CleanTech Forum XV is Coming

In the Hutong
Hiding from Expat Trick-or-Treaters
1647 hrs.

For those of you with an interest in clean technology and not otherwise occupied on the day, the Cleantech Forum is coming to Beijing on December 3-4. The real interest here will be for firms looking for interesting venture opportunities, as well as for the usual suspects seeking to sell their services to said firms.

Check out the information below:

Registration – Cleantech Forum XV, Beijing , December 3-4

Program – Cleantech Forum XV, Beijing , December 3-4

Tip of the hat to Dennis Best for the heads-up.

Beijing’s Hybrid Hypocrisy

Starbucks Pacific Century Place, Beijing
Digesting raw fish
1254 hrs.

Here in the Hutong we are looking for ways to lower our carbon footprint while enjoying the conveniences of modern life. Tired of driving a car that is getting too small for the family, not wanting to own two cars, wanting a tough vehicle, and at the same time seeking to lower our carbon footprint, our natural instincts are to look for a vehicle that will give us more room and yet move us to a more sustainable lifestyle.

Despite all of the hype at the Shanghai Auto Show earlier this year, there are not a ton of options out there. The Prius is too small, so that was out. Our eyes naturally reached the Lexus RX400h as being a pretty good combination, an SUV with a hybrid drive.

Until, that is, we saw the price. For a car that fetches around $43,000 in the U.S., the dealer in Beijing was quoting us RMB 816,000, a tidy US$109,156. Trying very hard to make a sale, the dealer hinted that the standard RX400, without the more environmentally-friendly hybrid drive, could be had for around RMB 700,000, or a full US$16,000 less.

Is there a price difference between the two vehicles? Certainly there is – somewhere around $4,000, if US prices are any indication.

But what this means is that in China, in a nation where air pollution caused by automotive emissions is becoming a serious threat to public health, an environmentally-conscious car buyer is taxed by the government an extra 16-20% for wanting to make a better automotive choice.

Clearly, somebody very senior in government is not thinking this through.

Granted, from a policy standpoint, the fewer cars with large engines that are on the road, the better. And granted, from the same standpoint, the more domestically-produced cars (rather than imports) on the road, the better. This is the reason that imported cars with engines larger than 3 liters are already subject to a whopping 100% tariff.

But if someone is going to buy that imported vehicle, from an environmental standpoint it makes more sense to do everything practical – up to and perhaps including actually subsidizing that purchase – to encourage the consumer to make the right choice. At the very least, you would not want to penalize the buyer any more than the actual cost differential of the vehicle.

I cannot believe the problem is with the environmental bureaucracy. This sounds like a simple case of the General Administration of Customs doing their jobs and collecting as much money as possible for imported vehicles. To bring about a change, somebody very senior in government needs to get involved.

This sounds like something that, if the large automakers handle correctly, could redound very much in their favor, both publicly and among their dealer community. What I suspect, however, is that the major hybrid-makers (Toyota, Ford, GM, Honda) are not interested in fighting this battle.

The big question is – why not?

China and International Pressure: Keeping the Laundry Indoors

In the Hutong
Enjoying a postprandial food coma
1816 hrs.

A source of constant entertainment for those of us living in China is the growing stream of armchair diplomats who believe that the Beijing Olympics is somehow a lever to bend China to the will of the West.

While one has no problem with a little punditry now and then – even with wonks who challenge one’s own beliefs – one would hope that said pundits would think through their positions with care. This applies in particular to those who speak from the more visible pulpits of The New York Times, The Washington Post, The Times of London, The Independent, CNN, and similar outlets.

A current example is Roger Cohen, speaking in the Gray Lady about the goings-on in Myanmar. He calls upon China to press for an end to the Junta’s rule in Myanmar. Citing the example of Mia Farrow’s criticism of China’s “complicity” in Darfur atrocities, and suggesting that said criticism yielded modest movement, he calls upon someone (it is not clear whom) to “shame China into shepherding Burmese reform, beginning with the release of Aung San Suu Kyi.”

Wordcraft, not Statecraft

This brings up several interesting issues.

First, as mentioned, he is vague about who should do the shaming. The State Department? George Bush? Ms. Farrow? The University of California class of 2012? A polemic is fine as far as it goes, but if one is to call for action, shouldn’t one be specific about who is to do the acting?

Second, he calls upon China to press for a rapid end to the Junta’s rule. Wonderful idea. Unfortunately, Mr. Cohen is also vague about the lever China would use. With the case of North Korea (which he cites as an example of China’s power in the region), the dual levers of food and fuel to an isolated economy were powerful. What, exactly, would China use as a lever with Myanmar? Trade and economic sanctions with pariah nations have a pathetic record of producing change – they tend only to increase repression.

At the other end of the spectrum, armed force on the part of the PLA would make China’s leaders queasy, and the rest of the world would hardly welcome the emergence of the PLA as an expeditionary force. (Chinese tanks in Rangoon, anyone?.) Statecraft – particularly when the ends include regime change – is a very tricky and – as the current U.S. administration has discovered – often bloody business. But again, why ruin a good polemic with details?

Third, Mr. Cohen notes he is neither in favor of a boycott of the Olympics, nor of a breakdown in Chinese-American relations. Once again, though, he fails to suggest what lever the U.S. or self-appointed citizen-diplomats like Ms Farrow might use to convince China to do whatever vague something he is urging. If you want to threaten to boycott the Olympics, you had bloody well better be prepared to do just that – and endure the damage to Sino-American relations – before you sit down at the table. And if not that, what?

Finally, Mr. Cohen is quite keen on dumping the junta, but he is again without the support of detail when it comes to what should replace it – and how.

Statecraft, not Wordcraft

The problem, of course, is that Mr. Cohen is one of those people who feel the only way to deal with China is with the most accessible blunt instruments of statecraft. In this he exposes his lack of understanding of how to work with the leaders of the world’s largest countries.

One need neither kowtow nor threaten to get China to work with the U.S. or the international community on issues of mutual interest. One need merely make a clear, cogent case to China’s leaders that their bests interests are served by finding a mutually acceptable way of inciting change, and do so in a way that addresses the domestic political realities of all involved.

Want China to bring about regime change in Burma? Explain to the nation’s leaders exactly how China will benefit by the change (domestically and internationally), how it will benefit by being seen as the catalyst, and how whatever will replace the junta will be better for China than the current situation. Sound easy? I can assure you, it is not.

Oh, and by the way – make sure before you do all of this that you have thought through the long-term implications of a China prepared to use its growing muscle in defense of its own interests.

Once astride the tiger, the Chinese saying goes, dismounting is difficult.

Blackberry: Not Exactly DOA, but Close

In the Hutong
Munching peanuts
2035 hrs.

About a week ago I was listening to somebody on CNBC (I don’t remember whom, but he was in New York, not Singapore or Hong Kong) tout Research in Motion (RIM) because they are about to launch in China, and that’s going to mean big things for the company.

With respect to the folks at CNBC, the guys over at Reuters have run a much more sober piece (via CNET) about the challenges RIM faces in marketing its BlackBerry devices and services here in China. Reuters correctly notes:

  • Local push e-mail services already exist that are price-competitive.
  • Chinese businessmen who can afford the device do not, in many cases, feel the same compulsive need to be hooked into e-mail. The phone is enough.

That’s all quite true. But it gets worse.

Moose in the Shark Pool

The article implies that RIM is considering stepping beyond its core market of high-end enterprise users. That would be a bad move. The sharks are out for RIM.

I have no doubt that BlackBerry will have an appeal among many expatriates – at least, those who don’t already have service from overseas – and senior Chinese executives of global firms. That’s not a giant market, but it is one that will be willing to cough up nearly US$1,000 a year for the service. (And lest you think I’m just an old cynic, I walk around China with a BlackBerry myself. Of course, It’s an unlimited global service plan from T-Mobile, but that’s beside the point.)

  • Device Cost – While pricing has yet to be set, a good indicator is Hong Kong. All devices are purchased in Hong Kong and China on pretty much the same basis – unlocked but no subsidy. My 8707, purchased from CSL, set me back the equivalent of RMB 4,000. There is no camera, no music, no external memory.
  • Device Competitors – Unlike when BlackBerry launched in the U.S., there are very real competitors in China who have prepared for BlackBerry’s arrival with devices that arguably match BlackBerry in email functionality and beat it in a host of other areas – for a lot less money. In fact, it is entirely possible that the launch of BlackBerry devices with China Mobile – delayed as it has been – will be accompanied by simultaneous launches of QWERTY devices from Nokia, Motorola, Samsung and Palm.
  • No Brand – The percentage of potential customers who know RIM is tiny. Not only does this mean that there is a minimum “anticipation” factor that will drive initial sales, but also that RIM has a long battle to fight to build the BlackBerry name. There are over 80 brands fighting for attention in China, and all of them have a better brand than him. In the case of companies like Motorola and Nokia, we’re talking decades more experience and billions in brand equity that RIM doesn’t have yet – and would have to spend millions to build.

RIM’s Smart Road to China

If the guys at RIM are sitting in their offices in Canada eagerly expecting China Mobile to reach into its cash hoard and pay to market BlackBerrys, they are in for a crushing disappointment. I suspect that, whatever their original beliefs, RIM now understands that this is not going to happen. If they don’t push Berries, nobody will.

The company faces a choice: invest millions in a sales, marketing, and advertising effort in China in an attempt to expand its natural market into the hyper-competitive heart of the mobile phone industry, or focus entirely – at least initially – on building and defending its home turf with lawyers, professionals, and the local offices of their global customers.

Those “low-hanging fruit” could do a lot to jump-start positive cash flow and begin building brand, a basis from which RIM could later build with more targeted offerings.

Stay away from the temptation of the big numbers, guys. Remember your market and stick with it. Doing so will make the difference between you having a business in China, and China sending BlackBerry home to North America in a body bag.

WSJ Database Marketing is a Dud

In the Hutong
Digging for my American Chopper DVDs
2127 hrs.

One of the great promises of computer technology was a thing called Database Marketing.

The theory behind database marketing is that a company with which you have a relationship will record information it learns about you and it will send you solicitations that will not only be relevant, but indeed will anticipate what you want.

So much for the theory.

Let’s take, for a moment, the Wall Street Journal. I have had a long and mostly satisfying relationship with the publication for many years. I was one of the early subscribers to the electronic edition, and I’ve maintained that almost consistently since they began offering the service. ($339 per quarter to fly dead trees to my doorstep just seemed like a bad idea all around.)

You’d think they know me by now. They’ve got my billing information. They know where I live in China. They know what I do, how old I am, what I read, what my interests are, what I download, how much I make. They even know I’m a white male.

So when I get an invitation from the WSJ inviting me to a Career Fair (I own my own business, thanks), a “Diversity” career fare, no less (white man I am), in about two weeks at the very-inconvenient-to-me Embassy Suites Hotel Old Town in Alexandria, Virginia, I realize that either Dow Jones is totally incompetent at marketing, since they don’t know the difference between “database marketing” and “SPAM,” or they just don’t care about who I am and don’t care if I know it.

I’m starting to change my mind about Rupert Murdoch and Dow Jones. Surely their database marketing couldn’t get much worse.

Down and Dirty Marketing: Don’t Go There

In the Hutong
Enjoying the quiet
1753 hrs.

One of the reasons I like reading Shaun Rein’s stuff is that he does his homework. I don’t always agree with his conclusions, but I respect him deeply for going and getting the data first. You don’t get a lot of that in China, and you especially don’t get it often from people who know what they are talking about.

Shaun did a piece for Forbes where he rebutted a Harvard Business Review article by a leading U.S. management consultancy. Said consultants urged multi-national corporations operating in China to go for the low-end of the market in order to compete with domestic companies. Shaun’s point is that competing on price in the short term burns your brand in the long term.

Anyone who has followed the long, painful saga of a phenomenon known as “The China Price” knows that while engaging mostly state-owned Chinese companies in a game of price-chicken may bump the sales in the near term, in the long term all it does is wipe out profits, erase the stature of your brand, and eliminate any hope for rebuilding that brand in the future when the market goes upscale.

Ask the guys at Volkswagen (if they will level with you) about how difficult a time they are having in their home city of Shanghai trying to get people to see them as anything but a low-end auto brand.

Ask the guys at Dell whether diving down into the battle for the low-end of the computer market was a good idea.

On the other side of the equation, ask the guys at Li-Ning what they would give to swap their “brand of the people” image for a market position that would put them on a par with Nike or Adidas.

IF, on the other hand, you MUST dive into the low-end of the market, do it with a better experience, better customer value, AND halo products that will keep you firmly entrenched at the high end.

None of this is rocket science – it is Al Reis/Jack Trout Positioning 101 stuff.

Unfortunately, there is a crop of people out there who are still touting the idea that China is so different that the basic rules don’t apply. They’re wrong, and take with a healthy dose of skepticism anyone suggesting that the rules in China are any more than about 5% different from anywhere else.

There’s More to That’s

In the Hutong
Looking up “Lactose Intolerance”
1537 hrs.

That’s Beijing, and its sister publications under the China Intercontinental Press marque, are the functional if not ideological successors of the departed-but-not-forgotten Beijing Scene, an underground periodical that was the lifeline for the dispersed and disconnected expatriates of the capital in the days before Internet, Jenny Lou’s, Starbucks, and cheap mobile phones.

Beijing Scene was written with an edgy, dry wit by people like Jeremy Goldkorn (later founder and lingdaoof,) Ada Shen (now a film producer here in Beijing) and Steven Schwankert (IDG Asia editor, SCUBA poo-bah, Explorer’s Club member and Village Grouch.) Whereas That’s, for much of its history, has been written and edited indifferently, almost as if the articles were meant as a token gesture to the pretense that the publications was actually something more than a repository for advertisements.

I’m not quite sure how, but that’s all started to change in the last year or so. I am not quite ready to pronounce That’s as the true heir of Beijing Scene’s legacy, nor name it the Village Voice of China. But I’m starting to see signs that more time, care, and attention is going into the editorial side of the business.

Unsurprisingly, that’s a talent thing.

Sticking rocker-cum-scribe-cum-digimarketing guru Kaiser Kuo on the back page with his Ich Bin Ein Beijinger column was initially a bit of a risk, but Kaiser has found his voice, and his occasional romps into styles and themes that seems to have him jamming with the laptop keyboard the same way he would with an electric guitar means that the book always finishes with an edge. Imagethief Will Moss, who occasionally subs for Kaiser, should have his own column, and we should probably encourage that when Will returns to Beijing from his Shanghai soujourn later this month.

I first came across senior writer Alex Pasternack when I had temporarily convinced myself that there was a lack of locally-savvy international environmental reporting in China. I started to plan what I could do with an opportunity like that. Then I ran across one of Alex’ articles on TreeHugger. And I got mad. And the more of his articles I read, the more pissed off I got. Because the guy is good. After I got over the fact that I had been beaten to the punch, I started to enjoy his writing style, especially how fast, easy, and fun his stuff reads.

Ed Lanfranco, though a journalist by profession (UPI should count itself lucky), is an amateur historian who put many professionals to shame, and his focus is Beijing. His stuff makes excellent reading, and it’s inThat’s. Besides, anyone who would say that if he were emperor his first act would be to abolish the second tone cannot help but write engaging stuff.

The occasional contributors are also getting really good. Amanda Weiss, in the current edition of That’s, does an interview with award-winning director Li Yu that is both engaging and includes a quote that is going into my hall of fame:

“When asked how she feels about being labeled a ‘feminist director,’ Li bursts into laughter. She shakes her head, amused. ‘If I were constantly crying out about feminism, it would be like I defined myself as a powerless, disenfranchised person. But I feel that just naturally existing is fine.'”

I could go on, but you get the point. There are the nascent signs of greatness in That’s, and it will be worth watching where Mike Wester and his team decide to take the publication.

Blogging as TV Covers Blogging

NBC Beijing Bureau
Doing some wide shots and insert shots
1044 hrs.

This is probably my favorite kind of live-blogging: writing something in order to look like I’m actually working for the benefit of the cameras at a broadcasting studio.

Really, I’m trying to look natural as they do this. It was pretty cool to be interviewed with Silicon Hutong on the screen behind me.

By the way, the folks at the NBC bureau – Mark Mullen, Adrienne Mong, and their team – are the kind of people who are living testaments to the high priority China now enjoys with editorial desks in New York, London, and around the world. As is usually the case for a major global city, we have always had a cadre of outstanding foreign correspondents in Beijing, but what amazes me is that the quality is staying consistent even as the sheer number of foreign journalists rises. In a day when traditional news organizations are finding it more and more difficult to afford and hold onto really good journalists – much less staff expensive overseas bureaux – the NBC team is a reflection of Beijing’s status as a global capital.

This shift of journalistic resources to this part of the world, in the long term will, I think, prove to be a very good thing for China. Better and smarter journalists will feel less of a need to run sensationalist stories, and will be more comfortable reporting in the way Mike Chinoy used to at CNN. Mike understood his mission to be something quite different than finding stories that would anger or outrage Americans – he saw his goal as explaining China to Americans so that Americans would understand – right or wrong – what the Chinese were thinking and why.

Forget the Great Firewall

The Airport Expressway, Beijing
Heading to my appointment at NBC
0931 hrs.

Sitting here prepping for an interview at the NBC bureau, I’ve realized that our metaphors are not keeping up with the time.

Bear with me.

The expression “Great Firewall of China” originated in the mid-1990s, when China’s government was attempting to create an alternate Internet that was walled off from the rest of the world with the exception of a few select access points. Back then, it was fairly descriptive.

Today, however, the Internet in China is largely integrated into that of the rest of the world, with specific, increasingly pinpointed sites and services (Wikipedia, the BBC, some porn, and lately some RSS feeds) walled off from access.

It’s not an ideal situation, but it is one far different than the one that a cute metaphor like “Great Firewall” conjures up.

It would be far more accurate to talk about “Checkpoint China,” an image that conjures up a flow of traffic going in and out of the country, with restrictions being far more targeted than the kind of URL and keyword profiling that we used to have to deal with in the past.

I know, it may sound like a lot of semantics, but words are important. So many of us here in China complain when people outside of the country have outdated or inaccurate views on China. If we use inaccurate, inapt catchprases just because they sound good on the tongue, not only are we propagating the wrong impression, we are setting the rest of the world up to take actions vis-a-vis China that would be inappropriate and wrong.

I don’t know about anyone else, but from my home, my office and public access points around Beijing, I can get onto 98% of the sites I want to reach at any given time, and its a lot better now than it was five years ago.

So please – give up on the “GFW.” China’s Internet restrictions are much more about neo-Confucian paternalists (“Net Nanny”) and increasingly selective filtering (“Checkpoint China”) than a general effort to keep the Internet away.

Windows and Hoops

In the Hutong
Slowly decompressing
1456 hrs.

As Tim Chen makes his move from the leadership of Microsoft China to his new chair running the NBA here in the PRC, everyone seems to be asking two things: how badly will this damage Microsoft, and why is Tim doing this?

To answer the first question, you have to look at why he was brought into Microsoft in the first place.

The People Artist

When Mr. Chen arrived at Microsoft four years ago, the company faced challenges on all fronts. They were seen as distant and arrogant by consumers and the channel, all of whom ; manufacturers resented the company and brazenly shipped computers loaded with pirated copies of Windows; the government was making noise about Microsoft’s perceived monopoly and was openly supporting Linux and other free and open source software; the company was getting no credit for its research and development efforts in the PRC; and, to make things worse, relations between Microsoft’s own people in Redmond and Beijing were hardly optimal, fraught by misunderstandings on both sides.

Certainly from an outsider’s point of view, all of these things were getting worse – so much so, in fact, that many of us wondered if Mr. Chen had taken leave of his senses by leaving the rapidly-recovering Motorola to go to work for a sinking ship.

As it turned out, the move was a good one for all involved. The company’s own press release suggests how things are getting better, but there is more to the story than Microsoft is giving away.

(Note, before I go on, that I am not what you would call a Microsoft fanboy, nor do I consider myself a particular Friend of Tim’s. I’m speaking with an outsiders perspective here.)

Turning a Corner

In the space of four years, Mr. Chen ensured that the company reversed its slide with all of its critical audiences, not by micromanaging, but by catalyzing change in each problem area through personal attention and careful appointments of key managers.

Across China, the company began rebuilding its reputation with consumers, enlisting deeper support among the channel, getting key manufacturers to begin paying for pre-installed copies of Windows, reinvigorating its relationships with government across all portfolios and all levels, and making significant progress in its fight against piracy. The government’s outspoken efforts to drive the adoption of Linux have faded, and the company is getting more credit for its R&D.

Internally, Mr. Chen pulled the company together by installing experienced, China-savvy leadership in each department. He built a bridge between Redmond and the “sub” in Beijing through increased contacts and an all-out effort to educate headquarters in the challenges – and opportunities – the company faced in China, while at the same time proffering solutions rather than making excuses.

After Tim

To credit Mr. Chen alone with all of the improvements in Microsoft’s fortunes in China over the last four years may be stretching the point. But as my father was fond of pointing out, a fish stinks from the head. At the very least, Mr. Chen was a critical agent of change, applying effort and attention in those places where he saw that properly-applied effort would help turn specific problems around.

What he left behind was a company heading in a far different direction here than it was when he found it, with the people and systems in place to continue that momentum. Assuming Microsoft can choose a successor (whom, for the moment, remains The Player to be Named Later) with a vision that will ensure Microsoft continues to address its problems and grab its opportunities in China, the company’s future in the PRC looks bright indeed.

After Microsoft

By all rights, Mr. Chen’s efforts at Microsoft should have won him greater rewards and opportunities inside the company. In all likelihood, that was not in the cards. Growth for Microsoft is now a matter of adding and acquiring new businesses, and the company’s senior leadership is fairly set in place. Mr. Chen’s growth opportunities at Microsoft would probably have been largely limited to growing the China business incrementally. That’s not a bad opportunity, but it’s probably not the sort of thing to keep a guy with solid entrepreneurial/intrapreneurial instincts happy for long. Having to fly economy class on trans-Pacific business trips probably didn’t help.

The NBA makes great sense. While people closer to Tim than I have joked that he was making the change to get Olympics tickets, my bet is that he is even more excited by the scope and depth of opportunity open to the NBA in China specifically and Asia generally:

• First, the NBA is seriously ramping up current activities, and they go way beyond player recruitment, licensing, and the occasional exhibition game. The NBA China Games, NBA Madness, NBA FIT Camp, Jr. NBA, and the NBA Cares Tour, plus all of the work with the Olympics, Special Olympics, and Paralympics should keep Mr. Chen busy for a bit.

• Care and feeding of sponsors like Haier (the official HDTV of the NBA), Lenovo, (the official PC Partner of the NBA), DHL Express (the offical Logistics Partner of the NBA in the Asia Pacific region) will be important, as will cultivating new sponsors the NBA wants and needs for its broadcasts and live activities in the region.

• Deeper licensing opportunities, extending past the NBA to include teams and individual players, would benefit greatly from someone like Tim with his experience fighting IPR violations.

• There are a host of unspoken opportunities implicit in cloning the NBA in China. The NBA’s partnership with the Chinese Basketball Association has a lot of room to grow.

Plus, let’s face it: the NBA is more than sports, it’s show business. Hopefully, Mr. Chen will have a lot of fun.

Congratulations, Tim.