Silicon Hutong

China and the World of Business • China Business and the World

Silicon Hutong - China and the World of Business • China Business and the World

No China Experts

Hutong West
In search of macro-fauna
1241 hrs.

I have said this in other fora, and as my book Public Relations in China goes to bookstores I am getting questions from media and others that have caused me to lay out the following disclaimer:

  1. I am not a “China expert.”

  2. There is no such thing as a “China expert.”

  3. Anyone who comes to you claiming to be a “China expert” is either deluded (and thus to be pitied), lying (and thus suspect), or out to separate you from your money (and thus to be avoided.)

  4. You don’t have to believe me. Dr. Fan Gang, the head of China’s National Economic Research Institute and the Secretary-General of the China Reform Foundation (among many other titles), once said as much to a reporter when she asked Dr. Fan and I whether, “as China experts,” we saw China’s economy improving or in decline in coming years. He denied being a China expert, told the reporter that he knew I agreed, and questioned the very existence of anyone who could claim the title of a China experts.

  5. China is too large, too old, and too complex to be sufficiently understood by a single individual. At the very most, we can be “specialists.” We can never be “experts.”

When doing business in China, you thus cannot rely on the counsel of a single individual, regardless of how experienced, well-connected or erudite. Instead, seek and genuinely consider the advice of a range of people of different backgrounds, and in so doing form your own view based on a synthesis of their views.

China “experts” will only get you into trouble.

The Cost of a Revolving Door

In the Hutong
Watching Fall Arrive
1223 hrs.

Sitting in the lobby of my hotel in Beijing, I watched over an hour on a Saturday morning as several groups of tourists negotiated an automatic door. One group overfilled it, jamming the door and compelling doormen to come to the rescue.

Two other families (who came in separately) did not get the idea of an automatic revolving door, and pushed the glass partition as they believed that this was what was causing the door to turn. A third family let their kids play in the door, causing several jams and frustrating groups of other guests, one almost to distraction.

The hotel, as a result, posts a doorman nearby to help tourists negotiate issues with the door that was installed in order to eliminate the need for a doorman; and a cleaning lady was hired to clean the door that was installed to minimize the cleaning of the lobby.

All of this serves as another fun reminder that the most prosaic things can have unintended consequences and unexpected costs in a Chinese enterprise.

Sophisticated Chongqing

Hutong Forward
LAX bound for Bangkok and Shanghai
1215 hrs.

My first trip to Chongqing summarily destroyed all of my preconceptions of the central Chinese river terminus.

Instead of an immense but slightly provincial city, I came away after three days with the impression that Chongqing is about as provincial as Hong Kong, and is in many ways a lot more livable than its coastal cousin.

People were fashionable and stylish, at least as much as Beijing. The streets along the river were lined with remarkable restaurants and shopping districts that made Shanghai’s Xintiandi look both quiet and unsophisticated by comparison. The Pedestrian Street between Minzu Road and the Liberation Monument bisected the central business district with a sophistication that rivals Nanjing Road and Wangfujing. And the people have that warmth that seems to come so readily to the people of Sichuan.

I berate myself now for delaying my visit for so long. There really is more to Chongqing than a foggy, overgrown river port, and I suspect that I will be going back again soon.

We were never the “big shots”

Hutong West
Contemplating the mathematics of wavelets
1335 hrs.

The misleading promotional lead-in to an otherwise pretty good story on expats in This American Life reads:

It used to be that the American expats in China were the big shots. They had the money, the status, the know-how. But that’s changed.

That line is a big, smelly load of unadulterated bunkum. American expats in China were never the big-shots, and any who acted or thought they were soon found themselves either wrestling with terminal culture shock, alcoholic, on a plane back to the US or some combination of all three.

The reason was simple: any expat, American or otherwise, who believed himself or herself to be a big-shot was worse than useless to the organization for which they worked and would rapidly wear out their welcome and usefulness.

No doubt it must be comforting to a few people to think of the first and second generations of American expats as a privileged, arrogant, cloistered lot who behaved like a bunch of swaggering weasels. There were a few. But we didn’t all have money, we didn’t all have status, and many of us who had know-how found that China was often in no position to compensate us for it.

The True Measure of Urban China

On the Hutong Express
Somewhere in Central China
1123 hrs. 

As I hurtle through 2,800kms of Chinese countryside, a question occurs to me about China’s massive urbanization. The shift is unprecedented, and for that reason alone begs for close examination.

The truth is, we are not examining the scale of urbanization as closely as perhaps we should. Is China urbanizing as quickly as statistics suggest? Or are we – at least in part – witnessing some statistical sleight of hand?

The thought that provoked me on this trip was the villages. Admittedly, my survey was back-of-napkin and limited to those villages alongside the high speed rail lines, but there seemed to be more building, more development, and little blight. That made me wonder. Are people really leaving their villages and heading to the Big City, or are they staying put, and statisticians taking villages and towns previously designated as “rural” or other non-urban areas and predesignating them as “urban?”

There is more to this question than statistical nit-picking. If many people are urbanizing in place, this means that China faces a very different set of challenges in addressing urbanization, including rethinking the infrastructure that needs to be built and probing whether this means that more of the country’s shrinking stock of arable land is in jeopardy.

For marketers, it would mean that a growing percentage of potential customers are physically beyond the reach of their current advertising, retail promotion, and distribution infrastructure.

Either way, it is time we tarted probing China’s urbanization statistics rather than take them as gospel.

Quotable Friday: Sir Martin Sorrell

“I remain an unabashed bull on China,” said Sorrell. “There are worries about the slowing of growth but that was inevitable. It was natural it was going to slow. We are concerned about the stock market bubble and the fall in the stock markets has implications. Having said that, we still believe in the longer term in the economy. We think it is a short term phenomenon.”

Source: WPP’s Sir Martin Sorrell bullish about China prospects despite sales slowdown | Media | The Guardian


The Limits of Coercion

Persuasion trumps coercion. Even in China. The government has a monopoly on force, but it does not retain that monopoly by employing it without consideration of public opinion.

The days of high-handed government action are over, and this makes the government’s task more complex – and delicate – than ever. Power my grow from the barrel of a gun, but the nation’s leadership cannot ignore that it remains rooted in the people.

Concept of the Week: Urbanizing In Place

Urbanizing in placeconcept – the idea that China’s urbanization is not being driven entirely by migration from the countryside to the cities, but that large areas that Beijing’s statisticians might once have considered “rural” are now considered “urban.”

In-place urbanization could occur in one of three scenarios.

The physical area of a municipality has been expanded to include what was once surrounding countryside.

In the second scenario, a village that was once considered part of the countryside has now grown into a town that a demographer or statistician would now classify as urban.

In the third scenario, a group of villages in a given area are considered to be conglomerated as a single administrative entity and reclassified as a single town.

In these cases, China’s urbanization is taking place without migration, and presents a different set of policy, marketing, and personal challenges and opportunities than classical migration-based urbanization.

The Third Way on Xi

English: "Long live the great Communist P...

English: “Long live the great Communist Party of China” in Xinhuamen, Beijing ‪中文(简体)‬: 新华门左标语“伟大的中国共产党万岁” (Photo credit: Wikipedia)

“Is the Chinese dragon losing its puff?”
Peter Harcher
The Canberra Times
March 16, 2015

Professor David Shambaugh’s recent essay in the Wall Street Journal suggesting that China’s political system is about to hit some very rough times (“The Coming Chinese Crackup“) has provoked intense debate. Peter Harcher’s article written in response offers a neat summary of what makes Shamgaugh’s conclusions so debatable.

I nevertheless absolutely reject his conclusion which I find astonishingly ill-informed. The pervasive sense of dramatic change is, I have found, combined in almost all Chinese minds with satisfaction and confidence that the change is urgently needed–indeed long overdue—and in the right direction.

It also demonstrates that the American academy has powerful competition as a source of cogent analysis on Chinese politics.

Any serious discussion of China’s future must include non-Academics like economist Arthur Kroeber and Australians like Geremie Barmé of the Australian National University and David Kelly of China Policy in Beijing.

Barmé, for his part, writes off Shambaugh’s collapsism as the view of an American deeply anxious about America. Kroeber, an American himself, argues that the Party remains as strong and adaptable as it was in 2008, when Shambaugh wrote his excellent China’s Communist Party: Atrophy and Adaptation.

My problem with both sides is the determinism implicit in the arguments. The Party’s collapse might not be imminent, but neither is its adaptability without real limits, imposed upon it by important groups and individuals within its own ranks. I find it hard to believe that Barmé and Kroeber would argue that point.

We thus must agree that there may be circumstances under which the Party might prove insufficiently adaptable to avert an existential crisis. And before you protest, let us agree that there may be circumstances under which any polity, however strong and adaptable, might face the same limits. In that case, the answer is neither “the Party will collapse” nor “the Party is too adaptable to collapse.” It is, rather “under what circumstances would the Party face the danger of collapse?”

Like most of us, neither I nor my clients can afford to treat China like its future is a game of roulette: bet on Red, the Party stays in power. Bet on black, and it collapses. Creating strategy in business means contending with all possibilities, balancing them, and coming up with a pathway that appropriately addresses them.

We can be neither Cassandra nor Polyanna. We should not overestimate the considerable challenges Xi Jinping faces as he guides the nation through roiling and uncharted waters, but none of us can afford to underestimate them.

Concept of the Week: The China Entrepreneur Reality Distortion Field

China Entrepreneur Reality Distortion Fieldnoun – the special power granted to successful Chinese entrepreneurs that allows them to take advantage of selective disclosure, a lack of third-party oversight, a global fascination with the rise of China, and a modest cult of personality to establish an exaggerated perception of their company’s value. See LeTV, Xiaomi, etc.

China Marketing: Silos and Timid Marketers

For a variety of reasons, cross-platform alignment occurs too infrequently. First, marketers have become disorientated, even intimated, by the emergence of quantitative technologies that promise algorithmic salvation. Second, advertising agencies have yet to identify models of collaboration that pair conceptual distillers – that is, “storytellers” — with systemic thinkers, the latter capable of devising innovative transactions. Finally, many organizations have siloed operational structures. This is particularly true in China where sales departments wield control over marketing. To boot, online and offline units function independently.

via Digital Commerce in China: Cheap Tricks or Deep Love? | Tom Doctoroff | LinkedIn.

Concept of the Week: WaterTech

WaterTechnoun – the discipline combining elements of of biology, agronomy, engineering, environmental science, and electronics to find ways to make more efficient and effective use of limited water resources.

In an upcoming post in The Golden West Review, I suggest that the California drought is really a great big hint from the universe at one of the greatest business opportunities facing both China and the United States. The companies and countries that are able to develop the products, technologies, skills, techniques and services that significantly reduce per-capita water usage will be the winners in the 21st century.

As the steam slowly leaks from the microelectronics and telecommunications revolutions that created Silicon Valley, we need to start looking for the next revolution. WaterTech will no doubt be a major part of that, and Sand Hill Road would be stupid to leave the opportunities to foundations and foreign firms.

Friday Irrevrence: Labels are Important


My wife’s aunt brought this bottle of wine to a recent family dinner at the Liu Family Restaurant next to the National Art Museum of China (Meishuguan) in Beijing.

Nobody is happier than I to see Chinese vineyards jumping into the wine business. But someone should alert this particular winery that selling a wine without a year on the bottle makes it very hard for all but the utter tyro to trust what is in the bottle.

Shameless Plug Dept.: New Fast-Food Paper

Hutong West
Contemplating lunch
1253 hrs.

My most recent paper, this one on addressing the challenges facing fast food franchisors in China, “Jumping China’s Great Food Wall (pdf),” is now up on the Allison+Partners website.

Failing that, you can find the paper on here.

This is more of a practical paper than my last one, giving a quick overview of the uneven success enjoyed by fast food companies in China, and offering a series of prescriptions designed to avoid some of the more serious rocks and shoals, and mitigate the effects of many others.

Nokia Problem #342: We Ignored Journalists

In the Hutong
Watching the tourists shuffle through the Forbidden City
1055 hrs. 

Working on a long paper about China and the demise of Nokia, I came across this interesting little anecdote from a journalist friend from 2011.

“So if you want to leak something, especially since you’re such a big fan of NOK, you can let the world know that a certain journalist found out today that despite having submitted questions for an interview in late July, was informed today, 17 days after the initial deadline, and 10 days after an extended deadline, that the interview would not be available.”

Nokia did not melt down because of the way it handled its media relations. Nonetheless, I contend that the problems that led to the end of Nokia were visible in a hundred facets of the organization long before the high flying handset maker found itself a rump division of a rudderless software company.