China Business Blog and Podcast

Buying nothingness at the Xiangyang Market

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The following is a complete transcript of today’s podcast:

For those of you familiar with the recent history of Shanghai, you will remember the Xiangyang market. Plunked right in the middle of downtown Shanghai, it was both a beacon to tourists and a bane to local authorities - for it was the biggest, wildest, most uncontrolled fake-goods market in the city (if not the country). The tension among the local authorities was palpable because, although it was a big draw for many foreigners, it was also a sign that China’s control over knock-off products was not as good as they were touting.

The authorities have since shut down the market claiming, rightly so, that the land was too valuable and needed to be developed (I think they are putting in another hotel-shopping-residential-commercial complex that will look just like the other 20 million similar complexes in China, thereby eliminating any character and class from a city that used to have buckets full of both).

Anyhow, this podcast is not a screed of the cynical China expat - or, at least, it is not intended to be. It is actually the story of grace and kindness in the midst of hardcore commerce. This is the story of the day I went to Xiangyang Market to buy nothing. I had something to buy but that something was, really, nothing. Lest this quickly digress into a podcast on Retail Zen - “Grasshopper, first you must know the sound of one hand shopping” - let me try and explain.

I had recently purchased a new belt at Xiangyang. When I got home I found that I needed a couple of extra holes to make it smaller. Now, if I were back in the States, I would go to the garage, find a hammer and nail and just make my own hole. But in China, I possess neither hammer, nor nail, nor garage so I had to find someone to help. And this is where the nothingness comes in: I needed to buy a hole.

I figured that since I had purchased the belt at Xiangyang, I would return to the scene of the crime in search of the belt puncture-upgrade. I reached the market gate and steeled myself for the phalanxes of commerce vultures screaming the glories of their wares (all of whom, oddly, mistook me for Dick Van Dyke, repeatedly greeting me with a hearty “Hello, DVD!”).

But first, a confession: I really am a cynical person. The reason matters not, for I am not alone: the expat community in China is rife with cynics. And our Cynicism Radars are particularly active at Xiangyang-type markets where the stall owners are out to make a quick RMB off our supposed ignorance.

However, my radar did not seem to be functioning that day and I found myself explaining my situation to one of the DVD touts at the gate. He smiled and, with a glint in his eye, said “Follow me.”

We wove our way through the stalls of “genuine fake” goods, ending up at a shoe repair place at the back of the market. My new Best Friend proudly introduced me to the proprietor and I explained what I wanted. Shoe Repair Guy looked at the belt and shook his head; no, he didn’t have a leather punch big enough for that purpose and recommended that we try another place a few stalls down - where we found that they, too, did not have the right tool but directed us to yet another stall down the way. This charade lasted half an hour, with each stall owner shaking his head in empathy - “can’t help, so sorry.”

After awhile, my radar warmed up and I began to wonder if my Best Friend was taking me for a ride, a ride that would end at his stall where I could not get a hole made but where I was sure to find an excellent selection of other belts (in addition to an oh-so-lovely purse, should I wish to accessorize further).

Just as I was about to give up, we stopped by a stall that was tucked among the meat vendors (where, I am pretty sure, you can find all the components to assemble your own pig, should you care to).

I explained to a cobbler, for the umpteenth time, my dilemma. She took a look at my belt (which, by that time, I had removed from my person to relieve myself of the embarrassment of beginning a striptease at each stall), hauled out a punch and whacked two proper-sized holes in it. She handed it back and said, “That will be 5 kuai.” Stunned, I fished around in my pocket for change and handed it to her.

I looked over at Best Friend, Radar in “full alert” mode, expecting him to try to sell me something else, but he just looked at me and asked “Is it OK now?” I was shocked. Did he really want nothing from me? Was he really just trying to be helpful? Is the world really flat? Is up, down; is black, white; and are Shanghai pedestrians now crossing only at intersections?

But it was true: He really was being helpful. He saw someone in need and decided to take 45 minutes out of his day to help me out. Amazing. I thanked him profusely and asked for his card, promising to stop by his stall with my rich laowai friends.

So beware, dear listener of foreign origin: If ever we meet in person, I am going to insist you visit my Best Friend who, while no longer at Xiangyang market, has moved to a different one and was kind enough to inform me of the fact. After all, we are guests in China and we owe our hosts a debt. Our cynicism must be compensated for with kindness, and I don’t plan to foot the bill on my own.

Photo courtesy of Marc van der Chijs on Flickr

Accounting firm J.H. Cohn is hosting a special dinner event on Oct. 1 in New York City that features Steve Ganster delivering a presentation titled, “Strategic Sourcing and Operating in China: The Rules Have Changed.” The event is targeted at senior financial executives at retail and consumer products companies.

More from the event description:

Rising oil and commodity prices. Changes in tax regulations. Inflated Chinese currency. With these recent changes in the Chinese landscape, just being in the game is no longer enough. To be successful, retail and consumer products companies need to take a strategic and financial approach to supplier relationship management and the operating environment.

Steve also will speak at the Council of Supply Chain Management Professionals 2008 Global Conference, also in October. Stay tuned for more information on that event.

China’s auto aftermarket moves into high gear

SHANGHAI — Sept. 9, 2008 — Parts and service in China’s light passenger vehicle market reached an estimated US$27 billion in 2007, driven by strong expansion and continued aging of the vehicle parc, according to new research conducted by Technomic Asia, an international market consultancy specializing in China strategies for U.S. companies.

The report, titled “A Strategic Assessment of China’s Light Passenger Vehicle Aftermarket, Fourth Edition,” stems from Technomic Asia’s ongoing primary research into the Chinese auto marketplace and its key players. Other major findings indicate that the light passenger vehicle car parc has expanded to more than 32 million units, with middle-aged vehicles (4-9 years old) reaching a 41 percent share. More information is available at http://www.technomicasia.com/auto.

“The aging and expanding parc, coupled with private ownership of vehicles at almost 70 percent today, supports strong growth in the parts and service market,” said Steve Ganster, managing director of Technomic Asia and primary author of the report.

“The market is fragmenting as more vehicles from recent market entrants, notably the Japanese, hit the road,” Ganster said. “Both local and international parts and service companies are aggressively developing their infrastructures to penetrate this dynamic market. Though many challenges exist, the outlook for growth remains robust, with the market expected to expand at 19 percent per year through 2012.”

This unique China auto report offers valuable statistics, insights and analyses to assist management to successfully address this important market, including:

• Perspective on China’s automotive market, including a long-term growth outlook for China’s light vehicle market in terms of types of vehicles, key OEMs, growth drivers and constraints, etc.
• Overview of the automotive aftermarket in terms of parts and service, covering size, segmentation, parts types, key players and trends
• An assessment of China’s automotive parc in terms of size, vehicle composition, age, technology base and future growth
• A description of the maintenance and light repair service market, covering outlets, services provided, value, etc., and current and forecasted 2012 value by vehicle and service type
• A description of the collision repair market, covering the insurance market, accidents rates, service providers, service value, etc., as well as current and forecasted 2012 value by vehicle type
• A description of other major and minor spot repairs in terms of value, repair type, segmentation by age of vehicle and vehicle type, growth vector and key trends
• Collision repair market, covering the insurance market, accidents rates, service providers, service value, etc., as well as current and forecasted 2012 value by vehicle type
• A detailed evaluation of the parts supply chain, with descriptions of structure, key players, pricing characteristics and future dynamics
• Perspective on key opportunities and challenges facing players in China’s automotive aftermarket

For more information on the report, or to purchase a copy, please visit www.technomicasia.com/auto or call our offices at +1-919-855-5437 (U.S.) or +86-21-6473-2588 (China).

The 2008 Supply Chain Leadership Forum, an event hosted by our parent company Tompkins Associates, takes place next week — Sept. 9 and 10 — in New Orleans.

The in-depth conference is subtitled “Emerging Trends and Best Next Practices.” It’s designed to help senior supply chain executives gain insights into hot topics, including reverse logistics and global supply chain capacity constraints, and understand how your current performance and operating practices compare to similar enterprises.

Technomic Asia’s Steve Ganster is one of the many presenters at the conference. He’s presenting “Global Sourcing Practices” of “top quartile companies,” helping attendees understand how their operations compare with those of industry leading companies.

For more information, visit the Supply Chain Leadership Forum site.

Alliances in China

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The following is a full transcript of today’s podcast:

KENT KEDL: Newsflash. The U.S. economy stinks. Now I know I do not have the academic credentials to make an educated pronouncement about this – then again, a Master’s degree in Chinese philosophy qualifies me for very little – however, I think it is safe to say it is true. The Republicans thinks it is too many taxes, the Democrats think it is too much outsourcing, and Phil Graham thinks its all in our heads. No matter the cause, the fact remains that the U.S. economy is deep in the doldrums and there does not seem to be much hope that it will get out any time soon.

This was really brought home to me when I was back in the U.S. a few weeks ago for an all-too-brief summer holiday. I try to get back to the U.S. several times a year to visit family and clients, and it is always an education. No matter how informed I try to be here about what is going on back home, simply reading news stories does not give one the full picture, particularly the current status of emotions in the U.S. business community.

So it is from these conversations with U.S. clients and friends that I reached this conclusion: the U.S. economy stinks. More to the point, the many people I talked to seemed to question whether or not the U.S. economy was worth investing in as a stand-alone investment. There was not a lot of faith that we would be getting back to the hey-days of the U.S. economy where growth was easy, foreign competition was very low and return on investment nearly guaranteed.

Notice I qualified that last statement by saying that I heard people questioning the U.S. as a stand-alone investment. This is a key point – certainly, U.S. businesses are not giving up on their domestic markets completely; however, they are considering how their domestic and international strategies can work together. And this is where I heard some rumblings of optimism among U.S. businesses, that there were some investment opportunities outside of their domestic markets which, if successful, could help grow their domestic business.

One of the key investments we see companies making overseas is some form of equity alliance with a foreign company – be it joint-venture, acquisition, merger, etc. Here in China, over the past year, we have seen our M&A practice jump to a new level as Western firms interested in the China growth opportunities are looking for good companies to align with.

But when times are tough in domestic markets, this puts even more pressure on a foreign alliance to work the first time – there is no margin for error when sales are down and capital markets are tight. Over the past few years of these podcasts, we have addressed the subject of China alliances from various angles. Today, I’d like to update that perspective and talk a little about what makes China a unique environment for alliances. This is not meant to be an exhaustive list; rather, I want to point out what makes China alliances unique and identify potential potholes in the road ahead.

One of the biggest challenges to doing good alliance deals in China (or anywhere, for that matter) is finding good alliance targets. In other podcasts, I have talked about the all-too-common mistake we see foreign companies make here by being too opportunistic in selecting their alliance partners. A common pitfall is finding a partner at a trade show – what I have called the “industrial single’s bar” – and, after a few drinks and an exchange of product literature, both sides are ready to do a deal. I won’t harp on the fact, again, that it is CRUCIAL for you to “date around”, to assess multiple alliance opportunities and benchmark them against each other and against the strategy you have in mind for China.

But when you find these companies, they will, generally, share some similarities. Assuming they are a private company (and not State-owned, a whole ‘nuther can of worms here!), it is almost guaranteed that they will be a “first generation” owner, meaning that the founder of the company is likely to be the owner or at least one of the owners. In more developed and older economies such as the U.S. and Europe, good targets can be found among second- or third-generation owners. The kids or grandkids of the founder have run the business for awhile, have made some money but have lost the original emotional attachment to the business and, in many cases, are looking for an exit strategy.

Not so in China where modern business is still measured in years, not decades (or even centuries). Private businesses were allowed here starting in the late 80s and did not start becoming popular until the mid 90s, so we are still very much in our first generation of founder/owners. These are people who have put their very lives into their businesses, risking a LOT to do so. Many of them could have settled for a well-connected job in a State-owned company but they didn’t. Many of them gutted it out and became successful as a result.
So, psychologically speaking, these owners are in a unique place when someone approaches them about a possible alliance. In the first place, they are not actively looking to sell their companies nor are they even interested in capital investment. If they are good (and typically we are only targeting the good ones), then they are fully confident in their ability to continue to grow their company and be successful, without having to give anything away or ask for anything.

I have told this story before, so forgive me if you’ve heard it, but its like my oldest daughter (now 15) when she went to her first day of preschool here in Shanghai when she was 4 years old. A very confident and outgoing child, she walked in the front door of the school, put down her book bag and called out, “OK, I’m here … you can all play with me now!!” In the same way – and unfortunately – many foreign companies think that, because they are foreign, everyone here is just DYING to work with them. They can just show up and everyone will come running.

Owners of Chinese private companies want to know what the foreign partner brings to the table. Before starting a program, we work with our clients to define, very specifically, just what they could bring to the Chinese partner. Chinese companies are often looking for access to foreign markets (particularly big-name customers) and access to brand or technology. Many of these companies know that, to be a legitimate global player, they cannot copy technology or rip off trademarks. This – oftentimes more than money – is what the foreign partner can bring to the Chinese side and make a potential alliance very attractive to both.

A desire of many Chinese companies is also to go international and this can be a key motivation for them to do a deal with a foreign company. If the foreign company has access to good channels and customers then, often, they can work with the Chinese company to expand their product portfolio by either providing a broader range of products or more price, quality and brand tiers. However, before you go offering this to a Chinese company, you must think VERY carefully about how that will impact your current business and how to avoid diluting revenues and margins with additional – often lower cost – products.

Another characteristic of first-generation owners is that their objectivity in valuations can be a bit skewed. If you have just invested your heart, soul and savings account into a business and have succeeded, you are not going to be satisfied with more “objective” calculations such as multiples of earnings or discounted cash flows. The cold, objective, CPA-driven valuations that many Western companies take can really be a turn-off to a Chinese company. When we approach the topic of valuations with a Chinese alliance target, we do it very carefully and slowly, helping them see just how the foreign company is looking at the deal as well as the final numbers.

Very often, I will represent the foreigner’s perspective and will say to the Chinese partner “You know, we foreigners have our own way of looking at things and the board of directors for Company X is no different. This is how they will be doing their valuations…” and I launch into a description of the criteria and methods our client will use. But then I continue, “However, we all know that there are many more issues that need to be taken into account when evaluating your company and we want to make sure we are able to capture all of them.” Then we start to have the conversation about the assets – tangible and intangible – that the Chinese partner brings to the deal and start drilling down into the details of just how valuable they really are.

For example, we just went through this with a Chinese company that a client of ours is considering doing an alliance deal with. The Chinese company, though small, has captured some very big customers, in particular the largest Chinese company in this industry, a Big Name. The Chinese target is, rightfully, proud that they are a supplier to this Big Name and they point to this as being a reason that they are such a valuable partner. However, when we started digging down into the actual metrics of this relationship, the picture changed – we discovered that the business the target was doing with the Big Name was barely break even and, in fact, had prevented them from serving other, potentially more profitable, companies in a similar space.

After some time – and it did take some time – the owner of the target company started to see that maybe this Big Name was not such a big deal after all. In fact, this started a very good discussion about how, with our client’s participation, they could both go after even bigger names and could demand the kind of premium that would result in a sustainable, profitable business. And, in addition, we were able to get to a much more reasonable and agreeable approach to valuation.

Finally, these first generation owners – while very “modern” by Chinese standards – are still often very traditional in that relationships are of central importance to them. All of them, without exception, cultivated good relationships to get them where they are today. And I am NOT saying that they succeeded only BECAUSE of key connections which, to foreign ears, implies some form of under-the-table dealings. In some cases, this is true, but that is fairly easy to discover in a rigorous course of commercial due diligence. No, successful Chinese companies got that way because they sought out and nurtured relationships all along their value chain – from suppliers, to customers, to regulators and even competitors. They work very hard on getting and maintaining these relationships.

In the same way, they are going to judge the value of a potential partnership on the basis of the type of relationship that they are going to be able to build with you. You might dazzle them with your company’s success and the animated PowerPoint slide show about how you are going to dominate the market might be kind of cool, but they will follow through with an alliance ONLY if they trust you. There is no set path to developing these relationships – suffice it to say that everything you do, every word you say has an impact. If you are truthful and fair in the due diligence and the negotiation process, then chances are you will be able to continue that going forward. If you are cheap and are trying to “win”, then you can just give up now – because even if you “win” the deal, you are going to loose the business eventually.

A very practical way to show the importance of this relationship is to clearly identify the role of the owner going forward. The fear of every business person is to go from owner to employee. And, even though the org chart might say “employee”, no former-owner should be made to feel that way. In China, it is appropriate to just “hang-out” … spending an afternoon having a conversation. I would recommend that the role of the owner be a topic for several of these sessions. You are not going to solve it in one sitting, but if you keep returning to it and talk about it over time, you will show that you are serious about it and you will get to a conclusion that feels right to everyone.

A Chinese friend of mine asked me yesterday what I thought of the U.S. economy and what the chances were of recovery. “I don’t know,” I told him, “I don’t think anyone knows. We are such a new territory here – while the U.S. has certainly seen some down economic times in its history, never before has much of the rest of the world been as strong. This is certainly a threat in that, if they U.S. cannot bounce back or find their feet, then other global economies will come in and fill the vacuum (and one might argue that this has already happened in the manufacturing sector, particularly for commodity goods). However – and I hate to sound like a bad fortune cookie here – with every threat comes and opportunity, and a well-planned alliance in China could be just that opportunity.

Thanks for listening to the China Business Podcast. Remember, in China, everything is possible but nothing is easy. We’ll see you next time.

Our friends at our parent company Tompkins Associates have launched a new online audio series called the “Global Supply Chain Podcast.”

Tompkins Associates says its podcast series will “educate business executives on the advantages of adopting a global supply chain strategy, and any company that makes, buys, sells, or moves products will want to hear the series.” Here’s more info from the series description:

Your company needs a supply chain operations strategy that is responsive to a global market. The leading experts at Tompkins Associates explore the hot issues associated with global business today, including supplier relationship management, supply chain benchmarking and best practices, the facts versus fiction in globalization, and much more in this podcast series. Tompkins Associates designs and integrates global end-to-end solutions for companies that embrace supply chain excellence. In mp3 format and updated with a new podcast every first and third Tuesday of the month.

The first podcast in the series is called “Stop Debating Globalization: It’s a Reality.” Read the transcript or listen now.

You can check www.tompkinsinc.com/podcast for more or subscribe via the podcast’s RSS feed.

My final column for “that’s Shanghai” magazine…and the story about why it was never published.

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Dear faithful reader [Kent has sent his monthly "that's Shanghai" magazine columns to a list of several hundred e-mail subscribers, but that came to a halt recently]:

Sorry it has been awhile since you’ve heard from me as we have been distributing my monthly column from “that’s Shanghai” magazine.

But there is a reason for my silence. I am not quite sure how to say this … so I will just say it. I was fired. Well, maybe “fired” is too strong a word. Let’s say I was “given a firm talking to by the authorities and then summarily ignored.” In a Chinese context, that is being fired.

I started writing for “that’s Shanghai” in 2005 when the magazine was just exiting from a nasty battle between the publishers and the former owners. There was a new managing editor — I will call him “Ian” — and he was looking for something to spark up the magazine. Someone sent Ian some of my musings and he called me. Ian is classic Dubliner Irish and has lived a long and hard life here in China — so when he called, I thought it was the Lucky Charms leprechaun channeling Tom Waits.

“I read yer articles, lad,” he said to me. “Not bad. Want a job?” When I told him I already had a job but that I would love to write for him he said, “Whatever … just don’t go over 800 words. What country you say you were from? American? Well, then really don’t go over 800 words!”

Over the ensuing months and years, Ian would prove to be my toughest editor and biggest fan. Every month he would call me: “We got a problem with the censors this month, lad,” he’d say. “They say yer being too sarcastic. I told them ‘of course he’s sarcastic … he’s a fackin’ American! What else could he be?’ I hope you don’t mind.”

No, I did not mind in the least. Ian had one of the toughest jobs known to foreigners here, trying to ride the jagged edge between being interesting enough for people to read and yet politically correct for the State-controlled media. He was immensely successful and remains, to this day, one of my personal heroes.

However, the closer we got to the Olympics, the more pressure Ian was getting to dial back the tone of the magazine, to be more “supportive” of China and less critical. My article, on the back page of the magazine, was a key culprit and Ian caught all sorts of flack for it. The censors — the State-owned entity that controlled the publishing license — were on his case to talk to me. When that did not happen, they insisted that he set up a meeting between them and me. Ian held off as long as he could. “Sorry, lad … but would you mind meeting with these chaps? They’re on my arse about it.”

I said, “no problem” and was actually looking forward to it. It is not everyone that gets hauled in to the Great Principal Publisher’s office. I thought that, at least it would make great content for a new article!

I met with their chief rep, a very nice guy who had actually studied and worked in Australia for a bit. He was oily-smooth, just as I had imagined a publisher would be. “Kent,” he said, “Let me start off by saying that your article is just what we want our magazine to be. It is smart, funny, articulate, to the point. Great writing. Just great. It is the first column everyone around here reads every month. We love it!”

I nodded and smiled … and waited, because I knew it was coming. The Chinese word “dan shi.” Dan shi means “but” or “however” in Chinese and it signals a radical turn is ahead — “I have been telling you all of these nice things, dan shi, I am going to give you the real story. And it ain’t gonna be pretty.”

“Dan shi …” he said. “There is a bit of a problem. You see, you are being very sarcastic in your articles by pointing out the behavior of the Chinese people. That is causing a problem.”

“I see,” I said, “but don’t you also see that, when I point out people’s behavior here, I also point to the even-more-ridiculous behavior of foreigners. My conclusion is usually that all these people are behaving this way and don’t have a problem with it — therefore, it is not them that is wrong, but ME!”

“Yes,” he said, “I see that. But still. You are pointing out behavior and that is not good. As you know, all media in China is approved by the government. And if this is published, it is like the government approving these things. And that is not possible. Kent, let me tell you this: You are becoming too famous in Beijing.”

And it was that last statement that froze me in my tracks. The very last thing anyone wants to do here is to become well known for anything! Chinese phrases are rife with warnings: the tallest tree in the forest gets blown down first; the highest nail gets hit. To be famous here is not good.

So I crumbled. I said yes, he was right. I should dial it back. I should not be so sarcastic. I should be nicer. We continued for some minutes as he emphasized that I was not in trouble at all, but that this was just a friendly conversation. I got up to leave, shook his hand, promised to do better and walked out, my knees still shaking from this “friendly conversation.”

But then and there I knew it was over. One only gets hauled before the court here if one is guilty. Judgment had been brought and sealed by my agreement to attend the meeting. I went home and wrote my new column — trying hard to behave myself, knowing all the time that it would never be published. It was, of course, rejected. Completely. “Too sarcastic,” they said.

So it is time to close this chapter and go look for another one. However, I wanted to at least get this out because, although the style is different and “nicer” than what I usually am, I mean every word of it. Here it is…

Dear Chinese Citizen,

Hi. How are things? Its been awhile since I wrote. Been busy. Living in your country is a full time job. I don’t know how you handle it with such grace.

Anyway, I thought it was time to write and say “thanks” for letting me live here. I know I complain a lot. Sorry for that. I am trying to become a better person but don’t have much to work with in the way of raw materials. My elementary school teachers said the same thing.

You have an amazing country. Honestly, I am into my third decade here and not a day goes by when I don’t sit back and think about something new I saw that day. Try to find that anywhere else. I know the rest of the world is impressed by the big stuff — the Great Wall, tall buildings, new Olympic sports venues — and well they should be. But I am more impressed by the little things I see every day.

For instance, your road construction workers. Do they have no fear? Americans are proud of our astronauts having the Right Stuff…but to face immanent death the way your DMV gauchos do every day? Wow. These men and women live lives of Tao-like calm amidst chaos, like a duck in a shooting gallery. And what do you make those orange vests out of? Must be Kryptonite, the way cars seem to avoid them.

Then there are your inventions. I know you are more famous for your gunpowder, paper and kites (and make full and ostentatious use of them around Spring Festival) but I am more impressed by some of your modern creations. I was in a park the other day and saw a wedding photographer with several groups of newlyweds. He had a wedding dress with a quick-release zipper in the back…strap it on one bride, snap some pics and then move it to the next. Beauty and efficiency, all in one package. Very cool! With the high divorce rate in the U.S. we could benefit from one of those. Here is a business tip: set up your first distributor in Las Vegas.

And how about that horn you have on official vehicles? Who came up with that sound? Ah-oo-ga!! It’s like a nine foot tall goose with adenoidal blockage or a T-Rex with intestinal gas. Clears traffic like a flatulent T-Rex would too. Kudos to your sound engineers for that one.

I know I gripe a lot by how crowded it is here, but it doesn’t seem to faze you. To those of us of Caucasian-European heritage, our body size and sense of personal space are directly proportional and we do not take kindly to being touched, bumped or grazed (our ratio in swimsuits is, on the other hand, indirect – the larger the belly, the smaller the Speedo). A room is crowded in the U.S. when you can reach out and touch your nearest neighbor; in Shanghai, I could have three people living in my back pocket and still feel there is room to expand. The morning subway here looks like a shuttle bus for the Siamese Twin Convention, but no one gets upset. Incredible. In the U.S. there would be three lawsuits per subway car by the end of rush hour.

I am also amazed by what good travelers you are. The quality of a person’s character can be clearly seen in their response to the inevitable delays that plague every plane, train and bus terminal around the world. When a flight is delayed in my home country, the chorus of complaints sounds like extras rehearsing “Mutiny in the Bounty.” But in China, a delay just means there is more time for another bag of sunflower seeds, a longer nap stretched out on your carry-ons or another hand of cards. By the way, thanks to that group in Beijing late last year that included me in their game — remind me again, are face cards high or low?

I have always been impressed with your food history, one of the greatest in the world. However, you are not food snobs — your ability to tackle a gourmet restaurant meal and airplane food with equal relish is astounding. Are your taste buds on a toggle switch?

Finally, I want to thank you for the grace you have shown me, a foreigner, living in your country and butchering your language. In the U.S. we legislate that English — American English — is the “legal” language and criticize anyone who speaks anything else, as if being multilingual is the same as being polygamous. But here, you are very excited every time someone makes a lame attempt at speaking your language, and most of us are pretty lame. A big 谢谢 for that (or, as most foreigners pronounce it, “shay-shay”!)

So thanks for all of this. I promise to tone down the whining and keep my eyes open for all the good stuff.

Sincerely, Kent

P.S. If you could hook me up with one of those T-Rex horns, I’d appreciate it…these morning commutes are killers!

So that’s it. My final column. A column that was never a column. For now, I am going to keep these musings going through the podcast and blog we do for our company — its called (creatively) The China Business Blog and Podcast. The link is at the top of the page and I would encourage you to sign up for it to receive them every week.

Thanks to all who wrote words of encouragement and appreciation for the articles over the year. I love this place and I love sharing it with others. Writing this stuff is the cheapest form of therapy I know. And goodness knows, I need a lot of it.

Needless to say, the past week in China has been a difficult one in which to concentrate – the excitement of the Olympics and the deluge of media attention is too much to handle for me, the poster child for adult-ADD.  Between the blogs burning trails in the ether and the traditional media outlets trying to prove they are as hip as the iKids, the back-and-forth is like watching the Williams sisters playing each other at the net.  In a typhoon.  On speed.

The articles that most fascinate me are those by journalists who have never been here and are sitting in a sports venue for the most hyped-up event in the lives of modern day Chinese people – and they try to deduce “what the Chinese are like” by watching the participants.

I read one article that was critical of the cheer that everyone uses here – “Zhong Guo Jia You!” and insinuated that this was something mandated by the government authorities to show support for China.  Um … no.  It is not.  Jia You has been around here for ages and is shouted at every sporting event – directly translated it means “add oil” or, better, “step on the gas”.  Basically, it is just a way to say “Let’s Go!!”  I attended a warm up game with the U.S. Olympic basketball team last week and thousands of Chinese fans were screaming Mei Guo Jia You (“Let’s go USA!!”).  Not sure what the same journalist would make of that – probably would tell his editors that a revolution was brewing.  Alert the Neo-Cons!

Anywhere in the world, there is a danger in observing human behavior from afar and deducing complex, internal cultural motivations.  And the Olympics is, in some ways, the WORST place to do this.  Its like the last time the beloved and beleaguered Minnesota Twins baseball team played in the World Series – the stadium was filled with thousands of Minnesotans screaming their lungs out and waving “Homer Hankies”, white pieces of cloth that some marketing genius came up with (the fact that we were waving a symbol of surrender did not occur to many of us until much later).  A simple Jane-Goodall-among-the-apes observation of these event would deduce that Minnesotans are all turbo-charged extroverts hyped up on 3.2 beer and have odd fascination with white cotton.  OK, the 3.2 beer is correct…

But what else can we do?  A view from the outside is often the only way we have of learning about other people and cultures.  And being new to China, frankly, doesn’t make that much difference.  Even though I am “here” and have been for some time, I am not really here (starting to sound like a Bob Dylan lyric??).  I am not Chinese nor do I blend in all that well (six foot five and blue eyes stick out somehow …not sure why).  My view is still one of an outsider – maybe a bit more informed than a newbie journalist but not all that much.

Such knee-jerk observations in the press could be an opportunity for those of us, more enlightened, foreign residents of China to retreat smugly into our China-watcher cocoon and pontificate on the “real” China (some of us might even have the hubris to start Blogs and Podcasts … imagine that!).  It would be easy to do as some of these observations – like the Jia You editorial – are pretty easy to swat out of the air.

However, I think we all need to remind ourselves that, like any culture and country, China resists the iron-clad box of clear definition.  We need to monitor our descriptions of China, avoiding definitive statements that begin “China is…” in preference for more qualified ones: “China seems to be…” and “China is in the process of…”  Wimpy?  Maybe.  Wishy-washy?  Yea, probably.  True?  Definitely.

In these pages and Podcasts, we make a point to tease out the subtleties in China business that impact your investments here.  Guaranteed, we have made a couple of Jia You gaffes in the past and likely will do so in the future.  However, the speed and scale of change here has never been seen, at least in modern times, so we are all working without a net.  All we can do is observe, comment and learn.

China-Watchers Jia You!!

The September 2008 issue of IndustryWeek has an important cover story written by the magazine’s editor in chief, David Blanchard. In “Eye on China,” Blanchard explores the idea that “As China rapidly evolves into a more service-oriented economy, U.S. manufacturers need to adjust their China strategy to remain competitive.”

Blanchard’s piece reinforces part of what our own Kent Kedl had to say in his recent podcast about the “new normal” in China: China isn’t simply the cheapest place to find manufacturing labor, but (to paraphrase) it is still one of the best places to establish manufacturing operations.

As a sidebar to Blanchard’s cover story, Technomic Asia’s founder Steven Ganster writes about how Western companies can “China-fy” their manufacturing operations. From the article:

Achieving the right level of China-fication in facility set up, process and equipment is the key to success here. China-fication is transplanting to China what you do well in manufacturing in the West, while exploiting the unique competitive aspects of the Chinese market. China-fication also means you have to do things differently than you do in your home market while not meaningfully compromising the integrity of the end result.

Ganster goes on to remind manufacturers of Technomic Asia’s favorite refrain, to remember the “6 Ds”: due diligence, due diligence, due diligence.

Read the full article on IW’s Web site.

I have decided that for this Olympics, I am going to be “of the people.” If I watch any Olympic coverage on TV, I am going to go to where Chinese people gather and do it there, eschewing private viewing at home. Kinda regular-guy of me, isn’t it? Actually, it is more of a necessity than a moral position – my satellite reception at home is broken and I can’t seem to get my repair guy out to fix it. You know that “we’ll be there between 8 a.m. and 6 p.m. sometime in August” you get in the States? We have that here, too! Cable guys, I guess, are the great cultural equalizer.

But I like this public viewing thing. I watched the opening ceremonies from two different locations, first at a local bar near my home here in Shanghai and then moving on to Malone’s, more of an expat hang-out (which, actually, was loaded with more locals than expats that night). I won’t comment on the opening ceremonies – needless to say they were very cool and had more how-the-heck-did-they-do-that moments than a David Copperfield special.

I spent as much time watching the crowd watch TV as I spent watching TV, and I was enthralled! The faces looking up at the big screen TVs, imagines reflecting off eyeglasses, was amazing. For every amazing moment, local Chinese were not only thinking “isn’t that incredible” … they were also thinking “aren’t we incredible?” When the Chinese national anthem came on, everyone in the bar stood up and sang at the top of their lungs.

As an American, I am conditioned to be wary of mass demonstrations of loyalty and unquestioned fealty for a government – I would say that, on the whole, Americans are proud of our system of government, but we are not necessarily proud of the people or parties that make up that system. We reserve the right to throw the bums out (even if we cannot get a quorum of citizens who care enough to get off their chip-eating, X-Box-playing tushies long enough to actually go into the voting booths).

During the singing of the Chinese national anthem at the opening ceremonies, many people had tears in their eyes, as if they had just won a gold medal after many long years of training. Well, in a sense, they have. Even if much of post-Liberation history has been erased from the books here, the shame of the Opium wars and Japanese colonial occupation is learned by wrote. So, to see 80 world leaders gathered with 91,000 others in a stadium to be watched by – probably – nearly a billion more on television, all to recount 5,000 years of Chinese history and contribution to world culture and commerce … well, that should be emotional.

So I say, let China have its moment. Are there still problems? Of course there are. But I believe that the way out of these problems is through the pride and (yes) abject nationalism of the Chinese people themselves. Pride in building a nation into the fourth largest economy in the world over the past 20 years is child’s play compared to the challenges of building one that represents justice for every one of its citizens. Given that, over the past 200 years, we Americans have not been able to do this ourselves – and, in fact, have slipped drastically backwards in recent years – should give us all pause.

But give it time and the Chinese people will stop comparing themselves to where they have come from and will start measuring themselves against where they could be. Then – and only then – will change happen in China.

Twenty years ago when I was teaching in a Teacher’s Institute in rural China, where the average wage was barely $40 a year, I never thought I would see this day. So I am going to gather with my friends and neighbors at the local pub and will lend my voice to the shouts of “Zhong Guo Jia You!!” (”Go China!!”). I, too, get misty when I see a Chinese gold medal winner on the stands and hear their national anthem. I am not Chinese and I will never claim to know what it is like to be Chinese, but I am honored to be here among them as they are discovering just what that is.