economy – Huawei has a hard time in the US

The unlinkable Wall Street Journal describes the tribulations of China’s most successful telecom company Huawei. Successful, that is in other developing countries, but it has a hard time in conquering the US market.

With little experience in marketing, Huawei has struggled to build brand recognition in the U.S. It confused customers by using a new name for its U.S. business. With the headquarters in Shenzhen, China, hesitant to delegate, local executives have trouble adapting to the local culture. The company has been dogged by suspicions of cutting corners on intellectual-property rights, and alienated some job applicants by pumping them for detailed technical information. Huawei's successful formula winning business in other countries with low prices hasn't worked as well in a U.S. market marked by long-term ties between phone companies and their equipment suppliers.

Cultural differences and distrust made it very hard for American employees to function, as this telling anecdote shows:

Chad Reynolds, Huawei's former head of human resources for North America, says when he visited the headquarters in China he was forbidden from carrying his briefcase into any of the main meeting rooms. He says his employers worried about theft of product documents. He was never given a security pass and was accompanied by security personnel wherever he went. "I never felt like I was truly part of the family at Huawei," says Mr. Reynolds, who says he quit in spring 2003. Huawei declined to comment about Mr. Reynolds.

Another story of a US engineer is almost as telling:

Two years ago, David Fox, a software engineer who had worked at several area telecom firms, was invited for an interview in Huawei's Shenzhen headquarters. On the first day of his visit, Mr. Fox, then 39, says he was startled when a group of 25 to 30 Chinese engineers began peppering him with detailed questions on engineering minutiae, scribbling notes as he spoke. "It became evident that this wasn't an interview," says Mr. Fox. "They were pumping me for technical knowledge of the U.S."

The global threat of Chinese companies might be of a different category compared to the Japanese companies in the second half of the 1990s as I argued yesterday. Chinese companies are still very early in the process, I must admit, and Japanese companies did have their troubles in getting business in and trusted non-Japanese managers enough to give them important positions in their companies.

internet – Become a desktop spy

In the past, spies were not only wearing long coats and sun glasses, they had to embark into long journeys into hot and dusty places to get their information. Just as for journalists, those days are over. Here you see a picture of the military airbase in Korla, Xinjiang province, courtesy of The opposite side of China and a tip by Global Voices.

Unfortunately, my own place in Xujiahui, Shanghai is not yet available on Google maps, but that might just a matter of time when I can see whose car is parked outside.

media - Forgetting about China a bit

One of the good things of staying outside China every now and then is the discovery that there are other things too that might at some stage even be more important. Last night I was glued to the traditional TV-screen as the BBC hosted a major discussion on the way the UK is dealing with terrorism. A fascinating discussion with police chief Ian Blair who is doing an excellent job in explaning to the public what is happening. And of course the official end of hostilities in Ireland by the IRA, so much part of my past as a journalist. Yes, China has rightfully dropped on the media agenda this week.

Many JIT-solutions

Just-too-late, the Chinese management concept – The WTO-column

(later also at Chinabiz)
My earlier comparison of the Japanese and Chinese management style triggered off some reactions, despite the ongoing holidays. Some people thought I was far too harsh on the – lack of – Chinese management culture. This column does not offer enough room to really go into the issue much deeper, but I do think it makes sense to recall how profound the influence of Japanese management styles has been on companies worldwide.
The now so familiar concept of outsourcing non-core activities and the formula of just-in-time logistics were triggered off by the fierce competition by Japanese companies. Those concepts in some of the Japanese industries were initially used by Japanese companies in Europe and the US, but after an initially wave of fear other global businesses adopted similar methods. Suppliers and retailers were forced to fit into this new style of managing companies by their multinational clients.

That system allowed Japanese companies, operating from one of the most expensive countries in terms of wages and other costs, to produce for example cars against competing prices. These heavily-studied features have changed the way how companies operate compared to the 1960s and early 1970s in a most profound way.
Compared to that change, I wonder whether China is going to trigger off a similar change, allowing European and US companies to compete with the flood of Chinese products that are submerging the global markets.
While Chinese companies have a distinct ways of operating, it is not that easy to copy by the outside world compared to the military style Japanese drive to efficiency. What makes most Chinese companies different is their profound lack of systems. Let me illustrate how this works.
My Shanghainese wife has started last month a job with a US company and has been traveling much of her time through Europe. Very little time was left to pick the new lease car she got as a part of her compensation package. Can you call the fleet manager and arrange it, she asked me. The fleet manager reacted shocked when I called him a day later. “This is the first time in 25 years I have to deal with a partner of an employee and not the employee,” he said. Welcome to the Chinese management style, I almost grinned, but I could restrain myself.
Nothing is sacred, not the 25-year experience of a fleet manager, no business plan, no rule, no appointment, no payment, no contract, no tradition, nothing. Everything is negotiable, every moment of the day. When well-regulated developed countries want to compete with China Chinese-style, it will be a very different struggle from the earlier fight with the Japanese. For the time being, I will baptize the Chinese system the ‘just-too-late’ system, a nice variation on the Japanese ‘just-in-time’.
Introducing the concept of outsourcing and just-in-time caused a decade’s long struggle in changing established European and American companies that were almost in an advanced state of rigor mortis. Too adopt the Chinese style might be tougher, as it throws out much of the advantages gained with the introduction of Japanese management styles.

Fons Tuinstra

internet – E-mail tool to “talk to old people”

Guo Liang, China’s most prominent internet researcher, noted with amazement that more than 60 percent of the internet users in China did not use email, once the most prominent and sticky feature of the whole internet. (His latest report is unfortunately still not available.)
The renowned Pew internet and American Life project has studied on the teen-life at the internet in the US and found that especially the youngest users of the internet are developing a preference for IM over email. 75% of the internet users between 12 and 17 years old use IM. While email is still used by most, they say they prefer IM to communicated with friends.

“Teens who participated in focus groups for this study said that they view email as something you use to talk to ‘old people’, institutions, or to send complex instructions to large groups.”

Since the internet in China is more dominated by the young and very young, this kind of shifts from email to IM might go faster and will be more profound than in other internet communities.

media – Xinmin evening news losing faster

A few months ago I mentioned that the Shanghai-based Xinmin evening news was one of the leading newspapers in China with a daily circulation of about two million. Still quite impressive although ten years earlier that was three million copies per day. That figure was based on information I got from journalists of the paper.
Today I saw some of the – not independently corroborated – figures on the circulation of daily papers in China and there the Xinmin evening news only had a daily circulation of 1.4 million copies, a much more drastic decline.
Three papers exceed now the circulation of the Xinmin evening news. Of course the People’s Daily with 2.1 million copies. The Guangdong Daily (1.6 million) and the Yangcheng Evening News (1.8 million) are getting close. In the case of the People’s Daily who is reading the paper might actually be more important than the actual number.
Considering the ongoing discussion how many people are actually reached by different media, an independent and leading auditing system would be useful.Media revenue are now based on circulation figures that might be partly a fabrication, raising questions on the basis of the fast growing increases, last year 25 percent more than over 2003.

economy - No fast Rmb change, says central bank

China's central bank, the People's Bank of China, is trying to cool down speculators' hope for a fast-moving Chinese currency, write many media including the China Daily.
"Gradualism is one of the important principles in the yuan exchange rate mechanism reform," the statement said. "Gradualism is aimed at the gradual reform of the yuan exchange rate mechanism, not at the gradual adjustment of the level of the yuan exchange rate."
That goes obvious against my own prediction, but then, we do not expect central banks to tell us they are going to move again very soon. My analysis was based on the assumption the financial authorities need revaluation as a tool to cool down the economy now other tools seem to fail. I still stick to that.

life - Taking on Marxist-Leninist Old Ladies

I mostly try to avoid the theoretical debates on the future of communism, since it is of very little relevance to China nowadays. But I enjoyed very much this entry by the Bingfeng Teahouse about the Ma-Lie-Lao_Tai mentality or the Marxist-Leninist Old Ladies he refers too (and you can find here also links to some of the 'old ladies').

literally, ma-lie-lao-tai means Marxist-Leninist Old Ladies, which refer to those old ladies in 1970s' china who stubbornly stick to an ideologies without any clue how to fit them into the real ánd changing world.

It is part of very many of the misunderstandings of those trying to make sense out of China. The outside world still sticks to the old concepts and rethoric of the past, while China has moved on, although it often forgets some of the old labels that then tend to confuse the outside world.

Wal-Mart, loved for its low prices, but not by everybody

labor - Wal-Mart expands, without trade unions

Last year Wal-Mart found its expansion in China in hot water and had to agree with unions in its stores, a unique feature in the largest company of the US.
Now it is using the Reuters propaganda machine to let its cheerleaders write the store expects to double its outlets by 2006 and double-digit sales growth.
That is all fine with me, but I do wonder why my colleagues have not even brought up this little issue of the trade unions. I would not be the only one interested in what kind of deal the company worked out here.

Foreign brands under threat – the WTO column

(later also at Chinabiz)
What have P&G, Unilever, Nestle, Dupont, Johnson & Johnson, Heinz, KFC, Colgate, Smith Kline and Haagen Dasz in common? They are all consumer good producers that got into problems after consumer complaints were taken to the media or caused uproar at the internet. In most cases there was a combination of actors, including local government departments who stepped in after the scandals started to move.

Some of the domestic media, like the China Economic Net here, have been collecting evidence and signal that the collective foreign brands are losing their trustworthy name, they had in comparison to domestic consumer goods, where Chinese consumers would not be surprised to learn they would produce a shoddy quality.

Companies are reporting reduced sales after such incidents, like the SK-II skin cream of P&G is said to have lost 30 percent of its revenue. Now, are the foreign brands screwing up in terms of quality? Are the foreign companies bad crisis managers when they are hit by the ire of Chinese consumers? Or are these barrages of publicity part of political campaigns by domestic media to make the equally dirty alley of domestic brands look rather clean?

Renowned Chinese scientists have been put in place to comment on the resulting loss in confidence Chinese consumers say to have in the trustworthiness of foreign brands.
Professor Mao Shoulong, sociologist at the Renmin University, “holds that quality is just a basic factor that ignited the distrust, and the more important reason lies in the discriminative attitudes foreign brands showed toward Chinese consumers when dealing with crisis,” says the article in the CEN… “Chinese consumers have always trusted foreign brands, which they believe adhere to strict production standards and thus have credible quality. But these negative incidents are damaging the trustworthiness of foreign brands.”
When you are held in high esteem, the fall down in consumer confidence might more nasty bruises, especially when you think the reaction of the consumer was rather unfounded. Partly, Chinese consumers, media and government departments do tend to react more sensitive when foreign companies cross a line, that would be more acceptable for a domestic company to do, as we have also seen in ‘scandals’ involving commercials that ‘insulted’ the dignity of at least some Chinese.
In quite a few cases popular sentiments could grow out of control, because the companies involved did initially not take the consumer reaction too serious. That is of course a cardinal sin against the marketing rule that the customer is always right, even when you honestly believe he is dead wrong.

Chinese consumers rightfully ask to be treated in the same way as consumers elsewhere in the world. Especially when it involves scandals that involve less serious or even no health effects on the users that might be tough in an emerging market where consumers would use every right between a return-policy and civil suits to squeeze money out of embattled firms. But only with a very, very clean health record, foreign firms might be able to resist themselves against all too irrational claims. Dealing with consumer crises should become part of normal management skills. Setting a standard in the Chinese market has always been one of the arguments foreign companies often used to justify their presence in the Chinese market. It looks like they are getting an opportunity to prove they can do things better.

Fons Tuinstra

media – The reliability of TV-ratings

ESWN starts an intriguing discussion on the reliability of TV ratings, based on an article focusing on the rating by CCTV-SOFRES and Nielsen Media Research. Since the tariffs of commercials are based on those ratings, any doubt on the credibility of those ratings is pretty crucial for their survival.
I’m not an expert on statistics (like ESWN, who works for one of their competitors), but the current limitation of the sample used to 300 households or slightly over 1,000 people seems rather limited for a population of 1,3 billion people with thousands of TV-channels to choose from. The traditional excuse that it fits international standards is nonsense, writes ESWN.

Also, there is no such thing as an international standard about acceptable sampling error. In the end, it is all about money (surprise!). When I first started to work in television audience measurement in local markets, my company had 500 households in New York City and Los Angeles, 450 in Chicago, 300 in Philaldephia and San Francisco. Meanwhile, Nielsen Media Research has 7,000 households in the USA national sample today. We would all like to have large samples, but it was all about what the market can afford to pay.

Since the media involved have a profound interest in maintaining the illusion of credible ratings, I wonder whether a real discussion will take off.

media - Image of foreign brands under threat

At least that is the conclusion of this article in the China Economic Net (a pickup from the headline service of Chinabiz). They collected all the scandals that have hit foreign brands in the recent past: Nestle, DuPont, Procter & Gamble, Johnson & Johnson, Unilever (Lipton), Colgate, Haagen Dazs, KFC and Kraft all get their place in a long row of consumer consumer scandals.

Chinese consumers have always trusted foreign brands, which they believe adhere to strict production standards and thus have credible quality. But these negative incidents are damaging the trustworthiness of foreign brands.
The negative incidents have also led to a sales decline of foreign brands. Proctor & Gamble's sales volume took a 30 percent hit in a month as a result of the SK-II skin cream scandal. And Nestle's other products like coffee and chocolate were badly affected by its substandard infant milk powder.

I'm not sure whether domestic brands do not have the same problems, but articles like this really focus on foreign brands, making it into a political problem too.

books - From Mao to Market

And there is of course John Gittings own book, out very soon.

Buy here Gittings book

politics - Was Mao Zedong 100 percent wrong?

Former Shanghai-correspondent of The Guardian John Gittings takes on the new take of Jung Chang and Jon Halliday on Mao Zedong in their impressive biography, Mao, the Unknown Story. (Tip by the China Digital Times).
Officially in China Mao Zedong is 'seventy percent good, thirty percent wrong', although the official verdict carefully avoids both discussion and nasty details about the wrongs are limited to the biographers abroad. Chang and Halliday now identify the former chairman as 100 percent wrong and Gittings challenges rightfully that perception.

First, can the Chinese revolution really be explained, as the authors imply, as if the Chinese people were terrorised by Mao into overthrowing the Nationalist government - did they not already have good reason?

And:

Second, to what extent does "lust for power" adequately explain Mao's long career with the Communist party? Even if he was attracted by its revolutionary violence, would it not have been more rational to hitch himself to the rising star of Chiang Kai-shek (who was not averse to shedding blood himself)? Third, although Mao's grasp of Marxist theory in his early years was shaky, were his extensive theoretical writings over five decades really nothing more than camouflage for his ambition?

Buy the biography here

internet - Looking for five million Chinese bloggers

Nothing is more fascinating than the way how figures on China emerge and get a life of themselves. So, we have this figure of 30,000 people policing the internet in China and how we also have this figure of five million webloggers in China. A few weeks away I made jokes about the South China Morning Post that used this figure without any obvious base. Frank Dai of Global Voices came this week up with the same figure.
He bases himself on the often rather solid Blog Herald. But then, their source is the South China Morning Post and we have a nice circle here. It is a well-known feature among traditional media, who give a figure credibility by keeping on re-quoting a very dodgy figure. It still does not help in figuring out how many webloggers there are in China.