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Archive for April, 2009

The WSJ ran a piece this week titled “China Faces a Grad Glut after Boom at Colleges“.   This issue of oversupply of college graduates in China is not new… it has been written about back in 2006 here, and in 2007 here.  

Together with everything else in China, higher education has expanded at a rapid pace.  Here are the key statistics (from the WSJ article):

china-education

 

 

 

 

 

 

 

 

 

University enrollment in China 30% per year consistantly over the past 10 years.  This growth surpasses China’s GDP growth, and greatly surpasses growth of “white collar” jobs.  Today, Chinese universities churn out >6mn graduates every year.  I have heard that even in prestigious universities like Peking University and Tsinghua University, 30-50% of students will not land a job right after graduation. 

Some people argue that China needs to reduce its university enrollment so that more of the graduates can land a job.  Philosophically, I do not agree with this approach.  Education creates hope and economic/social mobility within a society.  At the individual level, it makes no sense to take the opportunity away.  It is easy to say that there is nothing wrong being a farmer or construction worker when we are not the ones doing it.   Having said, once given the opportunity, it is up to the individual to make the best use of it.

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Lessons learnt

Having spent two years negotiating and closing an investment in China, I thought I will share some thoughts on what I have learnt (so far) about conducting cross-border deals. 

1. Yoga classes should be a prerequisite.  It is a huge test of patience.
2. Emails drop into a black hole – IM or call.
3. Every question is a statement.  A repeated question is a protest.  Pay attention.
4. Always ask for multiple opinions.  Never trust the self-declared “expert”.
5. Invest face time.  Maintain both official and unofficial communications channels. 
6. English is not a measure of business capability.
7. Risk-reward in China does not pay off.  The risk is basically unlimited.  ROI cannot be the only consideration.   
8. Trust is the basis of the relationship.  Legal protection won’t actually protect you.

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Jackie Chan’s recent remarks has gotten him quite a bit of press.  Apparently the actor went on some rantings about his personal political view that “Chinese needs to be controlled”.  There were some debate about whether “controlled” is the appropriate translation and he might have really meant “regulated”.   Where he got the most heat, however, is for saying that HK and Taiwan are “chaotic” due to “too much freedom”. 

Chan’s remakrs have spurred strong criticisms from HK and Taiwan, some suggesting that Chan should be stripped off his various “ambassador” responsibilites.  What’s ironic about this is that while this is all in the name of defending freedom/democracy, they are, at the same time, squandering it.  Social pressure and self-censorship is a powerful and dangerous force. 

I hope Chan will not bow to social pressure and apologize for expressing his opinions.   We shall see.

Update: NYTimes just published an article on this as well.

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Regional superiorities

I recently discovered Jenny Zhu’s blog which I find very interesting.  Jenny is the face/voice of Chinesepod, the language 2.0 company.  I was reading her post on “Language Snobs and Regional Superiority” and thought it brought up a few interesting observations.

Beijing and Shanghai are two of the proudest cities in China.  It is not unlike other major cities like New York or Hong Kong where being a native is considered a privilege.  While the official language in China is Putongua, native Chinese can tell where someone is from based on their accents.  The implications of this is huge – it is much harder for someone from an “inferior” province to make it in Beijing/Shanghai since they’re generally looked down upon.  In addition, Jenny pointed out a practical reason for discrimating against non-locals in business dealings – it is more difficult to trust someone who does not have local ties.   In other words, it is easier to fraud a stranger than a friend.

There is an excellent film, “Beijing Bicycle“, which touches on how a migrant teenage boy struggles to make it in Beijing.  It does a great job depicting the challenges he faces as an outsider.

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Scott Adams on China

I just want to put in a link to Scott Adam’s blog (the creator behind Dilbert for those who care).  It is China in Dilbert’s eyes if you may.  Here is the link, and here is an exerpt. 

First of all, there are 1.3 billion Chinese, but only 73 million of them are members of the Communist Party. The party has a monopoly on power. They decide who gets to run for office. The Communists manage a vast bureaucracy that apparently has provisions for weeding out the idiots. I make that assumption based on the fact that the country functions at all, given its size and complexity. Check out this chart of the Chinese government.
http://en.wikipedia.org/wiki/File:Chinese_political_system.jpg

Although the Communists run the show, I assume most citizens have the right to join the party and work their way up the ranks. So merit appears to be important in their system. Obviously any big political system will have its share of corruption and favoritism. It’s unclear to me if China is better or worse than the United States on those measures. But I imagine that getting caught with your hand in the public till in China means death. Here it means reelection. Advantage China.

Chinese citizens can vote for their local leaders, at least from the slate of candidates deemed appropriate by the party. And those local leaders in turn select higher level leaders, and so on. Is that less fair than the political systems in so-called democratic countries? Philosophically, it might be less fair. On a practical level, that’s not so clear.

Bear in mind that Scott is the creator of the comic below (source: http://www.dilbert.com):

Dilbert Strip

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What would you do with a Billion USD in China?   I suppose it is not much different from what one does with a Billion dollar in the US – making the next 10 Billions I suppose…

There are many things fascinating about China today, one of which is the incredible speed in which individuals accumulate wealth.  To date, there are 100+ known billionaires in China, just behind the US; almost all of whom got instanteously rich through IPOs of their family businesses.  When you combine the economic opportunities of an emerging country with a 21st century financial system, you have one explosive wealth creation machine. 

Here is the list of the richest known billionaires in China.  The stories behind this new wealth is equally fascinating.  Here’s one example of one of these transformational stories. 

#3 Xu Rongmao (许荣茂)

“Xu grew up in Fujian Province, the oldest of the eight children. After graduating from high school during the Cultural Revolution in the 1960s, he was sent to the countryside to work as a barefoot doctor. In the 1970s, he emigrated to Hong Kong and worked as a textile worker.

In 1988, he claimed to invest RMB$1.2 million in a knitting factory in his hometown, but he intended to build a hotel instead, although investments in private hotels were forbidden at that time. However, as soon as the construction was completed, the government policy was changed to allow private owners to have their hotels. Then Xu became the owner of the first private three-star hotel in China. He then started to invest into developing residential complexes and resorts in Fujian.

In the 1990s, he pushed his real estate business into Beijing and Shanghai just before housing prices rose up.

In the 2000s, he expanded his business by acquiring listed companies and changing their names. They are Shimao Holdings (listed on the Shanghai Stock Exchange) and Shimao International (previously listed on the Hong Kong Stock Exchange), while the latter was privatized by him in 2007. [2]His third company, Shimao Property, was listed on the Hong Kong Stock Exchange in 2006.”

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My impression of Beijing changes every time I visit.   Compared to my last trip in Sept 08 (right after the Olympics), I noticed the following changes, both big and small.  Of course, the entire world has also shifted quite a bit over the past 6 months or so.

  • Traffic is a bit worse than during the Olympic period.  Apparently they have moved from a “driving every other day”  system to a “driving 4 out of 5 days” system.  All traffic controls will be off in April, so perhaps back to normal.
  • Beijing looks more weathly across the board.  6 months ago, I noticed young people being particularly wealthy (or at least in their display of wealth).  This time around, I would say that an average Beijinger does not look much different than someone from any other major cities.
  • Beijingers look more content, for people up to say, 50 or 60 years old.  I used to be able to see the worries off people’s faces from everyday toll.  Not so much this time around.
  • Cab drivers have become less talkative; minding their own business
  • Lastly, at least among the educated elite there, there seem to be an acceptance that some form of social or political unrest will come over the next decade or so.

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