China Business Blog and Podcast

Landed last night after 10 days in Singapore and Malaysia. The trip makes my regular NY-Shanghai commute seem trivial. Twenty six hours each way. The good news is I caught up on some reading.

Two books to recommend.

“The Party: The Secret World of China’s Communist Rulers” by Richard McGregor. This book provides a fascinating and detailed look at the inner workings of the CCP. I have been in China a long time and I learned an incredible amount. A must for anyone who wants to know how things get done in China and a good primer for the leadership change next year.

“Rome” by Robert Hughes. The venerable art critic relays the history of Rome, it’s people and it’s culture through the story of its art and architecture.

So, the Dear Leader has passed. What does this mean for China? For the US? The World? It’s probably to early to say but the story in China Daily is a just the facts account without any editorializing. href=”http://http://usa.chinadaily.com.cn/world/2011-12/19/content_14288223.htm”>

We will have a top stories from China recap and top trends for 2012 preview later this week.

Interesting news out of England today. French National, Nicolas Anelka, one of the deadliest strikers in European Football over the last ten years, has signed a contract with Shanghai Shenhua FC.

The former Paris St. Germain, Arsenal and most recently Chelsea striker has agreed to a contract worth a reported $313,000 per week to play in the Chinese professional league.

This is roughly the equivalent of Pele, Beckenbauer, Chinaglia and other greats joining the NASL at the end of their careers in the 70s and more recently David Beckham joining the MLS team, LA Galaxy, five years ago. Anelka is on the back end of his career but still a viable player and the first such to join the Chinese league.

The title of this post refers to the excellent book by Franklin Foer, entitled “How Soccer Explains the World: An Unlikely Theory of Globalization.” I read this book some years ago and it is a fascinating study in how the global game has influenced and been influenced by global change.

China has thrust itself to the forefront of Sport since they were awarded the ’08 Games, dominating medal counts at the Olympics, producing world class Tennis and Basketball players and more. But there is a glaring hole…Soccer.

The Chinese National Team is still a minnow in the game, their players are not playing at world class clubs and their domestic league is, well, lacking.

Japan and S. Korea have built world class teams over the last twenty years and their players are playing in the best leagues in the world.

How can a country of 1.3 billion people produce 20 world class players?

Why not China?

Some will point to the irony that such a relationship-based society does not produce winners in team sports, only individual sports. This is true and is worth exploring more.

Lack of interest? That’s can’t be the answer as it is second in popularity to Basketball in terms of imported sport.

Whatever the reasons I know that the Chinese sporting authorities, as well as others, are embarrassed and unhappy that China can’t make a mark in the game whereas Korea, Japan and tiny Ghana have.

It will be worth watching how Anelka does in China and to see what effect he has on the recently violence-plagued, match-fixing riddled Chinese league.

Will he raise the level of play in the league? Will others follow him to China for big money? Will it spark a move towards international legitimacy for the National Team?

In terms of how this piece of the Soccer universe “explains the world” I think it shows us a few things:

-The Game is no longer just a European/South American game, it is truly global and China wants in

-China views sporting prowess as an important point of national pride and will continue trying to make itself a world beater across games -

-This a part of China’s new approach to “soft power”

-Soccer players like English teachers, business people, entrepreneurs and others see opportunity in China and are willing top go there to take a shot at it

Either way, we wish Monseuir Anelka the best of luck. I can’t wait to hear the first Chinese inflected gooooooooooooooooooooooooooooooooooooooooooooooooooooooaaalllllllllllllllllllllllll he elicits.

Note: In further news regarding the intersection of sports and geopolitics.

Russian billionaire playboy and owner of the New Jersey Nets NBS franchise has announced he wants to run against Vladimir Putin. Pass the popcorn please.

Yesterday morning I spoke on a panel at the Confucius Institute for Business at SUNY Levin in Midtown Manhattan. The subject was fashion and luxury in China and how language and culture play a role. The event was a success thanks to the excellent panelists and the enthusiasm and participation of the audience.

One question stood out. I said “hopefully” China will be successful in its transition from a commodity/export based economy, lacking innovation, to an economy driven by innovation, consumer spending and services.

I was asked why I said “hopefully.” My answer. This type of transition is difficult under the best of circumstances. Never mind if: you have 1.3 billion people to employ, feed and take care of, an environment that is poisoned, a populace that needs to pay for its own health care and education, a looming change in leadership, shifting Geo-political winds, a neighborhood that is increasingly wary of your intentions, a need to keep growth at at least 8%, an educational and political system that discourages original thinking and risk taking, an aging population etc. etc. etc.

Many people in the Chinosphere are talking about these being particularly gloomy times for China and many others are questioning the sustainability of China’s rise. See Dan Harris’ post from the

I tend to balance the positives with the negatives and never get too high or too low on China’s prospects.

That said there are a few stories circulating now that I think businesses, governments, NGOs and all those who have an interest in China must pay attention to as they point to some worrying trends.

They are:

The Issue: Apple Loses the Right to use the name iPAd in China

What it Means for the Future: One of the great bugaboos of doing business in China is the lack of respect for intellectual property. In the past China’s trademark and copyright laws were to loose. They have come the other way now and are among the strictest, and most complicated on Earth.

One of the greatest challenges to doing business in a “first to file” country like China is protecting your IP. Chinese companies have every right to use the name of your company, product, slogan etc. if you do not file first. If Apple can’t keep the iPad name in China it does not bode well form smaller players. It also sends mixed signals on the sanctity as well as the disposable nature of IP in China.

Good coverage here:

The Issue: Beijing’s Polluted Air

The huge controversy developing around Beijing’s air quality and the government’s commitment to telling the truth and taking corrective actions. This has reached emergency proportions. The air in Beijing right now will actually take 6 years off of your life.

Please see James Fallows’ coverage of the story for The Atlantic. He has all the details and has been semi-obsessed with Beijing’s air for the better part of 5 years.

What it Means for The Future: As I have explained in my “Wealth Through Health” analysis of the 12th 5 Year Plan, cleaning up the environmental mess in China and preventing further degradation is a major focus of the the government. That said, one has to wonder how much of this is just talk if the air in the country’s capital is the most polluted on earth. The Chinese people cannot prosper, nor can foreign businesses, if the air, water and land are poisoned.

Fallows’ coverage is here:

The Issue: Companies Employing Foreigners in China To New Pay Taxes, Surcharges

Beijing seems to be tightening controls on foreign companies operating in China. These new regulations will make it much more expensive for local and foreign companies to employ foreigners in China.

What it Means for The Future: China still needs the experience, expertise, technologies and best practices that foreign companies bring with them. This may dissuade some companies from entering or expanding in China, thus depriving China of what it needs most. It also seems unfair that employers have to pay these taxes and charges for employees that will never collect the social benefits they are supposed to provide.

It may also signals that China may be “souring” on some foreign enterprises and FDI and that they want to concentrate ever more on “Going Global” with their companies and investments.

MSNBC covers the story well here

What are you seeing, hearing, feeling out there? Any stories that worry you?

I have been writing a bit lately about the moves Beijing has been making in curtailing media content. Last month I made the case that by curtailing freedom of media and by not allowing the market to direct media production and consumption that China was actually endangering, not preserving its future. Why? Because China wants to move to an economy fueled by innovation, high value add products and services. China also wants to effectively wield soft power around the world. These moves will stifle the needed market motivations and personal creativity needed to achieve the above.

This week a number of readers have asked why Beijing banned some advertising on TV and what it means.

The first thing to know is that this move is part of a larger corralling of media of all types; internet, social, blogs, print, movies and yes, TV. The main factors feeding the year-long campaign, of which the ad ban is just one piece, are:

1- A change of leadership is coming. Next year President Hu and Premier Wen will be stepping down and Xi Jinping will assume power. Whenever there is a change of leadership in China, there is a temporary move to political, social and media conservatism. While everyone figures out which way the wind will be blowing, no one in the current or coming government wants to see disruption and disharmony during the transition (viewed as a vulnerable period).

2 – The Great Firewall worked very well for Web 1.0, but in a social-media dominated Web 2.0, Beijing has found that blocking key words, web sites and foreign content is not enough to maintain complete control. Recent scandals, including the Wenzhou train crash, the Shanghai Metro crash, a party official’s son hitting a pedestrian with his car and others, were all widely talked about, dissected and questioned through social media. This prompted authorities to rethink their engagement with and control of all media. How do you police 10 billion user generated posts per day? You start by rethinking your entire approach to controlling communications.

3 – The Chinese Central Government is in the media business. and doesn’t like having to compete for the attention, hearts, and minds of viewers or for the advertising dollars the big hits produce.

4- The Arab Spring - Beijing has followed the Arab Spring closely. They realize that satellite TV, non-state owned media and social networking not only fueled and provided logistics for these revolutions but they brought the images, sounds and events live to screens around the globe. There is a reason you never see video of unrest in the Western regions. If you don’t see it, it didn’t really happen. They see the media landscape as holistic and interconnected. If you are not consuming state-approved content you may start getting ideas…

What does this mean for business?

*TV is is the most widely consumed and effective advertising medium in China. If your company and brand depend on it, you need to rethink your plans for the next 18 months.

*China has more Internet users than any country on Earth and reaching them is critical to domestic and foreign companies branding and sales strategies. Social media is now an important part of commerce in China. If ads can be banned on TV, they can be banned on social media as well.

*Media of any type is still considered a National Security industry in China and in most ways foreigners will be shut out for the foreseeable future

*Like we always say – “Your China Strategy has a shelf-life of six months” – You need to constantly assess conditions on the ground and have contingencies in place.

What do you see out there?

Zakkour to Speak on China Fashion and Luxury Consumers at Confucius Institute in NYC

Michael Zakkour, principal of Technomic Asia a will provide commentary and insights about China’s fashion and luxury consumers for the Confucius Institute, Fashion, China, and You on Tuesday, December 6 from 9am – noon.

The event, being held at the SUNY Levin Global Center at 116 East 55th Street, is part of the State University of New York’s Confucius Institute for Business, which incorporates expertise in innovation, culture and business strategies. Zakkour has more than a decade of experience in developing and implementing business strategies for companies entering or expanding in China. Technomic Asia also recently concluded a year long study of China’s premium brand consumers. He will present these findings and other first hand information about China’s fashion consumer at this event.

The two other members of the panel are Renee Hartmann, co-founder of the China Luxury Network, and the Eno lifestyle apparel brand. Eno has 25 retail stores in China that markets brands to China’s youth market. Also speaking will be Professor Lawrence Delson, president of Delson International, and adjunct professor at NYU and lecturer at the Fashion Institute of Technology.

The panel will be moderated by Janet Carmosky, CEO of the China Business Network and a veteran of 25 years of doing business in China.

“In America we have laws and contracts so that we can create predictable outcomes. In China no such system exists but the same desire for predictable outcomes is there. That is what lies at the heart of guanxi”- Vice Minister Xi, paraphrased.

In this day of technological ubiquity in entertainment, it is still The Theater (and books) that give me the greatest pleasure. I love plays: comedies, dramas, ancient, classic, contemporary, and musicals of all stripes as well. I love that plays are essentially staged and told the same as they were 2,000 years ago. The planks, the players, the audience, the ambiance….

But it is not often that I go to the theater with the anticipation of seeing my life, my profession and my experiences laid bare upon the stage.

So it was with David Henry Hwang’s new play about cross-cultural misunderstanding, “Chinglish”. His best since his Tony Award winning “M. Butterfly.”

If you are in any way involved in doing business in/with China, if you are a Sinophile, if you have lived there or if you have spent any kind of time trying to navigate personal and business relationships in the Middle Kingdom then you will likely love this play as much as I did.

If you are clueless about China or know only what you read in the news the play will be just as satisfying because it is as much about how we interpret and define the meanings of honesty, love, ambition and most importantly, relationships, as it is about the incomprehensible aspects of language and culture between Western and Chinese people

This is a laugh out loud comedy with a deep and dramatic message at it’s heart.

Much of the play takes place in Mandarin with translations (and mistranslations) projected on the sets that marvelously recreate a Chinese hotel, office and home.

The characters are all people I have met and worked with. The attractive, whip smart, ambitious Party apparatchik, the smooth-talking, Manadarin-speaking, ex-pat “consultant”, the official who plays by the same corrupt rules as everyone else, the young, entitled “princeling”, the bad interpreters.

“Chinglish” is superbly acted, well written, well directed and the sets are near perfect. Jennifer Lim as Vice Minister Xi will almost certainly be nominated for a Tony as best female lead.

Seeing my early experiences, thoughts, feelings and confusion writ large upon the stage was like being in a dream where I am just landing in pre-WTO China again.

The central plot revolves around Daniel Cavanaugh (Gary Wilmes) trying to close a deal with the Guiyang Ministry of Culture to provide signs for the new Cultural Center. Vice Minister Xi appears to be Daniel’s adversary at first, but becomes an ally. I don’t want to give anything away so it will have to suffice to say that a series of political, romantic, and business intrigues develop that all expose how cultural perception and norms are real and truth is really an abstract, and that in China, not everyone (including foreigners attempting to reinvent themselves) or everything, is as it seems.

The play is not perfect, there were some issues I had with the length (could have used a 20 minute trim), character depth (we needed more for a few) and a tendency to overly rely on bang-you-over-the-head exposition, but in the end it was funny, touching and a work of great human exploration.

CHINGLISH

By David Henry Hwang; directed by Leigh Silverman; sets by David Korins; costumes by Anita Yavich; lighting by Brian MacDevitt; sound by Darron L West; projections by Jeff Sugg and Shawn Duan; an Theater. At the Longacre Theater, 220 West 48th Street, Manhattan; (212) 239-6200; telecharge.com.Running time: 2 hours.

WITH: Jennifer Lim (Xi Yan), Gary Wilmes (Daniel Cavanaugh), Angela Lin (Miss Qian/Prosecutor Li), Christine Lin (Miss Zhao), Stephen Pucci (Peter Timms), Johnny Wu (Bing/Judge Xu Geming) and Larry Lei Zhang (Minister Cai Guoliang).