Book Review: Age of Ambition, Chasing Fortune, Truth and Faith in the New China. By Evan Osnos

I always enjoyed Evan Osnos’s articles on China when he was the Beijing based correspondent for the New Yorker. Osnos lived in Beijing for eight years and speaks Chinese, two attributes that informed his writing on China which I have always found to be informative and entertaining.

Osnos’s recent book on China, Age of Ambition, Chasing Fortune, Truth and Faith in the New China is every bit as good as his writing in the New Yorker. He paints portraits of some of today’s most well-known dissidents including Ai Wei Wei and Chen Guangcheng as well as the popular anti-government blogger Han Han. And there are profiles as well of figures who have risen to become part of China’s elite, including a lady who runs China’s most popular dating site and a prominent journalist. In some instances these are the typical rags-to riches tales that are recounted so often in books on China nowadays and in this respect  Age of Ambition mirrors other recent books on China. Osnos’s book stands out, however, because he has access to many of China’s most central figures, by virtue of his assignment in Beijing for one of America’s most established magazines. For this reason we are often on the receiving end of the Government’s attempts at coercion and censorship, sometimes successful, often not. And that is what this book is really about, China’s hectic change and the Government’s attempts to keep up and to keep order.

There are also very good sections about the China Bullet train disaster, an accident that was very much owing to corruption, and a well-publicized incident in the South in which a small girl was hit by a car and no one came to her aid. These were big news stories both in China and overseas and Osnos gives us riveting accounts of both.

Still there are weaknesses. The Age of Ambition would have profited had Osnos spent a few months in 2nd or 3rd tier cities feeling the pulse of rural China which still makes up over 50% of the population. For example how effective are the Government’s efforts to curb freedom of expression in cities other than Beijing and Shanghai, where Osnos seems to spend most of his time ? In fact Osnos focuses almost exclusively on establishment figures in modern day Beijing, Starbucks or upscale office buildings being the setting for many of his interviews. A portrait of a textile factory owner in Jinagsu grappling with issues such as pollution and labor unrest would have been preferable to the portrait Osnos gives us of the blogger Han Han who, as both fervent anti-government blogger and amateur Formula 1 driver, obviously has some credibility issues. Osnos glosses over the hypocrisy of Han Han and his often banal blog posts and seems more dazzled by Han Han’s celebrity.

Osnos is also overly critical of China’s progress. He lambasts the Government’s censorship efforts, without acknowledging that mob unrest has a long history in rural China going back to the early Nineteenth Century and that Government fears about internet rumors fanning mob violence are in some cases well-founded. Religious cults, for example, pose a far more serious threat to political and social order in China than they do in more advanced democracies like the US or Japan and China has good reason to worry. Osnos moreover belittles China’s achievements in science and technology, not to mention the achievements of a couple of the individuals he has befriended and whom he profiles. He mocks the English teacher Michael’s attempts to master English and yet he portrays Michael as a friend.

Like other more recent writers on China, Osnos lacks the perspective of someone who was present in China in the 1980s and early 1990s when the country was mired in backwardness and had yet to experience the fruits of the Deng reforms. China was one of the poorest countries in the world then. Today it is one of the richest. Development on that scale means big problems and yet too many writers on China today, Osnos being one of them, focus on the problems and seem to forget the achievement, an achievement that long-time China watcher Henry Kissinger calls the “miracle of our time. “

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200th Blog Post – China Sourcing for Small Businesses aka Mulberry Fields

I was wondering what to write about for my 200th blog post, a milestone of sorts. Since I was reading an article on Pu Dong today and thinking back to my own experience there, which is unique, I think I will make the 200th post about Pudong.

In the fall of 1990 I moved to Shanghai where I had been invited to be an instructor for the 1990-1991 academic year at the Shanghai Maritime Institute in Pudong. This was the institute where all of the COSCO (China Ocean Shipping Company) and Maritime industry executives were trained. There were 3 overseas lecturers at the Institute – myself and two ladies from New Zealand, Mick and Jenny. We were all pioneers for we were the only three foreigners living in Pudong at that time, what I was told by the school administration. This was after all Pudong in 1990, a year before Pudong was declared a Special Economic Zone by the Chinese Government.

Pudong was a wasteland in those days. It was countryside and there were no tall buildings other than drab grey Soviet era apartment blocks. There were no tunnels or bridges connecting Pudong to Puxi ( Shanghai proper ) and if you wanted to go into the city it took a 20 minute bus–ride and then an anxiety laden trip across the Huang Pu River on a dilapidated and overcrowded ferry. I remember how on those trips across the river I used to look at the half-submerged stern and think how fortunate I was that my parents had sent me to swimming camp when I was a kid. Those ferry trips were certainly memorable. For the duration of the 15 minute passage, I had to endure dumbstruck and not always friendly stares from peasants because this was a time in Shanghai when there were very few foreigners and anti-western sentiment was still widespread. 40 years of anti-Western Maoist propaganda does not go away overnight. I am sure that for some people I was the first foreigner they had ever seen, their absolutely agape expressions betraying that. If I was lucky enough to get a space by the railing, what I always aimed for in order to avert the curious and hostile faces, I could look into the river and always spot some interesting objects, what became my pastime on those river crossings: bicycles, appliances, shoes or other articles of clothing and the occasional pig carcass. You name it and someone had tossed it into the Huang Pu. When dead pigs were polluting the Huang Pu last year, a story which made international headlines, I could certainly relate. Shanghai in those days was not the sparkling, chi-chi international city it has become, pig strewn rivers notwithstanding.

There was little to do in Pudong back then so I spent my days studying Chinese, playing basketball or frequenting some of the local pool halls with my students who knew a thing about pool and also about drinking ( these were employees of COSCO not regular students). The restaurants we would go to were great. Authentic Chinese food for a couple of dollars. Some of the best food I have ever had. Chinese food in New York, Tokyo, San Francisco ? Forget it.

Pudong nowadays looks like Manhattan. The last time I was there, in 2011, I was absolutely astonished at the growth. It is unrecognizable from the place where I lived over 20 years ago and it has become the symbol for Shanghai and modern China. Pudong can boast now some of the tallest buildings in the world and there are now over 50,000 foreign residents there. Driving past the Mercedes Benz dealership in Liu Jia Zui which is probably bigger than the New York Public Library, I could think back to my early days boarding the Pudong ferry in Liu Jia Zui and at that moment I could see all of China’s potential. And I think back to those COSCO training classes that Mick, Jenny and I taught. Just the three of us in that vast stretch of land across the river from Shanghai.

Wow, I can’t believe I was part of all that.

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Appreciating your vendors even when you don’t feel like it.

I have many small business owners or mompreneurs who come to me complaining about their China vendors. Most of the time quality is not the issue. It is cost. Costs gradually go up over time, and sometimes there is a big increase. The small business owner, with all the downward price pressures they face, feels helpless and approaches me to help them find a new vendor. Of course I am more than willing to help them but my advice very early in our conversations is always to stop for a minute, take a deep breath, and look more sympathetically at their current vendor. After all it is their current vendor who has helped them build their business to this point.

I have said this many times that just as there is no perfect spouse. there is no perfect vendor. If you have a vendor who has helped you build a business over the years, no matter what issues you have with that vendor, you have to see them as part of your family, so to speak, and appreciate them for that. That does not mean you can not look for a new vendor. You can and perhaps should. But don’t do, as so many who come to me are inclined to do, and look on those years you have spent with your current vendor as a waste of time.

If you do find a new vendor, make sure you spend time with that vendor before you leave your old vendor. Who knows the new vendor might be much worse than the old vendor. In fact, I just had a client say to me the other day, “ Geez, Vendor Y (her current vendor) is looking better all the time. “

The bottom line is growth. If your business is growing with your current vendor, is that so bad ? I don’t think so.

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The EAC junk email index of Chinese economic growth

As some measure of how slow China manufacturing is now, all I have to do is look at the number of unsolicited emails I get from vendors on a weekly basis. From the week of 7/9 -7/16. I received 20 unsolicited emails from vendors in China. These are emails from trading companies or factories advertising their products to me. In that same week I probably received about 20 emails from shipping or logistics companies. So figure about 40 unsolicited emails on average per week now.

If I go back to January of this year, picking a week at random, I see that from 1/14/13 to 1/21/13 I received just six unsolicited emails from vendors in China.

And if you go back further, to July last year, from 7/9/12 to 7/16/12 I received just two unsolicited emails from vendors in China – and both of those were vendors I had dealt with in the past.

The increase in the number of unsolicited emails I am receiving these days just makes a lot of sense when you consider the slump China manufacturing is mired in, all indicators way down from last year at this time. I find the emails from logistics companies alone fascinating because I read so many stories nowadays about the excess in container cargo space out of China. The big shipping companies are really struggling.

Still, I can’t say I mind all the emails because it just means that I have a much bigger pool of new vendors to consider. These are obviously vendors who want business. And that is very important in and of itself because you do not want to partner with a vendor who does not express enthusiasm for your business. Plenty of those unenthusiastic vendors out there as well, bad economy in China notwithstanding. Of course, I am sure there is a LOT of riff-raff among the companies who send me these emails but I am sure there are some diamonds in the rough as well.

I just wonder if we will ever get back to the “normal” few emails a week rate ? I kind of doubt it because China manufacturing is just different now.

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How to survive a Chinese banquet

What people are saying about Mulberry Fields
What you say is absolutely true about what you need to do to succeed in China.” – a company in Italy

Just some more today on my client in Toronto who will be making his first trip to China at the end of this month. He tells me that he is allergic to crab and was thinking about getting some cards made up with the message – in Chinese – that he cannot eat crab. I told him I thought this was being overly careful – not to mention that it would just accentuate his inability to speak Chinese earning him little respect from his hosts. It would after all be better to simply learn how to say “I don’t eat crab” in Mandarin than to hand someone a card on which this statement was printed. I told him he just needs to inform his hosts that he cannot eat crab and that should be enough to get him through the meal without breaking out in hives.

In fact if you travel to China and have any dietary restrictions you will have no problem as long as you tell your hosts beforehand and are somewhat vigilant during the meal. You need to be vigilant because just because you don’t eat fish does not mean it won’t be ordered. So it is always good to confirm with your hosts what you are eating all the more so because there will quite a few dishes on the table at a normal sized dinner or banquet. But relax because the Chinese are the consummate hosts and usually there is someone at the table who is watching out for you. You can think of this person as your “monitor.”

However, being allergic to something and not wishing to eat something because it does not sound or look palatable are two entirely different things. You should never decline any food that is served to you in China even if that includes some of the more unappetizing things that show up regularly at a Chinese banquet e.g. tongue, snake, chicken feet, mule, etc.etc I think this is sheer courtesy no matter where you are. Yet it is uncanny how many times I have been to China with foreign guests who shamelessly winced as they were offered something and then deferred much to the embarrassment of their Chinese hosts. Imagine if someone came to your house for dinner and you prepared an extravagant meal for them only to see them turn up their nose in disgust at one of your dishes. So the best advice is to stomach what you can’t eat ( no pun intended). At the very least it will make for a great story when you get home.

Drinking is another thing you cannot avoid unless you simply do not or can not drink. If you explain this to your hosts they will respect this. But be warned that there is no such thing as drinking in moderation at a Chinese banquet, especially for males. In other words you cannot tell yourself or your hosts that you will have just one beer and quit at that. If you don’t drink with them they will interpret that to mean you do not enjoy their company. In Chinese there is an expression for this. 一醉方休 不醉不归 ‘ yi zui fang xiu bu zui bu gui ‘ which simply means you don’t go home until you are drunk.

The expression is the rule.

http://www.theeastasiaco.com

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Travelling to Shanghai ? Consider the Astor House Hotel

What people are saying about Mulberry Fields
Your blog posts are excellent..” – a company in California with a presence in China

I am advising my Toronto client on a trip to China at the end of the month. He will be arriving and departing from Shanghai and so he was asking me where he should stay while in Shanghai as this is his first visit there. He said a friend told him he should stay on the Bund, a piece of advice I have no problem with since the Bund offers a very interesting architectural panorama of old Shanghai, once known as the “Paris of the East.” I suggested he consider the Peace Hotel, the most famous hotel on the Bund but he said that was a little beyond his budget for this trip. I then suggested what I described for him as the “budget Peace Hotel,” the Astor House Hotel, or as it has been known since 1959, the Pujiang Fandian.

The Astor House Hotel was at one time the most famous hotel in Asia, state of the art in its time. In 1882 a light bulb went on in China for the first time – outside the Astor House. In 1913 sound film made its debut in China, at the Astor House. Charlie Chaplin stayed at the Astor House as did Bertrand Russell, Albert Einstein, and Ulysses Grant to name a few people of note. Zhou En Lai was in hiding at the hotel when he was fleeing the Nationalists in the 1930s. Only in 1929 when the Peace Hotel opened did the Astor House Hotel cease to be a rendezvous for the rich and fashionable.

I stayed at the Astor House once for a few days and enjoyed it. Absent is the din and perpetual front lobby commotion that you find at the more popular Peace Hotel around the corner. The halls of Astor House are ghostly quite and the slight mildewy odor reinforces the sense that you are in something very old. As you descend the creaking mahogany staircase in the back of the hotel, it is very easy to engage your imagination and think that long ago Christy Mathewson (another guest of the hotel) descended the same staircase. Granted the bar, the business center and food leave much to be desired, the rooms are Spartan and the staff cannot speak English without a dictionary in hand, but for a couple of nights the inconvenience is well worth the experience. On the other hand, if you are not a history buff, you would probably do a lot better staying at the Ramada Plaza or one of the other antiseptic international hotel chains of which in Shanghai these days there are plenty.

But for me if I am travelling to Shanghai and want to stay near the Bund there are only two hotels: the Peace Hotel or The Astor House Hotel.

http://www.theeastasiaco.com

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Which is better, meeting a vendor online or at a trade show ?

What people are saying about Mulberry Fields
a very interesting blog…” – a company in France

I saw a post the other day in one of the most popular China blogs and the blogger was talking about the best way to meet vendors in China. Of course this is a topic I am passionate about having worked in product development and sourcing for many years. Much to my surprise, the blogger omitted to mention trade shows as a way to meet manufacturers in China and he seemed to say that online sourcing followed by on-site vendor visits was the way to go. He is a lawyer and not a manufacturing person so it was an understandable omission. But I put in my two cents to the discussion and here is that two cents accordingly.

I personally think going to a trade fair in China is the best way to get started. You really can get a good idea of your product cost/design and production by spending time talking to a lot of vendors over several days. Some of these vendors will leave you with a good impression, some with a bad impression, some you will find too big, some too small. But you really come back from the trade show knowing a lot more about your product and its cost and feeling confident that you have actually met people who can help you grow your business.

The problem with online sourcing is that you really have no idea who you are dealing with as often you are just exchanging emails with an account manager or salesperson. Even if the quotes are good and you get some good samples back, you can show up in China and find the vendor to fall far short of your expectations. Of course you can meet someone at a trade fair too who, when you visit their factory, falls short of your expectations. But this is not as likely to happen because a trade show booth can in fact tell you a lot more about a vendor than a website. It also sends vendors a strong message that you are active in China and are looking for options. If on the other hand a vendor knows you have spent 3 or 4 K to visit them, after only having met them online, they may simply regard you as having deep pockets which is not the impression you want to give vendors.

Finally, I would add that for the most part vendors need to see actual physical samples of your product to give accurate quotes. The quote you get based on a picture is most definitely not going to be the cost you pay when you go into production. If you are FEDEXing samples to multiple vendors in China trying to find out who can do your product the costs will add up. I have had customers spend hundreds of dollars on one sample shipment. When you go to a trade show though, it costs absolutely nothing to hand a sample to a vendor and ask “how much?” Often vendors will just borrow your sample for few days and return it to you while you are in China.

I have written a lot on trade shows and sourcing online. Here are some of those posts.

Preparing for the Canton Fair
The Canton Fair
Sourcing online: Not the best way to find a vendor
Sourcing on alibaba

http://www.theeastasiaco.com

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What doing business in China and baseball have in common.

What people are saying about Mulberry Fields
“I have read through quite a few of your blog posts and have enjoyed them very very much. We do business in China and face many of the challenges you describe. Much of what you write resonates with me and there are some very helpful tips” -a kid’s apparel company in Utah.

I have been doing a lot of reading on China blogs and in periodicals this week. As is frequently the case I see a lot of articles about how to effectively do business in China and examples are always provided about China ventures gone wrong. In all these examples the root problem is that the person did not know anything about China and just assumed that because they were successful in their own country they could duplicate their success in China. For example, there was an anecdote in a Harvard Business Review article this week about a successful NYC real estate developer who thought he could sell some high-end property to investors in China. After all China is now home to some of the world’s wealthiest individuals. The developer spent thousands of dollars on PR and even rented a large hall in Shanghai so that he could host a sales presentation. He then flew to China to make his pitch. Well, something went wrong because on the day of his presentation, only eight people showed up. Smart in NY did not translate to smart in China.

But it got me to thinking, why is it so hard for people, even really smart people, to understand and succeed in China? When I thought about this question the other day, the thought occurred to me that it is simply hard to comprehend something that you have little or no experience with. Even if that something has been described to you over and over again in the minutest detail, and you kind of grasp the concept, you really have to experience it yourself to be able to process the complexity and plan accordingly. There is a good baseball analogy for this. When you watch baseball on TV or in person you can effortlessly follow the trajectory of the ball as it leaves the pitchers hand all the way to the plate. It looks like the baseball is easy to hit. And I am sure many people who watch, but who have never played baseball, are thinking, “geez, that looks easy, why can’t he hit it ? “ But far from it. Hitting a baseball thrown at 90 MPH is generally said to be the hardest thing to do in sports. I believe it because when you are standing there at the plate that ball sometimes comes in so fast you literally won’t even see it. Belying its casual pace. baseball is in fact an incredibly difficult game.

And doing business in China is not an easy game either. I know that because I have been going there for 25 years and have the first hand experience of going to trade shows, meeting good vendors who turned out to to be very unreliable, meeting vendors whom I was not impressed with at first but who turned out to be solid, supervising production, inspecting orders, sourcing, getting good orders, getting bad orders, having vendors change prices after they have signed a sales contract, doing karaoke in Chinese with vendors, arguing with vendors, sitting for a factory for 3 days waiting for the rain to stop while a cancellation date on a PO slowly creeped up, etc etc. But there are many people who do not have this experience and, therefore, try as they might, they simply cannot comprehend the complexity of the culture and the sheer difficulty of the endeavor. When they do business with a supplier they met on a B2B site but have never met in person, and they fail to do any due diligence on this vendor and they do not inspect their order before it leaves China, it is just like they are watching baseball on TV and thinking it is an easy game.

So what is my advice to them? It is simple: go to trade shows in China, meet vendors in person, supervise your orders, inspect your orders, line up back-up vendors, get good orders, get bad orders, drink with good vendors, drink with bad vendors, argue with vendors, meet your vendor’s families, learn some Chinese, learn how to cook some Chinese food etc etc. In other words, get the experience. Or as the Great Helmsman himself used to say: 要想知道李子的滋味必须亲口尝一尝 ( yao xiang zhidao lizi de ci weir bixu qinkou chang yi chang) Trans: if you want to find out what a pear tastes like, you have to eat one.

I sometimes have what I call a “China Zen Moment.” This is when I see beyond specific topics like auditing vendors, product testing, trade shows, communicating with vendors, doing spec sheets etc etc and I am able to reduce China Sourcing to its simplest terms. Here are some of those Zen moments
How to win in China
China quality is not that bad
Doing business in China is easy
Don’t expect perfection
Locals too find the going difficult

http://www.theeastasiaco.com

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How to find suppliers in China

If there was a foolproof method to finding good suppliers then I would not be writing this post right now. I probably would not even have a China -related job but would be off teaching 18th Century literature somewhere. The fact is that finding reliable suppliers is one of the most frustrating aspects of sourcing in China.

There are four ways to find suppliers in China:

1.) Online sites like alibaba.com and global sources. I am skeptical of meeting vendors online simply because you have no idea who you are dealing with. I sometimes find it useful to get quotes from online suppliers when I am trying to figure out how much something costs to make in China but as far as actually ordering from people I have not met and know next to nothing about I would not advise it. I certainly would not do it if it were my business. A lot of small companies, start-ups and mompreneurs source online because the costs are seductively low, it is an easy process and they do not understand what a minefield China sourcing is.

2.) Trade Fairs. This I think it the best way to find new suppliers. As I have lived in or travelled to China for 25 years and speak the language fairly well I have become pretty adept at evaluating vendors, and I would say that my snap judgments are fairly accurate. I can usually tell what a vendor will be like to work with after spending an hour in their trade show booth discussing things with them and then following up with them after the show about samples and other issues. Occasionally I am surprised when a vendor I had marked as a good prospect turns out to be otherwise. But like I said I generally can spot the good ones from the bad ones. I really believe that there is no substitute for meeting the people who are going to be making your product. It is expensive to attend trade fairs in China. But it is more expensive to take possession of 3 containers of shoddy goods you cannot pass onto your customer(s).

3.) US or Canadian based China agents or product development companies. Although agents can save you a lot of time, energy and money in the beginning, working with agents over the long-term can be a costly exercise in frustration. In fact, most of the inquiries I get are from people who are not satisfied with their US or Canadian based China agents. They are not satisfied with the quality of the product they are receiving or the rising costs of that product. Still this is not to say that there are no good agents out there. There are and I have worked with them. But my sense is that you have to go through a lot of bad agents to find a good agent.

4.) Referrals. If you have a friend or trusted acquaintance who can introduce a good vendor to you this can remove a lot anxiety and some risk when you source in China. There are two problems with this approach though: First, how many people do you know who are doing business in China in your same product line who are not competitors and would be happy to divulge their suppliers to you ? Second just because a vendor has proven reliable for someone you know does not mean they will be so for you. It all depends on your product, QA standards, target costs and QTYs. There is no vendor who is simply going to roll out the red carpet for you just because one of your friends is a customer of theirs (unless they are a HUGE customer). But getting the name of a factory from someone you know, if you can do it, is a very good start. You should at least receive prompt replies to all your production inquiries.

The key is as I wrote in my post yesterday, to manage expectations. It may take you a year or two to find a supplier you are happy with. If you know that going into your China sourcing, your experience in China will be better.

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China: Not the monolith it seems

I read an article on auditing suppliers the other day written by a German businessman who has been importing electrical goods from China to EU countries for over two decades. The writer basically made some of the same points I have been making about doing factory audits, namely that it is important to come to some understanding about factory management, as well as knowing what QC processes the factory has in place and what kind of equipment they are using. After all the machinery, even if it is top-flight, is of no value if you have management that so focused on cutting costs that they don’t want to train people how to use the machines or burn the energy it takes to turn them on. The writer also mentioned that when evaluating a factory you should do the following:

1.) Make sure that you know who your factory’s subcontractors are.
2.) Confirm that rejected parts from these subcontractors are under lock and key ( one of the standards of ISO 9000).
3.) Confirm that the factory complies with China’s labor standard ( mainly the child labor laws).

The problem with the article I thought is that is leaves one with the impression that all factories in China are the same – large with management structure in place and at the point of ISO certification. However, the opposite is true. 60 % of China’s exports come from small businesses/factories and the great majority of these factories are located in rural parts of China where the factories operate pretty much at the whim of the owner. Child labor in these factories can be a problem and subcontractors are often local villagers that number in the thousands. In other words, there is no way to evaluate sub-contractors. Absolutely impossible. At most of these factories if you mentioned ISO9000 you would get a quizzical look from factory management.

You really need to remember that China, although it often comes across as one, is not a monolith. Just as there are regional varieties of Chinese cuisine, so business practices vary from Province to Province. What applies in Anhui Province, for example, may not necessarily apply in Guangdong Province. The same with factories. What is accepted as standard at a big electronics factory outside of Shanghai, would most likely be thrown out the window at a small furniture factory in Fujian. You have to keep this in mind at all time. Once again, do as much research on your own as possible before you enter into an agreement with a vendor or get on a plane to go to China to do a factory audit. It will save you much time and money.