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Archive for March, 2008

Survey: Testing Affects Price

March 29th, 2008

The Wall Street Journal ran an article on an American company producing quality suits in China. The suits are nearly as good as high-end suits you find made in Italy. Interesting piece, but let’s set aside so that I can introduce a survey.

Williams Loft, a distributor of mattress products, ran the recent survey. The company sent out requests for quotation (RFQ) to twelve suppliers in China. Each was given the exact same set of specifications. The company did nothing with the quotes, but went back to the same factories six weeks later. On the follow-up, they mentioned in passing that they would be verifying quality through a testing agency. Guess what the impact was of mentioning a third-party tester: Ten out of twelve factories immediately moved to raise prices by an average of 20%. Why would a factory raise its prices after learning that customer would be checking quality?

Back to the WSJ article where the idea is that quality is up. I’m not so sure much has changed. Manufacturers have for some time now been in the position to make a product at virtually any quality level. The bigger variable is whether the customer is getting what has been ordered.

Links:

H/t: China Law Blog

Forbes: Dealing With China’s ‘Quality Fade’

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China’s Faltering Security Forces

March 24th, 2008

In the comment section on a recent post, I suggested that events in Tibet revealed an amount of ineptitude among Chinese leadership.

I suspect that patience has been confused with indecisivenesses. When Beijing made its move, it made its move all right. There is nothing subtle about military force.

The New York Times ran a piece that is worth a look.

The absence of police officers emboldened the Tibetan crowds, which terrorized Chinese residents, toppled fire trucks and hurled stones into Chinese-owned shops. In turn, escalating violence touched off a sweeping crackdown and provided fodder for a propaganda-fueled nationalist backlash against Tibetans across the rest of China that is still under way.

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Monks Need Stuff, Too

March 21st, 2008

Tibet is falling apart because some are poor, suggests Abraham Lustgarten in a Washington Post article.

“Tibetan culture is so deeply rooted here,” the owner told me. “I don’t think it will be diluted — it’s important for business.” Yet looking around, I saw no Tibetan employees, and Tibetans represented only a smattering of customers. The bar served mostly Chinese businessmen and army officers, whose tabs could run as high as $2,000, several times the per capita income in Tibet.

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China: Patient, Subtle and Sophisticated?

March 21st, 2008

In a recent blog post over at TheAtlantic.com, James Fallows described Chinese government leaders as (1) patient, (2) subtle and (3) sophisticated…

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Alibaba Stock Tumbles

March 18th, 2008

Alibaba shares have fallen to below their IPO price. It took a few months, but, as we suggested, it was inevitable. This IPO was the largest of its kind, and it was promoted heavily by the media. At the very height of the hype - when everyone was asking how Jack Ma did it - we asked whether the company was really worth US$7.8bn. Never mind the run up that followed the stock issue; the price put on the initial offering was itself too rich.

The problem has always been with the company’s core business - Alibaba.com. As someone involved in trade and manufacturing, I didn’t get it anyway. The website is nothing more than a directory. The company collects a simple fee from manufacturers who wish to list their company’s name and details. It’s not like eBay where the website gets a small slice of every transaction. The unit’s revenue model depends on having lots of factories willing to list for a fee.

Many recent reports have claimed that factories in China are going out of business. I believe that these reports are exaggerated, but think about it for a moment. If there will be fewer factories, what would that do to revenue at Alibaba.com? The stock has fallen in part because of failed earnings expectations, but investors maybe are putting it all together. Alibaba.com’s star could not be rising if the number of factories in China is falling.

Related links:

Irrationally Exuberant: Is Alibaba.com Really Worth US$7.8bn?

Cigarette Smuggling: Alibaba & The Forty Thieves

Guangdong Manufacturers: “The Reports Of Our Death Have Been Greatly Exaggerated”

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Vanity Fair Article

March 16th, 2008

An article in Vanity Fair makes for some very good reading. It’s written by William Langewiesche. Here’s a piece:

Cleaning up for the Olympics is a time-honored tradition. The Germans, for example, swept Berlin’s Gypsies into prison camps and temporarily took down the signs banning Jews from public places. They even loosened their restrictions on homosexuality, demonstrating the largesse of the Fascist creed while personally serving no small number of Nazis as well. For the German government, it became crucial that the Olympics do Germany proud. China is not Nazi Germany, and indeed is led by a particularly pragmatic regime, but its political culture is shallow, and it seems to have been overcome by a similar mood.

Here’s another bit:

The games will open on August 8—on 8/8/2008—at 8:08 p.m. Eight is considered to be a lucky number because in Mandarin it sounds like the word for “fortune” or “prosperity.” Beijing will be well mannered, and I myself will gladly be gone. August 8? I think I’ll head offshore for a few days of sailing on the far side of the world, safely beyond television range.

I know a number of China-based people who are of this mindset. They don’t want to be anywhere near the Games this summer.

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China Wants More

March 15th, 2008

China wants its foreign companies to do more, the Shanghai Daily has reported. About 3,000 people were surveyed, many of whom work for large multinational corporations. About 90% of those who responded felt that MNCs had made a contribution to China’s development, but only around 22% found that these same companies were doing enough today. The poll also suggested that nearly 80% saw evidence of discrimination against local employees within these companies.

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John Fraser on Tibet

March 15th, 2008

The Chinese: Portrait of a People was written by John Fraser, a journalist with Canada’s Globe and Mail back in the 1970s. While it’s been some time since I looked through the book, when riots broke out in Lhasa, I thought of it. Some excerpts, in case they are of interest.

On how the Chinese then felt about living in Tibet:

“Most Chinese who are sent by the central government to Tibet resent the posting and have to be bribed with extra pay and perquisites. As soon as they can return to the interior, they do so. If they are required for long periods, they make sure their children get a proper Chinese education back in Sichuan province or one of the coastal cities. The Tibetan diet, which rests on the sturdy foundation of yak’s milk and its by-products, strikes the Chinese settlers as revolting, and at great expense the government imports more tolerable fare from the interior.”

On China’s inalienable rights:

“The myth of Chinese respect for Tibetan history and culture was so easy to dissolve as to be laughable. Literally, every historic site or religious buildling to which we were taken had been chosen by our Chinese hosts not to give us more insight into Tibet but to point out the ‘inalienable right’ of China to rule Tibet.”

On bad moods in Tibet:

“Visitors are told that the high altitude of Tibet often puts people in a bad temper, although I suspect it was more to do with the high hypocrisy of the Chinese Government.”

On the inevitability of continued conflict:

“Since they won’t adopt Chinese culture, they will always - however subliminally - represent a threat to the Chinese government and therefore have to be controlled. Hence the policy. Anyone with an open mind and honest eyes learns quickly that it is a policy of containment first, ultimately leading to absorption.”

Oh. There was one more detail that the book had introduced. The Chinese had closed all but about 10 of 16,000 monasteries by 1959. This was a statistic made available to foreign correspondents in the summer of 1979.

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Tibet: What’s Coming Next?

March 14th, 2008

It seems that all hell is breaking loose in Tibet. It’s been nearly 20 years since Lhasa has seen such violence and rioting, and Chinese political leaders must at this very moment be contemplating their next move. NPR’s Anthony Kuhn ran an interesting segment, pointing out one detail worth a mention:

“…when the last wave of major unrest shook Tibet — in 1989 — the region’s Communist Party boss did not hesitate to unleash a harsh military and political crackdown. That boss, Hu Jintao, is now China’s president.”

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The 2008 China Games And The ‘Björk Cork’

March 13th, 2008

Nice article in today’s International Herald Tribune by Howard French. While China insists that the world not make politics out of the Games, China in fact sees everything related as political.

“Foreigners who persist in touching upon what are quaintly known in China as sensitive issues, thereby putting the government on the spot, risk being treated as unfriendly to the country, or even downgraded further to the status of enemies.”

Speaking of those who persist on touching upon sensitive issues, I dropped a quick post here a few days ago, suggesting how ridiculous it should seem that China claims “hurt feelings” over Björk. In the IHT article, French noted that it was simply ridiculous propaganda (I still think it was more interesting that the NY Times reported on “hurt feelings” as if it was news… but let’s leave that alone for the moment):

“This brings to mind a saying about propaganda, which is defined as a kind of magic practiced by people who don’t believe in it for people who do. A crude, practical example of how this all works was delivered last week after the Icelandic singer Björk ended a concert performance of her song ‘Declare Independence’ in Shanghai with the cry ‘Tibet! Tibet!’ Beijing said that act not only broke Chinese law, but even more preposterously, ‘hurt Chinese people’s feelings.’”

Harry Connick, Jr. was in Shanghai this week and was the first to get the “Björk Cork”. Authorities came in an hour before his stage performance and crossed off some musical numbers from his act’s play list. As a result, Connick was forced into performing older songs, some of which his band didn’t know how to play! The audience came away from the performance disappointed - no big surprise there - and the press reported widely on the incident.

Musicians often adjust their act up until the last minute, for any number of reasons, and it is hard to imagine a Ministry of Culture that understands so little about stage performances. Let’s not even think about what any of this says about the future of improvisation (”Attention: All improvisation must be pre-approved by authorities”).

In the run up to the Olympics, the CCP has promised it would loosen up. It has done more on Darfur than anyone ever imagined, and it has made incredible gains on human rights issues (even as the Chinese government has gone all out to denounce the U.S. this week on American human rights abuses). It’s sad to see any artists treated poorly, but this particular incident was telling. Almost nothing says more about the state of things in China in the run up to the Olympic Games as much as the image of Harry Connick, Jr. - an already tame act - forced to play the piano by himself while his band simply looked on.

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