Battling Shyness

I’m invariably surprised when, at employee training sessions or staff meetings, none of my Chinese employees ask questions.

Part of the reason, they tell me, is that schools don’t encourage students to ask questions – and certainly discourage them from interrupting teachers and professors.

This is very bad training for journalists, who have to ask questions and interrupt as part of their job descriptions.

There’s nothing worse than a journalist at a press conference who fades into the background. They should be out there, collecting business cards, introducing themselves to everyone, asking questions, arranging follow-up interviews and otherwise working on developing their sources.

But if shyness is bad for journalists, it’s murder on sales people.

Recently, a friend of mine needed to hire a business development person to find leads and schedule interviews with prospects, and he specifically wanted a young college student for the job.

To test for shyness, he had the candidates come all at the same time, to a group interview, to see how they acted when they needed to compete for attention.

In addition, he asked me to come in to serve as a potential customer. I was, in fact, a potential customer for his services – Carlo Wolff is a partner at Wolff & Tan, a consulting company that helps small businesses become more organized and profitable.

We conducted mock telephone calls in which I played the part of myself, and one job applicant after another pretended to call me and attempt to get through my sales resistance.

The experience was educational for the job applicants – they watched what the others were doing and saw what worked on me and what didn’t work.

It was also educational for me. I learned a lot about cold calling from watching Carlo run the job applicants through their paces.

Most of the applicants were local students, but one was from Singapore.

The difference between the Singaporean applicant and the others was dramatic. He was more outgoing, had a stronger presence, and also had some experience as well.

I talked to Wolff later about what he thought of the experience.

“Especially in this context, which is strongly culturally-directed, it was interesting to get people out of their comfort zone,” he said. “In a Western setting, this would have been easy. But here, it was a challenge for them.”

Next time, he said, he plans to push the applicants even further in the interview setting, and increase the stress level even more.

After all, sales is a high-stress field – candidates who cannot handle the pressure should be screened out as early as possible.

Next time I have a number of job applicants to interview I may well do the same thing. Call them all together into one room, and run a mock press conference. See who asks the most questions, who introduces himself and comes up to shake my hand, and looks me in the eyes, and gets my business card.

And the one who calls me up afterwards, and asks follow-up questions – that’s who will get the job.

The Holiday Spirit

Christmas is my all-time favorite holiday. I’m not alone, it’s popular with many people, whether or not they actually adhere to the Christian faith. In my family, with its blended background of faiths, we see Christmas as a symbol of what is holy in every child.

But, putting aside, the religious significance, the Christmas season has more stuff associated with it than any other holiday I know of.

Sure, the Fourth of July has fireworks, flags and picnics, and Thanksgiving has a big meal and a football game. New Year has the ball on Times Square and a big party at midnight and one song that most people only know a couple of lines of, anyway.

Chinese New Year is a pretty good holiday, too, with fireworks, red envelopes full of cash, gifts, and bright red decorations.

But Christmas is a whole industry. There’s the tree and the presents. The decorations. The proximity to New Year. Plus a million Christmas songs and carols, movies, cartoons, books and poems. You’ve got the Santa Claus legend with the sleigh and the reindeer and the elves and the costumes. The North Pole village, Rudolph and Frosty, the Grinch. There’s a Santa in every major mall and shopping center in the US and many countries around the globe – and now, in China as well.

It can be overwhelming for some, sure. People who are living alone, without friends or families, can feel even more isolated during the holidays.

And then there’s the spectre of consumerism and commercialism that haunts the holiday – almost as bad, in my opinion, as the spectre of self-righteous religiosity that can make those of other faiths feel uncomfortable and unwelcome.

But, on the whole, the Christmas season brings people together. I’m glad to see that the holiday is becoming more and more secular. The gifts, Santa Claus, many of the songs and movies, are not specifically religious. But even the secular aspects of this holiday are about family, about giving and sharing, about shared traditions.

Those of us who celebrate this season in all its trappings, whether as Christmas, Hanukkah, Kwaanza, or even simply as a secular New Year, are participating in a shared international event. Even more than the Olympics, Christmas reaches directly into homes and public gathering places.

Many countries have contributed to Christmas traditions, and there are regional variations on this holiday. The best holiday practices spread quickly, by word of mouth, from family to family, by businesses, and by the media.

As countries like China embrace globalization, they adapt this holiday and make it their own – and add their own touches.

You can track the pace of globalization through China by tracking the Santa Clauses and the decorations in public squares and the carols playing in the shopping centers.

Foreign firms are in the vanguard, with chain restaurants like KFC putting up holiday banners and playing holiday music.

But even Chinese stores, like the national supermarket chains, are playing Christmas music in a variety of languages. Most of the popular Christmas carols now have Chinese versions, and they sound as pretty as they do in the original.

Others may bemoan the secularization of Christmas. But, to me, a secular Christmas is an inclusive holiday that brings people together into one global family.

Given the choice between bonding over competitive, national-pride events like the Olympics, and shopping and eating centered holidays like Christmas, I’ll take the food and presents anytime.

All Roads Lead to China Blogs

As a journalist, I routinely hear complaints that the news industry is dominated by a few giant multinationals that determine the boundaries of public discourse. I also hear that the news industry is dying, as bloggers now do for free what the media used to do for money.

My personal position is that we’ve always had consolidation in the industry – as long as publishers existed, they’ve been growing bigger and merging with other publishers.

But we’ve always had competition. First the tabloids and the “yellow press,” mimeographed newsletters, radio and television, alternative newsweeklies, and now the Internet.

New companies will always spring up. Some will fail or be swallowed up. Others will remain small, serving a particular niche audience. Some will rise above their humble beginnings and join the ranks of media conglomerates.

I am enjoying watching the rise of the online news alternatives – the bulletin boards and forums that aggregate user-generated materials, the blogs and personal newsletters, the podcasts and videocasts.

One of my favorites is Fons Tuinstra’s China Herald. Disclosure: Fons is an old friend, and a member of my board of directors.

I subscribe to his blog on RSS (using Bloglines). One of the great things about reading his blog, and blogs like his, is that I don’t just find out what he’s thinking about on a particular day, but also what he’s reading.

Bloggers like to read other bloggers, and they link to them on their sites.

This week, for example, Fons linked to China Rises, a blog by Tim Johnson, the Beijing bureau chief for McClatchy Newspapers.

Tim has been collecting photos of overburdened trucks and bicycles. It’s a lovely introduction to the perils of transportation and logistics management in China.

In a recent blog post, Tim talks about having some furniture reupholstered – and seeing a sofa, several chests of drawers and two huge bookcases loaded on the back of a tricycle.

My other favorite blogs include All Roads Lead to China and the China Law Blog.

At the beginning, one of the main topics of conversation of bloggers was blogging. They wrote about their software problems, about how they agonized over which font to choose, and other administrative and technical details.

Interesting comments often got lost among the minutia.

Today, however, blogging software has become reasonably easy to use and standardized, and bloggers turn more of their attention to their topics of interest – rather than to their blogging process.

Sure, some blogs never catch on. Their writers either give up or keep the blog as a hobby, with a small group of diehard readers.

Other blogs catch on, get organized, get professional, get discliplined, and get focused. With readers come advertising dollars, and the bloggers can even hire staff and turn into what is starting to look like real news operations.

This has happened at Gawker Media in the U.S., for example.

English-language blogs don’t do as well in China simply because the audience is smaller – there are fewer Americans in China than, say, Americans in America. But blogs like The Shanghaiist, with its stable of regular contributors, looks like it might be getting there.

Do you have a blog about business in China? Email me, and I’ll add it to my personal blog list – and we might review it here on this site as well.

The Educated Workforce

This week, Xinhua reported that the new four-year education plan will extend compulsory nine-year education to 98 percent of children in China’s 410 poorest counties.

In 2004, children in those counties received an average of 6.7 years of education each – hardly enough to prepare them to work in today’s industrialized China.

Today, the agency reports, nine year education covers 368 of those 410 counties

These counties are mostly located in hard-to-reach mountainous areas.

To solve this problem, local governments are setting up boarding schools for junior-high level students so that they can get a state-of-the art education.

According to Xinhua, the central government allocated 10 billion yuan (1.3 billion U.S. dollars) between 2004 and 2007 to build over 7,600 boarding schools, serving about four million students in a total of 953 counties in western China.

I recently visited one such boarding school in the Sichuan province, just east of the city of Chengdu, on the western side of Longquan mountain. This is the Longquanyi district, home of the “Golden Phoenix” project – junior high school students get free housing, school uniforms and a food allowance, and attend an urban boarding school in Longquan.

More than 3,000 students have already moved from their mountain villages to the city for their educations, almost two-thirds of them subsidized by the government. The district government has already spent 14.5 million yuan on the project, and will spend another 160 million.

School officials told me that 42 percent of the district is located in the poor, mountainous parts of the province. In 2006, all middle schools and high schools located in the poor regions were closed down, and the students transferred to central, urban schools. Often, their parents moved to town as well, and got city jobs.

At the Longquan junior high boarding school I visited, the building was surrounded by new construction projects – the district continues to invest in student education. Classes were large – over 50 students per class – and both the classrooms and dorm rooms were unheated. However, this is typical for a southern Chinese city. Even in Shanghai, classrooms tend to be unheated.

The school had a huge outdoor sports field, covered with artificial turf, where students exercised. There were computer labs, and English language classes. And central plumbing.

Students and teachers all carried magnetic stripe cards which they ran through card readers to get their lunches – tofu and vegetables, slapped onto metal trays. Students bussed their own tables.

Longquan is a high-tech development district, with over half a million people. The high tech parts are in the urban areas, of course.

Now these students will have a shot at the urban jobs.

The hillsides that they used to farm will probably revert to forest, as the district finds tourism more profitable than trying to grow crops on a mountain.

I also visited some of the farms in one of the mountainous parts of Sichuan, near Yibin, and the plots of land are tiny, terraced into the hillsides. All the labor is manual – it would be difficult to get a weed-wacker up these hills, much less a tractor or a combine.

By getting a decent education, the children of these poor farm families will get a chance at a better life – and employers will be able to benefit from having a more trained workforce.

China Putting Teeth in Environmental Regulations

This year, Chinese officials began putting some sharp teeth to the country’s environmental regulations.

This can have significant implications for the economy – last week, the World Bank calculated that air pollution alone is costing China 3.8 percent of its GDP. Adding in water pollution and non-health impacts of pollution raises that estimate to about 5.8 percent of GDP – a total of about $100 billion.

Last month, health officials said last that birth defects in China had increased by nearly 40 percent since 2001, in part as a result of environmental degradation, according to the state-owned China Daily newspaper.

Jin Yinlong, a researcher at the Center for Disease of Control and Prevention told the National Forum on Environment and Health in Beijing, that water pollution accounted for 59 percent of 600,000 complaints registered last year.

Zhou Zhengxian, director of the State Environmental Protection Administration, told Xinhua this week that local regions will be assigned pollution caps – those that exceed those caps would not be allowed to embark on new potentially polluting projects.

In 2009, enterprises would be required to get environmental permits before discharging byproducts into the environment.

Enterprises that do not meet discharge requirements or are found guilty of other environmental regulations would be refused permission to list on the stock market, he added, and companies that are already listed must open their environmental records to the public.

In rural areas, sewage systems will be upgraded and the use of chemical fertilizers reduced, with all new or renovated poultry farms required to pass environmental assessments.

By 2010, he said, 70 percent of all urban sewage will be processed before being discharged.

"From a long-term perspective, our target for China's rivers is to resume their natural appearance," he told Xinhua.

In July, a new policy required local authorities in areas along the four major rivers to prioritize the environment over the economy.

Some of the new measures are already having an effect.

According to Xinhua, in the first three quarters of this year, emissions of sulfur dioxide - the major air pollutant - hit 19.06 million tons, down 1.81 percent year on year. Chemical oxygen demand - a key water pollution index - was 10.44 million tons, down 0.28 percent.

Last year, a survey showed that surface water was generally affected by "medium pollution," and a full third of samples of surface water were graded "worst polluted."

Putting new teeth in environmental regulations is just half the battle, however.

The government also needs to allow non-governmental watchdog groups – non-profit organizations, educational and research institutions, and media groups – to take a more active role in monitoring violations.

Private companies, state-owned enterprises and government agencies must all be subject to public scrutiny – and the criticism that sometimes comes with it.

Public criticism doesn’t always make for a perfectly harmonious society, but it could lead to a cleaner and healthier society – and create more harmony in the long term.

The New Chinese Farmer

During my trip to Sichuan last week, I met several successful Chinese farmers. The main reason for their success, however, was that they weren’t actually farmers any more. Instead, they were construction contractors, or operated tourism resorts.

It’s hard to run a small family farm anywhere in the world, and China is no exception.

My home is in Massachusetts, where my in-laws used to run a family dairy farm, with about 100 head of cattle on 90 acres of land. They shut down operations quite a while back, to take regular “city” jobs, and the only thing left to remind us of the farm are a couple of baby cows and a barn full of unused milking machinery.

The reason is that it takes either massive economies of scale or a very high-end, niche product to make a living as a farmer these days.

The tiny plots owned by most farmers don’t lend themselves to economies of scale. We could see by the ditches and other obstacles separating fields that there hasn’t been much thought given to bringing in tractors or other mechanized equipment. And everywhere we went we could see people doing manual labor in the fields. Selling your plot to the farmer next door so that the fields can be combined is an option in other countries, but not in China – farmers don’t own their land here, they rent it from the government. And, since they don’t own the land, they can’t borrow against it in order to buy machinery.

And the problem with making a high-end, niche product is that marketing is a bear. The people who can pay for high-end organic produce or gourmet cheeses are on the coast, far from the farmers themselves.

Local governments are doing their best to solve both of these problems. For example, farmers are allowed to sublease their lands to agricultural businesses. They get a little income for their land, and then either work for those businesses directly or go into the cities to find jobs. Other initiatives include farmers’ cooperatives, where farmers pool their lands in order to engage in agriculture on a larger, more efficient scale. Both businesses and cooperatives are able to engage in more marketing activity than individual farmers, as well. There are also marketing initiatives, such as an organic food certification program.

Chinese farmers could use a few million tractors, combines, harvesters, balers, fence post diggers – you name it, they need it. In theory, there should be plenty of opportunities for farm equipment manufacturers and distributors. But it will take a few more reforms before the average farmer in China can afford to buy them.

Eventually, most of these farms will be gone. A few family plots will probably remain, tended on weekends or holidays. The rest will turn into retirement homes, vacation resorts, parklands – or industrial-sized factory farms.

It will be sad to see a way of life disappear. But, like many traditions, family farming looks best from a far distance. Up close, the work is dangerous, grueling, and ill-paid.

Meanwhile, if you want to see rice paddies, hand-tended plots of cabbages, tiny fields painstakingly terraced into hillsides, and the absolute quite that comes from not having any machinery around, do take a trip to western China before it’s all gone.

There's Something About Chengdu

Earlier this week, I asked Ge Honglin, the mayor of Chengdu, what incentives his city had to offer foreign companies wishing to relocate here.

Can companies get subsidies? Low-interest loans? Tax breaks?

His answer surprised me. I expected a few vague promises, maybe some obfuscations, some exaggerations.

I got none of that.

"Frankly, Chengdu can't offer the same kinds of incentives as some other cities are offering," he told a room full of visiting foreign journalists.

Yang is a technocrat. He started out his career as an engineer, and seems not to have learned the art of hype and public relations. Instead, he tells it like it is.

At the Bookworm the next night – the town's favorite gathering place for expats – a local business executive told me that Ge was the best mayor in China.

The mayor has to be doing something right.

The city has a third of the population of neighboring Chongqing. It's located in a basin, and a perpetual bank of clouds seems to hang over it. The city itself is flat, and full of gray, dull buildings.

But there's something about the place.

It's got the fifth largest airport in China, and ranks third in the number of cars people drive, according to Zen Chen, general manager of the local European Union Chamber of Commerce. It's a major draw for high-tech firms, for foreigners, and even for foreign restaurants. About 11 percent of the city's GDP comes from tourism. Over 25 million tourists came to the city during the first half of the year, a 15 percent increase over last year, according to the latest government data. The number of foreign tourists went up 41 percent, to almost half a million, for the first nine months of the year.

The city consistently ranks in the top ten for livability and business climate.

It welcomes outsiders like few other cities in the region, said Zen.

For example, Chengdu has twice the number of Starbucks as Chongqing.

According to Ge, 120 of the Global Fortune 500 have offices or branches in Chengdu – including 14 foreign banks.

From what I heard, the city is focusing firmly on the basics – and not the unnecessary frills. On education, for example. On building a new subway system. On making it easier to commercialize farming. On helping out the rural underclass. On protecting the environment.

I heard from locals that, in years past, the air was so full of pollution that the sun could never get through. Today, I'm told that a nice bright sun will sometimes burn away the clouds and you can see blue skies.

I saw the Panda Research Center – a world-class facility. The pandas had beautiful habitats, very much in keeping to what you would see in the best zoos in the West.

But I was constantly surprised by how little hype and selling was involved. Sure, there was a tiny little alcove where you could buy a stuffed panda, but with 500,000 visitors a year to this facility alone (60% foreign), I would have expected to have been besieged on all sides by people looking for a piece of my wallet.

If this center had been anywhere else, it would have been difficult to walk out without panda T-shirts, panda books, panda jig saw puzzles, panda DVDs. And where was the panda-themed restaurant and amusement park?

Here, as everywhere else, Chengdu seems understated to the point of humility.

There were no sequins on the clothes in downtown storefronts that I could see – the whole city seems to be classically stylish.

Even the high-end malls in the city center, showing off the latest European fashions, avoid the garish.

The city is also far more intellectual than I expected. The drinkers I met debated Chinese history. The population of expats is small but warm and welcoming. There is a definite vibe of a college town.

Everybody I met here loves Chengdu.

According to the mayor, there's a saying that once people visit Chengdu, they don't want to leave.

I'm flying back out to Shanghai on Saturday, and I have to admit that Chengdu is a difficult city to leave.

Fair Taxes For All

At a dinner over hairy crabs a few days ago, I was discussing Chinese taxes with a group of visiting Italian logistics managers. A Chinese manager at the meeting complained about high taxes and fees but after the Italians heard what the tax rates actually were, the conversation took a different tack entirely.

Sure, an increase from 15 percent to 25 percent is big jump high. But compared to the tax rates in other countries – especially Europe – the 25 percent starts seeming like a pretty low number.

And, as Sherisse Pham explains in this week's article about Aoxing Pharmaceutical, some foreign companies are able to lock in the previous 15 percent rate for a little while longer.

For Chinese companies, the tax rates are falling – from 33 percent to 25 percent - thus leveling the playing field for domestic and foreign firms.

I have friends who are Russian businessmen who came to China because the tax situation is so friendly. It is possible to do business legally in China, paying all taxes and fees, and still make a decent profit. In Russia, by comparison, taxes can sometimes add up to more than 100 percent of income.

Sure, some people do avoid paying their taxes. Eventually, the "fapiao" system of tax receipts needs to be replaced with the standard international system, where any invoice or receipt or cancelled check can be used as documentation of a business expense – and all revenues are taxable, whether a company issues a fapiao for them or not.

However, even with its problems, China's tax structure – and collections – are improving dramatically.

Earlier this month, China's State Administration of Taxation reported that tax revenues went up 30.8 percent -- to 3.72 trillion yuan (US$495.5 billion) -- in the first three quarters of this year. That's the highest growth rate for the same period since 1994, according to Xinhua.

It's also about three times higher than the rate at which the economy as a whole grew.

Corporate income tax revenues rose even more, by 35.8 percent.

Clearly, somebody out there is paying more taxes than they paid last year.

Equalizing taxes between foreigners and locals can only encourage that process, as a basic unfairness in the system is eliminated.

And much of the taxes that are collected do go for pretty decent purposes – infrastructure, education, health care. This creates a virtuous cycle – better infrastructure and education helps business, which in turn further expands the tax base.

Now that the government has lowered the tax rate, it should make it easier to track receipts. Today, taxi cabs and Starbucks restaurants already issue receipts which are official tax documents, so it is possible to integrate tax collections into general operations. But the supermarket chain downstairs forces customers to go to the customer service window to get a tax receipt. It's very doubtful that more than a small percentage of customers will ever bother doing that.

KFC Ditches Nestle, Teams up with Mongolian Sour Cow

I love fast food, and I love celebrity marriages. Better still, I love celebrity divorces.

This week's announcement about the tie-up between KFC and Mengniu Dairy has everything I need.

In June, Mengniu also pushed out Nestle in a deal with Starbucks.

Mengniu is the largest milk producer in China, a country not traditionally known for dairy products. But today, Xinhua reports, China is the third-largest dairy producer in the world - following the United States and India.

In part, it was foreign brands such as KFC - which has over 2000 outlets in China - that helped change that. I'm thinking of KFC's soft-serve ice cream, for example. Or Starbuck's lattes. Or the slices of cheese on McDonald's hamburgers.

According to the state-owned China Daily, the deal is a demonstration of faith in China product quality.

This past January, Mengniu became the "Official Dairy Product of the NBA in China." Last summer, Hong Kong Disneyland named Mengniu as its dairy supplier.

Mengniu literally means "Mongolian cow." I remember the company for its sponsorship of the Supergirl contest, a copy of foreign talent shows like "American Idol." The show was officially known as the "Mongolian Cow Sour Yogurt Supergirl Contest".

The contest has since been banned by the Chinese government for being, as far as I can tell, too non-conformist – but it did help catapult Mengniu to national prominence

In other countries, dairy companies are very conservative. Cheeses are made based on centuries-old formulas. Occasionally, someone will come out with an innovation like 2 percent milk, or a new flavor of yogurt, or organic cheese but, in the end, what can you really do?

My in-laws were dairy farmers in Massachusetts. The farm went out of business a couple of decades back – as a mature industry, milk is a commodity product. It's hard to make a business at it, except through vast economies of scale.

China proves that it doesn't have to be that way.

By allying itself with Supergirl, with the NBA, with Disneyland and Starbucks and KFC, Mengniu is nothing if not the epitome of cool. The Chinese daily industry in general is cool – fast growing, innovative, popular with the youth market.

And new dairy products are coming out at a rapid pace. Flavored milks and milk with chunks of real fruit, novelty ice creams, even "breakfast cheese."

But, as Li Bin writes in this week's feature about China's dairy industry, China still has a long way to go.

Despite being one of the world's leading producers of daily products, China averages 10 kg of dairy consumption per capita – a tenth of the consumption of the world average. Japanese consumption is 18 times higher. US consumption is 30 times higher. And the French – no surprise here, given their love of cheese – consume 50 times as much dairy as Chinese do.

If the pace of growth in China's dairy industry continues, China may soon eclipse the US in milk production. But it is already eclipsing it in innovation.

Working Men Need Protection as Much as Women

Last week the China Daily explained a new labor law – due to come into effect on January 1 – that ostensibly protects women from job discrimination.

Ironically, the way that it does this is to list jobs that are "unsuitable for women."

These jobs including working in mines, cutting lumber, installing and removing scaffolding and carrying heavy weights.

On the heavy weights issue, there are plenty of burly women – and plenty of weak men. Those jobs might have physical strength requirements, but should be based on ability, not based on gender.

The other three restrictions are based not on physical ability as much as physical danger.

And, it is true, mining is not a safe environment these days in China. But it's not safe for anyone, whether male or female.

Rather than forbidding women from taking these jobs, the labor authorities should be cracking down on industries that violate safety standards.

After all, who would argue that men are more expandable than women? That their lives are worth less, and that they need fewer protections?

Okay, there are some women – maybe those going through a divorce, say – who might feel that way. But that's no reason to set public policy.

There's also the question of setting precedent.

If mining jobs are too dangerous for women, what about jobs requiring riding bicycles on city streets? Or jobs requiring long hours and stressful work, which might lead to heart attacks? Or police work, or fighting fires, or farm labor? Working on a farm is pretty dangerous work.

In the United States, for example, the farming industry as a whole is almost as dangerous as mining, with 22 deaths per 100,000 per year for farmers, compared to 24 deaths per 100,000 per year for miners. By comparison, the rate is 3.8 per 100,000 for all jobs, according to 2002 data from the US Bureau of Labor Statistics. Forestry and fishing also had high death rates.

The people with the most dangerous individual jobs – in the United States, at least – are timber cutters, fishers, pilots and navigators, structural metal workers, roofers, electrical power installers, farm workers, construction laborers, and truck drivers.

Does the same apply to China? Not exactly.

Last fall, Xinhua reported that the three most dangerous jobs in China are mining, policing, and journalism.

As an employer, can I now refuse to hire female business reporters on the principle that these jobs are dangerous? After all, there's a precedent -- the government has a policy in place of protecting women by keeping them out of dangerous jobs. And, if you work in television, there's also all that heavy equipment to lug around.

China's labor law is well-intentioned, but does the opposite of what it is supposed to do. I hope that the Labor Ministry takes another look at this issue before the law goes into effect.

Outsourcing with Chinese Characteristics

Historically, there have been two ways for a software outsourcing industry to develop in a country: through domestic demand, and through foreign demand.

The US, Japan, and other developed countries are prime examples of the first option. Large domestic customers - financial services firms, manufacturers, retailers, government organizations, the military - slowly turn to outside vendors to fulfill steadily more comprehensive technological functions. At first, outsourcing firms are brought in as consultants for specific projects, such as the roll-out of a new software system. Or they come in to handle a specific task, such as email management.

Some outsourcing companies started out as primarily hardware vendors, and initially their technicians only visited customers to help them set up new equipment. Other outsourcing companies were business or accounting consultants that moved into providing technology services as well. Others handled paper-based processes, such as payroll, and became technology companies when those processes were automated.

The biggest of these firms took the expertise they developed in the domestic markets and went global with it. The major examples are American companies - Accenture, BearingPoint, EDS, IBM, HP.

Then there's the export-oriented approach. A large customer based, say, in New York, needs some short-term programming help. One of the programmers already on staff knows just the guy - a friend back in the programmer-s country of origin. The staff programmer serves as a liaison, bridging language and cultural gaps between his employer and the growing team of outside programmers in India, Russia, or Israel.

When global companies were hit with the Y2K problem, hiring new programmers just to do that one fix didn't seem practical to many. In any case, there was a shortage of people in the United States who were willing to do the boring work of changing date formats in applications written in ancient computer languages. India was the best positioned to scale up to meet demand, with a large number of English-speaking programmers who knew the old languages and who were happy with the work. The small teams composed of friends and brothers-in-law morphed into real companies - companies that now had insight into the software development processes of major American firms.

When the Y2K crisis was over, these firms turned to other low-end programming tasks. Using their connections with customers in the US and elsewhere in the developed world, they offered to take on software testing, maintaining legacy systems, and rewriting old software to work on new computer platforms.

Today, of course, Indian outsourcing firms do extremely high-level software development, to some of the highest quality standards in the world.

China is not following either of these paths. Instead, it is feeling its way along in a completely new direction - outsourcing with Chinese characteristics. This includes localizing international software and websites to work in the Chinese market, serving domestic firms, and outsourcing projects for Japanese companies and some work for international clients.

It's not an easy path, however. Chinese firms have to compete with the American and Indian giants for both large domestic accounts and for the localization business. All of the world's major outsourcing firms are scaling up in China, and are bringing in their expertise and finely-tuned, world-classes development processes.

It's hard to imagine how, without government intervention, Chinese firms will be able to compete.

If they do then the Chinese path might become a realistic model for other developing nations to follow, the same way that its economic transformation has become a classic case of a peaceful - and profitable - transition to a free market economy.

Selling Computers In China's Frontier

It's not easy to sell computers outside of the big cities, with logistics one of the main challenges.

I was at a logistics conference a year ago, where Carrefour president Jean-Luc Chereau showed slides from a typical loading dock (Carrefour has been in China since 1995, and has over 100 hypermarkets in dozens of cities around the country).

The reason I mention them is because one of the slides he showed is still stuck in my head. It was of a loading dock somewhere within China. A nice modern truck was pulled up, unloading cardboard boxes. Next to it was a bicycle, piled sky-high with computer boxes.

I'd hate to see that fall over in the middle of a busy street.

I also had a quick chat with Ying Wu, executive director of business transformation for global supply chain at Lenovo Group. He said that many of his company's computers were sold at small mom-and-pop stores around China - many of which didn't even have Internet access. As a result, Lenovo was forced to develop a sales tracking system that allowed store owners to report their data via cell phone text messages.

Despite these obstacles, China's computer sales continue to rise.

In 2006, Gartner reports that total PC shipments to China were over 28 million - making it the second-largest computer market after the US. This year, Gartner predicts, Chinese consumers will buy more than 33 million desktops, notebooks, servers and other computers. And China's computer sales will continue to grow at double-digit rates, the research firm predicts.

China has an advantage over many other markets, such as India, or Europe, in that everybody in the whole country reads the same language. As a result, applications and operating systems only need to be translated into Mandarin, and everyone is all set, making the computers accessible to people throughout China.

In addition, it seems that Chinese consumers clearly understand the need for computer ownership when it comes to their children’s education - a significant driver for computer purchases in many homes.

Today's story by Edward Russell shows that much of this growth is coming from China's smaller cities - a sign of the growing maturity of markets throughout China.

Computer makers are adjusting their marketing and sales strategies for the new markets.

HP plans to expand its presence to 600 cities in the next two years - up from just 20 cities in 2003.

And it's not just the smaller cities in China that are benefiting from increased attention from manufacturers, both foreign and domestic. Farmers are, as well.

And Lenovo announced a 1,499-yuan (US$199) computer last month designed for the rural market. Another major domestic manufacturer, Haier, has also announced a strategy and new products for the market.

Earlier this month, Haier announced a joint venture company with Henan Zhongcheng Computer Company to produce computers for rural consumers in Henan, expected to ship a million computers designed for rural residents in three and a half years. The first computers are due out this October.

Promoting Outsourcing

Outsourcing - services, not manufacturing - is one of the most appealing industries to get into. It doesn't pollute, and provides white-collar jobs to college graduates.

It's no surprise that China has been enviously looking at India's progress in services outsourcing and looking for ways to emulate its success.

Now the government is putting some money behind it. On Sept. 12, the AsiaPulse news service reported that the China Development Bank (CDB) will provide up to 5 billion yuan (US$665 million) in loans to services outsourcing projects. The CDB is one of China's three policy banks, and has signed an agreement with China's Ministry of Commerce to this effect.

Late last month, India's IT trade body, the National Association of Software and Services Companies (NASSCOM), issued a white paper about China's services outsourcing industry, concluding that China has the potential to develop a large software and business process outsourcing sector.

"The Chinese government is key on promoting this sector," NASSCOM said. "Rapid progress on the tangible aspects of infrastructure and capacity creation is evident."

China's outsourcing industry resembles India's in the early phases of its evolution. However, NASSCOM pointed out that China also has some systemic weaknesses, and softer aspects remain a challenge.

There is a lot of opportunity for cooperation between India and China, however.

"Underlying this is substantial domestic market potential, a sizeable educated workforce and strong government emphasis on developing the sector," the organization said.

"China has come a long way in establishing itself as a destination for IT sourcing, with all stakeholders including government, academia and industry working towards improving the regulatory environment, offering incentives to IT companies and increasing the talent pool," NASSCOM president Kiran Karnik said in a statement.

Today's story by Li Bin illustrates just this, with a discussion of an agreement between India's National Institute of Information Technology and the Chongqing Information Technology Bureau to offer IT training to universities in and around Chongqing.

"Each month we host delegations from China which seek to learn from India," Karnik said.

According to NASSCOM, China's IT software and services sector accounts for just 0.5 percent of China's gross domestic product in 2006.

"Given this, the Chinese government and industry have taken a systematic approach towards addressing the above challenges with ICT [information and communication technology] oriented industry policies," said NASSCOM vice president Ameet Nivsarkar.

To develop China's capabilities as an outsourcing base for IT software and services, the Ministry of Commerce has launched a ten-hundred-thousand program: to promote ten (now 11) key outsourcing cities, attract 100 multinationals to China, and help 1,000 enterprises develop outsourcing capabilities. The end goals to double service exports by 2010.

As part of this project, the ministry is creating a special fund to train between 300,000 and 400,000 students over the next five years to prepare them for software outsourcing and business process outsourcing jobs.

The ministry will also help the 1000 enterprises obtain international quality certifications.

The plan also includes preferential treatment for cities in central and western China, such as discounted loans.

"China's approach to developing its IT software and services sector reflects the pattern adopted earlier while developing its hardware sector," NASSCOM reports. This means trading market access for foreign technology, encouraging joint ventures with foreign firms, and letting them set up production networks in China to support domestic companies.

Will all this make a difference? To the companies and individuals involved - definitely. To the country as a whole? Probably not for a while, as it takes time to create a legal system that effectively projects intellectual property and create a large enough pool of trained professionals and managers.

Go West, Young Meeting Planner

When things stay the same, you do things the same way. When things change, that's when life gets interesting. Fortunately for businesses in Central and Western China, things are starting to change.

For companies that keep up, this is good - more customers, more suppliers, more business partners.

Companies that don't keep up will see the new customers go to their competitors. After all, if your sales and marketing efforts are focused on taking the same three guys out to a fancy dinner, then your business will be limited to those three guys - unless a competitor comes in and sweeps them away.

There are two main avenues to change: education, and networking. Your sales and marketing staff need to learn new techniques for finding and developing customers, for example.

Both education and networking happen at conferences and seminars. And, as Central and Western China starts to develop, so does the event planning industry in the region.

That's what a friend of mine just told me, whose company is currently organizing an event in Xi'an and is planning to open one or two offices inland in the next six months.

David Taylor, spokesman for Monaco-based naseba Lnoppen, is one of the high-end events organizers, catering mostly to multinationals and the biggest domestic firms. In mid October, the company is holding the Advanced Coal and Chemical Summit in Xi'an.

"That's where the industry is," he told me. In fact, event participants will even get an industry on-site visit.

The company is also planning an event in Chengdu for later this year.

The government's "go west" program was a big jump-start to the events industry, he said. "Business is moving there, and we follow the business."

Foreign businesses - and big Chinese companies - who are moving into the region need information and local contacts. Meanwhile, local companies that want to go national - or international - benefit from training and contacts as well.

So far, there isn't too much competition our west, he said. "It's almost an untapped market when it comes to events. A lot of that, as best as I can tell, is because the events companies tend to come from a fairly international perspective an they still see Shanghai and Beijing as being the center of China business."

But with the growth in the inland cities, demand for information at all levels is expanding sharply, he said. This creates opportunities for event organizers both large and small.

The major industries contributing to this move are the energy sector, heavy industry, logistics, and, of course, manufacturing. There's also interest in financial events, he added.

Running a successful business takes quite a bit more than producing a product and getting it out the door. It's nice to see ecosystems developing, of all the ancillary services that businesses in today's world need to survive - and thrive.

Disclosure: David is a friend, and he and I have talked before about doing joint projects together. We met, of course, at a conference.

Local Incorporation Spurs Westward Moves

This past April, Chinese regulators started giving permission for foreign banks to incorporate locally. Incorporation means that the bank can do business in yuan and issue credit cards. Previously, foreign banks were only allowed to handle foreign-currency accounts, and were only able to offer credit cards through partnership deals with local partners.

Before, the foreign banks pretty much stayed in the coastal cities, going after the high-value, foreign-currency customers.

Today, those same banks have become much more appealing to China's middle class consumers -- and they have started moving to where those consumers are located. In other words, throughout China.

ABN Amro is now only one of foreign banks with branches in Chengdu and Chongqing, for example. HSBC, as today's story by Mai Yi demonstrates, goes even further, with a branch in rural Zengdu county.

Citibank, HSBC, Standard Chartered, and Hong Kong’s Bank of East Asia – among others -- are also competing head-to-head with domestic banks throughout China.

China's retail market is an attractive target, with 30 trillion yuan (US$4 trillion) in household savings and surging demand for credit cards and other financial services as incomes rise.

"When you are able to do local currency business, the more presence you have, the better off you are," one banking executive told us late last year. "The west is developing and it is developing fast or faster than the national average. Secondly, the government is encouraging western expansion and they are making branch licensing easier."

Foreign banks were first allowed to open branches in western and northeastern China in late 2003, but the lack of ability to do local-currency business hindered expansion.

It all bodes well for the Chinese consumer, who has one of the world's highest savings rates -- and enjoys some of the world's worst customer service when it comes to banking.

And not just Chinese consumers will benefit, though they will probably benefit the most, since there is more of them than just about anybody else.

Foreign businesses will benefit as well, since they will be able to get access to good banking services wherever they go throughout China

For example, it's a nightmare for my company to transfer money -- even within Shanghai. Too often, an employee has to carry stacks of cash between bank branches.

With international banks expanding in China, and bringing international service standards -- and product offerings -- local banks will have to shape up to stay competitive.

I'm looking forward to the day when I can transfer money electronically from my business account to my landlord, to my employees, and to my suppliers. Or, at the very least, write them checks.

In America, paper checks are so last-century. An inconvenience and a cost.

Here in China, paper checks, for some businesses at least, would be a big leap forward, and a cost savings over the current paper-bag-full-of-cash payment mechanisms.

Not to mention the security and risk management improvement.

Hotel Hotspots

Three years ago, work took me on a trip out of Shanghai, and my colleagues and I stayed at a decent-looking hotel -- one of the best in that area.

We were the only people there. When we checked in, the staff acted surprised that we needed things -- like room keys. Nobody showed us where to go, and for a little while we stumbled around in the dark, looking for our rooms in the multi-building complex.

The rooms were chilly, and badly supplied. None of the amenities I'm used to seeing in even the worst hotels in the US or Europe were present.

The hotel was located on a road lined with industrial enterprises -- but the road was strangely deserted every time we were on it.

The hotel managers had trouble getting us drinks, or calling us taxis.

The promised Internet connections didn't exist -- instead, I was given directions to a near-by Internet cafe. The cafe was a bit of a hike away, full of teenage boys and cigarette smoke. Not the worst working environment of my life, but not the best, either.

Hotels are high-visibility business projects. They can bring some glamour to a town, give a place for visiting executives and investors to rest their feet in nice surroundings.

Clearly, a good hotel is a must-have for any up-and-coming business city in China.

Three years ago, that feeling, that a location "should" have a hotel, was the primary consideration for putting one up.

But is the location any good? Is management effective? Is the hotel going to make money? These are the questions that must be asked instead. And today's hotel executives are doing just that.

As this week's story by Edward Russell and Miranda Li demonstrates, business logic is the driving force now in the industry -- and it is now flourishing, even in second-tier cities.

As a result, developers are paying attention to budget hotels -- less showy, but more practical, since most travel in China is domestic, and subject to price constraints.

However, as foreign interest continues to grow in central and western China, we're starting to see some high-end properties as well.

I'm now looking forward to visiting the Shangri-La hotel in Wuhan, for example.

Rooms are just around $100 a night -- a bargain by international standards. The hotel has conference and meeting rooms, a fitness center with a swimming pool, and honest-to-goodness Internet in the guest rooms.

But the same town also boasts a Novotel, a Ramada and a Best Western -- all of which have been getting great reviews from business travelers.

The Ramada Plaza Tian Lu hotel has all the same amenities as the Shangri-La, as does the Novotel Xin Hua, and the Best Western Premier Wuhan, and prices are about the same or lower -- many sites list prices at between $60 and $70 a night.

"I just attended a hotel conference at the Ramada Wuhan," says a typical review. "I was expecting a disappointing experience typical of interior cities. I was pleasantly surprised that it had good service and cleanliness."

Last time I traveled into China's interior, away from the major cities, I stayed with friends.

Next time, I'm going to give some of these new hotels a try.

India's Outsourcing Headstart

China has three major strikes against it when it comes to software outsourcing.

The first -- and biggest -- is that India has already sewn up the industry. It's got the contracts, the customers, the experience, the employees, the facilities, and the certifications.

Home-grown Chinese companies start out far, far behind. But even US and Indian outsourcing firms who come to China have to grapple with the lack of experienced personnel.

Typically, China dominates industry by coming in at a lower price point, and with more people. But India is at about the same price as China when it comes to wages -- at least, on the coasts.

In Central and Western China, Chinese firms could have a price advantage, and I know of a couple of domestic firms that are hard at work setting up branches inland in order to capitalize on just that. But, unfortunately, the lack of language skills and experience gets progressively more pronounced in the interior of the country.

In addition, India has plenty of engineers to go around. In fact, Indian colleges and universities are well suited to producing masses of engineers who can go to work for outsourcing companies -- again, because of India's track record. Established outsourcing firms have partnerships with universities, consult on curriculum, and produce veterans who can go back and teach. There are also plenty of internship opportunities. It's easy for an Indian student to find out what skills are needed in a software development job.

None of this is the case in China. Without a track record, without a critical mass of established firms, without collaboration between companies and educational institutions, the software engineers who graduate in China are less likely to have the skills needed by a world-class development house.

Related to the problem of track record is the issue of trust. Indian outsourcing firms have a long history of working for the world's top financial institutions, and, for the most part, doing a decent job protecting intellectual property and customer data. When a problem does happen, the industry reacts quickly, setting up security measures and procedures. For example, after Citibank had a problem with an outsourced call center employee stealing customer data, the Indian outsourcing industry put a process in place for tracking the history of each employee in the outsourcing industry and for checking the backgrounds of new hires.

In addition, India's justice system is reasonably fair and transparent. For India, the outsourcing industry its one of the main drivers of the economy. If anything happens to threaten that, the entire country can mobilize.

In China, the outsourcing industry is an afterthought to the country's main business, which is manufacturing. Intellectual property rights and other issues of critical importance to software developers don't get the degree of attention that they could. Even Microsoft backed down on its battle to protect Windows and issued a low-cost version for the Chinese market.

The last issue is not necessarily the most significant, but the one that comes first to mind of potential US customers: the language gap. Sure, Indian programmers have accents, but their knowledge of the English language itself is superb and they are generally easily understood. To make the language gap even smaller, many Indian outsourcing firms run "accent amelioration" programs for their employees.

In China, the problem isn't the accent as much as basic language skills. English just isn't as widespread in China as it is in India. For manufacturing firms, this is not a significant barrier. But for call centers, for data processors, and for programmers who have to work on projects with partners around the globe this is a major problem.

Today, the bulk of software development in China is localization projects -- producing Chinese-language versions of software and websites for foreign clients. There is also some domestic work, especially for Chinese financial firms looking to modernize their systems.

I predict that, in the next few years, China might become a regional outsourcing hub, producing software for Japanese and Korean companies, for example, as well as small, specialized projects for international firms. Other companies might outsource software development here because they already outsource of their manufacturing, or are interested in getting a foothold in China's domestic market by first playing nice with the Chinese government and creating white-collar jobs.

But, barring a significant catastrophe in India, it is not likely to catch up with that outsourcing giant anytime soon.

The Biggest City You've Never Heard Of

Actually, the above headline is not true. If you're reading our publication, you probably have heard of Chongqing - and heard a lot about it.

If Beijing is China's Washington, D.C. and Shanghai is New York City, then Chongqing is Chicago.

I used to live in Chicago - the American one. My first journalism job out of college was in the Windy City. Chicago's heritage is as a frontier town, though it's pretty civilized these days. I was always nostalgic for the past, however - that feeling of excitement, of being at the frontier, of building something new.

Today, Chongqing is that frontier. It's the frontier of industrialization, of modernization, a front line in the move from the farm to the city.

Shanghai, with dozens of pizza delivery places and a half-dozen competing English-language city magazines, with its supermarkets and movie theaters, its five-star restaurants and its World Expo, can hardly be considered a frontier any more.

In Chongqing, other than KFC and McDonald's and hotel restaurants - and how can you escape those? - it's hard to find a good western restaurant.

But Chongqing is the home of the world's biggest public toilet, where 1,000 people can answer nature's call at once.

The Chinese government is investing in highway improvements, the city is developing special economic zones, there's a monorail in town, and the long-lost twin of the Chrysler Building is going up.

While the rest of China is growing at an average annual rate of 11 percent - Chongqing is growing at 14 percent.

Over 30 million people live in the municipality, making Chongqing one of the largest metropolitan areas in the world. Most of these residents live in the countryside, not in the city proper - but that's likely to change as the city continues its push for industrialization.

Progress comes with a price, of course. According to the Natural Resources Defense Council, Chongqing is the fifth most polluted city on the planet.

This week, however, the city government announced that it's most of the way through a project to move 100 polluting factories out of the city - 82 are already gone and the rest will be moved within the next five years, according to the Chongqing Economic Commission.

I'm not sure how effective this plan will be to reduce pollution. After all, an estimated 200,000 people move into the city each year - many of them to work in new factories being built on the outskirts of the city. That's today's outskirts - the city is spreading out at a rapid pace.

Beijing and Shanghai are under pressure to clean up because they're showpieces - the Olympics and the World Expo are bringing in significant attention, but these cities have always been doors to the West. This is where the foreign diplomats and businessmen and journalists set up shop.

Development in Chongqing, however, will be independent of these considerations. It will be a true test case for whether the Chinese government is able to take a tough line on pollution and sustainable development - not for the sake of international perception, but for the sake of the long-term viability of the city.

Marketing to the Second Tier

The residents of Shanghai and Beijing have, by now, gotten used to a superabundance of advertising. On television and on the radio, in newspapers and magazines, in buses and subways, on the streets and in taxicabs and even in elevators. They haven't reached the level of cynicism of Western audiences, perhaps, but they're increasingly more sophisticated and demanding consumers.

By comparison, consumers in China's second and third-tier cities are where the tier-one cities were a few years ago: they're less used to advertising, less familiar with the products being advertised, and less willing to pay more for foreign brands.

They need more explanation of what a product does, and they need a lower price to be able to afford it. But, at the same time, they don't want to be talked down to, or get an inferior product pawned off on them.

Discovery Ogilvy China recently surveyed consumers in 65 lower-tier cities around China. The report, "The Real China," was released this month and shows some interesting insights, the results of which can be seen in our lead story.

To me, the fact that Ogilvy conducted this survey is a sign that international marketers are increasingly starting to look beyond Shanghai and Beijing when marketing their products in China.

And it's about time. Chinese consumers throughout the country need the same kind of services and products available in the big cities. They may have less purchasing power, and will be more selective in what they buy, but their sheer numbers far outweigh the populations in the tier one cities.

And as the economy continues to grow, so will their wallets. When the coastal markets are becoming increasingly saturated and hyper-competitive, it makes sense to look inland for new opportunities.

It will be interesting to see how fast the changes will come – and which foreign companies will take advantage of these trends, and which will stumble.

I hope that Ogilvy will continue to conduct this survey in the years to come, and that other marketing organizations join them in helping create a better picture of the Chinese consumer.

China's Transportation Network a Key Advantage

This past February, I visited some outsourcing firms in southern India -- Chennai, Hyderabad, Mumbai.

The food, I have to say, was excellent. As a vegetarian, I have to say that I have never eaten as well as I did during that ten-day trip.

I was shocked, however, by the state of the roads. Even near major airports, roads were in disrepair and there were few signs of ongoing construction -- at, least, in the places I've visited.

I flew from Shanghai to Chennai and the difference in the roads to these airports was stark. In Shanghai, the highway is wide and straight. Yes, it's packed full of cars, but for the most part, traffic moves. In Chennai, the road was narrow, full of potholes, and wound through what appeared to be abandoned constructions sites -- inadequately fenced -- residential areas, and shopping districts.

And don't get me started on the taxis. Compared to the cabs in Mumbai, the taxis in Shanghai might as well be right out of the Jetsons.

The roads in other cities I visited were no different.

My experiences were not atypical. The problems of India's transportation network are a major bottleneck for that country's development. It's railroads, airports, and highways are full to capacity, and its difficult to get new projects approved.

China's transportation network, by comparison, is a modern marvel. Keep in mind, I'm comparing it to India and not, say, Germany. But for all its faults, the roads are straight and wide, and there are new plans for road and airport construction in every part of China.

And those plans are backed by political will, financial wherewithal, and by a centralized power structure.

Now, in the long term, India's decentralized, democratic decision-making system may take the country further. By having to get buy-in from affected constituencies, the country may be able to avoid some of the social problems associated with development.

But that's not necessarily a guarantee of stability, and there are plenty of other areas of social stress besides highway construction.

In addition, new highways and airports bring new manufacturing plants, new logistics hubs, new retail outlets -- in other words, jobs and economic prosperity. And the highways don't only bring in new jobs, but help employees get to jobs elsewhere in the country. That helps to alleviate a great deal of social discontent.

They certainly alleviate my social discontent.

But, more importantly, it alleviates the discomfort of China's growing blue-collar working class, the foundation of this fast-growing economy, the basis of a middle class culture.

Chinese regulators should be more careful in ensuring that there is adequate buy-in from everyone affected by a construction project. With cameraphones in the hands of everybody these days, high-profile "nail houses" will only become more common, creating the possibility of embarrassment for local officials, or a focal point for protests. Adequate public comment periods and open information about future transportation planning will help deflate some of the frustrations.

Meanwhile, those of us doing in business in China will be able to benefit from one of the fastest-growing transportation networks on the planet.

Every day, with every new road built, a new land of opportunity opens up.

Buying Power

As Shanghai and Beijing reach retail saturation, international retailers are increasingly looking to smaller cities as their entry-points into China.

According to new research from A. T. Kearney, a Chicago-based management consulting firm, consumers in second- and third-tier cities are ready to embrace Western-style retail concepts and products.

The reason? The influence of television, movies and the Internet, researchers said.

"In China, foreign retailers such as Wal-Mart and Tesco, and Hong Kong-based retailers are branching into smaller mainland cities, such as Yuxi, Weifan, Nanchang and Wuhu," the research company said.

However, companies may need to use different approaches in the smaller cities.

"Retailers should not go into second-tier cities armed with a first-tier strategy," said Mike Moriarty, a partner with A.T. Kearney and co-leader of the GRDI, in a statement. "Successfully entering a new country via smaller cities requires careful identification of cities with consumers who are ready to embrace modern retail formats. But with the right strategy, smaller cities can be attractive targets for retailers that missed the window of opportunity in major cities and for established retailers looking for growth."

For example, in the most obvious difference, incomes tend to be smaller outside Shanghai and Beijing. This means that some products may need to be priced or marketed differently.

In addition, consumers in China's smaller cities live different lifestyles and have different needs than those on the coast. Differences in the quality of public transportation and penetration of car ownership may affect the kinds of products consumers can easily bring home, for example.

And, of course, there are market considerations.

In Shanghai, for example, a new product may be competing against twenty existing brands. The key marketing challenge would be differentiation.

In a smaller city, a new product may be one of the first of its type, and the challenge would be consumer education.

The problem for us business journalists -- and for you business executives -- is the lack of good research about the retail industry in central and western China. Most research reports still focus on the coastal cities, and those that do look west tend to be very broad and infrequent.

This situation is bound to change over time, but, until then, international retailers are relying on custom research reports from some of the smaller research shops that have recently opened doors in China.

Unfortunately, custom research is time consuming -- and expensive.

As a news magazine -- and not a research firm -- we at Emerging China can't hope to fill this gap. But we will try to do our own small part to address it, with special sections on China's retail industry and in-depth reports about particular cities and industry segments.

Also keep an eye out for reports about China's market research firms.

If there is anything in particular you would like to see us focus on, please don't hesitate to write. In fact, we welcome letters to the editor on any topic.

Looking west at real estate

Until the late 1990s, Chinese households and enterprises occupied state-owned property. Average residents had their housing provided for free, through government welfare departments and the housing offices of state-owned enterprises.

With the advent of privatization came one of the largest real estate booms the world has ever seen.

Shanghai is an obvious beneficiary of this -- new skyscrapers, shopping malls, and residential housing complexes are springing up both in the city and in the surrounding suburbs.

But central and western China now offer even more opportunities for real estate investment, and the reforms that have worked in the coastal cities are promulgating through the rest of the country.

According to a report by Beijing-based research firm Zhongjing Zongheng, just released in English last month, the real estate market has grown by 19.5 percent in the Eastern cities. But that pales before the growth in the inner regions -- 36.3 percent increase in central China and 32.1 percent in western China.

The research company predicts that the boom will last for another 20 years.

They may have a point, since city residents still account for only 42 percent of China's population, according to United Nations Population Fund, compared to an an average of 75 percent in the developed world.

That's a lot of growth potential.

Here at Emerging China we plan to devote a significant amount of time to cover the changing real estate market in China's central and western cities.

International companies are affected by this growing market in a number of ways. Foreign firms buy and rent property for their offices, and sometimes need residential space for their key employees.

In addition, many foreign investors are getting into the real estate as an investment, to the constraints allowed by law.

Finally, international real estate companies may have an advantage over local competitors when it comes to reliability, service, and their global capabilities. But, again, local regulations may limit the extent to which they're allowed to do business.

Regulatory changes are as important -- if not more so -- than market demands, when it comes to the Chinese real estate industry.

When we plan our coverage for the coming months, you can look forward to articles about the ways the laws are changing throughout China, and how foreign investors, renters and property companies are affected by the laws.

Next week, we will be posting an online calendar with a schedule of our special issues -- please keep an eye out for it.

Have a great summer!

The Biggest Business Story on the Planet

After the Soviet Union fell apart, I went to Russia to cover the civil wars in the former Soviet republics. I covered the dot-com boom for Computerworld -- particularly the way that the Internet transformed the world's financial system.

For the past three years, I have been covering the way that the rise of China has been transforming the global economy -- and this is the biggest story yet.

The way that China is transforming from a command-style to a market economy without massive political upheaval and loss of life is an example for every country in the emerging world. It is a privilege to be able to chronicle the ways and the means in which this is happening.

But what we've seen so far, with the transformation of Shanghia, Beijing, and Guangzhou into world-class cities, is only a fraction of the story. Cities in central and western China have been quietly learning from the example of the coastal trendsetters and implementing laws and policies that make them equally attractive to both foreign investors and home-grown entrepreneurs.

In addition, the national government is quickly putting in place the infrastructure that the country needs to develop, including roads, railways, and airports.

Here at Emerging China we hope to cover the westward expansion of China's economy, the good along with the bad. If you would like to participate in our endeavor, as a contributor or as a supporter, please feel free to contact me at maria@tromblyltd.com.

Meanwhile, enjoy your reading.

It promises to be a great trip.

Journalists and bad job-hunting skills

Note: This blog post also ran in the Society of Professional Journalism's "Journalism and the World" blog. Click here to see the original post (and comments).

I don't know if this is the case just in China or everywhere, but a great number of journalists I interview lately have remarkably poor job hunting skills.

It seems that I'm spending this week - like most weeks -- up to my eyeballs in recruitment ads and job applications. This time, we're hiring for a bookkeeper/office manager and freelance writers and copyeditors for a new online magazine about central and western China.

I've been seeing resumes from people with nice academic backgrounds and truly horrible work histories. Sure, there's always the chance that they're evil people who can't keep a steady job because of their hobby of murdering drifters. But I tend to assume the simplest explanation -- they don't know how to job hunt.

This is sad because there are so many books and other resources for job hunters, and it all really boils down to research and networking -- two things that reporters should be excellent at.

I understand that the market is saturated and it's hard to get started, but there are a few things that I look for on a resume and from an applicant that I hardly ever see -- and the bad job market can't possibly be to blame. Among them are:

* Commitment to journalism. Even during stints as a waitress, does the applicant continue to write freelance articles, contribute to professional organizations, take courses, even volunteer as editor of the local library newsletter? Something? Anything? Or do they just give up? I don't want to hire people who give up easily.
* Basic professionalism. Is everything spelled right? Are parallel grammatical structures actually parallel? This is a no-brainer. Why would anyone turn in a journalism resume to an editor before it's been proof-read?
* Pushyness. If I don't have a job available or at the right salary, does the applicant negotiate? Maybe there's something else they can do to prove themselves, or while the right job comes along? I want a reporter who can't take "no" for an answer. If the reporter is really, really pushy I might even create a job just for her. It's a tough profession. I want tough people.
* Volunteerism. How willing is the applicant to do something that's not in the job descriptio? I want to see evidence of participation in professional organizations, or taking on extra assignments. If it's not in the resume, it's easy enough to demonstrate -- offer to help me out with a project. There's always things I'm working on that I need help with. Even if it doesn't directly lead to a job, it will certainly lead to good recommendation or referral.

On the other hand -- and I hate to admit this -- I have a soft spot for applicants with no job-hunting skills. I see someone with a decent educational history and job record but an misprinted resume and ugly shirt and an inability to look me in the eye, and I think, "If I hire this guy, he'll stick around for a while, because he doesn't know how to job hunt."

I'm not proud of this. And I feel guilty, and compensate by helping writers out when I can. I've been known to copyedit applicants' resumes. (Okay, that's not from guilt -- I just can't stop myself. I even copyedit restaurant menus.)

Freelance writers are even worse. Which is funny, given that they, in effect, are constantly job hunting.

Here's what I often see from freelancers:

* No website. In this day and age, how can you not have a website? The quickest, cheapest way to do it: get a free blog from Google (Blogger) or Terapad, which are the two services I recommend most often. Blogger, however, is blocked in China - which could either be a good, or a bad thing. Post your bio and your resume in the "about" section, and your clips as blog entries. You can back-date your blog entries, so you can post your clips by when they appeared. Depending on the kind of permission you have from your old editors, you can either post the whole article, or just the first couple of paragraphs and then the link to your original story. You can add a couple of articles a day until you've got a nice selection of clips to look at - which brings me to the next point:
* Just one clip per pub. Writers often provide a list of publications they write for, plus one clip each from a handful of them, presumably their best clip. I wonder: did the magazine drop them after one story? Were they so hard to work with that the editors never wanted to see them again? More than a nice clip, I want to see evidence that the writer had a long-term, successful relationship with an editor. In the past, when clips had to be copied, editors probably didn't want to spend their time wading through stories and just wanted to look at a handful of the best ones. Now, I want to see all the clips. Yes, the all the hundreds -- or thousands -- of stories. Maybe the best ones can be featured in a special section somewhere, but I want to be able to browse. Is the writer consistent? Able to learn new subjects? Have a broad background -- or have depth of knowledge in a particular field? These are all good things to know.
* Goofy email address. It costs $10 (or less) per year to register a URL. Gmail will cost your email for you, for free, at that URL. So you don't need to have a hot_john@spam_host.com account. You can use john@johnsmith.com, and still have Gmail's great interface. Many small businesses are using it these days to host their corporate email. Freelance writers should, too, or invest in an email hosting service.
* No testimonials. Many editors would be happy to give writers a quote testifying to their ability to meet deadlines or to produce usable copy. For some reason, however, most writers never ask. It's okay to ask. The worst that could happen is that the editor woud say no, and blame corporate policies. I want to help my best freelance writers stay in business, which means that they need a steady flow of work. And if they get too busy to write for me -- well, I'm sorry to see them go, but I'm also happy for their success. I bet other editors feel the same way.

Meanwhile, if you're looking for either freelance or staff work - or a summer intership -- look me up. I'm always checking my email.

Signing off in Shanghai,

Maria

Outrage continues to build about jobs outsourcing

Note: This blog post also ran in the Society of Professional Journalism's "Journalism and the World" blog. Click here to see the original post (and comments).

On Sunday, Gene Weingarten of the Washington Post made fun of PasadenaNow's plans to outsource local reporting jobs to India in his column, Hack for Hire.

He does it by trying to show how funny it would be if American reporters tried to cover news in India or China.

Of course, American reporters cover news from India and China all the time.

American journalist routinely parachute into foreign countries and write them. They are obviously taking jobs away from locals with much better understanding of local cultures. Sure, they write in terms that people back home can understand, but I would argue that it is much easier to learn to write in terms that Americans can understand than to figure out what's happening in, say, China or India.

And many American reporters cover the world without ever leaving home.

They pick up the phone and call people, or send emails to them. A few years ago, it would have been impossible to do this -- you would literally have to have someone on the ground, going around and knocking on doors.

Today, my reporters complain when their voice mails to Vietnam officials aren't returned the same day.

I did a story on the Iraqi stock exchange a year or two back. It was when there was still optimism in the country, and there was actual hope for the exchange. I did meet some Iraq Stock Exchange executives while they were on a trip abroad, but I never took them up on their invitation to visit Baghdad. The interviews for the story were conducted by phone and email.

I also wrote about Indian outsourcing for years before I ever actually visited India. But then, what technology journalist hasn't?

Usually, my conversations with sources in foreign countries are very specific: What do you think about the new regulations? What does your company plan to do next?

Occasionally -- very, very rarely -- I might ask sources to describe what something looks like. As webcams proliferate, I might soon be able to ask them to pan the camera across their office.

Electronic communication is already good enough for business, technology, and economics stories. With the rise of blogging, it's even become possible to do remote "man in the street" type interviews with ordinary citizens, by finding them through their blogs.

Sure, Weingarten may do a lousy job with his first attempt at covering local news in India. But if he were to do it, day in and day out, for a few months, he'd probably get pretty good. Sure, he probably won't learn Tamil in that time, but he will have probably collected the emails and telephone numbers of all the local players, so he can contact them after the meetings and find out the background of what actually happened and what it means.

An Indian reporter covering the US will have a much easier time of it. Indians already grow up with a steady diet of Friends, Hollywood movies, and all our other cultural exports. There's no language barrier, and public information is usually easily accessible compared to that in other countries.

Then there's the "hierarchy of majors" effect on US journalism.

Here's my theory (in case you haven't heard it yet):

The toughest majors are the math-heavy ones: physics, mathematics, economics, chemistry, engineering. That's where the preponderance of the smartest students ends up.

Then there are the tough non-math majors: premed, prelaw, the life sciences, government, history. There's a lot of memorization of facts and understanding of processes.

After that, you've got the language majors, comparitative literature, the softer side of the literal arts curriculum. A student might have to read a few books and write a few papers, but it's neither rocket science nor brain surgery.

Finally, you've got the communication majors. I'm not sure what they have to do. I presume they already know how to communicate before they ever get to college. It's the major of choice for college athletes and men and women going for the Mrs. and Mr. degrees. When I get a job application from a communications major, I better see a second major in economics or government or something -- anything! -- else.

So, on the one hand, you've got an excess of American communications graduates barely able to add two and two and planning to hop over to public relations the minute they get a chance.

And, on the other hand, you have smart, hungry, driven Indians who had to work like crazy to get into college at all.

You do have a problem with quality control. Even in the United States, reporters sometimes slide fake stories through. Oversight is much, much harder when the reporter is on the other side of the planet, especially when the editor isn't familiar with the story the reporter is covering.

I suggest the following quality control mechanism for overseas reporters (of any nationality):

* Full transcripts -- in English - of every interview. If a quote doesn't have a transcript to back it up, cut it out of the story.
* Full contact info for each source (including email addresses). Routinely email quotes to sources to check for accuracy. (Not the whole story, just their particular quotes.)
* All source materials (using Google translation if they're in foreign languages). If a fact isn't backed up by a source material, cut it out of the story. And, of course, if a fact isn't attributed at all it shouldn't be in the story in the first place.

It is a little bit of a pain to collect all this stuff. We use an online relational database in our office. But the investment in a good document tracking and workflow system is well worth it, in my opinion.

Signing off in Shanghai,

Maria

Busy season

Note: This blog post also ran in the Society of Professional Journalism's "Journalism and the World" blog. Click here to see the original post (and comments).

Last week, we had so many story assignments coming in that we ran out of writers (including our freelancers). Thus no postings from me for a while.

We've been running ads for more writers and copyeditors, but it will take time to train people and get them to the point where they actually save us work, not create more work for us to do.

For a new writer, we have to hold their hand through the entire reporting process, help them organize their stories, and then rewrite everything from scratch after they hand them in.

For a new copyeditor, we have to hold their hand through the copyediting process, then re-edit everything they hand in.

We don't have a choice, of course -- there aren't many experienced business writers out where we are, so training is essential.

I had much the same experienced when I worked in Russia in the early 90s, though back then I was training news reporters, not business writers.

Meanwhile, if anyone wants to get involved and help us out, just drop me a line.

Signing off in Shanghai,

Maria

How to avoid paying bribes

Note: This blog post also ran in the Society of Professional Journalism's "Journalism and the World" blog. Click here to see the original post.

At lunch today I had a nice chat with a lawyer friend about paying bribes. Now, I'm not about to comment on this issue in China (except to say that, for me at least, it hasn't come up).

But I'll share a bit of my experience in Russia and the former Soviet republics.

Again, I'm not often asked for bribes. When I am, I don't pay them. End of story.

But I've known colleagues who had to pay through the nose for everything. Every single stamp, ticket, piece of paper, or anything else they needed -- the bureaucrat's hand would come out. Even for simple things like hiring drivers or translators, they were forced to pay way above the going rate.

Some dealt with this problem by bargaining hard, others by sending local assistants to negotiate on their behalf. Others just resigned themselves to pulling out their wallets.

And I have other colleagues who are never asked for bribes. Instead, they get favors from bureaucrats -- favors that the bribe-paying guys wouldn't even dream of getting.

What's the difference? In my exprience, the difference comes down to how much they like the people they're dealing with.

Let's talk about Alex, for example. Alex was a freelance television journalist of European origin. Short, balding, funny-looking.

But he genuinely liked the people he met in the war zones. He liked the bureaucrats, he liked the mass murderers, he seemed to like everybody. Occasionally, we would get together socially with the people we were writing about and he would always participate in all the toasts, tell funny stories -- and basically act like he treated everyone like an equal.

Everybody we met wanted to do him favors.

You don't have to be a born salesman to do this, though.

Another colleague, shy and self-effacing, had a "shucks, golly gee, can you help me out here?" vibe coming off of him. And people did help him out. He wouldn't rush up and hug people and pat them on the back, he would hang back shyly, but you could still tell that he liked the people he met.

Imagine you're a big black man on an elevator and you're covered in tattoos and carrying a gun and a tiny white guy in a nice suit gets on. (Those of you who've been there know exactly what I mean.)

If the little white guy cowers and hides in a corner, or puffs himself up, or otherwise acts like he's scared of you and doesn't like you, you're going to be pissed off. If you're nice, you won't show it, but it would be pretty tempting to say "boo!"

But if the little white guy is relaxed, smiles, maybe compliments you on your guy, you'll feel warm and fuzzy towards him.

When American journalists go out and cover wars in third world countries, we're all the little white guy in the elevator. Including those of us who are big and black and covered with tattoos. We can't help it. We've got money, and little notepads, and they've got resentment and lots of guns.

It can be hard to like mass-murderers. And it can be hard to like bureaucrats.

But if you get past the murdering and the paper-shuffling, we're all just human.

Here are some tricks to help bring down those barriers:

* Do something purely social with the bureaucrats.
* Find a personal connection: does one of their kids go to school in the States? Do you know anybody there? Do you have any friends in common? Do you have common interests? Do you like the same movie or music?
* Do you have the same things? Do you hate the weather? Do you hate George Bush? Do you hate athlete's foot? Do you hate your boss?
* If you're single -- maybe they know someone they can introduce you to. If they're single, maybe you can introduce them to someone.

You don't have to do all of these things with every bureaucrat you meet. In fact, you don't have to do any of these things, with any bureaucrat. All you have to do is know that you could, if you wanted to. Making friends -- even once -- will help you change your attitude. You will know that if you made an effor to reach out, that you would see them as human. They will pick up on your attitude.

If your attitude is "I will never think of you as a human being -- you are nothing more to me than a lousy functionary/mass murderer/racial or ethnic stereotype" then you don't get very far.

So when you first arrive in a new country, do your best to get rid of that attitude. Make friends with locals. Make friends with local bureaucrats -- even if not the same ones you'll be dealing with.

Your attitudes will change. You will give off those little, unconscious signals that you see the other guy as an equal, that you think he's okay, that if you got together you might wind up friends.

And that makes all the difference.

Signing off in Shanghai,

Maria

How (not) to write a China article

Note: This blog post also ran in the Society of Professional Journalism's "Journalism and the World" blog. Click here to see the original post (and comments).

Sinocidal (a.k.a. "Five guys hanging around in China") has a great post today by blogger ChouChou about how to write a China article.

Quick summary:

* Title: China/The Dragon/The East/1.3 Billion People/Red Star + Rises/Century/Awakes/Stirs/Does Dallas
* Interview a taxi driver
* Add in a contrast -- such as a statue of Mao with an ad for Coca-Cola in the background.
* End with a vague conclution about things looking bright -- or remaining unclear -- for either the country or for specific individuals in it. Or combine all of the above like this: “It seems that the future is looking bright for the 1.3 billion people who make up the world’s most populous nation. But for Li *** - who is still working at the condom factory for just two grains of rice a year - that future is still unclear.”

Fellow blogger Mike J. compared it to this McSweeney classic: Create Your Own Thomas Friedman Op-Ed Column.

I agree that there's a lot of formulaic writing out there.

In effect, what I think is happening is that writers are rewriting articles that have already been done, adding in their own color and quotes but without doing the hard work of actually discovering the trends on their own.

Back when newspapers were closed little universes -- their subsribers and only their subscribers saw their articles, and their subscribers didn't see articles from anywhere else -- it made sense for every newspaper to have its own "big picture" story about major news events.

Now, with everything available online all the time, there's no reason for anybody to be writing the same story that, say, the New York Times has already done. Unless they think they can do it better, or take a different angle, or otherwise add value to the discussion.

I believe that more and more news outlets are realizing this and cutting back on their "me, too" coverage -- which reduces the numbers of stories such as those that ChouChou was making fun of.

There are two possible consequences of this: an outlet can cut back on its foreign coverage, or, an outlet can redirect that coverage in a more useful direction.

Too often the former happens.

I personally feel that foreign news is becoming steadily more important to people with globalization, so newspapers should be looking for ways to make foreign coverage more specific, unique, and relevant for their readers.

Say, for example, you're the Springfield Times. You want to do a China story, and have a budget to send a correspondent there. You're afraid that he'll come back with the Sinocidal-style formula piece.

There are lots of ways to localize the China story, and make it useful and relevant for readers. Some examples (these are off the top of my head -- I'm sure there are many others):

* Springfielders adopt babies from China. How does this process work? Where do the babies come from? What are the conflicts and/or trends involved? (Requires visits to the orphanages involved, possibly home villages of the babies, home visits to the new parents, interviews with grown-up adoptees.)
* Springfielders get stuff from China. Poisoned petfood is just one example. Look at an industry important to Springfield and find out how China is changing that industry. If a plant moved to China, visit the new plant. What is it like? How does it compare to the Springfield plant? Are there any problems? Any surprises?
* Springfielders sell stuff to China. Maybe it's their time and expertise (English teachers or lawyers or architects abroad). Or intellectual property like music or books. Or actual physical stuff -- luxury goods, electronic components, medical supplies. Follow them to China and find out how they're used and who buys them.
* Springfielders lose money in China. For example, a company might see its product copied at a lower price. This can even extend to out-right theft, as in the case of software and movies. Springfield companies may even have problems with China-made counterfeit goods. So visit the factories of the counterfeiters -- the victims are usually more than happy to give you directions.

Signing off in Shanghai,

Maria