Google's China problem - the WTO-column

(later a Chinabiz)
When a huge an successful company comes to China and screws up in a massive way, I tend to be fascinated. For nobody the China market is a sure win and everybody is allowed his or her share of mistakes. But then, when you are as huge and successful as Google, the expectations might also be high. But then, I'm not much of a clearvoyant but the current downturn in its Chinese fortune does not come as a surprise.
What comes as a surprise is the speed and the amount Google has been able to lose its market share. Two recent surveys indicated the US search engine has lost about one third of its market. While the domestic search engine Baidu was already a market leader in eyeballs, those were perceived less valuable than the group of relatively older, better educated and better-earning users of Google. The new research indicates that Google has been wiped away in its key markets in Shanghai, Beijing and Guangzhou.

How could that all happen? Very early in this century, Google developed into the key search engine, not only in the US but also in China. We internet users would not know how to survive without what initially was a very simple search engine. So powerful was Google's position in China that when the internet censor got some new tools in 2002 and decided to block Google, it had to retract. The Chinese internet users were so upset about this move, the government had to back down.
There were some strong indications that at the Google headquarters in California, they had not really a clue what was going on.
When Google decided to offer a censored Chinese search engine it caused an outcry among the free-speech movement in the US who wondered what the company who had "Do no evil" as a motto was up to. Chinese internet users were equally puzzled, as they saw no reason to visit the censored Google, since they preferred the uncensored one.
Most people just speculated this would fit into a grand scheme for world dominance by Google, since the idea Google could mess up was too alien for most internet users.
But in June even Google-founder Sergey Brin admitted they might have made a mistake. The Chinese service attracted a poor one percent of the market and Brin suggested they might as well stop the search engine.

Meanwhile since last year Google started to invest in China and in March I attended a Google-party during a search engine conference in Nanjing. It made me a bit upset since in stead of the expected Chinese food, they only offered peanuts and cheap beer. That was a sign they had no clue how to adopted to the local situation. It was also otherwise very hard not to leave with the idea that something was very wrong there. US-Google managers formed islands of loneliness in the party, while outside in the hotel lobby intensive networking was going on. Most of the Google-people I met were freshly hired managers who often had a long track-record in other IT-companies in China. Since it was a party, everybody acted happy. But those seasoned had to swap their business suits for Google t-shirts and play ball games and work out.
Rumors suggest that those people have now stopped playing ballgames and are leaving Google China, because they think it is a sinking ship. Although there has not yet been a good explanation for the sudden drop in market share, there seems to be a pattern.
Earlier other US-based internet companies like Ebay and Yahoo dramatically underperformed in China. In those cases increased domestic competition was one reason. Another was that the American management just did not want to get they had to play in China a fully different ballgame.
"Even for American standards, those companies are a bit weird," told me a US newspaper executive last week. She had visited the US IT-companies regularly in an effort to learn from them.and found herself in a playground of youngster "who are still a bit wet behind the ears". She had one explanation: "It is simply American arrogance".

Fons Tuinstra

economy - Reed/Elsevier cancels China conference

A prestigious conference on doing business in China in the Netherlands has been cancelled by the main organizer Reed/Elsevier because they could not find the right level of Chinese participants, a Dutch website on China has announced. It was a deja-vu, since I attended last year a exhibition and conference by the German division of Reed/Elsevier. That event went on, but I was a bit shocked about the poor quality of the Chinese exhibitors, who were even blackmailed into attending an exhibition that made no sense to them.
My analysis then was: Reed/Elsevier has the wrong partner back in China. I of course offered by kind services, but that was killed somewhere in poor communication between different entities of this huge company. It still looks like their problem has not been addressed; a pity, since the November conference in November really looked very interesting.

"you are the most beautiful girl I have ever met"

internet - Egao, Chinese humor at its best

Bingfeng Teahouse gives (you have to click here to get the whole story) a nice example of egao or spoofing on Chinese websites. It has become a very nice subculture at the Chinese internet, showing that the story Chinese have no sense of humor is a serious misunderstanding.

internet - Google losing traction in China

Billsdue points at this report in The Red Herring, indicating that Google has started to loose market share in the high-end user section where it had been able to dominate Baidu, China's largest domestic search engine. Google has been losing out in Beijing, Shanghai and Guangzhou, according to the research company IntelliConsulting.

In Beijing, the only city for which detailed results were made available, Baidu’s market share rose by 13 percent from one year ago to 65.4 percent, the survey showed. Google fell by 12.3 percent, from 32.9 percent to 20.6 percent.

That is a rather dramatic drop and bad news for a company that only started to invest seriously in China at the beginning of this year. Moving into China had brought the US company only bad news, as they are losing the strong position they had before they were present in China. Billsdue rightfully points at the other US giants, Yahoo and Ebay, who have a similar bad record.

Can any large US Internet company succeed on its own China? The record--Yahoo, Ebay and now Google--is not encouraging.

Update I: China Net investor writes that the market share of Google has slipped more than 10 percent. That is one way of counting. I would say they have lost more than 30 percent of their market.
Update II: China Web2.0 comes with another report by CNNIC documenting the drop of Google. Although less dramatic than the other report, the drop is still remarkable. I find the two explanations for the drop not really convincing - although I do not have a better one myself. Key word blocking has always been in place, so that could not explain the difference, unless Baidu has improved greatly in the past year. Making Google more local could perhaps work out in the future, but does not explain why it was then so successful in the past when it was not even present in China.
Meanwhile many of the freshly-hired Google-employees are according to rumors in the market leaving the company again because they have no faith in its future. This all needs some thought.
Update III: Jake Ludington also takes a shot at the Google' problem in China.

Among people I spoke with from the tech community, the prevailing opinion is that Google isn’t taking China seriously. By dictating business decisions about China from Mountain View, CA in the U.S., the opinions feel that Google isn’t making an effort to understand the Chinese search market.

labor - China creates jobs in the Netherlands

China has created 23,000 jobs in the Netherlands. That was one of the more interesting results that have been presented this week in a report by the Dutch planning commission, the Centraal Plan Bureau. The average Dutch household saves 300 euro per year because of the import of cheaper products from China and that is huger than the effect of any measure the Dutch government has taken for its citizens.
The so-called Wal-Mart effect on the wallets of ordinary citizens has already been studied a lot in the US, but a positive balance in employment shifts is a new one. Three thousand jobs have been created directly by Chinese companies while the rest is caused indirectly. The report does not say how many jobs could have been lost and in general terms the Netherlands might have a more positive balance compared to other Western European countries because of its position as a logistical hub. Having the largest port of Europe does help.
Much of the labor-intensive industries have already left the Netherlands for decades, so the loss of labor might actually be lower than in countries like Mexico or Lesotho (to name a few) who are more dependend on cheap labor.

Update: Here is the original report (English, pdf).
(Now with the correct link)

labor - Taiwan Office pressed for Foxconn-settlement

Remember the surprise ending of the heavy handed conflict between the Taiwanese supplier of iPods Foxconn and the China Business News? ESWN gets some lose ends together and points at the weblog of Xinhua reporter Zhang Wen, who also used to work for the China Business News. What was heading for a landmark case in China's media history, ended with a half-hearted compromise.
Zhang dismisses the way the whole conflict has been dealt with:

[The involved editor] Qin Shuo should not have chosen to compromise and retreat. But he did it. So this says that there was something in there that was beyond his control.

While the heavy hand of a concerned government departments was all too obvious present, Zhang comes with some additional information.

Based upon what I know, the Taiwan Affairs Office of the State Council interceded in the matter, and they got the local governments of Shanghai and Guangdong to mediate. That was how this 'farce' screeched to a halt. They were afraid that this incident may turn into a protest against all Taiwan businesses, which would affect cross-strait trade relationships.

jobs - Looking for two sales people

The Chinabiz headhunting service is looking for two qualified sales people with a PR-background, one in Beijing and one in Shanghai. The selected candidates will be supporting a high-end speakers' bureau in China. The candidates need to be fluent in Chinese and English and preferably have extended experience in working with foreign companies in China. When you are interested, you can get in touch with Scott Shi of Chinabiz for more information.

media - Chinese courts: silenced or more open?

I had some time to look into the media report on the relationship between the Chinese courts and the media. Foreign media have been giving it a negative slant by focusing on possible punishment for court officials who release news without proper authorization. But they have missed the original reason for the government to install such a punishment.
Getting information from Chinese courts is possibly tougher than pressing water out of a stone: giving information was not on their agenda, unless there was a clear political advantage to get. Or in case a reporter was able to develop a "special" relationship with court officials, often involving bribes, blackmail or other tools than just picking up a phone.
Now, Xiao Yang, the president of the People's Supreme Court, has announced the appointment of 65 spokespersons for the courts. That would be a major improvement, provided of course that their phone numbers are not treated as state secrets. In the past other spokespersons of government departments were less than eager to speak, although the situation seems to improve slightly over time.
This news has a possible negative and a positive angle: most of the headlines focused on the negative one.

economy - Chinese companies prefer London

London is most successful in attracting Chinese companies, compared to other European destination, writes China CSR, based on the Ernst & Young European Investment Monitor.
Countless delegations visit China, hoping to attract Chinese investments and companies, although there seems rather little return on these activities. Even the top-destination, London, attracted only 34 Chinese companies who invested in the British capital, worth about 200 million euro. That is 15 percent of the total Chinese investments into Europe. Hamburg and Paris only got a quarter of the result London shows.
There is no indication in the article on what might cause the differences.

Internet - Second webloggers conference due in October

The second Chinese webloggers conference will be held next month on the 28th and 29th of October in Hangzou and the first speakers are lining up. Amy Gu (after hitting out at the poor attendance at the Euromoney conference) tells us that the meeting is still short of sponsors. It looks like I'm not going to make it this year again, since I'm tied up with meetings in those days in Shanghai.

media - New rules continue to confuse the foreign media

I just finished a call with a rather confused journalist of the New York Times, who wanted to discuss the 'new' rules on foreign media in China. You might have read my slightly contrary viewpoint on the issue. I do not believe that so much has changed, ahead of the political season, Xinhua has just restated already existing rules. It does not make China a better or worse place, but there is simply hardly anything to report about.
I just checked Google News, but 439 articles have been published about the issue, I must assume that not everybody agrees with you.
I tried to explain her my take, but got the impression it did not work. "I thank you for your perspective," she closed the conversation. Probably a nice way of saying she did not agree.

Update: Well, at least Wen Jiabao agrees with me.

internet - How to fuck a cabbage?

Nothing stays hiddend these days. From Shaanxi Province we get information about a delicious dish. The question is of course how you end up with this kind of bizar translation. The Dutch magazine who picked it up suggests a software generated translation might have helped here.

Watch the trade union in your company - The WTO-column

(later at Chinabiz)
Catching trends in China is a bit of an art. Officially we are talking about a culture of thousands of years old, where very little ever will change.
But when you do not pay attention for two seconds everything might be different while you did not pay attention. AIDS had been a neglected problem for a decade, but suddenly it emerged high up on the agenda after the government discovered the country was heading for a disaster. The environment was taken very lightly for ages, but now efforts to deal with the environmental degradation seems high on the agenda.
There is one other emerging trend that deserves your attention. Perhaps you have a trade union in your company who, in exchange for two percent of your payroll, organize an annual trip for your staff. The ACFTU, as China's only allowed trade unions is called, has been traditionally seen as an extension of the state bureaucracy with very little real impact.
Most of the officials in this trade union might actually have no clue what a trade union is or should do. Preserving the peace, or harmony, was their main task and that meant in the past often that they take sides with management, if they would take sides at all.

But things are changing and Wal-Mart had to give in after two years of resistance against the ACFTU, offering a valuable training ground for trade union officials who were not used to organizing labor.

The recent unionization of Wal-Mart has been possibly the start of a change that will far outreach the current situation at the US firm. Media reports of the whole process have shown a mixture of attitudes toward the whole process, but for sure the ACFTU for the first time since decades got a large scale taste of what it means to organize labor bottom-up. More, they did so with the explicit blessing of president Hu Jintao. That is of course not going to have a direct influence on the trade union people in your company, but certainly a trend that is worthwhile to watch.
While a harmonious society is high on the agenda - at it has officially been for thousands of years - the ways to harmony might differ from those in the past, where economic growth, and much less the quality of that growth, were most important.

Sociologist Anita Chan comes with a few interesting conclusions:

The ACFTU is not the monolithic structure it is often portrayed to be. There are union officials and local unions who understand the principles of organizing and are willing to push the limits. But they are constrained by pro-capital forces within the Communist Party, the government and the ACFTU on the one hand, and domestic and international anti-union forces on the other.

And:

But the ACFTU has little experience of grassroots initiative, and many union officials are nervous about activities that are not top-down and initiated and controlled by themselves. Nor are they accustomed to, or comfortable with, having to organizing workers themselves, whatever the precedent set by the recent experience with Wal-Mart. Reformers within the ACFTU want to push in that direction, as the editorial makes clear, but they are themselves untrained and on unsure ground. Trade unions in our own countries have accumulated a wealth of experience in union organization that they can help transfer to the Chinese union’s reformers—if our unions become willing to reach out.

So, perhaps you should have a cup of tea in the trade union office of your company. It is better to be the first one to notice those trade union people are no longer as boring as they used to be.

labor - What is happening to the Chinese trade union?

Since the sudden appearance of the presumed dead Chinese official trade union ACFTU in Wal-Mart, the question what is happening has become relevant. Anita Chan has been analyzing the background, including different Chinese media reports. She sees a wide difference in opinions reflected in those media reports. Her questions:

Has nothing positive emerged out of this Wal-Mart trade union incident? Is the ACFTU a dinosaur that never changes? Alternatively, could there be reformists from within the ACFTU pushing for changes?

While the AFCTU is traditionally dismissed by the international trade unions and dissident groups in Hong Kong as a powerless extention of the Chinese bureaucracy, Chan takes a slightly more positive viewpoint on what is happening in the ACFTU. He stories give more color to the story of how Wal-Mart was actually unionized, interesting, since it might work out as a blueprint for unionizing other foreign companies, who have not done so voluntarily.
Chan:

The ACFTU is not the monolithic structure it is often portrayed to be. There are union officials and local unions who understand the principles of organizing and are willing to push the limits. But they are constrained by pro-capital forces within the Communist Party, the government and the ACFTU on the one hand, and domestic and international anti-union forces on the other.

And:

But the ACFTU has little experience of grassroots initiative, and many union officials are nervous about activities that are not top-down and initiated and controlled by themselves. Nor are they accustomed to, or comfortable with, having to organizing workers themselves, whatever the precedent set by the recent experience with Wal-Mart. Reformers within the ACFTU want to push in that direction, as the editorial makes clear, but they are themselves untrained and on unsure ground. Trade unions in our own countries have accumulated a wealth of experience in union organization that they can help transfer to the Chinese union’s reformers—if our unions become willing to reach out.

internet - The so-called suicide of a teacher

Pictures and statements of demonstrating students in Rui'an, including video of clashes with armed police have hit the internet, here summerized by ESWN.
The students have been calling for justice in this rather extraordinary protest after one of their teachers, Dai Haijing, committed suicide according to the police.
The students suggest their has been a cover-up. Up to 10,000 people have attended their protests.

Update: Global Voices suggests a task force is needed to save the video clips made from protests like this one. Chinese hosts move very fast to delete this kind of video's when ordered so and unlike other online tools, it is very hard to save them.

internet - Only a minority wants to stay Chinese

Danwei points at a rather sensitive poll by Netease asking Chinese internet users whether they want to come back as a Chinese in a next life. The answer is not that surprising, despite the virulent patriottic outbursts by a vocal minority. In total a majority of 64% has different reasons not to return as a Chinese. Most votes (38.1%) goes to the "Chinese do not get respect" section of the no-answers. That is also a rather nationalistic take on this issue, although one that shows deep frustrations. And that is of course a figure to watch carefullly.

internet - A place for public discourse

Thanks to a very flaky internet connection I could finish the second chapter of Johan Lagerkvist's book on the internet in China. He is setting the stage for a rather worthwhile debate:

It is indeed distressing to hear reports about cyber dissidents hunted down in authoritarian countries like China and Vietnam with the aid of Western surveillance technology. But already now, in a relative calm phase in which Chinese citizens are witnessing record economic growth and increasing prosperity, we are witnessing how these new electronic meeting places on the internet have influenced the verdicts of court judges, Party officials and the news agenda in traditional types.

What is would disagree with is his assessment of the relationship between internet and democracy. When the internet took off there was a suggested one-to-one relationship between the introduction of the internet and the emergence of democracy. Lagerkvist assumes now that that misunderstanding has disappeared. Perhaps that is the case in academic circles, where they more often keep their findings rather secret, but in media reports and from other actors I still see that this misunderstandings is still having a solid footing.

media - No news from Xinhua

I have been basically been ignoring the recent upheaval on the "new law" restricting the domestic usage of foreign newswires, although it has hit many other foreign media. Why? There is actually very little news to report since Xinhua has been mainly repeating already existing rules and regulations. China Law Blog already wondered in despair whether he was missing something and fortunately pointed at Silicon Hutong , who took more time to explain so little had actually changed. Indeed,

The Xinhua News Agency has for a long time been the owner of a dying business model.

And is desperately trying to save it, not different from other dinosaurs in the industry.