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Underwriter of Two Rivers--ChinaVest.
See also ChinaVest Business Diary.

Two Rivers is about the umbilical cord between America and Asia, particularly Greater China.  A few amongst us are still pointed to Europe and Russia.  But the more advanced leaders of North America are trafficking across the Pacific and below the Panama Canal.  For more on companies doing business in China, such as ChinaVest, see our Business Diary.

204. -new- Chinese Noodle Dance

The Chinese export machine keeps penetrating new areas. Now it is getting more deeply into consumer outlets.  Hai Di Lao, a successful Chinese restaurant chain, is coming to the States.   "Only in the past several years have Chinese companies significantly embarked outside the country. But most have centered on sectors like energy and manufacturing. Mr. Zhang is one of the few who have gone after consumer."

"In China, every Hai Di Lao employs a handful of "noodle masters," who train an average of four to six months before starting to perform their dance in the middle of the dining room. They stretch foot-long wads of dough into at least 10 feet of slender, ribbonlike noodle by whipping the center out like a jump rope and rippling and swirling it through the air like the ribbons twirled by Olympic rhythmic gymnasts. Often, the dancer flings the dough over customers' heads as they squeal and clap, before folding it with a flourish and dropping it in the broth."

"Hai Di Lao's 75 outlets made more than a 10% profit on 3.127 billion yuan ($510 million) in revenue in 2012, up 54% from a year earlier, Mr. Zhang said.

"The entrepreneur is well aware that not every trick in his playbook will work for the U.S. market. Manicures in restaurants aren't likely to pass muster with U.S. food-safety inspectors. Costs for amenities like hot hand-towel service and dancing wait staff are bound to be higher in the U.S., just as they have been in Singapore."

Look here to see the noodle dance. (05-23-13)


203. China Opens World's Longest Sea Bridge

Built in just four years at a cost reported by the Chinese state media yesterday as 1.42 billion the bridge stands on 5,200 pillars and was entirely designed by Chinese engineers at the Shandong Gausu Group.

We have learned a lot of new techniques and skills during the construction, said Shao Xinpeng, the bridges chief engineer.

At least 10,000 workers toiled in two teams around the clock to build the bridge, working from opposite sides of the bay and linking the two ends together in the middle. That was a totally original design, claimed Mr Shao.

While they were working on the bridge, more engineers were simultaneously building an accompanying tunnel underneath the bay, which will help to ease the traffic flow.

A staggering 450,000 tons of steel was used in the construction, enough for almost 65 Eiffel Towers, and 2.3 million cubic metres of concrete. Chinese officials said that the bridge will be strong enough to withstand a magnitude 8 earthquake, typhoons or the impact of a 300,000 ton ship.

The bridge has eclipsed the current Guinness World Record-holder, the Lake Pontchartrain Causeway in Louisiana, by at least two-and-a-half miles.

However, it will be eclipsed in 2016 by another Chinese bridge, which is being built to link Hong Kong with Macau and Guangdong province and which will be around 30 miles long.

China also boasts a 102-mile-long land bridge on the route of the Beijing to Shanghai high-speed railway.

The worlds longest sea bridge, Qingdao Haiwan Bridge, deconstructed:

Length: 26.4 miles (almost 3 miles longer than the previous record holder)

Width: Six-lane expressway

Capacity: Expected to carry over 30,000 cars a day

Tensile strength: Able to withstand earthquakes of 8.0 magnitudes on the Richter scale, strong typhoons and the impact of a 300,000 tonne vessel

Made up of: 450,000 tonnes of steel and 2.3 million cubic metres of concrete, supported by 5,200 columns

Built by: More than 10,000 workers

Built in: Four years

Importance: Reduces the distance between Quingdao city and the Huangdao district by around 18 miles

(March 27, 2013)

202. Chinese Ready for the Exits

Sinologists and Silicon Valley lobbyists are constantly at work telling us how all the young bright Chinese brainy entrepreneurs are deserting America and making their way back to the Ancient Kingdom to seek their fortune. But lately we notice that there is more commentary on bright people coming this way. Moreover, several wealthy Chinese have their suitcases packed, ready for a quick exit to other countries if things get too touchy in China. For instance, the Wall Street Journal declares "More Wealthy Chinese Said to Prepare Exits." And Der Spiegel tells us "Successful Chinese Emigrating to West in Droves." In these volatile times, agile people are ever on the move, finding almost all pastures less than green.


 201. Child Prostitution and Slavery in India

India probably has more modern slaves than any country in the world. It has millions of women and girls in its brothels, often held captive for their first few years until they grow resigned to their fate. China surely has more prostitutes, but they are typically working voluntarily. India's brothels are also unusually violent, with ferocious beatings common and pimps sometimes even killing girls who are uncooperative.

Unicef has estimated that worldwide 1.8 million children enter the sex trade each year. Too many are in the United States, which should prosecute pimps much more aggressively, but the worst abuses take place in countries like Pakistan, India, Bangladesh, Nepal and Cambodia"   "Raiding a Brothel in India," Nicholas Kristof, New York Times May 25, 2011.

The Indians themselves are well aware of their child prostitution and child slavery problem, but have not really been able to come to grips with it. Child slavery has a long history in India, through thick and thin.  Moral questions aside, the mis-use of human capital throughout India is yet one more impediment to the successful growth of the national economy.


 200. Beyond the Censors: China’s Publishing Industry

The censors in China exert a heavy hand on popular media, the broadcast industry, and the Internet. But, it seems, the book publishers have a freer  hand and are flourishing.  “Mr. Zheng’s triumph reflects a significant shift in Chinese society as headlong economic development has brought new liberalization and ideas.  While film, radio and television remain squarely under the thumb of the Chinese government, the book industry has steadily become more open:  New York Times, December 27, 2010, p.B3. Certain subjects are still very much off limits—such as Taiwan, the Dalai Lama, the dark periods in Communist party history. But literature, much of it imported, pours off the presses:  Chinese publishing houses bought 15,700 foreign titles in 2008. 

This loosening up has also been accompanied by a gradual change in governance at the highest levels of Beijing’s councils.  More than one of our sources has asked government officials if various saber rattling portends a cold or hot war with America.  All the officials say, “No way.  The Chinese people will not tolerate it.”  While the country is far from democratic, the people have sway.  This is not unlike, say, 16th and 17th century England were inchoate freedom developed as the economy grew, even if the populace could not vote.  Economic liberalism gradually fosters an articulate bourgeoisie. (3-2-2011)

199. Poking Through the Great Firewall

“How Dissidents Punch Holes in China’s Great Firewall—and Evade the Cyberpolice.” Wired, November 2010, pp.178-186.  Sketching out how Falun Gong members and others in this country have devised software systems tied to proxy servers with programs such as UltraSurf and Freegate to thwart digital barriers erected in China, this article implicitly recognizes the central dilemma of China’s rather able leadership.  On the one hand, it has, in its own eyes, to control information exchange that threatens its political dominance, but on the other, has to build freer information exchange if it is to have a modern economy and a system that successfully manages the huge numbers of everything, especially people, with which it must deal.  China today, for instance, could never have a 311 data collection system, such at that in New York City, where citizen questions and complaints are gathered, answered, and analyzed.  Though the article does cover the rise of Iranian voices with virtually the same needs as the Chinese, it is not global enough in its outlook, since nations all about the earth are all doing information sifting and censorship that are thwarting the promise of the internet.  Turkey, for instance, seems to be fiddling with social networking sites, most notably Facebook, even though we bump into scads of Turkish users there. (10-26-10)

198. Huge Healthcare Opening in China

The Wall Street Journal is just one of many publications that is beginning to realize that the Chinese Government is going to spend aplenty on healthcare.  This is really a 2-year old story, and we are surprised that media have learned about the party so late.  “That nation plans to spend $125 billion to build tens of thousands of hospitals and clinics, extending health care to nearly all of its citizens. Its ambitious three-year plan, announced last year, has created a rare feeding frenzy in the lucrative field of diagnostic-imaging machines, an area in which Western manufacturers still face little Chinese competition.”

“Indeed, China's total medical device and equipment market is expected to roughly double between now and 2015 to $53.7 billion, according to market-research firm Frost & Sullivan. That figure includes products ranging from patient-monitoring devices to stents, but much of the growth will likely come from MRI and CT scanners, which are highly profitable and can cost up to $2 million apiece.” (Frost and Sullivan, incidentally, published a report on these prospects back in February 2004.)

“GE, which plans to increase its 4,000-employee health-care work force in China by as much as 15% this year, has expanded its line of lower-priced Brivo imaging equipment beyond X-ray machines and into CT scanners that are roughly 30% less expensive than the company's costlier models. GE says it has sold 70 Brivo scanners in China since they were introduced in March”

With its vast aging population and its huge peasant population vastly underserved by the healthcare sector, the PRP government is contemplating some innovative mass health measures that have not yet been reported in the Western press. (08-04-10)

197. Chinese Workers and Beijing

The WSJ reports that Chinese worker unrest is posing a threat to the highest levels of the Chinese government, and that Beijing does not quite know what to do about it. “The success of strikers at three Honda parts factories near Guangzhou in winning concessions is creating a dilemma for the Communist Party, which wants to be seen as supporting better conditions for workers yet is fearful that strikes led by militant workers could escalate into broader demands for more autonomous unions and pose a threat to its unchallenged rule.”  In our own view, the reporting in this article is overblown.  The Government is concerned, but not alarmed, by labor restiveness we are led to believe.

The main fear of the Government has been and will continue to be the peasantry inland .  Chinese leaders have long feared that rural peasants, if aroused, could blow the top off things.  The main concern of government bureaucrats is to see whether the rising costs of urban labor can be met by rising sophistication in industy.  The question is whether industry can move up the value chain so as to produce cost competitive products that still can absorb more expensive labor. (08-04-10)

196. The Party’s Hidden Levers of Power

In  “China’s Private Party,” WSJ, May 15, 2010, Richard McGregor details how China’s leadership keeps a tight hold on all the major institutions in its society.  All the top people in the society are wired together, literally, by a private phone system.  “The phones are encrypted not just to secure party and government communications from foreign intelligence agencies. They also provide protection against snooping by anyone in China outside the party's governing system. Possession of the red machine means you have qualified for membership of the tight-knit club that runs the country, a small group of about 300 people, mainly men, with responsibility for about one-fifth of humanity.

The modern world is replete with examples of elite networks that wield behind-the-scenes power beyond their mere numerical strength. The United Kingdom had the "old-boy network," originally coined to describe connections between former students of upper-class, non-government schools; Japan has the Todai elite, graduates of the law school of Tokyo University, an entry point into the long-time ruling Liberal Democratic Party, the Finance Ministry and business. The U.S. has the Ivy League, the Beltway, K Street and the military-industrial complex, and a host of other labels to signify the opaque influence of well-connected insiders.

None can hold a candle to the Chinese Communist Party, which takes ruling-class networking to an entirely new level. The red machine gives the party apparatus a hotline into multiple arms of the state, including the government-owned companies that China promotes around the world these days as independent commercial entities.”  The WSJ article is an escerpt from McGregor’s book The Party. (07-14-10)

195. Is It Too Late to Enter China?

This is just a silly rhetorical question, the title of an article by Edward Tse, chairman of Booz in China, that appears in the Harvard Business Review, April 2010, pp.96-101.  Of course, it’s not too late.  Booz itself has been late to most parties, and yet it’s still around, peddling advice far and near.  In fact, any Tom, Dick, and Harry can make a nickel there and obtain semi-fame, as laments our China correspondent who talks about an instant China expert who made the front page of the Wall Street Journal:  “However, it scares the hell out of me when a fellow who builds a law practice in Hawaii (of all places) and has all of two years experience in China is being quoted as an "expert" on China's property market!”  In fact, latecomers might easily do better there, avoiding some of the missteps of the fools who first rushed in.  If GM can make money in China, anybody can.  As ever, the mantra should be to ‘make haste slowly.’

But Tse gives us little interesting factoids which should prepare us for the China Adventure.  “The number of private companies in China shot up from 140,000 in 1992 to 6.6 million by the end of 2008, even as the number of foreign corporations grew to 435,000. Of the Fortune 500 companies, about 480 are already in China….”  “China surpassed the U.S. as the world’s largest automotive market in 2009.”  For the first time the net profits of China’s top 500 companies exceed the top 500 in the U.S. in the first half of 2009.  “No other country –not even Japan or the United States—has as many products and brands as China does.”  (05-05-10)

194. -new- China’s Invisible Barriers

It’s not the Chinese Wall that keeps foreign influences out of China.  It is all sorts of virtual barriers.  Most recently, we are hearing more about the enthusiasm with which the Chinese Government is clamping down on internet transmissions it regards as unfriendly, such that Google has wondered whether it should pull up stakes there.  It should be noted, however, that millions of Chinese do find pathways around the censors, often abetted by offshore services located in America and elsewhere.  Moreover, a host of Government officials in China are very regular users of Google and would not know what to do without it.

Despite its promises of fairer trade practices with its accession to the WTO in 2001, the Chinese Government and local governments have found countless ways to keep foreign products out of China.  “China accounts for less than 2% of the global sales of drug giants such as Pfizer, Astra-Zeneca, and Bayer, estimates IMS.”   (Economist, October 17, 2009, p73).  The complaints about China range from  “subsidized competition, restricted access, conflicting regulations, a lack of protection for intellectual property and opaque and arbitrary bureaucracy.” “China agreed to allow foreign firms to compete to offer booking systems to local airlines, but according to the European Chamber it has not yet produced the necessary regulations.”  “Local officials go to great lengths to protect companies on their patch, often by giving them preferential access to land or credit, or by easing bureaucratic constraints for them.” 

This said, a number of companies are doing well in China, if they produce locally there.  At the moment, anyway, many foreign companies with large manufacturing operations in China are prospering, and this is not much reported on by the Western press. (02-24-10)

193. China:  The Green Giant
In 2006, China surpassed the U.S. as the world’s greatest producer of greenhouse gases.  Those who are pessimistic about the country’s future might dwell on its pollution levels and it mysterious disease outbreaks and its curiously adulterated products—such as its milk supply.  In Beijing, pollution counts often enough reach the 500 level whereas U.S. cities grimace in horror if they even touch 100.  It’s not uncommon to see strange plumes as one flies into Chinese cities such as Shanghai.

But, the Chinese are trying harder to do something about it than the U.S.  Although U.S. research still produces an awful lot of breakthroughs, the Chinese have ramped up their efforts hugely during the last 20 years. More importantly, they have become leading producers and installers of green installations, such as wind turbines and solar equipment.  Evan Osnos surveys this giant program in “Green Giant, Beijing’s crash program for clean energy,” New Yorker, December 21 and 28, 2009, pp.54-65.  In 2003, China made virtually no solar cells: by 2008, it made more than any other country.  The Coda, a $30,000 all-electric car that will be hitting the U.S market soon, gets a critical component, its lithium batteries, from China.  China is a huge producer now of wind turbines. (02-10-10)

192. Is China a Disaster Waiting to Happen?

China watchers have long wondered whether China and its buoyant economy is doomed to implode.  They point to the restive peasants in the interior, that rural oppressed mass even feared by the Chinese leadership.  Others have focused on its over-geared banking system which holds loans that will never be repaid but which have really been made to please the various whims of government officials.  And there are a crop of other sore points.

The Economist (January 16, 2010, pp. 67-70) allows that there are problems. “Chronic overinvestment has, it is argued, resulted in vast excess capacity and falling returns on capital.  A flood of bank lending threatens a future surge in bad loans, while markets for shares and property look dangerously frothy.”  But it would argue that all these concerns are very over-stated, and that its problems do not begin to measure up to real bubble economies. 

But we must recognize that some very smart parties, including James Chanos and Pivot Capital, feel that things are very risky.  One has to take Chanos very seriously since he has made some very prescient calls. “As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.

“Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.” He is planning a speech later this month at the University of Oxford to drive home his point.”---New York Times,  January 7, 2010. The insufficient returns on invested capital deserve a great deal of attention.  In China’s command economy, a great deal of capital is wasted, and, in this regard, it does not appear to compare well with another big growth economy—India.  That’s a real worry. (01-20-10)

Update: The Invisible Hand

It’s not clear who runs what in China’s financial system, but ultimately it’s obvious that the Central Government  is the prime mover in all the major banks.  “ ‘The State Council…tells them to lend, and they lend.’  Overt controls increase in line with the amount of credit.  Loans above $500M are said to be directly vetted by the State Council.”  “Red Mist,” The Economist, February 6, 2010, pp.79-80.  “Something like four-fifths of the assets in the banking system are controlled by 17 institutions.” “Technically, the banks fall under the auspices of Liu Mingkang, chairman of the China Banking Regulatory Commission.  Interest-rate and exchange-rate decisions come under Zhou Xiaochuan, head of the People’s Bank of China….Even so, in the shifting currents of power, many believe the critical hand is played by Wang Qishan, the vice-premier responsible for the financial sector, a former mayor of Beijing and former head of China Construction Bank.” He “is a member of the Politburo, the government’s chief political arm.  He also serves on three big regulatory commissions covering insurance, banking and securities.”

As in the United States, both the concentration of assets and the unfortunate nature of government regulation lead to a mis-allocation of credit and capital.  Perhaps the biggest negative effect in both countries is that too much capital is constantly being pushed at big enterprises, too little at small companies and organizations, the places where most employment is created and where the major long-term economic growth cumulatively occurs. “Virtually non-existent in 1979 when China took its first steps away from centralized planning orthodoxy, its smaller companies numbered around 1m by 1990 and 8m by 2001.  Today they total around 60m….Together they account for 60% of China’s GDP and half its tax revenues.  More than 95% are privately owned….” “They are responsible for 66% of the country’s patent applications and more than 80% of its new products.”  “China’s Struggling Smaller Firms,” The Economist, September 12, 2009, pp.70-71. “They are also responsible for 68% of China’s exports,” and the drop in export growth has particularly hurt them.  “Of the more than 7 trillion yuan loaned out in the first half of this year by Chinese banks, only an estimated 10% has gone to smaller firms.”

Meanwhile, it should be noted that Fitch has downgraded ratings of two midsize Chinese banks.  “It represents the first time in more than six years that Fitch has downgraded a Chinese bank.”  Wall Street Journal, February 3, 2010, p. A12 (02-10-10)

191. Getting China’s Consumers Consuming
It’s said that the two kingpin economies of the world—China and the U.S.—are both out of  kilter.  The U.S. consumes too much and does not save and invest enough.  China makes things, build roads, saves a lot of money, but its people, particularly its vast peasant population don’t have enough to spend, have a truly miserable health system, etc.  For the world to function right, both countries have to mend their ways.  James Surowiecki remarked on the Chinese problem in “The Frugal Republic,” New Yorker, December 7, 2009, p. 35.  “Proportionate to its economy, China spends far too little.  Consumption accounts for just thirty-five percent of G.D.P., significantly lower than for most Asian countries and only half the rate of the United States.  Chinese households set aside a quarter of their disposable income, and, collectively, consumers and institutions put away $2.5 trillion every year.”  “Credit isn’t always that easy to come by.  China’s policy of holding down the value of its currency means that consumer prices are higher than they would otherwise be…”  “Once you move beyond China’s biggest cities, there’s often  a dearth of retail outlets and products for sale.”  “The inadequacy of the social safety net forces the Chinese to engage in ‘precautionary savings,’ buffering themselves against disaster.” “In the past decase, in fact, the share of G.D.P. that goes to wages has actually fallen, while the share that goes to profits has risen.”  What does not seem well understood in China, even amongst China’s very smart top rulers, is that its overwhelming focus on infrastructure and production probably is politically destabilizing.  The Government would be wise to follow the example of autocratic Bismarck who ladled out some beneficience as he knit Germany together in the 19th century. (01-06-10)

190. -new- Double-Digit Depression

“More than 17 percent of Chinese adults have a mental disorder…far more than the 1 to 9 percent reported in studies done between 1982 and 2004.”  New York Times, June 16, 2009, p.D6.  This finding comes from a study by Columbia University researchers who worked with counterparts at hospitals in Beijing, Shandong, Zhejiang, Qinghai, and Gansu.  See also “Comparing Diagnostic Methods for Mental Disorders in China, Lancet,13 June 2009, pp.2002-2004.  These findings are not at all surprising, as variously described mental disorders now run epidemic in developed and fast developing countries.  One would suspect that this study merely corrects the flaws in previous studies.  The authors caution us that they cannot say that the numbers revealed here would hold true for the whole of China. (09-09-09)

189. Entrepreneurs Key to Chinese Economic Growth

Yasheng Huang, in the December 2008 edition of the McKinsey Quarterly, claims it was rural entrepreneurs, not state iniatives and investments, that put China on the road to high growth. “What actually happened is that early local experiments with financial liberalization and private ownership, in the 1980s, generated an initial burst of rural entrepreneurialism. Those earlier gains—not the massive state-led infrastructure investments and urbanization drive of the 1990s—laid the true foundation for the Chinese miracle.” “Although many experts contrast China’s grand infrastructure projects and gleaming factories built using foreign money with India’s dilapidated highways and paltry foreign-direct-investment flows, this point of view overstates the contribution of public spending and foreign investment to China’s growth.” “Shanghai is the most visible symbol of China’s urban development. Its modern skyscrapers, foreign luxury boutiques, and top-ranking GDP per capita make it China’s model city—a glittering testament to the success of state-led capitalism. Or is it? By more meaningful measures of economic achievement, Shanghai’s rise is far less impressive than that of Wenzhou, an enclave of entrepreneurial capitalism a few hundred miles to the south, in Zhejiang province. In the early 1980s, Wenzhou was known for little more than its struggling farmers. Of five million inhabitants, fewer than 10 percent were classified as urban. Today, Wenzhou is China’s most dynamic municipality, teeming with businesses that dominate European garment markets. By contrast, Shanghai, once home to China’s earliest industrialists, is now oddly bereft of native entrepreneurs.” “The real mystery of China’s miracle isn’t how the economy grew, but how Western experts got the growth story so wrong.” Private ownership, holds the author, is the key to how China achieved dynamic growth. (06-24-09)

188. -new- China’s Wine Will Runneth Over
“In May, Berry Brothers & Rudd,” an English wine merchant on St. James, predicted in its “Future of Wine Report” that in 50 years China would be the world’s leading wine producer.  Further it says China has the right conditions to produce wines of absolutely the first rank.   China is already sixth, with some “400 wineries.”  New York Times Magazine, December 14, 2008, p.80. 

187. China’s Transportation and Logistics
ChinaVest, a merchant banking house based in Shanghai, has long focused on China’s efforts to knit itself together, which involves ports, highways, trains, airplanes, warehouses, American fast-forward services such as FedEx and UPS, and so many other things.  It includes, too, the Internet: China now has more Internet users than the USA.  Its newsletter is making a more determined effort to share some of its insights with us, and China observers would do well to look there to see how the tapestry is coming together.  China’s government has determined to weave the interior to the over-developed coastline and, in the process, to create one large national market, not unlike what the U.S. did after the Civil War across the whole of the nation. We are hopeful that ChinaVest will broaden its review over time to include more of the less dramatic but terribly important nodes that collectively are creating one nation.  Shanghai, we learn in a recent report, is China’s dragon, handling 3 times the containers of any other city, but a slew of other ports are fast making themselves key distribution centers. In cargo, however, several cities, especially Ningbo, are giving Shanghai a run for the money.  Nanjing, it seems, is the top river port.  (11/5/08)

186. Drucker in Asia
Peter Drucker lives on.  Back when Drucker and the rest of the Four Horsemen (Juran, Deming, and Feigenbaum) were at NYU, the Japanese paid them much more heed than Americans.  Now, we notice, America is fast forgetting Drucker, but Asia still worships at his feet.  This is chronicled in “Drucker’s Teachings Find Following in Asia,” Wall Street Journal, June 18, 2008, p. B2.  “In China … Mr. Drucker is the man of the moment.  In the past few years, devotees have created 14 Drucker academies in Beijing, Shanghai, Xian, and other Chinese cities.”  “Mr. Drucker himself laid the groundwork for China’s enthusiasm … meeting in 2000 with leaders of the nonprofit Bright China Management Foundation to get the Drucker academies started.  Last year 6,000 Chinese managers graduated from the academies….”  Other countries, such as Japan, South Korea, and Japan share this continuing enthusiasm for Drucker.  (10/22/08)

185. Fantastic Restaurants in Beijing?
We would suggest that modern China needs one more turn of the screw before it offers truly great cuisine.  We find, for instance, that very young, mobile chefs who have gone to other ports prepare more interesting, fresher dishes than are available on the Chinese mainland or, for that matter, in the various Chinatowns across the world.  That said, an intrepid Stan Sesser, writing for the Wall Street Journal, May 9, 2008, p. W1, boldly proclaims he has found offbeat Beijing and some real winners.  Here are some of his discoveries: Liqun Roast Dunk(PekingDuck) 11 Beixangfeng Alley, Zhengyi Rd., Chongwen district; (86-10) 6705-5578.  Jiu Men Xlao Chi (Beijing-style snacks) 1 Xiaoyou Hutong off Denei Dajie Rd. Xicheng district; (86-10) 6402-5858. Guo Yao Xlao Ju (Tan Family cuisine).  58 Jiaodaokou Bei Santiao, Dongcheng district; (86-10) 6403-1940. Jun Qin Hua (Guizhou). 88 Meishuguan Houjie, Dongcheng district; (86-10) 6404-7600 Xlan Lao Man(Beijing-style dumplings). 252 An Nei Da Jie, Dongcheng district; (86-10) 6404-6944. Jade Garden (Jiangsu) 6 Jiqingli Chao Wai Ave., Chaoyang district; (86-10) 6552-8688.  Hong Zhuang Yuan (Beijing congee) 7 Panjia Yuan Rd. (near Panjia Yuan antique market), Chaoyang district; (86-10) 8771-80 Hua Jia Yi Yuan (Modern Beijing) 235 Inner Dongzhimen St., DONGCHENG DIST.; (86-10) 6405-1908 Kejia Xlao Zhen (Hakka) 103 Manheyan Dajie, turn into Nanwaizi Hutong (across from Days Inn), Dongcheng Dist.; (86-10) 6522-8993, Fei Teng Yu Xlang (Sichuan) 1 Gong Ti Bei Lu (Corner of Chun Xiu Rd.), Chaoyang district; (86-10) 6417-4988. (7/16/08)

184. UPS in China
“United Parcel Service Inc, which aims to open an international express-delivery hub in Shanghai in November, is doubling its bet on mainland China with plans to move its hub for regional shipments to the booming southern Chinese city of Shenzen.”  (See “UPS Enlarges Footprint in China, Wall Street Journal, May 22, 2008, p. B4). It will have 5 times the capacity of its former hub in the Phillipines.  Fed Ex is going to open in Guangzhou and DHL plans a facility in Shanghai.  As we have noted, China has been focused in developing its internal market, with heavy emphasis on logistics, transportation, and communication. These expansions go hand-in-hand with this effort to knit together the Chinese heartland. (7/2/08)

183. China’s Try for an Ultra-Power Grid
Reviving a Soviet era technology, China is trying to patch up its power grid.  “China’s power distributors have been” pushing “an ultrahigh-voltage power grid that would transfer large volumes of electricity from remote inland regions rich in coal and hydropower to economic powerhouses along the coast” (Wall Street Journal, November 15, 2007, p. A20).  State Grid Corporation is shepherding a pilot project “than will link parts of Shanxi province with Jingmen city in the central province of Hubei via a 1,000- kilowatt alternating- current transmission line.”  Generating and transmission capacity investment “could reach $2.9 trillion, equivalent to a quarter of the world’s total….”  “Last year China added more than 100 gigawatts of power-generating capacity—equivalent to France’s entire installed capacity.”  (2/27/08)

182. Herbal Drugs–Shanghai Hutchison Pharmaceutical
“Shanghai Hutchison sold 200 million doses last year for $8.7 million, with sales up 17% from 2005.”  “The two companies, Shanghai Hutchison and Hutchinson MediPharma..share the same parent, Hutchison China MetTech, or Chi-Med.”  It is trying to expand traditional herbal drug market, while uncovering brand new drugs from Asian flora.  See Forbes, June 4, 2007, pp. 80-84.  It is owned by Li Ka-shing, Asia’s richest man.  “Sales of Western pharmaceuticals in China grew 91% in five years to $13 billion in 3005 … roughly equal … to the traditional Chinese medicine market.”  Western firms have had a few hit drugs derived from herbs for malaria (Novartis Coartem) and for genital warts (Medigene of Germany).   Samantha “Du and her staff have screened 10,000 traditional Chinese medicines looking for ones that influence cancers and the immune system and have come up with a handful of new prospects.”  The FDA allows botanicals to skip early stage trials if the candidate has a history of safety already in China.  (2/13/08)

181. Charles Bethell Wheat
Can a young man from Shanghai do well and do good in America?  Born in Shanghai on June 18, 1933, Chuck was reared in California and Oklahoma, many of his business acquaintances knowing him as the witty Okie from Ohio.  In fact, he became as American as apple pie, and it’s all too fitting that he spent a good portion of his life in Middletown, Ohio.  Wherever he hung out—Ohio, Virginia, London, even New York City—he sank his feet into the clay and made the place very much his home.  In at least two locations, he even penned local histories.

For he was a journalist and writer.  We remember him as a speechmaker for corporate presidents at substantial global companies.  At one point we visited him at the top of a skyscraper in the Midwest, where he officed with the chairman, president, and vice chairman who were his writing clients.  Not for him the pits of the public relations department at the lower depths.

We experienced his creativity in several ways.  Most fun perhaps was his contribution to the unending novel on this website called Monongahela.  His chapter was called “Escape from San Quentin.” 

But he never forgot his entry into this world in Shanghai, which he recounted for us:

I was born in the British Country Hospital in Shanghai.  When people ask me why I was born in China, I used to reply "to be near my mother."  Actually, I was the first (legitimate) U.S. child born to a member of the  Navy's Yangtse Patrol.  My dad, a J.G. at the time, was Gunnery Officer (executive officer on a gunboat) on the Panay.  This was in 1933, four years before the Japs sank her.  During those years, the Navy had the responsibility of being the police force on the Yangtse under the treaty ending the Boxer Rebellion. War lords, pirates and the like.  I recall several good tales told me about that which I won't bore you with now.
I was only 2 years old when my dad was transferred to the Philippines, so I recall nothing personally of China.  Pity.  But when I worked in London, a good friend who was born in the same hospital in Shanghai allowed me to join the annual luncheon in Limehouse of the London Born in Shanghai Club.  Fascinating.  Even a member of the famous Soong family was there.  And when my friend's mother and mine got together one time in that lady's suburban home near London, we all had a blast watching those two formidable old women compare notes on living in China.  They got out street maps and recalled old memories of the Bund, "Bubbling Well Road" and the race course, and watching the Jap bombs fall on Shanghai from the rooftop of the old Metropole Hotel.  And my mother saying of that hostel "those Satin sheets. Ah, those Satin sheets!"  A sweet memory of her for me that never fades.

He made his mark, leaving his bevy of friends bereft, and Asia, North America, and Europe emptier for his passing.  At the end, he had found his way back to the water—on the Eastern Shore of Virginia at Onancock.  He wouldn’t miss Christmas but took his exit on December 28, 2007.  (1/23/08)

180. Finally, the China Pot of Gold
Thar’s gold in them thar hills. As the Wall Street Journal puts it, “China Begins to Fulfill Its Potential for Profit,” October 9, 2007, p. A12 ff.  “A 1998 survey by consulting firm A.T. Kearney found more than one-third of multinationals were losing money in China, and an additional 25% were barely breaking even.” “An analysis by San Francisco-based Revere Data of filings by companies trading on U.S. stock exchanges shows that 44 reported that 5% or more of their 2001 revenue came from China. By last year, the number had leapt to 108. The true figure is all but certainly higher, because many companies don't disclose revenue by country.” According to a survey of the U.S.-China Business Council, 83% of the American companies they have surveyed now are getting profits, and usually profits that matter, from China. “China is now, by far, Yum’s most important growth market. In the first half of this year, the China division, which includes small operations in Taiwan and Thailand, accounted for 70% of the company’s profit growth over the same period last year. In the most recent period, Yum would have reported an operating loss if not for the $65 million in operating profit from China.” The WSJ reporter mainly reports on the growth of the Chinese market and the fast growth in revenue of many American corporations. But we do understand from reliable sources that many of the majors really are making significant profits there. It’s still another matter yet as to whether those profits are getting re-patriated. Getting the money back out has always been a problem in the People’s Republic. (1/16/08)

179. China Investment Research Sources
As China’s equity markets burgeon and, frankly, get overheated, the need for serious investment commentary grows stronger.  Some of the sources of information on China’s companies and markets have become tainted, as entrepreneurs involved with the markets have over-reached themselves, even to the point of incurring the wrath of the Chinese government.  Below are a couple of sources that enjoy a good reputation.  We will be adding to this list:

  1. Chinavest, a merchant banking firm that is helping major American firms gets positioned in China and is helping Chinese firms invest outside Greater China, publishes a frequent newsletter that details transactions of note in the Chinese financial markets.  Its reports are archived on its website in its Research Library.  Prior to the founding of the merchant bank, Robert Theleen was China’s premier venture capitalist, having started venture activities there several decades ago.
  2. Research-Works is headed by Hugh Peyman, a veteran commentator on Asia’s and China’s public companies. Institutional investors throughout the West purchase his research.  Each year, in addition, it publishes a handbook on China’s principal companies, some 200 of them.
  3. Latitude Capital Group is focused on private companies and is based in Hong Kong.  We have found its notes on real estate activity helpful, although its sector updates can give investors a quick snapshot of other areas as well. (1/2/08)

178. China’s Environment and Pollution
China is about to displace Germany as the world’s third biggest economy.  But it is also getting ready to overtake the U.S. economy in one important respect.  Its pollution and gaseous output is set to equal the world’s largest economy, occasioned in some respects by the fact that China’s infrastructure is a vast sieve that wastes energy and resources while creating a flow of contaminants.  All that said, the Chinese government has begun to turn the heat up on environmental protections in a number of ways.  We will be following here both the depth of the country’s environmental problems and its accelerating efforts to get on top of them.

Readers are urged to peek in several places on the Global Province—Agile Companies, Big Ideas, Two Rivers—where you will discover that China is already up to a great deal that will make an environmental difference.  For instance, in “Windpower,” we learn that the Chinese are only producing 68 wind megawatts today, but 400 megs are in sight, and some visualize 20 gigawatts by 2020.  In “Solar Shi,” we learn as well that one of China’s richer men has made his ascent through solar manufacturing.  Suntech Power Holdings, now listed on the New York Stock Exchange, is now a big photovoltaic equipment producer, with “first world technology and developing world prices.” 

Amidst its flood of greenhouse gases, China is forging ahead with clean-tech, according to the Economist, July 21, 2007, pp. 64-65.  One report puts the economic cost of air and water pollution at around $100 billion a year, or 5.8% of China’s GDP.  “Venture-capital investment in clean tech in China is picking up, increasing by 147% from $170m in 2005 to $410m last year, according to the Cleantech Group....”  Several companies trying to earn credits under the Kyoto Protocal by doing clean up projects in poor countries to offset their emissions in the more developed world are taking on projects in China.  The government has already approved some 524 projects; “China accounted for 61% of the CDM market last year, which was worth nearly $5 billion.”  The Chinese Government has also pushed standards and projects of its own.  The Joint US-China Co-operation on Clean Energy (JUCCCE), headed by Peggy Liu, once of Silicon Valley, and now a venture capitalist in China, is now particularly enthused about cutting energy waste in buildings, which tend to use 2 or 3 times more power than buildings elsewhere in the world.  “Last year the government set a goal of reducing the energy consumption of new buildings by 50%, and in some cases by 65%.”  As elsewhere, green ideas depend on government subsidies.  “A shining exception is solar-powered water heaters, of which China has more than any other country.  Chinese firms sold $2.6 billion of them last year alone.”

Despite this tremendous commitment, a clean environment and sustainable practices will not come easy to China.  This is easy to see in Beijing which, in a way, is an environmental laboratory for all of China.  As part of its Olympic bid, China pledged to make Beijing and its environs green for the 2008 Summer Olympics.  “Smog and Mirrors,” Wired, pp. 146-149 and 158, explores both the successes and the limitations of the clean-up.  “They’ve shuttered the worst of Chairman Mao’s beloved old blast furnaces, torn up streets to build subway lines, upgraded sewerage plants.  They’ve planted tens of millions of trees, pulverizing a nearby mountain for fresh soil.”  Olympic Village will have solar-powered showers, a fleet of electric buses in on the way, and energy-efficient streetlights are being installed in some places.  “Chinese officials promised to pour $12.2 billion into cleaning up.”  Despite this copious effort, the air is still dense, poisoned by the 2 million cars now on the streets, and by the foul stream of effluents coursing in from neighboring Hebei Province, a heavily industrialized area. (11/7/07)

177. China’s Advancing, Retreating Internet
China’s Internet is making great strides technically.  On the other hand, the government is maintaining as tight a clamp as ever over it, and it’s uncertain what bloggist or what site will be put out of business next.

“In research labs throughout China, engineers are busy working on another project of that the Chinese government plans to unveil at the Olympics: China’s Next Generation Internet (CNGI), a faster, more secure, more mobile version of the current one.”  See CIO, July 15, 2006, pp. 43-48.  “CNGI is the culmination of this revolutionary plan” to turn China into the world’s innovation capital, says Wu Hequan, vice president of the Chinese Academy of Engineering.  “The technology at the heart of CNGI is an emerging communication standard called Internet protocol version 6 (Ipv6)….  The current standard, Ipv4 … doesn’t have enough unique addresses for every would-be user in the world to connect to the Internet.”  By getting a jump on adapting to ‘6,’ it could seize an innovation lead, developing products around the new standard:  Japan and Korea are trying to be early adopters as well.  “China’s NextGenerationn Internet could further tighten its control over Internet access and traffic while offering a strategic advantage to foreign intelligence.”  If the U.S. remains on ‘4,” it will become impossible to track China traffic back to its source.  “Today CNGI connects 100 universities, 100 research institutes and 100 companies in 20 cities.”  “China, which is expected to surpass the United States as the world’s biggest Internet user later this year, has just 2 percent of the world’s IP addresses, or around 60 million—about as many as Stanford University.”

Ipv6 solves “the address shortage by increasing the number of decimal values in each address from 4 to 16 (or 128 bits), resulting in a near infinite number of combinations….  Ipv6 can also recognize Ipv4 traffic, allowing network operators to phase out the old standard over time.”  

Internet and wireless voice and internet use are spreading copiously in China.  But “the government has also spent freely to keep its liberating side-effects under control.”  See “China and the Internet,” Economist, April 29, 2006, pp. 27-30.  Even with efforts of American firms to placate the government so as to maintain their market presence, local firms are gaining ground, and having a more profound effect on China’s people and economy.  The search engine Baidu apparently now controls some 56% of the search market.  Another important domestic internet company is Jack Ma’s Alibaba

Other sources suggest that China’s Internet population grew 18% in 2004 and 2005, and 23% in 2006.  See Deborah Fallows, “China’s Online Population Explosion,” Pew Internet Center, July 2007.  At these rates China could have 210 million users by the beginning of 2009.  China’s Internet population is overwhelmingly urban, and now it is interesting to see if the country can get substantially beyond its 3.1% rural penetration.  Wireless telephones have made major inroads, and it is possible that wireless transmission may expand Internet usage, if farmers and the like can see the upside of using it.  (10/31/07)

Update: Mobile Fun Downloads, Social Life, Games
In “Alternative Reality,” The Economist, February 2, 2008, we become clear that the Chinese Internet is not a knockoff of what goes on in Western countries, but instead an intriguing organism that is developing along far different lines. It just reached 210 million users, up 50% in a year, it is 3 times larger than that of India, its software savvy neighbor, and it is slated to soon surpass America’s numbers. And still, it just covers 16% of the population, so its rocketing growth probably will continue unabated. Despite severe government controls, it is flourishing as a tool of youth—in contrast to the West. “More than 70% of Chinese internet users are under 30, precisely the opposite of America….” Margins at leading internet firms are 28%, a contrast to America’s 15%. Its “most obvious use is to distribute free pirated films, television shows and music.”

Though the Government screens out content that is politically objectionable, it has not stopped piracy of foreign media.  “When it comes to making money online, the biggest market involves the delivery of mobile-internet content to mobile phones.”  “Another big field is online multiplayer games, which have become so popular the government has started to worry about their impact on adults’ productivity and children’s education.”  “The most dynamic area, and the hardest for outsiders to understand, is that of online communities, many of which are run by a company named Tencent.  Its site offers an instant-messaging service and a MySpace-like social networking site….”  Read more about Tencent in “Internet Boom in China is Built on Virtual Fun.”  Also see “Creating Consumer  Value in Digital China,” Morgan Stanley, September 12, 2005, Richard Ji and Mary Meeker.  It appears, however, that Internet user growth in China has exceeded even the optimistic estimates put out by Morgan Stanley in 2007.   (3/12/08)

Update: Welcome, Big Brother
As we have previously indicated, a very high percentage of Internet users in China are quite young.  And their elders are quite concerned about the tone and content of what passes through the Internet portals.  So “Few in China Complain About Internet Control” reports Deborah Fallows of the Pew Internet & American Lifek Project, March 27, 2008.  “According to findings from the fourth and most recent of a series of surveys about internet use in China from 2000 to 2007,1 over 80% of respondents say they think the internet should be managed or controlled, and in 2007, almost 85% say they think the government should be responsible for doing it.”  “Three-quarters of respondents deemed reliable most or all the information on government websites, compared with 46% for pages from established media, 28% for results from search engines, 11% for content on bulletin boards and in advertisements, 4% for information from individuals' web pages, and 3% for postings in chat rooms. In addition, an overwhelming 93% of internet users said they considered much of internet content to be unsuitable for children.”  (6/18/08)

176. Religion in China
The July/August 2007 Atlantic is heavily devoted to various aspects of China and is well worth a read.  The editors have put a stake in the ground and decided to make China their own special province, though most of the world is little aware of this, because it is not relentless enough to attack the subject in every issue.  The fine journalist James Fallows has a signature article here on why we should be content that China has become the world’s cheap manufacturing machine, but it is a little thin, and Fallows is better when he describes an enterprise or a business TV program, as he has done in recent times.  Jeffrey Tayler’s “South of the Clouds” is quite fine, an intelligent look at Kunming, China’s City of Eternal Spring, in Yunnan Province, sorely tempting us to make a sortie in its direction on our next trip over.  Northwest of Kunming is the Qiongzhu Si, the Bamboo Temple, which reminds us that religious activity is never far from the surface in China.

“I stepped up to the rope cordoning off the hall from the courtyard and focused on the walls on either side of the Buddhas.  There, surfing sculpted waves, were the surreal characters for which the temple is known: an imperious duke astride a flying rooster, a masked buffoon atop a lion, devils mounted on dragons, and a multitude of other playful statues, all commissioned from the famous 19th-century Sichuanese sculptor Li Guangxiu and modeled after arhats, or monks who’ve attained nirvana.  It took Li more than seven years to complete the collection, which comprises 500 figures, each depicting an aspect of human experience.”

That brings us to the most important article in the issue, Adam Miner’s “Keeping Faith,” billed as Bishop “Jin Luxian’s 50-year struggle to keep Catholicism alive in China, balance Rome and Beijing, and build a Church for “100 million Catholics.”  Luxian, at great sacrifice to himself, has kept the original Catholic Church alive in China, even as the State constructed its own version of Catholicism with priests who toed the official line.  At times this task has put him at odds with Rome as well.  “Defying canon law, as Jin has done on several occasions, is no small matter for a Catholic bishop.  But Rome has tolerated his disobedience, largely because of what he’s accomplished in Shanghai.  From his modern office, Jin looks out over a diocese that includes 141 registered churches, 74 priests (most under the age of 40), 86 nuns, 83 seminarians, and 150,000 laypeople.”  “In 1980, China officially had 3 million Catholics (likely an underestimate due to poor census data), the same number it had had in 1949.  Today, the best estimates place the Catholic population between 12 million and 15 million.  No single explanation accounts for this.”  Jin’s survival, even amidst incarceration, and his subsequent rebound as Bishop of Shanghai indicates how resilient religion has been, even with the various moods of the Communist Party. 

Today the Party and the State have become rather permissive towards several religions, except for cults that it thinks may create social instability.  Particularly with the stresses between the cities and the rural poor, it has come to regard religion as a useful opiate to keep the peace.  See, too, “Christianity in China.”

In “When Opium can be Benign,” February 3, 2007, pp. 25-27 the Economist discusses the resurrection of religion in China.  “The resurgence encompasses ancient folk religions and ancestor worship, along with the organized religions of Buddhism, Taoism, Islam … and Christianity.”  (10/24/07)

175. Finding the Great Wall
“There isn’t a scholar at any university in the world who specializes in the Great Wall.  The fortifications have been poorly preserved, and in the past many sections of low-lying wall were plundered for building materials, especially during the Cultural Revolution.”  See “Walking the Great Wall,” New Yorker, May 21, 2007, pp. 56-65.  Since 2002, David Spindler “has worked as an independent scholar of the Great Wall, and although he has no academic affiliation or outside funding, he has become one of its leading researchers.”  This should remind us, incidentally, that the most interesting, original, and provocative research always is done without much official sponsorship, since independent people do not stroke institutions very well.  Spindler had studied at Peking University, worked for CNN’s Beijing bureau, tried Harvard Law, worked for McKinsey & Company, again in Beijing, and then simply quit to do the great Wall.

“In 2006, Spindler began giving more lectures—his main client was Abercrombie & Ken, a high-end travel service—and his income rose to twenty-nine thousand dollars.”

Dong Yaohui, a former utility line worker, has become a Wall compulsive as well.  “He helped found the Great Wall Society of China, which publishes two journals and advocates preservation of the fortifications.”  A British geologist, William Lindsay, had done 4 wall related books and founded the International Friends of the Great Wall.  Wall enthusiasts maintain a website at

The author of this article queries enthusiasts about the importance of the wall.  Many consider it to be a symbol of national pride, a way of waving the flag.  But the most committed wall enthusiasts think of it more as a historical symbol of how China defended itself against attacks from invaders.  It is most interesting that a raft of foreigners have proven to be its most diligent explorers.  The Great Wall is so visible, such an important symbol, but so forgotten.  (10/3/07)

Update:  China Heritage Quarterly and Great Wall

China is so busy re-inventing itself that it is hard to remember that it so wonderfully old and that it harbors a durable culture that, out of sight, survives, sometimes because it is so neglected, sometimes because an oddsome bunch of foreign enthusiasts keep it alive. One of the ways to stay in touch with its culture is to pay heed to Australia’s China Heritage Quarterly.   As we have suggested before, for instance, Chinese scholarship on the Great Wall has been patchy and many from abroad know it better than the locals.  So it is worth a read of  “The Great Walls of China”  As well, see “The Great Wall of China: Tangible, Intangible, and Destructible.” “Although walls rarely form a part of traditional Chinese ritual concerns, they play a key role in Chinese discourses of power and provide an aesthetic for defining urban spaces and housing that resonates through Chinese architectural history.” “Great Wall studies (Changchengxue) is a relatively new branch of Chinese scholarship that examines the history of China's various walls, and it is a field that attracts professional archaeologists and amateur enthusiasts. The China Great Wall Society is the leading organisation championing the restoration of the Great Wall…”  To some extent, the CHQ is rather too caught up in its missionary zeal to save artifacts and edifices, a passion that sometimes gets in the way of appreciating the heritage itself. 

174. Spurt of Private Colleges in India 
“Amity is part of a wave of private universities in India—the most high-profile backed by the nation’s business moguls—that are sprouting up to meet the demand for skilled workers.”  Amity started as a small management school 16 years ago, financed by Ashok Chauham, head of AKC Group of Companies that has flourished in plastics and herbal medical products.  Now it has 45,000 students on two campuses near New Delhi with plans to expand throughout India.  There are quality questions about some of the new colleges.  On the other hand, Shiv Nadar’s Sri Sivasubramaniya Nadar College of Engineering has earned high marks for its educational standards.  (7/11/07)

173. India Short on Tech Workers 
Though India “produces two and a half million college graduates and four hundred thousand engineers,” it is short on postgraduates and many undergraduates come out of community colleges with rather incomplete educations.  “India spends roughly three and half per cent of its G.D.P. on education, significantly below the percentage spent by the U.S…” (New Yorker, April 16, 2007, p. 54).  Despite its investment incidentally, the U.S. is also running into shortages of knowledge workers with critical skills.  (7/4/07)

172. China’s Reality Business School
“There is also a best Chinese reality show….  We first heard of  Ying Zai Zhongguo, or Win in China from … Baifang Schell, who was involved in the production (“Win in China,” Atlantic, April 2007, pp. 72-78).  The show offers big money to contestants, the originator Wang Lifen having raised the money from big investors in China.  Prominent business figures served as judges and played other parts in the show’s promotion.  CCTV has now renewed the show for 2 more seasons.  (6/13/07)

171. China’s Promontory Point
In 1869 America spanned the continent, tracks from East and West uniting at Promontory Point.  About a century and a half later burgeoning China is getting the task done, putting railroads across its interior so that all its commerce is no longer concentrated along the coasts.  See Wall Street Journal, March 20, 2007, p. A8.  “The plan calls for the government to nearly quadruple its investment in the nation’s railroads to almost $200 billion by 2010.  The aim is to create 10,500 miles of new track, much of it in underserved central and western China.  By the end of the decade, if China meets its goal, the rail system will have grown to more than 56,000 miles.”  “In many countries, railroads carry as much as 20% of all containerized freight; China’s historically underfunded tracks transport less than 2% of its shipping containers.”  Since trucks are cost effective for a distance of about 300 miles, this isolates the interior and makes it hard for it to participate in the export trade.  James Wang, a transportation geographer at the University of Hong Kong, calculates that no less than 94% of China’s international trade is generated within 150 miles of the coast.”  “A centerpiece of the plan is the creation of 18 logistics centers to expedite the distribution of containers throughout China.”

China Logistics News details some of the details on logistic center plans.  “Property consultant Jones Lang LaSalle (JLL) said in a research report that China’s five main logistics centers could be joined by ten second-tier cities as centers of manufacturing and logistics.  The second-tier cities all show increasing trends in retail growth.  They are Chengdu, Hangzhou, Shenyang, Chongqing, Wuhan, Nanjing, Harbin, Changchun, Xi'an and Zhengzhou.”  “Logistics activity is expected to consolidate in to the five main hubs of Beijing, Shanghai, Guangzhou, Shenzhen and Tianjin.  In northeast China’s the Bohai Bay region, Beijing and Tianjin dominate the market.”  See Establish for logistic highlights and links to sundry logistics publications.  (6/13/07)

170. The Growth of the English-Language Press
Well, newspapers may be dying in the West, but not in China.  And emphatically not in India.  India’s population, incidentally, includes the second-largest body of English- speaking citizens in the world.  See “Let 1,000 Titles Bloom,” Economist, February 15, 2007:

India has some 300 big newspapers, with a combined circulation of 157m last year--a rise of 12.9% on 2005.  Only a few dozen of these rags, with a circulation of 35m, are in English, but they get about half of the advertising cash.  The economy has grown by 8% a year over the past four years and growth has been particularly strong among traditional advertisers, such as carmakers, property developers and airlines.  …  The language of inspiration is English and the medium of aspiration is the newspaper, so an English newspaper is almost a ladder on which this class seeks to rise.  …  In recent years, led by the Times of India, the biggest English dailies in each region have gone national, breaking a gentleman’s agreement to avoid each other’s patches.  For example, the Deccan Chronicle, traditionally of Hyderabad, has won a circulation of nearly 200,000 in Chennai, traditional home of the Hindu, in just 18 months.  (5/16/07)

169. China Getting Green 
Long a laggard, China is turning green and trying on health.  Its environmental and healthcare problems are huge, but interestingly its government has become mildly activist on both questions.  “China Tilts Green: Global Warming Softens Stance,” WSJ, February 13, 2007, p.4 talks about this change of heart.  “China, which could soon surpass the U.S. as the top generator of carbon-dioxide emissions, is rethinking its policies regarding greenhouse gases.”  It is embracing carbon credits, a Kyoto Protocol idea, where companies in developed countries are allowed higher emissions by finding gas reduction projects in developing countries.  It is launching a program to use energy more efficiently. 

In health, as well, China shows signs of at least turning the corner.  “In China, Farmers Become Health-Care Monitors: Test Program Targets Nation’s Broken System; Fining the Local Doctor,” WSJ, February 13, 2007, pp. A1 and A22.  “Only a small fraction of China’s rural population receives any health-care aid, compared with about 90% in the early 1970s.”  “One pivotal problem: In China, most village doctors make their income solely by selling drugs.”  Citizens are being encouraged to speak up about bad care.  “In 2003, William C. Hsiao, a chair professor of economics at Harvard’s School of Public Health, began enrolling about 60,000 farmers in a health-insurance program he and other academics designed.”  The enrollees have a big say in how the money is spent and controlled.  Various studies have shown that over-prescription of drugs in rampant.  Hsiao’s program, and others like it, unfortunately only get at a portion of the costs borne by a seriously ill patient, and does nothing to remedy underinvestment in hospitals, health services, etc.  (5/9/07)

168. Broad Air Conditioning
James Fallows has once again given us insight into the shape of the future.  His “Mr. Zhang Builds his Dream Town,” Atlantic, March 2007, pp. 84-92 provides tremendous insight into the ways of China’s growing band of capitalists and into the many ways they are reshaping the world beyond China’s borders.  Zhang Zue and his company are located in Changsha, well inland from the Coast.  In China, it is now correct to say, “Go West, young man, since the greatest expansion is now taking place in the heartland.  Not only is Zhang’s home a virtual palace, but it is housed in substantial enclave—a factory town estate totally controlled by him.  “In China, Changsha,” with a population equal to New York City’s, “is famous as the capital of Hunan province and one of the places where the young Mao Zedong lived and worked.”  Broad Town has a fancy club, a 130-foot-high gold-covered replica of an Egyptian pyramid, and 43 bronze statues of leaders from different cultures and different times.  The factory and its workers are run with military precision.

Zhang, one of the few leaders in China allowed to fly his own craft about the country, interviews Fallows about aircraft, anxious to buy a more fuel-efficient, environmentally friendly plane.  He wants it now, though Fallows would prefer to have him wait 3 years until a new generation of executive jets are in circulation.  Zhang has a do-it-now impatience that puts executives in the West to shame.  Interestingly top Chinese are becoming activists about energy, the health, and the environment, pushing these issues with a fervor not yet found in the United States.

A control room in the factory manages real-time control of air conditioning installations all over the world—in hotels, at malls, in airports.  It is probably not widely understood that a Chinese company is in command of building systems all over the globe.  “Broad Air Conditioning has no debt, and last year had annual sales of about $300 million.  The company’s English name is derived from Yuan Da, which means expansive or spacious.” “Broad’s specialty is a form of air-conditioning that uses less energy than conventional means.”  The company has been the subject of a Harvard Business School case called “Broad Air Conditioning and Environmental Protection.”  Their coolers are non-electric, using natural gas to boil a special liquid, which, upon condensing cools the surrounding air.

“Employees are like an army in mufti.  They eat, work, and sleep in the base—I mean, the factory grounds.”  “Solar-energy collectors are everywhere in Broad Town.  Part of boot-camp indoctrination is training employees about environmental issues.” 

Zhang has set out what he expects the “The World in 2015” to look like.  In it, Asia becomes the center of the universe.  We could put that down to jingoism, except that Zhang and his peers have a habit of making their visions come true.  (5/2/07)

167. China’s Irrational Exuberance
The U.S. is not alone in having millions who are playing the stock market as if it were a crap game.  China’s markets are equally frothy.  See “Chinese United by Common Goal: A Hot Stock Tip,” New York Times, January 30, 2007, pp. A1 and A10.  “Less than two years after share prices collapsed, China’s stock markets are almost going mad … with the leading Shanghai Composite Index approaching 3000….”  “One mutual fund raised $5 billion in a single day.”

This is a worry to the government.  See “Stock Frenzy in China Stokes Official Concern,” Wall Street Journal, January 30, 2007, pp. A1 and A15.  Investors are using their homes as collateral to buy stocks, or even running up bills on their credit cards to raise cash for plunges.  “The Chinese Securities Regulatory Commission … hasn’t permitted the sales of any new mutual funds this year, following the launch of 92 new funds in 2006….”  With the run-up, China’s markets are now third in Asia, after Japan and Hong Kong.  (3/28/07)

166. China’s Optics Valley
See Global Sources, 5 October 2006.  “Wuhan, capital of Hubei province, is known as China’s Optical Valley.  It is the first and largest base for the optical electronics and photoelectronics industries in China.”  “Its fiber-optic cable sector is currently third in the world in terms of manufacturing capability.”  “Wuhan currently has 48 colleges and universities, 56 institutes, 11 national key laboratories and 10 national project technology centers.  The Wuhan Research Institute of Post and Telecommunications (WRI) and Huazhong University of Science & Technology (HUST) are considered leaders in optics technologies.”  “Wuhan has about 600 optical electronics product makers, which in 2004 hit $40.17 billion in output.  About 30 of these companies are optical communication or fiber-optic makers.  Twenty of the top 500 companies worldwide have invested and established factories in Wuhan, and these include NEC, IBM, Fujikura and Philips.”  “FiberHome’s products are exported to 37 countries and regions.  The company has set up overseas offices in Saudi Arabia, Russia, Nigeria, Malaysia and South Africa. In 2005, FiberHome achieved an estimated total sales of about $376 million, in which optical communication systems accounted for about $10.79 million.  Its export sales is estimated to have reached $25 million in 2005.”  (2/7/07)

165. China Business: The Almost Agile WSJ
The Wall Street Journal is now offering a China Briefing, which is a grand idea, but the execution is lacking on all counts.  It cumbersome title is dumb: “The Wall Street Journal Briefing: China Business.”  Its content is undigested: it looks like a hackneyed rewrite of wire service pieces, so it’s more of a chronicle than a briefing with insight.  And the promotion for it is dismal, so its success will depend on an avid readership demand, rather than on the merchandising finesse of Dow Jones.  In sum, it has all the problems that usually occur with WSJ publications—outside of the flagship newspaper.  For somewhat similar reasons, the WSJ has botched its European and Asian editions and has utterly snatched defeat from the jaws of victory with the Far Eastern Economic Review.  All this saddens us, because the WSJ should be America’s premier publication.  (12/27/06)

164. Solar Shi
Suddenly Shi Zhengrong of Wuxi has now become one of China’s richest people.  See “For Chinese Tycoon, Solar Power Fuels Overnight Wealth,” Wall Street Journal, October 12, 2006, pp.A1 and 10.  Though unobserved, considerable wealth is now being amassed in the advanced developing countries by adventurous entrepreneurs who have placed bets on alternate energy.  In this regard read about Tulsi Tanti’s Suzlon Energy in India where a textile captain became a windpower general.  (For more on solar, see “Solar Power Revisited.”  Suntech Power Holdings, now listed on the New York Stock Exchange, is now a big photovoltaic equipment producer, with “first world technology and developing world prices.”  Shi is also a prime example of the power of China’s policy of sending students abroad to learn—in Zhengrong’s case, to Australia—and then reaping benefits much later when the savvy student returns to China with entrepreneurial ideas.  Ninety percent of the equipment produced in China is estimated to be sent abroad, particularly to countries like Germany and Japan which offer incentives to solar energy producers.  His company, registered in 2001, has achieved very fast growth. Through necessity, he invented a cheaper manufacturing process that was ready for primetime in 2003 when solar sales took off, soaring to $266 million last year.  (12/13/06)

163. Yum Yum in China
Yum Brands, owner of KFC and Pizza Hut, is making quite a mark in China, not only by implanting many outlets there, but by starting a whole new chain in China to serve Chinese food.  See “One U.S. Chain’s Unlikely Goal: Pitching Chinese Food in China,” Wall Street Journal, October 20, 2006, pp. A1 and A8.  East Dawning is the name of its Chinese food chain, and it is proceeding slowly and deliberating, already scrapping one version and opening stores at a slow rate.  Among other things, it has been hard to come up with a formula for all of China, since the tastes and cooking are so different in different regions.  Yum got 16% of its profit in China last year, operating 2000 stores in 400 Chinese cities, well ahead of its international rival McDonald’s. 

Sam Su, who is leading the effort, hails from Taiwan and comes out of Proctor and Gamble’s operations in Germany.  Yum has gotten a leg up by offering a better atmosphere than typical Chinese fast-food chains, but building a nation-wide menu with enough variety will be more challenging.  Other chains are nipping at it.  Yonghe King, open since 1995, is looking to open 500 locations, having entered a partnership with Jollibee, a chain in the Phillipines.  (12/6/06)

162. IBM Purchasing in Shenzen
IBM is moving the headquarters for its global procurement arm from Somers, New York to Shenzen (Wall Street Journal, October 12, 2006, p. B3).  IBM has been sourcing for hardware in Asia for 50 years; now it plans to buy more there for both the software and services part of its business.  It spends “30% of its $40 billion procurement budget in the Asian-Pacific region, of which about half is spent in China.”  “IBM employs a quarter of its 7,500 procurement personnel in Asia, with 700 in China.”  “China is IBM’s eighth-largest market and the company’s sales there grew 8% in 2005.”  It is also expanding in India, with a software development center in Calcutta that will be second in employment in India only to Bangalore.  “IBM expanded its work force in India to 43,000 in June from 38,500 in December 2005.  (11/22/06)

161. China’s Thirst
China’s growth is outrunning its infrastructure—in so many ways.  Most recently we read that “China’s Urban Growth Overwhelms Water Supply,” Wall Street Journal, August 23, 2006.  There’s both water pollution and a shortage of potable water. “By the end of last year, about 52% of the wastewater from cities was being treated, up from 34%in 2000.”  “The government says some 300 million people don’t have access to clean drinking water.”  “Leakage remains a problem.  About 20% of a typical Chinese city’s water supply is lost because aging pipes leak badly—more than double the ratio of losses for a city in the West….”  (10/18/06)

Update: More Water Problems
Getting new water is not an easy matter.  It is very complex to change the course of rivers.  And regulation of water resources requires ingenuity at the point of consumption that thus far has been lacking. 

For instance, “an engineering project as ambitious and controversial as the Three Gorges Dam is attempting to divert billions of tons of water from China’s floodprone south to the Yellow River and the cities that rely on it” (Wall Street Journal, October 20, 2006, p. A8).  “The lack of water in China’s north is so severe that planners have quickened construction of a part of the canal network to make sure there is enough water to supply the Beijing Olympics in 2008.”  China has ¼ of the per capita water resources of the world’s average; in Beijing, 1/30.  “More than 300 million people … lack access to clean drinking water….”  More than half of the waterways are badly polluted, and ¼ of them cannot be used for anything.  This diversion would take water from the Yangtze to the North.  “The entire project could take decades … at an estimated cost of $60 billion….” The eastern part of the project would involve an upgrade of the Grand Canal, the longest in the world at 1,100 miles, which dates back 1,400 years. 

Many commentators think the diversion will lead to great ecological damage and substantial waste.  They are urging conservation and better water management.  Even the water minister Wang Sucheng has spoken out against some parts of the diversion proposal.  But sundry government bodies now urge a rise in the price of water which, even with substantial hikes that have occurred, is still at 1/3 of estimated average cost around the world.  And, “more money” to help fix leaking pipes would make a difference.  The Chinese media says urban pipes leak at twice the rate of those in developed countries. Even where wastewater plants are available, they are often under-used or not used at all.  See the Economist, October 28, 2006, p. 50.  (1/17/07)

160. The Bloom Is off the Factory
China is getting more expensive, and, a little at a time, its manufacturing position is eroding, especially in the coastal provinces.  See “China Loses Some Allure as World Factory,” Wall Street Journal, August 7, 2006, p. A4.  We are seeing as well a decline in foreign direct investment in China, both in absolute terms and as a percentage of GDP.  “At this point, much of the manufacturing that can be profitably shifted to China has already moved, while the lowest-end production is starting to migrate away to less expensive locations.”  Vietnam is one such location.  (9/27/06)

159. China’s Soft Underbelly
Will The Boat Sink the Water is an investigation of Chinese peasant life by two Chinese journalists.  See “Betrayed by the Revolution,” Wall Street Journal, July 6, 2006, p. D8.  Published in 2003, it sold 250,000 copies before the authorities yanked it off of China’s shelves.  “The authors describe a world of violence and corruption, a world in which Chinese peasants—the supposed beneficiaries of the communist revolution—suffer at the hands of vicious local officials.”  The book “suggests that a threat to China’s Communist Party now exists in the form of peasant uprisings.”  It is widely known, moreover, that the biggest fear of the Chinese leadership is that the Chinese peasantry, left behind so far by the country’s coast economic development, will rise up against the government.  (9/6/06)

158. Fine Wines in China
“In October 2000, however, Nicolas Billot-Grima decided to build a winery, far from his native Bordeaux, within sight of the Great Wall of China, 43 miles northwest of Beijing” (New York Times, July 4, 2006, p. C7).  “Wine consumption in China, including Hong Kong, is forecast to grow 78 percent in the 10 years to 2009, according to a study by The International Wine and Spirit Record in London.”  Chinese wines, though growing in volume, are a bit substandard in quality.  A number of foreign winemakers are setting up small projects in China, and a few Chinese vintners are trying to crawl into the quality game.  All this reminds us that once a year we had a celebration in New York’s Chinatown, and our host also brought along a couple of bottles of cheap Chinese Chablis:  we would not know what to do with Chinese wine that pretended to be upscale ripple.  (8/30/06)

157. Wumart vs. Wal-Mart
Shares of Beijing based Wumart Stores have been on the rise.  “In February, Wumart agreed to pay US $46 million for a majority stake in Merrymart, the fourth-largest retailer by size in the Beijing area.  In April, Wumar paid US$22 million for a 28% stake in Shanghai-listed supermarket retailer Xinhua Co., which has a strong position in the northern Ningxia province.”  Major chains only have 0.5% of retail sales in the China market, obviously the world’s largest by population.  “The prospect to all this competition led local retailers to lobby for a set of proposed regulations that may curb the expansion plans of foreign retailers and benefit local players” (Wall Street Journal, July 20, 2006, p. C14).  “Wumart’s market share in the great Beijing area will be slightly more than 5%.”  Wumart is giving the foreign discount chains a run for the money.  (8/23/06)

156. The Mandarin Offensive
“Ma is the deputy director general of the National Office for Teaching Chinese as a Foreign Language, better known as Hanban, and the map chronicles his success exporting Mandarin around the world” (Wired, April 2006, pp. 84-93).  “The map shows that the hottest markets for Mandarin are Thailand and South Korea, where all elementary and middle schools will offer Chinese by 2007.”  Mandarin is already the most spoken language in the world and is second on the Internet.  “The government is backing” the Mandarin initiative “to the tune of nearly $25 million a year.”  Gasper Caperton, former governor of West Virginia and now president of the College Board, is a major promoter of Chinese learning in the United States.  (8/23/06)

155. Foreign Capital Going to Secondary Cities
Foreign real estate investment in China was up 37% in 2006 from the second quarter in 2005.  While there was still heavy investment in Beijing and Shanghai, over 2/3 of the deals were done in secondary cities, especially Chengdu, Guangzhou, Nanjing, Tianjin, Quindao, and Guiyang. See Latitude China Real Estate Quarterly, Second Quarter 2006.  (8/16/06)

154. Auto Passion
China is fast knitting its coast and the rest of the country together, creating one giant, integrated domestic market.  Ample evidence of this is provided by the national highway network—which is growing by leaps and bounds—the huge growth in automobiles, and the zeal with which the Chinese who can afford it are taking to their cars.  “Capitalist Roaders,” (New York Times, July 2, 2006, pp. 30-37, 50, 54) lays out just this story: Ted Conover, a Western journalist who writes about roads and prisons and all manner of thing, takes a journey to Hubei Province, with a stopover at the Great Gorges Dam, as part of an auto club, clubs increasingly popular among the affluent.  “Total miles of highway in the country: at least 23,000, more than double what existed in 2001, and second now only to the United States.  Number of passenger cars on the road: about 6 million in 2000 and about 20 million today.”  While most of the cars in the writer’s expedition were foreign-made, “more than 40 local brands are currently manufactured in China.”  Gordon Wu’s “Guangzhou-Shenzhen Superhighway was the beginning of an infrastructure binge that seems to be only picking up steam: the government recently announced a target of 53,000 freeway miles by 2035.  (The U.S. Interstate Highway System, 50 years old last week, presently comprises 46,000 miles of roads.)”  The Chinese driver’s “style of driving helped me understand better why China, with 2.6 percent of the world’s vehicles, had 21 percent of its road fatalities in 2002….”  “According to The Wall Street Journal, Bejiing’s sulfur-dioxide levels in 2004 were more than double New York’s, and airborne-particulate levels more than six times as high.”  “By 2030, according to the International Energy Agency, China may be importing as much oil as we do.”  (8/9/06)

153. Safe Drinking Water
China’s government apparently has made safe drinking water its top environmental priority (Wall Street Journal, June 6, 2006, p. A10).  It is struggling to deal with pollution in its major rivers as well as recurring drought in the north.  “More than half of the surface water in China’s seven major rivers is unfit for human consumption….”  We ourselves make a point of staying at hotels with good filtering systems when we are in China.  (7/19/06)

152. Drive-Through China
McDonald’s is now cementing a deal with China’s largest gas retailer, state-owned Sinopec Group, to build drive-throughs at its gas stations.  McDonald’s calls this De Lai Su, which means approximately, “Come and Get It Fast.”  This goes against the grain in China, which has not favored take-out food.  McDonald’s, Yum Brands, and others are betting that exploding car ownership will lead to burst of take-out consumption.  See the Wall Street Journal, June 20, 2006, pp. B1 and B9.  (7/12/06)

151. Sake It to Me
Trends in Japan, 23 May 2006 shows Japanese sake production to up 8% in 2005, with the dollar value up 18% to $48 billion, a record for the 5th year in a row.  All the growth is from exports, which are up 50% over the past five years.  “The United States is the top importer of Japanese sake, accounting for 31% of the exports.”  “After the United State, the biggest import markets for Japanese sake are Taiwan and Hong Kong.  There is also growing interest in China, particularly in major cities.”  (6/20/06)

150. Ikea in China
“By increasingly stocking Ikea’s Chinese shops with China-made products, Mr. Duffy pushed prices on some items as low as 70 per cent below prices in Ikea outlets outside China.”  “The gamble seems to have worked.  Next month, Ikea will up the ante in its low-price strategy by opening a store in Beijing that will be its largest store in the world outside of its flagship store in Stockholm” (“Ikea Hits Home in China,” Wall Street Journal, March 3, 2006, pp. B1 and B4).  “Typically, Western brands in China price products such as makeup and running shoes 20% to 30% higher than in their other markets.”  Now, of course, Britain’s B & Q will double its units, and  Home Depot is thinking about entering the market, promising more intense competition.  (6/14/06)

149. Avid Adders
“Spending on advertising grew 18% last year from 2004 … but it was off from 22% the  year before and a skyscraping 39% jump in 2003…” (Wall Street Journal, February 17, 2006, p. B3).  The U.S. rose 3% to $150 billion.  One hitch was Chinese government roadblocks for giants such as Disney, Viacom, and News Corp., all of which are trying to establish a larger presence in China.  “CTR reported about $30 billion in advertising in China last year, tying the nation with the United Kingdom and Germany,” which were in third place behind the U.S. and Japan.  “Foreign companies represent about 30%” of ad revenues in China, with P & G leading the way, a change from 2003 when local Chinese brand spending overshadowed the foreigners.  As competition heightens, advertisers, as in the West, are moving beyond traditional print and TV into sundry alternate media and direct marketing.  Last year newspaper advertising dropped 1%, but radio, a good buy, was a gainer.  The WSJ cautions that the figures should be discounted a bit, since they are based on rate cards, rather than actual billings.  (5/17/06)

148. Fractured Anglais
When last in Shanghai and wandering about the city, we were pleasantly accosted by some delightful elderly Chinese who wandered away from their exercises in the park in order to chat with us.  The conversation was about as expected: “Where have you been here and what have you enjoyed?  Where do you come from?”  Only later did we figure out that these senior citizens were avid to try out their English on us, worried that their Chenglish might die from lack of use.  There is a passion for English in the People’s Republic, and it is conceivable that it may become the largest English speaking country on earth. 

“Today the Chinese are obsessed with English” (The Economist, April 15, 2006, pp 61-62).  “This is fueling a market that comprises everything from books, teaching materials and tests to teacher training and language schools themselves.”  China is already the world’s largest market for English, according to “Mari Pearlman at ETS, an American group that developed TOEFL, a well-known test of English-language proficiency.”  “Macmillan has sold more than 100m school textbooks in China….”  “At its kindergartens, Beijing’s municipal government has just started testing interactive whiteboards made by a British firm, Prometheus.”  “Finally there are the private language schools themselves—some 50,000 of them, reckons Ms. Pearlman, from family-run outfits to chains,” including “New Oriental, a Chinese operator that claims to be the largest, with 2.5m enrolled students.” The Economist reckons that profits are thin, particularly given government controls over the whole education process.  (5/10/06)

147. Getting in Hot Water
In “Heat for the Tubs of China,” Wall Street Journal, March 31, 2006, pp. A11-A12, James T. Areddy remarks on how “cheap solar-powered devices” are bringing “hot water to millions” of Chinese.  “China has quickly emerged as the world leader in using solar power for a more mundane task—providing hot water for showers and washing dishes in dwellings that often have no other source of heat the year round.”  “Already, China claims an estimated 30 million solar households, or nearly 60% of the solar capacity installed in the world, according to Worldwatch Institute….”  The Chinese are now to make a bid to enter the U.S. market, hoping to heat swimming pools, showers, and dishwashers.  Apricus Solar Co. in China claims to have shipped 4 times as much equipment to the U.S. in 2005 as 2004, and is apparently on track to triple this again in 1006: one importer is Earth Sun Energy Systems.  It is noted that China is making considerable progress on both sun-to-heat systems, and sun-to-electricity equipment.  Despite China’s vast energy usage and its horrendous environmental record, it is clearly making progress on both solar and wind energy, and in some ways it is leading other major nations in this regard.  (5/3/06)

146. Backwater Tourism
“China is beset with rural poverty….  In response, the government is pouring $10 billion into the tourism infrastructure of dozens of scenic but impoverished areas” (Wall Street Journal, April 22-23, 2006, pp. P1-P9).  The article particularly cites the somewhat isolated province of Guizhou, where only 270,000 foreigners visited last year.  Other remote new tourist locations include Jiuzhaigou national park and Lhasa, the capital of Tibet.  This tourism thrust on the part of the government fits its general objective of fostering the growth of service jobs in its domestic economy.  The opening up of remote areas is creating new opportunities for sundry tourism related industries.  The French chain Accor, with 30 hotels in China, plans to open 30 more; Sheraton, Intercontinental, and Super 8 all have growth plans as well.  (5/3/06)

145. The Decline of the State
China, the world’s most populous ‘socialist’ economy, becomes relentlessly more capitalist:  it “aims to cut the number of enterprises owned by the central government by about half…” (Wall Street Journal, April 13, 2006, p.A8).  The reductions will be achieved mostly through mergers, cutting the total SOEs down to 80-100, with less successful groups merged into more successful ones.  “But a recent backlash against pitfalls of market-oriented policies, such as a growing wealth gap and environmental degradation” has many thinking about how to successfully privatize within the context of various societal initiatives.  The further thought is to take several of these enterprises public eventually, particularly those in non-strategic sectors.  Since 1999, the number of state-owned enterprises has roughly been cut in half: as well, the number of unprofitable ones has also been cut by 50%.  (5/3/06)

144. Looking at Beijing
Squidoo is the witty name of an online newsletter from a quirky little marketing firm in Connecticut called David Manners.  It’s got a guide to Beijing and a piece on the 2008 Olympic Games that merit your attention.  These introductions are far from definitive, but are a help.  The 2008 Games will be a transforming experience for China—and certainly for Beijing.  All of us will be giving a bit more attention to China’s political capital, a bit less to its economic capital—Shanghai.  The companies we advise are maintaining outposts in both cities.  (4/12/06)

143. Arriviste China 
The worry of the very astute Chinese political leaders is the ever widening, yawning gap between the haves and the have-nots.  There’s more and more talk about billionaires and millionaires.  And we hear about more and more serious revolts in agrarian China where the peasants can’t make ends meet, and are plundered to boot by local authorities.  The explosion in golf is probably as good an indicator as any that the parvenu urban classes have come into their own, not only at the renowned Mission Hills complex but all about Shanghai and Beijing.  Golf is a metaphor for the new China, the most capitalist socialist country on earth. 

This is all very well laid out for us in “How Do You Say Shank in Mandarin?” in Play, the new sports magazine of the New York Times, February 2006, pp. 102-107, 114.  “The first modern course, an Arnold Palmer design, opened in 1984.  Another dozen or so were added in the decade following.  But in the last 10 years the total has soared to 230, making China second in Asia in terms of golf course acreage (behind Japan), and though there is supposed to be a moratoriusm on constructing courses, new ones seem to spring up every month.”  

Sheshan Golf Club, on the outskirts of Shanghai,  is “the newest and most exclusive of the Shanghai clubs.”  “Thanks in part to a connection with IMG, the giant sports-management agency, Sheshan was selected as the site for last November’s HSBC Champions tournament, whose $5 million in prize money, the richest purse in Asia, was sufficient to attract even the likes of Tiger Woods….” 

“Mission Hills—with a lavish clubhouse, a five-star hotel, pools and spas, and a mall-size pro shop—is a sort of factory itself, turning out rounds of golf on an industrial scale….  Mission Hills is the brainchild of David Chu, a native of Hong Kong who was one of the first entrepreneurs to see opportunity in mainland China…”  He has put together 10 courses altogether, each designed by a golfing great such as Els, Nicklaus, Singh, Duval, and Greg Norman.  (3/29/06)

142. -new- How Nations Design 
“One of the keenest observers of this renaissance has been Lee Kun Pyo, director of the Human-Centered Interaction Design Laboratory at the Korea Advanced Institute of Science & Technology.  BusinessWeek Asia Editor David Rocks and Seoul Bureau Chief Moon Ihlwan recently sat down with Lee in a Seoul Chinese restaurant to share plates of roasted eggplant, grilled shrimp, and fried tofu while discussing the changes sweeping Korean design” (“The Flavor of Korean Design,” Business Week, January 24, 2006). 

But Koreans traditionally don’t articulate what they’re doing beforehand.  They’re very contextual.  Of course they do customer research and product planning and user-centered design and so on.  But they quickly arrive at solutions, then look at the solution to find any further problems.  Some might say that’s unsystematic, but it’s really very dynamic.  And it works well for products with a short lifecycle, like mobile phones or MP3 players. 

It’s not only design—there’s a pattern of differences among the cultures.  In food, the Japanese keep things very simple, Korean food is very hot, Chinese is very greasy.  In colors, Japan is very monochrome.  Korea is a little bit red.  And China is red and gold.

In Japanese traditional music there’s almost no sound.  Korea’s is a little bit noisier, and Chinese opera is very loud.  The same goes for the communication mode.  In Japan, when people finish speaking there’s a little pause, then the other person replies.  In Korea, people are a little faster, and in China they all overlap.  All those things are visible in aesthetics.  Japanese products don’t violate the horizontal and vertical, but Korean design is a little bit more dynamic.  And in China, it’s very busy. 

Korea has 230 design schools—more than America.  But 80% of those schools still require a drawing examination for admission.  Of course there are some design problems that require drawing.  But interface design solutions can’t be drawn. It doesn't make any sense. 

And this explains to us why Japanese design leads to too much functionality in a product and a dashboard (i.e., switches) that is much too complicated to operate, designed for a nation of near-sighted people.  On a more serious note, this whole discussion probably leads us to think rather carefully about where to have a product designed.  

It’s worth a visit to his lab’s website where one can get an idea of the scope of his ideas and publications.  It’s a little tricky, we find, since one seems to get Korean pages when keyed to English, and English pages when keyed to Korean.  That’s just a humorous footnote.  There are serious efforts here, too, in the area of robot design, a field in which there is rumblings the world over.  (3/29/06)

141. Auto-China in the Fast Lane
As we said in “Autos: The Thrill Is Gone,” the world auto industry is undergoing massive consolidation, but in Asia, as happens in this world of contradictions, it is forging ahead in China, Korea, and now even India.  Keith Bradsher of The New York Times (February 17, 2006, pp. Al and C5) writes tellingly of China’s vaulting ambitions:

In the latest sign of this country’s manufacturing ambitions, a major Chinese company (i.e, Lifan), hand-in-hand with the Communist Party, is bidding to buy from DaimlerChrysler and BMW a car engine plant in Brazil….  The failure of China to develop its own version of sophisticated, reliable engines has been the biggest technological obstacle facing Chinese automakers….

Now the enormously wealthy and prominent president and principal owner of Lifan, Mr. Yin (i.e., Yin Mingshan) has his sights on exporting to Europe in 1008 and the American market in 2009….  The Tritec engine is one of the most technologically sophisticated and fuel-efficient care engines in the world….  Mr. Yin said he wanted to rebuild the factory on vacant land next door to his car assembly plant here. 

Lifan, already one of the world’s largest motorcycle manufacturers with sales in 112 countries, is about to start exporting its remarkably well-built, $9,700 roadsize sedans to developing countries.  (3/8/06)

Update: Technology Transfer
Keith Bradsher continues his excellent coverage of the Chinese auto industry.  Reporting from Chongquing, he says, “Thanks to Detroit, China is Poised to Lead,” March 12, 2006, pp. BU1and 9.  U.S. and European automakers are desperate to establish and hold major positions in the Chinese market, and, for this entry, the Chinese are demanding a stiff, some would say an unconscionable, price.  GM is making a nickel in China, while losing its shirt at home: it’s no wonder that it’s committing long-term strategic suicide there.  Company after company is exporting its technology and techniques to China where it has to be shared with Chinese partners who will be exporting to the world before long.  Chinese carmakers have finally captured 28.7 percent of their home market, now ahead of everybody else, even the Japanese.  (4/26/06)

140. Shanghai Tang Comes on Strong
“But now the new team, led by le Masne de Chermont and Ooi, believes that Shanghai Tang’s moment on the world runway has arrived.  If, as global market watchers from Wall Street to Tokyo have claimed, this is the China Century, then Shanghai Tang may just turn out to be that century's banner—China’s first global, upscale brand.”  This from Linda Tischler in Fast Company.   Ms. Tischler, incidentally, is quite focused on the nuances of global branding: 

While the global luxury market is already big—$168 billion a year, according to Bain & Co.—and growing at a rate of 7% per year, ‘big’ doesn’t begin to describe the potential market for glitzy goods in China itself.  A quarter of a century ago, there were no millionaires in China; by the end of 2004, there were more than 236,000, Bain says.  And Patrizio Bertelli, the CEO of another fashion house that’s hungrily eying the market—Prada Group—figures that China could overtake the United States as a market for luxury goods by 2020. 

Until now, Shanghai Tang has been proceeding cautiously, focusing first on satisfying the growing Chinese demand for prestigious labels at home, with five stores in Hong Kong and four on the Mainland (plus 10 outposts in places such as Paris, London, and Bangkok).  But now it's embarking on an ambitious expansion plan that will see it launching five stores a year in the world's toniest markets. 

The brand’s founder, British-educated David Tang, is from Hong Kong, that most Western of Chinese cities. Ooi is American; Camilla Hammar, the marketing director, is Swedish. Le Masne de Chermont, who is French, honed his luxury branding skills at Piaget before being deployed by Richemont, whose portfolio also includes Mont Blanc, Chloe, Dunhill, and Cartier, to fix its ailing Shanghai Tang brand. 

David Tang, son of a wealthy Chinese businessman, launched the brand in 1994 in Hong Kong as a custom-tailoring business, marshaling the talents of Shanghainese tailors who had fled Communist China in 1949.  In 1996, anticipating a robust market selling Chinese souvenirs to well-heeled tourists attracted by the handover of the city from the British in 1997, he expanded into ready-to-wear.  [Tang went on to sell a majority interest in the company to Richemont.] 

Meanwhile, rivals were starting to steal some of Shanghai Tang’s cultural thunder. One of them was Ooi, who, after various jobs in the Hong Kong fashion industry, had opened her own store across from the Shanghai Tang flagship.  China was chic, and international fashion editors were going wild for qi pao dresses.  “I thought I'd launch my own ready-to-wear line based on the idea of innovating this iconic symbol,” says Ooi, a 5-foot-6 Asian-American whose own fashion taste runs to jeans and T-shirts.  “To underscore my point, I even made one qi pao out of African kente cloth and put it in my window.  I thought I would eat Shanghai Tang for lunch. 

The theme for the spring/summer 2006 collection: contemporary Chinese art.  Ooi commissioned well-known Chinese artists to create designs and, in turn, asked students at China’s most prestigious art academy to create artworks based on fabrics from the collection.  She’s currently gathering ideas for a collection based on Shanghai in the 1930s, the period when the city was known variously as either the Pearl of the Orient—or the Whore of the East. 

We and our colleagues always visit Tang in Hong Kong to see what’s up and to see what it tells us about the Chinese temperature.  The brand is doing very well, but the enterprise has surely lost some of its magic playfulness.  (3/1/06)

139. China Goes Upmarket
Edward Tse’s “Five Surprises” provides a host of insights about China’s future, warning us that the past may not be a very good guide to the future.  We are most struck by the fact that the Chinese are rapidly going upmarket, moving away from commodity, unbranded products to offerings where they can capture more of the value added:

Within China, some industries are already developing a maturity that their Western counterparts took decades to reach.  In automobiles, for example, full-service retailers have emerged (formerly, they were state-owned enterprises or joint ventures between the government and foreign manufacturers like Volkswagen).  Chinese vehicle manufacturers are establishing global vehicle brands, such as First Auto Works, the world’s foremost producers of midsized heavy-duty trucks.  The Wanxiang Group (a privately held manufacturer of auto parts from Hangzhou) is acquiring ownership stakes in American, European, and Japanese companies to build a global supply chain and develop a global brand.  Chinese component suppliers are consolidating; some are establishing themselves globally.  Most significantly, according to a Booz Allen Hamilton analysis of cost figures, price competition in China (along with price competition from India) has put enough pressure on margins that vehicle manufacturers will probably need to reduce costs by 8 percent per year within the country to stay profitable, even as annual sales volumes increase by 10 percent or more per year.  Similar consolidation is taking place in appliances, electronics, and textiles.  These are the hallmarks of a maturing set of enterprises.  (2/22/06)

139. The Yanghan Deep Water Port
On an island some twenty miles out to sea, China has opened what promises to become the world’s largest container shipping port, further cementing Shanghai’s pivotal role in China, in some ways similar to New York City’s key role in 19th-century commerce that was accentuated by the Erie Canal.  “Other experts say that the city of Shanghai might have to spend up to $18 billion over the next 15 years to complete the construction of this complex port…”  Already Shanghai is the world’s third busiest container port, behind Hong Kong and Singapore.  Existing ports are 23 feet deep, but the new port, 49 feet deep, can handle much larger vessels.  A six-lane bridge, some 20 miles in length, has been built to connect the islands to the Coast in order to lorry in cargo.  See the New York Times, December 12, 2005, p.C7.  (1/25/06)

Update is a good way to keep track of port development around the world, although we notice that it is a bit outdated.  Yangshan (or Yanghan) is, of course, listed, since it is surely the most important port development around the world. Meanwhile trade continues to surge at China’s other principal ports such as Qingdao, Ningbo, Guangzhou, and Tianjin.  (2/8/06)

138. Drucker: The Chinese Weakness
“In contrast, the greatest weakness of China is its incredibly small proportion of educated people.  China has only 1.5 million college students, out of a total population of over 1.3 billion.  If they had the American proportion, they’d have 12 million or more in college.  Those who are educated are well trained, but there are so few of them.  And then there is the enormous undeveloped hinterland with excess rural population.  Yes, that means there is enormous manufacturing potential.  In China, however, the likelihood of the absorption of rural workers into the cities without upheaval seems very dubious.  You don’t have that problem in India because they have already done an amazing job of absorbing excess rural population into the cities—its rural population has gone from 90% to 54% without any upheaval.  Everybody says China has 8% growth and India only 3%, but that is a total misconception.  We don't really know.  I think India’s progress is far more impressive than China’s.”  From an interview “Peter Drucker Sets Us Straight,” Fortune, January 12, 2004.  (12/28/05)

137. Christianity in China
Official figures suggest there are 5 million Catholics and 15 million Protestants, while unofficial estimates about the size of the Christian population range from 2-7% of the population.  The most ambitious claims speak of perhaps 100 million underground worshippers.  Growth has often occurred outside officially sanctioned places of worship, in gatherings in private homes, for instance.  This opening up has occurred since 1980, when hard Mao-era restraints on religion were lifted.  “Most striking in recent years has been the spread of Christianity among urban intellectuals and businesspeople,” with some striking activity on university campuses.  See The Economist, April 23, 2005, p. 44.  “David Aikman, the author of Jesus in Bejing, a book about the growth of Christianity in China, says there are probably dozens of Chinese universities teaching Christian culture.”  (12/14/05)

136. Johnny Apple’s Shanghai List
R.W. Apple has made more of a splash as a journalist with a global expense account than he ever did as a political writer on the New York Times.  He gets his tips about this city and that from a source or two in each city, and his tips are as good as whatever deep throat he discovers.  Most recently he did a bang up job in Thailand, but then he has a superb on the ground friend named Robert Halliday, who really does know food.  In fact, his Bangkok article, “On the Streets of Bangkok, Two Guys Keep It Real,” is far more interesting than his foray into Shanghai.  We have cribbed his list of Shanghai eateries from an October 9 piece called “Shanghai, a Far East Feast,”  a title that did not tax his imagination.  His list will get you started, but you will find much better offerings as you move about amongst the city’s more than 3,000 restaurants: 

1. Bao Lu, 2721 Fumin Lu; telephone: 6279-2827

2. Chun, 124 Jinxian Lu; telephone: 6256-0301

3. Xin Ji Shi, North Block Xintiandi, Building 9, Number 2, Lane 181; telephone: 6336-4746

4. Nan Xiang, 85 Yuyuan Lu; telephone: 6355-4206

5. Din Tai Fung, 12-20 Shuicheng Lu; telephone: 6208-4188

6. Crystal Jade, South Block Xintiandi, House 6-7, Lane 123; telephone: 6385-8752

7. Guyi Hunan, 89 Fumin Lu; telephone: 6249-5628

8. M on the Bund, 5 Zhongshan Dong Yi Lu; telephone: 6350-9988

9. Laris, 3 Zhongshan Dong Yi Lu; telephone: 6321-9922

10. Jean-Georges, 3 Zhongshan Dong Yi Lu; telephone: 6321-7733

11. Whampoa Club, 3 Zhongshan Dong Yi Lu; telephone: 6321-3737 (12/7/05)

135. Growth of Linux in China
In China Linux is making the Big Leap Forward, urged on by a government that is resistant to software with proprietary code.  “According to China’s Ministry of Information (MII), almost 70 percent of all software purchases last year were of Linux-based products.  Meanwhile, provincial governments installed 45,000 desktops with Linux operating systems.  Now private companies are following suit.”  See CIO Magazine, October 15, 2005.  pp.21-22.  Red Flag, a major Chinese Linux vendor, says the government’s railway and telecom companies pushed into Linux early on.  (11/30/05)

134. The Real Mao
Nicholas D. Kristof, a fine journalist, provides an excellent review of Mao: The Unknown Story in the New York Times Book Review, October 23, 2005, pp. 1 and 10-11.  Jung Chang, along with her husband historian Jon Halliday, has “written a biography of Mao that will help destroy his reputation forever.”  “No wonder the Chinese government has banned not only this book but issues of magazines with reviews of it, for Mao emerges from these pages as another Hitler or Stalin.”  The Chinese Communist Party in its early days was entirely under the thumb of Russia.  “Mao rose to be party leader not because he was a favorite of his fellow Chinese, but because Moscow chose him.”  “More startling, they argue that Mao didn’t even walk most of the Long March—he was carried.” 

The Communist Party, of course, is having some difficulty maintaining its legitimacy in modern China, and the erosion of the myth of Mao will not help.  Such a book suggests that the Party will have to broaden its pantheon to include other historic figures and embrace some of the traditions coming from earlier periods in its history.  (11/30/05)

133. The Logistical Costs of Doing Business in China
“Making It in China” (CIO, October 15, 2005, pp.46-56) explores the added costs of doing business in China, particularly in the hinterland.  Lead times for bike production at Pacific Cycle, a maximum of 60 days back in the U.S., can now run as long as 270 days.  This involves shipping times, delays on inland transport, complications for sourcing components or raw materials, lack of transparent supply chain controls, etc.  These hurdles must, of course, be balanced against very low labor costs which, depending on the product, may be all important.  Some companies try to beat some of the headaches by buying their own factories, but that is a mixed blessing as well.  (11/23/05)

132. Top Hong Kong Story
We have been vaguely keeping track of this story, but it has gripped Hong Kong and the Orient in the same way as the O.J incident. transfixed the United States.  An overpaid U.S. banker—out of Greenwich we think—and his wife have for years apparently led an absolutely wretched life there together, both mentally askew.  Right or wrong, the courts have found her guilty of his murder.  You can read most of it on East West blog—in several entries—whose author obviously has as big a taste for low-life matters as the next guy, whatever the ambitions of his blog.  To read about Robert and Nancy Kissel’s very soiled underwear, you can start at Zonaeuropa.  One of our associates out in the Kong also promises to do a write up.

131FBI Watches Chinese Economic Spying
David Szady, number two in the FBI’s counterintelligence division, is leading the charge on China’s effort to pick up U.S. economic secrets.  See the Wall Street Journal, August 10, 2005, pp. A1 and A4.  The Chinese are alleged to have something like 3,000 front companies in the U.S. that put out feelers to Chinese nationals working at U.S. companies, particularly in technology.  “All told, about 700,000 Chinese tourists and business executives visit the U.S. each year.”  “Mr. Szady and other FBI agents believe China began intensifying its spying operations in the late 1970s,” when relations opened up between the two countries.  Formal spies sent out by the Chinese don’t actually peek in company’s files; instead, agents collect information from Chinese and China Americans working in vital industries.  (9/28/05)

130Asian Middle-Market Investment Bankers
Asia in general is still constructing its financial infrastructure.  Now a number of firms are springing up that can minister to the special needs of middle-market companies to include reverse mergers, U.S. listing, capital raising in and beyond Asia, exit strategies to include buyouts by Western companies.  We will be adding more investment banks to this list and will eventually include the names of other kinds of intermediaries. 

ChinaVest.  A longtime venture-capital firm funded in the West but staffed with both Westerners and Chinese nationals, it has now converted itself into a merchant bank based in Shanghai.  Founder Robert Theleen has wide experience in a number of Chinese sectors to include light manufacturing, branded services and retail concepts, technology, etc.  We think he has particular insight into the logistics and distribution sectors, areas of particular concern as China tries to integrate its domestic market.  It has most recently completed a financing for Net 263.  With offices in Bejing, Hong Kong, and San Francisco, it is probably best reached at its Bund office in Shanghai at telephone 8621 6329 3610.  Fax: 8621 6329 3951.  Website:  (9/7/05) 

Orient Financial.  President Nils Ollquist and Principal David Sih have shown themselves to be skillful at helping young Hong Kong entrepreneurs on a fast track expose their companies to Western markets.  They have clients throughout Greater China and India.  Examples of transactions are at  Orient Financial Services Limited.  One International Financial Centre, 18th Floor.  One Harbourview Street.  Hong Kong Central.  Telephone: 852-2166-8333.  Fax: 852-2166-8999.  Website:  (9/7/05) 

FirstAlliance Financial Group.  Chief Executive Weiming Zhang, based in Shanghai, has shown particular aptitude for bringing companies public in the U.S., often by reverse mergers.  The firm is particularly active with companies in the automobile components sector.  Clients include Pacific CMA (Amex:PAM), China Automotive (Nasdaq:CAAS.OB), and Sorl Automotive (Nasdaq: SAUP.OB).  See biography for Ms. Zhang at www.wpcapital.
com/management1.html.  FirstAlliance Capital Group, Inc. 1800 West Zhongshan Rd., 25J1, Zoa Fond Universe Building, Shanghai, 20035.  Telephone:  011-8621-6440-1678.  Fax: 011-8621-6440-1901.  Email:  (9/7/05) 

Trenwith Group.  Now a fast-growing affiliate of BDO Seidman, a second-tier accounting firm, Trenwith, formed on the West Coast, has intensified its China activities over the last 5 years.  It started as a merchant bank in1981 and has gradually broadened into a full-scale, multi-office investment bank.  Its particular strength we think is its collaborative nature, as it has shown an uncanny ability to work with a host of other financial intermediaries.  One can get some idea of its range of assignments at  We would particularly point companies seeking help to Douglas Ivan in Newport Beach, California, who has had broad experience working on a host of questions for middle-market companies stretching well beyond the usual banking menu ( Unlike most young investment bankers, he actually returns his calls.  He can be reached at the Costa Mesa office at 3200 Bristol Street, Fourth Floor, Costa Mesa, California 92626. Telephone: 714-668-7333.  Website: (9/7/05) 

Latitude Capital.  We have found Latitude to be useful on due diligence and some aspects of negotiations for selling parties.  We notice that it is now publishing more information on completed transactions.  This group has ample staffing.  As well, it is publishing some sector information—IT, healthcare, logistics, mobile phones, etc.—which is moderately helpful and suggests it has its eye on active sectors.  We see it has subsidiary offices in Bejing and San Francisco, but we would point you at Hong Kong, Suite 4310, Jardine House, One Connaught Place, Central, Hong Kong.  Telephone: 852-2973-5311.  Fax: 852-2295-3979.  Website:  (9/7/05)

129. The Art Torrent from China
We have said elsewhere that the most vibrant part of China is the art scene which, even with politics, has a vibrant interchange with the Chinese diaspora outside the borders of the People’s Republic.  In this regard, we refer you to Eleanor Randolph, “China’s Moving Art Scene: Pushing into Dark New Territory,” New York Times, November 7, 2004, p. Wk 10.  She refers to the 2004 Shanghai Biennale (the fifth) at the Shanghai Art Museum, a magnificent comfortable museum, incidentally, which houses a gratifying collection (  Through last November, one could see there “a dis-orienting upside-down room, or examine photos of distant nudes on blinding, white ice….  These artists in Shanghai,” she thinks, “and in some places as Xu Yong’s avant-garde place in Beijing offer a glimpse inside a Communist society that is becoming increasingly capitalistic.”  We are not sure that she’s got it right about capitalism, but she at least understands the vibrancy, even disturbing momentum, of  art throughout all of China—inside and outside the borders of the Middle Kingdom. 

More so, the art scene speaks to the fundamental unity amongst all Chinese, of whatever political stripe.  For instance, one should note that Cai Guo-Qiang’s “Art Show Bridges Chinese Divide on Taiwan Strait,” Wall Street Journal, September 15, 2004, p. A19.  A 47-year old New York Chinese artist from China’s southeastern coast, he just staged an art show in Quemoy of 18 artists from both sides of the strait.  See http://bmoca.kinmen.    

For more on the galloping market demand for new Chinese art, see “Appreciating Oils,”  And for Chinese art shows, see  Significantly, the government is now even stoking the art machine.   (8/31/05)

128. Future Cola
We much recommend Wharton’s online business magazine, so that you can catch up on Wahaha’s marvelous growth.  It’s the number one beverage (milk drinks, bottled water, and mixed congee) company in China with $1.37 billion in sales and $163 million in profits.  Started in 1987 by Zong Qinghou, it was state-owned til 2000, when Zong bought 55%, giving 25% to his employees.  He does not think employee ownership has hurt or helped the company.  He started with beverages and ice cream, then started up Wahaha Nutritional Food Factory in 1989, and establishing a fast hit with Wahaha nutritional liquid, particularly targeted at children where there were a lack of competing products.  It now has 40 subsidiaries in 16 provinces, a children’s garment line, and Future Cola—its answer to Coke and Pepsi.  Danone is a major investor and provider of capital.  With lower costs than foreign competitors and knowledge of local distribution, it often penetrates rural markets first, using that as a base to attack the cities.  Read the full article at  (7/20/05)

127. Foreign Babes in Beijing
Rachel DeWoskin banged around China with her father, a noted sinologist, in her youth.  After Columbia, she rushed off to China and went to work for a pr firm.  By luck she wandered into a job that made her China famous—one of two title gals in a Chinese nighttime soap called “Foreign Babes in Beijing.”  Since she has done a book by this name—in case you’ve forgotten, Foreign Babes in Beijing—an account of her times in China as well as on the show.  And she tucks in four stories of girl friends in China, capturing the flavor of China through the lives of her China peers.  DeWoskin most wanted to catch the rapidfire change that has taken hold of modern China, it probably changing more in 90s than it did in the last 5,000.  For a good account on De Woskin, see Columbia, Spring 2005, “Our Babe in Beijing,” pp. 11-15.  (7/6/05)

126. China Connects
As we have hinted in East/West Blog, blogging in Greater China and throughout the Pacific Rim is of paramount importance, much in contrast to the West where bloggistas just add more noise to an over-messaged world.  With the Internet and with mobile communications, Asia is leapfrogging past the old style media (landline telephones, TV, newpapers, etc.), creating in crackerjack fashion a communications network that is putting citizens in touch with one another.  Within Greater China, particularly the People’s Republic, blogging has even greater meaning, because it permits everyone to go around officialdom which strives to control and censor all communications.  Today there’s a great push on logistics in China, there being a vast effort to link up the interior with the coastal regions with the hope of creating an integrated national market.  Much unintended, the Internet has blossomed as the virtual equivalent of this logistical integration, and a necessary one at that, since a national market cannot work unless the people are knit together by dialog.   

Nicolas Kristof, a thoughtful columnist at the Times who outthinks the more celebrated Tom Friedman, has seized on this in “Death by a Thousand Blogs,” New York Times, May 24, 2005 (, where he grasps that blogs have given China a functioning political press.  Though the authorities shut down many bloggists, there are too many out there for the Party to keep a real lid on things.  He particularly mentions Lu Xinde’s, which focuses on official wrongdoing.  Likewise, he mentions the wide circulation that penetrating that Jiao Guobiao’s essays receive simply by an active exchange of emails about the land (
2005bios/05_04_14bios/guobiao_jiao.htm).  Even government officials pay keen attention to them.  (6/22/05)

125. China's Open Dorr on Logistics
The Latitude Capital Group in Hong Kong, an up-and-coming boutique investment banking group, has just published a report on the Chinese logistics market, which is undergoing rapid change and expansion, especially as China knits its interior together with coastal markets.  (See  The report suggests that WTO reforms are driving this market: there is a timetable for foreign entry into each logistics segment basically calling for full participation by December 2005.  There is a considerable amount of consolidation and M & A activity.  But this really understates the WTO impact.  China is shaking up its markets in several ways to ready itself for outside competition.  Noted is a $100 million acquisition of Sinotrans by UPS, and TNT plans to spend $260 million on building its network.  UPS’s supply chain management company is opening 20 more logistics centers in China this year.  “China logistics spending is expected to increase from about $300 billion in 2003 to $360 billion in 2005.”  The third party logistics market is now fairly small, perhaps 4% of total market, but is expected to swell.  As the Economist has made clear, lots of multinationals are targeting the vast Chinese market, but are discovering that is fragmented, with poor internal communications, making it very hard to act on a national basis.  (See www.economist.
com/displaystory.cfm?story_id=2495097.)  With burgeoning logistics development, help is on the way.  (6/1/05)

124. Bowring
Philip Bowring, who has been posted in Asia since 1973, served once as editor of the now defunct Far Eastern Economic Review—it is being revived in a lesser form at—but has contributed invariably insightful columns to everything from the International Herald Tribune to the South China Morning Post.  We much enjoyed his columns on the slow death of FEER, which can be found at
htm and at  He more or less attributes its demise to Karen House, current publisher of the Wall Street Journal.  An awful lot of his columns are about China and Hong Kong, but, on occasion, he roams through Southeast Asia with telling comments about politics and economics.  Read him as well on Davos, which he finds to be less and less worldly, particularly as it becomes a circus of stars.  See www.bowring.
net/davoslist.htm.  He’s the hardworking overseas columnist the Times should have on its staff—indeed, it once had types like him in the days when any journalist worth his salt wanted to get as far away from the meddlers at headquarters in New York as possible.  A great deal of his work is posted at  (4/20/05)

123East/West Blog
About one half of one per cent of all blogs merit our attention.  East/West Blog is one of them.  Sadly, this blogista pulled down most of the stuff of his site on March 12, 2005.  But a few entries remain, and he promises to restore many of his bests.  Look here for interesting essays on everything from a comparison of the divorce laws of China and Chile to an examination of the polarizing effect of blogs wherein like-minded people tend to talk to each other, virtually shutting out people and thinking of different suasions.  See  (4/5/05)

Update: Dilemmas of the Chinese Middle Class
East West/Blog surveys the worries and dilemmas of the Chinese middle class, which sound awfully close to those of striving, worried, self-centered Middle Americans.  The Bloggist translates a section of a book called Investigation of the Chinese Middle Class.  Again, the main surprise there is that middling Chinese are like the bourgeoisie everywhere.  What we find a bit different, however, is that the Chinese wonder whether to be truthful or deceitful on the Internet.  In China, in Korea, and in many other nations of Asia, we find the citizenry to be  even more compulsive users of  the Internet than virtual Americans.  We think even more of their lives are tied up in online fantasies.  Indeed, in response to a fairly mundane inquiry we made to one journalist in Singapore a while back, we got back a recommendation to visit an Asian pornographic site.  More and more Asian lives are immersed in Siliconville.  See and  We would claim that you cannot understand modern China unless you carefully peruse the Internet.  Indeed, it was our Asian clientele that demanded that we ourselves become more email conversant.  Watch out, however.  Viruses pour in from all parts of Asia.  (5/2505)

Update: The Soong Song: Media researcher Roland Soong is the author of East/West blog, a fact he has loosely kept under wraps.  He is, we find, as good a way as any of keeping up on the flavor of politics and the facts of urban life in Hong Kong and China. Incidentally, it is worth probing into his life a bit, because he did a fair amount of time in New York City, where he was a researcher by day, yet often a translator of documents for U.S. Government agencies by night.  Apparently he is a quick study. 

You can learn much more about Soong and some of the other more than 50 bloggists that thrive in the Hong Kong scene in a very good article in The Standard ( dated May 17, 2005 and entitled “The Blog Is Mightier Than the Sword.”  We debate about the value of blogs in the West, since they are often an unhappy mishmash, poorly written, dealing with neurotic concerns and plagued by adolescent musings whatever the age of the writers.  But the China blogs are very important, clearly abetting the spread of culture throughout Greater China.  We intend to spend more time reading them.  A fair number of these bloggers have been educated in the West, and they constitute one of America’s most significant exports to China.  Doug Crets, who wrote about blogs for the Standard, also thinks highly of Yan Sham-Shackleton’s, which, we find, has some worthy outpourings on art, as well as the usual stuff on politics, censorship, etc.  (6/29/05)

122. Discount Airlines in China?
Right now some of China’s airlines are offering much lower fares, as they expand capacity and broader segments of the population have the wherewithal to travel by air.  “Private airlines also are poised to begin offering cheaper fares soon,” including Okay Airlines out of Bejiing and United Eagle Airlines from Chengdu. “China’s new plane purchases by new and incumbent airlines are expected to boost seat capacity 15% during the next two years….  Last month, China’s state-owned airlines collectively bought 60 Boeing 787s, the largest order for” Boeing’s new medium haul jet.  Some service has finally been allowed for the Chinese New Year between the Mainland and Taiwan, and operators are hopeful that this practice can be extended.  Wall Street Journal, February 8, 2005, pp. B1 and B2. 

Meanwhile low cost, budget airlines are dotting the tarmacs throughout Southeast Asia.  You can go from Singapore to Bangkok for $14.17.  In the fray are Bangkok’s Nok Air ( ), Singapore’s Tiger Airways( ), and Jetstar Asia ( ) of Singapore, which formed just last year.  The new Oasis Hong Kong Airlines plans to fly from Hong Kong to several European destinations this year.  AirAsia of Kuala Lumpur, which has led the way,  touches down at some real out-of-the-way spots.  Valuair ( will get you from Singapore to Perth.   See “Low-Cost Airlines Finally Land in Asia,” Wall Street Journal, March 2, 2005, pp. D1 & D3.  (3/23/05)

121. Why So Down on Zhao Ziyang?
In “Martyr Complex,” New York Times, January 26, 2005, Yale’s premier China historian Jonathan Spence ponders why the party chieftains in China are keeping a lid on any mention of Zhao Ziyang, even though he has now passed away.  Under house arrest for the 15 years following his ejection from power, Zhao was clearly the very unforgotten forgotten man.  Spence argues that he was like many who came before him, well back into the time of the emperors, “a bold and visionary reformer who insistently calls for change and openness in a tightly controlled political environment.”  Eventually cast aside by their co-governors, such reformers eventually achieve martyr status, something the leadership tries to avert if it can.  The fear of the leadership is that a martyred Zhao will personify all the calls for broad political reform which would, of course, upset Party dominance.  Read about Spence’s Treason by the Book—about a scholarly revolt in the Manchu Dynasty—in the Infinite Bookstore.  Spence posits, of course, that (a) ideas do matter and can change the world, bringing down an imperial order, and (b) China is all about dynasties and their fall, up to and including the current dynasty which just happens to have Politburo in its name.  In like manner, the mainland government has sternly opposed sundry cult movements, strongly opposed to any system of belief that might seek to take precedence over the state. (2/9/05)

120. Tourist China
Hainan, an island off the South Coast of China, was once thought to be another Hong Kong.  But it has struck out as a business center, and now is trying to be “a playground for China’s new rich.”  See The New York Times, January 18, 2005, pp. C1 and C10.  It has a heavy influx of visitors from both China and Russia, and 3.7 million tourists stayed in hotels there in 2004.  It has staged its own version of Davos to attract more attention from the West.  (1/26/05)

119. Citicorp Gives China Region Its Own CEO
Creating a new post, Citicorp has named Richard Stanley to be its China CEO, and it will place him in Shanghai.  Prior to this post, Stanley had headed corporate and investment banking in the Singapore region, and before that, he led the bank’s retail thrust in China.  Probably this goes halfway towards establishing the kind of presence Citicorp needs in mainland China.  Years ago another Fortune 500 company stumbled in Japan because it included that country in its Asian group operations rather than recognizing that Japan was then so important that it needed to be separately organized and report directly to the CEO on the Eastern Seaboard of the United States.  Citicorp should break Citicorp China out of the Asian region; the appointment of Stanley only partially recognizes the utter importance of the China market.

118. China's National Highway System
As we have said many times, China is now building its internal market, carefully weaving the whole country together in order to integrate economic activity and to spread prosperity beyond the usual coastal suspects.  For a quick take on the burgeoning highway system, read “When the Silk Road Gets Paved,” Forbes, September 20, 2004, pp. 111-12 and 117-18.  “In 1989 China had lots of bicycles and only 168 miles of expressways.  By the end of last year—a year during which China spent $42 billion building roads—it had 18,500 miles of expressways, and the plan is to reach 51,000 by 2008….”

Update: Betting on Infrastructure 
China has put heavy bets on its infrastructure, ceaselessly spending on the arteries that will knit the nation together to drive growth.  See the Wall Street Journal, November 8, 2008.  “Much of the $586 billion stimulus package China unveiled this week will go toward building highways, railroads and airports.  Already, according to official estimates, infrastructure spending had been increasing by an average of 20% annually for the past 30 years.”  “The speed of China’s motorization is stunning—some 30,000 miles of expressways were built in the past decade.  Plans call for China's highway system to stretch 53,000 miles by 2020, surpassing the 47,000 miles of interstate roads in the U.S. currently.”  (12/17/08)

117What the World Needs Now
Economist James Smith concludes in this recent speech (August 25 and 26, 2004) that the vibrancy of the world economy is utterly dependent on the stimulus provided by China and the U.S.  Fortunately he finds the two economies to be in pretty good shape, despite all the worries about a halting recovery in the U.S and overheated markets in China.  For the full text of Smith's speech, click here.

116. Riedel Research Group
Riedel Research Group covers smaller capitalization companies in China, Thailand, Indonesia, and Malaysia.  See  David Riedel founded his company in his Tribeca apartment in May 2003 after he was put out to pasture by Salomon Smith Barney.  He used an interactive jobs service in Hong Kong to hire analysts in his target countries.  Interestingly he is filling a gap in the research picture.  Firms out in Asia do not do a good job of covering smaller cap companies nor do they gear their research to the needs of hedge funds and institutions in the West.  So far he has 6 major clients.  See The New York Times, July 29, 2004, p. C5.

115.  Business Sense: Mr. China
In the July/August 2004 issue of Global Finance (pp. 17-19), Winter Wright offers Westerners getting started in China sundry do’s and don’ts on dealing with a climate that still does not really have an enforceable business code.  Above all, he suggests, you should not suspend the commonsense you would display in any other country.  Don’t place blind trust in a local business partner.  Understand that a government bureaucrat, particularly one on the take, can put you in business or out of business in a moment.  Find a way to achieve scale (perhaps, with alliances) even if you are small, since that is paramount to getting traction with the locals who are the gatekeepers of your success.  Know that China does not really score that high on the criteria put out by the International Finance Corporation in its Doing Business in 2004, which you can now read about in Agile Companies.  

Our man in Hong Kong, Andrew Tanzer, reviews below with high praise Mr. China, an almost tell all by a writer who actually knows a lot.  It gives you a sense of what you have to deal with in China.  But as Tanzer points out, with all the complications, there’s still plenty of success to be had in an economy growing 8% a year: 

Let’s say an aggressive journalist with a keen sense of smell sniffs an undisclosed scandal or investment debacle in a corporation.  He or she approaches the company fortress and is greeted by obfuscating or stonewalling executives, oily PR handlers, barking lawyers.  Hard-nosed and energetic, the reporter interrogates suppliers, customers, ex-employees, ex-spouses, garbage handlers—anyone, to get the scoop.  Weeks later, the editor rings to say time is up: the paper has deadlines; resources are finite.  The paper trumpets an investigative expose that is maybe half of the real story. 

The beauty of Mr. China, by Tim Clissold (Constable & Robinson, London, 2004), is that the stories are all there.  With rich, delectable anecdotes, Mr. China illuminates scams in China, piles high the dirt and etches heroes’ and villains’ portraits memorably.  The tales of foreign investment disaster, and conflict between the Chinese and the foreign barbarians, oscillate between comedy and tragedy. 

Clissold, of course, is no journalist.  A Chinese-speaking Briton, he had a front-row seat in the 1990s as second in command at a foreign private-equity investor he doesn’t identify.  Nor does he identify “Pat,” the boss, a master of the universe from Wall Street who somehow raised $418 million in the U.S. in the mid-1990s to invest in China.  We’ll make an educated guess: the firm is Asimco and the Wall Streeter with the China dream is Jack Perkowski.  Mr. China is the story of vanishing dollars and the unraveling of that China dream. 

Pat focused on two industries: motor-vehicle components and beer, businesses where he figured he could buy Chinese factories and be the great consolidator.  A consummate salesman, he had no trouble raising over $400 million in the U.S.; perhaps more surprisingly, he invested the entire amount in just two years.  Then the cultural learning experiences commenced. 

The first deal, an ignition-coil factory in Changchun (the Detroit of China), Northeast China, went like this: the foreign side invested cash for 60% of the business; the Chinese put up land and buildings for a 40% stake.  A few weeks after the deal closed, the Chinese factory director called to say there was a slight problem: “Our factory’s land … is not registered in our name so we can’t put it in.  Does that matter?” 

After the foreigners invested in a gear-wheel factory for motorcycles in Sichuan, the factory director flew to Beijing to seek approval for a gearbox factory.  The foreign investors rejected the proposal.  Next visit to Sichuan, Clissold was stunned to find a new plant under construction, “‘Er, Mr. Su, what’s that?’” he asked.  “Mr. Su, beaming from ear to ear, announced proudly, ‘It’s the new gearbox factory.’” 

But these lessons were mild compared to what was to come.  Up at an electrical components factory in Harbin, when the foreigners attempted to sack the manager, he coerced suppliers to stop shipping parts to the plant and told customers that the plant was going bust.  Down in Zhuhai, Guangdong, the factory director of a brake-pad factory stole millions of dollars through issuing phony letters of credit that a Chinese bank opened without proper authorization.  Clissold visited the Zhuhai Anti-Corruption Bureau to ask for an investigation.  The chap in charge of cases involving foreign investors said he’d investigate, but “in order to do so we would have to give him a ‘car and some working capital.’”  When the foreigners sought justice against the bank in a local court, the case was thrown out even though the bank “lost” documents demanded by the court. 

One of the best factory directors in their universe, in Anhui, built a second factory in direct competition.  When the foreigners sought legal action, the warlord-like factory director milked his relations with local government and apparently fomented a factory strike.  Demonstrations turned so violent that the local government called out the military. 

Over at an electrical-motor factory in Hubei, the joint venture factory director siphoned profits into the Chinese partner through sales offices that operated in the partner’s name.  When the foreigners attempted to sack the director, violence erupted.  Nor did the hapless foreigners fare any better in beer.  Shortly after investing $58 million in a beer joint venture in Beijing, Clissold discovered that the money had vanished: it went to repay an overdue bank loan by the Chinese partner, which was owned by the Beijing Government. 

“I was dealing with a society that had no rules—or, more accurately, plenty of rules that were seldom enforced,” writes Clissold.  “China seemed to be run by masterful showmen: appearances mattered more than substance, rules were there to be distorted and success came through outfacing an opponent … a core difference between Chinese and Western business: for a Westerner, a contract is a contract, but in China it’s a snapshot of a set of arrangements that happened to exist at one time.”  Clissold simultaneously felt squeezed by the uncomprehending, impatient investors in the U.S.  Somewhere along the line, the young man had a heart attack while on vacation in France. 

The funny thing is, today China’s car market is booming and rapidly integrating with the global car industry; Chinese breweries are rapidly merging and the beer industry is consolidating.  Reckless and naïve, Pat may just have been a bit ahead of his time.

114.  Big Boys Betting Super Big on China
Big companies in several countries, which have often experienced tepid growth in their traditional home markets, are betting very, very big on China, perhaps to a worrisome degree.  GM has announced that it and local partners will spend $3 billion by 2007 to expand facilities (Volkswagen, Toyota, Nissan and Daimler-Chrysler are also on the move there).  Sales were up 20 % last year, but this is a slowing from the torrid pace set earlier as Chinese regulators try to cool the economy.  GM is aiming now at 1.3 million vehicles by 2007, upping a previous goal of 865,000, and doubling the 530,000 produced currently.  It is now highly profitable, and has moved its share up from 1 to 11 percent.  GM expects to generate enough cash from operations to pay for the expansion.  (See The New York Times, June 8, 2004, pp. W1 and W8.) 

Meanwhile, BHP of Australia (the old Broken Hill) just signed a deal to sell $9 billion of iron ore to China’s steel mills over the next 25 years.  BHP, to feed China and world demand, is spending $5.4 billion over the next 5 years to expand production of copper, nickel, and alumina.  It and other producers are straining to meet demand for commodities, but the news of Chinese pullbacks has hit producer stocks (i.e., equities) as well as the currencies of the many nations heavily dependent on raw material production.  (See the Times, June 8, 2004, pp. W1 and W8.)

113.  Harvard for the Masses via CNBC and Dow Jones
Our colleague Andrew Tanzer brings us up-to-date on HBS exports to China: 

The weekend of July 11 will mark quite a bold experiment in television.  CNBC Asia ( ), a joint venture between CNBC and Dow Jones, will bring Harvard Business School case studies to television in Shanghai, China.  China Business Network, a Shanghai Media Group ( channel, will broadcast “Strategic Decisions.”  Dragon V (see, a nationwide satellite network, will beam the show to cable operators around the Middle Kingdom.  Potential audience: more than 400 million households. 

HBS case studies hardly sound like riveting entertainment, and they’ve never before been adapted to the tube.  But consider this: upwardly mobile Chinese are hungry for management education and business information.  “So many people want to get ahead in business in China,” explains Cynthia Owens, vice president for programming at Singapore-based CNBC Asia.  Owens says the target audience is 25-45 years of age.  In July, CNBC Asia will also launch a career show aimed at aspirational Chinese called “Road to Success,” also with China Business Network. 

“Strategic Decisions” will be filmed in a studio in Shanghai.  In each hour-long episode (52 minutes of content, 8 minutes of ads), the Chinese presenter will lob questions about the case at a panel of four Chinese experts and interact with the studio audience comprised of Shanghai business school students.  A Harvard professor tied to the case will be separately interviewed in Cambridge.  It’s all a form of cheap distance learning for the ambitious young Chinese.

112.  Ogilvy Moves into Second Cities
Oglivy and Mather, part of WPP Group, is well established in Shanghai, Bejing, and Guangzhou.  Now it is moving into China’s second tier of cities.  It purchased 51% of Fujian Effort, the largest agency in the eastern province of Fujian.  To serve its multinationals, it must get out in the hinterlands.  China is increasingly being knit together, creating a broader interconnected internal market that will call for national marketing.  Now Oglivy will also court more Chinese companies.  See The Wall Street Journal, June 17, 2004, p. B4.

111.  American Entrepreneurs Abroad: Heinecke
Andrew Tanzer, our colleague in Hong Kong, waxes poetic about the considerable effect American entrepreneurs have had in the Asian business scene: 

There’s no shortage of transplanted Asians who have enriched the U.S. economy through importing entrepreneurial skills.  In the computer industry, for instance, Jerry Yang co-founded Yahoo, Charles Wang started Computer Associates, and let’s not forget Wang Laboratories’ founder An Wang.  What’s less understood is that the trade in entrepreneurism is two-way: many American entrepreneurs have built huge businesses across the Pacific.  In Hong Kong, for instance, Robert Miller and Charles Feeney founded Duty Free Shoppers, an industry giant now controlled by LMVH; Nebraskan Merle Hinrichs started NASDAQ-listed Global Sources, a highly profitable and leading electronic marketplace; William E. Connor II has quietly constructed an impressive supply-chain management/buying agency for a list of blue-chip clients including Nordstrom, Williams-Sonoma and Land’s End. 

Over in Thailand, William Heinecke has made his fortune in fast foods, hotels and branded-goods agencies.  Heinecke, the son of a U.S. military journalist who worked overseas for the Marine Corps’ Leatherneck magazine, paid his adopted country the ultimate compliment: he abandoned his U.S. citizenship and became a Thai.  His The Entrepreneur: 25 Golden Rules for the Global Business Manager, told with Jonathan Marsh (John Wiley & Sons, 2003), is an accessible, practical blend of memoirs and primer for the aspiring entrepreneur.  

No arcane, academic tome, The Entrepreneur offers simple, commonsensical and humorous advice on topics such as crisis management, hiring and firing, and time management.  One of the most attractive aspects of the book is that, unlike so many self-important and narcissistic American CEOs, Heinecke relishes poking fun at his own blunders, which adds credibility to his story.  For example, Heinecke admits that a Thai businessman beat him hands down in supermarkets in Bangkok.  His competitor’s Villa chain had fresher produce and superior inventory control.  “I knew we were in trouble when my wife told me her friends preferred to shop at Villa….  We got out as soon as we could, poorer but wiser….  Never confuse qualities of determination with those of stubbornness and stupidity.” 

Indeed, humility and high emotional intelligence are clearly two of Heinecke’s strong suits.  A high school graduate, Heinecke obviously listens well, learns constantly and makes an art of “OPB”—working with other peoples’ brains.  He knows his weaknesses and hires the best people he can find to compensate.  “Too many business people waste time on tasks to which they’re ill-suited….  Half of being smart is knowing what you are dumb at….  If you keep hiring people who are smarter than you in important areas, you will build an organization that is very strong.” 

Obviously a good manager of people, Heinecke stresses that a leader must cut loose the underperformers.  Firing “involves coming to terms with your own failings.  You have to admit that you made a mistake by hiring the person in the first place.  But if you don’t fire mediocre performers, you are doomed to failure as an entrepreneur.  Just as excellence breeds excellence, mediocrity breeds mediocrity.” 

Like many successful entrepreneurs, crisis and adversity seem to bring out the best in Heinecke.  He bounces back with the resilience of a Thai kick-boxer who keeps scraping himself off the mat.  For instance, he weathered the Asian Crisis of 1997-98, whose epicenter was in Thailand; he survived a bruising battle with Goldman Sachs over control of a Bangkok luxury hotel and picked himself up after losing the Pizza Hut franchise following a vicious battle with YUM, the U.S. parent company. 

And like many entrepreneurs, Heinecke succeeds by thinking differently.  He introduced pizza to Thailand, a nation of spicy cuisine and no tradition of eating cheese.  “Eating pizza in an air-conditioned, American-style restaurant became a perfect symbol of increasing purchasing power and changing consumer attitudes,” he explains.  He brought traditional Thai architecture to hotels and condos in Thailand when local developers were looking overseas for bad architectural ideas.  “Developers looked at concrete blocks in Hawaii and then built carbon copies in Thailand.  Sometimes it takes an outsider to point out something that is staring everyone in the face—Thai architecture is breathtakingly beautiful.” 

Like Richard Branson, Heinecke is an adventurer who flies his own planes and helicopters and competes in car races.  He makes no apologies for disappearing sometimes for weeks.  Indeed, he sees a management lesson here: “This is good for me as well as my executives, who have to operate without my presence.”

110.  The Shanghai Express
Another first in China.  Shanghai has a new magnetic levitation train, the first in commercial service.  At peak speed, it cruises at 268 miles per hour, taking just 8 minutes from downtown to the airport.  Started in January, it only carries 4,000 riders a day, about 1/6 of its capacity.  Like the Concorde, it is not very comfortable, just fast.  But it’s quite a milestone, since maglev trains have been talked about in the States and elsewhere for years, but they never quite get off the drawing boards.  See The New York Times, April 22, 2004, p. A4.   Shanghai is getting into a lot of superlatives, tall buildings and the like, as it displaces Hong Kong as the commercial center of Greater China.

109.  China Darkness?
Demand for electricity in China is growing at the rate of 10 to 15% a year.  In some 21 provinces last year, the lights dimmed in homes and factories went down.  Particularly hard hit was Hunan in southern China.  As with other resources including capital, China is profligate, and energy conservation alone could meet a great deal of future power demand.  Adding 30 plus gigawatts a year to its supply, China will have to be a ballooning importer of oil, with 1/3 of its crude already coming from abroad.  See The Economist, March 27, 2004, pp. 43-4.

108.  The Rush to India
With India’s growth rate bettering that of China last year, the nations of Asia are pushing commercial ties in India to lessen their dependence on China.  See “Singapore Leads India Charge,” The Wall Street Journal, April 5, 2004, p. A17.  ASEAN’s (Association of Southeast Asian Nations) trade with China is still 5 times that of its dealings with India.  “More than 1,400 Indian companies have offices” in Singapore, including 19 of the top 20 Indian technology companies.  Singapore, Thailand, and ASEAN itself have trade agreements and other ties on the way with India.  “Singapore companies have invested in everything from  Indian ports to real-estate developments to communications.

107.  Kobe Suds
You have probably noticed that Japan’s Prime Minister has even been reaching out in television ads to attract American tourists to Japan.  Kobe and Hyogo prefecture are going him one better, trying to lure foreign businesses to locate there.  P & G, Nestle, and Eli Lilly have put their Japanese headquarters there.  That said, efforts by the local bureaucracy to attract multinationals had been stuck in low gear until a couple of years ago.  Then Werner Geissler, P & G’s on-the-spot manager, started lending P & G branding, marketing, and public relations expertise to the Japanese.  Now Kobe’s presenters reach out to more companies with much livelier presentations, and a local official Masaaki Akagi is spearheading the drive to reach into the executive suites of  foreigners with offices in Tokyo or those who have passed through Kobe.  See The Economist, March 27, 2004, p.62.  For an introverted and insular nation, this is earthshaking.

106.  Behind the Mask
The Economist, March 20, 2004, features a special section on business in China entitled “Behind the Mask.”  There are no particular surprises, as the article repeats most of the truisms already known to China hands.  Foreign companies are having a tough time building scale there, and, more importantly, making any profits.  Their difficulties are compounded by an uncertain legal structure, push and pull with both central and provincial governments, and partners that do not operate by Western norms.  Fueled by ongoing and massive foreign direct investment, the economy grows at an 8 or 9% clip, but it is a marvelously inefficient user of capital, wringing very poor returns out of the influx of funds.   

Despite the fact that the SOEs (state-owned corporations) deliver either poor returns or losses, they are not going out of business anytime soon.  The State intends to hold onto the biggest enterprises and let the smaller fish slide into bankruptcy or the private sector. 

The real agenda of  SASAC (the State-Owned Assets Supervision and Administration Commission) “is the transformation of a group of 30-50 SOEs into globally competitive ‘national champions’ by 2010.”  While it points out that “the three big oil companies, Baosteel, Haier (household appliances) and TCL (electronics) are breaking into the bigtime globally,” The Economist says this global thrust will be a hard slog.  It notes that “only 11 Chinese companies rank in the Fortune 500 list of top global firms by revenues….” 

The Economist is most concerned about the weak condition of the banks and the financial system.  “China’s sclerotic financial system not only fails to allocate capital properly; its frailty endangers the company’s growth and stability.”  “At the very least, the country will soon have to restrain its reckless fiscal pump-priming and will need to stop bankrolling SOE reform and rural migration.”  Both The Economist and the majority of China experts share this view: They see nothing but risk until China gets its financial house in order. 

We are not sure China’s leaders see priorities in the same light.  In fact, we believe they are working harder to keep the flow of funds coming, next perhaps by floating shares and debt of more Chinese companies in the West.  They hope to sell their way out of trouble.  

We think they’re most worried about their rural poor—above all else.  Necessarily, this is their highest priority.  In this vein, see “China Focuses on Its Have-Nots,” The Wall Street Journal, March 4, 2004, p. A14.  “The gap between urban and rural incomes has widened as China’s economic overhaul has sparked a boom, mainly in the cities.”  While residents along the Coast in private enterprises have prospered, farmers as well as workers in state-owned enterprises are hurting and are getting more vocal about their distress.  The trick will be for the State to get better returns from capital and yet to put more people to work—not an easy task.

105.  Haier Learning
Haier of China has grown 70% a year for two decades and has now reached $9.7 billion in sales, and its head, Zhang Ruimin, is celebrated around the world.  It is trying to become a global brand, with $1 billion of sales now overseas.  Ruimin is going abroad in a big way, because margins are suffering at home, given an explosion of competition. The Economist believes that it will have problems—with too broad a product range, too many iterations of each product, flat profits with increasing volume, and higher costs as it produces abroad.  In other words, by Western standards, it is spread too thin.  Nonetheless, it has been smart enough to penetrate markets by gobbling up niches: it’s the big boy in very small refrigerators in America.  What has yet to be examined is how it is going about achieving deep consumer recognition.

104.  Who Is the Smartest Banker of Them All?
There are a host of questions about Alan Greenspan, with high anxiety in some quarters that he has turned on inflation with low interest rates, fueled speculative endeavors, and prompted misallocation of capital.  Wright and Smithers think he should have dampened asset inflation (i.e., stock market bubble) (see
The%20Economic%20Consequences%20of%20Alan%20Greenspan.PDF), and suggest that the failure to do so will inevitably lead to a strong period of economic contraction.  To some, European bankers appear, on the other hand, to have too many feet on the brakes.

The Economist (February 14, 2004, p. 68) believes Japan’s Toshihiko Fukui, who has only been on the job about a year, is the central banker who has gotten it right.  He has been feeding money into the system, while verbally pumping up markets by saying he will keep easy policies in effect until deflation is routed.  Expectations have clearly changed, and share prices have been rising.

103.  China’s New Media
Our man in Hong Kong, Andrew Tanzer, points out that Dow Jones, The Financial Times, and everybody else under the sun is trying to make a go of English-language publications for Greater China and the whole of Asia with less than spectacular results.  Much more buoyant is the growth of publications in China for the Chinese, as the Government cuts back on its own publications and cautiously allows growth of the entrepreneurial market.  Our commentator does not remark on the slow but steady progress in private broadcast initiatives which we detected as far back as 2001.  At any rate, here’s his take on magazines and newspapers:

“The bigger opportunity, of course, is in local-language publishing, especially in the mother of all emerging markets—China.  Not only is the ad market booming in China; the people are also thirsty for knowledge and information.  Media are still one of the mostly tightly controlled sectors in China, but if you look closely you can see change.  Largely for economic reasons the Communist Party is beating a retreat from media.  The Party is shutting down, privatizing or selling stakes in hundreds of loss-making Party and government-owned newspapers; the Government says it will stand behind only a handful of newspapers.  A new government regulation bans coerced subscriptions to publications.  The media sector is clearly moving towards a market economy; restrictions on foreign investment are being relaxed.

We’ve been reading some of the Chinese newspapers and magazines.  The big surprise is some are shockingly good.  We’ll give you a taste of 21st Century Business Herald, a twice-a-week newspaper published in Guangzhou (traditionally an intellectual backwater in China) by Nanfang Daily.  Clearly one of the leading candidates to be the Wall Street Journal or Nihon Keizai Shimbun of China, 21st Century is printed in eight cities and sells for less than a quarter a copy.

We are, quite frankly, blown away by the content of this newspaper.  While American publications, perhaps influenced by USA Today and People Magazine, are moving to lighter fare, jazzier graphics and more white space, 21st Century is content rich, solidly researched and surprisingly critical.  No, it doesn’t call for the overthrow of the Party, but there’s lively debate and an independent tone.

One recent edition of 21st Century included the following articles:  an interview with a scholar about weeding out corruption in the Party; an editorial on streamlining and improving disclosure of the central government’s budgets; a piece on the need to fund public schools for the children of migrant workers; a well-reported story on the tsunami of Japanese car-parts investment in China; an investigative tale about theft and disappearance of oil from pipelines in the country; an opinion piece on the need to improve ethics education in the schools; an analysis of the politics and debate over a new labor-insurance law; a story about the rapid spread of shopping malls in the nation; an analysis of Philips Electronics’ logistics system; a four-page package of articles comparing the economic development strategies and paths of India and China; a story about a government campaign to rein in excess investment in cell-phone manufacturing (current capacity 170 million handsets a year for a market of 80 million units).  This is all in one day’s newspaper!

21st Century Business Herald is clearly a remarkably highbrow product, but of course it doesn’t turn away advertisers.  This same day’s edition included the following ads:  consumer electronics ads from Toshiba, Konka and Shinco (two domestic makers); ads for BMW and Citroen (Xinhua reports that auto adverts in Chinese newspapers jumped by 80% last year); a large ad for UBS, touting its Greater China banking services; and ads for Hainan Airlines, a domestic hard-liquor brand and a new shopping mall in Dongguan,  a Guangdong Province boomtown.”  For more on 21st Century Business Herald, see

The Financial Times (March 4, 2004, p.13) recently commented on the cautious opening of the government to partial privatization.  “China late last year launched a review of more than 1,400 party and state newspapers and periodicals:” it closed half and made the rest begin to clean up their finances or join commercial groups.  Foreigners now can invest in TV production companies which will have to generate voluminous content for hundreds of new State TV channels that will be ramped up in the years to come.  The content of newspapers has gotten more interesting, ranging from sports to entertainment to corruption exposes.  Papers are learning not to do investigations close to home, but delving into bad deeds in remote provinces, thus avoiding the heavy hand of local party officials.  Advertising in media has edged up to about $5 billion from $3 billion in 1998. 

Despite state controls, a greater range of opinion and information is exchanged on the Internet than in normal publishing channels, abetted by online discussion boards and a huge flurry of text messaging.”

Update: China's New Media
Hu Shuli is editor of the twice-monthly (to be weekly) Caijing magazine, which is devoted to business and finance.  It has a circulation of 80,000 and is staffed by 40 journalists.  Founded in 1998 by Wang Boming, it is part of SEEC, which Wang hopes to grow into the country’s biggest media group.  It has run daring stories on corruption and crony capitalism, but both its owners and Ms. Shuli are close enough to the powers that be to skirt stories and attitudes that may rub officialdom the wrong way and result in a shutdown.  See The Economist, May 29, 2004, p.68 and  It is considered the most hard-hitting of the business magazines.  One can not overrate the importance of the emerging independent media in China, a sign that the government recognizes the corrective nature of good newspapers for both growth and stability as long as they operate within limits.  

The government is less at ease with the Internet, and continues to extend its controls with perhaps 35,000 Internet policemen trying to block uppity websites and dissidents.  This now extends into local administrations with a comprehensive recent addition of special rules in Shanghai.  However, blogs are now running rampant, and the government simply can’t get its arms around them, because there are so many.

Update: Openings for Foreign Media. In an interview, “Hold the Presses: The Story on China’s Media Sector is Still Evolving,” at Wharton, January 11, 2006, Zhengrong Hu, a professor at the Communication University of China, spoke of the emerging opportunities for Western content and business process providers in the Chinese landscape, despite public controls over controversial subject matter.  Wharton outlines the vastness of this market: “China today has 1.2 billion radio listeners and 1.23 billion TV watchers, and there are currently 282 radio stations, 314 television stations and 1,913 broadcasting stations at the city level.  Income from these outlets totaled approximately $10 billion in 2004—numbers that will only grow as cable and digital TV roll out nationwide over the coming years.”  Broadcasting outlets can produce less than 70% of content locally, according to Hu.  Now “less ideological activities—such as production, distribution, transmission networks, advertising, entertainment, music, movies, TV dramas, sports and lifestyle—will fall to private media companies.”  Apparently with the flowering of broadcast media, newspapers are feeling a great deal of pressure as in the West, their revenues sometimes flat or declining, and readership migrating to electronic media.  (2/15/06)

102.  Portal to Asia
The Pair Catalog (Portal to Asian Internet Resources) can be found at  http://webcat.  It will lead you to websites on sundry topics for a multitude of Asian countries, with links ranging from culture and public health to business.

101.  America Déjà Vu
Now we learn that Columbus did not discover America.  We are continuously learning that all the things we invented in the Western World were done in China first.  Our man in Hong Kong, Andrew Tanzer, reviews a fascinating and controversial book that claims that the Chinese uncovered the New World well before Western European explorers thought they were charting a new passage to Asia, going West to go East.  At any rate, it's a good read: 

“Gavin Menzies’ quest began when he stumbled upon some startling 15th-century maps and charts, cartography that he argues conclusively demonstrates that some mariners discovered and mapped the Americas, Australia, Greenland and Antarctica long before the great European explorers arrived.  His answer: “There was only one nation at that time with the material resources, the scientific knowledge, the ships and the seafaring experience to mount such an epic voyage of discovery.  That nation was China.”  So writes the retired British submarine commander and amateur historian in 1421: The Year China Discovered America, William Morrow, 2003 (tellingly entitled 1421: The Year China Discovered the World in the UK edition). 

Menzies spent 14 years and visited 900 museums around the world in conducting research.  His yarn goes like this: from 1421-23 China conducted global voyages of exploration under the command of the famed Admiral Zheng He, Grand Eunuch in the Court of early-Ming Emperor Zhu Di.  Menzies maintains that the Chinese explored and discovered the Americas 70 years before Columbus; rounded the Cape of Good Hope over 60 years earlier than Dias and da Gama; circumnavigated the globe a century prior to Magellan’s vessel (Magellan himself was butchered by the natives on the Philippine island of Cebu); and explored Australia three centuries before Captain Cook.  Then, in a fit of xenophobia in the mid-15th century, the Chinese court burned all records of these historic expeditions.  Menzies says the legendary European “explorers” all carried maps recreated from Chinese cartography. 

When Menzies sticks to facts the book is fascinating.   The first purpose of Zheng He’s armada was to return tribute-bearing envoys to their homes in Southeast Asia, India and East Africa.  These had visited Beijing for the 1421 inauguration of the exquisite Forbidden City, built by five million laborers at a time when Europe was crude and rather barbaric.  Zheng He could call on treasure ships that were 480 feet long, 180 feet wide, each with the capacity to transport 2,000 tons of cargo (Europe’s best of that era were Venetian galleys: 150 feet long, 20 feet wide, a cargo capacity of 50 tons).  Beside superior naval architecture and the invention of the magnetic compass, Chinese sailors were able to calculate longitude centuries before Europeans; they measured latitude more accurately, possessed superior astro-navigation skills and water-desalinization technology.   The Chinese seafarers even ate and slept better: soybeans were grown on ships to prevent scurvy; otters were trained to catch fish; well-qualified concubines were on board for every pleasure.   

Menzies sees Chinese fingerprints wherever he goes: shipwrecks, artifacts, mysterious stone structures, DNA and linguistic legacies.  He points to evidence such as the early appearance of Asiatic chickens and pigs in Latin America, the introduction of rice to the Americas and the movement of corn from South America to China.   

The trouble with the book is that it reads like a novel.  Most of the evidence is circumstantial; many of the conclusions are highly speculative.  Menzies’ approach reminds one of a journalist who writes his story before commencing reporting.  Yet the book does serve the useful purpose of reminding Westerners of the glory of China’s ancient culture, the tradition of innovation in science and technology—and points to the vast potential of the ingenious Chinese civilization.”

100.  Chinese Investment Overseas
Most of our attention so far has been focused on FDI—foreign direct investment—in China.  But now you will notice that some major Chinese companies are beginning to open up factories in the West, sending money in the other direction.  Haier, for instance, is putting an appliance plant in South Carolina, and already has 13 sites abroad.  FDI into China did reach a record in 2002 of $53 billion and was projected to ratchet up another $8 or $10 billion in 2003.  Apparently, the Chinese invested $2.9 billion outside China in 2002, a small but significant amount.  Roland Berger, a consulting firm, says 3/4 of its manufacturing firms have foreign plans in the works.  China’s 3 big oil firms have invested in 14 countries.  Baosteel is planning a big stake in a giant Brazilian steel plant.  In order to move upstream, the Chinese are also buying ailing foreign brands with a view to selling higher value-added, pricey products.  See The Economist, September 6, 2003, p. 57.

-new- Update.  The uneasy but symbiotic relationship between the United States and China draws ever closer.  Yilu Zhao’s “When Jobs Move Overseas (to South Carolina),” New York Times, October 26, 2003, BU4, closely details Haier’s expansion into a $40 million plant in Camden, South Carolina.  Haier already has 1/3 of U.S. market for compact refrigerators and half the market for wine-cooler cabinets.  With 2% of the standard size refrigerator market, it has goal of expanding to 10%.  The article speculates that Haier, rather connected to the Chinese government, may be pursuing market share and a U.S. presence with less of an eye to profit and a heavy emphasis on gaining market position at all costs.

99.  Home Improvement
Urban China, at least, is taking up the habits of Western affluence in very short order. “China’s home-improvement market, estimated to be worth almost 200 billion yuan ($24 billion) two years ago, has since grown much bigger.  “B & Q (part of Great Britain’s Kingfisher) is already China’s biggest chain by sales.  Its foreign rivals include Sweden’s IKEA and Germany’s Obi. America’s giant Home Depot, which already has links to Homeway, a Chinese chain,” plans to take a bigger plunge in this market.  While the Chinese buy the home improvement goods, they  don’t, as in the West, do the work themselves.  Margins for these stores are thin, however, because supply and distribution costs are still high, and customers require lots of service which leads to excess staffing.  See the Economist, October 11, 2003, pp. 67 and 68. 

98.  China First
Greater China is becoming a more important market for Japan and Singapore than the U.S.  Japan’s exports to Greater China (Taiwan, Hong Kong, and the People’s Republic) are surging, reducing its trade imbalance with China.  “Singapore’s third quarter economic figures  showed the fastest growth in eight years.  The July-to-September quarter posted a blistering 17.3 per cent expansion compared to the quarter before.”   

China is now Singapore’s top export market:  “China has overtaken USA to become Singapore's top export destination for the first time.  For the first nine months this year, Singapore’s exports to China and Hong Kong, which redirects much of the exports to China, hit $30.6b, compared with the $24.8b to the U.S. in the same period.  In a fillip for the all-important electronics sector, which accounts for a third of Singapore's manufacturing output, microchip exports to China almost doubled for the first nine months of this year, compared with the previous year.  The US was Singapore’s top export market last year, importing $32.9b worth of goods, while China and Hong Kong were close behind at $32.8b.” 

See Bites of the Week, Challenge Newsletter, Singapore MITI, week of November 15-21, 2003.

97.  The Birth of Democracy
Japan long has had the trappings of democracy, but not the substance.  Now, in its most recent election, we apparently have witnessed the beginning of a genuine two-party system that is a necessary prelude to a complete revitalization of its economic structure.  This would set the stage for something similar in China and the rest of Asia, where some political problems are intractable due to the lack of popular participation.  For more on this, see our Letters from the Global Province, November 19, 2003, “The Sun Maybe Rises.”

96.  Reverse to Forward Engineering
In a flipflog, Indian drug companies are fully coming of age.  Once busy tearing apart and then copying American drugs, then selling them on the cheap, they are now going straight.  Indian up and comers such as Ranbaxy Labs (, Dr. Reddy’s (, and Cipla ( have forged research partnerships with the likes of Pfizer, Novartis, and Watson Pharmaceuticals.  Is it possible that the Indians will do in pharmaceuticals what the Japanese long ago did in electronics, moving from knockoffs to we-will-go-you-one-better?  Since U.S. drugs are horribly overpriced, this is a distinct possibility.  See Wall Street Journal, November 13, 2003, pp. A14 and A16.

95.  Watching India
We have plenty of China watchers, but probably not enough India watchers.  There are several reasons why we should pay more attention.  As we have said, its GDP growth has become impressive in recent years, getting as high as 6.1% in 2000 and 4.3% in 2003, years ending March 31.  For the current year (ending March 31, 2004), some current private forecasts look to growth as high as 8%.  With more structural reform and a more welcome attitude towards foreign direct investment, it could equal or outclass China.  But, of course, its political leaders do have a habit of being the country’s worst enemies, continuously shooting the country in the foot on all sorts of issues, which is  probably linked to the enduring  legacy of Britain’s imperial adventure there and to its inability to bring its culture into the 20th century, despite the fact that it is a mecca for software production for much of the developed world.  Interestingly, foreign equity capital has poured into India stocks recently, up about 5 times over 2002, and the private equity houses are coming in, even with all the obstacles.  “World Bank officials do say New Delhi’s debt load—owed mainly to domestic lenders—is undercutting the government’s ability to fund new infrastructure and development programs.”  See Wall Street Journal, September 25, 2003, p. A17.   

“A rising number of Western and Asian multinational companies are setting up or expanding Indian production operations, both to cash in on the booming local economy … and to capitalize on an export platform with important potential.”  The car companies are coming here in a major way, particularly Hyundai which has taken a 20% share of the local car market.  Nonetheless, there remain doubts among foreign investors, particularly since the Indian infrastructure is still so outdated.  See “India, the Export Launching Pad,” Wall Street Journal, October 2, 2003, p. A11.   

Indian businessmen in the United States, particularly in the high-tech community, have tended to organize very well in mutual help business groups, which are worth a look since they give insight into worldwide Indian business trends. 

As a practical matter, however, one should be ever watchful in doing business with India.  We have reports from substantial companies in both Canada and France that they always encounter flies in the ointment when contracting for exports.  Something always goes wrong, and their Indian correspondents simply won’t remedy the defects.  In fact, this problem is so acute that they now boycott Indian products.

94.  The Shirt King
Harry Lee’s TAL Apparel Ltd. in Hong Kong not only makes shirts for everybody under the sun, but it, instead of the retailers it supplies, has pushed supply chain principles to the nth degree with the companies to which it is linked including J.C. Penney, but also J. Crew, Calvin Klein, Banana Republic, Tommy Hilfiger, Liz Claiborne, Ralph Lauren, and Brooks Brothers.  For Penney it does everything from design, to ordering, to replenishment.  “Because TAL manages the entire process, from design to ordering yarn, it can bring a new style from the testing stage to full retail rollout in four months, much faster than Penney could on its own.”  It is now negotiating to do exactly the same thing with Brooks Brothers.  From Malaysia TAL Apparel is making made-to-measure, semi custom pants for Land’s End (see Land’s End on Agile Companies #180) and shipping them directly to U.S. customers, with a Land’s End invoice enclosed.  See the Wall Street Journal, September 11, 2003, pp. Al & A9.  Also study IBM case history on TAL at  Lee is moving into other articles of clothing such as underwear.

93.  Reaching Deeper into China
Western consumer companies ranging  from Nokia to Swatch, Johnson and Johnson, and Coke are moving beyond the biggest cities and the 13 China Central Television channels to reach the millions outside the major urban areas.  Some 70% of China’s 1.3 billion people are peasants, for instance, in rural markets.  This is a complicated chore.  “China has more than 3,000 channels and hundreds of markets.  There are also 1,800 radio stations, more than 1,000 newspapers, some 7,000 magazines and numerous internet portals.”  In fact, this effort tracks the larger national effort to weave together and strongly develop the whole internal market which is not unlike America’s 19th-century effort to link all of the United States into one integrated economy, particularly through the railroads.  See the Wall Street Journal, August 29, 2003, p. A6. 

92.  Global Virtual Teaching Blackboard
Founded in 1997, Blackboard ( is going Chinese.  Its interactive educational software platforms now are in use at 3,000 clients (600 of them abroad), but now it has concluded a deal with Cernet, a Chinese public-private education company, an undertaking which could far overshadow previous efforts.  It is expected to generate $3 to $5 million a year for a company that only turned its first profit last year with revenues of $22.6 million in the quarter ending June 30.  Cernet expects 50 to 100 thousand students to use Blackboard this year, with a rise to 5 to 10 million in the next 5 years.  Clients now include Yale, Oxford, and the National Technical University in Singapore.  See the New York Times, September 1, 2003, p. C3.  Cernet ( itself deserves some extra study by educational policymakers and China watchers because it is assisting in the transformation of Chinese education, which itself is moving from a lecture, top-down mode of teaching to more of a seminar or conversational mode of learning.  It is felt that the Internet, properly used, can be a vehicle for accelerating national change, particularly in under-funded infrastructure sectors such as education and health.  

91.  India Closing in on China
The common wisdom is that China is an economic miracle and that India is a basket case.  David Wessel of the Wall Street Journal (July 24, 2003, p.A2) shows us that the facts are different, based on his reading of an article by Tarun Khanna of Harvard Business School and Yasheng Huang of  Sloan School of Management at MIT in Foreign Policy magazine.  Because of huge inbound Foreign Direct Investment, China has grown at a 7-8% rate for the past decade, while India comes in at 6%.  In addition, India saves 24% domestically versus China’s 40%, so in aggregate China has a huge capital base to power its growth rate.  Commentators note that China wastes a considerable percentage of this capital, particularly in the State Owned Enterprise sector.  So India gets a much higher return for its capital, and one can argue that a modest rise in savings and investment could put India on the same growth curve as China.  Note, too, that China became serious about its economy in 1978, while India only began to shift its economic strategy in 1991:  We might assume convergence will occur as India gets another decade under its belt. 

We suggest strongly that readers look at the magazine article as well, since it has so many other important observations (  Last year, it notes, the Forbes 200 included 13 firms from India, but only 4 from mainland China.  The authors believe that India’s infrastructure, capital markets, and legal system are superior to China’s.  They conclude that India, even with its bureaucracy, has fostered a more dynamic entrepreneurial class than China.  Clearly their article goes overboard to make a point, particularly when you look at a table in their article comparing the two countries where India compares so unfavorably on poverty, infant mortality, excess population growth, and digitization as expressed in phone saturation.  It should be noted, however, that India has achieved much more horsepower in the software area (which is probably a proxy for modern intellectual capital) and is even now exporting mundane software chores to China. We would suppose, however, that smart investors will find ways, difficult as it may be, to place more capital in India and other places in Asia that are showing world competitive entrepreneurial energy.

90.  Gender Gap in Japan
In Japan, women comprise 8.9% of managerial workers, 20.2% of civil service workers, and 7.3% of Parliament.  The equivalent figures for the U.S. are 46%, 49.3%, and 14.3%.  If anything, the U.S. lags in government categories among developed nations, but is a leader in the private sector.  This sets the stage for Howard French’s important article, “Japan’s Neglected Resource:  Female Workers,” New York Times, July 25, 2003, p. A3.  Given the fact that Japan has an aging workforce, which is reaching retirement in greater numbers than in the West, and since it shuts out migration into the country, this social anomaly amounts to economic suicide for the nation.  It needs all the workers and educated talent it can lay its hands on—both as workers and consumers.  With the country’s mini-depression, there is even some severe pressure to squeeze women out of the second rank jobs they hold.  This has more than one strategic implication for the United States:  Whether it is the Middle East or Japan or other places, it is in the interest of the U.S. government to target more of its communications at the female population which, given its status in so many places, is the Trojan Horse for many, many countries.  And, as the content of jobs migrate from brawn to brains in many parts of the world, it becomes imperative to entwine one’s economic policy with the advancement of women who can be equal or better knowledge workers than their male counterparts.  Asia, in general, will have to face up to the claims and place of women in the 21st century if it is not to lag the West.

89.  Chinese Brand Names
As might have been predicted, Chinese manufacturers, after years as cheap producers of goods for Western multinationals, are exerting more muscle and putting their own branded products out into the marketplace.  This move into all aspects of marketing and distribution has been gathering momentum for some 5 years, but Western publications are just beginning to take note of it.  See, for instance, “Made, and Branded, in China,” Wall Street Journal, August 22, 2003, p. A7.  Haier Group, an appliance manufacturer, has long been putting its wares around the world, and it has a real presence in the United States.  Among those reaching out are Konka Group, Sichuan Changhong Electric, and TCL International Holdings.  This, incidentally, is the most important aspect of China’s forthcoming hosting of the Olympics: It signals a coming of age in the marketing sphere, just as it did in Korea in its day.  Western economies will have to think long and hard about all this, since, increasingly, the only value companies there add to the mix are marketing and distribution.  What will they do now?

88.  Hungry China
Not only for food, but for all sorts of raw materials.  “The country’s crude-oil imports this year are on pace to hit a record 80 million metric tons….” See the Wall Street Journal, August 21, 2003, p. A8.  Increasingly, you can expect China to be a vast importer of all sorts of commodities that are vital to its economy.  This has major implications for the world’s raw material markets.

87.  Hong Is Long Kong
Hong Kong has been taking an economic pelting ever since the People’s Republic re-absorbed it into Mainland China.  Much of the property now sells for less than the mortgages the banks hold on it.  Just as manufacturing has moved into adjacent provinces with ample, cheap labor and space, the business titans are emigrating to Shanghai, China’s New York City if you like.  Since 98, the Hang Seng index has charted the misery of the city’s stockmarket.  Likewise shipping is moving out of town, to Shenzen Province and to Shanghai where the fees are much less.  Interestingly, the Hong Kong banks, including overseas branches of European banks, having seen substantial  loans go bad, have turned unduly cautious, often failing to lend adequately to perfectly healthy enterprises.  So this financial center is seeing mainland Chinese banks steal away even its natural banking franchise.  Paradoxically, Hong Kong was probably more productive for the whole of China when it was under a British mandate.  Independent Taiwan likewise probably does more for the Chinese economy as a semi-independent nation.  Perhaps this is not unlike the situation in Germany, where the re-union with East Germany has dragged the whole economy down.

86.  Chinese Students Abroad
Two articles in the Economist highlight the flood of Chinese who are schooling abroad—and then returning home to change China forever.  “The latest figures, from 2001, show around 18,000 Chinese students in British higher education.  That makes them the largest group out of a total of 143,000 foreigners.  And it is a 71% increase on 2000.  Preliminary figures for 2002 show a further increase of 67%, taking the likely total over 25,000.”  See Economist, March 29, 2003, p.53.  In parallel, considerable numbers of children of rich Chinese now also go to boarding school abroad, the parents not only bearing very handsome stipends for the education, but supporting the very high spending habits of the children.  (See Economist, March 29, 2003, p.39-40.)  Education of Chinese and Asians in the West has, as we have said before, becoming an increasingly important export of Western developed nations.

85.  Cutting through the Very Red Tape
In “Red Tape,” Forbes, March 3, 2003, we learn how a McKinsey consultant discovered his true calling.  Jeff Bernstein has found his home in China in “logistics—getting goods to the right places at the right time.  Because its distribution is so fragmented, the nation spends about 15% of its GDP (which was $1.2 trillion last year) on logistics, well above the U.S. rate.”  His Emerge Logistics does business with 15 Western corporations wanting to avoid the considerable hassle of physically moving goods through the underdeveloped Chinese distribution network and the dealing with countless government approvals that burden the whole process.  “Getting goods through customs requires 100 forms and an additional wait for clearance so that Emerge’s data terminal can print out the government’s okay.”  As we have said, distribution and logistics has become the most important area of development in the Chinese economy, as the country tries to knit the interior together with coastal areas and more fully develop its internal market, not unlike 19th-century America.

84.  China Tech
Business Week, which seems to do a better job on China than its competitors Fortune and Forbes, portrayed all that is underway in technology in China in a cover article October 28, 2002.  Technology exports, still 1/6 of India’s, are expected to pull even with India in perhaps five years, and the two are projected to pour $60 billion worth of goods or so annually into world markets in fairly short order.  The article reminds us that China has an abundance of engineering graduates, and that an engineer commands $15,000 a year, a tremendous competitive edge in world markets.  But the most interesting observation is how China is tapping into the Chinese diaspora abroad, with numerous Chinese professors, for instance, holding joint appointments at universities in their adopted land as well as in China.  We would add that the considerable number of returnees from abroad who are starting tech ventures in China is a key driver in China’s quest to catch up with all the Silicon Valleys of the world.

83.  Global Yamaha
Genichi Kawakami died May 25, 2002, age 90 (See Economist, June 8, 2002, p. 81.)  Our interest in him is that he took Yamaha global in a host of product categories and made sure, to boot, that his products enjoyed a good enough reputation to go head to head with the best.  His pianos, at the end, were regarded as well as Steinways by many.  “By the late 1980s, Yamaha has become the world’s leading maker of musical instruments of all kinds, not just pianos.”  He also scored in motorbikes, water scooters, tennis rackets, golf clubs, machine tools, etc.  His marketing went to the unusual:  he started a worldwide chain of franchised music schools, and perhaps 5 million students got their harmonies and a touch of Yamaha in just this way.  Little wonder that many bought Yamaha instruments along the way.  We suspect he is a model for business generalissimos in the present age where one has simultaneously to go upmarket and to go global.

82.  Internet Guide for China Studies (and A Lot More)
The Institute of China studies at Heidelberg University is one of those very helpful sites hidden in the Web’s Virtual Library System with a system of links that gets at almost any subject.  See  Though most of its links lead you to academic resources, there’s an attempt to get at a range of everyday concerns such as exchange rates, stock prices, and business news.

81.  Go West, Young Man
Business Week (December 9, 2002, pp. 51-58) did an interesting special report on the integration of  the Greater China economy, by which it means roughly the knitting together of  the People’s Republic, Hong Kong, and Taiwan.  In some respects this is old news, since all this has been afoot for several years.  Even more significant, we think, is the integration of the economy inside the People’s Republic as industrial development and logistics infrastructure knit Western China together with the coastal areas where the first wave of modern economic development took place.  The Chongqing Municipality is at the center of this opening up of the interior, and Business Week notes that over $200 billion is expected to be invested there over the next decade.

80.  China:  And Now for Imports
China has been an export economy, but now the imports are beginning to matter.  Beginning in 2000, imports finally soared past $200 billion, and, thinks the Wall Street Journal (October 14, 2002, p.R5), this year they should mount to $250 billion.  This surge has also been accompanied by a spurt in travel by Chinese citizens, with some 12 million going abroad last year.  People from the coastal areas are not only consuming foreign goods at an increased pace but are paying-up for tours overseas as well.

79.  Chinese Stock Markets Open an Inch
As of December 1, large institutional investors (with $10 billion and up in assets) will be able to invest in Shanghai or Shenzen yuan-denominated markets.  It will be hard to get in and impossible to get out.  So the institutions are not beating a path to China’s door.  The opening of the China markets is to be a slow process which is just the way the Chinese want it, no matter how dependent they already are on foreign direct investment flows, which are huge and which are fundamental to its fast growth rate.  See Economist, November 16, 2002, p. 68.

78.  Headquarters Hawaii
Japan is tough on small companies.  Closures outpace start-ups, and venture capital investments are an infinitesimal fraction of the GNP, not only when ranked against the United States but even when stacked up against European nations such as France and Portugal.  Some smart entrepreneurs are sidestepping legal and financial headaches by registering their companies in Hawaii, even if they really intend to do business in Japan, having discovered this loophole in Japanese regulations.  See “Japan’s Entrepreneurs Say Hawaii Offers a Better Business Climate,” Wall Street Journal, October 15, 2002, pp. A16-17.  Digital Point has gone them one better.  Not only has this Internet consulting business set up shop in Hawaii, but now its owner, Hiroshi Kawasaki, has a second product line—advising other Japanese companies how to do the same thing.  He’s got a book out on the subject with a somewhat amusing title called The Easy Way to Set Up an Incorporated Company for 300,000 Yen.  We imagine this is one instance where you can tell a book by its cover.

77.  Pan Asia Websites
A while back, we began looking for websites about Asia that had breadth and depth, and found that all the normal suspects (newspapers, government institutes, and the like)  were offering less than tours de force.  So we will begin the list with a couple of Pan-Asia sources that at least make an effort to offer a lot, and we will plan on adding to the list in the future: 

2. Contemporary Postcolonial and Postimperial Literature in English.  This will get you Singapore, India, Australia, and New Zealand.  This affair is managed by George P. Landow of Brown University and the National University of Singapore.  Obviously it is supposed to take you into the literature of each country, but it also gives you briefs on economics, history, demography, etc.  The value of the site lies in the fact that you cannot get a very good window into any country unless you can get the flavor of its art and literature.

1. Asian Studies Network Information Center  Lo and behold, the University of Texas at Austin has a pretty comprehensive site, replete with all sorts of links, which gives you a rather big sweep of Asia.  Kindly be warned that the fellows in Texas have not been diligent (many of the links are outdated) and the site needs to be better maintained.  Nonetheless, it leads you to some pretty good places.

76.  Making Tracks
“Spending $42 billion in the five years to 2005, the government plans to add 4,400 miles of track to the country’s sprawling 43,000 rail network.  The goal is to clear major transportation bottlenecks that threaten to choke economic growth.  One byproduct could be huge contracts for foreign companies selling next-generation rail technologies.”  See “China Lays New Tracks to Spur Growth,” Wall Street Journal, July 16, 2002, p. A12.  The thrust is to build east-west links as part of the larger effort to tie together China’s internal market, spreading development from the Coasts into the interior.  China is also inviting foreign investment in rails and cargo now, realizing that it has to create infrastructure in a hurry to service its internal market.

75.  Pharma from Farming
Natural remedies have always had a hard time making it into the mainstream marketplace because they do not offer large proprietary profits to the drug companies and because, almost as a consequence, controlled large-scale testing does not take place.  Our regulators need massive controlled tests in order to pass on a drug.  But, slowly, herbs are finding their place in the sun.  “The Hong Kong Trade Development Counsel reckons the world market for Chinese medicine has doubled over the past eight years to about $23 billion.”  The biggest market is Europe, particularly Germany.  “In June, Changchun Da Xing (HONG KONG: 8067.HK), a mainland company that gets 80% of its profit from a traditional treatment for cervical ailments, issued shares in Hong Kong and found them ten times oversubscribed.”  Simple to say,  there is simply too much latent demand for such treatments to be kept in the bottle.

74.  Chopsticks
Food is the glue that ties countries together.  And this is easily seen in “The History of Eating Utensils,” now on exhibit at the California Academy of Sciences.  There you can learned that chopsticks came into being in China 5,000 years ago, earning the name kuai-zi (“quick little fellows”), so appropriate for these agile utensils.  Later they spilled over into Vietnam, Korea, and Japan.  The Japanese word for them is hashi (“bridge”), possibly accounting for the numerous real bridges in Japan that really go nowhere but satisfy the porkbarrel urges of public officials who feel one cannot enough too much of a good thing.  In any event, chopsticks do tie Asia’s leading nations together.  See

73.  The Esprit Is Maybe Back
Can the spirit recover?  Because of family spats and other problems, the once-powerful Esprit clothing producer and retailer has gotten into deep trouble.  And now it is all owned by Hong-Kong’s Esprit Holdings (HSKE: ESHDF;, the Asian outlet having swallowed its parent.  Besides picking smarter store locales, Esprit is changing its target audience from teenies and young 20s to 28-year-olds.  This kind of ownership reversal has happened before:  Japan’s 7-11 had to take over 7-11 in the U.S.  Increasingly, retail innovation is coming from abroad, rather than from the U.S., where various outdated mass-merchandising tactics often cause retailers to falter.  See the Wall Street Journal, June 17, 2002, B1 and B4.

72 The Sanxingdui Museum
Another one of our intrepid travelers, Dr. Ed David, one-time National Science Advisor as well as research impresario at AT&T and Exxon, discovered this gem on his most recent trip to China.  He could not rave enough about the museum and its contents, citing, for instance, the 40-ft. bronze trees that were meant to take you up to heaven in the Shu Kingdom, some 4800 years ago.  The handsome little museum sits beside the Yazi River, an attractive introduction to several aspects of ancient Sichuan.  See  The fruit of longtime archaeological endeavors dating back to the 1930s, the surfeit of bronzes and other objects are unsurpassed, apparently bettering collections now on tour in the West.

71.  Taming of the Dragon?
The Economist (June 15-21, 2002, after page 54) has a curious survey of China called “Out of Puff.”  It is doubly curious because these Economist surveys usually lack much of a point of view.  This article is clearly focused on China’s troubles—unemployed, over-taxed rural people; the huge overhang of non-performing loans at the nation’s banks; a leadership that may not be ready for enough change, etc. etc.  You will be convinced that horrible times are coming.  These are, incidentally, amongst the ills cited by the China specialists at all our best think tanks.  But a troubled China is not what we saw on our recent visit.  We met a leadership willing to acknowledge its many problems, and tackling a great many of them.  The last ten years constitute a miracle of spellbinding economic progress.  But the specialists say that all the progress simply means that China took on its easy problems first—and that its big simmering problems will lead to an explosion.  China is now busy constructing its internal market; if it is successful, it will realize a galaxy of benefits.  The biggest threat to its well being, as we see it, is the coming retirement of Zhu Rongi, China’s chief operating officer (i.e. prime minister), who has been driven less by statecraft and more by his will to get things done.  We don’t know who the next table-pounder will be. 

70.  Buyouts in Japan
We have previously commented on foreign acquisition activity in China, where large amounts of current inflows now represent acquisitions of parts of Chinese state-owned companies.  Since 1998, the pace, size, and volume of deals in Japan has also accelerated, with a commensurate transforming effect on business practices.  Nissan Motor, now really run by Renault, has transformed purchasing for the auto industry, while it has cut costs and employment dramatically.  Foreign purchases probably are the best hope for unproductive, debt-ridden state-owned enterprises in China.  And they are probably the key to reviving the Japanese economy, long held back by encrusted oligarchic practices and a government bureaucracy unwilling to undertake broad reform.  See the Economist, March 23, 2002, p. 59. 

69.  Electricity in Darkness
In April, China announced a new de-regulation power policy that will split power generation from transmission and allow for enough generators to ostensibly create a price competitive atmosphere.  Because of politics and other intrigue, there is a large question mark as to whether this highly politicized industry can obtain true independence of the state and achieve market-driven efficiency.  “Chinese consumers pay about 30% more for their electricity than do Americans.”  AES of America owns some plants (as do some other foreign concerns) it would like to dump, but there are no takers for these black holes.  There is now a surplus of energy available in China, but it is thought that this will soon enough turn to a shortfall if the new policy does not really lead to thoroughgoing reform.  See the Economist, June 8, 2002, pp. 60-61.

68. East-Asian and Japanese Studies at Columbia
Columbia, Columbia University’s Alumni Magazine, focused its Spring 2002 issue on the history of  East Asian (heavily Chinese) and Japanese studies at the university (pp. 8-19).  The vitality of both departments stemmed from the considerable new blood they drew to Columbia at their start, particularly from abroad.  At first East Asia brought in a raft of talented Europeans, and after, a multitude of Chinese students, some of whom went on to teach there, others who became world famous such as the diplomat Wellington Koo. Ryusaku Tsunoda put Columbia on the Japan Studies map, and Sir George Sansom, a colleague, once referred to him as “the father of Japanese studies in America.”  Even to this day, Columbia has some special claims in Asian scholarship.

67. Big Spenders
Consumer finance is beginning to come very alive in Asia, because many segments of the population are learning to spend and consume, rather than save and abstain.  The mechanics are not yet all in place, with a lack, for instance, of good credit bureaus in several countries.  The demand is there, with credit cards and consumer finance companies in its wake.  In this vein, the Economist reports that consumer credit is a major force behind South Korea's boom.  See Economist, April 20, 2002, pp. 69-70.

66. Roadways on the Way
China, according to officials, now has 19,000 kilometers of highway, but it is adding new roads rapidly.  By 2020 it is expected to have a 55,000 kilometer grid.  This is part of the growing internal market infrastructure and distribution system that is being hastened by the advent of WTO.  (Economist, April 20, 2002, p. 40)

65. Polo Chic
Ralph Lauren shows how the U.S. and China have interpenetrated each other at a cultural level, a necessary precursor to the developments now occurring at the economic and political levels.  Likewise, his very smart online magazine at also shows how lifestyle and cultural marketing is the sine qua non of salesmanship for high value-added products.  In Polo.Com Magazine, look at such articles as “Ancient Chinese Secrets” (tales behind prominent decorative symbols, see by David Soul, “Decorating with Chinoiserie” ( by Jill Kopelman, and “Porcelain's Puzzling Patterns”( again by David Soul.

64. The Alameda Corridor
After 20 years in development, the Alameda Corridor links the Los Angeles and Long Beach ports with LA’s transcontinental rail yards.  Imports from Asia will now speed ever more rapidly to their U.S. destinations now that rail and sea are better tied together.  See the Wall Street Journal, April 9, 2002, p. B7.

63. Lu Sing
In 1888, Louisa May Alcott completed her last novel, Lu Sing, about a young girl in China who was brought up by her aunts.  It was both a model and memento for her niece Lulu who had come to live with her on the death of her sister May.  It is testament to nineteenth century's America's fascination with the East, and Alcott's own Chinese cultural studies.  The original manuscript is now being offered to publishers in the hopes of raising money to save the Alcott's Orchard House, now being devoured by powder post beetles; it is the family home in Concord, Massachusetts.  Previously, America’s long love affair with China is deep and complex.  See the New York Times, March 27,2002, p. B7. 

62. Microsoft to China and India
Reuters on March 2l reported that Microsoft is considering going head to head with AOL in both China and India, expanding its MSN Internet service from the U.S. to other regions.  Now with 7.7 million users, Microsoft is still far behind AOL overall, but it is clearly entering these big, underserved markets to keep breathing down AOL Time Warner's back.

62. Next: Distribution
Matthew Miau of Taiwan is fast becoming the Third Force in the computer distribution business, right behind the two U. S. behemoths, Ingram Micro (NYSE:IM) and Tech Data (NASDAQ:TECHD).  His Synnex Information is making fast strides in the U.S.  Unusual because we think of Taiwan as a producer and not a distributor, Miau is also thinking—at the right time—about mainland China, since he is now putting $35 million into distribution centers there.  We are clearly at a stage where more Chinese businesses will be springing up in the distribution sector to take advantage of the WTO-induced integration of China's internal markets. See Forbes, April 1, 2002, p.62.

62. The Real Restructuring Begins?
The next stage of Chinese economic development may be starting.  We will know that the shake-out of the state sector really has begun when we see bits and pieces of companies hived off and legitimately sold to brand new interests.  In particular, this will mean sales to foreign interests, with more than 50% ownership going to the supplier of capital coming from outside the country.  While this has been resisted so far, a couple of such deals have just been completed.  Emerson just bought 100% of a division of Huawei, a telecom equipment company.  In another, Alcatel got an increased stake in and control of a joint venture it has with a state-owned company.  Naturally all this sounds quite exciting to international investment banks who need a jolt in their M & A practices.  And, if we see more, we can expect a major productivity burst in China, as cross country consolidations reap benefits from an internal economy headed towards much greater integration.  See the Economist, March 16, 2002, p. 66.

62. Schools for Top Dogs
The Wall Street Journal reports that Western MBA factories (Henley, Instead, University of Chicago, etc) are turning up good revenues with executive MBA courses often staged in Asia (e.g. Singapore), not in the West.  See WSJ, March 20,2002, p.B5A.  This trend in executive education only further extends a growing phenomenon in U.S. higher education, which, in fact, is propped up by its influx of foreign students, particularly from Asia.  Cultural and knowledge exports are to be a growing part of the U.S. invisible trade.

62. Chinese Discovered America?
John Noble Wilford in the New York Times this week (March 17, 2002, p. 14YNE) offers up a Brit's theory that the Chinese may have discovered the New World before Columbus.  Gavin Menzies, retired Royal Navy submarine commander and navigation expert has put together a somewhat convincing assemblage of maps and conjecture to suggest that Zeng He may have gotten here first.  Menzies has tried to reconstruct Zeng He's long voyage from March 1421 to October 1423 as admiral of a huge fleet.  Naturally the doubters are many, even though Menzies has been given a most respectful hearing in Great Britain.  Wilford, incidentally, is a long-time science writer at the Times as well as author of a history of maps, Mapmakers.

62. The other Davos
Davos has moved its meeting from Switzerland to New York, and Switzerland is getting more involved with the UN.  Less noticed, but more important perhaps, is the gathering momentum of the Boao Forum for Asia, permanently headquartered in China's Hainan Province.  (See  Started by former Philippine President Fidel Ramos and former Prime Ministers of Australia and Japan--Bob Hawke and Morihiro Hosokawa, respectively--it draws broadly from the leadership of East and West.  Hainan, once an island for exiles, and now virtually a resort, provides a relatively idyllic backdrop for the musings of movers and shakers in and around Asia.

61. China's Coming Transformation
This article, by George Gilboy and Eric Heginbotham, appeared in Foreign Affairs, July/August 2001.  The authors contend that the next generation of Chinese will be pragmatic and loosen the political strings enough to ensure that economic development continues.  "Many of today's senior Chinese officials recognize this dilemma but have powerful personal motivations to resist change.  The next generation of Chinese leaders, however--set to take office in 2002-2003--is both more supportive of reform and less constrained by Tiananmen-era political baggage."

60. Emperor Qianlong's Lodge
See the New York Times, February 19, 2002, p. B1 and B2.  Retiring in 1796, he lived here in retirement until his death 3 years later.  Castiglione's influence is felt in the murals.  And now the World Monuments Fund is assisting in the restoration.  "The lodge represents the crystallization of a moment of encounter between the East and West," according to Stubbs of the WM Fund.  Also known as the Lodge for Weary Diligence.

59. The Decline and Rise of Temple Architecture
With the decline of Buddhism in Japan, temple-building and Japanese temple carpentry have been in decline.  But, to a certain degree, it has soared into the United States, with recent shows at the Asia Society and the Japan Society -- and with a number of tool shops and craftsmen available on each of the coasts.  See the New York Times, February 21, 2002, p. 10.  Also, see;;; and

58. Bund-erbar
Like everything in Shanghai, the Bund, along the bank of the Huangpu River, is undergoing a revival.  For tourists, the buildings along the Bund have always made a sparkling display at night, reminding one of some Scandinavian harbor.  Business again is looking for a locale in this area.  For a tour, see

57. China Reconstructing
Slowly commentators far and wide are catching up with China's last economic decade, when the leaders out of Shanghai (who are today's national leaders) remade China's industrial economy, with the banks and agriculture yet to come.  Clifford's and Panitchpakdi's China and the WTO highlights some of the meaning of China's accession to the WTO.  Obviously they dwell heavily on the integration of China into the world economy; perhaps as important is the fact that now China's own economy, propelled by WTO, will achieve integration and raise productivity.  On February 5, 2002, the Conference Board came out with its first real study of China, "Reconstructing Chinese Enterprises," which shows how private capital and/or local control generates vastly more productive enterprises, the SOEs (state-owned enterprises) still being the millstones around the Chinese economy.  Shortly we will have a volume on Zhu Rongji, the author of many of these changes.  Humorously enough, major private equity investors, who have been burnt earlier in China, are now sitting on the sidelines, with a solid chance of missing the good times ahead.

56. Wired Nation
Elsewhere we talk about smart communities (see Big Ideas).  The smart communities people should study Korea, a nation not usually on the list of smarties.  "More than half of Korea's 15 million households have broadband service, while more than 60% of Koreans carry cell phones.  Korea's telcos are already trying out third-generation mobile handsets, designed to handle high-speed wireless transmission of video, data, and voice.  In the securities market, about 70% of all share trades are done online."  See BusinessWeek, February 4, 2002, p. 50.  To be this wired is a competitive advantage and is one of the reasons why smart private equity is going two places in Asia -- China and South Korea.

55. China-Intensive Companies
In 2001's Annual Report on Annual Reports, we implied that any company serious about growth has to be passionately committed to doing business in China.  Who is?  Here's an ever-growing list....

6. Intel (NASDAQ:INTC,  Even though other Coca Cola and Motorola have cottoned onto China, the chip houses, well before other industries, have figured out that China is number one.  Now Intel has announced that China will overtake Japan -- which accounts for 7% of current sales value -- as its number one market in Asia.

Most recently, on a visit to India, CEO Craig Barrett stated that China and Russian probably will garner the biggest share of Intel investment for a number of years to come.  According to a Reuters release of August 30,2002, Intel has invested about $500 million in China over the last 5 years, and it will double employment at its Shanghai chip plant, from 1,200 now to 3,000 by 2004.  Intel will also put more into India, ranging from $100 to $200 million over the next few years, building up software operations by tripling its engineering staff to 3,000.

5. General Motors (NYSE:GM;  GM is going downmarket in China.  Already a major force with its Buick plant in Shanghai and a sport utility vehicle in the Northeast, it has concentrated on the high end market so far.  Now it is spending $30 million for a third of a partnership with two Chinese companies for a venture in Guangxi that will focus on minivehicles, a segment that has been growing robustly and now has edged up to more than 600,000 units a year.  Its partners are Shanghai Automotive (SAIC) and Liuzhou Wuling Automotive which sold 120,000 minitrucks and vans last year.  See the Wall Street Journal, June 4, 2002, p. D6.  Since China is now expanding its internal distribution and logistical network, GM’s move would appear to be well-timed.

4. Wm. Wrigley Jr. Company (NYSE: WWY;  Chairman Wrigley remarks that "Record shipments in Russia completed our recovery from the ruble's devaluation of three years ago, and China solidified its position as our second largest volume country in the world.  These two significant and relatively newer markets continue to showcase the Company's long-term strategic focus..."  See Annual Report 2001, p. 5.  Asia, as a whole, grew at a 25% clip last year, with total company sales growing at a fourth of that rate.

3. DuPont (NYSE:DD;  DuPont seems to be making more progress in China than it is on the homefront, where all its redos never quite get the company churning again.  First off, it and others are making some good buys there.  “Purchases of Chinese assets accounted for as much as a fifth of the $51 billion of foreign investment in the country last year….  St. Louis-base Emerson has made the biggest buy so far, spending $750 million for the electric motor business of China’s privately owned Huawei Technolgies….  But DuPont’s $20  million purchase of the protein plant in Yun Meng is notable, too….”  Its total investment there will soon add up to $700 million, with a $70 million joint-plastics venture with Japan’s Asahi Kasei announced in March.  DuPont first came into China in 1863; with time out for the early days of the Communists, it returned in 1984.  See Forbes, June 10, 2002, pgs 92-94.  Dupont’s success there is taken to be related to its focus on doing a series of small steps and an ability to pick up the right partners along the way.

2. ChinaVest (  A venture capital firm based in Hong Kong and San Francisco, ChinaVest only funds enterprises in China or in the overseas Chinese business community.  Its five funds have has consistently bet on Chinese enterprises, especially those accustomed to operating in more than one country surrounding the Pacific Rim.

1. Siemens (NYSE:SI; The chairman recently said: "I'm especially pleased about China.  In the past fiscal year, we reached our goal of making China our third-largest market, after the U.S. and Germany, with sales of some $3.5 billion."

54. Traveling to Cambodia and Thailand
Howard Gross, who has traveled Asia for telecommunications companies for 10 or 15 years, responded to our recent pleas on the hows and whys of traveling through Cambodia and Thailand.  We trust his comments will help you through Angkor Wat, Bangkok, and other fascinating, difficult places that never do completely recover from the tremors of several wars. Click here.

53. Cabs from London to Bejiing
Brilliance China (NYSE:CBA, will start making the British black cabs in China under a license from Manganese Bronze (OTC BB:BNZE.OB,, the UK manufacturer in Coventry.  Already China's biggest minibus maker, Brilliance has just inked a deal with MG Rover to turn out cars and engines by 2005.  See the Financial Times, January 8, 2002, p. 23.

52. The Sushi World Guide  Here you can learn where to get sushi outside Japan, in practically every country on earth.  At last count, the site listed just short of 3,000 restaurants.  In our own area, it captures about half the restaurants, but does miss the secret best.  Indeed, through food we learn how successful a nation is in exporting its culture.  Like our bar guide, this sushi collection is created by a couple of German fellows.  We can only assume the Germans are the ultimate list makers.

51. Hinterlands
The very able Nicholas Lardy, frequent spokesman on China and Asia at the Brookings Institution, has a raft of books out telling us what makes Asia tick and what makes it explode.  One study, China's Unfinished Economic Revolution, says the tough stuff is yet to begin.  The combination of bankrupt state banks and effectively bankrupt state companies (SOEs) to which banks lent their dough amounts to an economic time bomb.  Interesting.  But we don't think that's where the trouble really lies.  We think the government will set the banks and companies to rights.  Watch the country, not the cities.  The people in the outback are bust.  Even rural governments are broke.  (See Economist, December 15, 2001, p. 36.)  The real dilemma is not the industrial economy, but agrarian devastation.  For more Lardy books and wisdom, see:

China in the World Economy
Foreign Trade and Economic Reform in China, 1978-1990
Economic Growth and Distribution in China
Agriculture in China's Modern Economic Development
Integrating China into the Global Economy

50. Best Way to Introduce Haiku to a Child
One of the most charming gifts under our Christmas tree this year was Cool Melons—Turn to Frogs! , a children’s book about the life and poems of Kobayashi Yataro, known in Japan as the poet Issa (1763-1827).  This delightful volume intersperses 33 of Issa’s haiku with a simple retelling of the major events of his life.  Kazuko Stone, a New York illustrator born in Japan, read more than 2,500 of Issa’s poems and visited his farmhouse before embarking on this project with author Matthew Golub.  Her illustrations are often sweetly humorous, as a dragon roof tile snaps at a crescent moon, or a family of monkeys relax in a steaming hot spring.  Some drawings—a crimson peony, a bejeweled dragonfly—are exquisitely detailed.  The book is published in English, but each poem is also rendered in flowing cursive calligraphy down the side of the page.  For a child, we can think of no more appealing introduction to haiku than this gentle book.  See:  Cool Melons—Turn to Frogs!, by Matthew Golub, Kazuko G. Stone, and Keiko Smith (New York:  Lee and Low Books, 1998.)

49. China's 100 Richest People
Forbes has expanded its list from 50 to 100 in recognition of the obvious (see  China is burgeoning, and it is creating all sorts of new money.  At Forbes, you can read much more about China unbound, particularly articles such as "Sleeping Dragon Joins the Club" (at or "Shanghai: China's New Gotham" (at 

48. Beating-Heart Pioneer
China's Wan Feng has seized the lead.  He is performing as many or more beating-heart operations than anybody in the West, moving easily from hospital to hospital to turn in the most successes and earn a superior income.  Even in the health section, skilled practitioners, returned from America, are showing entrepreneurial energy.  See The Wall Street Journal, December 5, 2001, pp. B1 and B4. 

47. China Kills Drug Lords
China's population is paying up for drugs, and China's government does not like the cost.  It plans to cap drug prices.  "Under the plan, a maker of a patented drug could sell it for no more than 30% to 40% more than what it would cost a generic Chinese manufacturer to produce."  See The Wall Street Journal, December 3, 2001, p. A16.

46. Dollar Radio
Commercial media, as we promised, draws closer in China.  Last week, the state set up China Radio, Film, and Television Group as part of this effort.  "State-owned media have grown increasingly commercialized in the last few years."  See The Wall Street Journal, December 7, 2001, P. A16.

45. Tiger Woods at Mission Hills Golf Club
It was a draw, folks.  Zhang Liawei, China's top gun, pulled off a coup.  And Mission Hills is in China -- Shenzhen -- not Southern California.  See The South China Morning Post, November 4, 2001, Sport, p. 17.

44. U.S. Restructuring for Japanese and Chinese Monoliths
Executives from the U.S. (or Europe) who can wield an ax are being brought into unwieldy enterprises in Japan and China to set them on the road to profitability.  Tim Collins of Ripplewood Holding, LLC has made a $25 billion bet on Japan and has lined up "killer executives," often from the U.S., to run operations there, ranging from auto parts to audio equipment.  For Shinsei Bank he brought in Japanese handlers who had trained at Citibank's U.S. operations.  Carlos Ghosn of Renault now runs Nissan Motors, which was headed for the rock pile but has now turned nicely profitable.  Likewise, China has begun to bring in Westerners to turn around some of its SOEs (state-owned enterprises), which are largely moribund.  See Business Week, December 10, 2001, pp. 42-46.

43. Museum of World Religions in Tai Pei
Who would have thought it?  Designed by Ralph Appelbaum, who did the Holocaust Museum in Washington, it celebrates all the major religions, as well as several specialized faiths.  Ten years in the making, the museum opened November 9th.  It was spearheaded by the Venerable Dharma Master Hsin Tao, a Buddhist monk, and funded by 100,000 members of the World Religions Foundation.  The Museum of World Religions.  236, Section 1, Jungshan Road, Youngho City, Taipei.  Telephone: 8862-8923-3088.  Website:  See the South China Morning Post, November 10, 2001, Features, pp. 1 and 3.

42. Suzhou Solution
As Shanghai's prices rise, some of its business is moving west to Suzhou.  Foreign contracts signed have soared to $6.6 billion this year, the first time Shanghai has not been in the top spot.  The move there includes lots of electronics, including several of the chip facilities now being built in China by every group in Europe, the U.S., and Taiwan in order to get a toe hold in the burgeoning tech industry.  See The Wall Street Journal, November 30, 2001, p. A13.

41. Indian Pills
Based on a 1971 law which decided to ignore patent restrictions, India is becoming dispensary to the world, or at least to the Third World.  Based on reverse engineering, very low marketing costs, and Western price-fixing, it is selling knock-offs of Western pills at 1/50 of the U.S. price.  We just met a chap from Hong Kong who buys his allergy pills in India.  He claims the quality is actually better than those produced in the West.  A stand-out is Dr. Reddy's Laboratories Ltd. (NYSE: RDY), this year's high-performance ADR.  India's pharma industry is just one of the many forces that will eventually rationalize U.S. drug prices.  See Forbes, December 10, 2001, pp. 70-72.

40. Confederate China
Clearly one of the hopes of China's leadership is that entry into the WTO will promote more integration inside China in order to overcome the severe barriers to internal trade that exist today.  Sandra Poncet of the Centre for International Research and Alwyn Young of the University of Chicago have both published studies on the economic disparities created by the Balkanization of China.  See Far Eastern Review, November 7, 2001, P. 44.  Andrew Tanzen (Forbes, November 12, 2001, p. 74ff) speaks to the same subject, demonstrating the excessive supply chain costs arising from local barriers and poor interior distribution networks throughout China.  As we have said, we do not think China will overcome these barriers unless it moves from a producer culture to a culture with a marketing mentality.

39. China's Productivity
"One essential to economic growth will be the breaking off of the involution (growth of product without increase of productivity for man-hour of labor) that has for centuries checked the rise of mass living standards."  (See John King Fairbank's China: A New History, p. 431).  This is the chicken-and-the-egg principle in Chinese economics: labor abundance has not bred labor productivity.  (For more on Fairbank's study, see entry 38 below.)

38. High Song and the Barbarian
In his study, China: A New History, John King Fairbank writes that "A curious anomaly haunts the three centuries of the Song in China.  On the one hand it was a great creative age that put China ahead of the rest of the world....  On the other hand, during just this time of Chinese efflorescence, tribal invaders from inner Asia gradually got military and state control over the Chinese state and public" (p. 88).   Is, may we ask, China ready for its new Song dynasty, and is re-engagement with all the globe through WTO a necessary catalyst?

37. Starbucks in China
We have already highlighted the vast success of Starbucks in Japan (see Agile Companies #130).  It's off to a good start in China as well, having extended to more than 35 stores since its opening in January 1999, led by David Sun, president of Mei Da Coffee Company, which owns the Starbuck's franchise in northern China.  (See The Economist, October 6th, 2001, p. 62).  The only fly in the Starbuck's coffee cup is some diminution of quality as it expands, ranging from a bitter taste to its coffee to the addition of lots of miscellaneous kitsch to its original clean store design.  Andrea Illy, president of Italy's Illy Expresso (see Best of Class #191), thinks Starbucks over-roasts its coffee and depends too much on take-out trade.  We suspect regional variations in water quality also diminish the product.

36. Vietnam Opens
The U.S. has now signed a trade accord with Vietnam, and it will probably light a fire under Vietnam's trade and commerce.  Several companies based there -- Ikea, American Standard, Nike, and others -- will be pumping products into the U.S., as tariffs fall dramatically.   (See The Wall Street Journal, October 25, 2001, p. A14.)

35. Time Warner Was First in China
AOL-Time Warner has become the "first foreign broadcaster given direct access to Chinese audiences."  In turn, Chinese state television will be carried to audiences in New York, Los Angeles, and Houston.  The Time Warner Channel will first reach audiences in Guangdong province, next to Hong Kong.  (From the Associated Press, October 22, 2001)

34. China Institute
New York's China Institute was founded in 1926 by John Dewey of Columbia University and Hu Shih, who later became ambassador to the U.S.  It focuses on cultural exchanges, lectures, and the like.  And now it has layered on trade and investment discussions, yet more evidence of the intersection between commerce and culture.  Recent events include a talk on a world-class porcelain collection and a lecture on "China's Technology Capital Markets -- 2002 Forecast."

33. China, the Global Engine
With the U.S. stalled out, China is now potentially the back-up engine for world development, if the Chinese leaders accept their new responsibility.  The Russian Far East is yet one more example of China's new dynamism, as seen right at the intersection of Russia, Mongolia, and China.  See "Chinese Creating a New Vigor in Russian Far East," The New York Times, September 23, 2001, p. A3: "From Vladivostok to Zabaikalsk, Russians are coming to depend on the Chinese for everything from buildings to bananas to boomboxes.   And that is unsettling even to the architects of the Sino-Russian reconciliation."

32. IMF Praises Chinese Currency Management and Just About Everything Else
The International Monetary Fund's release 01/91 issued August 24, 2001 summarizes its review with Chinese leaders in all aspects of the Chinese economy, noting that "China's exchange rate policy had served both China and the region well in recent years."  Obviously, it looks to more progress in reforming state-owned enterprises and the banks, both of which are a considerable drain on China's economy.   With China's robust growth and prudent macro-economic management, the IMF continues to paint a glowing picture for 2002 and beyond.

31. Buddhism in America
On August 18th, the largest Buddhist temple outside Asia was dedicated in Red Feather Lakes, Colorado, two hours outside of Denver.  It commemorates a Tibetan Buddhist master named Rinpoche, father of the Shambhala branch, who died in 1987.  This branch is heavily focused on meditation.  The Economist (August 18, 2001, p. 24) speculates there may be 1,000,000 non-Asian converts in America, with Tricycle, a Buddhist quarterly, now selling 50,000 copies.  For more on Shambhala, see  For more on Tricycle, see

30. Profits in China
The not-true truism is that China is a black hole from which profits never emerge.  Business Week (June 18, 2001, p. 26) notes that U.S. subs rose from 45 to 335 from 1990 to 1998 and that foreign affiliate earnings from China topped $7 billion in 1998.   Earnings of private Chinese companies, under $130 billion for many years, climbed sharply in 2000 and are now in the $200 billion range.  (See Business Week, July 9, 2001, p. 28).

29. "China on My Mind"
This is the title of this year's baccalaureate address by Richard C. Levin, Yale's president.   See Yale Alumni Magazine, Summer 2001.  Its main importance was that it documented Yale's historically deep connection with China, dating back to 1854 when Yung Wing, a Chinese student, graduated from Yale.  Yale-in-China dates back to the turn of the century (1901).  A long article elsewhere in the magazine, "Sticking with China," provides some of Yale's current Chinese involvements.  The most interesting footnote is that the Dean of the School of Management, Jeffrey Garten, has put China very much on center stage, calling it "the second most important country in the world" and placing it at the top of the list in his book, The Big Ten: The Big Emerging Markets and How They Will Change Our Lives.

28. Mutual Funds in China
The truism, up to now, is that the private equity markets in China have been working, and the public markets have been a little bit of a bust, even with frenzied purchases of individual stocks by China's citizens.  A new trust law, passed in April, will now permit mutual funds.  China's first open-end mutual is due out some time this summer.   Soon insurers will be stock-purchasers as well--all meaning that institutionalization and deeper markets are on the way.  In a parallel move, there are hints that China may begin to begin to create a real re-insurance market, making for broader, more efficient insurance markets.  See The Economist, June 30, 2001, pp. 65-66.

27. Lesser Estates
In 1997, Wong Kwan paid $70 million for Genesis, the world's most expensive house, located in Hong Kong atop Victoria Peak.  Its 28,000 square feet have practically everything, and Kwan turned down $110 million for it along the way.  Its value, however, is now down 50-90%.  "As many as 200,000 households in Hong Kong are burdened with negative equity."  See The Wall Street Journal, June 20, 2001, p. A15.   Still to come: the bust in California, Fairfield County, and Florida enclave prices!

26. Lingua Franca
One of the new requirements of global management is to achieve a global mindset.   Certainly this is very evident in U.S. executive ranks, where almost all managers have global responsibilities yet think primarily about Middletown and focus on the intersection of Main Street and Wall Street.  Now up and comers at Matsushita, Toyota, NEC, Hitachi, Komatsu, and others have to learn English before they can get ahead.  "A 1999 government report entitled 'Japan in the 21st Century' argues for making English the country's official second language."  The hope is that the shock of learning English will lead to global thinking, and, of course, it will be vital as Japan achieves more of a marketing culture and becomes less of a just-in-time manufacturer.  See The Wall Street Journal, June 11, 2001, P.B6A.

25. End of the Line?
The anomaly of Asian business, in country after country, is that so many of the major enterprises are family affairs grown big under the sway of a powerful leader and the loyalties of a close-knit clan.  But with the Asian economic crisis and the eventual conversion of Asia to a global marketing style, the inbred (read opaque) machinations of family executives (read nepotism and average talents) is impeding economic progress in virtually every Asian nation.  Most interesting, in this regard, is Dhanin Chearavanont of Thailand, head of Charoen Pokphand (CP), taken by some to be one of the better run companies in Asia.  He has customarily been ahead of the pack; "he was the first outside investor in China when Deng Xiaoping reopened the country in 1978, and he is one of the biggest and best-connected investors there today."  Now he is planning to make all family members shareholders in a transparent company.  "'We cannot keep the business in the family forever....  So if you know that, why not prepare?'"  See The Economist, March 24, 2001, p. 78.

24. Valuing Asian Stocks
Stock markets outside of Japan have not functioned extremely well, and this is bound up with the unreliable disclosure and lack of transparency on the part of Asian companies.  So how do you put a price on an Asian stock?  "The winning strategy has been to buy shares in those companies that achieved the highest returns on equity in the previous accounting periods irrespective of their current value."  After that, one focuses on indicators peculiar to each country--current ratios in China and the Philippines or research and development rates in Taiwan.  Dividends turn out to be universally important, since capital gains may be long in coming.  See The Economist, May 26, 2001, p. 74.

23. An Unlikely Partnership to Rescue Shangri-La
An unlikely alliance between the U.S.-based Nature Conservancy and the government of Yunnan province may help to save a pristine mountain hamlet from the ravages of grinding proverty and unchecked tourism.  Yubeng, an isolated Tibetan village in one of China's last old-growth forests, is renowned amongst biologists as a "hot spot" for biodiversity.  More than 10,000 plant species, including 162 species of rhododendron and 120 species of primrose, as well as snow leopards and golden eagles, all flourish in this remote area of upper Yunnan province, which has remained a stronghold of Tibetan Buddhism.

Yet Yubeng is a four-hour walk from the nearest dirt road, and its 133 inhabitants suffer from a lack of modern medical care, poor sanitation, inadequate nutrition and desperate poverty.  Now the villagers have begun to explore ways of improving their lives without destroying the extraordinary world in which they live.  Aiding them in their quest is the Nature Conservancy, which hopes to preserve the area's biodiversity, and the Yunnan government, which has permitted the rebuilding of Tibetan temples as a way to increase tourism.  Also involved are Ed Norton, former Washington environmental lawyer, and his wife, Ann McBride, former president of Common Cause, who abandoned the Beltway in 1999 and came to live in Yunnan where they have founded the Yunnan Great Rivers Project, which advises on responsible development in the region. All parties are currently exploring eco-tourism as a means of gently linking Yubeng to the modern world, without destroying its remarkable spiritual and biological assets.  See "A Holy Place in China Fights for Its Life, Body and Soul," The New York Times, June 10, 2001, p. 16.

22. Inequality in China
Every blessing is curse.  A market economy has brought untold riches to China, but also a growing gap between rich and poor--with the possibility for social unrest.  Even officialdom admits that the Gini coefficient is near 0.39, which, translated, means that inequality is possibly destabilizing.  "The Gini coefficient is a commonly used statistical gauge where naught represents perfect equality and one would mean that a single person received all the income."  See The Economist, June 2, 2001, p. 39.  Clearly the leadership is concerned about this trend.

21. Taiwan and China Merging
Business Week has caught up with the simmering big story.  With the prospective entrance of Taiwan and China into the WTO, their economies are already merging.  This said, it will be hard to keep them separate politically.  See Business Week, June 11, 2001, pp. 56-58.  Taiwan's moguls are pouring money into China, particularly into Shanghai.

20. China Logistics
We're embarrassed to say that we don't know where we drummed up this provocative article that's billed as an update of one that last appeared in the Mercer Management Journal.  Two Mercer consultants, Laurence Alberts and Hugh Randall, plus Guy Ashby of Inchcape China Logistics, laid out "China Logistics: Obstacle and Opportunity" a few years back.  "The Hong Kong Investment Bank Peregrine (now history, as they say) estimates that China will need to invest more than $230 billion in its infrastructure to sustain continued economic growth through the next five years."  "While China's production is now only 45 percent controlled by state enterprise ... 90 percent of transport and warehousing remains in the hands of state entities...."  Both domestic and multinational companies need, as a next step, to broaden their distribution in China.

19. Hong Kong and Singapore Too Expensive
"Charles de Trenck, an analyst at Schroder Salomon Smith Barney, reckons that it costs twice as much to handle a container in Hong Kong as in a port on America's west coast.  ...   [P]orts have profit margins as high as 40%...."  Maersk, Singapore's largest customer, has moved next door to Malaysia.  Some Hong Kong traffic is moving to "two new ports in Shenzhen," and the Chinese government seems to be putting the blocks to Hutchison Whampoa, Hong Kong's monopoly operator.  Singapore, of course, is a transshipment port for Asian commerce, while Hong Kong is moving goods in and out of China.  See Economist, April 24, 2000, pp. 57-58.

18. Chinese Brands Arrive
In everything from shampoo to laundry soap, homegrown Chinese products are stealing shelf space from Coke and P&G, which had established commanding positions in the Chinese marketplace.  With lower prices and relentless advertising, Chongqing Toothpaste and Bee and Flower Shampoo have become national brands.  As remarkable is the growth of Chinese advertising.  "Local brands have displaced global names as the country's 10 biggest advertising spenders."  See the Wall Street Journal, May 24, 2001, p. A17.

17. Fremont Kowloon
Fremont, California, a few miles away from California in Eastbay and for years a nondescript backwater, has transformed itself into one of the nation's most Asian towns.  (See the New York Times, May 26, 2001, pp. A1 and A8.)  Hillside Drive is now called Gurdwara Road, named after Gurdwa Sahib Temple, the Sikh temple there.  The Chinese residents have learned not to leave their shoes on the front porch when they go out, since thieves pillaged houses advertising their vacancy.  The Asian population, having doubled since 1990, now comprises 37 percent.

16. Me and Thou
The Asian Foundation in San Francisco has published this year two volumes on America's role in Asia.  They are compendiums by experts on America in Asia--from both Asian and American perspectives.  The Asians' last recommendation--that American universities "strengthen their Asian studies programs" is probably the most interesting comment from across the ocean.  Surprisingly, the American experts are well down their list--to recommendation 10--before they get to their two economic recommendations, even though economics are the crux of both stability and progress not only for Asia but for the world.  The Asian Foundation offers a host of publications helpful to serious students of development in Asia, growing out of its half century of activity along the Pacific Rim (see

15. China's Century
China's Century: The Awakening of the Next Economic Powerhouse by Laurence Brahm, a lawyer and consultant in Beijing, flags the obvious for us--but is an obvious fact that many Westerners are ignoring.  With admittance to WTO, China is on track to become the world's number two economy.  The book's roster of contributors includes everybody under the sun, from Zhu Rongji, Premier of the People's Republic of China, and a raft of Chinese government officials, to sundry ambassadors to China, heads of multinationals with substantial operations there, consultants, journalists, lawyers, etc.  Included are the financiers who are the major enablers of Western entry into China, such as Peter Sutherland of Goldman Sachs, Robert Theleen of ChinaVest, and Alexander Rinnooy Kan of ING Group.  "Today China is driving forward its policy of guided market economy, making what is ironically fast becoming one of the most laissez-faire economies in the world today."

14. "The Essence of Indianness"
"I have often wondered what it is like to be entirely One.  Not Two.   One."  "I speak like an American.  I look like an Indian.   /  I am Two.  I am not One."  From a poem by Bhavya Mohan, age 15 of Danville, California.  This was a winner in the contest "Growing Up Asian in America," sponsored by the Asian Pacific Fund.  See the San Francisco Chronicle, May 25, 2001, p. A27.

13. Will Business Suffer in a China Stalemate?
Well, the Times article never answers the question.  See The New York Times, April 8, 2001, p. 4.   Querying Nicholas R. Lardy, China expert at Brookings and author of China's Unfinished Economic Revolution, the interviewer never finds out what's going to happen economically.  But he does discover that China became one of the top ten U.S. export markets in the 90s.  The U.S., nonetheless, runs a trade deficit with China, because things we used to buy in Taiwan, South Korea, and Hong Kong we now purchase in China.  The economic relationship is huge and not one-sided.

12. Beyond the Outer Banks
The North Carolina Museum of Art's two current significant exhibits both look for inspiration to the Orient, a further sign perhaps of the swelling importance of the Asian population in the Research Triangle.

Born in Charlottesville, Virginia in 1890, Stanton Macdonald-Wright had a long run in New York, Paris, and California as the father of Synchromism, a painting movement not widely known, though it and Macdonald influenced a slew of other artists.  Raised in California, he attempted to blend more and more of the Orient into his work.  This show will move on to the Los Angeles County Museum of Art and then to the Museum of Fine Arts in Houston.   See  

Xu Bing, who divides his time between the U.S. and China and who perfectly symbolizes the cross-cultural figure establishing the real links between the two nations, has mounted museum installations all about the globe.  His "Reading Landscape" at the North Carolina Museum is a minor affair but intriguing, nonetheless.  It links to the landscape (which needs to be significantly redone) outside the museum windows, while using the language of calligraphy to create a landscape in the room devoted to his work.  Read more about Bing at

Increasingly, nonprofits are having to demonstrate global imagination in order to enlarge their franchise.  The smarter ones now are looking to the Pacific, instead of the Mediterranean, for a worldly vision.

11. Best Museum Catalogue of a Japanese Renaissance Master
One of the most elegantly restrained Asian art exhibitions of recent years floated into the Philadelphia Museum of Art late last summer.  “The Arts of Hon’Ami  Koetsu, Japanese Renaissance Master” put on display 70 works of an extraordinary late 16th-century Kyoto artist who, like Leonardo da Vinci, excelled in many disciplines.  Born into a family of sword connoisseurs, Koetsu became an expert draftsman, renowned for his exquisite calligraphy. and also for his beautiful laquer designs and raku tea bowls.  In a review for The New York Times (“A Many-Splendored Minimalist,” August 4, 2000), Roberta Smith wrote about the “ethereal ambience” of the show, noting that the seemingly effortless simplicity of Koetsu’s art reflects the same aesthetic principles of “directness and abstraction” that animate great “modernist” works throughout the centuries.

For those of us who missed the exhibition, the Philadelphia Museum of Art has fortunately published a remarkable catalogue, written by an international group of scholars and with color photos of each work of art. The focal point of both the exhibition and the catalogue are the poem cards on which Koetsu collaborated with the painter Tawaraya Sotatsu.  “Moon and Pine Trees,” for example, depicts gold branches and pine needles against a luminous aquamarine sky, overlaid with flowing calligraphic characters in rich black ink.   Other highlights include nine of Koetsu’s raku tea bowls, among them “Shichiri,” on which a lustrous black glaze contrasts with rough clay underneath. This is a book to peruse slowly, perhaps over a period of months or even years.  Contact:  The Philadelphia Museum of Art, Benjamin Franklin Parkway and 26th Street, Philadelphia, PA 19130. Telephone:  800-329-4856.   Website:

10. Drop Outs in Japan
Just as the governance of Japan is finally changing, so are the governed.   No longer is everybody obsessive-compulsive, and some are breaking away from the mores and psychology of prior eras.  The Economist talks of "freesters," now 1.5 million strong, who have either eschewed or missed the track of the educated--safe jobs in big companies with a house in the suburbs.  These "freesters" drift from job to job as permanent part-timers, live with their parents, and perhaps even get spending money from their family.  Of course, Japan's lifetime employment system is falling apart, so many of these drop outs are merely accepting the inevitable.  See "Poor Little Rich Kids," The Economist, April 21, 2001, pp. 34-35.

9. Inside Out
In 1998-99, the Asia Society and the San Francisco Museum of Modern Art presented this exhibition of the "new art being produced by artists in mainland China, Taiwan, [and] Hong Kong," as well as by some Chinese artists now in the West.  It is at this level that we see the most interesting joining of East and West.  Fortunately, the Asia Society captured the show on its website at   Notice the link to Beijing's on-line magazine--Chinese Type Contemporary Art at

8. Japan's Shrinking Surplus
See The Economist, March 31, 2001, p. 69.  "In January ... exports rose by 2.9%, compared with the previous year.  Imports, on the other hand, were up by 24.8%."  Consumers are spending yet demanding cheaper prices, so dollar consumption figures are flat.  But Japan is shifting lots of production abroad, particularly into China.

7. WTO Story
Business Week is over its head in this story, even though it has good journalists on the case.  See "China: Coping With Its New Power," April 16, 2001, p. 28-34.  Basically, the article shows that the U.S. and China are locked at the hip economically, while they're eyeball to eyeball diplomatically, like angry Siamese twins.  Buried in this average article, however, is some serious copy about China's forthcoming WTO entry.  This is an earthshaking event, even more so than the article comprehends.

6. Big Bourse
We remember spending an evening, years ago, with a Chinese lawyer who wanted to understand arcane details of our stock market, such as the meaning of "par value."  He was working on the underpinnings for China's stock markets.

Things have come a long way.  "China's A-share market is now Asia's third largest behind Tokyo and Hong Kong," according to The Economist.  But the public markets still do not operate terribly well in China: private equity is the place to be now. 

Nonetheless, The Economist notes, if "China could merge its various stock markets, the result would be one of the world's biggest."  See "Piecing China's Markets Together," The Economist, March 3, 2001, pp. 67-68.  Should the B, A, and H markets get together, China would be number four--behind America, Japan, and Britain.

The Economist thinks this is still years or decades off, since complete integration would be linked to yuan convertibility.  Of course, the Chinese may fool us, since their economy is now at a stage where all sorts of integration--often invisible to Westerners--is taking place.  Everything from physical-highway links to more horizontal-communication links between businesses of various sorts are supplanting the old command-and-control SOE (Stock-Owned Enterprise) model with a more intricate business network.

5. Discount Counts in Japan
Costco and Carrefour have come to Japan successfully.  We are constantly told that the rigid Japanese economy is not really changing, but there are surely tremors beneath the surface.  Cheap thrills (i.e. foreign discounters) have come to Japanese shoppers--and they like them.  With the traditional department stores and the cost-laden retail distribution chain under assault, the retail system is breaking down.  Formidable as it is, the retail system is having a hard time withstanding the permanent recession.  See "Thinking Big in Aisle 1, Thinking Cheap in Aisle 31," New York Times, March 16, 2001, p. A4.

4. North by Northeast
"Asia's Investment Spotlight Sweeps North ... China, Japan, and Korea Supplant the Southeast As Sites of Opportunity" reads the headline in The Wall Street Journal, February 28, 2001, p. A17.    Foreign investment is dropping in the Southeast and mounting in the North.

3. China's Economic Power
From 1995-2000, China's economy outpaced all the developing countries that mattered, coming in over 8%.  Last year it did 7 or 8%, depending on whom you read.   Foreign Direct Investment is mounting at $40 billion a year.  From no inter-provincial highways a decade ago, it now has 7,500 miles worth, underlining the growth of both the transportation and distribution sections of the economy.  China's imports grew by $55 billion last year.  Upwards of 50,000 Chinese study in America's universities.  And that's just the half of it.  See "Enter the Dragon," The Economist, March 10, 2001, pp. 23-25.

2. Tian's Second Goldmine
Edward Tian, who got his Ph.D. at Texas Tech University and earned some spurs in Dallas, has hit it big twice in China's technology scene.  His Asia-Info--consultant and integrator--was China's first technology IPO on America's NASDAQ and was a startling success.  Now he is off and running with China Netcom.  Though backed by the State, his company is run in high gear by Tian, who has 8,500-kilometer fiber-optic web already strung across China.  When we visited with him, his go-to spirit surpassed what we have seen in Silicon Alleys around the globe.  See "China Netcom Sets Out to Ride Reforms," Wall Street Journal, February 27, 2001, B13A. 

1. Treason by the Book
Jonathan Spence's book is about a scholarly revolt against the Manchu dynasty.   Perhaps inherently this historian and storyteller is telling us that revolt in China often comes from unlikely sources. He may also be telling us that China is always about dynasties--even today, although the Beijing court tries to drape itself in Communist clothing.

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