Should we all move to China?

Look, even Murdoch is moving to China!  Actually, not really – but he can if he wants to.  As you have heard, he recently bought a traditional courtyard house in Beijing, right next to the ex prime minster Mr. Zhu Rongji.  There seems to be an emerging trend, particularly in the “investor class”, to embrace everything Chinese.  Jim Rogers is famous for hiring a Chinese nanny to teach his young daughter Mandarin.  SiliconValley.com published an article called Americans in China: Valley expatriates take risk on fast-growing economy, describing several young families relocating from the US to China. 

Since this century belongs to China, shouldn’t all of us move to China?  For me, the answer is not that obvious.  Given China is still an emerging country, there are trade-offs.  Sure, business opportunities are abundant.  With a lot of patience, some frustrations, enough luck and many trials and errors, the chance of building significant wealth is higher than that in the US.  On the flip side, living in China means the endurance of growing pollution (as NYT illustrated here), inadequate medical care, human rights issues and, and just day-to-day inefficiencies…  Unlike business, we only have one shot in life – how much are you willing to sacrifice?  Like everything else, it’s a matter of priorities.

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What’s on the (Chinese) Web?

Ever wonder what Internet sites are popular in Chinese? Here’s the Top 25 websites in simplied Chinese according to Alexa.  I’m not familiar with Alexa’s methdology, but I presume they track top trafficked sites accessed from the US, not from China.  This probably explains why top gaming sites do not show up here…  Nevertheless, it gives insights into what overseas Chinese consume. 

As you can see, in contrast to the US, portals are incredibly popular – many of which are practically identical in content and layout.  It’s also important to keep in mind that many of these portals have a large community component (IM chats, message boards, etc.).  The next 25 is very similar, with additional of a couple of the “youtubes” and gaming sites.  #50-100 have more content and community sites including auto, real estate and gaming. 

What explains the popularity of portals in China?  One theory is that Internet users in China are really fragmented – there are users from all ages,  education and income levels.  Thus it is difficult to target a specific group of consumer, or have a website that offers focused products/services.  Another theory is that this is a natural state of progression – the US started also with portals, and gradually navigated away from it.  It could have also been a result of the tech bubble – portals failed to innovative through the down years and alienated readers.  Or, perhaps, the much higher cost structure makes it much harder for large players to reinvent themselves in the US.  What do you think?   

Search 

1.  Baidu.com (http://www.baidu.com/)  

8.  Google.cn (http://www.google.cn/)  

11.  Googlesyndication.com (http://www.googlesyndication.com/)  
18.  搜狗 (http://www.sogou.com/)  

Portals
2.  腾讯网 (http://www.qq.com/) – Entertainment focused
3.  新浪新闻中心 (http://www.sina.com.cn/)  
4.  Sohu.com Inc. (http://www.sohu.com/)  
5.  网易(http://www.163.com/) 
7.  TOM.COM (http://www.tom.com/)  
9.  雅虎中国 (http://www.yahoo.com.cn/)  
10. Xunlei.com (http://www.xunlei.com/)  – Entertainment focused
12.  东方财富网 (http://www.eastmoney.com/) – Finance focused
15.  互联星空 (http://www.vnet.cn/)  – Entertainment focused
16.  Mop.com (http://www.mop.com/)  – Entertainment focused
17.  和讯网 (http://www.homeway.com.cn/, http://www.hexun.com/) – Finance focused 
21.  6park.com (http://www.6park.com/) – Overseas Chinese focused
23.  中华网 (http://www.china.com/) – White-collar focused
25.  天极网下载频道 (http://www.yesky.com/) – IT focused

Classifieds

6.  淘宝网 (http://www.taobao.com/) – Auction Site
19.  51.com (http://www.51.com/)  – Jobs 

Video Syndication

13.  土豆网 (http://www.tudou.com/)

14.  优酷（http://www.youku.com/） 

Others

20.  126.com (www.126.com) – ISP

22.  Poco.cn (http://www.poco.cn/) – Social Community
24.  起点中文网 (http://www.cmfu.com/) – Book reviews

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RSS & Email Subscriptions

I have added RSS buttons, and also a weekly email subscription link (this is experimental…) to the sidebar.  Let me know if you encounter any issues.  Have a great weekend.   

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The Worry-List

Last week’s Economist published an insightful article about Capturing Talent.  Apparently Skilled Labor Shortage is #1 on China’s worry-list while #1 on India’s list is infrastructure, and # 1 on Japan’s list is cultural differences.

The article cited labor shortages in almost all professional areas in China, including: 1) pilots, 2) lawyers, 3) doctors, 4) nurses, 5) accountants, 6) IT, 7) managers. 

With supply greatly lagging demand, experienced professionals in these areas can command high salaries and inflated titles.  They are also less likely to stay and build a career at a particular company given the never-ending opportunities elsewhere. 

Labor shortage (more misallocations, actually) is, and will be, the constraining factor for China’s growth.  Processes and intellectual capital need to be accumulated over time.  Education is only one component of the equation – unlike building infrastructure, the development of human resources cannot be manufactured overnight. 

Here, I would like to point out that the labor shortage issue only applies to a very small segment of experienced professionals.  I was told that around 50% of Peking University graduates each year do not land a college-level job.  There are not enough of entry level jobs to go around. 

It is in times like this when opportunities are created.  It is indeed an exciting time for young people in China; sometimes life seems unfair when you consider what the previous generation had to go through. 

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Beyond 2nd Degrees

I recently ran into a couple of sticky situations which makes me think about the value of guanxi and its relation to the number of degrees of separation. 

Here’s a model with no basis at all, except my personal experience.  Assuming you trust your 1st degree contacts 100%, and D = degrees of separation:
% Trust = 100% / D^(D-1).  This gives me the followings:

D=1 -> 100% Trust
D=2 -> 50% Trust
D=3 -> 11% Trust
D=4 -> 2% Trust
D=5 or 6 -> 0% Trust

This implies that if you trust your own contact 100%, you can trust your contacts’ referral 50%.  If your contact’s referral refer you to someone else, you can trust him/her only 11%.  By the same token, your level of trust will become zero by the 5th and 6th degree of referrals.  This seems to make sense applying the rule of  six degrees of separation.  By the 6th degree, the value of your guanxi should become zero since, afterall, having guanxi with everyone means having no guanxi at all. 

My experience matches the hypothetical model.  By 3rd degree, you’re pretty much on your own.   And by the 4th, you are on your own.  This makes total sense since if my 2nd degree contact (D2) refers me to a 3rd degree contact (D3), D2’s allegiance lies with D3 since he’s much closer to D3 than to me (D0).  OK, I should give up – this all seems so clear in my head but probably totally confusing (and boring!) for anybody else. 

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Flight Talk

On my last flight to Beijng, I had the misfortune of sitting beside an incredibly chatty American businessman in his 60’s.  I made the mistake of being friendly in the first 5 mins, which converted to never-ending interruptions during the entire 13 hour flight.  Very obnoxious comments, I might add. 

Here are a few provoking, and sometimes ridiculous, points made.  I thought I’d share for your entertainment:

1. He used to own an investment firm and will only hire Chinese immigrants who have lived in the states less than 3 years.  According to him, after 3 years, they will get “tainted” and lose the extra drive.

2. Chinese guys generally choose to return to China after graduation.  Chinese women prefer to stay in the States.

3. The only other industry he despises more than media, is finance. 

4. All young people should enter the industry of investment management, unless they have a particular passion.  It’s the easiest way of making a lot of money. 

5. Having a support base is important – it is not wise to uproot oneself and move to a different country for opportunities.  This is pertaining to moving to China for work (I will comment on this one later).   

6. And a tip: if you fly into Beijing and show up at hotels without bookings, you can negotiate a really good rate.  

I have left out a couple of comments (generalization of NYC single women and American guys) since they are too offensive to quote.  Morale of the story: don’t be too friendly too early on a long flight – you never know what you gonna get… 

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Concept of 旅住 (Travel & Live)

I was recently introduced to a new concept called 旅住, which literally means “travel & live”.  旅住 is when someone moves to an international city/town for 6 months or a year to immerse in the culture.  Perhaps similar to the idea of studying abroad, minus the studying.  Apparently this has become a trend for newly wealthy Chinese in their 20’s and 30’s.  The idea is to experience life in the city, not at a tourist, but as a local.  I can certainly see why this is appealing. 

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Travel Info Page

I’ve added a page called Travel Info to include some notes on traveling to China.  I’ve added a subpage, Beijing.  This will be updated regularly as I plan my future trips… 

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Language Learning 2.0

OMG, I love Chinesepod!  It is about time the language learning industry gets a major shake-up.  Major players today carries products developed in the early 90’s using primitive multimedia technology.  Players have sunk so much developmental capital into these products that they spent the past 15 years recuperating the costs.  Last year, I spent $295 on the premium Rosetta Stone Chinese Learning product and am hugely disappointed – not only was I underwhelmed by the technology, I was astounded by how obsolete and impractical the content is.   I barely used it and is still sitting on my shelf.

And here comes Chinesepod, the savior.  Using interactive tools offered by the web as well as other mobile devices, it offers a fun, interactive way of learning the language.  I am hooked to the daily podcasts; quick 10-15mins episodes about one aspect of modern Chinese live.   I think I’m going start learning some Spanish too, with their new product, SpanishSense. 

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The Wahaha Mess

One of my favorite programs is “Managing China” (schedule) on CNBC World.  Managing China is a weekly CEO interview program co-produced by CNBC and China Business Network in Shanghai.  The program is in Mandarin, with English subtitles.  

This week’s interview is with Emmanuel Faber, head of Danone Asia’s operations, addressing the public freud with Wahaha’s longtime chairman, Zong Qinghou.  This Article in the NYTimes summarizes some of the disputes.  While watching the interview with Faber, it occurs to me that Danone will never win this fight, regardless of who is right and who is wrong.  Danone is fighting a legal battle while Zong is fighting a practical one.  What is Danone going to do without Zong?  Apparently nothing much – Like they teach in business school, in any negotiations, you’d have to know what your BATNA (stands for Best Alternative To Negotiated Agreement) is.  Danone does not have much of a BATNA and Zong is well aware of it.

Zong’s responses in public reflects a common sentiments of Chinese entreprenuers:

1.  “Such an agreement is ‘not fair” because it restricts Wahaha’s growth while letting Danone acquire Wahaha’s rivals” – Here, history plays a part.  China has historically entered into many unequal treaties as part of war settlements.  In China negotiations, I’ve encountered the concept of fairness often.  If you have these rights, we want it too.    

2. “Danone invested 1.5 billion yuan (US$194 million) in the ventures with Wahaha without actively managing the companies and made a profit of 3.8 billion yuan out of them” – There is little value placed on capital risk, especially when it is from an institution. 

The Danone-Wahaha mess also demonstrates the underlying flaw in the JV structure.  Both sides entered into agreement with different agendas.  Danone wants to build a China presence while Zong wishes to learn best practices from global player.   There’s inherant misalignment of interests which makes the JV structure unsustainable.

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