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Is China the next bubble?

March 29, 2010/0 Comments/in China Business Blog /by Mike Bellamy

In my post the other day,”Eduscam?“, I pointed to the entirely anecdotal experiences I had recently with our college educated youth who haven’t a moment’s work experience between them when they leave school. I had one thought that I decided to save for today.

Many young souls seem to want to be bankers or lawyers, as though these are highly lucrative careers that guarantee a sweet life in the Hamptons. Certainly they can, but most bankers and lawyers slog along without ever making the big bucks. Moreover, they are careers without a real product that you can point to and say “I made this”. I tried explaining there are no safe corporate career paths anymore, and believe me when the cost cutting starts, they start in middle management.

I remember reading an article written by a British MP maybe 20 years ago that has formed part of my philosophy ever since. At the time he was writing about the challenge posed by Japan to the British manufacturing base, what was left of it anyway. I am going from memory and as the article predated the internet, I have had no luck finding it. But the quote went something like this,

British Leyland did not go out of business because of the Japanese. It failed because it made dreadful cars. Our economy today is almost entirely based on people in London trading bits of paper.
Real economies make things.

Did this make anyone substitute “Chrysler”, “Chinese” and “Lehman Brothers” in their heads?

The issue has been much debated of late about whether China’s economy is a bubble, perhaps the greatest bubble of all (see here, here, here, here and here). Certainly the yuan is undervalued. Certainly much of what you see in the Chinese cities is pastiche – empty buildings abound in any major city. There is vast overcapacity in many industries, driven by cheap loans from government banks to drive development and keep unemployment manageable, similar to the government role in the Japanese and Korean economies during their early growth periods.

But my mind and my gut keep coming back to that quote from the Brit – “real economies make things“. There is real manufacturing know-how in China and it grows stronger daily as they gain more experience. The infrastructure and man-power are real. These are not paper assets that vanish in the blink of the eye like the billions lost in the last two years in the USA.

Does the Chinese economy need to make adjustments. Yes, indeed it does. So does the USA. And as with all things, we will all be forced to one way or the other. But the knowledge gained in this Chinese industrial revolution will persist and remain a real asset even if the bubble does burst. Japan is still the #2 economy despite 20 years of stagnation. They have not fallen back to the misery of late 1940’s. I am confident China will survive as well, even with their monumental challenges. They have come so far in 30 years, I just don’t see them giving up, and when the world economy does recovery, they will still be the largest source of low-cost manufacturing capability on the planet.

And future bankers of America need to remember it is a whole lot easier to move a financial center than the infrastructure required for manufacturing.

PS – If you have never watched Top Gear, I highly recommend it. The 30 minute episode on British Leyland is well worth your time, if only to remind yourself of how awful cars used to be.

“As Europe and Asia become ‘veritable old-age homes,’ the U.S. will enjoy the benefits of a growing population.”

March 25, 2010/0 Comments/in China Business Blog /by Mike Bellamy

Here is an interesting book review of Joel Kotkin’s new book, The Next Hundred Million, in the Wall Street Journal, entitled “The More the Better“, by Nick Schulz, which I will quote in full, since it is so short.

A gloomy mood might seem to be justified at the moment. Unemployment is nearing 10%. We have just witnessed a bitter financial crisis, a series of debt-deepening bailouts and a bruising fight over health care. Conservatives fret that we’re running out of time to tackle the entitlement crisis. Liberals fret that we’re running out of time to tackle the climate crisis. Roughly 60% of poll respondents say that America is on the wrong track. Meanwhile, China has resumed its torrid economic growth and has become for the U.S. what Japan was in the 1980s—the seemingly unstoppable Asian force that will soon leave America’s economy behind.
How to respond? “Declinists have always projected America’s imminent demise,” the editors of Newsweek wrote earlier this month. “For a change, they’re onto something.” Joel Kotkin would disagree. In fact, he is in a cheerful mood, in part because he has been thinking less about the present than about the near future, when the news, he says, is likely to be much brighter, at least for America.
“In stark contrast to its rapidly aging rivals,” Mr. Kotkin writes in “The Next Hundred Million,” “America’s population is expected to expand dramatically in coming decades.” He points to a slowly rising birth rate and to the continuing in-migration of young workers from poorer countries. Most of America’s population growth between 2000 and 2050, he notes, “will be in its racial minorities, particularly Asians and Hispanics, as well as in a growing mixed-race population.” No other developed country, he says, “will enjoy such ethnic diversity.”
For Mr. Kotkin, population growth translates into economic vitality—the capacity to create wealth, raise the standard of living and meet the burdens of future commitments. Thus a country with a youthful demographic, in relative terms, enjoys a big advantage over its global counterparts. In the next four decades, Mr. Kotkin observes, “most of the developed countries in both Europe and Asia will become veritable old-age homes” because of stagnant population growth. And the economies of these countries, already devoted to a vast welfare-state apparatus, will face crushing pension obligations—but without the young workers to defray the cost.
Inevitably, Europe and Asia will decline, Mr. Kotkin predicts, and America will thrive. Indeed, the U.S. will emerge, he says, “as the most affluent, culturally rich, and successful nation in human history.” What about the billion-person behemoth across the Pacific? Not to worry. Mr. Kotkin thinks that, by midcentury, China’s one-child policy will cause it, too, to suffer from the burdens of an aging population.
If Mr. Kotkin is right about America’s “next hundred million” people being the key to its happy destiny, where are these people going to live? In the suburbs, he believes—and why not? For most Americans, Mr. Kotkin writes, the suburbs represent “the best, most practical choice for raising their families and enjoying the benefits of community.” He adds that, even with one hundred million more people, the U.S. “will still be only one sixth as crowded as Germany.” In short, there is lots of room to grow.
Mr. Kotkin’s vision of America’s next four decades—expanding, browning, adapting and thriving—is largely convincing. He’s no Pollyanna, however. He worries especially that upward mobility is more difficult than it once was and that class polarization is a real possibility, because a knowledge economy like America’s tends to widen class divisions. The result is “an expanding affluent class of the highly educated, a stubbornly impoverished population, and a shrinking middle class.”
Here is one area where Mr. Kotkin might have said more. The collapse of the family in America’s underclass persists—with more families than not headed by single mothers. Mr. Kotkin is delighted to report that the family in America is taking ever new shapes, adapting and “resurging” in different forms. This claim may well be true for the broad middle class. But in that stubbornly impoverished sector, the family isn’t resurging at all. America’s relatively high birthrate—a source of national strength generally, as Mr. Kotkin says—contains a large percentage of out-of-wedlock births. In some urban neighborhoods, the rate stands close to 70%. The most “successful nation in human history” still has some work to do.
Mr. Schulz is editor of American.com, the Journal of the American Enterprise Institute, and co-author of “From Poverty to Prosperity” (Encounter, 2009).

The demographic challenges of China are indeed real and as Mark Steyn pointed out in his much darker book, America Alone, demographics are destiny. What concerns me (and I imagine the Chinese government) more immediately than the aging is the dearth of women. The combination of the one child policy, modern medicine and Chines cultural preference for boys has led to tens of millions of men who will never find mates. The women simply weren’t born.

Some of this is offset by female immigration from other Asian countries, mainly Vietnam and the Philippines, but that is only an option for someone wealthy enough to pay for a wife.

In short, I am not afraid of China. It is a dynamic and fun place, much as Japan and Korea were during their booms. But America can only fail if we defeat ourselves. Sometimes I think some of us are trying…

Stand Up While You Read This! More validation that the TrekDesk is the right product at the right time.

March 9, 2010/0 Comments/in China Business Blog /by Mike Bellamy

Here’s a great article from the NYT by Olivia Judson about the health benefits of staying active while working. I am a huge believer in this concept, and I built my own treadmill desk some years ago with the help of my brother-in-law. I was thinking about taking the idea to market when PassageMaker was approached for a Sourcing Feasibility Study by the inventor who beat me to the patent office, Steve Bordley of TrekDesk. Over the course of the coming months, he worked with our Endorsed Service Provider, Dwight Smith of Contract Engineering Services, on the design and then with our team for Vendor Coordination / Product Development, led by Dave Learn. The VC/PD team handle the research that goes into the Sourcing Feasibility Study and should our client decide to proceed with the project, Dave’s team is then introduced, fully up to speed and ready to roll.

This project has now transitioned to Pramod KC‘s team for production. Pramod’s team manages the vendors (we call it Vendor Coordination / Export & Logistics) and coordinates to make sure our Assembly Center gets all components and performs Assembly-Inspection-Packaging to the customer approved Product Quality Manual. When all is complete, our Logistics Department arranges the shipment, often shipping directly to the client’s distributors and retailers, often in customer-specific packaging, including point of sale displays and barcoding. In short, this is not only a great product, but it is a great example of how the PassageMaker system works start to finish.

But enough about us, back to the article. Key paragraphs:

You may think you have no choice about how much you sit. But this isn’t true. Suppose you sleep for eight hours each day, and exercise for one. That still leaves 15 hours of activities. Even if you exercise, most of the energy you burn will be burnt during these 15 hours, so weight gain is often the cumulative effect of a series of small decisions: Do you take the stairs or the elevator? Do you e-mail your colleague down the hall, or get up and go and see her? When you get home, do you potter about in the garden or sit in front of the television? Do you walk to the corner store, or drive?
Just to underscore the point that you do have a choice: a study of junior doctors doing the same job, the same week, on identical wards found that some individuals walked four times farther than others at work each day. (No one in the study was overweight; but the “long-distance” doctors were thinner than the “short-distance” doctors.)
…
But it looks as though there’s a more sinister aspect to sitting, too. Several strands of evidence suggest that there’s a “physiology of inactivity”: that when you spend long periods sitting, your body actually does things that are bad for you.
As an example, consider lipoprotein lipase. This is a molecule that plays a central role in how the body processes fats; it’s produced by many tissues, including muscles. Low levels of lipoprotein lipase are associated with a variety of health problems, including heart disease. Studies in rats show that leg muscles only produce this molecule when they are actively being flexed (for example, when the animal is standing up and ambling about). The implication is that when you sit, a crucial part of your metabolism slows down.
Nor is lipoprotein lipase the only molecule affected by muscular inactivity. Actively contracting muscles produce a whole suite of substances that have a beneficial effect on how the body uses and stores sugars and fats.
Which might explain the following result. Men who normally walk a lot (about 10,000 steps per day, as measured by a pedometer) were asked to cut back (to about 1,350 steps per day) for two weeks, by using elevators instead of stairs, driving to work instead of walking and so on. By the end of the two weeks, all of them had became worse at metabolizing sugars and fats. Their distribution of body fat had also altered — they had become fatter around the middle. Such changes are among the first steps on the road to diabetes.
…
Some people have advanced radical solutions to the sitting syndrome: replace your sit-down desk with a stand-up desk, and equip this with a slow treadmill so that you walk while you work. (Talk about pacing the office.)

Why yes, yes we have. It feels to good to be a radical sometimes!

I have found that walking at 2.2 mph at 6 degrees of incline is just right to really get your heart rate going and still be able to type, write and talk on the phone. So go order a TrekDesk, and if you need help bringing your product to market, give PassageMaker a call!

Child labor

March 3, 2010/0 Comments/in China Business Blog /by Mike Bellamy

I read with interest the recent articles (couple of them here and here) about Apple’s announcement that some of their suppliers had used child labor in the past.

What I found most interesting was the “child” part – when I was 15 I would have slugged anyone who called me a child. During the summer of my 15th year, I was working in our metal stamping plant where the highest temperature reached 103 F (40 C). I had my first factory job when I was 14 turning wheels on a lathe. My Father never read child-labor laws, and thank God for that. It was an invaluable experience that I am sad to say I won’t be able to give to my son.

I can remember in 1998 visiting a factory for a major automotive supplier in Taiwan. There were 14 year old boys working on the lines making seat belt assemblies. I asked about it and found that they were students at the local technical school. They worked half a shift on the line and spent the rest of the day in class studying engineering. Today, 12 years later, they would be around 26 with degrees in mechanical engineering and over a decade of hands-on experience. I imagine some of them are running plants in China now.

I’ve written about The Wiffle Ball Life before, a term coined by P.J. O’Rourke to denote the rather pathetic American obsession with safety, self-esteem, and never doing anything the slightest bit risky – especially if it might also be fun.

I understand that Apple is worried about its image, and I acknowledge that those eleven 15 year olds may not have wanted to be there. But there is a big difference between a 15 year old farm kid fibbing about his age to get a good factory job to help support his family and using 6 year old slave labor in an illegal fireworks factory in Sichuan. It would be nice if the amazingly flexible English language had a concise way of stating the difference. I think “under-aged labor” is more reflective of the reality of the situation.

Should you need to verify that your suppliers are not using “under-aged labor”, our friends at China Quality Focus can perform a Corporate Social Audit for €376 + travel expenses, a small price to pay to avoid the kind of (undeserved) bad publicity Apple is experiencing.PassageMaker can also help our clients, under the auspices of a Vendor Coordination contract, draft supplier agreements to reflect the social norms of their home country or industry.

A better solution would be to have PassageMaker perform the Assembly-Inspection-Packaging functions in our 100% US-owned and -operated Assembly Center. We will warrant that we meet the necessary social compliance metrics.

Give us a call before you write the press release or talk to the New York Times.

Arrogant Americans need not apply, the decline (?) of the West and what if the Chinese stop buying US paper?

February 24, 2010/0 Comments/in China Business Blog /by Mike Bellamy

“The enemy always has problems of his own of which you are unaware.” – George C. Marshall

Not that China is necessarily our enemy, but they are certainly a competitor, and I don’t normally borrow money from my competitors. Some interesting articles covering all sides of the USA declining(?) debate and other silliness.

America On The Rise – I sure hope so, and the author’s demographic points are very valid
10 Mega-Themes That Spell The End Of Western Dominance – for a contrary view, if a bit overly pessimistic IMAO
How America Can Rise Again – a very good overview of our dynamic creative culture and moribund political system – he had me until he started pointing to the Carter Administration as his example – please – but overall a very worthwhile article (hat tip to David Bradley)
Foreigners cut Treasury stakes; rates could rise – if the US government was spending this borrowed money on upgrading our infrastructure, that would be one thing…
Foreign demand falls for Treasuries – more detail
Jitters over China’s waning taste for T-bills – more if you can stand it
Uncle Sam vs the Dragon – this is a good strategic overview
Flip-flop diplomacy with the Dalai Lama
The Global Debt Bomb – interesting interactive report – I feel like I need an aspirin
China to release pollution-fighting fish in lake – and this is just odd

Sorry nothing more for today, too much catch-up from Chinese New Year.

Day 37 – Home

February 19, 2010/0 Comments/in China Business Blog /by Mike Bellamy

My Blackberry Storm 2 from Verizon Wireless has been progressively crapping out on this trip. It is not a good device, and the longer I have it, the less impressed I am. In addition to the outrageous charges to receive calls – I practically had to hang up on a few clients to get them to shut up so I could call them back on my China Mobile (Verizon US$2.00+ to receive; China Mobile US$0.05 to make = VERIZON SUCKS) – this Blackberry has been regularly crashing, repeatedly uninstalling the browser which now doesn’t work at all, losing its data connection (everyone around me has full data and my China Mobile has 5 bars) forcing me to remove the battery to restart it and see if it can reacquire the data signal.

So I guess I should have known that it was not reliable as an alarm clock. Suffice it to say I am an experienced enough traveler that I don’t cut things close, so I had planned to arrive 2 hours earlier than needed. Despite the fact that the alarm failed, the sun woke me and I showered, shaved and “packed” in about 25 minutes. I say “packed” because I made the decision some days back to leave most of the clothes behind as I will be back in about 6 weeks and didn’t see the point. Because the driver is waiting and I want to get through the Huanggang border crossing before the Chinese New Year rush hour starts, everything I wanted to take got unceremoniously shoved in the bag – couple small gifts for the kids, some movies and books and medicine and out the door.

It’s a glorious morning, blue skies and lots of fast moving clouds. It is warming up fast and very humid. We head to the main Luohu border crossing, Huanggang, which I am fearing will be a mob scene. Although the official Chinese New Year doesn’t start until Saturday, many factories and offices are already closed. Around 450 million people travel inside China during the 2-3 weeks that cover the Lunar New Year season. That’s 1.5 times the entire population of the USA. And we bitch about travel around Thanksgiving and Christmas. Last year the blizzards in China had over 250,000 people stranded at the Guangzhou railroad station for days. I’ve been there on a normal business day, and it is no wonder they had to bring in the police to maintain order.

So I am not surprised that Huanggang is in fact a mob scene. The company driver drops me off at the stand where they sell tickets for the mini vans that run you across for 150 RMB. I usually get a limo for 700-800 RMB, but decide to try this less expensive method. In the future, I will be using the limo again, more on that in a minute.

Photos inside are strictly forbidden, and I did not feel like taking the risk 4 hours before my flight, so you will have to visualize the chaos of maybe 3,000 people with their luggage squeezed into a room designed to hold perhaps 500. There were 30+ lines for Chinese and only one for Foreigners, so getting through took a long time. They were really being critical this morning, usually passport control for a white guy takes 30 seconds, but today he looked through every page of the passport and spent several minutes looking things up on his computer.

If I had hired a limo, I would have been able to go through passport control in my own lane, never getting out of the car. 700 RMB (cost of the limo) – 150 RMB (cost of the van) = 550 RMB = US$80. That savings is looking less important all the time.

Outside I find our van and it appears I am the last man. I expected as much, due to the 3rd degree from the border patrol. Except the driver insists I am not the last, he says we are missing one. When we buy our tickets, we are given stickers with the van’s number on it so the driver can keep track. The van seats 7 passengers – 3 in back, 3 in the middle and one riding shotgun. I did not look in the back when I boarded, but I take it on faith that he is correct – they would never run these things across a passenger light, certainly not on a day like today. In the van with me are a Singaporean man, four Taiwanese men and one Taiwanese woman. The Singaporean is mighty worried about missing his flight, and after 30 minutes waiting for the missing passenger in the 80 F warmth and bright sunshine, he is starting to get hot, as in pissed. The driver placidly insists he can’t leave the 7th (which none of us can exactly remember) because he paid too, we have his luggage, and if we leave he will be stranded, as there is no way to hire a car on this side. The driver is quite right…in theory.

The Chinese was fast and very heated, but it seems the Singaporean insists there is no 7th, something none of us can confirm. The Taiwanese woman who was also in the back seat, says nothing and refuses to answer when asked. Very strange. He then opens to back and starts counting luggage. He points to different bags and the various passengers chime in to claim ownership. When he points to mine, I say “我的”, “mine” which makes him actually do a dramatic double take that the laowai can speak Chinese. It appears the mysterious 7th has no bags, so we double count, and indeed all the bags on board are accounted for by the six of us. The driver sees that the luggage is no longer an issue, but still insists on waiting. The Singaporean in now in a rage and calls over another driver from the same company who just pulled in. He loudly explains the situation and the other driver agrees to find the missing 7th, who may not even exist, and tells our driver to roll out.

Back in the car, for the the first 2-3 minutes the Singaporean loudly berates the driver, who must be a Taoist, as he is completely at peace and does not get the slightest bit ruffled under this assault. Finally the Singaporean realizes the futility and quiets down. I find the whole episode educational and an example of what fascinates me about Asia. Singapore is wealthy and sophisticated city state (I lived there in 1994 and loved every minute), and this guy acted like he was a typical rich snob from good side of town. The driver must have a special permit in order to cross the border so regularly, but my guess is he is from the Mainland. People on the Mainland, especially the older generation, have been raised to just take it. I’ve seen Singaporeans, Taiwanese and Hong Kongers pull this stunt on Mainlanders, berating them publicly, because they know they can get away with it. One of my rules for life is to show as much respect as you can to the people who wash your clothes, cook your food and drive you around, etc., because they are the ones who make your life easy. They deserve more respect than this guy got.

Hong Kong is one of the coolest places on earth. The drive to the airport is always amazing but is especially so this morning with dramatic and fast moving clouds with occasional bursts of sunlight. The natural setting is glorious and dramatic, hundreds of mountainous islands covered in verdant green rising out of the harbor. The cities and towns are built to work with the land, unlike the wholesale flattening of the hills that takes place in Shenzhen. The bridges that connect to Lantau island and Hong Kong International Airport (HKG) are brilliant – one each of suspension and cable-stayed – and the whole setting reminds me of a scale model too perfect to be believed. My camera stinks, so this is the best I could do.

We arrive at HKG with less than two hours before my flight, far less than I normally allow. I know before I even get to the airport that there is no chance of getting better seats, not so late and not on the Thursday before CNY. Nevertheless, even though I checked in online last night, I head over to the United counter and chat up the very attractive lady at the counter (in Asia it is still OK to hire public relations personnel who are good looking – it is often part of the job description) and she tries every trick in the book to get me a better seat. Nothing doing, flight is booked solid. Oh well, I appreciated her efforts and gave her a business card (she didn’t believe that I’d been in Asia for 5 weeks with no luggage so I told her to check the blog), so if she’s reading this, thank you very much for your help!

I head through passport control and security, and get accosted by the eager young folks who are always there taking a survey of foreigners to find out how much time and money you spent in Hong Kong on this trip. I am in a hurry, but I take a minute anyway to talk to them. Yes, I absolutely love Hong Kong. I would move here tomorrow if my wife would come with me. I’ve been here many, many times and will be back again soon. It’s awesome and now I have to go.

Five minutes for a quick bowl of noodles and to buy some candy bars (paid for in 1 second with my Octopus card – love it). Then up and down the seemingly endless series of escalators with the train ride to the other terminal in the middle and on to the gate. It is very humid and pretty warm and HKG, like Shanghai Pudong, is built to be big and impressive which means by the time I get to the gate, it is now officially sticky uncomfortable. It is February, so I don’t think they have the AC on, but this not how you want to board a plane. The security is far tighter than the USA, with every bag searched.

I am in a aisle seat in Economy, which means the next 14 hours will only be mildly tortuous. My seat mates speak not a word and neither do I. Both sleep through the entire flight. Just as well as I’m not in the mood. United is sticking with the 4 movie format, but at least they are good – The Invention of Lying, Where The Wild Things Are, My One And Only, and The Informant! The food sucks and is even sparser than last time. Thank God for candy bars.

Land in Chicago exactly on time, and after a pretty thorough grilling by passport control, out into the airport. For some bloody reason you have to go back through security again, which in O’Hare is less than fun. Security in HKG is MUCH tighter than in the States, but nothing for it, so shoes off and laptops out. My flight to ROA is out of one of the commuter terminals, to one with no good restaurants. Lunch at McD’s. blech.

I sit down to read the Wall Street Journal Asian edition they gave me on the plane and wait the two hours for my flight. There is a great article on Chinese Intellectual Property law that I would love to be able to concentrate on, but instead I spend this time listening to an astoundingly annoying woman tell the lady across the aisle from her nearly every detail of her life and recent travel history, including how her underwire bra sets off the metal detectors EVERY TIME (I feel so much safer now knowing they actually work). I know this because despite the fact that she was about 100 feet away, her voice was SO LOUD everyone in the terminal heard her. At least when people in China are loud and obnoxious, they are all loud and obnoxious at the same time, so the result is sort a loud silence. They all just drown each other out into white noise. Oh, how I wish I were back in China.

Bumpy flight to ROA with the annoying lady talking only intermittently during the flight. I think she was airsick. Thank God for turbulence.

Finally, almost exactly 24 hours after I woke up, we land at Roanoke Regional Airport. Out into the cold and snow covered mountains. 24 hours ago I was in 80 F weather, now below freezing. Yipee.

It’s been a great 5 weeks, but when I see the family again, I know where I belong.

Happy to be home.

Days 32-36 – Wrapping it up

February 18, 2010/0 Comments/in China Business Blog /by Mike Bellamy

Day 32 – After recovering from the party the night before, Adam Supernant and I pick up a couple of our clients for a shopping outing to Dongmen. It is actually quite brisk – south China this time of year can go from the 80s to the 50s in one day – and neither of them are feeling 100%. We head to Ajisen, a Japanese noodle chain. Service is atrocious, but food is good. Like McD’s, it’s always the same, which makes me wish we had Ajisen in my part of the USA. Oh what I would give for good noodles here…

That evening we head out to meet [name redacted at the request of her employer on 7 April 2011], aka Banana (adopted from China and raised in Germany and Hong Kong – yellow on the outside, white inside – her term), and one of our Endorsed Service Providers, Ms. Li Yan of the JunZeJun Law Firm. Li Yan and I have been referring people to each other for a while now and she’s done an exceptional job with our clients, 8-0 on IP cases. It was nice to finally meet her face-to-face. We dine at the Da Yu (Big Fish) the crazy teppanyaki place with the all-you-can-eat, all-you-can-drink special for 150 RMB. The place is packed to the gills for CNY celebrations. Ultimately we are seated and have a spectacular meal.

Since we were one of the last tables to eat, the chef used our grill to make a massive batch of egg fried rice for the staff’s dinner.

The group breaks up after dinner, though some of us go for a few more drinks – Erdinger at McCawley’s (my favorite German beer). Banana is with us and says I’m pouring it wrong. That may be so, but I’m pouring it the way I like it. Besides, my way is more fun for entertaining the wait staff. No way to describe it, just have to show you the next time I see you. Starts raining which sort of kills the fun sitting outside. Head for home.

Day 33 – rained hard all day, forcing us to cancel our trip to Hong Kong and Macau. We did nothing except sit inside all day working and watching movies. When the rain finally started to abate, headed out to get some KFC. Yes, I know, but sometimes you feel lazy. We pay for it later with wicked acid indigestion. KFC is much spicier and greasier than in the US. Later in the evening we head out to Shekou to get rooms at the cruise ship so we can watch the Superbowl live in the morning at the sports bar downstairs. We take our clients to dinner at Tasca, the Spanish tapas bar and have a grand time. Early to bed.

Day 34 – Up early to watch the Superbowl. I don’t care about either team, but fun nonetheless. Our clients head out early via hydrofoil ferry to HKG, which is much quicker than crossing by land (the “business” excuse for our trip to Shekou – have to take care of those customers). This is the first time I’ve been to Seaworld in the daylight in years, and after the rain it is a gloriously clear morning.

Because it’s Monday (China is 13 hours ahead of the east coast of the USA, so Sunday night is Monday morning), after the game we head to work. We have to stop by B&Q again.

On the way home from the plant, we see a VW Santana with a big involved graphic across the back of the trunk lid. It says “SOCCER” and has a picture of some famous footballer. Only one problem – it’s backwards, a mirror image of what it’s supposed to be. You see this kind of stuff all over the place here – English words on t-shirts, handbags, advertisements, etc. that are misspelled or upside down or backwards or just thrown together at random. My wife has a t-shirt from our time in Taiwan that says “I’m Fine Muck”. Yes you are, sweetie.

We are interviewing a Filipino process engineer to work with me at the Assembly Center. He looks like he’ll be a good fit. He’s got loads of plant level experience working for major global companies and has lived in Shenzhen before. He has family in Dongguan up the road. He tells us a harrowing story about his last time in China when he was kidnapped and robbed at knife point in broad day light. I have heard these stories about SE Asians in China, but never about a Westerner. I guess the gangsters assume the police will care less about the SE Asians. Sadly, they are probably right.

Day 35 – Last day at the Assembly Center. We hired the process engineer, Harold Roman, this morning and he’ll spend today and tomorrow with me reviewing our kaizen agenda for the next couple months. I intend to return for the month of April, but don’t want things to go cold after CNY.

The last lunch is celebratory, the first lunch with beer since I’ve been here. Had I been doing the factory visit two-step, every vendor would want to treat me to an alcohol-soaked luncheon. I was not here for that, but in this case, a couple cold beers in the afternoon is an appropriate reward. Only problem, no cold beer. No problem, we’ve got ice. Iced beer. That was honestly a first for me.

When we get back the postman is delivering the mail on his green China Post motorcycle with saddlebags. Very cool. We get back to work until Julien Roger of China Quality Focus calls and asks me to join him for a business dinner. The schedule requires me to wrap things up early and head back to Liantang. We have our closing meeting and say our goodbyes. I’ll be back in April, but will miss these folks in the meantime. A good team all around.

On the way home I finally get a not-completely-blurry photo of the “staircase street” we pass every day. They are not good, but this is a very cool little oddity of Shenzhen.

When I get back to Liantang, the driver drops me at the end of the street. Our street is private, meaning that you have to pass through a gate and take a ticket to get in. If you stay on the street for more than a few minutes, you have to pay to get back out. We have a parking spot outside the wire, so this is typical. Nearly every shop is already shut down for the Chinese New Year, a bit of a ghost town. I come across one scene outside of a restaurant that is very cute and hugely disturbing at the same time.

Julien and I head out to meet up with Renaud Anjoran of the Quality Inspection Blog at a northeastern style restaurant. I love this style, and was wickedly disappointed by the last place I tried, so I went in hoping for a good experience. Julien said this was his favorite place and I see why. It was excellent across the board.

After dinner, I go for my last massage of the trip. I have a bad back, had to wear a back brace when I was a teenager and am used to regular pain and discomfort. On this trip, I have definitely been spoiled by the affordable and effective massages. My back feels better than it has in years. The woman tonight is in her 40’s and her experience shows – she is an expert and despite the momentary thrashing when I wake up in the morning I feel like a million bucks. Total cost around $25. Love. This. Place.

Day 36 – Last day at the office. Beautiful morning. We battle the usual chaos before the CNY, mainly problems with customer payments clearing in time to release goods to get a berth on a freighter. Customers often can’t envision the traffic at the ports during this time of year, and think that if they get the check out on the last day that that will translate to goods on the water. To clarify, no it won’t. If you are one of these customers reading this blog, it is nothing personal and trust me you are not the only one, but in the future, send the money early. The earlier the better. The Chinese have been celebrating CNY for 5,000 years. It’s not like you weren’t warned, and trust me, there is NOTHING I can do about it.

Our favorite local restaurant is still open and so we have our final lunch there. All the favorites plus this that I’d not had before.

We have a very productive day and then select Mao’s House for the final dinner. How I love those chili shrimp skewers. We have at least 4 plates between us – Mike Bellamy, Brian Garvin, Adam Supernant, and Harold Roman of PassageMaker and Julien Roger and Ludovic Larry of China Quality Focus. Much later we head out to meet up with Dave Learn at Viva, running into Banana and other friends on the way. How bizarre it is to have such a dual life. And how exciting as well. I am looking forward to being home and seeing my family, but I will miss this place when I am gone.

Home at a reasonable hour and to bed. Early day tomorrow.

Day 31 – 恭喜发财 – PassageMaker’s Chinese New Year party!

February 16, 2010/0 Comments/in China Business Blog /by Mike Bellamy

恭喜发财, gōng xǐ fā cái, wishing you a prosperous new year!

Days 27-30 – Plenty of hard work and plenty of visitors

February 15, 2010/0 Comments/in China Business Blog /by Mike Bellamy

I’ve already returned to the States a few days ago, but the last couple weeks in China were so hectic, I am filing these posts late. Days 31-37 to come shortly.

Articles, articles, articles…

Chinese diplomat: Ties with US deteriorated recently – no, really?
More from Reuters
This is just wrong – Chinese girl, 9, becomes one of world’s youngest mothers after giving birth to a baby boy
India forms new Climate Change body
Uh oh – Fears of sexual frustration among workers in China
Proof there is a God
China’s Debt Bomb – as good a reason as any for Washington to quit spending so much money
Dazzled by Asia – a different perspective, far less rosy about China’s future, and hard to argue with
Five Things the U.S. Can Learn from China – a rather silly article in Time magazine, which again reminds me why I no longer read Time magazine. As Dave Learn put it, “it sounds like an article written by someone who read a book about China”.
And this also popped up on the Google search (from the Business Insider) – TIME Magazine’s Ridiculous Five Things America Needs To Learn From China
China PLA officers urge economic punch against U.S.
Stay rates for foreign Ph.D.s rebound after decline

A little random tidbit from Dave, who is going on another Asian adventure for the Chinese New Year. Airlines are just no damn fun anymore (from the terms and conditions on his plane ticket):

– Guests can no longer carry guns and/or ammunition on flights to or from Indonesia

Killjoys.

Day 27 – A client from the USA arrived today, one of a group of three we were expecting. The other two were delayed by fun winter weather in the USA, so they will arrive tomorrow. After a long day at work, I met the client for drinks at our preferred corporate hotel, the 999 Royal Suites. Nice rooms for a very reasonable price. The bar caters to foreign businessmen and they have the standard Filipino cover lounge singers. Some have been there for years and it was catching up with old friends. The Filipina hotel day manager, Queenie, looks great and I am glad to see her rising in her career with the 999. I once spent 5 weeks living at the older 999 hotel across the courtyard, so I got to know the staff pretty well.

Day 28 – We have visitors today from [company name redacted 7 April 2011], a German 3PL based in Shanghai with offices in Shenzhen [and no sense of humor apparently]. The head of the Shenzhen office is a self-described “banana”, yellow on the outside and white on the inside. She was adopted from China as a baby by a German family and raised in Germany and Hong Kong. Very interesting young lady. We have a great lunch and then they head off to tour our facilities. Here they are with Mike heading into our medical assembly center with clean room and sterile packaging capabilities.

L-R – Mike Bellamy, founder of PM, and anonymous employees of an anonymous German logistics company that no longer wishes to be named in this blog [as of 7 April 2011], prepare to enter our Clean Room Assembly Center. Too funny.

Later the rest of the clients arrive and off we go to the traditional first-night-in-China Xinjiang dinner. Great time. The highlight was the staff practicing their traditional dances out in front of the restaurant late at night. I’ve seen them do this before, and really don’t understand it, because none are from Xinjiang and they don’t work in local costume and don’t perform at the restaurant. But this is one of my favorite scenes from China. I’ve tried before to take photos and this is the first time they were any good.

Day 29 – Very productive day of meetings with our clients from LimbGear and our Endorsed Service Provider, Camrett Logistics. They have a great new family of products and I expect we will see great things from them in 2010. At night we head out for a Northeastern style dinner, normally one of my favorite styles, at a restaurant called 东北人, dōngběirén, literally “northeastern person” or “northeasterner”. We were told it would be awesome. It wasn’t. The food was a warm cup of OK, but the service was bloody atrocious. After waiting more than 10 minutes I actually had to get up to go find a waitress and mildly berate her for leaving us sitting so long with no tea. She was embarrassed enough to come immediately and take our drinks order, but the service stunk throughout the meal. This is extremely rare in China, where most of the time you have almost too much service. If you are in Shenzhen, Dong Bei Ren near King Glory Plaza (GuoMao station on the subway) is one to skip.

Day 30 – Another day at the Assembly Center. I am starting to feel the end of the trip and have so much to do I eat lunch at my desk. When I lived in Taiwan, I loved the lunch boxes (bien dang in the local dialect). Today’s take out was not the same (bien dang are more complete rounded meals) but it reminded me a bit. A good light and healthy lunch all the same. Now if I can just get my TrekDesk (one of our clients!) set up in China, maybe I could actually LOSE weight on these trips.

On the way to dinner, we saw one of the more memorable sights of this trip. We are fast approaching the Chinese New Year, and families stock up on fresh produce to last through the long holiday (1-2 weeks). And when I say fresh, I mean live.

Dinner was one of the best of the trip, which is really saying something.

Everyone’s tired and a little lubricated, so early night. More adventures tomorrow!

Days 15-26 – Pollution, street food, deadlines, Hong Kong and crossing the road in China

February 5, 2010/0 Comments/in China Business Blog /by Mike Bellamy

Our founder, Mike Bellamy, who evidently doesn’t have enough WORK TO DO posted the Rick Roll the other day under my name. That was his hint that I should blog more often, so here goes. Sorry for the Rick Roll. Sorry for the absence. And sorry in advance for the length of this post.

More interesting articles:

Hong Kong remains world’s freest economy: report
For this American, the idea that the US government can get Google to do anything is silly
Impressive China economic growth numbers
Now IMDB is blocked in China
From Wired, In the Next Industrial Revolution, Atoms Are the New Bits
De-industrializing Detroit
How to Push a Dump Truck Out the Window – the wreckage that was America’s 4th largest city
US slaps duties on electric blankets from China
Bacteria Rebuilt To Make Oil
We Are So Screwed – a fascinating look at financial crises
China protests US arms sales to Taiwan

The last two weeks have been insane. The pollution was unbelievable up until this past weekend, as bad as I’ve seen it in over a decade. I could taste it and feel it on my teeth. Blowing your nose was a bit of an adventure and made me wish for black handkerchiefs.

It has also been fun as the Great Firewall is now blocking Bloomberg completely and Reuters about half the time. Several IT guys we’ve worked with in the past have left China for Thailand because the Firewall is too big a pain in the neck.

Day 15 – Customer visits seem to to be an almost daily event. So far this trip we’ve had them one after the other from USA, France, Australia, etc. I was running late, so I hired one of the gypsy cabbies who hang out by our apartment complex to run me across the street to the office instead of taking 10 minutes to walk. He proceeded to pull straight out into oncoming traffic driving the wrong way down the main road and then cutting across 4 lanes of oncoming traffic to get to our side of the road. Such is life in China. After 10 years here, Mike still doesn’t drive.

Lunch was nothing special, though I am constantly amazed at how fatty the meat here is. In the USA, where nearly everyone can stand to lose a few pounds, fat is bad, horrible, terrible stuff. Here, it is where the flavor is. And hardly anyone is overweight.

At night I head off to Futian to meet an old friend who is now a rep for PassageMaker. He was born in Hong Kong but raised from infancy in the UK, so he speaks perfect British English. He moved back to HK on the day of the handover in 1997. He wanted pizza and beer, so we go to NYPD (New York Pizza Delivery), an outdoor place that serves the best American style pizza I’ve ever eaten. Really.

The owners are a couple American Born Chinese (ABC) from California who developed a dough recipe that is mind blowing. Crispy and soft at the same time, it kicks the pants of anything I’ve tried anywhere else in the world. All ingredients are flown in weekly from the USA. And the beer is dirt cheap, too. Across from our table was a skyscraper with a gigantic TV across the top 5-6 floors. We watched TV while we ate and chatted. My camera sucks in low light, so I couldn’t take a photo.

Sitting outside on a nice night, eating great pizza, drinking cold beer, watching a TV 5 times the size of my house and hanging out with an old friend, all for about 20% of the cost of a similar meal in the USA, I wonder why the heck I don’t live here full-time.

Day 16 – Worked all day and well into the night. We didn’t leave the office until nearly 11 PM. Given the hour, Mike’s wife thoughtfully arranged for dinner – a meal of grilled tofu, potatoes and lamb skewers, washed down with copious amounts of cold beer. Oh, did I mention it was on the side walk, sitting on stools that would be reserved for a pre-school classroom in the USA and eating off a plywood folding table sized for a dwarf? It was bloody fabulous. It cost about $5. I love this place.

Day 17 – A full day at the factory. We are working on a big order that needs to go by the end of the month, and we are using this as the first test case of my ideas for operational improvements.

Day 17 view from our factory managers window every industrial park needs a decorative fountain

That night we picked up some prospective clients for dinner at my favorite Xinjiang restaurant. I’d gotten them hooked up with my old friend from Taiwan as a translator and we all had a great time. One item of note, we saw the world’s most expensive production car outside the hotel.

Day 18 – Mike asked me to join him for lunch on Saturday. On the way down to meet him, I passed a ballot box – the apartment complex is having an election.

We head to an Algerian coffee shop in the center of Luohu. Both of us are in the mood for something other than Chinese food. The place has several things that rare in China – a separate smoking area and SILENCE. The Chinese, especially the Cantonese, are not quiet people. Going to a typical food court on a Saturday is like enjoying lunch next to a jet engine. You get used to it (by slowly going deaf), but it is a shock for first-timers used to the USA where typically people don’t shout in restaurants. We had business to discuss, so it was a good choice.

That night we head to Coco Park area for Brazilian barbecue and to later join friends at Club Viva. I love churrascaria and this one was acceptable. The ones in China just fail on the salad bars, which is a big part of the appeal for me in the States. However there were two items of note: camel meat and beer urns.

Day 19 – despite being Sunday, we go to the office to work most of the day. Not much of note, but a few photos nonetheless.

The day ended with another wonderful dinner by Mike’s wife and the maid. Simply magic from such a small kitchen.

Day 20 – I woke to ghastly pollution. At first it appeared a lovely misty morning, but that soon turned into choking smog that persisted all week. That said, it was a great and productive day at the Assembly Center. The culinary highlight was a fabulous meal at a very upscale restaurant near the factory. The place was part of a large apartment development with Spanish style architecture, a welcome departure from the typical Chinese apartments.

Day 21 – Pollution continues and is even worse. Back early to the Assembly Center to start working on the line. We have a big rush order of a complex assembly, around 90 parts in the BOM, and an agonizing wiring step that takes around 8-9 minutes. No way to automate it, it must be done by hand.

First thing is to head off to B&Q to buy some decent tools to cut down on assembly time as much as possible. For the February order I will get electrical and air tools to speed things up and allow for more people at the wiring operation, but today it is just decent hand tools. By upgrading the tools and teaching some Drum-Buffer-Rope practices, we complete the order 5 days ahead of schedule.

Lunch was at a North West style restaurant.

Day 22 – Another day at the Assembly Center. A good day with more smog. Ho hum. The highlight though was dinner with my old friend, my lao pengyou, Sabrina. She was Mike’s first employee 9 years ago and we have become close friends over the years. We always go for dumplings when I am in China. She is a wonderful project manager, a very tough lady who doesn’t take any crap from suppliers.

Day 23 – Another day at the factory, including lunch at the cafeteria. This time we invited members of the production staff and they played “gross out the foreigner” with the lunch order. Good natured fun and I am used to it. I’ve never yet backed down. Except for the waterbugs a few years ago, but I was already recovering from food poisoning. Oh and did I mention the pollution *cough*?

We join Mike at the office and walk home for a late dinner. This involves Mike’s preferred method of crossing the street – sprinting across 8 lanes of traffic instead of the “long way” using the pedestrian bridge. Chinese pedestrians have no concept of jay walking. The only thing more dangerous than the air in China is the traffic.

Day 24 – We head out in the morning to pick up a prospective client in Futian at the Marco Polo. Dinner involves a trip out to Shekou for dinner at Tasca, a fantastic authentic Spanish tapas bar. Spanish food is the only thing I like better than Asian cuisines.

After dinner we walk over to Sea World, an outdoor mall surrounding an old cruise ship. This was the ship where Deng Xiao Ping signed the papers to create the Shenzhen Special Economic Zone, which was sort of the real starting gun for the reemergence of China. They’ve since filled in the harbor, completely surrounding the ship. The place is now a “Little Foreign Town” catering to expats. My camera did not work with the lighting, so no pictures. I am sure you are heartbroken. We went to the original McCawley’s for a drink and then headed home.

Day 25 – It’s a glorious Saturday. The pollution is gone and it is deliciously warm but not hot. Mike’s in the mood for pizza and his wife and daughter want to go shopping. The car drops us off in the heart of Luohu, in the shadow of the “Empire State Building” of Shenzhen, Di Wang Da Sha. It is one of the best looking skyscrapers in the world, IMAO.

Scroll back up for the pollution shot of this building from a distance. If China adopts a better energy source – perhaps modern nuclear as in France and Japan – this a pretty attractive city. The clear days that you do get remind you of how awful the pollution really is.

Papa John’s is the choice for today, and like many US chains in China, they’ve gone upscale and adapted to local tastes. The dining area is an alcove of sorts, shaded with big comfortable chairs. Kind of like eating pizza on you covered patio at home. The recipe for the dough was substantially different than in the States, and while it was satisfying, it is no NYPD. Looking out from our alcove a gleaming new Gucci store dominates. A Mercedes festooned with wedding decorations pulls in to park. To the left is a brand new Hyatt and to the right the Huaan Conifer Hotel, a Chinese hotel that is by far the nicest place I’ve ever stayed in Asia. I spent 3 weeks there once and it is decadent. Next door to the Papa John’s is the most badass fast food restaurant on the planet.

After lunch we go to the Dongmen (“East Gate”) Road shopping area, which is a sprawling warren of narrow streets selling every consumer good under the sun. It was a mob scene. And lots of fun to see that many people out having a good time. We buy some movies and the ladies get squid-on-a-stick (they didn’t ask me if I wanted any, *sniff*) and take it easy instead of going out on the town.

Day 26 – Another beautiful day. I go across the border into Hong Kong with a co-worker, just into the New Territories, not the famous city center. We are going shopping for American style dill pickles (yes, really) for Mike, mainly an excuse to get out of Shenzhen and do something different. We cross the border at Luohu, and see something across the fence in Hong Kong I have never seen in Shenzhen – a grave yard.

Today also saw my first trips on the Hong Kong MRT and the Shenzhen subway system. So now I have an Octopus card for Hong Kong (which can be used to buy all sorts of things, not just riding the MRT, very cool) and a Shenzhen subway pass. I rock.

First we went to a Chinese “wet market” selling an amazing array of fresh ingredients. The smells were powerful and it is not for the faint of heart. I thought it was awesome.

Upstairs they had a food court. As I mentioned above, these places are LOUD, but I feel right at home. This dynamic, barely controlled chaos, coupled with incredible food, is what attracted me to Asia in the first place. We have two 600 ml Skol beers and noodle soup.

After lunch we try a number of Western style grocery stores looking for the pickles. They are located in malls that are part of the MRT stops. Very sensible. Not sure which is the chicken or the egg, but it works well. The grocery stores are 100 times better than when I was last here, but they are still thinly stocked compared to your average Kroger and are positively claustrophobic. I can barely walk down the aisles without turning sideways. After an hour or so of looking, no pickles. We buy Cadbury’s chocolate for the office instead. Couple things caught my eye.

Defeated we cross back into Shenzhen at the new Futian crossing, a far more impressive building than the old Luohu crossing. Reminds me of an airport. In this place the Shenzhen River is much wider.

We take the Shenzhen subway to meet Mike for dinner. Very clean and efficient. Instead of a poster in the car showing the map of the lines, they have an electronic display that tracks the progress of the train. Very cool. We head to a Japanese restaurant that has the craziest deal I’ve ever seen. All the sushi and tepanyaki you can eat and all you can drink – juice, soda, tea, beer, wine, sake, doesn’t matter – for 150 RMB. That’s $22. I have no idea how they stay in business. By my count, I ate $100 worth of food alone, not even counting the beer. There is no restrictions – you can order anything off the menu. The absolute highlight was kobe beef sashimi – raw slices of rice paper thin beef. I ate at least 3 orders, each 45 RMB. It was fantastic. It is now my official favorite thing to eat in the whole world. Note to the FDA – it is far easier to control the diet and health of a cow than a wild fish swimming in the ocean. If sushi is legal in the USA, why not raw beef?

This restaurant is in the basement of one of the big malls in the area, CITIC Plaza. It is a bit of a maze, so we went round and around looking for it, including an elevator with the follow sign:

Last item for today’s blog, the Japanese restaurant had cool bronze dragons on the table. I had seen these before in Korean restaurants, but had forgotten about them. I need to get some of these for my home in the USA.

That’s all for now…