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

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.

Get off the plane

English: Business class at grand opening of Be...

English: Business class at grand opening of Beijing–Shanghai (Jinghu) High-Speed Railway. (Photo credit: Wikipedia)

In the Hutong
Watching the pigeon hutches
1011 hrs.

Speaking to a group of students touring China from the UK, I asked how they traveled from Shanghai to Beijing. Their response, of course, was that they flew.

I understand the rationale for flying inside of China. Under the best circumstances it is fast, and other forms of travel are harder to arrange from overseas.

That said, my recommendation to anyone organizing a trip to China for a group of executives, students, or scholars is to do yourself and them a favor: on the leg between Shanghai and Beijing, put them on a high-speed train, in either First or Business Class.

(Be aware that for reasons that escape everyone but the Ministry of Railways, Business Class is the better, more comfortable, and more expensive of the two.)

Even if flights are on time, the elapsed time from downtown Shanghai to Downtown Beijing (or the reverse) is not that much greater, especially if you purchase your train tickets in advance. And if there are flight delays (and there are frequent delays, because of weather, VIP flights, or because the Air Force feels like it), the trip can actually be faster. But that’s not the best reason to take the train.

The best reason to take the train is that the people you are squiring across China will actually get to see out their windows something more than modern cities and clouds. They will see farms, villages, half-completed roads, factories, and the insides of a half-dozen cities of a million souls or more that they had never heard of.

Send them home with visions of modern cities in their heads, and they will get the wrong idea about China, making the same mistake made by instant China experts like Thomas Friedman and Niall Ferguson. Expose them to a bigger slice of China, and they will understand that a large part of the nation is still 40, 70, of 100 years behind Shanghai. Then they will start to understand the forces that drive this Asian Leviathan. And is that not the point of bringing a group to China in the first place?

Case Study: Why You Should Seek Multiple Opinions on China

“Three Things TLD Registries Must Know About China’s Domain Name Regulation”
Chang Jian-Chuan
June 18, 2015

I get to talk to groups of businesspeople and business students on a regular basis, and one of the maxims I include in just about every speech or presentation is this:

Don’t get your China advice, whether generally or on a specific issue, from any single individual. China is too large and complex for you to trust the future of your enterprise in this market to the viewpoint of one source, however knowledgeable he/she/they may seem.

The news this week offers a superb example of why this is the case. The Ministry of Industry and Information Technology (MIIT) has had one if its periodic regulatory spasms regarding the Internet. One of the specific areas covered by the current policy outburst is the arcane but important area of top-level domains (TLDs).

The Internet Corporation for Assigned Names and Numbers (ICANN, the international body that, among other things, operates the system that makes it possible for you to type “” into your browser and get to a bookstore instead of an error page) has recently presided over an explosion of top-level domains (TLDs), those bits of an site name to the right of the dot, like “.com,” “.net,” and “.org.” Where there was once only a handful (in addition to nation-specific top-level domains,) there are now literally hundreds, if not thousands of these, and we’re all having to adjust to a world that includes “.law,” “.ninja,” “.guru,” and “.me,” and .”porn,” among hundreds of others.

China’s adjustment is coming in the form of a new regulation (“Interpretation (Reading) on Carrying Out the Domain Name Registration Services Market Special Action Policy”, promulgated by the MIIT on May 12) restricting how registries (the companies that own the top level domains and collect fees for domain names that use them) can sell domains to customers in China. This is causing a bit of a panic.

Chang Jian-Chuan, a Ph.D. and a research fellow who covers the field for a local registry, offers this piece in a leading industry publication as something of a palliative, and I agree that panic is unhelpful, but he loses me when he writes:

Nowadays a revision of the regulation is under way to reflect the latest expansion of registry operators. However, except for the new requirement that any foreign registry has to establish a legal entity in China, all the other requirements for the license have maintained unchanged. Therefore, it is fairly safe to conclude that there is no “tightened control” or “new move” against New gTLD registries and registrars.

What we have here is a disagreement (to put it mildly) over terms. While a superficial reading of the regulations may suggest no significant change, if you understand both the challenges faced by the companies affected and the knock-on effects of the law, it is clear that the change doe represent a new move that tightens control of the industry and endangers the business of many foreign registries currently selling into China.

From a business standpoint, the regulations throw the business of many registrars into a spin, if for no other reason than they are required to set up and register a local operation in China with $170,000 in registered capital, with local technicians and customer service personnel. Someone familiar with the global registry sector would know that most registries, including some of the larger ones, are not yet operating in China, and for all of those this represents a costly process and significant ongoing expense. For the vast majority of non-Chinese registries the cost will be prohibitive, in effect shutting them out of China.

From a legal standpoint, attorney Allan Marson at noted in November:

When MIIT promulgates these revisions (and barring any last-minute amendments), they will substantially change the status quo for non-Chinese registries in China. While users in China will continue to be able to access websites outside China (subject to passing through the “Great Fire Wall“), in order to promote and serve Chinese customers, a non-Chinese registry will be required to set up a subsidiary registry or entrust a China-based registry to operate its TLDs in China. Failure to do so will likely result in Chinese registrars refusing to sell domain names under the non-Chinese registries TLDs and preventing resolution of any websites that are already registered under those TLDs.

Contrary to Dr. Chang’s fairly offhanded dismissal, a common sense reading of the regulations from the viewpoint of a foreign registry and from an attorney is that this regulation and its knock-on effects represent a new move and tightened control over the field, one that significantly changes the way most companies in an entire industry must operate in China.

While most of us shy from anything that may seem ad hominem, when seeking advice in China you must consider the provenance and possible motives of any advisor. For example, Dr. Chang is a former official with CNNIC working for a local Chinese registry. This would suggest that, far from being a dispassionate observer, Dr. Chang has some skin in the game. It is worth noting that his company, KNET, stands to gain if the new regulations are enforced to the greatest extent possible. It is also worth noting that his publishing an article in an international industry publication praising an MIIT regulation will not hurt his company’s regulations with its regulatory overlords at MIIT, and that it would have been impolitic – if not commercially suicidal – for Dr. Chang to have written a different opinion.

Let me be clear: the goal of this article is neither to impugn Dr. Chang nor his employer. I am sure Dr. Chang is a wonderful person and an academic of great integrity, and that his company is a fine organization operating in a highly competitive and heavily regulated industry.

The point, rather, is that the advice you receive from anyone about China is often influenced on where the individual comes from, where he or she sits, and the pressures under which he or she operates. The only way to get a true picture of the challenges and opportunities your company faces in China is to reach out to a range of advisors, tapping each for their thoughts, questioning each, and forming a picture based on all of the above.

Brands in China: Cheap or Premium (and Aught Twixt ‘Em)

China’s brandscape is bimodal, polarized between omnipresent discounting versus high prices born of aspiration.  Cheap Xiaomi mobile phones, Yili ice cream and Nestle “three-in-one” instant coffee exist in the same universe as premium Apple, Haagen Dazs and Starbucks.

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

Once again, the brilliant Tom Doctoroff nails it.

China: State Multinational or Global Superpower?

America fights, in other words, while China does business, and not only in Afghanistan. In Iraq, where U.S. troops brought down a dictator and are still fighting an insurgency, Chinese oil companies have acquired bigger stakes in the oil business than their American counterparts. In Pakistan, where billions in U.S. military aid helps the government keep the Taliban at bay, China has set up a free-trade area and is investing heavily in energy and ports.

via China succeeds by behaving more like a multinational company than a global superpower.
nne Applebaum
September 27, 2010

This was a clever observation when Anne Applebaum first made it five years ago, and there is still some validity to it. Nonetheless, one cannot help but wonder if things will stay this way much longer. China’s military posture overseas continues to rise, and its companies are beginning to discover that the easy fruit has fallen. We may well have witnessed either the high point of China’s overseas expansion, or, more likely, the end of China’s purely commercial overseas expansion strategy.


Making Crepes is Not Cultural Theft

US Jianbing Maker Accused of “Stealing Chinese Culture” | The Nanfang.

A young American goes to China. She finds out how to make jianbing, a popular local street food. She goes home to Portland, and she opens up a shop to make it.

And is promptly excoriated by Chinese netizens for “stealing Chinese culture.”

Leave aside unfathomable presumption (or cultural chauvinism) that would prompt someone to suggest that only Chinese should be allowed to make Chinese food (or that only French should make French food, or that only Italians should make Italian food.)  Those who have issues with Alisa Grandy making her living on making Chinese crepes miss the bigger point:

This is exactly the kind of cultural diffusion that the Chinese should be applauding as a natural result of China’s rise. The world is discovering Chinese culture, and in the process more and more aspects of China will wind up woven into the world’s cultural fabric.

If Chinese chefs can make hamburgers, pizzas, and fajitas (and I know more than a few who do, and some very well), American chefs should be allowed to adopt – and extend – Chinese cuisine.

Stadiums, Sports, and the Imagination Gap (Updated)

Hutong West
Beijing on Sunday
0800 hrs.

Visiting Winnipeg on business in April, I was treated to a personal, behind-the-scenes, roof-to-foundations tour of Investors Group Field, the gleaming, high-tech new sports venue that will host eight matches of the upcoming FIFA Women’s World Cup, including the sold-out pre-cup friendly match between China and the USA.

You would not necessarily associate Winnipeg with great sports business (beyond, say, sales of donuts at a hockey rink,) but what I found even more impressive than the physical plant of the 33,000-seat stadium was the care and thinking that went into creating a venue designed around a great experience for both spectators and athletes. Everything about the stadium, from concessions to security to the locker rooms, was designed and built to do one or more of the following:

1. Create the best possible experience for fans from the minute they leave home to the minute they get home: parking is ample, buses to and from the venue serve neighborhoods throughout the city; there is a huge grassy area just for toddlers where parents can still follow the game on screens: there are areas designated for people who want to watch the game in a bar or club-like environment; and seats and bathrooms are spotless;

2. Maximize revenue opportunities at every event, but do so without making people feel like their being gouged or nickel-and-dimed: concession selections were eclectic and reasonably priced, and there were numerous ways to “upgrade’ your experience;

3. Simplify the jobs of the people who have to bring the talent to and from the stadium, whether the managers of the home or visiting team, or Taylor Swift coming to do a concert: the venue was set up so that fans could see the stars pulling into the stadium and their specially-designed dressing rooms, but not obstruct or endanger them in any way;

4. Maximize revenue from the venue even when there are no events scheduled but in ways to make the events themselves more exciting: the venue had a series of boxes that are rented for parties (both for kids and adults) focused on the sports events; there was a huge fan store open year-round on the main level; plans are now afoot to commercialize the tour that I was given;

5. Make the venue as practical and simple to maintain as possible: there were numerous places where the designers could have added some flair and touches that would have made the venue more visually stunning or that would have been very “cool,” but they wisely chose to make the venue beautiful, comfortable, and hardy.

As I rode to dinner after the two-hour walk, I could not help but compare Investor’s Group Field with so many of the beautiful stadia in China. The nation has built temples to sport that are uplifting in their architecture and stunning in their scale. And yet few, if any, are delivering lasting value to their owners, to their neighbors, or to sport.

Beijing’s most iconic sporting grounds have become silent, aging white elephants. Yet Winnipeg, a city of around 700,000 that is so cold for five months of the year that locals dub it “Winterpeg,” can boast two new, prospering sports venues with two league-leading sports teams and dozens of events and commercial activities to support them.

I recognize that prosperous sports leagues and venues are, for a “developing” nation, nowhere near as high on a list of priorities as, say, putting a man on the Moon. But the constellation of decaying stadia that dot China’s cityscapes stand in mute testament to a national failure, not in finance or audience, but above all in imagination.

China’s leaders have focused on technological innovation as the nation’s pathway out of the middle-income trap. The focus is valid, but myopic. The silence of the Bird’s Nest is a hint that something else is lacking. In its quest to lead the world economically, culturally, and politically, Beijing must dare to stoke the imaginations of its people, its merchants, its scientists, and its athletes.

New York’s Transparent Buildings

Full Bank Accounts, Empty Storefronts: The Economics Of High-Rent Blight.

Fascinating little story that somehow brings to mind places like Kings Garden Villa in Beijing, and much of the city of Ordos.

I would wager that at least some of the money that has found its way to Manhattan is coming from Chinese investors who would rather wait for tenants who can afford their desired rents than rent out at less and undermine the likely ridiculous sums they paid for the properties.

This is not a uniquely Chinese behavior, but it is a practice that is notably common among property owners in China. What is more, the sources of cash flowing out of China and into North American investment properties are certainly not limited to giant, high-profile developers like Wanda. So while it would assume far too much that Chinese money is the cause of High Rent Blight in New York, it is likely a contributing factor.


Shameless Plug Dept: New Paper on Strategic PR in China


Hutong West
The cool before the heat
1855 hrs.


Public relations people have a word fetish. We invest the aphorism “words have meaning” with an almost scriptural infallibility. Yet when it comes to terms we use to describe our own capabilities, we become maddeningly imprecise, if not deceptively hyperbolic. The best (or perhaps worst) example of that is the word “strategic,” as in “strategic public relations.” In fact, we use it so much when referring to so many different things that the phrase has almost lost its meaning.


In a new paper published last month by Allison+Partners (“Strategic Public Relations in China: Actions, Behavior and Communications”,) I ask the PR industry generally and in China specifically to take a step back. I argue for a definition of strategic public relations that steps completely outside of the communications function: as it was originally intended by the founders of the public relations craft, PR begins with the actions and behaviors of a company, and the obligation of PR counsel to guide them. My point: it is time for all of us to become more strategic, and in no place more so than in China, where so many brands consistently fail to understand, much less live up to, the expectations of their publics.


For my fellow PR practitioners and anyone else who oversees a PR function, the paper is available for free download and review on It’s a fairly quick read.




So You Think Apple Should Buy Tesla?

English: Tesla Motors opened its showroom in M...

English: Tesla Motors opened its showroom in Munich in September 2009. (Photo credit: Wikipedia)

Hutong West
Finishing the Table of Contents
1200 hrs., 11 March 2015

So do you think Apple should take some of that massive cash pile and spend it on Tesla? Some shareholders apparently do. And if you did, you might have a point. Who better to finance the disruption of the automobile industry than the largest, most profitable company on the planet?

But for the rest of us, consider this sequence of events that I am betting would take place within 18 months of Apple closing the deal.

Day 1 – Apple buys Tesla

Day 30 – Elon Musk quits, citing creative differences, but attests to his continued faith in Tim Cook and Tesla’s future with Apple. Musk takes his cash hoard and shifts his attention to SpaceX.

Day 60 – Apple hints at major redesign of the sedan by Jony Ive. Tech and automotive media go into spasms of speculation.

Day 120 – Tim Cook takes the stage at the Detroit Auto Show to announce that Apple is dropping the Tesla name. From now on the marque will simply be “Apple.” He then unveils the redesigned sedan, which bears a striking resemblance to the Audi coupe in Will Smith’s “I, Robot.” Except, you know, it’s glossy white. The car will be called the Apple Phaeton, and it will be followed by the Apple Barchetta coupe, and the the Apple Combo crossover SUV.

Day 180 – Apple announces that due to unspecified issues in Fremont, after the first year they will be outsourcing all production to China.

Day 210 – At the Los Angeles Auto Show, Apple announces pricing for the Phaeton and Barchetta, 25% higher than the previous models. They also announce that they are shifting to a proprietary fast-charging system called ePlug. And with the presidents of Exxon-Mobil, Chevron-Texaco, BP, and Valero onstage, announces that all of these chains would begin installing ePlug fast charging systems across their North American units starting that day. Each company agreed to a seven year exclusive with ePlug.

Day 212 – In a class action suit, GM, Ford, and Toyota all sue Apple for violating Sherman Anti-Trust act in gaining a monopoly on electric charging at fueling stations.

Day 300 – The Big Three automakers lose their suits.

Day 350 – Google agrees to buy Ford in an all-cash deal. GM announces that it is being bought by its Chinese partner, Shanghai Automotive.

Day 370 – The Apple Phaeton launches, selling 10,000 cars in its first month.

Seem far-fetched?

Trust me. Remember. I’m the guy who predicted the iPad.

Happy motoring.










The Confucius Institute Question

To: Dr. Gene Block, Chancellor, University of California, Los Angeles
From: David Wolf, California taxpayer, UCSD alumnus, UC Davis alumnus UCLA extension alumnus, and son of a UCLA alumnus

Dear Dr. Block:

I know that you are busy, so please pardon my intrusion into your holiday week. I have a concern I need to raise with you.

You have enough money in the campus budget to teach Afrikaans, Ancient Near-Eastern Languages, Arabic, Armenian, Czech, Dutch, French, German, Greek (Ancient and Modern), Hausa, Hebrew, Hungarian, Quechua, Iranian, Italian, Japanese, Korean, Latin, Polish, Portuguese, Romanian, Russian, Swedish, Norwegian, Danish, Serbian/Croatian/Bosnian, Hindi, Vietnamese, Thai, Tagalog, Indonesian, Spanish, Portuguese, Swahili, Turkish, Uzbek, Azeri, Ukrainian, Yiddish, Yoruba, and Zulu.

But when it comes to teaching Chinese, the language spoken by more people on the planet earth with the exception of English, you find it necessary to go begging to the Chinese Communist Party – via the Confucius Institutes – to adequately fund and staff instruction in that language.

This is, at best, a misallocation of priorities. If there are three languages that should be taught at your institution, they are English, Spanish and Mandarin Chinese. All of those should be funded as a matter of necessity. Choosing to fund staff in French, German, and Norwegian over Chinese suggests that the university might be losing touch with its core mission.

At worst, this compromises the independence of a public institution of higher learning. The Chinese government official charged with the oversight of the Confucius Institutes is not shy about her goals.

May I respectfully suggest that the university seek a way to fund instruction in the Chinese language and literature that does not entail a dependence on the funding of a foreign government with complex motives? And may I further suggest that such alternate funding not come paired with implicit leverage that might be used to undermine the political, philosophical, and behavioral freedom of the UCLA community?

Many thanks,

David Wolf

Lu Wei’s Facebook Gambit

Hutong West
Writing the Book
0935 hrs.

In all of the brouhaha around Facebook founder Mark Zuckerberg’s pandering comments to Chinese Internet czar Lu Wei recently, the China commentariat are lining themselves up on both sides. One side is morally outraged at what Jimmy Sonni at the Washington Examiner called “Zuckerberg’s efforts to ingratiate himself with an authoritarian regime – a regime that Facebook has an enormous incentive to placate…” The other side rejects the moral outrage. They believe that Zuckerberg should be applauded for attempting to position Facebook as a means to give Chinese more access to the global Internet.

Both sides (ostensibly) share a disgust with the regime in Beijing. One seeks to undermine it via isolation, another by assimilation. Yet both are naive; isolating China’s internet, thus compelling China to develop its own social media will no more back China into a corner than did compelling it to develop its own newspapers and television networks; similarly, the belief that the Party will sit back and allow foreign social media to undermine its position belies history and underestimates the efficacy of the Party’s methods.

If Mark Zuckerberg wants to help Facebook make a fortune in China, all while serving the interests of the Chinese people over those of the Party, he start by asking himself a hard question. Why did Lu Wei really come visit Facebook?

Because it is entirely possible that Beijing needs Facebook almost as badly as Facebook needs China. Lu Wei is a good poker player, and he is surely not showing any of his cards, but it may be that in order to accomplish the Party’s goals, it needs Facebook’s cooperation and assistance, willing, witting or otherwise.

Zuck needs to pull his best, smartest people together and think this through. Because if they figure it out, they may not have to behave like lickspittles, handing over the keys to the empire in return for a handful of vague promises. Instead, they can improve their negotiating position and either stroll into China with heads high, or walk away knowing that it was the best alternative to doing so.

There is much more too all of this than meets the eye. Facebook’s fonder has the wherewithal to suss this out. He should do so, and soon, before the company finds itself a pawn in somebody else’s game.


The Apple Pay Early Adopter Problem

In the Hutong
Fighting Sleep
24 October 2014

English: People pay tribute outside the Toront...

English: People pay tribute outside the Toronto Apple Store. (Photo credit: Wikipedia)

I am caught in the heart of a swirling vortex of work at the moment and getting ready to fly this weekend, which explains my slow posting of late. More announcements on that soon. In the meantime, I’m going to be firing off a series of short posts on things that I have been itching to share.

Let’s start with Apple Pay.

Arguably the most interesting and revolutionary announcement tha Apple made at its product launch gala this week, Apple Pay promises to finally put the US on the long pathway to doing away with fat wallets, something that has been happening in Hong Kong for nearly two decades and in Australia for almost as long. It is also being touted as the big differentiator for the Apple Watch, and an important one for the iPhone 6.

I have two reservations.

First, I think we all need to take a deep breath and think carefully before entrusting our financial information to any large company. That’s not luddism, that’s wisdom. The recent series of security breaches at major retailers alone should give us pause, and Apple is no exception: a company that has shown itself incapable of protecting Jennifer Lawrence’s photo album has to prove to us that it can be trusted with our wallets.

Second, the high profile of this announcement will surely pique the interest of just about every hacker on the planet, from the kid down my block to certain military units operating from Shanghai suburbs. Even the best systems tend to have hidden vulnerabilities, and those of us who can wait for Apple Pay should do so if only to allow the engineers to discover and addres its most blatant vulnerabilities.

These aren’t deal killers for Apple Pay, but they do suggest that most of us should venture carefully into this new system.


Wanda Arrives Arrives in Beverly Hills

“China Developer Buys Robinsons-May Site in Beverly Hills”
Julie Makinen
Los Angeles Times
August 8, 2014

The Times scored a win in picking up this story about how Chinese development giant Wanda is raising its bets on US real estate. Based in Beijing, Makinen can be forgiven, though, for not addressing what the real story is likely to be: the challenges the company is likely to face in gaining approval for its project.

Wanda has yet to reveal plans for the site, but the location has some particular challenges familiar to locals. Traffic is already very heavy going into the area on both Wilshire Boulevard and on Santa Monica Boulevard, which border the site, and during large parts of the day the proximity of Century City makes Santa Monica Boulevard a parking lot for several miles of its length. The development of a high-density complex on the eight-acre site would only exacerbate the problem.

That issue alone is likely to provoke public opposition to a sizable development. The NIMBY factor in the area is high. I know: I grew up three blocks away, and worked at the recently-demolished department store between college and grad school.

If Wanda is wise, it will embark on a campaign to woo local residents, most of whom live in homes with values far in excess of $3 million (and who are accustomed to wielding political clout with the local government,) as well as the Beverly Hills City Council. It will have architects focus on creating a site that integrates elegantly with the Century City, downtown Beverly Hills, with the Hilton, and with the elementary school and neighborhoods to the north.

If the project is clearly woven into the broader fabric of Beverly Hills, seeking to update an enhance rather than just plonking another Chinese multi-use center like it created in Beijing, Wanda will wind up with a flagship property and the respect of the business community in Southern California.

That costs money, of course. But Wanda has plenty of money, and it has every reason to make nice in the US as it diversifies its portfolio beyond China’s increasingly uncertain real estate market.