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Monday

Semi-Final Reflections...

I’m not yet able to fully express my feelings about China and the experience we had there… I find myself thinking about the country everyday as I come into contact with thousands of items that were made there, or look at the prices paid in the US and compare them with the production or sales cost in China, or drive by Panda Express :)... I am also still trying to get my head around the astounding extremes that I bore witness to daily; in regard to economics, opportunity, wealth, sanitation, human rights, and environment, the range was truly phenomenal. One thing I am sure of is that my perceptions and perspective have been changed because of this trip and I expect that the trend will continue in the months to come. Following the path of our journey, here’s some of what I encountered and what affect it had on me:

Shenzhen:

The first city we traveled through was Shenzhen. Primarily an industrial base, the city experienced massive growth towards the end of the 20th century, when it became China’s first Special Economic Zone. The success of Shenzhen has led to a number of SEZs being created throughout the country and they have helped draw in further investment to fuel the rapidly expanding Chinese economy.

Our business stops on the first day of the trip included two factories which produced electronic components/products. The workers, who are almost exclusively from inland China, live and work at the factory location. The apartments we viewed would easily be considered sub-standard by U.S. measures as would the sanitation of the bathroom/shower facilities, and the density of the housing. While the food wasn’t particularly good, the meals we were served we at least well balanced and somewhat nutritious. The working conditions were also unacceptable by western standards and safety did not seem to be anywhere on the list of priorities. Though I’m not pleased with what I saw at these locations, I am certainly glad to have seen it. I hope that these conditions change as time progresses and China modernizes, but what would happen to Sony if the shareholders found out that production prices were going to increase 5-fold… I have a feeling that HD-TV sales would drop off pretty sharply when the prices started running up over $10,000. The bottom line is that as much as the first-world hates the living conditions in the third-world, the vast majority are not willing to incur the cost of having them ended. I suppose you could argue that that is the ugly side of capitalism, but since communism didn’t prevent the conditions from arriving in the first place the blame should perhaps be laid on humanity.

In exploring the city of Shenzhen I had a fantastic time. The energy of a big city was palpable as we explored some of the downtown district. Though I doubt I would have planned a trip there on my own, I would certainly spend another day there if the opportunity arose. The opportunities for businesses in Shenzhen are certainly present and growing as well. The population is increasing; the infrastructure is high quality and growing; and even small increases in wages could pour immense amounts of money into its economy. Though the Chinese save at record rates, the right product in an increasingly capitalistic economy is certain to meet with success there. The marketplace around the corner from our hotel provided me with the promised throngs of Chinese, and walking shoulder-to-shoulder (maybe shoulder-to-head is more realistic) with so many people was exciting in its own right.

Our stop at the Yantian International Container Terminal at the port of Shenzhen was a fantastic illustration of the modern logistics and infrastructure capabilities of this region. The operation was organized and efficient with capacity for future growth already built in. The fact that they can turn around the largest container ships in ¼ the time it takes in the U.S. is all you need to know to understand that they’re on the right track.

A quick stop at a new housing development marketed towards ex-pats illustrated that developers are expecting continued growth in this market. Posing as management trainees for a large U.S. corporation got us in the door and tours of one of the units, further evidence that the growth is not expected to stop.

Shanghai

Shanghai reminds me of New York. The only thing that could improve that skyline is perhaps transplanting Yankee stadium there. Bring the Jets as well and I’m moving. The hustle and bustle was intense and the financial power of that city was dripping from the neon striped buildings. Of all the cities we visited, Shanghai was my favorite, and I would have no qualms about living and working there for a number of years.

The common theme amongst all of our company visits in Shanghai was the almost unlimited opportunity that they see within PRC. Each U.S. based company was excited to be conducting business in China and planning future expansion as the markets become ever more open.

I was particularly impressed with the Urban Planning Exhibition and our visit to CB Richard Ellis. These visits, in tandem, gave me a wonderful understanding of Shanghai’s size and scope as it has evolved over the past few decades. In addition, I learned the future path that is being taken in the development of the city. The detail to which they have already planned out their expansion and infrastructure improvements is truly incredible and a perfect example of how swiftly China is changing. Growth management for a city of over 23 million seems an overwhelming task, but somehow it is well in hand in Shanghai.

Exploring the city, I was exposed to beautiful gardens, parks, plazas, and architecture. The sidewalks were wide, open space was appropriately placed, and trees lined many of the streets. The combination of these details made the city feel much smaller than it actually was. While walking in the Bund area, I came across a giant plaza where a large band of various drums were being played; it was a completely unexpected taste of Chinese culture that was a high point in the day. The French Concession and Bund were both examples of the European influence that permeated Shanghai during the early years of European/Chinese relations.

Perhaps the most moving and unexpected thing I was exposed to in Shanghai was not the beautiful spaces or modern lifestyle, but the poverty that would sometimes reveal itself across the street or around the corner. While exploring the areas we came across, we often noticed that directly adjacent to modern high rises and skyscrapers were blocks of old shanties with residents living in impoverished or semi-impoverished conditions. Open air markets with little or no refrigeration for raw meats and poultry, a lack of sanitation, and a lot of dirt were common place. It was sad from an outsider’s position, but the people did not look unhappy and the promise of the PRC’s growth makes me feel that over time these people and areas will see greater prosperity.

Wuzhen

We spent a few hours in the village of Wuzhen on our way from Shanghai to Hangzhou. This little village fronts waterways in similar fashion to the buildings of Venice, Italy. The city is over 1000 years old and has been converted into a tourist destination with the support of the Chinese government. Within the village, professions are practiced in the traditional way and are available for the tourists to witness and learn about. Dying, distilling, cobbling, silk production, and more are practiced in the same way they were centuries ago. While the same style of historic village can be found in the USA, making brooms and churning butter, the Chinese village was of much more significance to me. Though these workers performed in this manner for the sake of the tourists Yuan (Chinese currency), there are vast swaths of western China where these methods are still followed as a way of life. Wuzhen serves as a reminder that while the Chinese cities on the eastern coast are flourishing in the new economy, much of the west is still hundreds of years behind and in need of global attention.

Hangzhou

Our stay in Hangzhou was brief but beautiful. Situated on the West Lake, the city felt cool, clean, and relaxing. While here we took a boat ride out on the lake and were able to get a fantastic view of the skyline of this small city (only 5 million people). Following the boat tour was a visit to some classical Chinese gardens which featured traditional architecture, and beautiful scenery with exemplified an attention to detail that I found to be a common thread amongst Chinese art, gardens, architecture, cuisine, and writing.

That afternoon we had lunch at a green tea plantation and we able to tour the grounds. We also received a presentation that taught us the history of green tea and the Chinese tea ceremony. At the conclusion of the presentation, Dr. T (the presenter), explained the differences between the various grades of tea and immediately followed up with an offer to sell varying amounts at substantial discounts. Dr. T may have been the best salesman we came across on our trip and a number of our group members happily obliged his pitch with purchases of high quality green tea for themselves, friends, and family.

Our day in Hangzhou concluded with an overnight boat trip that took us down the oldest and longest canal in the world to the city of Suzhou. The groundbreaking for the Grand Canal took place is 486 B.C. and the extension was completed during the early 600’s A.D. The canal now stands at slightly over 1,100 miles. For comparison, the Suez Canal is 120 miles long and the Panama Canal runs 50 miles. The immensity of such a project, completed almost 1500 years ago, leaves me in awe of the Chinese people. No cranes, no bulldozers, no jackhammers… just an incredible idea and the passion to see it happen.

Suzhou

Our time in Suzhou passed quickly. We were only there a day, but got a little taste of what this city is like. Our day started off with a visit to some of the most beautiful Chinese gardens we would see. Though the heat was oppressive outside, the abundance of trees casting their shade across myriad ponds and rock sculptures within the garden provided a feeling of coolness that made the stroll enjoyable. These gardens typified the gardens that would be built by public officials after retiring from public life.

Later in the afternoon we visited “old town” Suzhou which was also built along the waterways. There were a variety of shops and restaurants fronting the water in similar fashion to Wuzhen, just modernized by hundreds of years. The group I was with traversed the waterfront and took an alternative path back through another alleyway of “real China” where we came across citizens mixing concrete for street repair, poultry pens strapped to the back of bikes, and a public toilet that consisted of a pit in the ground with two slabs of concrete straddling the target area. It was another reminder of how close the rich and poor sometimes live within Chinese cities. By this point in the trip, I found myself feeling less surprised by these areas and more curious to look for the details of how these folks live their lives. And as in most areas, meeting a blank stare with a smile and a nod would always get a response in turn.

The second day in Suzhou entailed a trip to the Suzhou Industrial Park. Another of China’s SEZ’s, it blew all of my expectations out of the water. What I expected to be a campus of industrial buildings turned out to be miles upon miles of residential, commercial, industrial, and public spaces subject to very special economic policies geared towards attracting global business to Suzhou. The incentives go well beyond reduced tariffs or taxes and include a Social Security system that operates independent of the rest of China. The industrial park felt more like a separate country than an industrial haven. The whole region was master-planned to provide the greatest level of service to the businesses located within it, and everything we could see seemed modern, advanced, and appropriate. It was another business gem uncovered on this trip to China that caught me totally off guard and showed me just how serious China is as a resource and competitor for the US.

We wrapped up the day by heading back to Shanghai to visit a Carre-Four store (similar to Super Wal-Mart) before embarking on an overnight train ride to Beijing. The store was immense and contained everything from sporting goods to housewares in addition to being a full grocery store. The train was comfortable and climate controlled, and everyone enjoyed relaxing and chatting for a few hours before heading to bed.

Beijing

Arrival in Beijing marked the final leg of our trip. In contrast to Shanghai, which reminded me of New York, Beijing seemed more reminiscent of Los Angeles… rather than a clearly defined city center with decreasing density as you moved outwards, Beijing seemed to sprawl across the landscape for miles upon miles. As I walked through the city, I never felt the energy that had been present in Shanghai and, to a lesser extent, Shenzhen.

The first day began early as we debarked from the train at about 7 and made our way to the hotel. I walked around a little bit with one of my classmates and met another great Chinese salesman while walking through a small park. He explained that he was part of a traveling art exhibit that was headed to the U.S. in a few months. They were actually leaving Beijing that day, so he encouraged us to come with him to look at the work immediately. We knowingly obliged and chatted with him a bit as he led us to the “exhibit.” The clever part of the pitch was that he led us to an actual exhibit that was closed for renovation and upon arriving he explained that the artwork had been relocated across the street. He then led us into the store in which he worked. We weren’t really interested in buying anything so we told him we might come by later and made our way back to the hotel for the day’s company visits.

The first day’s business visits were to the U.S. Commercial Attaché’s office and CB Richard Ellis. The CBRE visit was, as in Shanghai, very enlightening. They had a wonderful grasp on the political and economic climate of Beijing and China, and they provided a lot of insight into how the city is developing. I was most impressed by the amount of infrastructure being built within Beijing. Clearly the city has substantial traffic problems, as we witnessed gridlock on a number of occasions and had to budget time for traffic congestion into our travel plans. To address the issue, the city is greatly expanding their subway coverage throughout the city. The scope of the expansion, which includes miles upon miles of new tunnels and a number of completely new lines, is immense and makes the “Big Dig” in Boston seem like a commonplace project. I can’t imagine a city in the U.S. making a commitment to so much expansion at one time, and I don’t believe there is a city in the U.S. that could get the project done on such a short timeline.

That night, the street we were staying on became a street market that even the pouring rain did not interrupt. I wish I had not eaten so much at dinner because some of the items available would certainly have been worth trying. While the snake didn’t look particularly tasty, the fried starfish on a stick had a lot of potential. After exploring the market a little bit, a few of us decided to make our way over to Tiananmen Square to have a look at it at night. We hired a couple of rickshaws and in just a few minutes were waking around the largest public square in the world. Through we couldn’t go into the square at night, we were able to walk some of the perimeter and take it all in from across the street. It was certainly worthwhile to visit at night and picture the entire square filled with students and protesters as it had been back in 1989.

The second day in Beijing was one of days I had been waiting for since the early stages of planning the trip. It was the day dedicated to hitting the tourist high-points of Beijing. The day started with a trip to Tiananmen Square and the Forbidden City. Tiananmen during the day presented a stark contrast to the previous night’s exposure. It was buzzing with activity as tourists took it in, hawkers sold their goods, soldiers stood vigil and people with things to do strode purposefully through. Directly across the street from Tiananmen was the entrance to the Forbidden City. Looking up at the imposing red walls it was easy to imagine what it must have been like to be an explorer from the west who was to be brought before the emperor. After walking through the arched tunnel and into the open square inside the impressiveness of the Forbidden City only increased. Using the audio tour I was able to learn about the history of the city’s design and construction as well as the history of the inhabitants. It is truly an amazing place and I could easily have spent an entire day there, but the afternoon has us traveling to the Great Wall so I headed back to the bus.

To Be Continued...

Review of HBR: Doing Business in China

The Harvard Business Review on Doing Business in China is comprised of a series articles analyzing economic, cultural, and historic differences that affect the way business dealings are handled in China. The compilation is not too long and would make a good read for any westerner looking to conduct business with the Chinese. Each of the eight articles starts with an executive summary that I found somewhat unnecessary as the articles themselves are not extremely long and none of them were overly complex.

Having read these articles after returning from China and completing all of the work associated with the trip, I found much of the information redundant; but there were a few points that struck me as particularly applicable and worth noting here. One of the articles focused on negotiation and the differences between the western techniques and those used in China. Westerners tend to expect things to happen swiftly and directly while the Chinese will be more cautious and are used to more subtle maneuvering. These differences can be linked to cultural differences that have emerged over the long history of the Chinese people. TANGENT: As the article explored these differences, I found myself thinking of some of the intellectual property issues discussed in the preceding article and on the global political scene. The intellectual property regulations that we seek to implement through the WTO (among other organizations) don’t take into account these cultural differences and I wonder if they aren’t looked at in the same way as western negotiations – domineering and unrefined. Perhaps western politicians should read a few more books about conducting business in China before sitting down to author treaties, regulations, etc. The focus on short-term results is also an interesting point. While China, on a national level, is very long-term oriented, the current environment of double-digit growth has created a decided interest in succeeding NOW. Dealing with a Chinese company means grasping where and when they expect success in order to be working on the same page. While this seems like an obvious consideration prior to entering into dealings with anyone, it may be something that is easily taken for granted and regretted later. Understanding the goals of the Chinese may not be as easy as it sounds as they are less likely to come out and divulge their tactics and expectations. As with negotiations, taking the time to build the relationship and trust is integral to having a successful relationship for any extended period of time. The final high-point of the articles was the importance of understanding the market before trying to enter into it. There are many factors that influence the Chinese consumer and they are not always the same as those of the western consumer. Spending the time and energy to understand the various factors that influence the Chinese buyer can be the cornerstone to success in the Chinese marketplace.

The only real weakness to this “book” is that it is not truly a “book.” It is only a collection of articles and thereby does not fully explore each of the topics it covers. The information is certainly good, and being a relatively quick read, I would definitely recommend it to a businessperson headed towards business in China. It can provide a decent overview of some of the key differences in working with China, but I would recommend following it up with the other two books I read (One Billion Customers and The World is Flat) to really get more of a feel of how things are and where they’re headed. I probably would have enjoyed it more if I had read it first, but the authors are clearly knowledgeable in their areas and provide some good insight that can potentially provide great benefit.