China Study Tour 2010

If I have on overriding feeling about the trip to China, it is that it would be a great place to live and work if it weren’t so horribly polluted. Living there is basically asking for respiratory problems at a minimum, and almost guaranteed cancer, not to mention the sheer amount of waste one would produce from all the bottled water to avoid the contaminated water there. But, the food was a amazing, the opportunities are amazing, and I find Chinese language, culture and history fascinating. It’s really too bad that they have failed to keep their natural environment sustainable for human life in the long-term – here’s to hoping they can actually turn that around.

There are a few places and things we saw in China that make me more hopeful for China’s future. Young people seem to be more concerned with sustainability and less waste, rather than embracing the insanity of Western consumer culture. Given the huge population and somewhat limited natural resources of China, they don’t have the time to waste before even more harm occurs than 30% of water being contaminated, or entire cities being evacuated due to chemical spill.

There is a lot to be worried about though. There are a lot of cars in China, and most of them are like ours, which is to say dirty polluters of both particulate matter and CO2. What’s worse is that to achieve the same percentage of GDP we do, China expends 10 times or so the energy. Every bit they grow, they exponentially increase their levels of pollution, fossil fuel usage, and resource usage. If the Earth had infinite resources, that would be just fine, but it doesn’t. So, I have to admit that China’s growth really worries me, because we can’t tell them they shouldn’t do what we did in good faith, especially since we’re not taking significant steps ourselves to reduce our own levels of pollution.

The key takeaways:

-There is a lot of opportunity in China at this moment in terms of growth and a consumer minded middle class

-China is incredibly polluted from trying to grow so fast and from having a growing consumer minded middle class of consumers

-It is really hard to be vegetarian in China

We all split up after taking the first few group shots, and made our way around the Expo. The lines were incredibly long at some of the pavilions, and we heard that you had to have reservations for the Taiwan exhibit. Some of us eventually made our way over to the Europe pavilions, as our resident architecture expert Juli told us they were worth seeing – and she was right. The UK exhibit was like a giant metal porcupine, and the Germany exhibit was a really neat angular thing. Definitely enjoyed viewing them, but the lines…. Not gonna happen.

I wanted to see the Austria exhibit, and Claudia wanted to see the Sweden exhibit, so we continued on through the Expo park after some of the others took off. Even the Austria exhibit had an hour long line. We finally felt like we hit pay dirt when we reached the shared European pavilion that contained San Marino, Liechtenstein, Cyprus, and a few other small European countries – no lines! It was like getting free candy, but better.

The final going away dinner was the best dinner we’d had in China, which is saying a lot. The food here has been really amazing. There was an orange fish that was so perfectly cut and prepared that you could just take the breaded and sauce covered chunk directly off of the fish, no bones. Highly impressive – but not as impressive as the house specialty, their roast pork. It was a slow roast pork that just about melted off of the rib that was dipped in sweet and sour sauce, then in panko bread crumbs, and then wrapped in a piece of lettuce and eaten like a spring roll. I cannot go into enough raptures about how amazing the flavors and textures of that particular dish were.

Our evening entertainment was a karaoke parlor, Chinese style. Normally, there’s a professional running the karaoke machine, and you just submit a piece of paper and sing awkwardly in front of strangers. This was a private booth type place, where you run the machine (which is in Chinese) yourself, and then sing awkwardly in front people you actually know. Much more awkward. But, I do love to sing, so it was fun. All in all, a great ending to a great trip.

Today is our “Seattle” day – both company visits today are to businesses headquartered in Seattle. Expeditors is a logistics solutions company, and PMI is a beverage solutions company. I find that this “solutions” term has become ubiquitous in business parlance of the past decade or two. In any case, I think these visits were the most interesting for us this trip.

The answers at Expeditors were frustratingly vague on the big questions we asked, although they were perfectly happy to answer detail questions about their operations. We were wondering if perhaps they were trying to put a perfect face on their operations. Regardless, it was very frustrating to keep asking the same questions over and over again and getting the same non-answers from the regional manager.

PMI makes the cups you see at Starbucks, in addition to other private label items. The visit to PMI was brilliant, and really my favorite company visit. We were lucky to have Qin Chen at our lunch table prior to the visit, and had a detailed discussion about the employment of expatriates in Chinese firms. He said that the kind of problem solving and managerial skills they needed when they first went to Shanghai simply didn’t exist in China in the numbers that they needed to be able to find local hires, since every other foreign company was looking for a person with the same sort of experience. He said that they’ve been able to build up a number of their employees internally, and so they have those skills now, but that it is still worthwhile to hire expatriates. This could be very concerning for a company, because that’s a huge amount of time and invested effort into these Chinese employees just to make them the kind of employee that can do the necessary work. Replacing someone would be quite difficult in those circumstances.

Our trip from Xi’an was entirely uneventful, as are the best plane trips. The airline food was minimally edible, although the Sprite was nice. We took the Maglev from the airport, and it reached 431kph, which is pretty darn fast.

From the plane upon arrival in each of the cities I’ve visited in the developing world, one could see the slums on the outskirts of the city. I think Chinese slums must look different than I’m used to, because all I saw were very cramped looking brick houses. India breaks your heart with the obvious human suffering surrounding the visitor every step, every day in India. One must eventually learn to ignore it, or else go slightly insane. Maybe China’s heartbreak is primarily rural and can’t be seen on a Study Tour encompassing only the urban centers of Beijing, Xi’an, and Shanghai.

Upon initial arrival in Shanghai, it struck me that I was reminded of Mumbai. There are so many people in the streets, there is a ripe scent to the air that I suspect is the combined odor of millions of sweaty bodies from the muggy, humid heat, and a certain late 19^th/early 20^th century European flair to many of the old buildings along the waterfront. However, this is where the comparison must end, as Shanghai is an amazing city, full of diverse, innovative architecture, it boasts a Maglev airport train, and is currently hosting the World Expo. No offense to Mumbai, but there really is no comparison after the initial superficial similarities are set aside.

After checking in and getting mostly settled in, we took a walk down to the river to see the Pudong and the Shanghai skyline. This resulted in much picture-taking before we settled on heading across the river to the Pearl Tower.

After a long stroll to reach the ferry, then a ferry ride (2 yuan!) and then a long stroll to the Pearl Tower, it was discovered that the cost for dinner was 280RMB, or 140 times the cost of the ferry ride. That price is completely ridiculous, so half of us settled on Subway, as we were starving, and others went to a nearby mall for other fare.

The view was mostly worth the price of admission (100RMB), although having my personal bubble invaded about every two seconds is honestly getting annoying. Having my alone time helps me get back my equilibrium to face the seas of humanity about me each day, but I have to admit it will be nice to go home, back to a place where an elevator with five occupants is considered full.

Brother is a Japanese company that initially began a joint venture with a Chinese firm in Xi’an in 1993. In this location, they make low-end to high-end industrial sewing machines as well as machine parts for large machinery primarily located in the south of China.

Our presentation was made by a Japanese employee who was fluent in Chinese, and reasonably good at English, although he kept distrusting himself and switching to Mandarin and one of the Mandarin speakers in our group would translate, usually Derek. He said that there were 11 Japanese employees at the plant, and only one of them spoke Mandarin. Their upper level plant managerial staff all spoke Japanese, and workers could attend Japanese courses if they wished. We found this very interesting – this is something seen in France and Japan, I would say most, this sense of national pride and an unwillingness to compromise national culture in a multinational venture. This is in reality too broad an indictment of all Japanese and French firms. However, I do believe that firms in China will either wish to speak their own language, or expect to conduct business in English. I feel that the Chinese have not yet attained a level of status in the world that would force those who wish to do business here to learn their language. Until then, I will be pleased that my language is now the language of the world, making my life much easier when traveling.

Our presenter wasn’t actually prepared for us when we arrived. He said that Chinese people are usually 1-2 hours late, and thus he didn’t expect us to be on time (we were five minutes early). Thus, some of the charts weren’t in English, and he seemed very flustered and unsure of how to structure what he had to say.

The most surprising part of visiting Brother was in hearing how not lean the processes at the plant were. Brother is headquartered in Nagoya, the same city as Toyota, and they ascribe to lean principles and the Toyota manufacturing method, and yet the volume of work in process inventory just sitting on the factory floor was staggering. The workers also weren’t wearing hard hats or safety equipment, but that is probably beside the point. The company’s core values, dress code, and team metrics were posted in prominent places in the factory. But, I just couldn’t get over the volume of inventory lying about – it was clearly not a just in time sort of operation.

The most interesting part of the presentation to me was the discussion of profit, or lack thereof, in the operation. Brother already makes virtually no profit on their lower-end sewing machine, which retails for $300, and is primarily intended for markets such as Bangladesh. They do quite well on their high end machines, but the presenter was saying that wage increases and logistics difficulties in transporting parts and finished goods were seriously eating into the potential profits of the business.

Website: http://www.thestarfishfosterhome.org/index.aspx

China Contact Information

Starfish Foster Home

Attn: Amanda de Lange

Maple Leaf New City, Area C, Block B-502

Ke Ji Road, Gao Xin

Xian 710075

CHINA

86.29.88044168 (Cell);

86.29.88390648 (Home)

chinese.starfishthrower@gmail.com

Tuesday morning, we had the privilege to have Amanda de Lange, founder of Starfish Foster Home, give us a talk on non-profit work in China.

Amanda’s story for being in this line of work seems to be similar to many people who saw others in suffering and decided to do something about it – not generally a particularly clearly thought out plan initially – and took it upon themselves to make something happen. Amanda takes in babies with special needs who would otherwise likely die in the orphanages that they had been living in due to their special requirements. These babies can range from having problems like cleft palate, spina bifida, hemangioma, or congenital heart defects. All of these are treatable, but many parents in rural China don’t know where to go to help their child, or don’t have the money with which to do so, and so they are abandoned.

To illustrate the severity of the problem: children born with cleft palate in the United States (which happens at a much lower rate than in China, probably due to maternal malnourishment in the developing world) will have surgery to fix the deformity and will live the rest of their lives with a scar, but little else will be different for them. If a cleft palate baby goes to an orphanage here, the mortality rate is around 80%, according to Amanda, based upon the lack of available care to make sure that the baby gets the food they need to grow.

Any non-profit faces problems working in China. For one, it is very difficult for NGOs to enter or work in China, and Amanda said that none have been approved to work in China for the past ten years. For another, the legal framework doesn’t exist as it does in other countries to reward donors for giving to a charity, and the charity has problems setting up as a not-for-profit entity. For that reason, Starfish Foster Home is set up as a 501(c)(3) non-profit in the U.S., rather than in China.

Some of the management problems that Amanda faces are due to Chinese culture, and some are due to her own managerial style. She has faced numerous problems with her staff not being able to anticipate problems, or respond sluggishly when there is a serious problem, such as a stove broken for two days, meaning no warm milk for the babies. She also works way too many hours in the day, because she doesn’t have a capable administrative staff to take some of the load off of her shoulders. In addition, Amanda’s style is passionate – not business process oriented. Her love for her babies is more than apparent, but she admitted herself that she has flown by the seat of her pants for the past five years and more or less has approached her growth and non-profit business development in a very ad hoc way. If she had more specific and detailed processes for her staff to follow when inventory was low, something was broken, even in the form of a decision tree, she wouldn’t have to spend nearly as much time thinking for them, and could spend more of her time on fundraising and networking with the people who can help the children most.

Some of the organizations and people Amanda has worked with:

Smile Train

Operation Smile

Lisa Buckmiller (University of Arkansas Children’s Medical Center)

One of the things I found most admirable about Amanda is that even in the face of serious adversity, such as her rooms being torn down and needing to find new lodging for her nannies and her babies, and in the face of an uncertain future for her foster home based on the political climate in China, she still is passionate and giving of herself and has spent her life savings on this project, even when it probably would have seemed prudent to leave the work to someone else. I deeply respect and admire anyone who can take their reaction to the pain and suffering of others and build something to respond to that need. It is unknown to me how many babies Amanda has saved through her work, but even one baby would have made her effort worth it.

Our visit to the Xi’an Hi-Tech Park was another public tour style view into Chinese business. While they had A/C, they did not have the candor of say, VanceInfo, or the usefulness of the U.S. Embassy presentation. What they provide most of all is a view into how China wants others from the outside to see itself, and how it chooses to present itself.

The layout of the demonstration area that is in a building, which is apparently dedicated entirely to the purpose of attracting businesses to Xi’an if the building directory can be believed, was similar to ENN’s in that it told the great and wonderful history of the Xi’an Hi-Tech Park. I’m sure there is some value to always painting a rosy picture to outsiders looking in, but it is to be hoped that they are at least honest amongst themselves in their own planning sessions about what challenges they actually face.

The primary focus of the presentation was about how Xi’an’s infrastructure was being improved to the point that it was just as desirable as a coastal city, while still having much lower costs and much lower turnover rates, especially as compared with a place like Shenzhen. The speaker was very much speaking the party line, and it reminded me of the professor from the University. The only reason the government has so much control and influence in these ventures is that people really seem to believe it’s working, despite the immense environmental degradation that rapid economic growth has wrought, as well as the clear disparity between the haves and the have-nots in society. What the government has done is provide them hope for the future – and any government who manages to keep the populace hopeful for future prospects does not have to worry about losing power.

Another thing that I found interesting, both in this visit and throughout the trip, is the focus that the Chinese are putting on high-value added services and goods. I have read some executives’ words in interviews saying that we’re only sending low-end goods abroad, and that the U.S. will continue to be a global center for innovation and high-tech goods. While I do not doubt this is partially true, since that is something we have experience with and are good at, this is precisely the area that we should realize China wants. The space station, the work on aerospace technology to build large places, micro-processing plant – if anyone still really believes that the U.S. can continue to be world leader and innovator in high-tech products and happily continue to dump only low-value added work to the developing world, they’re very much mistaken. Many of these countries have the hope of truly competing, and gaining for themselves the kind of respect and admiration we have garnered in our businesses in the past century, and it shouldn’t be at all surprising that this is so.

Another interesting note from the presentation was the volume of government sponsored educational institutions. While I’m sure they’re doing very good work in training the populace for gainful employment, I can’t imagine the professors enjoy any sort of actual freedom to teach as they like, when I can’t even access my own blog from here.