China starts to export cars, in bits and pieces – The WTO-column

(later also in Chinabiz, although I'm running now a bit ahed)
One of the more fascinating markets in China is that of the car market. Its size matters economically, of course, but also the way how overrated expectations play a key role among the producers, suppliers, government departments and last but not least among the users if absolutely fascinating. All parties involved tend to behave like pathological optimists, who have little room for doubts when it concerns the automotive industry.
Being an optimist myself, I saw all the dangerous symptoms among my fellow patients, and have been warning against it from the early start. After China entered the WTO, the sales of cars saw a stellar growth, which has caused an influx of investments that was almost unprecedented, only Brazil saw such investment in overcapacity.
Last year growth stagnated and only the most optimistic scenarios still predict growth this year. Domestic demand has slumped and the export of cars is an illusion that might take another decade to become really true, despite some high-profile cases.
It is not because China cannot make cars. They were also able to produce in the 1990s airplanes for McDonald-Douglas. It only took them a while to get the pieces together, because of the lack of economy of scale, lack of management talents and poor logistics. Making airplanes and cars has more to do with being able to get things organized than with producing high quality parts.
So, cars from Japan, Germany and the US can still be cheaper, because those countries have organized the automotive industry in a better way.

The large car producers have outsourced effectively all their risks to their suppliers and they find themselves now in an interesting dilemma that illustrates perfectly how China and globalization interact. The process happens in many more industries. The suppliers in the automotive industry have been blackmailed to come to China. They were often the global suppliers of key brand names, and could not stay out of China unless they risk losing their only client. Now China’s shrinking car market and its non-existing export do not offer the economy of scale these suppliers often need.
But if China is not able to produce enough affordable cars at a competitive rate those suppliers can still export their products, piece by piece. What we see is that while China cannot export cars, it is becoming increasingly better in exporting car parts.
The problem on a global market is of course that those often foreign suppliers in China are competing at the global market against themselves or their mother companies at home. The automotive parts that, according to the always optimistic Chinese media, are flooding the world, erode the markets in Germany, the US and Japan, and erode the suppliers’ profitability at home.
In struggling Germany trade unions have forced the automotive industry to keep on using a certain percentage of domestically made products. Trade unions might be able to get such an agreement from the industry, as Wal-Mart shows; the consumers would rather follow their own financial interests.

You do not have to be much of a fortune teller to see how the automotive industry will be forced into a new wave of consolidations, forced by Chinese products. In that way the Chinese automotive industry will get their export, will develop its economy of scale and might in a decade or so perhaps even start to export cars on a decent scale.

Fons Tuinstra

internet - "The government has blocked the site" and other nonsense

I have a small side-business in helping companies to find out whether their website is blocked by the Chinese censor or not. It is simply unbelievable how easy people think sites are being blocked, while there are mostly hundreds of other problems that can cause a site not to show up.
Just now a friend (real friends get a discount on my normal service fee) banged on my skype-window and said that some western media sites were unaccessible. She works in an office building just at the other side of People's Square, so I check the sites and get to them without any problem.
Then her IT-guy walks into the office and tells her that the sites are blocked by the Chinese government. Why would he lie, she sputters when I say it is not true. "Why would I lie," I counter the attack. First, I can see the sites, and second, all IT-guys blame the government when they have no clue.

blogging - Nepalese bloggers avoid press black-out

News from our blogging neigbors in Nepal, who are able to circument the measures taken by the king to stop reporting from the kingdom, reported by the Online Journalism Review. Efforts to block news from leaving the country is not working.

The journalists who run blogs were less concerned. The Nepalese group blog, United We Blog, quickly ran the photo of the strumming journalist, along with a commentary on the 1,000 radio journalists who had possibly lost their jobs recently.

Required reading – The WTO-column

The Nike-add
(later also at Chinabiz)

Shanghai – The other night I attended a cocktail party at the home of Jochem Haakma, the Dutch consul general in Shanghai and – among very many other people – I bumped into Jonathan Wilshere, director of the Shanghai Business Review, one of the many free give-away print publications that have a booming business here in Shanghai.
We were very much each others opposite in taking in information. Wilshere said he had not time to read all that stuff on the internet, and wondered who would have time to do that anyway. He was, as we bloggers call it, very much past century.
I would literally not make my hands dirty on any print publication, including the free ones. I would be scanning the news only on the internet, mainly by using an RSS-reader with around one hundred websites and weblogs subscribed, while only going to, say four or five publications that have not yet an RSS-feed.
What we are seeing is a Teutonic shift in how people get their information and when media, companies, governments and pr-agencies do not get it by now, they might be losing out.

When I started to visit Asia at the beginning of the 1990s I was already reading the Far Eastern Economic Review. In China very soon the South China Morning Post and Asiaweek became part of my diet of compulsory reading. When you would not read those three publications, you did not know what was going on and what people were talking about. Even though you would get them in China days too late and against a heavy surcharge, you did put up with that.
Those three publications have or disappeared or made themselves otherwise oblivious. The South China Morning Post I would read when I’m in Hong Kong, because it is a great local paper, but here in China it is no longer compulsory reading. I have not seen the paper in years because it is not online for free available and from the very few references of other media make to the Post I deduct that I’m missing very little.
This is not a unique Asia phenomenon. The media industry in the US will hold very soon a discussion the “the vanishing newspaper”. When I described last year for the Nieman Report of Harvard University how the changes in the media would change foreign correspondence and have affected the role of the classic foreign correspondent, I still thought that flagships like the New York Times would be an exception on this general downward trend. Now I’m not that sure anymore.
Orville Schell, the dean of the journalism school at UC Berkeley and always good for a nice metaphor, compared in January in Business Week the demise of the traditional media industry with the fall of the Roman Empire, where a powerful conglomerate was replaced by small warring states, the bloggers, who did not give birth to another empire for centuries. Mass media are over, while niche markets take the lead.

There are early signs that the influence of the internet in China is going to be as seismic as it is in the United States, where high-profile media figures at CBS and CNN were brought down, not because they were necessarily wrong, but because these institutions of a past century had no clue how to defend themselves against the attacks on the internet. In China Nike was the last foreign company to feel the heat of the internet when they pulled an innocent commercial around Christmas and apologized for insulting Chinese dignity after a lynch mob occurred at the internet. They were not the first and will not be the last to be hit by the Chinese chatroom warriors. Jonathan Wilshere might not have time to get his information from the internet, when foreign companies have to make time to find out what is going on it might be too late.

Fons Tuinstra

blogging - Missed my first meetup


Darn, missed last night my first Shanghai weblogger meetup! Hope I see some reports on the different weblogs later on, but have not seen anything yet. Life came in the way, as Adam Curry would put it when me misses a podcast. (Who actually figures in a nice article on the topic in Wired.
I attended yesterday a cocktail part of the Dutch Consul General Jochem Haakma, a belated effort to greet the new year of the rooster and an excellent network party. A wide variation of guests, old friends from the ministry of foreign affairs, new friends of the Shanghai Institute of International Studies, business people, diplomats, remarkably few journalists and Haakma himself of course who was at the core of his network.
Promise to attend the next meeting in March.

internet - Struggling with podcasts

Last year was the year of the weblog, this year is going to be the year of the podcast, trendy people tell me. It comes from the ipod, the Apple device that allows you to listen to mp3-files in the car, the subway and boring meetings. Music was the obvious start, but people have started all kind of new podcast shows and a group of people is thinking of setting up a podcast on Asian Affairs.
You can use an ipod-like device to listen to it, but also your computer or any other application that can play mp3-files. You can download it overnight and listen to it at a moment that is convenient for you.
To get things organized I downloaded software of ipodder.org and subscribed to a few cool podcast, so I would at least be able to listen to podcast myself. Making them would be the next step. In that way I really got some very beautiful stuff, like this interview with John Barry who compared SARS with the 'Spanish' flue in 1918.
Problem: downloading goes very tiresome. At this stage 82 feeds wait to be downloaded, and sometimes I only get a few minutes of a podcast show, or I get the same one three times. Anybody else into podcasting in China having similar problems? I blame the poor connectivity, not allowing a smooth download. If that is the case, podcasting might be tough in China.

media - Is blogchina becoming a news agency?

Amy Gu sits on a potential hot story, as she wonders if hosting service BlogChina contemplates becoming a news service, as they broke - they claim - the Shanda buys Sina-stock story. Other internet related services like Wikinews are trying to do the same with volunteers rather than poorly paid journalists.
I guess that in China they could only get away with it, if they do not call it a newswire.

NGO's - Anti-globalists: long time no see

The anti-global movements is gathering coming weekend in Hong Kong for a first major display in years, reports AP. While fierce at times, the movement lost its momentum after 9/11, as even the most convinced anti-globalists thought there were perhaps other problems more serious.
Twohundred activists representing 120 international organizations will gather for a two-day meeting, the first on Chinese soil, to prepare protest during a WTO-meeting in Hong Kong later this year.
Police said they might ban 'troublemakers' from entering the territory. It will be interesting to see how Hongkong police, and later mainland police will deal with international protest, that are inevitably connected with international events.

media - The 1918 influenza and SARS


I'm listening to a great interview with John Barry, author of the award-winning book The Great Influenza. He describes the way how the USA dealt with the disease and makes great comparisons with SARS in China in 2003, including the harsh way the US administration at the time dealt with dissent and public health information. Compared to the legislation at the time - remember the First World War was going on - "the Patriot Act reads like a manifest of free speech organizations," Barry says at one moment.
Well, the US has recovered from that period of repression, there should be hope for China too. I got it as a podcast, will save it. When you are interested, I can forward you the 9 MB mp3 file.

Update: It is actually much easier when you download it directly from the great site IT Conversations. You can chose between different formats and have a look at their other great interviews.

life - Activities picking up after Springfestival


Activities are suddenly rushing in, after the traditionally big of a lazy period between the two New Years. New and old businesses rushing into town, belated new year's cocktails and this evening an SFCC showing of a documentary. There is tomorrow evening a Shanghai Webloggers Meetup talking about "What makes your weblog tick?"
I might be a bit late myself, because of some other meetings, but do not hesitate to show up (after rsvp'ing) if you are interested. Now, getting in shape for some calls to the US and a lunch at Sasha's.

economy - UTstarcom starts lay-offs

UTstarcom used to be one of my favorite companies, small, smart management and seemingly having the right product, the xiaolingtong, a cheaper edition of the mobile phone. Because the xiaolingtong did not offer worldwide roaming services, but was an extention of your fixed line, it could offer mobiles much cheaper than the traditional companies.
But before Springfestival they started to lay off up to 15 pecent of their work force, notes Pacific Epoch. Their major customers China Telecom and China Netcom have been reducing their purchages of equipment. It is a worldwide trend, caused by the consolidation in the industry.

education - New training school for government officials

The central government is opening tomorrow a new high-end training school for high government officials in Shanghai, Pudong. People who have seen the new building were already very impressed and the initial information looks pretty solid. The board of the China Executive Leadership Training Academy Pudong (CELAP) will be chaired by Mr. He Guoqiang, head of the Organization Department of the CPC Central Committee.
It is meant for participants up to the ministerial level and will also offer an MBA-degree. It looks that it is both competing with the better MBA-schools, like CEIBS, but also the current party school that used to have a monopoly on this kind of education.
At the first event tomorrow Mr. Gordon Brown, Chancellor of the Exchequer of the UK will visit the new school.

labor - Guangdong sees again drop in migrant workers

The number of migrant workers to booming Guangdong province is dropping against, just like last year, the China Daily reports today. Most of the article is writting in a typical propaganda-style, focusing on new government policies that should make it easier for rural workers to go to the cities.
But in the tail it says:

"In Guangdong, things are a little different. The province, one of the country's
economic power houses, is witnessing a reduction of job seekers from outside the
province this year."

More freedom does not mean automatically that more workers will go to cities, when their living conditions at home improve.

internet - The revolution is already taking place

Interesting how NPR's Rob Gifford in his third dispatch on how the internet changes China uses different ways to frame his China story. The main story is still the myth that the internet will bring down authoritarian governments, while China is very succesful in proving this is not happening.
Gifford acknowledges that China has changed beyond recognition, but seems still to be waiting for the labels on the packages to be changed. My viewpoint is quite different. The changes taking place have been so profound, they will allow the changed one-part state to strengthen itself, while allowing more and more freedom, without changing the labels.

blogging - I know my RSS-feed sucks

Unfortunately, the feed is a free offer by feedster.com and it seems to work only once a week, delivering RSS-feeds at random. What I have done, and fortunately my RSS-reader Bloglines allows me to do so, is switch to the atom feed. Will try to find a more solid solution later.