Silk Road International Blog

Sorry for the lack of posting this last month.  Contrary to popular opinion (wishful thinking?) I was not arrested for protesting.  I was on vacation, and then at two different trade shows in the US, and then in a couple of factories for almost all of the last week.

Some interesting mail arrived over the vacation and I thought I should share.  This is a letter from an actual supplier:

DEAR ALL CLIENTS:

VERY IMPORTANT NOTICE!

IN FUTURE, ALL THE BUSINESS SHOULD BE DECLARED AT REAL PRICE AND REAL AMOUNT, CAN’T BE DECLARED AT SMALLER AMOUNT!

BUT WE CAN STILL HELP TO ISSUE THE SMALL VALUE INVOICES!!

PLEASE NOTE THAT WE CAN’T DECLARE LESS AMOUNT, BUT CAN
ISSUE SMALL VALUED INVOICES!

FROM NOW ON, CHINA GOVERNMENT FORBID ANY PAYMENT TO
COME TO CHINA WITHOUT A CONTRACT, AND THE CONTRACT HAVE
TO BE REPORTED TO THE GOVERNMENT, ALL THE DEPOSIT AND PAYMENT
RECEIVED HAVE TO BE SAME AS CONTRACTED!

SO IN FUTURE, THE PAYMENT AND DEPOSIT HAVE TO BE PAID ON TIME
AT RIGHT AMOUNT! OTHERWISE, THE BUSINESS WILL BE DIFFICULT TO GO ON.

CHINA’S RMB CURRENCY APPRICIATED TOO FAST BECAUSE OF TOO MUCH
FOREIGN CAPITALS FLOW TO CHINA, DISTURBED OUR FINANCIAL SYSTEM
TOO MUCH!

THAT’S WHY CHINA GOVERNMENT NOW PUSH HARSH MEASURES TO FORBIDDEN SUCH HAPPENING AGAIN.

THANKS FOR YOUR KNID ATTENTION,

This is telling for a number of reasons.  First, obviously standard practice for many companies in China is to lower the invoice amount to avoid declaration penalties (save money).  If this is a problem for you (and it should be since it’s illegal in the US and other countries) then you need to be involved in the shipping process even if you are buying product FOB.

Second, public announcements of compliance with legal standards are necessary to at least appear to be following the rules (i.e. the default assumption is that no one is).  To be sure that your suppliers are following the standards you require you need to confirm samples and double confirm production and have additional independent confirmation for each step in the process that you will be held accountable for.

Third, prior to this year exporting from China was relatively easy and buying (read: not necessarily qualifying for) the licenses, clearances, export visas, etc. was relatively common.  Since the clampdown last year on toy factories there has been a concerted country-wide effort to require that everything leaving China has a confirmed factory of origin.

Things are certainly changing for the immediate future and hopefully for the long term.  But in the mean time you still must continue to be working under the assumption that the bottom line is driving production/purchasing decisions.  Despite the increasing stringent legal standards if the RMB values higher against foreign currency and domestic inflation increases this will increasingly be the case.

Tags: Business, China // Add Comment »

I have to say the introduction of this book scared me.  Mr. Leonard prefaces his writing by admitting that he knew so little about China that he hoped a trip or two could help him “learn the basics” and then allow him to go home.  But maybe the lack of info on China is what made the book readable.  It’s written from a perspective of “this is what I think that leaders are thinking” with no preconceived notions of what’s already by known Sinophiles.

The book is short, and reflects a number of different strains of thought competing for supremacy within the bureaucracy.  Hence the title is misleading as it does not answer it’s own question—what does China think?  It does advance the theories of a couple of prominent scholars in a couple of general issues—but leaves us wondering about a number of things including who’s listening, what do the masses think, are any of these opinions shared (en masse) by groups such as the new rising middle class, and how much of the thoughts presented are purely Chinese in origin and how much is Leonard’s own amalgamation of collected research?

The book is quite a good introduction to Chinese political thought.  Namely it reviews  (and reinforces) the idea that “China feels it’s due superpower status;” it confirms that China is only recently learning to both play by the international rules and that China is consciously trying to change the rules (as do all powers).  In this sense it’s not unlike books that I read 10+ years ago as an undergrad studying Chinese International Relations—which is where I think this book may be of value, in a undergrad class.

While it is a good review, the book also glosses over the problems of China’s international influence and consciously amoral stand on international relations with rogue nations.  Maybe this is because the people Leonard spoke with don’t think that China has a problem; but surely all the intellectuals he spoke with don’t think the recent changes in policy toward Dufar, Burma and North Korea are all based on (miraculously) coincidental changes in China’s immediate economic advantages.  Yet, Leonard presents the shift in position on sticky issues as a rather conscious recognition of the need to compromise rather than an acceptance of pressure from the international PR disasters that these events indeed have been.

The best part of the book, I thought, was the contrast between different schools of thought and the description of how that debate ultimately results in a relatively unified national direction.  Recently a lot of attention has been give to the idea that China is not monolithic in its power apparatus.  I couldn’t disagree more.  While there are most definitely cliques and ideologies within the Party that differ and a wide distribution of power at local and provincial levels that quite actively revolt against policies made from above there is no international face for China other than CCP and the national level leaders.

I also found it difficult to separate Mr. Leonard’s own analysis from his presentation of “what China itself thinks” in his conclusions.  Some of the analysis is certainly not Chinese in origin and so I’m left wondering, again, whose thoughts are these, really?

At 140+ pages it’s a nice primer for Chinese IR.  A nice road-trip book.  But it certainly needs to be read in context—and in my opinion that context needs to be both the thoughts of the other 1.3 billion people within China (whom are mentioned only in passing) and what the rest of the world will be saying and doing about China’s ideas.

Tags: Book Reviews, China, Politics // Add Comment »

As if visa restrictions and embassy staff weren’t discouraging enough, from the NYT today:

“…when an American called the China Travel Guide Tourist Agency last week, a sales clerk even discouraged the person from visiting Beijing during the Olympics.

“You really don’t want to go there,” said Lorna Liu, the sales representative at China Travel Guide. “Why don’t you try Xi’an or Shanghai and visit Beijing a little later?”

If you can get in, there will be no party; they’ve all be canceled due to security concerns.  Since I’m already “in” and the hotels are empty…hmmm…maybe this is not such bad thing after all.

It’s also not just Olympic travelers that are having issues.  Entire tradeshows in Guangzhou have been canceled and the part of the Chinese economy that is bassed on exports is taking a hit too.  Doing things legally, I was able to get the necessary visas for myself and family with no problems in the US in March.  But others are not so lucky. If you go to Hong Kong, the usually just so-so busy consulate in Wanchai is PACKED to the gills (with new security and new crowd controls).  And the official China Travel Agencies have lines stretching out the doors and around the blocks. Tons of “businessmen” from all over the world are hanging out in Hong Kong waiting for visas.

The only hassles I’ve ever had was getting stoped at the HK boarder for an hour or so with other noticalbly foreign foreigners (yea, I have a beef with the fact that “Asian” foreigners are not stopped too).  We were stopped, asked to provide documentation and then questioned about the number of visits in our passports.  Nothing sinister but tourists without confirmed hotel reservations were turned back.  The biggest annoyance was the at the top of the hour, when the boarder guard shift changed, we were all just let through.  The new shift just didn’t want to deal with us.

Tags: China, Politics // Add Comment »

A couple of really good articles that indirectly have some significance for business in China.

First, of course, if you didn’t know, gas prices in China just went up 18%; but they are still relatively lower than the EU or the US because of remaining government subsidies.  While the domestic consumer market is not expected to revolt, the impact to prices for everything manufactured here is going to go up.  In addition, if you’re working inland and you have to truck in either materials from other provinces or you have to truck product out to a sea port your through-port costs just went up.  By the way, the fact that 18% increase in gas prices is not expected to cause massive revolts nation wide gives you an idea of how “non-Chinese” the big East-coast cities are—meaning you see photos of Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong, but these really aren’t the “reality” for most Chinese.

Second, why being polite is more than just an 0lympic trend.  This article explains very clearly the business environment that most Chinese are familiar with—close personal, inter-provincial relationships.  Historically there has been very little movement between provinces (hence the hundreds of regional dialects).  What this had bred in addition to language variations is both a mistrust for other (Chinese people from other provinces) and an real inability to communicate with strangers on personal level.

If you’ve worked in a factory for any length of time at all you probably noticed the province and regional cliques among the workers.  These are not just for convenience in communicating or because they like the same foods.  But there is a tangible mistrust for “others” that these groups guard against.  When things go bad, when bad news is shown on TV, when someone tells of getting ripped off, one of the first things that happens is people are “stereo-typed” by where the perpetrator was from.  “All Funan people are just like so and so,” or “All Hong Kong people are such and such.”  It can get down right nasty and racist (can you be racist within your own ethnic group?).  Certainly this is not unique to China, but since most foreigners don’t speak Chinese and have a hard time telling the difference between the various Asian ethnicities it blurs the degree to which this happens.  This happens all over Asia (and everywhere else too, I know)—every province in China looks down on some other one, none of the other Chinese like people from Shanghai, Taiwanese in the North look down on their Southern “country” cousins, Thai’s look down on the Lao, Cambodian and their own Esean (northeastern) neighbors.

Quick comedic sidebar.  This is the one and only episode of King of the Hill I’ve ever seen.  My brother showed it to me once after I told him about one of my trips to Laos.

Quotes from “Westie Side Story.” Written by Jonathan Aibel & Greg Berger, Directed by Brian Sheesley.

BILL: They look Japanese.
DALE: Nope. I think they’re Chinese.
BILL: How can you tell?
DALE: Japanese guys usually have glasses and a suit and a tie, and stuff like that.

BOOMHAUER: Yeah, man, them Chinese, man, you can’t understand a dang-ol’ word they say, man, just try, dang ol’ whole upside-down and whatnot.

HANK: So, are you Chinese or Japanese?
KAHN: I live in California last twenty years, but first come from Laos.
HANK: Huh?
KAHN: Laos. We Laotian.
BILL: The ocean? What ocean?
KAHN: We are Laotian. From Laos, stupid! It’s a landlocked country in Southeast Asia. It’s between Vietnam and Thailand, okay? Population 4.7 million.

HANK: So, are you Chinese or Japanese?

OK, so what does this little anthropological foray have to do with business? Specifically, it means that if you are working in Jiangsu and you have someone from Jiangsu you’ll get more attention and probably better pricing.  If you are working in Guangzhou and your project manager speaks Cantonese you’ll get much more of what’s going on that if you rely solely on Mandarin.  If you are foreigner working with (any) Chinese the affect is magnified.  So does this mean that you need to hire a person for each province where you are working?  Yea, it probably does.  And why not?  If you are going hundreds of thousands of dollars of business in Guangzhou but your office is a mandarin only office in Shanghai you might want to rethink you positioning.  Ditto for a Shenzhen based Cantonese speaking office doing work in Ningbo and Jiangsu.  If you are moving into China’s second and third tier cities you’d better really study your positioning before you move.

I double-checked this article’s theory with my resident Chinese expert (my Chinese wife) and she agreed and volunteered a few of my Chinese cultural missteps as examples (so helpful).  She says that when we first got married that I said “please” and “thank you” so much to my in-laws that they thought I didn’t like them!!   In Chinese society, the more polite you are to people the larger the relative social distance.  She says they understand now that I’m being police because I do like them, not the opposite.  She also pointed out that I am way too polite to line workers and office employees.  I try to always proceed a request for work with a “please” and end all emails and most conversations with a “thanks.”  Managers/Owners just don’t talk like that to people on lower economic/professional/educational/social levels.  It not only is contextually not appreciated by the thanked parties, it can also be misinterpreted to mean more than was intended.

Finally, I was sent a map of Chinese development that I really liked.  I don’t agree with all the analysis and there are some cities that are now expanding the edge of the “west coast” of the Isle of China (reclaimed land?), but it’s a very visual way to express the relative development of China.

Tags: Business, China, Culture // Add Comment »

Not sure which is more foreboding for the future of the US Chinese relations.

The fact that the Chinese publicly don’t think that Obama can handle the pressure or make any significant change (smarter than we give them credit for, eh?).

Or

The fact that “it’s the economy, stupid” and McCain is economically stupid, by his own admission!

Scary.

Could the two US political parties have put forward two worse options for President? Our choice as voters is either an extremely liberal political neophyte or a economically challenged bitter centrist. Whiners on both sides will say “But he’s the first black president!” or “But he’s a war hero!”

So what?! How about this for novel voting criteria: “Is he competent?!”

I remember in 1992 when Clinton was elected I had some family traveling in Europe.  While there, they were constantly mocked due to the fact that the US people just elected BC–they couldn’t believe how stupid that vote/selection was (smarter than we give them credit for, eh?).  Most liberals claim that Bush was the (only) one that made the US lose face internationally–that would be true only if US history started in the year 2000 and if the Clintons and Carters never existed.

Wave the flag and pass the apple pie, it’s the next President of the United States. Thiibbbbttttt

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