietly replaced with new ones designed to forcibly transfer technology to Chinese firms. Cyberespionage is this industrial policy taken to its logical extreme, subsidies in the form of intellectual property theft.

If 1.3 billion Chinese don’t care, and except for sinophiles no one in the West even takes notice, then how is this a new global showdown of earth-shattering importance?  It’s not.  (I wrote this last month—heard anything lately about Google in China?  Nope. Me neither.)

Article #4 With suspicious statistics, China obscures economy, David M. Dickson.

I’ve mentioned accounting with Chinese characteristics a number of times.  Without exaggerating I can tell you that any numbers you read out of China are faked to some degree or another—Enron style faking.  There is no standard, no regulation and no reason not too.

For example, when you buy anything in China you’re supposed to get a tax receipt from the vendor.  But every store/restaurant/service provider I’ve ever shopped at will offer you a 5-7% discount if you don’t take the receipt—so they don’t have to report the sale and pay the tax (that’s why all the tax receipts are part of a lottery to entice consumers to force vendors to hand over the receipts).  Similar, but much larger discount deals are offered for production runs of product, imported components, export duties, etc.

I have a couple of friends that do finance work for a MNC’s with offices here in China—they tell the same stories—accounting in China is a complete mess.   Sure the accountants themselves are well trained and can crunch numbers as competently as anyone else.  But finding “real” numbers to crunch is the problem.  And anyone who has ever dealt with SOE’s, 30% or more of China’s economy, knows that accounting is political at best and sometimes nonexistent.  Mike Bellamy of Passagemaker tells of buying components for below cost because the SOE just needed to keep people working (and they purposefully made defects to have product to fix too!).

Article #5. China mulls setting up military base in Pakistan, Saibal Dasgupta.

Since this is from India about a Chinese threat to India, I’m not sure how accurate the reading of the “signals” really is.  But with the stance that China has taken in the last 5 years as they move up in influence in the world and with all the investment into Pakistan, I don’t discount it either.

Like I’ve said before, as they themselves see it, it’s not really in China’s best interests to be a “good neighbor.”  It’s in their best interests to quell unrest at home, promote domestic economic growth at almost all costs and not overtly aggravate their neighbors.

China’s foreign policy can be, I think described best as plausible deniability.  Publicly send SOE’s in instead of direct govt action, don’t support anything that is even slightly partisan in the UN, talk about growth, equality and “fair” play the “victim” and/or “still developing country” cards ad nauseam, and then quietly do what ever they want.

The down side of this new base being true, is of course, that this will eliminate at least ½ of all the content of China’s international speeches (“we are not interested in influencing other countries’ domestic affairs”).  How will they be able to complain about the expansionist US military now that they too are building overseas bases?

Warning.  These last two articles I totally hated. Read very very carefully—American Edition

Article #6.   China scientists lead world in research growth, Clive Cookson

What’s wrong with this picture? (Graph is from the article linked above)

Did you find the “mistake” or did you just read over it the first time like I did?  The US is fourth behind China, Brazil and India, right?  Wrong—the US has almost 40% more articles published annually than all of the BRIC countries combined.

Sure, the title (China scientists lead world in research growth) is accurate but it’s either designed to be completely misleading or is very poorly explained.  This is like saying “Hangnails are the most painful injury.” (Of course this is only for people with no other injuries whatsoever).

What you don’t get from reading the article, only looking at the (awful) graph is that even with a 64-fold increase, and even with more students, China’s total is still actually less than 1/3 of what the US produces annually.  Less than one third!  China probably has more college students than the US has people!  Don’t buy the argument that China is taking over the globe just yet.

And of that huge increase—at least 9% is co-authored by US scholars.  And the study only counts US scholars and doesn’t count all the co-authors from other countries.  Remember, you should read 90% of statistics with a large grain of salt.

To the details, anyone that’s worked in academia in China knows that the idea of “mixed quality” is a major understatement.  Two personal anecdotal examples.

First, to graduate from college in Shenzhen, my wife had to write an English thesis—10 pages of original research and analysis.  Any topic.  Her thesis adviser told her to copy text from the internet on a page that isn’t very popular and that way he “wouldn’t have to read it” since he would know that it was already “correct.”

Second, when I was teaching at a college in Sichuan (’95) I was asked to review the theses of a number of grad students (20+) that were hoping to go on to foreign schools or better domestic universities for post graduate work.  There wasn’t one of them that had done any original work.  Not one.  They had copied and pasted paragraph after paragraph with minimal original transitional sentences linking them all together—this was obvious to detect since the first and last sentence of every paragraph were the only ones with any grammar problems.  When I brought this up to the Dean of the English department, he looked at me with a shocked expression and said something like: “Well, of course.  Their English isn’t good enough to do all that work on their own.  Besides they don’t have time with all their other class work.”  Mixed quality indeed.

This article gives no context or analysis: The article claims that “if [China] continues on its trajectory it will be the largest producer of scientific knowledge by 2020.”  That’s a HUGE “if.”  The “logical” extension of the article that that China is on its way to dominating the world’s research centers.  But this can’t be true for multiple reasons which are never discussed.  First, They will not have this much growth opportunity in the future (remember, they were at ground 0 in 1980).  Second, they will not average 10% GDP growth for the next 30 years, not even this year (or last year).  Third, they can’t continue to push this many students into grad school.  Impossible because of physical limitations now and the fact that the one child policy will limit the number of available students soon too.

The thing about most journalists who didn’t study China and are just writing about them now is that it’s like other than some fuzzy memory about the summer of ’89 they’ve only just heard of China for the first time with the Olympics last year.  “Wow, did you know China has 1.3+ billion people?!”  My question to the author of this article and others is this: Shouldn’t China be producing the most grad students and research in the world anyway?  They have the most colleges the most students, the most grad students, the most engineers, etc., etc., etc.  But they don’t have the most peer review or original research so they won’t pass the US in research or innovation until they can solve this structural problem.

If you don’t know much about China you may be asking: “Yea, but 64-fold increase is awesome, why the amazing growth?”  Good question.  I’m glad you asked since the “Science Editor” for the FT didn’t (and should be asking and answering this question in the article).  Here’s some historical context.  The story measures growth from ’81 to ’08.  Prior to ’81 what was happening in China academically?  Absolutely NOTHING!  You could probably count the number of peer-reviewed papers from Chinese scholars from ’66 to ’81 on one hand—really, no joke.  All schools were closed until ’76 because of the cultural revolution.  ’81 is just about the first time in a decade in when China could actually have students that finished some college and were now graduate students and doing “peer-reviewed” papers at all.

Because of how the info is present, there are a couple of complete lies within the article.

1. “China far outperformed every other nation, with a 64-fold increase in peer-reviewed scientific papers since 1981, with particular strength in chemistry and materials science.”  It should read “China far outperformed every other nation IN THE INDEX.”

2. ““China is out on its own, far ahead of the pack,” said James Wilsdon, science policy director at the Royal Society in London.”  it should read: “China is out on its own, far ahead of the OTHER BRIC COUNTRIES.”  Sure this is a quote, but isn’t there some responsibility to clarify statements that are misleading or out of context?

Many other parts are just totally misleading:

While the US is measured in the graph it is NOT included in the research itself.   But that fact is NEVER mentioned in the article.  Of course readers are going to assume, from the visual presentation, that the US in included in the research and in the totals talked about in the article—why wouldn’t they?  Since the US is purposefully included in the graph why didn’t the editor purposefully note that the US is not included in the research?

So, what’s the point of this?  Major mistake?  I would hope not.  So then what’s the agenda behind a horrible article and misleading graph like this?  I don’t know what else it could be other than the promotion of China as a threat.  Odd, since the FT is usually pretty even handed, I think.

Now don’t get me wrong.  I’m trilled that academia is gaining ground again in China.  My first job in China was teaching English at a college in Chongqing in ’95.  I think that more education is one of the very best things that could happen to China.

What I hate is the media distorting news for some unspecified agenda.  This is just the most recent example of crap-reporting about China.  As China grows and exerts more and more influence in the world you’ll see more and more reporting like this.  Especially if the US economy continues to stagnate and China continues to grow—many in the US need a villain to blame.  (It couldn’t be our own fault that our economy is paralyzed with debt.  Nah.).

And I love the FT.  I read it and link to it all the time.  But this article should never have been published like this.

Article #7.   Global Weirding is Here, Thomas L. Friedman

I love my wife and my inlaws (honest), but my love for them hasn’t led me to believe that everything China does is glorious and wonderful.  If anything it’s taught me that I don’t know nearly as much about China as I thought I did.  Unfortunately, I can’t say the same for Thomas Friedman.  Love of China has certainly blinded him to a number of realities over here.

In his latest diatribe on the how our planet is, through America’s faults, getting more “weird” than it otherwise would be without us evil (Western) humans, he ends with this gem:

“China, of course, understands that [renewable energy is “going to be the next great global industry”], which is why it is investing heavily in clean-tech, efficiency and high-speed rail. It sees the future trends and is betting on them. Indeed, I suspect China is quietly laughing at us right now.”

I agree that China is laughing at us, but it’s over our debt, not our energy sector.  Besides, four desperately needed high-speed train lines (and no other evidence) doesn’t really show that China “gets” anything but logistics (and maybe capitalism too).

A few example of China not getting it.

How about the fact that they are the #1 builder of dirty coal plants on the planet?  China builds more new coal power plants every year than the total number of coal plants in operation the US.

How about the over building of every major commercial city center causing massive warming in more metro-areas than in any other country?

What about the fact that they now have more autos than any other country?  (So it’s evil for the US to have so many, but for China it’s a sign of progress?)

Or that fact that air pollution from China is so bad that they have 16 of the top 20 dirtiest cities on the planet or that air pollution from China can be measured in the US?  Do they really get it?

SIDE NOTE: It kills me that the environmentalists defense of climategate is 1. It’ climate change, not global warming so the cold is part of it too (So global cooling in the 70’s was what?).  2. It’s overall climate not local weather that is the issue (so what about localized studies that “proved” #1?).  3. “Yes, we lied, but it’s better to be safe than sorry, right?”  Safe from what?  You lied!  You made up the threat!  Friedman’s spin on this is: We fudged a bit but it’s going to be the next big thing—so let’s make as much money from it as we can!  Isn’t that the problem in the first place?!  Capitalism is destroying the planet, isn’t it?  So how is more capitalism (from the resource desperate Communist Chinese, no less) going to save the planet?  What a joke.

The reality is that China is investing into “clean tech, efficiency and high speed-rail” for at least five major reasons completely ignored by Friedman.

1. One billion plus people.  The logistics of China are such that much of what is done elsewhere is just not logistically possible here.  High speed trains are cheaper than airfare and so service more people for less per person.  This is a simple case of Friedman trying to fit a logistical problem into a complex liberal theory to prove a completely unrelated point.  Just follow the money and the power: If normal people don’t have access to cheap transportation, they protest against those that are in power.

2. Defensive realities.  China is wholly dependent on foreign oil.  More so than the US—because they have few natural resources, a larger % of their population dependent on out-of date transportation, heating oil and ever increasing social pressures to back up political rhetoric with actual physical improvements (like more cars).   But, unlike the US who can project military power, China cannot.  One of the major military fears of the Chinese (and the reason for renewed presence in Pakistan—ports, roads, pipelines and prioritized attempts at a military presence in East Asia) is the very real fear that in a conflict they will be cut off from the oil that they import.  Oil which is necessary to run both the country and the military.  China isn’t laughing at the US for not going green, they are scared to death that if push came to shove that due to the power of the US military they couldn’t get enough of the oil that they too are addicted to.

The reality of “green” energy is that it is, for all intents and purposes, it doesn’t exist yet—not feasible green energy, anyway.  And not enough to replace oil.  Not now, not this next decade, not in the foreseeable future.  China’s not betting wisely on future trends, they are in panic mode when it comes to energy.

3. China is fast becoming a garbage dump.  Literally.   I love some of the things about living here, but it’s dirty and it’s not getting better.  Air pollution, toxic spills, low levels of environmental rule enforcement, increasing numbers of automobiles, more coal plants, more flights, a rapidly increasing standard of living for 500 million Chinese, the governments goal of urbanizing 80% of the population—all of these things contribute to a increasingly dirty country.  China is going green out of necessity.  Again, follow the power and money—when things get too dirty, normal people protest. And in many cities in China it’s already “too bad.”  You can’t have people complain when your national slogan is “harmonious society.”

4. Inefficiency.  Despite the fact that everything is made here, it’s not made well here—meaning, China wastes more of the energy (imported oil) needed to produce one unit of product than almost any other industrialized country.  China is going to get poor (and old) before the majority of their population get rich—and that’s the real motivation for any and all changes.

5. Money.  If Freidman is right about anything it’s that there will certainly be (artificially created) demand for “green” energy in the future—socialist governments across the planet will see to that.  And where there is money and opportunity, you will find Chinese entrepreneurs.  They may be late to the capitalist table, but they are fast learner and they know how to make money!

Friedman is biased and agenda-driven and has painted himself into a corner with past positions on (now discredited) anthropogenic global warming and the omniscience of Chinese group-think.

Article #8.  China extends position as worlds’ leading food producer, Reuters.

The comments say it all—I’m not the only one tired of the media looking for someone to blame.

The client, of course, is pointing out that the samples are much better looking than production and the sample from the factory is the standard he agreed to before he paid.  The factory boss turns to me for support in his argument and says: “Mr. Dayton has been doing QC in Asia for many years, he knows that we can’t get it perfect, right?”

Now, this was the first time that we’d ever worked with this specific factory otherwise this manager would have known that this was a bad move on his part.  I complete agree with the client—but, since I’m next in line (to be screwed?) I’m a little bit more diplomatic.   But only a little. “Yes, there are often differences in production and samples. BUT since you have both a sample and a contract, I believe that you should be able to get exactly what you contracted for since the factory already told you they could do it.”

The manager who started out smiling was not pleased with my final answer.  But, I was there to have the exact same conversation with him about our products.  I wasn’t going to lie to this other guy (who was obviously lost as to what to do next) just to be nice to a factory that I was already displeased with.  I’m all for being nice, but I’m not much on compromise when it comes to my clients’ money.

The other client ended up getting more than what he was currently getting, but not as much as he wanted or thought he had contracted for.  He got (almost) what he expected because of three things he did–he had a contract (and brought it with him);  he and the factory both signed multiple sets of samples (and he brought them with him); AND HE SHOWED UP AT THE FACTORY.  Not doing anyone of these three things means he never gets what he wants.

I got a cheap bowl of Pho and a very silent ride back to my hotel.  But I also got what I wanted/contracted for and stayed though two more days of production to guarantee it.  I’ll take the crappy lunches, pay for my own taxies and endure the silent treatment if that’s the price of getting what I’ve ordered.  It’s not what I want nor is it fun/comfortable.  But it’s certainly worth it.

On day two of my visit the manager, obviously still bugged, asked me why I didn’t help him out a bit more with the other client.  I told them that I thought the client was right and that I’ve worked with too many factories that make golden samples to have any empathy for “differences” in production vs sample quality.

He then told me that he has this same argument with just about every foreign client that comes to the factory (but not the local ones or the ones that don’t come to the factory, hmmm….)  And then he launched into the same oratory that he used the day before with the other client.  I listened politely, waited until he was finished and then, again, disagreed 100%.

Side Note: Listening to disarm. I have found that if you listen to, without interrupting, most people, but Asians in particular, and allow them to finish their arguments completely they are just blown away if, in the end, you don’t agree with them.  It’s like they think that if they can just finish the sentence uninterrupted they win.  I think that they expect you to interrupt each and every time you disagree and if you don’t interrupt, then you certainly must agree with all of what they’ve just said.  When I first figured this out, I admit, I tried it a few times just for shock value.  Now, I’ve seen it so many times over so many years that I realize that it’s more than just individual quirks.  Yes, I’m stereotyping (“I’m like my mother, I stereotype. It’s faster.“).  But I’m not saying Asians are dumb/bad/ignorant/purple/whatever.  Relax.  I’m just pointing out that expectations in communications are different and it’s to your advantage if you know those differences.  Remember, if you can name the game, you don’t have to play it.

I told him that Westerners feel lied to if they get production pieces that are noticeable different (lower quality) then the samples they used for contract standards.  Let’s be honest, in the West it’s bait and switch.  I said that doing business like this is the best way to ruin relationships quickly. I tried to share with him the idea that he’s got to under-promise and over deliver, and right now he’s doing the opposite.  Foreigners want the sample to be the basic standard—something that checks off all the boxes but in no way should be better than production.  It’s the standard, not the exception.

Of course, he told me the same thing that every other factory tells me when we have the “golden sample” argument.  Factories in Asia all face so much competition that they make perfect samples to get orders all the while knowing that production will never be that good.  They just want to get the deposit and start the order assuming that they can work out the discrepancies in quality later; which they often can (or they can hide it if they know you’re not coming to do QC).

My take away was this: the factory isn’t stupid.  They would rather get deposits and have this quality argument over and over than take a chance at losing orders with “almost” perfect samples and never argue–money is more important peace.  And I can’t argue with this logic; when a good percentage of the clients either don’t do QC, don’t call them on the changes or don’t even show up at all, factories have really lost nothing by making golden samples. In fact they’re making money!

One more reason to always do QC.

For me, this is the single most exasperating thing about working in China (and Vietnam and Thailand and Taiwan and India too).   Bad quality we can monitor and keep to a minimum.  Ditto late deliveries.  Changes in the prices and terms after we sign contracts really sucks, but the changes usually are not killing deals.  But mistakes, even (or especially?) factory-acknowledged errors that cost time and money (and my face) are the thing that always makes me mad.

“Nothing can be done perfectly” I’m always told (after we’ve approved the sample, paid the deposit and committed to the client).  What does that even mean?!  OK, so about 99% perfect?  No?  96%?  Who, if it’s not me (the guy holding the bag), gets to choose what is and is not perfect?  Which part of “yes, we can do that” does not cover the current imperfection?

Now, I’m not unreasonable, I understand that mistakes happen.  Anyone that reads this blog knows about my (poor) typing skills—everyone has something they don’t do well.  That’s just part of life.  Typo’s are my fault and I’ll refund your subscription if they are too much for you to deal with.  I want that same offer from my factories.  Or at least an offer to pay for the fixes!

Only once or twice has that ever happened though.  So, more often than not, we have to find ways to solve the problems or go crazy being angry all the time.

Usually when we find problems, we’re also told something like, “It’s just really hard to do what you want” or “We’ve never done this before” or “What you’re asking for is impossible.”  I’ve found that one of the best ways to resolve production issues is to ask these questions back to whomever is telling you no: “Is it impossible or just difficult?”  And: “Is it impossible or have you just never done it before?”  Impossible means you need to find a new factory.  “Difficult or “never before” simply means we need to try something new.  Most production issues are NOT impossible to resolve.  But because China is so task specific (a product of both hierarchy and a focus on labor) people are usually tied to very a very limited number of repetitive duties.  They are paid to NOT make any changes or deviate from SOP so they do not solve problems.

For example, this week we had a hat manufacture that had (handmade) perfect samples but was now having issues getting some layering correct in mass production.  They even went so far as to tell my QC that what we were asking for was “impossible.”

I went to the factory, they were politely embarrassed but agreed to build a hat with me. We walked through every one of the production steps with one of the hats, from cutting materials to final ironing and packaging.

Now I’m not a seamstress (seamster?) so I had lots of stupid questions about why they were doing it the way they were.  They had answers for most of the questions and a couple times they were honest and just said “that’s just how we’ve always done it.”  After we produced the same (wrong) result together (“See?  This is just what we can do!”) I asked them to switch up a couple of the steps in the process and see what would happen.  They wouldn’t do it.  I finally told them I’d pay for whatever happens—the wasted sample, the material, extra bills.  Just switch up the steps, please.  They did, amidst a bunch of grumblings and comments like, “It just isn’t done this way” and “I don’t think that our machines will be able to do this” and “You’re not a professional” and “We’ve been making hats for 15 years and never done this before.”

What do you know?  It worked!  They were as surprised as I was and we solved the problem at no extra cost to me (which was the whole point).  This wasn’t me solving the problem as much as it was just being in the factory and taking responsibility for trying out potential solutions, one of which happened to work out.

I was talking with my friend, and 25-year China vet, Bernie, about why this lack of “just try it” attitude exists.  He mentioned that it may have something to do with that fact that there is no one who is responsible for the mistakes it may cause or the fact that it’s really no one’s specific responsibility to try new things either.  So no one does.  It also opens the door to future “adjustments” and “changes” and gives the client the expectation that they are welcome to come in and change process and try other things out in the future.

I agree and would add that there is no incentive to try new things as that means new processes and potentially new and currently unknown problems and/or costs.   And if you get paid by the piece, why would you do anything but the same thing as fast as you possible can over and over—even if it’s wrong (as long as your step in the process is done correctly)?!  In fact, if you’re paid by the piece and you know something is wrong, it’s better for you to not say anything and then have twice as much work (income opportunity) to do later.

Side Note: Did you ever see those management clips where the guy in the US factory pushes “the button” and stops the whole line?  The boss comes down, they talk about the solution that this line worker thought up and all of a sudden the planets line up, world peace happens spontaneously and everyone is happy.  You know the one I’m talking about, right?  Well the Chinese have never see it.  In China the guy would be fired, the loses from a delay in the line would be taken out of his salary–his family would probably be billed too, he’d be locked out of his dorm so they could sell his stuff, and if he had the guts to tell a manager that they were doing it wrong (or there was a better way) he’d be laughed at, cursed at.  If foreigners were there at the time, they would be apologized to profusely and promises would be made that something like that would never happen again.

For whatever reason, it takes pressure from someone with influence (paying client), a manager (responsible party), a technician (the person running the machine) and then an agreement that the change can be repeated (without extra costs or time or money) in the production process to make even a simple change and have it last.

I’m serious about getting all these people involved.  If you don’t have a technician, you’re not getting the full machine capabilities—this person is really important and they don’t usually have any financial stake in the production process; they’re getting paid no matter what.  They will say things that the salesman or the manager won’t and they know production details that that admin folks do not.  Pay attention to these people, buy line workers or QC or engineers drinks gets and you’ll get access to privileged info and you’ll have a “friend” on the inside for future problems.

And no matter how many friends you have on the line, you’ll never be able to do anything without having a manager sign off on the process.  What I see more often than not is that this admin guy may also have to be at least the co-author of the solution too.  Not always a bad thing since he’s then invested in making it work too.

Knowing the process isn’t as important as knowing the final result/testing standards/quality spec’s and being here to make sure that you get what you want.  I can’t know everything about every product that we manufacture.  There are just too many variations.  And I can’t do anything without a ton of other people signing off on the processes, prices, standards, timelines and contracts.  So, as in all business, I trust a limited number of people in each part of the production process.  Each has specific value added that I can’t do without.

First, I trust the factory that they know what they are doing—even if I don’t agree with the way they are doing it.  Hopefully I’ve done enough homework that this trust isn’t misplaced.  But I’m also not arrogant enough that I don’t back up my own decision; we always have a second factory (or even third) that can do what we want if Option A fails.  This also means that I’ve verified a supplier’s previous products, clients and as much history as I can find; so it’s not a blind trust.

Let’s be very clear about the trust here.  I trust factories to know how to make product and buy supplies.  I do not trust them to value my business interests over their own.  So I also trust in very very detailed bi-lingual contracts and instructions and lots of on-site QC.

Further, I’ve learned that while there are specific steps and standards that can be translated from the West to China, there are many things that are done completely differently here but still achieve the same end result—which, again, is the goal.  Don’t confuse the importance of the process with the importance of ending up in the right place.  I know, sometimes you can’t skip steps.  Some times process IS the end result.  But many times, what we think is absolutely necessary isn’t even an option in China.

Second, my staff—an honest QC, a detail orient project manager and an aggressing negotiator are as good as gold in China.  If you have people that you can trust to look out for you first, you can get just about whatever you want in China (or anywhere).  It is worth just about any amount of money to have quality, committed staff.

Third, my clients—they are often banking their lives (second mortgages, loans, etc) on their products and they have a HUGE store of information/knowledge about what is and isn’t acceptable and usually a list of things that have already failed.  They almost always know more than I do about their own product/industry than I do—and they want to share and be involved.  People already in the industry are a gold mine of information, especially if they have a vested interest in your success.

Chinese factories have issues with letting others in or letting people know that there is a problem.  For some reason there is a deeply ingrained fear of mistakes being made public.  I’ve said over that if you want to solve the problems (or even know about them) you have to be here and you have to ask the right questions.  If you’re not here to ask, you won’t even know there is a problem until crappy (already paid for) product shows up in your warehouse.  But even if you are here, you’ve got to get to the root of the problem before you can solve it.

Interesting article.  Convoluted point.  My ten cents:

1. He’s right that Chinese brands aren’t famous in the West yet. But while ubiquitous elsewhere in the 3rd world, they are not “famous” in other countries either. I do a lot of business in Vietnam and Thailand–Chinese brands of soap, motorcycles, noodles and other household items are everywhere–are they famous/have they built a brand or are they the lowest entry points into the market and so everyone carries them? Ditto Li Ning shoes–famous or cheap options with aging/unfamiliar reps (Shaq–failed at his own shoe line, JKid, Battie).  Maggie Rauch points out that they are not really going global at all, just trying to look like it for the Chinese Market (see #4 below).

2. Taking market share and “building a brand” are not synonymous. If a Chinese brands takes (the bottom?) 5% of Coke’s high-end tea market, I’m willing to bet, they’ll let them have it. When a Chinese brand makes a serious play at their connection with McD’s or the NBA OUTSIDE of China you know that have both branding success and market share (and deep pockets).

3a. The Chinese market is not the same as the West, true. That they don’t understand this is the knock against Western brands that fail going into China.  But like every other article on this topic, the pro-Chinese side here fails to mention that this is also the very same reason that Chinese brands don’t do well in the West.

3b. While HK and each city and class in the mainland are unique and must be understood individually, for some reason we’re supposed to believe that expensive tea and Li Ning and other Chinese brands (that no one has heard of) are getting the entire “West” right all at the same time? And the first time they try it too! LA and Lisbon are the same? Paris and Chicago? Hell, LA and Irvine are not the same.

4. China is culturally (and internetly, yea I just made that word up) isolated. Not because they aren’t connect or don’t ‘get out’ but because they are so big at home that there is often limited motivation to move into the unknown when there are still so many opportunities in the known. Ok, and they have repressive investment, currency, internet, and travel laws too.

5. Read Elite China or Luxury China for details on what the Chinese consumer really want. Wait 25 more years before anyone produces The Chinese version of Good to Great (even the examples of the past ten years like Hai’er have since stumbled) or the coffee table book: Famous Chinese Brands.

6. This NYT article from 5 years ago says the same thing as the BW article–China brands are going big soon. Look out world! Totally different brands mentioned than Shaun’s article–what does that say about the longevity/global position of Chinese Brands?

7a. BW list of 20 Top Chinese Brands–where’s Huawei and Hai’er? I guess since they are not “technically” registered Chinese companies they don’t count?  What does “Top” mean?  Certainly not famous or global.

7b. Of the 20 brands in the BW list less than 1/2 are private–only Moutai and Lenovo in the top 10 are. And if these are the best, then branding efforts are pretty pathetic. (Anecdotal evidence: I’ve lived here for 10 years and speak Chinese and haven’t even heard of some of them IN China, let alone out of China.)  I think that this is really a list of actually profitable state owned companies with a couple of semi-private companies thrown in just for (Wall) street cred.

8. The best book to read about this would be Capitalism with Chinese Characteristics–it points out specifically (written by a mainland Chinese scholar at Harvard) that NONE, not a single one, of the big Chinese success stories would even exist without Hong Kong. Most of the companies are not really Chinese and even when they are, they leave as quickly as possible to protect themselves from the Chinese govt.

Finally, (or maybe this should have been first) if people can’t name the Chinese brands off the top of their heads then how can Chinese companies be meeting any objective definition of “building a brand?!”

One thing that most people should take from the Google mess is this: no matter how big you are, no matter how much money you throw at China, no matter how many other countries you’ve been successful in already, no matter if you hire local or foreign or both, the bottom line is that China is still a different beast. My friend from Wal-Mart and I have sat around and told the same stories about working with factories in China. Exact same problems, just different dollar amounts.  Your size doesn’t matter when dealing with China–no matter who you are.  The pool is just so big here that most foreign companies are nothing here.

China ranks first in the world in exports, first in car sales, third in GDP, first in people, first in internet users and the list goes on and on (and will continue to grow–better get used to it).  But it ranks 140 out of 183 in terms of freedom. Even if you don’t like this particular survey or the rankings (certainly a very hawkish source), the fact is that China is wildly different than what most westerners are used to.  It’s much more like the ASEAN countries—just lots bigger (than all of them put together).

And that’s the real trouble.  If you’re coming from Vietnam to China, or vise versa, you’ve probably got some experience that crosses over very well.  If you’re coming from Perth or Detroit or Liverpool, probably no so much.

The fact that HK, Singapore, Japan, Macao, Taiwan, South Korea, Malaysia and Thailand are ahead of China in the rankings is not all that surprising—they all had a 30 year head start and more international exposure.  But that Cambodia and Lao are also ahead and openly repressive and corrupt Vietnam is about the same says clearly that economic development and engagement do NOT mean more freedom—business or otherwise.

Imagethief, in his discussion on Google last week, highlights the fact that there are specifically predetermined ways companies are expected to work with China.  Though speaking specifically to public communications the analysis is applicable to other areas of work in China as well.

Google has taken the China corporate communications playbook, wrapped it in oily rags, doused it in gasoline and dropped a lit match on it. In China, foreign companies tend to be deferential to the authorities to the point of obsequiousness, in a way that you would almost certainly never encounter in the United States or Europe. Scan any foreign company’s China press releases and count the number of times you see the phrase, “commitment to China”. Demonstrating “alignment with the Chinese government’s agenda” is an accepted tenet of corporate positioning and corporate social responsibility work in China. This is testament to the degree of direct power that the Chinese authorities wield over the fortunes of foreign businesses in China. Even when foreign companies are in dispute with the Chinese government they tend to offer criticism obliquely as long as they have a business stake or operations in the country. Note, for example, the scrupulous diplomacy of Rio Tinto’s communications concerning the detention of its employees last summer, a far more serious situation than anything Google has encountered (although also with far more money at stake).

To me the key part for small business owners here is that there is a play book at all–and the people spending big dollars all know it.  This is something that small companies typically learn the hard way, over years of (painful) involvement on the ground.

Further to that end is an article from the Guardian UK.  The Chinese internet (and country in general), it says, is more like its own intranet than a hub in the global community.  Despite how “small” the world is today, China is still very much an island unto itself.  Like the (legitimate) criticisms aimed at the US for being too culturally insulated (physically isolated), China is the same, only with more people, less overall education, fewer if any emigrants and a more restrictive government.

I’ve been saying this for years—China is unique.  Business is business, I know.  But the context within which business is conducted, personal relationships and communications here are all different from anything most have ever worked with in the West before.

But “different” doesn’t mean threat, although it may be threatening.  In the larger picture, there are generally two theories bantered about by China watchers, the China threat and the engagement philosophy.  James Mann’s book discusses why both have failed and if there is a third path.

Anyone you talk to in China thinks that the rest of the world (especially many politicians the US and the popular media) sees China as a threat.  I agree that this is the most popular approach for many in the US (media)—they need a villain in their myopic, simplistic, sound-bite driven world of ratings.  “China is good” doesn’t have nearly the impact as “Red Hoard” or “Chicoms” does.

But even in the midst of this Google mess, I don’t think that China is an inherent threat.   I do believe that China, for purely short-term domestic political goals thinks that the rest of the world is a threat to China (or at least wants the Chinese populace to think that the rest of the world see China as a threat).  Because the Chinese Government is scared (of the rest of the world or of losing domestic power) it then acts like a threat—a threat because it’s actions are based on an aggressive fearful position that it’s being attacked.

China thinks that the rest of the world acts just like they do—the specifics in the response to Google and the attacks on the Whitehouse, for example, are exactly what is going on here.  China assumes that Govt communication issues/companies in the US are tied to and part of the US national interests and that the corporations actions are directed by the govt—just like they are in China.  Of course they see everyone else acting like they act.  We all do this. (And just because they are paranoid doesn’t mean they aren’t right.)

But like the strict law defense that we’ve heard from China over the years (“Our laws are more strict than those in the US!”  Yea, but you have no enforcement, so the laws are often meaningless.), just because China is honestly acting in their own best interest does not mean that they are not, at the same time and by those very same actions, threatening others.  Just because you’re not an overt threat does not mean that you are not threatening.

For precisely this reason, China is not a global partner or good neighbor.  Could they be?  Yes.  Will they?  I doubt it; only because they’ve determined that it’s not in their best interests to do so.

Side Note: And for those who are offended at this, this blog isn’t about “yea, well the US sucks too!”  I really don’t care what you think about the US.  This is about the question “will China act like the super power that it wants to be” (and claims internally that it already is).  You want to complain about the US?  Go get in line somewhere else.

And I’m convinced that foreigners are trying to use some kind of reverse psychology on China–convince them that by our mass stupidity they really are the best in the world.  These, for example, are defenses of China’s GFW: “We have a very controlling govt in Australia too.”  “I guess that the people of China really do want to decide their own direction with the internet.”  So by this same logic, if we have human rights violations in Australia, then it’s OK to have them in China too?  How about other crimes?  How about just crappy quality?  That OK too?  And which part of “the people of China” do you think are “deciding” anything about “their” internet or anything else for that matter?  Sorry.  I’m finished.

This Google mess bring to light specifically how “business” can very quickly become nationalized and politicized.  Just like Rio Tinto last year.  What is considered “State’s interests” is up to anyone’s guess.  Like so much of the content that is blocked on the Chinese internet or the people that are stopped at the border crossings—it’s random, political, emotional and event (rather than policy) driven.

If you don’t think that this affects you, Mr-I’m-here-doing-business-on-a-tourist-visa, then you just wait for the combination of the tightening economy and this year’s census.

One of the best lines that I’ve ever read about doing business is form Jame McGregor’s One Billion Customers: “Most business people come to China with way too much trust.”

I strongly suggest that you read James Mann’s book, The China Fantasy.  Excerpts from my review:

“But if you wonder why economic change in China hasn’t lead to political change or why no one seems to mind that every US president has taken a hard line on China to get elected but then reversed course in office then you should read James Mann’s The China Fantasy: Why Capitalism will not bring Democracy to China.”

“This is not a rah-rah China book and it’s not a China disaster book either—it’s a middle ground, a third path.  Mann says that it’s far more likely for China to continue to grow economically and remain repressive politically than any other option.  The question is: can businesspeople and politicians and consumers in the west live with that.”

1. Order your 2Q products in the 4Q of the previous year NOT in the 1Q, just weeks before you need it.

Everyone knows that nothing gets done in the States the last week of each year.  From about Dec 23^rd to Jan 2^nd you can just count on 50% of every office staff being out on holiday or taking their accumulated sick days or just not working (because everyone else they need to talk with is on vacation).

So why is it hard to understand that China has the same event, just at a different time each year?  Sure CNY is on the lunar calendar so it changes every year.  But it’s still in same quarter, always in January or February, so it’s not that different.  And besides, Easter is lunar; the dates for President’s Day, Mother’s Day, Memorial Day, Father’s Day, Labor Day, Columbus Day and Thanksgiving change every year too, but we don’t forget those.  If your secretary was Jewish, you wouldn’t forget that she’s taking off for Chanukah (every year).  So if your supplier is Chinese, how is CNY a surprise every year?

Remember, all of China (the whole 1.5 billion people-population) goes on vacation for at least 10 days if not more; and all at the same time.  So Chinese factories also place their 2Q orders early too.  January is easily the busiest month of the year for everyone in China—and so if you’re late placing your order, you’re out of luck.

Just assume that if you want anything before April of any given year, you’d better order it before Thanksgiving.  Mark your 2010 calendars now—I’ll wait.

2. Working with China is like working with a contractor–it’s always going to be late and over budget.

If you’ve ever worked with a contractor on any building or remodeling project you know that while the end result can be very satisfying, the process is usually hell.  Delays, over billing, living through a mess in your house (or office); it’s just not pleasant until it’s completely finished.  Working in China is much more like working with a contractor than working with a box store (which is the attitude that I feel like some people come to China with).

China is not Wal-Mart or Home Depot or Target or Costco.  You can’t just walk in and buy 5 or 500,000 pcs in the same amount of time.  If you order 5,000 pcs you’re not going to be able to get 500,000 pcs made in the same amount of time.  Even if the contract says the lead-time is 45 days, that does NOT mean that you’ll have product in your warehouse with in 7 weeks.  If you get a bid on 350,000 pcs you’re not going to buy 70,000 pcs for the same price.  Just because they’ve “done it before” doesn’t mean that your production run will not have issues.  I caution everyone to assume that production will certainly have issues—the question is just how many issues you’re going to have.  You’ll probably have at least 2-3 pull your hair out scream at the wall issues.  Know it going in, and when it happens, you’re ready.  And if it doesn’t, well….it never doesn’t.

China is a contractor not a retailer.  The price and supply of materials is not set even though you’ve got a contract with a fixed price.  The time to create a new product (or even do re-orders) is dependant on many things that are not confirmed when you sign the contract (holidays, raw materials, mistakes, power outages, people problems, mistakes, transportation issues and weather, mistakes).  I honestly don’t think that we’ve ever done an order for any product in the last ten years where at least one things hasn’t changed that affected the final date or price. (And yes, that’s what I get paid to do: eat the new costs and fix the problems for people that are not here themselves.)

This is not an excuse for inefficient labor or poor quality production or mistakes or flat out lies.  But it is a realistic view of working here.  You have to know that just because “you can do it back home” doesn’t mean that you can have it done here—and let’s be honest, you can’t do it back home (for the same price) or you’d be doing it there now and you wouldn’t be here in China in the first place, right?

With the cheaper prices comes more need for management and QC.  Remember when you go factory direct you are cutting out a lot of fat in the pricing but you’re also cutting out a lot of legitimate services too.

3. Just because the rules are the same doesn’t mean that business is the same.  AKA: Driving in the US vs China, part 748.

When driving in the US you assume that everyone is going to follow the rules and you’re bugged at the one guy that doesn’t.  China is the opposite—no one follows the rules and they are all just fine with that.  In fact they usually only get angry at the foreigner that does follow the rules (and is driving different from everyone else).

My experience, both driving and doing business in China, is that for the most part, foreigners are usually pissed off at just about everyone here; simply because no one follows the (assumed) rules.  The real problem though, is with the foreigners whose expectations are based on experiences from driving and doing business in the West.  Those experiences then color our expectations of how things are supposed to work over here.  Processes here are completely different, even if the rules are the technically the same, so we spend an inordinate amount of time being frustrated.

Again, this is not an excuse for illegal dealings or getting cut off by some jerk that doesn’t know where he’s going.  But foreigners need to understand that while the West is mostly black and white with very little gray, China is mostly gray with very little black and white.  And the black and white that there is, at best sporadically enforced, if at all.

Part of the reason that the prices are so good here is precisely because enforcement of the laws is so lax. (There.  I said it.  The secret is out.)  Another part of the reason that you can get done whatever you want here is because if there is money in it someone will figure out a way to get it done.  You can do that (entrepreneurialism) when you don’t have the US nanny state breathing down your neck.

4. Just because it’s your project doesn’t mean that you’re the best one to negotiate the prices or solve the problems (obviously, or you wouldn’t be having problems in the first place).

Sometime you need to play a different role (and that other role is NOT backseat driver either).  When you contract with a factory and something goes so wrong that you need to bring in someone else to fix the problem, you are no longer in charge of the negotiations. Maybe you think that you are. Maybe you’re still paying for all of it.  But the fact that you couldn’t fix it on your own tells everyone involve that you’re no longer the Chief.

Problem is, you’re probably part of the original problem and the factory knows that if they can talk with you then they don’t to deal with the negotiator/problem solver that your hired (who is going to be infinitely more strict and consistent since they probably only get paid in full if the problems are all solved and the product is delivered).

Take for example a project we’re working on with a factory in Zhongshan now.  The client brought us in mid project because he needed help with, in his words, “getting the factory to do what they said.”  But the original client is still answering all the emails from the factory; there really is no place for us as the project manager/problem resolver in the chain of command.

After a few days of negotiations and QC with the factory, the factory emailed the client and complained that we were too strict and they couldn’t do what we were asking (which is only what the client originally contracted for).  So client, scared that he won’t get his order, caves in and changes the standards.  Now he’s paying the factory more for less and he’s paying us to do nothing too—and we’ve told him so.

Sometimes you need to let someone else fix things for you.  It’s not a knock on you personally, it’s just China.  You may be great at managing projects and negotiating contracts back home.  But you’re not in Kansas any more and you need to understand that while you may know product X better than anyone else in China, you probably don’t know China better than someone that’s been working here for 20 years.

5. China is huge.

If you’re a geography major or you’re here already, this is a no brainer.  But if you’ve never been here before, I’m warning you.  It’s bigger than you think.  And more crowded too.

“I’m going to China” is like saying “I’m going to the US.”  Ok…where?  New York? Chicago?  Detroit?  Miami?  Houston?  Denver?  LA?  San Francisco?  China has 10 cities the size of LA or New York or larger.  Chances are, where you’re going or where your factory is located is not convenient to anything else you’ll be doing in China.  Similarly the chance of getting a positive response to the question “Have you ever heard of factory x?” is literally like finding a needle in a haystack.  There are millions of factories in China and the likelihood of finding the exact one is slim to none.  Pick the biggest tradeshow that you’ve ever been to and I’ll bet I can find two in Guandong Province alone that are bigger (both in terms of attendees and exhibitors).

Side Note: May favorite question.  “Oh you’re from the US, do you know Joe in New York?”  And the foreign counterpart: “Oh you work in China, do you know this American guy in X city?” I don’t know how many times I’ve been asked these questions—obviously the geography classes on both sides of the Pacific are lacking somewhat.

For example, we’re managing a shipment for a client now that includes product from 9 different factories in 5 different provinces.  This is more than usual, but not unique.  We figured out that we average 6 factories and 2 provinces per order in 2009.   The client in this case had already “found” 3 suppliers at a show and online.  We never could reach 2 of the 3 factories the client “found” but we found the same (or better and/or cheaper) product at completely different factories.

The point?  You’re not going to fly into the Canton fair and come away with everything that you need for your company in one city let alone one factory—so plan accordingly.  The corollary is that if you’re only looking in one area of the country, your missing out on opportunities elsewhere.

6. Everything is relative.

Just as I was about to post this, I got a reality check.  I was eating lunch and started talking with a lady who was living and doing work in India.  She was in Guangzhou on vacation and couldn’t believe how nice it was.  “No noise, so clean, everyone follows the (traffic) rules, it’s so easy to get around.  You can actually walk on the streets and use the public transportation.”  I was blown away.

Coming from the States to China, I often find the exact same things she complemented as nightmarish.  But coming from India, for her China is an absolute dream vacation!

Pollyanna?  Maybe a bit, but as I look out at the large square in the middle of downtown, blue skies and nicely dressed shoppers, I have to agree.  Somewhat.  The infrastructure here is really pretty good (even compared to the US), it’s just that there is more than a billion more people using it.  The pollution is bad, but it’s bad in LA, Mexico city, Bangkok and India too.

China is what you make of it.  It’s a great opportunity for me.  Frustrating at times, yes.  But on balance a good experience.  Will I spend the rest of my life here?  Not a chance.  But other than maybe, Phuket, I can’t think of anywhere else that I’d like to spend the next 50 years either.

Good Luck!

We’ve got the PO signed, the deposit paid and what happens?  Factory tells us: “We don’t think that we can do this order.  We’re really busy now.”  This, of course, was the response to the payment of the deposit.  No indications prior to the placing of the order that there would be anything problems.  We’ve talked EVERY day in the two weeks preceding the actual transfer of funds and every conversation was great.  “Of course we can meet these dates.” “Of course we’ll work with you QC.”  “Of course we’ll meet all the QC standards (you’ll never be as strict as our Japanese clients.)”

So we’ve spent the last week just trying to get them to keep the commitments that they agreed too (signed and chopped) in the contract.  Every single line in the contract was review with them before they signed it.  Every point was agreed to.  Dates were confirmed.  Qtty’s and time frames agreed to.

And then they got the money and EVERY item that was important (material, quality, times, prices) were all no longer committed to.

We have a negotiator/problem solver that we hired just for situations like this.  She worked on the factory for three days before we got back to the point where we were when we made the deposit in the first place.  (Side note–this person does the least amount of actual daily punch-the-clock work in the office, but saves us more money than any other single employee other than maybe QC.)

Here is what she reported to me after the order issues had been resolved.

1. They did it on purpose.  She said that there are times when there are legitimate concerns and changes and times when it is completely a strategy to get more money.  The major difference between real and fake issues include: when you can track changes in material prices, you can see factory capacity already maxed out, or there are differences in the samples and production standards.

2. Fighting about the contract is not nearly as effective as begging.  It’s all about face.  They know they are wrong but allowing them power can often be as effective as offering them money.  The end result of our negotiations is them being in power anyway—they have the deposit, the control the speed for the production line, they monitor the QC, purchase the materials—there is so much that could be sabotaged and be made to look it was just bad luck.  So, giving them the face now and admitting that we’re at their mercy is both pleasing to them and the truth.  We don’t pay any more (yet) and can still go after them legally if we had too.  But at this point they are pretty pleased with themselves and we’re just glad to be back to square one.

3. Thanking them profusely (gifts) is the correct response.  A dinner will cost $100 for the manager that told us “we moved other projects back for you.”  A shirt or wallet (brand name but from Ross or another US discount store) gives tons of face and costs $20.  It fulfills the social obligation we had to the manager for “helping” and it saves us a bundle of money we would have wasted in transferring the order or suing them or fighting and raising the price.  I’ve often said that sometimes the best option is paying more to get what you had already agreed to.  When it’s a small gift or dinner it’s almost not even painful.  Ego is a bit hard to swallow, but that’s about it.

Sometimes you are totally in the right. Sometimes people lie to you.  Sometimes there is nothing you can do about it.  But the end goal, which is often very very hard to remember, is to get the project done (correctly, on time and on budget).  You may not get what you wanted at the originally contracted-for price, but on balance you’re still getting what you want (and it’s still at a savings too!).