Monday, August 23, 2010

Pam's China Lessons

• Even though China has a large percentage of poor, particularly in the rural areas, it is important due to enormity of the population in sheer numbers.
• As of last week, China has surpassed Japan and is now the second largest economy in the world behind USA!
• The opportunities for new business ventures are endless as made clear by speakers from Mahon China and JFP Holdings. Anything is possible but not necessarily easy.
• Though urbanization is creating a growing middle class that in Beijing looked much like the American counterparts in terms of style and dress, there is a great difference in cultural value of money verses actual value.
• As Americans visiting China, we took great pride in our “negotiation skills” that are a given in the Chinese culture. We most often failed to understand that we were often negotiating literally over the equivalent of pennies.
• One of our speakers, Jack Perkowski, presented our group with the concept of a "cultural" equivalent of $100 vs. 100RMB. That 100RMB is valued to Chinese as much as our $100 is to us, even though it's real equivalent was only $14.74.
• A lot of items really are very cheap in China!
• The one child family rules are very acceptable to the Chinese. They feel they cannot afford more children, thus more than one would be a financial burden.
• Young couples that BOTH come from a single child family are allowed to have two children. I had the impression that Isabella was disappointed that her husband had a brother thus only one child allowed. It seemed in direct conflict with her earlier statement that one child was acceptable due to expense.
• China has a huge population, however, the one child rule has created this 4 grandparent, 2 parent, 1 child population that over time will dramatically reduce the population over the next generation
• Health care delivery in China is very inefficient with such large populations outside of city areas; they are often hard to reach. The rural populations also are less literate, and have less money.
• Due to the many poor, particularly in the rural areas, I came to understand why "good enough" quality needs to be considered even though we see it as “bad” quality. It makes goods available that the poor can afford.
• Cities like Beijing and Shanghai are international cities and thus may not reflect the overall Chinese population. For example, it was quite a surprise to see a Rolls Royce and a Maserati car dealership along with stores like Chanel and Louis Vuitton along the avenues. However, as we took advantage of services on the same street, foot massages, we got a little different story. The young masseuse told us he worked 6 days a week, 12 hours a day, and had no time to go home and visit his family who lived hours away.
• I was fascinated by the multinational company speakers, American and European, who were in China for a very long time. For foreigners whose earnings reflect their home countries, the lifestyle in China seems to be very appealing.
• Topnew, the government owned textile company, offered some interesting points for consideration. Many of us felt that there was a lack of transparency throughout much of the presentation. The factory was impeccably clean and seemingly efficient. It was a clear example of Chinese efficiency with limited expensive technology offset by inexpensive labor, as it seemed like endless rows of employees at sewing machines. I couldn't help but wonder if it typically looked that orderly or if it was cleaned up for visitors. Were the workers usually that focused and with little interaction with each other?
• The dormitories, at first seemed a little disconcerting for many of us, but when you consider how little the factory workers earned each month, you can also appreciate that they were also housed and fed, thus having little or no expenses.
• Factory workers came from rural areas for short stints to make enough money to bring home and survive until the next time they were in need. This makes for a pretty young and/or ever changing employee population. I wonder how it affects loyalty and commitment to the employer. Do these temporary workers go back to the same factories?
• B&Q looked very similar in many ways to our Home Depot and Lowe's home improvement stores. They do a much greater business in a complete installation vs. "do-it-yourself". They say this is due to apartments bought only as 4 walls and everything from kitchen to bathroom must be purchased. Because the buyers must work and labor is cheap, it has great value to hire the installation. This confuses me a bit. If labor in general is cheap, how are they earning enough money to pay for the labor? Another contradiction...only fancy western style toilets, but there were predominately eastern toilets used everywhere we went.
• Guanxi not only is very important, but must be successfully developed if a company is to be profitable in China. Most interesting to me is that there are a diverse number of ways that it can be cultivated. Joint ventures or partnering with a Chinese organization is helpful. Developing relationships with appropriate government officials can also create a “partnership” that allows the government to have some say if the company provides some important good or service that helps the government with its goals. Bribery too, can be an acceptable form of quanxi. In a nutshell, you must find the right Chinese “support” for your particular company or industry to make it all work.
• Microsoft seems to have lacked in guanxi in its first years in China. My interpretation of what was presented to us is that Microsoft was very Unsuccessful in China for the 15 years due to what may be seen as American arrogance. It seems that they are “giving away” their operating system to saturate the market and hope to profit by that later.

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