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

If you’re in or near Shanghai and interested at all in the issues raised in my post on China’s evolving approach to Internet governance, you definitely want to catch “Who Controls China’s Internet,” a talk being given by Professor Mark Grabowski of New York’s Adelphi University on Monday, August 11 at 7pm at C3 Cafe. Grabowski, who has focused on the Internet and media, is working to help frame a viable scheme of Internet governance that would head off the possibility of fragmentation – a path towards which China’s policymakers appear to be treading. Go if you can. huang pi south road 700, building A, room 105 上海黄浦区黄陂南路700号A105(过 合肥路)
Shanghai (map)

Fredrik Öqvist does some interesting reading of the VIE tea-leaves. The Ministry of Commerce, he suggests, doesn’t like VIEs very much, but they are less likely to outlaw them outright than slowly squeeze them so the structure becomes more headache than benefit.

Further Reading:

VIEs: The Long Resolution (

Asia and the Need to Re-engineer Research

Hutong West
1200 hrs. local

Fair warning: I’m about to get a little wonkish, so if you don’t care about market or academic research, skip on down to my last post.

In an otherwise superb review of Doh Chull Shin’s Confucianism and Democratization in East Asia, in Foreign Affairs, (“Confucius and the Ballot Box“, July/August 2012) Andrew Nathan digresses from his eloquent explanation of why “Asian Values” and democracy are not incompatible to defend Shin’s methodology.

Critics view the survey-based study of culture as flawed in three ways. First, if culture is something shared by all members of a society, treating it as a distribution of values and attitudes among individuals ignores the way it works as a shared experience. Second, by reducing culture to a series of questionnaire items, the survey method oversimplifies complex, multilayered attitudes. Third, the questionnaire format forces respondents to choose among rigid response categories that cannot adequately reflect their beliefs.

For all that, the survey method remains indispensable. No other approach does as good a job of finding out what large numbers of people actually believe. And it is less reductive than the older method of gesturing in the direction of an entire nation and claiming that all its members share some vaguely defined set of norms.

This all may seem like a shot in an esoteric battle of academic nit-picking, but it is telling that Nathan feels compelled to conduct this preemptive defense in a review written for a mainstream (rather than purely academic) journal. Dr. Nathan protests overmuch, and in so doing gives us a view to his fear that while they may be one of the few methods available to make the social sciences as scientific as possible, surveys have some innate flaws that call for some extra scrutiny on Shin’s thesis specifically, and the conduct of research in Asia in general.

My first concern is general: does the survey method travel well? The survey method was developed in the West by sociologists who were operating in a specific culture and political environment, one in which people feel relatively comfortable about voicing their honest opinions without worrying about political reprisals or pleasing the person doing the survey. This is important because if you stop to think about it, the value of any answer to a survey absolutely depends on those two conditions.

Yet common sense and a passing knowledge of Asian cultures call into question whether these conditions exist to the same degree in Asia as the West, and, equally important, whether they exist to the same degree among Asian cultures. Indians, for example, might be very ready to answer frankly and at length. Would Koreans be as willing? Would Singaporeans? Would Japanese? Would there not be differences between how Americans would answer and how any Asians would answer?

I would be less concerned if Shin had conducted his survey in the context of a single culture, because he could have designed an survey and delivery method that compensate for the variances between that country’s culture and the outspoken West. One firm I know in China, for example, has learned how to compensate for cultural factors by making the interviewer someone who is known and trusted by the interviewee, and focuses on interviewer training to work the variances out of the responses.

But Shin’s survey cuts across sixteen different cultures and nationalities, and this brings me to my second concern. By using the survey method across a range of cultures and polities where there are likely to be huge variances in the willingness to speak out and the cultural desire to please, is it even possible to wind up with comparable results?

I have no answers that I can prove scientifically, but the questions need to be addressed before we accept Shin’s findings or those of any survey in Asia – whether academic of for business research. If we are genuinely interested in defensible research, we need to question our implicit assumption that the tools created in one culture work just as well in any other, and then test our answers.

I would feel a lot better about Dr. Shin’s book if either Shin – or Dr. Nathan, whom I admire greatly – had hinted that they had even considered whether the survey method is culturally appropriate outside of America at all, and whether and how it can be meaningfully administered across cultures.

They did not, and I believe that they did not because they cannot. The minute they start questioning the precious few tools on which their peer-reviewed research rests, they lose the ability to conduct the kind of research their professions and employers expect them to conduct. When our best scholars are shackled to weak tools, what can we expect but debatable outcomes?

Without more substantive answers, I’m led to the conclusion that for the sake of marketers, academics, and policymakers, we need to re-engineer research. The realities of globalization demand new tools. It is time to create them.


There are a lot of things that can push living in China to the edge of bearability, but in-your-face nationalism and xenophobia is not one of them. If there is one thing that has made living in China these past 17 years so wonderful, it has been the people I meet.
It never seems to get lost in a conversation that there is a difference between an individual and a government. Even at the height of anger over the Belgrade Embassy bombing, the vitriol was never personal: it was about a government’s mistake, not the mistake of a nation.
At the same time, it’s incumbent on every one of us living as a guest on this soil to behave as a guest should, and not as an entitled drunken teenager on Grad Night at Disneyland.
By the way, if you don’t read Sinostand regularly, you should. Great stuff.


Pictures like this make clear that China is the country most threatened by North Korean missiles, and thus have the most to lose if North Korea goes rogue. China is undoubtedly doing something to keep this from happening, but what?

Event: The Massification of Chinese Education

In the Hutong
Shrinking the Elephant Arm
1341 hrs

If you are in the Midwest this week and have an interest in China’s education system, you may want to stop by the Kelley School of Business at Indiana University – Bloomington. The Research Center for Chinese Politics and Business is continuing their colloquium series with a talk by Dr. Susan Blum on the Massification of China’s Higher Education System: The Consequences for China’s Youth. Dr. Blum, who serves as Chair of the Department of Anthropology at the University of Notre Dame, has spent some time over here and has put together a talk that will inform the debates around “Tiger Moms” and over the future of higher education in both China and the U.S.

From the event’s flyer:

From a low of approximately 3% just two decades ago to almost 25% in 2006, higher education is no longer an elite and rare good, but is increasingly “massified.” Such independent pursuit of limited opportunities has consequences for the nature of youth and the very meaning of childhood. Though the number of youth has been stabilizing because of China’s birth policies, the competition for entry into the expanding programs of higher education remains fierce. Debates about education often reveal debates about human and social ideals. As Mao and others showed, the very nature of education has the effect of changing society. Chinese intellectuals knew this a century ago, as New Youth drove reform; the current situation is both similar and different in instructive ways. We find enduring centralization and increasing privatization; social and individual goals; and focus on international competition.

The event is free and open to the public, so if you are up that way, please stop by. I’m hoping she comes out to Beijing to give her talk.

(Full disclosure – I’m on the advisory board of the RCCPB.)

Deconstructing China’s Nationalists

To Screw Foreigners by Geremie R. Barmé

In an essay from 15 years ago that remains one of the best background pieces on Chinese nationalism that I have ever read, professor Jeremy Barmé of the Australian National University delves into the historical and philosophical underpinnings of this rising ethos.

There is a growing consensus among Beijing-watchers that nationalism has replaced economic development as the primary driver of domestic Chinese politics on the eve of a generational leadership transition. For that reason, there is no better time than now to dive beneath the surface of this phenomenon and understand it from the roots.

I read Barme’s piece with great interest. While I didn’t come away with any profound conclusions, I see what is happening today with somewhat greater clarity. It also helps peer behind the Red Rhetoric of Bo Xilai’s campaigns to see something older and more elemental at work.

Not a short read, but a great one.

Favorite Hutong Reads from Last Week

Spending the week catching up on work and writing and preparing a graduation ceremony for 88 Cub Scouts, so writing was a little sparse. I managed to get a little reading done around the edges, and this was a particularly good week, so I thought I’d share. Enjoy.

Posted from Diigo. The rest of my favorite links are here.

Hutong Reads 03/22/2011

  • Russell Leigh Moses has the money quote: “The hard-liners have won the field, and now we are seeing exactly how they want to run the place,” said Russell Leigh Moses, a Beijing analyst of China’s leadership. “I think the gloves are coming off.”

    tags: china online regulation

  • Interesting report provided the viewpoint you want is that of Fortune 500 companies doing business in China. Most of my clients are in that category, but I’ve also discovered that viewing the China operating environment through that filter does not offer many forward-looking insights.

    By contrast, the challenges that face SMBs and foreign entrepreneurs in China are massive, arguably more indicative of the regulatory climate as a whole, and are largely ignored by groups like AmCham and the U.S. China Business Council. The next time somebody wants to do some research on business attitudes in China, ask the little guys. You would be amazed how different the picture is.

    tags: china regulation foreign business fdi

  • Provoking article, and I have a soft spot for R3, but I’m not sure what it all means. In the end, what is engagement worth, and does the survey really work in the Chinese cultural context?

    tags: china brands research

  • Worthy take on the new five year plan. Why do I think Accenture is moving into the corporate communications business? Read the last section.

    tags: china plan economy communications

Posted from Diigo. The rest of my favorite links are here.

Hutong Reads 03/21/2011

Posted from Diigo. The rest of my favorite links are here.

The Best Story Wins

A thought provoker from Joseph Nye’s December article in Foreign Affairs:

Conventional wisdom holds that the state with the largest army prevails, but in the information age, the state (or the nonstate actor) with the best story may sometimes win.

Allow me to revise that for business:

Conventional wisdom holds that the competitor with the best products prevails, but in the information age, the competitor with the best story may sometimes win.

Just as strategic communications is increasingly important as a means of national power, corporate strategic communications should be a competitive weapon, a game-changer, not just news releases, press conferences, and spin.

Blessed few western companies understand that, and I’ve yet to find a Chinese company that does.


Consumer Price Spot Check

So the Hutong Secretary went to Jingkelong in Tianzhu to buy some eggs this morning. A five-dozen egg bulk pack set us back RMB 66, or around $10.02. The same eggs, USDA inspected, would have cost us RMB 65 at Vons in California, delivered to our home.

Not a big deal, but an interesting anecdotal indicator.

Not All Chinese Real Estate is Equal

In the Hutong
Waiting for guests
1203 hrs.

The question of whether China’s real estate market is overvalued or not is a recurring theme in the regions business media. The most recent example is an article in MarketWatch by Chris Oliver, which quotes Forensic Asia managing director Gillem Tulloch as saying “the bubble will likely burst sometime in the next year.”

You can debate Mr. Tulloch’s prognostications, as well as of his wisdom in using dark windows and Google Earth as evidentiary sources to support his thesis. My problem with the entire debate is that most analysts, foreigners in particular, lump all Chinese property into a single amorphous mass when analyzing value.

This is not a mistake an analyst would make in other real estate markets of the size, and for good reason. When not accompanied by major economic crises, real estate markets are naturally cyclical. In each of these cycles, some properties, by dint of either size, price, or location, tend to fall faster when drops occur, and rise more slowly when recoveries begin. Prices of condominiums and homes in less desirable neighborhoods, for example, fall faster and further – and recover more slowly – than single-family homes in more exclusive locations.

While 15 years ago the case could be made but there was not much differentiation among Chinese properties, that is no longer the case. Even a casual jaunt though China’s largest cities reveals vast differences among both residential and commercial properties. The variances of design, construction quality, and management among new apartment developments in Beijing or Shanghai that would surpass even the gap between a Harlem walk-up and a Park Avenue penthouse.

In addition, a clear dividing line must be drawn between commercial and residential real estate. Even in China, these markets move to different rhythms, often to the frustration of developers and managers of large, multiuse properties. And, as my friend Bill Bishop would happily point out, to compare the dynamics of the real estate markets in Beijing and a third-tier city in Gansu is a specious exercise: by definition properties in those cities appeal to buyers in vastly different circumstances.

It would be useful, as the debate around when and how far Chinese real estate prices will fall proceeds, for all of us to begin to divide Chinese real estate into types and classes better suited for analysis. While this may still not adequately explain the disconnect between rental rates and property prices, it will take us a long step closer to understanding how and why this market behaves as it does.

Update: A superb entry by Ranjit Lall in the FT’s “beyond brics” blog explains why the Chinese Property Bubble meme may well be a myth.