Our Blog - Read about what we've been doing in China.
August 7, 2006
Vietnam
In an attempt to offer our customers a wider product offering, XPI is increasingly exploring the benefits of Vietnam. While generally Vietnam is not established enough as a manufacturing center to support many of our clients needs, it is very strong in some key areas in which XPI is involved, most notably textiles. Currently, textiles account for 1/5 of Vietnam’s total exports. Additionally, as the US continues to put regulations in place to slow the flow of inexpensive garments from China, Vietnam is becoming more and more attractive.
June 22, 2006
A little taste of home in Ningbo, China.
Last night I had the pleasure of being invited to poker game in Ningbo. What made this experience notable was that this time I was not playing some complicated Chinese card game like “Down with the Landowner” but the Cadillac of poker itself, Texas Hold’em. The game was organized by local bar owner, Mark Poirier. Mark has been living in China for about 10 years and a little over a year ago he decided to open LBB. LBB is a bar for westerners designed to give them a little taste of home. I must admit that a glass of Jim Beam and a game of pool do just that after spending weeks speaking only Chinese eating various versions of duck beak soup. The poker game was quite an enjoyable experience, even if I did lose my shirt. “You guys are sharks!” I could be heard occasionally screaming. To make the experience complete, Mark even provided genuine Pizza Hut Supreme Pan Pizza.
June 12, 2006
Disney’s missteps in China
As small and medium size businesses rush to incorporate China into their overall business strategy, sometimes it is refreshing to see the big guys experience challenges too. This year, Disney opened its fifth park location, Hong Kong. A few months ago, facing lower than expected attendance, Hong Kong Disney chief Bill Ernest meet with Chinese travel agents to find out why. What he learned was that Disney didn’t have the same presence in China that they had in their other markets. The Chinese simply did not differentiate the Disney Hong Kong park with the hundreds of other amusement parks around the nation. In addition, Ernest’s park analysts told him that the Chinese visitors’ behavior patterns were different than their other parks: they spent more time eating their meals, they were ignoring waiting line signage and they were not laughing on cue during the performances using spoken Chinese. A new marketing blast and park changes are now being implemented. Disney has now learned what many non-Chinese companies have learned the hard way: the China market follows a different set of rules and these rules must be studied and incorporated into any Chinese expansion.
May 2, 2006
Chinese spending habits
Anyone who is a frequent visitor to China has seen the gradual increase in western influences. Now Chinese saving habits are seeing a shift as well. The Chinese are known for their thriftiness and desire to put a large portion of their earnings away for the future. Now, as the consumer goods of the western world invade China, the western spending habits are following. There is a new term in China. It is “yue guang zu” roughly translated as the “monthly tapped out class”. Surprisingly enough the Chinese government is actually supporting this shift. They see it as a way to reduce China’s massive trade surplus with the US. To further fuel the shift, recently, China’s central bank raised the interest rates for loans but left the interest rates on deposits unchanged. While this development may be distasteful to the older, more traditional Chinese, it may mean an increased opportunity for US companies to market their products and services in China.
April 7, 2006
No more new western magazines in China?
China has just changed the rules on foreign magazines wishing to expand to the Chinese market. As of now, only foreign magazines focusing on science and technology will be allowed to enter the Chinese market. While these new restrictions will not affect western magazines already sold in China, it has seriously damaged the expansion plans of many western lifestyle magazines. Rolling Stone for example has already rolled out its premier issue in China only to have the Chinese General Administration of Press and Publication forbid them from publishing again. There is still hope however, for it is not unheard of for China to impose restrictions on foreign investors only to ease them later or allow exceptions. On this, we will just have to wait and see.
March 22, 2006
Money to burn
You may have read an earlier Blog entry regarding the sale of 40% of B2B site Alibaba to Yahoo for a cool one billion dollars. Well, it was announced recently that Alibaba CEO, Jack Ma has already spent 750 million of it. Yes, that is 750 million dollars in about eight months, that’s over 3 million a day. How did he spend this money you ask? “Research and development and other projects” was the ambiguous answer. I am definitely curious to see what the future holds for Alibaba and Yahoo China. Stay tuned…
March 1, 2006
M&A predicted to pick up with Chinese companies
One of the world’s preeminent financial advisory firms, Lazard Ltd. Has opened its first office in China, signaling preparation for a surge in merger and acquisition activity among Chinese companies expanding overseas. Supporting this line of thinking, Dealogic data shows the number of deals Chinese companies are doing overseas has risen almost 40% from 2001. Many Chinese companies are starting their global acquisition trail in countries other than the US because of fears of potential political opposition. Last summer, an $18.5 billion bid by Chinese oil producer Cnooc Ltd. to buy Unocal Corp. failed because of opposition in the US Congress.
February 27, 2006
China Daily Headline: “Google.cn operating with no license”
Nowadays, Google is definitely the company everybody wants to be. They’re big, they’re rich, they’re fun to work for and they proclaim to do no evil. So, naturally I was surprised to see the headline in the China paper that they were “breaching Chinese Government Internet rules” and this illegal operation could lead to “rectification, fines and closure” or even “criminal charges”. Now obviously Google is too savvy to let this situation get too out of hand, but it just goes to show that even the all powerful Google has trouble navigating the complex world of Chinese governmental regulations.
October 8, 2005
Doing business in China? Bring a spare liver.
Over the years, we have learned that it is not necessary to drink mass quantities of alcoholic beverages to do business in China….unless, of course, you want to be successful. To be honest, it really isn’t the drinking that brings the success, it is the bonding that comes with the drinking. Since bonding over a friendly game of racquetball or a long afternoon jog isn’t really an option, drinking seems to be the bonding method of choice. For those of you who spent your four years of college doing shots and keg stands, you’re in luck, your Chinese business associates will be very impressed with you. If, on the other hand, you spent all your time studying and achieving your 4.0 grade point average, you may be in trouble. But, fear not, there is a solution. Hire a designated drinker. As ridiculous as it sounds, this type of role exists in China. Even for the seasoned Chinese drinking businessman, eventually he needs a break. Since drinking at the dinner table is unavoidable, the only solution is to direct your designated drinker to get your business associates drunk for you. All the while, you are sitting there politely smiling and sipping slowly on your drink.
August 19, 2005
Yahoo buys into Alibaba
It was announced that Yahoo is buying 40% of Chinese B2B site Alibaba for one billion dollars, yes, one billion dollars. Now, I would like to discuss for a moment why Yahoo would ever invest this much money for 40% of a company that a gross revenue of only $46 million in 2004. It is all about a Chinese customer base. Large companies, especially Internet ones have had so much trouble acquiring a large Chinese customer base that they are now deciding their only option is to buy it. While Alibaba’s revenues are small there customer base (or maybe we should call it contact base, as many list for free) is huge with 6 million businesses. This is what Yahoo is buying, for a $166 bucks each. When stated that way it doesn’t seem like that bad of a deal. If Yahoo were to buy each business dinner and drinks in an attempt to get them to join, it would be about the same amount of money and take a lot more time.
June 24, 2005
Swedes invade China
During my drive to Shanghai’s Pu Dong airport yesterday, it caught me by surprise to see a huge blue and yellow Ikea store. When I asked around, it turns out that Ikea has been in China for a few years and they have been surprisingly successful compared to other retailers that have tried to make entrances into the Chinese market, but their success did not come easy. When Ikea first opened the Chinese flocked to them, but not to buy furniture, they were there for the free air conditioning, clean toilets and even decorating ideas. To add insult to injury, these would-be customers would then buy cheap knock-offs of Ikea furniture from vendors set up across the street. When Ian Duffy, Ikea’s head man in China became aware of this, he had an unconventional solution. What he implemented was a pricing strategy unlike any that had been implemented by other multinationals. He slashed the prices, really slashed them. For example the price of an item in the Chinese store could be as much as 70% lower than the same item in the US store. They used new local furniture manufactures to drop their costs and salvaged their bottom line. It worked. Nowadays, the Chinese pack the stores every weekend and more importantly, they buy.
April 28, 2004
Brace for impact!
While words cannot express the insanity of the driving in China, I will do my best here. First I must make a distinction, when I refer to driving in China, I don’t mean places like Shanghai, Hong Kong or Shenzhen. I mean “emerging” China. I’m talking about the parts of China where 90% of the drivers have 1-2 years driving experience. I’m referring to the places where, unless there is a police camera snapping pictures of you, all laws are considered guidelines. This is the China that I must say has the absolute craziest driving in the world (yes, even compared to Rome). After spending the last week driving around in this, I have been trying to come up with a way of describing it. The following is the best I can come up with: Imagine driving in a place where, at any moment, any vehicle/human/animal can come at you, at any speed, at any time. Please take a moment to really let that sink in. Here is a small example. You are driving on a dark highway with no streetlights (China likes to save power). There are two lanes going in your direction. You are driving 50MPH in the fast lane following the taillights of a car in front of you. The car quickly swerves into the right lane revealing the headlights of an overloaded dump truck that has just chosen to use your lane and is coming at you at 80 MPH (your 50MPH + his 30 MPH). You also swerve to the right lane only to see that there is a donkey pulling a cart across the road in front of you. So you swerve again onto the shoulder to avoid the donkey, but you inadvertently cut off a Mercedes S500 that is doing about 90 MPH and is already driving on the shoulder. You pass the donkey and the truck and let the Mercedes by, wipe the sweat off your brow. And then you realize: you still have an hour to go.
February 20, 2004
COLD
I spent today working in our Yuyao injection mold factory. It was cold! When I am not in China, I spend my time in the “upstate” region of New York State. We are no strangers to cold. Nearby Syracuse held the United States 2005 snowfall record with 124.6 inches. Our temperatures commonly dip into the negative 10-20 degree Fahrenheit range. So when I reviewed the current temperatures in Yuyao and saw 40 degrees Fahrenheit, I thought “40? That’s like a nice spring day. I’ll pack light.” What I didn’t realize is that in America, we are seldom exposed to the true outside temperature. We are exposed to the temperature in the office, in the car, in the restaurant, in the hotel and in our home. The difference in rural China is that when the outside temperature is 40 the factory temperature is 40, the office temperature is 40 and the hotel room temperature is 40. The only relief is from the small heater that is in the hotel room, but these are not turned on until you arrive, which means comfort is still a couple hours away even after you arrive.
