Tiers In My Eyes

A recent report that China has 102 cities with over a million people brought home, yet again, the immensity of the Chinese population. Few people will travel frequently enough to visit them all one, whereas in the UK there are only two urban centers over a million (Birmingham is the second, which is sometimes forgotten), and even the US only has ten, with cities as famous and culturally important as San Francisco, Seattle and Denver not making the list. Even ancient old Boston only has 660,000 residents, about the same as Chinese backwaters like Panjin in Liaoning or Puyang in Henan. (Which, of course, I had to look up just now, having never heard of them).

I am always thankful that my experience in China included all three tiers of city. I first came to live in Huai’an, a Tier 3 in Jiangsu province, which I chose partly on impulse, partly because it looked small enough to be manageable, and partly because they were simply the first with a firm job offer. After a year, I moved to Tianjin, first downtown (Wandezhuang Dajie) then in Tanggu. Finally I moved to Beijing, inexorably drawn by the challenge of its immensity and opportunities. Here are some generalizations of the foreigner’s experience in each Tier.

 

Tier 3

There are maybe ten to twenty foreigners in the whole city, who you will cling to until you get despair of them. Every Chinese male aged 15 to 25 says “Hullo!” after they have passed by. Everyone stares at you – people will stare at your shopping basket, and come into the doctor’s room when you are getting the results of an X-Ray. There are no Western bars or restaurants. Western food in local restaurants is a thing of perplexing wonder. There is no Western food in the supermarkets, which themselves are relative novelties to locals more accustomed to wet markets, and have tanks with frogs, eels, and turtles. The few bars and clubs there are hideously smoky, and have the filthiest toilets ever seen outside an IRA prisoner’s dirty protest cell. There’s no subway but taxis are absurdly cheap, so you feel like you travel like a king. The main streets are nearly all self-owned stores rather than chains, with broken speakers at overly-loud volumes somehow drawing in customers. For entertainment, there is KTV, a bath-house, a snooker hall, and a few parks – the subterranean internet bars have mostly died out now. The parks are surprisingly nice. Most Chinese will be very approachable, some too much so: some will simply want to be friendly and some will want free English lessons. Life is sedate, inexpensive and generally pleasant, if limited in its options.

 

Tier 2

These cities are large enough to have a foreign culture and sustained presence, which nonetheless remains unobtrusive. They will have an expat magazine or two, maybe even a website, to help you navigate your way. You won’t know every foreigner, but they’ll only be one degree of separation away. The city has a sense of history and of culture, even though 80% of the buildings have been erected in the last ten years and there are few antiquities to actually “see”. There are numerous foreign restaurants; many come and go, binning expensive foreign staff once they’ve burned through start-up capital. Hardy perennials become much-loved haunts, even too much so. There is a terrific range of Chinese cuisines, which once you get your bearings become far better destinations. The subway is mostly new and expanding rapidly. You shake your head in wonder as lines open annually. Shopping options are generally adequate, especially in sports, but anything cultural will be severely limited. Only adolescent boys say “Hullo!” and it comes as a surprise. There are foreign food stores, pricey enough to cause resentment when compared to back home but which you still want to buy everything from, anyway.

 

Tier 1

Tier 1 cities have substantial foreign populations, large enough and wealthy enough to as widely segregated: from fresh-off-the-boat English teachers to hugely rewarded financial and business executives. Social contempt and envy rise their head again, but within your own class there is still often a camaraderie. The opportunities out there can feel limitless – this can be intoxicating and induce a New York-esque pace of life and mania for work (it certainly did for me), though this seems to be just accepted as part of urban life by most young locals striving to make a living. Leisure facilities and opportunities can feel equally endless – restaurants as variable as Hungarian and Moroccan, bars from sleek Japanese whiskey bar to craft beer to rough and ready backpacker dives, every sport you can think of, most music styles amply catered to (jazz, for instance, is surprisingly popular), and events from hackathons to Chinese history seminars going on. This is dazzling. Social events however can have a certain rubbernecking quality to them. Daily life can sometimes be a grind – the subway, the pollution, food safety concerns. Yet for the size of the cities, they feel less hostile than London or New York, say – your neighbors will be friendly and the local shops and restaurants will be glad of your custom. But it can be hard to put down roots. People come and go, and property ownership or educational access can be intolerably difficult. Yet living there is an experience that will mark you forever.

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Each tier thus presents a unique experience, and time spent in them all gives a greater appreciation of China’s many facets. But this isn’t even to consider the countless distinctions between north and south, east and west, or coastal and inland. Happy exploring!

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Ex-Pat Media

This month two different ex-pat media outlets have had business difficulties. The Nanfang, an online “news, translations, original writing and commentary” covering the Pearl River Delta, threw in the towel just before its seventh anniversary and ceased publication Similarly, publisher Ringier washed its hands of City Weekend Beijing and Parents and Kids Beijing, declaring in a rather odd turn of phrase that “[I]t is with great optimism that Ringier China announces that the November issue of City Weekend Beijing and Parents & Kids Beijing will be Ringier’s last”, though it then suggested the magazines may continue under a new local partner. Nonetheless, the two announcements together suggest a trend in ex-pat media in China. So what’s happening?

While it’s of course a truism that print everywhere is struggling thanks to the internet, Chinese media for the most part seems to be doing just fine, thanks to continued economic growth and a rapidly increasing middle class which advertisers are willing to spend to reach. Ex-pat media is however more tenuous. China’s 2010 census recorded a foreign-born population of just 593,832, or just 0.043% of the total. Beijing has been named the most international city in mainland China, yet has only around 110,000 foreign residents staying over six months, out of a population of 22 million. That’s just 0.5% of Beijingers. Nonetheless, ex-pat media in Beijing had to some extent been flourishing, with Beijing home to a remarkable seven magazines around 2012 – the Beiijinger, Time Out, City Weekend, That’s Beijing, Agenda, beijingkids, and Parents & Kids Beijing.

But this abundance led to a pruning. Truerun Media’s Agenda shuttered in 2013, while their the Beijinger magazine went bi-monthly this year. After striving to cut losses by going monthly instead of fortnightly, Ringier passed on its two magazines City Weekend and Parents & Kids Beijing to a new owner Liwayway China, the local division of a company based in Manila, in their first foray into publishing. The Nanfang meanwhile simply gave it up, partly for personal, partly for business reasons. The two co-founders, Cam McMurchy and Ewan Christie, said, “Like many online publications, we haven’t exactly hit our revenue targets for a variety of reasons.” McMurchy told me:

We were not very proactive in seeking advertisers, and those that worked with us had good results. But Google and Facebook now dominate online ads, so it doesn’t make much sense for a business to seek out a single website and form a relationship.

If you want to do business in China, you really want to target the Chinese consumers and advertise on websites popular with them. The expat market is minuscule in comparison.

We did seek other forms of ownership, and we considered increasing our investment, but ultimately we felt the model was broken.

Despite the economic output and influence of the Pearl River Delta area, culturally it still trails far behind Beijing or Shanghai, and The Nanfang was a major part of the ex-pat voice there. But now it too has gone. A shame.

From a personal perspective I know that it hurts to close a publication. I edited Agenda Beijing from 2012 to 2013, and was the last to do so. The magazine just didn’t generate the advertising revenue to support even its bare minimum staff of myself, an assistant editor and whatever interns we could corral. For months I had been working 70-hour weeks, in a frenzy of networking, events, writing, interviewing, cajoling, meetings, pleading, training, editing, and proofreading… and then it was over. The magazine just wasn’t making any money and the owners wanted to pull the plug.

But publishing is always difficult. Around 90% of magazines do not make it to their first year. Most magazines and newspapers do not make a profit and thus need a benefactor to sustain them. Ex-pat magazines, by their very nature, are ephemeral, catering to an audience which lacks roots in the area and which will likely not settle there. Yet they have a vital role, introducing the city to newcomers and giving a feel for its culture. Here’s an example. My wife and I married in Tianjin in 2009. Armed with a copy of Tianjin Plus, we visited literally every single four and five star hotel in the city, seeking somewhere that could cater to our Scottish-Chinese wedding and host the fifteen members of my family who came for it. (For the record, it was the Tianyu Hotel on Diantai Lu). And how else could I have known about Baiyi Teppanyaki, or Trueman’s, or Bawarchi, for example? Every issue I scanned the listings looking for somewhere new and interesting to try.

Ex-pat magazines and websites will of course soldier on. Their voices are invaluable, the function they serve essential to a large city. Done right, they can flourish, bringing together readers, city culture and commerce in a mutually beneficial community. Here, then, is a toast to ex-pat magazines, their exploration, their relish, their desire to share information. Every single issue is a labor of love, for you, the reader. Thank you for reading, as always.

 

Published in Business Tianjin

Gaming The System – And Breaking It

Via Global Times

An American friend of mine (Matthew – he’s on weibo, at @damaxiu) recently posted an interesting analysis of behaviour in McDonalds in Tianjin. Several downtown branches had initiated a new system, where customers ordered at the cashier counter, took a ticket, and had to wait to the side, in front of a pick-up counter, waiting for their ticket number to come up on a screen.

The new system worked – for a time. Customers obeyed as staff asked them to keep clear of the pickup counter and wait for their order to be called. But after a few weeks of the new system operating as planned, customers effectively broke it by crowding round the pickup counter, impatient to get their order, to the point that they blocked other patrons from getting their orders in a timely manner, or even took the wrong food.

Matthew then discussed how “the situation is actually a cooperation game with two easily identifiable equilibria: (1) the Pareto optimal equilibrium desired by McDonalds, which is all customers waiting across from the pickup counter and giving workers time and space to fulfil orders; and (2) the equilibrium customers at lunchtime have arrived at, a dominant “crowding strategy” with zero sum assumptions”. (He’s a smart guy). So faced with two strategies (“wait-as-requested” or “crowd-the-counter”), whether through impatience, group behaviour, or fear of losing out, the better option has succumbed to one causing aggravation, harassed staff and mistakes.

This sort of thing, unfortunately, is one of the most recurring and frustrating aspects in China of life: the way that Chinese people will game any system to destruction. A system is any kind of social convention, where certain behaviours are known and expected. And if there are expectations of behaviour, some people will try to use that to their advantage. But it doesn’t work when everyone is trying to get ahead. Things fall apart.

To take some other examples: I once worked on the top floor of a 16 storey building. At lunch time, the elevators would become crowded, everyone seeming to have lunch at the same time. So people on the higher floors would enter the elevator when it was still going up, in case it was full when going down. People from lower and lower floors followed suit, so that by the time it got to the sixteenth floor (hell, by the time it got to the tenth floor), it was always jam-packed, and unable to take any more passengers. Or another example: to see a doctor at the hospital, you have to buy a ticket beforehand. But because everyone knows they will sell out early, you have to go as early as possible. So everyone lines up hours before the hospital even opens – and so the tickets, of course, sell out instantly. (And this is before we even consider touts, or why there aren’t appointment booking systems). Or how, when driving, everyone will weave in and out of lane, trying avidly to get ahead, making drivers behind them brake and thereby causing the traffic to choke up quicker than if everyone had simply stayed in lane. Or how, at some buffets, people seem to act as though the food is running out, thus causing everyone to panic and grab as much as they can, causing the food to run out. Even the stock market can be understood this way. Investors pile in on changes in share value rather than the bottom line – leading to arbitrary booms and busts.

For the most part I applaud the tenacity and ambition of the Chinese. So many people are striving to get ahead, to develop. And in many situations, if people cooperate, it’s a non- zero sum game – everyone benefits when the rules are followed. Elevators aren’t full when they shouldn’t be, roads run smoother, McDonalds get orders out faster. But if everyone is battling to get ahead, the behaviours and expectations they should observe collapse. When there’s a finite amount of goods to go around, it is unpleasant to see people trampling down systems in their urge to grab some. Worse than that, it’s just counterproductive. You’re not gaining an advantage – you’re destroying the very methods that everyone is relying on. And that makes everyone

 

A version of this was published in Global Times

“You Don’t Understand China!”

Via echinacities
Via echinacities

There is a certain type of foreigner living in China who gains enough creditability in their understanding and explanations of life in China here that they get termed “a China hand”. Usually this involves a certain niche area of knowledge. China is simply too big, too populous and too ancient for anyone to have anything more than one area of expertise. Often China hands effectively act as ex-pat community leaders, helping newbies understand and so appreciate this strange new land. (Let’s just give a shout out to people like Kaiser Kuo formerly of Sinica and Baidu, Bill Bishop of Sinocism, historian Jeremiah Jenne, Beijing magazine-magnate Michael Wester and the many others who have provided help to everyone fresh off the boat).

Yet even the China hands occasionally receive the accusation that every foreigner in China eventually gets – “You just don’t understand China!” For example, you’ll be discussing some aspect of life in China with a local friend, trying to understand it, and then out it comes – “You just don’t understand China!” (The ironic thing is that your friend will never then explain what you apparently can’t understand).

Now of course, as a foreigner, you have a far shallower knowledge of any country you move to. It is impossible to replicate the absorption in a culture that comes from a domestic parenting and education. It might also be, perhaps, nearly impossible to fully appreciate the class basis and the cultural background of people’s interactions. (This can be one of the fascinating aspects of life in the UK, where class gradations are measured with a unique granularity).

But this does not, I think, mean that China is impossible to understand for the foreigner. Most of us when we come to China read up on the history and the culture. We travel and we get the chance to talk to people – a far broader range than back home, in many cases. We are in the fortunate position that many locals actually want to talk to us; there’s no Parisian froideur or “Seattle freeze” here. For sure, anyone living here has to adapt. I’ve know one or two who could not and returned after less than a year, after enduring endless baffled frustration, but anyone staying longer will find themselves altered, perhaps radically. And there’s also the way that coming to understand a new country is one of the great joys of living abroad. What at first seemed like incomprehensible social rituals and behaviors gradually become explicable. Social arrangements and national institutions start to take the inevitability and legitimacy that they have back home. And this is how you adapt.

So to have this accusation flung at us can be frustrating. Take for example a friend of mine, who write a tongue-in-cheek blogpost comparing some Chinese and US political leaders. He’s very well read in Chinese and US politics; that’s his thing. But an acquaintance of his, a local Chinese woman, took strenuous offense at some of the references, writing in great detail about the sorrier details of Chinese political history – of which, of course, my friend was well aware. (Even I knew them). The episode was insignificant in itself, but it was another demonstration of this rather puzzling certainty that foreigners do not understand China.

Where does this belief come from? It might be something to do with the oft-reiterated view that China’s political structure is right for China’s stage of development – in other words, that China is organized for the way that China needs right now. While this might be true, it can be taken to mean that only China can know what China needs. But this doesn’t really follow. We can all understand rules, systems and cultures. China’s political structure, for example, is not unique, but was adapted from the Soviet system created under Lenin. The Chinese Constitution is freely available. The Chinese economy is still subject to economics. (Though, of course, advice on it tends to be highly partial). “Socialism with Chinese characteristics” can be studied by anyone paying close attention to domestic and foreign media. Chinese history is wonderfully rich thanks to the achievements of its bureaucrats and writers. And Chinese society hits you immediately you enter the country, with all its energy and earthiness. (I’ve never forgotten my first car journey upon leaving Pu Dong airport, where I saw a bus undertaking up the motorway hard shoulder. That’s when I knew I wasn’t in Kansas any more).

In the end, people are people. We work, we raise families, we socialize, we eat. How a society organizes itself can differ greatly, but the varieties of human association are not unfathomable. You think foreigners can’t understand China? We think you can’t understand foreigners, if you believe that is true.

 

A version of this was published in Global Times

China, Football and Business – What’s Going On?

The football off-season, after Euro 2016 and before the start of the 2016-17 calendar, is always exciting, with transfers, appointments and resignations sustaining the interest (and newspaper back pages) before the actual football matches resume. But for those with an interest in China and soccer, this summer has been unusually interesting. China has been getting into European football in a big way. We have started to become accustomed to big-money transfers to the Chinese Super League, with big-name managers and players arriving first in a trickle but now in a flood. These once tended to be professionals on the downwards slope of the career, such as Nicholas Anelka or Paul (“Gazza”) Gascoigne, avowing their excitement at building the game in the world’s most populous country, and more often just seeking one final big payday. But now we’re seeing Chinese businesses take over top-level football teams wholesale, in a way that suggests a concerted strategy, and elite players are now coming to play in the Chinese league at the peak of their career. So what’s going on?

Football is of course big business, and has been since 1992, when the UEFA Champions League was inaugurated, giving a mid-week European league sold around the world. Many clubs turned from sporting associations to PLCs. Since then income and spending have boomed: the world record transfer has risen on average by 37% every year, or 19.5% adjusted for inflation – from £10,000,000 in 1992 (for Jean-Pierre Papin from Marseilles to AC Milan) to £89,000,000 in 2016 (for Paul Pogba from Juventus to Manchester United). Financial clout has until now been restricted to the major European teams, who have the ticket sales, TV money, sponsorship and commercial revenue (sales of replica kits, etc). Real Madrid, for example, is the world’s richest team, with turnover of €577m (£439m) in 2014/15.

But this looks to have changed, as the Chinese league has invested major cash on players in their prime. Shanghai SIPG splurged £46million on Brazilian striker Hulk, making him the third highest paid player in the world (behind only Messi and Ronaldo), at £340,000 a week; Jiangsu Suning signed Alex Teixeira for £38million move, and added Chelsea’s Ramires at £25million; Shandong Luneng spent £13million on Southampton’s Graziano Pelle (he’s now the world’s fifth highest paid player); and Guangzhou Evergrande splashed £35m to prise Jackson Martinez from Athletico Madrid. This is serious investment: and unlike players lured to Qatar or the US Major League, they are all in their prime, all being internationals and having been starring for their former teams.

Where’s all the money coming from? Most teams have heavyweight corporate backing. Nanjing’s Jiangsu Suning are, not surprisingly, owned by Suning Appliance Group; Guangzhou Evergrande is fully titled Guangzhou Evergrande Taobao, reflecting the two owners, Evergrande Real Estate Group and Alibaba Group; Shanghai SIPG is a shortening of Shanghai International Port Group Football Club, in deference to their owners. Also, the value of TV rights for the Super League is increasing exponentially. Media tycoon Li Ruigang raised many an eyebrow when he paid eight billion RMB (US$1.3bn) for five year’s coverage of the Chinese league, but online video company LeEco announced in February it had paid Li RMB2.7bn for just the first two years).

Investment by local industry is nothing unusually in football, of course, and rich proprietors are also common, with Chelsea’s Roman Abramovich being perhaps the modern game’s foremost oligarch. What is unusual is to see such investment so concerted, to so many teams at the same time. But this is only one pincer in the Chinese effort. Numerous European clubs are being bought by Chinese businessmen. Chinese investors have bought both AC Milan and Inter Milan. In the English league, Aston Villa, Wolverhampton, and West Bromwich Albion have all been bought by Chinese investors, whether individually (Villa’s Tony Xia) or by an investment group or business (as with international conglomerate Fosun International buying Wolves). In France, electrical components manufacturer Tech Pro bought FC Sochaux, while a Chinese/US consortium bought OGC Nice. In Spain, probably the world’s best league, Espanyol sold a 56% stake to auto manufacturer Rastar Group, while Chinese firm Link International Sports bought Granada CF.

So many acquisitions show that China really means business in football. Interestingly, none are buying at the top of the market. Only one of the English teams is in the top division, and while the Milanese teams are big names, Italian football is the poor relation of the Big 5 European leagues, with aging stadia and moribund attendances. This may just reflect a dipping a toe in the water of foreign football ownership. After all, many would-be proprietors have been exhausted by the insatiable demands of the game – even billionaire Randy Lerner found Aston Villa too much for him – just as companies making international acquisitions do best when they start small. But the ambition is clear. China wants to do football, do it big, and do it well. It wants the Super League to attract the best players, and for this to improve the standard of domestic players for the international team. The question, for Chinese domestic football, is how sustainable this is. The fans will have to buy into it, and be willing to spend sharply increased amounts to watch what is for now a curious mix of international stars, journeymen imports and domestic players. How willing is Chinese industry to pump cash into domestic clubs? The fact that so many have do so at the same time suggests a national strategy, from the very top. Will this improve Chinese players? With facilities, coaching and competition, they can only improve from their lowly position in the FIFA rankings. They are starting from the bottom, so the only way is up. How far they can go is however anyone’s guess.

How (Not) To Write About China

chongqing-women-apartment

Attention new writers on China, and writers new to China, too. No doubt the Middle Kingdom is so dazzlingly different, so esoterically exotic, so alliteratively awesome, that you’ll want to write about it. Here, then, is a cheat sheet that should enable you to write an article for the local media after you have visited for a week.

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China is “on the rise”, so talk about the good things you have seen, like the new buildings in the center of Beijing or Shanghai, and the new airports and subways, rather the bad things you have seen, like the toilets and the lack of drinkable tap water. Thomas Friedman’s New York Times columns are a great exemplar here: come in, rhapsodize about new infrastructure, leave. The new transport infrastructure you can equate to a country “on the march” – that sounds great, sort of Marxist or something. Don’t mention the vast differences between urban and rural life, or between the different provinces. Most people won’t know about them anyway. If you need to talk about agricultural areas, mention “paddy fields”. Don’t mention the fact that China is the world’s largest producer of potatoes. Keep to that narrative!

China is “a big country”. But if you want to describe people you met, keep to a few familiar types. The retired man hanging out in a hutong will be perceived to have some sage-like wisdom. It’s a shame he won’t have a beard, but no matter. A female university graduate, ideally pictured using with her iPhone outside Starbucks, will represent the young cosmopolitan urban professionals. A middle-aged male middle-manager would round things out nicely – but these guys drive rather than taking the subway, so they might be hard to find. So go with a taxi driver, they always know what’s happening. Don’t ask them what they think about Didi. And don’t start confusing readers with less familiar types, like the rich bored housewife (might seem too Western) or the diaosi guys (what’s up with them anyway?).

In your descriptions of ordinary people, they should be “striving”, “busy”, or “on the move”. Don’t write about the epidemic of childhood obesity. Don’t mention the retired guys sitting outside the apartment complex playing cards all day, and how they sing songs of praise every Sunday to the Communist Party for selling off housing stock and making them fabulously wealthy. Write about students studying, or about workers working, because that’s all that Chinese people are known to do – they just work so damn hard compared to the idle west. This helps to play up on fears of China having the largest economy. Don’t describe shop staff who refuse to help or threatening chengguan.

China is known to produce great businesspeople and negotiators. (You can add something about the Chinese game “Go” here, if you like). Where better to describe this than Beijing’s Silk Market? Here you can perfectly describe how you got a great deal on a knock-off Gucci handbag, just two-thirds the price of the real thing. Here too you can meet and describe how many foreigners come to China. Why are there so few locals there? (But that’s a question for another day). You can also talk about the scams you fell for: the teahouse scam, the art-exhibition scam. Advanced writers (especially on business), talk about business etiquette, like how to receive a business card or how to comport yourself during a banquet. Ignore the fact that Chinese businesses look to profit first and foremost, and that customers reading your book won’t learn much about how there are fresh fish to be feasted upon.

Chinese may be “developing fast”, but is known to “lack innovation”. You can describe Baidu as a “Google knock-off”, WeChat as comparable to WhatsApp, and Weibo as “Twitter-like”. Don’t mention the new services these products offer, from translation to ticket-purchasing. If you talk about Chinese industries, keep to the low-cost manufacturers, and make them sound as dreadful as possible. Ignore the fact that most workers there were happy to escape their agricultural jobs. Don’t write about high-tech companies like Lenovo or Tencent, who are in the vanguard of Chinese innovation. They just confuse things.

China has a “rapidly growing middle class”, so feel free to talk about the “new consumer class”, and the developing “domestic demand”. Write about all those “glittering malls” and hotels, and the “luxury” restaurants. Don’t mention how empty most of them are, unless you are writing about the ghost towns, or the fact that domestic consumption is still remarkably low by international standards. You can mention these things if you want to be a China bear, always predicting collapse and chaos, but be warned that you might end up forever forecasting apocalyptic turmoil, with China still stubbornly growing at a decent clip.

Finally, don’t write about you know what, or – well, you know what.

The e-Commerce Vision of Life in China – and the Reality

If the Western internet might, as some have claimed, have been developed by pornography, the Chinese internet has been led by e-commerce – and the desire to make money. Modern Chinese innovation and way of life are perhaps best exemplified by the giants of e-commerce, the BAT trinity of Baidu, Alibaba and Tencent – just as the American era was exemplified by the motor car and the suburban lifestyle it enabled.

What is intriguing about the e-commerce apps so popular in China is they aspire to a sort of frictionless life, where needs are instantly met by suppliers, and where goods and services are delivered without fuss or difficulty. Laudable aims, but it’s interesting how they aim to remove difficulties in life in China that really could be managed or removed if consumers had greater say. The apps represent a sort of great leap forward for consumer satisfaction, bounding over the logistical and behavioural issues that make every day life such a hassle.

Let’s take the bank apps for instance. Alipay is great, far in advance of the app I have from my UK bank, with its simple and convenient ability to transfer money, pay for an Uber cab, order take-out food, get online movies and games, pay for Tmall or Taobao purchases, lottery or air tickets, or even give via digital “red envelopes”. And yet compare that to the grinding difficulty of achieving anything in the actual bank branches – where, if you lose your bank card, it’s somehow less trouble to close your account, open a new one and change your salary direct debit than to issue a new card. Or so the Bank of China seemed to think when it happened to me. As for transferring money – well, if you asked me about losing a kidney or trying to send money back home, I’d have to have a proper think.

There are a number of healthcare apps similarly aiming to bring together practitioners and patients in a simple and convenient transaction. Alibaba, Baidu and Tencent have been particularly active in this field, acquiring startups and technology in what they’re clearly betting will be a strong economic growth area. Quyiyuan, for example, aims to provide appointment scheduling, diagnosis checking, and making payments. Chunyu Doctor allows users to connect with professional doctors, to seek diagnoses on potential diseases and symptoms for free. But – again – it’s little wonder that people are seeking better ways to operate access to healthcare. Why do so few hospitals allow you to phone or go online to make an appointment? Why is it necessary to queue up to buy a ticket at 6am? (Even more grating is the meibanfa shrug of the shoulders by both hospitals and police towards the touting problem, both declaring it’s not their responsibility).

Taxi apps similarly – why, before Didi Chuxing and Uber was it necessary to stand at the roadside, arm outstretched like a slot machine lever? Even worse was the way you stood hoping that a cab came along before someone brazenly stood a few metres in front of you to claim it first. And god forbid you want a cab in some popular resort or nightlife area, where gougers would be out in force. No doubt cab-driving isn’t an easy way to make a living, but there had to be a better way to operate than that. And so Uber and Didi Chuxing have proved, with the apps claiming 1 million and 4 million rides a day in China, respectively, across 200 cities. Which is nice, but you wonder why the existing cab companies were happy to stagnate into redundancy.

Beyond, apps are transformed education, dating, job hunting, property, and wealth management (to take a few examples). They like to describe themselves as disruptors, obviating the need for flabby layers of bureaucracy by directly connecting consumers and suppliers (for a slight fee). Certainly, in China, one can see their appeal: existing supply chains are often lumberingly inefficient, or just absent. (Western supermarkets have found China tough going precisely because they rely on efficient, just-in-time supply chains). That inefficiency grinds away, making every transaction needlessly difficult, clogging up time, and increasing consumer frustration. The frictionless world the apps create is one that leads directly to the consumer society that the Chinese economy needs to and promises to bring about. The apps herald an era of everything being instantly available and consumer satisfaction being the driving force for the economy. This will be a real revolution in how China operates, transferring power from producers to consumers. Already, there have been reports of conflicts between regular cabbies and Uber drivers. The shakedown of existing, comfortable supply patterns will discomfit some. But for the majority, it promises a more open, accountable and efficient future. It will be fascinating to see how these methods take hold, and to what degree they are allowed to, on the broader economy.

Published in Business Tianjin

Jack Ma, Counterfeits and IP: Giving It Away

Via Global Times

Jack Ma’s tenacity and competitiveness were great assets when he was building Alibaba Group from nothing to the ecommerce giant we know today. But there can come a time when that very pugnacity, on the behalf of a market leader, is self-defeating. His speech last week at an investor conference at Alibaba HQ in Hangzhou was a perfect case in point. But the speech perhaps revealed rather more than he may have intended.

Ma’s speech was no doubt intended to tweak the noses of Western analysts and the International Anti-Counterfeiting Coalition (IACC), both of whom have been putting pressure on Alibaba Group this year, as reflected in its share price falling 11% over the past year. On May 13th, Alibaba Group was dropped from the IACC, just a month after joining, with the IACC board claiming the move was “in consideration of some of the concerns raised by our membership.” Michael Kors fashion group described Alibaba’s membership of the IACC as giving “cover to our most dangerous and damaging adversary.”

Fighting talk, then, and Jack Ma has rarely been one to turn the other cheek, as eBay and Yahoo! will attest. His speech last week however not only struck the wrong note – the classic public relations move would have been to strike a note of humility and to emphasise the work Alibaba is doing to prevent and intercept counterfeits on its platforms. But no. Ma struck back aggressively, saying, “The problem is the fake products today are of better quality and better price than the real names. They use exactly the [same] factories, exactly the same materials but they do not use the names,” he said, adding, “It’s not the fake products that destroy them [luxury brands], it’s the new business models.”

This received a scandalized press, shocked at Ma’s equivalence of counterfeits and the genuine. Ma perhaps was intending to suggest that the only reason counterfeits are so popular is because they can do it better and cheaper than the genuine manufacturers, who ought to up their game so that people don’t need to buy fakes. The “new business models” he mentioned are of course the Alibaba model, where sellers can operate online for the barest fraction of the cost of an expense retail outlet in a premium shopping location, with the savings to be passed to the consumer. But by saying that fakes are comparable to the real thing, Ma also seemed to be suggesting that there was a free market, as it were, in each product, with counterfeits and the genuine article competing in terms of quality and customer satisfaction.

This fundamentally misunderstands how product are developed and sold. Of course it’s easy to produce high quality fakes, and at lower prices: there’s an already-existing template. Counterfeiters do not have to bear the costs of the genuine brands: they have no designing, no prototypes, no advertising, no customer feedback, no endorsements, no marketing, no materials sourcing. These higher-order components of the luxury market are precisely where value, such as it is, is generated – not in the manufacturing. Without advertising, sponsorship, endorsements and marketing, Gucci and Louis Vuitton and all the others would be nothing. They don’t manufacture fashion items – they generate meaning. Similarly, the retail experience – smoothly seductive, expensive, exclusive – is part of the branding.

The lack of respect for IP is often seen in developing countries. It’s only natural to value that with which you are more familiar, with the international division of labor split between high-end intellectual property and lower end manufacturing. But with China striving urgently to ascend the value chain of manufacturing by encouraging high-tech innovation, IP has to be given more respect. China’s e-commerce and tech products are now some of the best in the world, with WeChat superior to Whatsapp and taxi app Didi Chuxing more than holdings its own against Uber. But for Chinese innovation to be taken seriously, there has to be sufficient protection for those who spend the time, energy and money to come up with quality products.

Steve Jobs’ famous business strategy was that you didn’t need to market or focus-group great products; they created their own advertising and customer base. The same is true of the reputation of Chinese innovation: the products create their own narrative. Jack Ma’s comments unfortunately show that even some at the top of Chinese business don’t recognize the importance of intellectual property. Until that changes, the reputation of Chinese products will suffer.

 

Published in Global Times

How to Rate an Ex-Pat: A Simple Guide to Foreigners in China

“So, how long have you been in China?” is often one of the first questions you get when meeting another ex-pat. Just as you can tell a lot about someone from their job, so the length of time you’ve spent in China determines your attitudes, capabilities and positions on the Middle Kingdom.

Three months

Wow, this place is amazing! The food is SO cheap! I got a bowl of noodles in a restaurant for five kwai! And the beer – just RMB3 for a bottle of Qingdao! It’s all so different from back home. The buildings are so tall, there are so many people, it’s all so fascinating. I’m so privileged to be in a country of such history and when is developing so fast. And the people are so friendly! I love it! I email all my buddies back home all the time, to tell them everything I’m experiencing. They love it! My company set up everything for me so I haven’t really had to handle much Chinese stuff, though I’m sure it’ll be easy enough. I can’t wait to visit Beijing’s Forbidden City and see the Great Wall. I’ve got so many nice photos of amazing stuff. This has been an incredible experience for me.

Six months

Goddamit! I can’t find anything I need! I can’t get any cheese, or maple syrup, or Hershey’s chocolate. I really miss my friends back home, but I can’t use Facebook or Twitter, for christ’s sake. And why is everything I like so expensive? It’s more expensive to buy a laptop or iPod or Levis here than back home! How can people afford it? And just buying things isn’t that easy either. It took me an hour to buy an external hard-drive, and I took a taxi the other day and the driver dropped me some place that totally wasn’t where I asked. Why are all the shop and restaurant staff so unhelpful? I can say “Ni hao?”, “Ting bu dong” and “Duo shao qien?”, but not much more than that. It’s all too hard for me! I read “Wild Swans” – so sad. Beijing was pretty damn impressive, though I’m not sure I’d like to live there. Too many people, too big, but Sanlitun is a really cool place – lots of nice bars. Looking forward to visiting Shanghai next, too.

One Year

OK, I’m getting a hang of this. I can haggle prices with shopkeepers and know where to buy the stuff I like. I can tell you all about VPNs and proxies and have dozens of cheap DVDs bought from that friendly guy down the street. I got the first three series of “House” for CNY10! I’ve got some Chinese friends and they’re really nice, even if they drag me to KTV more than I’d like. And I love chuar! I can even tell the guy what to cook in Chinese – not bad, eh! I’ve visited Shanghai, Beijing and Qingdao, all fascinating places, but I really want to visit Tibet and Hong Kong, and maybe go on holiday to Thailand too. My Chinese is alright – I managed to give the taxi driver directions to my flat the other night, no problem! I still don’t know too many characters, though I am getting to recognise more and more of them above shops and everything. I’m studying Chinese in the evening and have a tutor, which helps. I now have a Chinese boyfriend/girlfriend, and things are going well, though sometimes there are breakdowns in communication.

Three Years

How long am I going to be here? What will I do when I go back? Will I ever go back? Will my Chinese partner get a visa? Man, the healthcare here is terrible – what if we decide to have a child? I know where all the international schools are, and can discuss their relative merits with other ex-pats who are parents. Beijing and Shanghai – pah! That’s just the tourist stuff. You want to visit Xian or Yunnan or Hainan to experience the real China, and the Harbin Ice Festival is pretty amazing. My Chinese is getting pretty damned good now – I can chat away with the locals, and tell my ayi what to do when she comes round. As for those China newbies all excited about being here – god, they’re so naïve! I remember when I was like that – ah, things were so different then. Maybe I should write a book about my time in China. It’s been some experience.

Five Years+

你已经来这里好几年了,中文也很不错。你长期在国外工作,所以能给刚来中国的人提出大量的建议和帮助。这是坎坷的但也是精彩的旅程,你做的很出色。

Playing the System – and Breaking It

 

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An American friend of mine (Matthew – he’s on weibo, at @damaxiu) recently posted on Facebook an interesting analysis of behaviour in McDonalds in Tianjin. Several downtown branches had initiated a new system, where customers ordered at the cashier counter, took a ticket, and had to wait to the side, in front of a pick-up counter, waiting for their ticket number to come up on a screen.

The new system worked – for a time. Customers obeyed as staff asked them to keep clear of the pickup counter and wait for their order to be called. But after a few weeks of the new system operating as planned, customers effectively broke it by crowding round the pickup counter, impatient to get their order, to the point that they blocked other patrons from getting their orders in a timely manner, or even took the wrong food.

Matthew then discussed how “the situation is actually a cooperation game with two easily identifiable equilibria: (1) the Pareto optimal equilibrium desired by McDonalds, which is all customers waiting across from the pickup counter and giving workers time and space to fulfil orders; and (2) the equilibrium customers at lunchtime have arrived at, a dominant “crowding strategy” with zero sum assumptions”. (He’s a smart guy). So faced with two strategies (“wait-as-requested” or “crowd-the-counter”), whether through impatience, group behaviour, or fear of losing out, the better option has succumbed to one causing aggravation, harassed staff and mistakes.

This sort of thing, unfortunately, is one of the most recurring and frustrating aspects in China of life: the way that Chinese people will game any system to destruction. A system is any kind of social convention, where certain behaviours are known and expected. And if there are expectations of behaviour, some people will try to use that to their advantage. But it doesn’t work when everyone is trying to get ahead. Things fall apart.

To take some other examples: I once worked on the top floor of a 16 storey building. At lunch time, the elevators would become crowded, everyone seeming to have lunch at the same time. So people on the higher floors would enter the elevator when it was still going up, in case it was full when going down. People from lower and lower floors followed suit, so that by the time it got to the sixteenth floor (hell, by the time it got to the tenth floor), it was always jam-packed, and unable to take any more passengers. Or another example: to see a doctor at the hospital, you have to buy a ticket beforehand. But because everyone knows they will sell out early, you have to go as early as possible. So everyone lines up hours before the hospital even opens – and so the tickets, of course, sell out instantly. (And this is before we even consider touts, or why there aren’t appointment booking systems). Or how, when driving, everyone will weave in and out of lane, trying avidly to get ahead, making drivers behind them brake and thereby causing the traffic to choke up quicker than if everyone had simply stayed in lane. Or how, at some buffets, people seem to act as though the food is running out, thus causing everyone to panic and grab as much as they can, causing the food to run out. Even the stock market can be understood this way. Investors pile in on changes in share value rather than the bottom line – leading to arbitrary booms and busts.

For the most part I applaud the tenacity and ambition of the Chinese. So many people are striving to get ahead, to develop. And in many situations, if people cooperate, it’s a non- zero sum game – everyone benefits when the rules are followed. Elevators aren’t full when they shouldn’t be, roads run smoother, McDonalds get orders out faster. But if everyone is battling to get ahead, the behaviours and expectations they should observe collapse. When there’s a finite amount of goods to go around, it is unpleasant to see people trampling down systems in their urge to grab some. Worse than that, it’s just counterproductive. You’re not gaining an advantage – you’re destroying the very methods that everyone is relying on. And that makes everyone worse off.