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Now that I am back from China, I have had time to reflect on what it was all about. Here are my thoughts.

The People

China is an amazing country. As most people know, it is home to over 1 billion citizens.  I found most people to be friendly. There were lots of smiles. As we moved north from Shenzhen to Beijing, the temperament changed. Rather than everyone being friendly, only about half were. Some merchants were nice, some weren’t. It was quite a change from Shenzhen. All in all, people are the same everyplace in the world; a bit apprehensive of strangers, but all in all, most just want to be happy.

The Country

On the bullet train trip from Shanghai to Beijing, I really got a feel for the landscape of China. Between these giant cities of millions of people lie endless identical rice paddies with similar houses and occasional massive power plants. Coming from California, I was surprised at the lack of variety of the terrain. I imagine some from the Midwest, with endless cornfields, wouldn’t be as surprised as I was.

The Food

After about a week, I got sick of eating Chinese food. Upon reflection, I’m not so sure that I was sick of Chinese food as much as I was sick of eating out every meal. When you are traveling, every meal is from a restaurant. I don’t eat out often. I think I wasn’t so much sick of Chinese food as I was sick of eating out. There first meal I ate when I got home was spaghetti and meatballs, which is at least a 50% Chinese dish. Macro Polo brought spaghetti back from the Orient after all.

The Sights

The Great Wall is amazing and boring at the same time. It easily rivals the pyramids in Egypt. It’s hard to imagine a threat so pervasive that it required several centuries to build a barrier. Imagine if America had been at war with England since 1776, what we would have done. It’s seems that some sort of negotiate truce or inter-kingdom marriages would have been far easier solutions.

I feel the same about Tiananmen Square and the Forbidden City. These two things are full of history, yet they are really just a giant empty square. If I return again, I’ll hire a guide who can help me understand them better.

The Hustle

Most of the Chinese people that I met were friendly. I only felt unsafe twice during the trip. Both times was in a hutong. Once was at night, when a group of teenagers began following us down a dark alley. The other was when we were about to be victims of the famous Tea Ceremony scam. I knew something was up, but I didn’t know what. Other than that, I felt safe throughout China. I didn’t use a money or travelers wallet. No one ever got close enough to me to be a pickpocket. I think that sort of danger was overblown. However, I think people should be aware of The Hustle.

In China, in certain markets, bargaining for things is common. In order to not get burned, you really have to know the fair price of item. The “genuine” pearls that I bought at the Silk Market are fake, even though I negotiate a good price.

Because I can understand some Chinese, I believe I noticed the hustle more than other students. Most items do not have price tags on them. I would hear merchants quote one price to a Chinese customer and a different price to us. For example, Tsingtao beers were $3 RMB for Chinese but $10 RMB for us at the same market across the street from our hotel in Beijing.

You really have to have your guard up at all times in China. Near the end of the trip, when I had become comfortable, I got my iPhone stolen. This was a $1000 lesson to always keep your guard up.

At times, I tried to apply what we learned at Cal Poly to the reality of China. At Cal Poly, our Operations class stress Lean Operations. I don’t know how you can be a lean company, when you constantly have to quality check your sources. I wonder if there is a how to run a Lean business in China course?

What I wish I would have done

I wish I would have brought a laptop. In day to day American life, I use a computer every day. Not having one for two weeks was difficult. I was unable to surf the internet to look things up. I feel that as a result, I missed out on many things on this trip. I missed out on Xichong beach in Shenzhen. I never figured out that the Yu Garden temple was right behind the Yu Garden market. Even though we went to the People’s Square, I didn’t’ understand its significance in Nanjing Road. I wish I would have gone to those. I’m probably would have still missed out, but having a laptop would have helped. I thought there would be more internet cafes, but I never saw one.

However, China is too massive and too rich to get it all in one trip. I may have missed out on much of the sightseeing. That will have to be saved for my next trip.

The Expected and the Unexpected

We travelled over 1,000 miles from Shenzhen to Beijing and the weather was pretty much the same. Coming from California, there is major different between Humboldt and San Diego, just as there is between Dallas and Denver. I expected more variation in weather.

I didn’t’ think I would have difficulty with the food, but after a week, I didn’t want to eat another bowl of fried rice. I wanted a sandwich. Be prepared for this.

Visiting with the former mayor of Mutianyu was amazing. It was a real eye opener and totally unexpected. This was the highlight of the trip for me.

English Corner was a close second. It was very cool. Not what I expected. If you are curious, you should just go a see for yourself. Have a cup of coffee first, because the experience is intense. I also expected never to see Jeff Brown again. I was pleasantly surprised when he arrived safely at the hotel later that evening.

How does China evolve?

People talk about how fast China is moving, but there business processes are slow. Going forward how does China evolve? In this decade, when China becomes the biggest economy in the world, what happens? Will to world adopt China’s slower business practices or while China become more “western.” China is becoming more modern, but what does their future look like. Does China adopt more western business models such as fewer dinners and more honest, posted prices? Do they develop an effective legal system? How does this all change if change is able to grow their domestic market to match their export market?

My hunch is that the old ways will disappear like they have in all other societies. I feel 100 years from now, there will be a global business cultural, with elements of all members, that will look more like how business is done in the west, rather than how business is done in China. In 40 years, when the bulk of China’s population has retired and they are now competing with the other BRICs, is it realistic to think China will follow the traditional ways? I don’t believe so. You can already see it in the youth of English Corner, wanting desperately to be modern and to understand the modern world.

My Advice for Next Year’s Students

I have a few recommendations if one of next year’s China trip students asked me for advice.

1)      Pick your roommate early. That way you two can start planning what you are going to do on your trip. Little hints you find you can share, etc. It’s a good way to get started on the trip.

2)      Bring a laptop. I recommend one per room, you can share. But you are probably not used to life without a computer.

3)      Buying a cellphone in china is difficult. You need a passport. It’s better to get an “unlocked” cheap GSM phone in the US and then just buy a pay as you go China Mobile or China Unicom SIM card.

4)      Bring a map for each city. Annotate it before you leave, it will help you understand where you are.

5)      The subway system is amazing and safe. Take it over cabs. It’s worlds better than BART.

6)      China is safer than you thing, take a chance and be adventurous.

7)      Never let you guard down.

Wrapping it all up

Describing China to friends, I tell them that up is down. It really is a different “world” over there. Every cultural norm that you are accustomed to is different. I had a hard time with the constant spitting everywhere. The really is no need to “huck lugis” every chance you get, but in China, it’s completely acceptable. I even watched people spit on escalators in the Shanghai train station.

For everyone I know who has not been to China, I feel now that I am an ambassador.  I am peppered with questions about all things China. From cultural to political or technological questions, my peers look to me for answers. I did not really think about this before the trip. It’s a natural result of having gone someplace most people have not. Now that I am away of this, I feel compelled to learn more. I have to make sure that my answers are correct and my opinions are valid. I want to pain an accurate picture of China and her people.  The CP China trip is mislabeled as a culminating experience. It real is just a beginning.

Every five years, China presents a new Five Year plan, which is the development goals the country will follow and try to reach during the next five years. This is in dramatic contrast to the United States, where one party doesn’t want to prepare for anything, other than war.

The latest five year plan (www) is a long document. It’s a difficult read, because it’s translated. If you are going to read it, give yourself plenty of time.

The latest Five Year plan is the 12th. To understand it, it’s best to start by comparing it to the previous Five Year plans.

9th Five Year Plan Goals:

GDP Growth: Target  8%, Achieved 8.3%

  • Coal: Goal ¥133 billion, Actual ¥73 billion
  • Industrial Waste: Goal Treat 83%, Actual N/A
  • Industrial Gas: Goal Treat 86%, Actual N/A
  • Urban Waste Water: Goal Treat 25%, Actual 34%

10th Five Year Plan Goals:

  • GDP Growth 7%, Achieved 9.48%
  • Major Pollutants: Goal Reduce -10%
    • COD (Chemical Oxygen Demand): Actual -7.35%
    • Ammonia: Actual -27.5%
    • Industrial Dust: Actual -17.1%
    • Smoke: Actual -6%
    • Urban Waste Water: Actual -55%

11th Five Year Plan Goals:

  • GDP Growth 7.5%, Achieved 11.2%
  • Major Pollutants
    • Urban Waste Water: Actual 75%
    • COD (Chemical Oxygen Demand): Actual -12%

Source:  http://www.circleofblue.org/waternews/2011/world/infographic-successes-and-failures-of-chinas-five-year-plans-1996-2010/

As you can see, one of the main goals of the Five Year plans is to grow GDP. For the 12th Plan, the goal is to grow GDP by around 8%, 7% annual growth of per capita income, and spend 2.2% of GDP on research and development. Even at the heights of the dot.com 90s or the housing boom 2000s, GDP in the US never grew up 8%. Yet, this is on the low side of the average for China. In China, in essence, every year is a dot.com boom. Imagine what it feels like to live in an economy that has had 8% growth for over 16 years. In America, the standard of living of the average wage earner has fallen since Reagan took office in 1980. Since 1996, the average Chinese has seen theirs grow 348%.

Understanding the Current 5-Year Plan

There are some strategic changes in the newest 5 Year plan. China wants more foreign investment in modern agriculture.  Currently China has a high demand for bulk agricultural products, Soybeans and cotton. US exports are up 80% to China. If the Chinese government pursues this new path of agricultural development, US exports would likely fall. (http://www.usda.gov/wps/portal/usda/usdahome?contentid=2012/03/0103.xml)

China also wants to move away from being the “world’s factory” to higher quality manufacturing and more research. If China does move its economy this way, that opens the door for the next world’s factory: India or Brazil; most likely India. If I were thinking about building a new factory, I would strongly look at one of the other RBICs, especially if there is some movement towards creating hubs of research and development.

Opportunities

During this explosive growth, there is much opportunity. The current trends in Chinese business, or hot industries are:

  1. Healthcare
  2. Education
  3. Cleantech/Greentech
  4. Food
  5. Software/High Tech

From: http://www.chinalawblog.com/2010/11/five_ways_to_make_money_in_china.html

In addition to the above five things, McKinsey & Associates notes that “private insurance could become cheaper and more accessible” in China, creating a $90 billion market by 2020 and that “regulatory reforms are making it easier for private hospitals to provide publicly-funded care.”

Perhaps this is why Professor Carr keeps telling us to pay attention to the insurance issue in China. China does not have a very effective legal system.  Currently, guanxi (connections) is how business is done. Going forward, guanxi is hard to maintain internationally and electronically. If you don’t have an effective legal system, you can replace guanxi with insurance. After all, what are connections? They are personal insurances. The time spent developing guanxi is mainly just a form of insurance.

Fueling this growth is China’s ravenous appetite for energy. Coal is not without its problems, just ask Al Gore. China has stated that they want to get more and more of their electricity from nuclear power. The big manufacturers of nuclear reactors are:

Keep an eye on them for any developments.

Can You Believe This?

I feel that Chinese culture is essentially dishonest. Given the opportunity to take advantage of someone, Chinese culture says you should. That is why they have fake eggs, contaminated milk, etc. In this culture,  can China’s economic figure be believed, or are they made up? James Chanos of Kynikos Associates (Greek for “cynic”) thinks China is the next Enron — that their reported financial figures are make believe.

Chanos was one of the early investors to doubt Enron’s figures. He made millions shorting Enron. James Chanos would be selling short China stock if it was possible. (I believe it is not possible to ‘borrow’ Chinese stock and then short sell it, the same way you can in America.)

(http://www.nytimes.com/2010/01/08/business/global/08chanos.html?_r=1)

(http://www.bloomberg.com/news/2011-05-24/chanos-says-hedge-fund-may-not-be-bearish-enough-on-chinese-real-estate.html)

Even some of the leaked classified cables from Wikileaks support this view, saying Chinese GDP figures are “man-made”. (http://wikileaks.org/cable/2007/03/07BEIJING1760.html)

The Economy: Not By the Numbers

——————————-

3. (C) Describing some of the challenges he faces as Party Secretary, Li related that despite brisk economic growth of

SIPDIS 12.8 percent in 2006, Liaoning’s income gaps remain severe. Liaoning ranks among the top 10 Chinese provinces in terms of per capita GDP, yet the number of its urban residents on welfare is among the highest in the country and average urban disposable income is below the national average. By contrast, rural disposable incomes are above the national average. Even so, incomes for Liaoning farmers are only half that of urban residents.

4. (C) GDP figures are “man-made” and therefore unreliable, Li said. When evaluating Liaoning’s economy, he focuses on three figures:

1) electricity consumption, which was up 10 percent in Liaoning last year;

2) volume of rail cargo, which is fairly accurate because fees are charged for each unit of weight; and

3) amount of loans disbursed, which also tends to be accurate given the interest fees charged. By looking at these three figures, Li said he can measure with relative accuracy the speed of economic growth. All other figures, especially GDP statistics, are “for reference only,” he said smiling.

The American Way vs China — Keith on a Soap Box

The 2012 5-year plan sets a goal of building 83,000 kilometers of highway. At one time, America did similar things.  Dwight D. Eisenhower signed the The National Interstate and Defense Highways of 1956  authorized  25 billion dollars for the construction of 41,000 miles (66,000 km) of high in America.

In our past, “We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard”. By 1973, America spent over $25 billion on the Apollo program, the legacy of John Kennedy.

The last President to attempt a long term plan was Lyndon B. Johnson and the Great Society program. He was able to spread freedom to all Americans, not just white Americans. But other than Civil Rights issues, many of the goals of the Great Society were never enacted. The rise of Barry Goldwater, and “Goldwater Republicans” spelled the end of bi-partisan support in American.

I don’t believe this level of strategic planning is currently possible in the United States. The Republicans current platform is defeat Obama. That’s it. Anything that makes him loose is what they are trying to accomplish. Any sort of planning is out of the questions — Unless it’s unlimited military spending. But that’s not a real plan.

Just look at the Republican response to Obama 2012 state of the Union:

“In three short years, an unprecedented explosion of spending, with borrowed money, has added trillions to an already unaffordable national debt. And yet the president has put us on a course to make it radically worse in the years ahead.”

(http://articles.cnn.com/2012-01-24/politics/politics_sotu-gop-response-transcript_1_mitch-daniels-union-speech-middle-class?_s=PM:POLITICS)

What the Republican’s call “an unprecedented explosion of spending” is actually the lowest growth in federal spending in more than 60 years.  Obama grew the Federal Budget 1.4%, compared to Reagan and Bush’s nearly 8%. But Republican’s don’t want to hear that. (Wall Street Journal: http://www.marketwatch.com/story/obama-spending-binge-never-happened-2012-05-22) They say it best: the “Obama spending Binge Never Happened.”

In light of the complete hostility of the Republican party to any sort of effective governance, I don’t see how any sort of planning, even short term planning could work.

China may not beat us, but we can beat ourselves.