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Overheard and Observed in China: Part 2: The Dalai Lama

There is something surreal about opening the morning newspaper at the breakfast table in your hotel each day and reading a polar-opposite, diametrically opposed point of view on an issue that perhaps you haven’t given much thought to–at least I hadn’t–but that you already know the answer to because it is so universally accepted in the media pool in which you swim.

One topic that jumped off the pages of the China Daily (the national English language newspaper of China) with a clang and a bang for me was the different perspective on the Dalai Lama, who is also on the front page of many Western newspapers, particularly in the wake of protests that accompany the Olympic Torch each step of its trek to Beijing for opening ceremonies. Oh, and that March 14 riot thing in Lhasa, Tibet, which included monks. Maybe. (Not “maybe” on the riot but on whether the monks were monks or soldiers dressed as monks.)

Here are just a few of the juxtapositions:

Western View: Tibet was a free country since a treaty that ended 200 years of fighting was ratified in 821 A.D., but was forcibly seized and annexed by China as part of Mao Zedong’s 1950 invasion with the People’s Liberation Army that was ratified under coercion in 1951. China View: Yes, Tibet and China separated in 821 A.D., but Tibet became an intrinsic part of China between the 13th and 15th Centuries in response to Mongolian invasions; China was granted formal sovereignty in 1751 to protect Tibet from the Nepalese Gurkha invasions.

Western View: The Independent Tibet movement rectifies historical injustices by returning sovereignty to the Tibetan people. China View: There is no historical validity to a Greater Tibet, administratively, religiously, and especially ethnically–at least 10 other groups have been living on the Qinghai-Tibet Plateau for generations, including Han, Hi, Mongolian, Tu, Monba, and Lhoba.

Western View: China wants to suppress religious expression in Tibet. China View: China has shown more than 50 years of restraint and respect on Tibetan culture, particularly in regards to religion. In fact, all of China is prospering and experiencing new freedoms, including speech and religion, to a much greater degree than Tibet, with its theocratic leanings.

Western View: The Dalai Lama is a man of peace and goodwill. China View: The Dalai Lama is a political operator–and sometimes instigator–who was part of theocratic feudal regime that enslaved and impoverished the Tibetan population; nobles and senior monks owned and controlled 90% of the land.

Western View: On March 14, awakening echoes of Tienanmen Square, the Chinese government once again crushed a peaceful demonstration of people who seek freedom. China View: The Tibetan Government in Exile, with the fundraising savvy and organizational skills of the international “Dalai clique” orchestrated a violent riot that resulted in $35 million (U.S.) in damage.

I spoke with one U.S. businessman who has lived in Hong Kong for a number of years and he commented:

Maybe I’ve lived here too long and have been brainwashed, but I’m no longer convinced that the Chinese government is all wrong on this Tibet issue and, in fact, may do more for the everyday Tibetan people than the separatist movement. For example, the government in exile has no plans on accommodating a multi-ethnic population.

So has he been brainwashed? The obvious answer is, yes, of course he has–and it’s tied to the simple notion that the official Chinese media can’t be trusted to produce anything more than propaganda. I’m glad that I don’t have to worry about that danger in America because I have objective, reliable, and trustworthy news sources like The New York Times to protect me. Okay, cheap shot. But there is a strong resentment in China that they aren’t getting a fair trial in the international court of opinion. A Western expatriate made this statement:

The official Chinese media may be clumsy, but at least they are not as hypocritical as the Western media which always claims to be impartial, yet are actually biased on many issues related to China … and in their own countries!

Well, I’m no expert on Chinese politics, but this exercise has helped me come to one iron-clad conclusion: to fight media bias on the issues near and dear to my heart, I’m going to hire the PR firm the Dalai Lama uses, not the one the Chinese government has on retainer.

Overheard and Observed in China: Part 1: The Economy

I just returned from a way-too-short and rapid trip to China. There are so many angles and facets to explore but for a Part 1, I thought I’d focus on some interesting economic dynamics in China that are highly interrelated with some equally interesting dynamics in the U.S. economy.

As context, note that the overarching paradox of trading with China from a U.S. standpoint is (a) we like China’s cheap costs but (b) we don’t like the trade gap. The burgeoning trade gap is particularly bothersome as the U.S. dollar continues to free fall in the international currency markets, which should make buying U.S. products more attractive than ever. But the trade deficet is going to be a side light and what U.S. businesses and consumers are really going to notice in the near and foreseeable future is that costs in China are on the raise and may increase at a more rapid pace. Here’s why:

1. We’re not the only ones that dislike a huge trade gap; for China’s economy to mature, more of its output needs to be consumed internally, not just by the export market. Toward that end, in the last ninety days Beijing has rescinded a substantial tax rebate (think subsidy) for factories and business that export their goods. That will no longer be part of the formula for quoting costs to U.S. companies that outsource to China.

2. The RMB (China’s currency) is up 20% against the U.S. dollar in the last 18 months. The renmimbi (“people’s currency”) is stronger across against many currencies on the international board, but with the ongoing storyline of a still declining U.S. dollar and its spending power, the bottom line result is higher costs.

3. New labor laws in China include new increases to the minimum wage and a sweeping worker reform act–no company can fire a worker once they sign a third employment contract–equals raising labor costs. On the second element, the reform act, one wonders if most Chinese laborers will now end up working for a new company every four years as many labor contracts are two year deals. Not even an almost limitless labor pool can hold back the simple reality that conditions for workers–from wages to safe working conditions to better factory-owned dormitories or private housing options–have improved and must continue to improve. Some have argued that with the reported 750 million unemployed workers this need not be the case. But what has changed is that people living a subsistance lifestyle in the great rural expanses of China are no longer willing to trade an open air work day for a factory work day that is still based on mere subsistance worker benefits.

4. Rising materials costs are happening across most industry categories, led by rocketing oil prices, but in my world, publishing, it comes as no surprise that the cost of paper keeps marching upward at a particularly steep grade. U.S. standards of “green” are much less stringent than those defined in Europe, but as that gap closes, costs will only continue to climb. Related but off topic: Bill Gates said that we tend to overestimate the impact of new technology over the next two years but underestimate its impact over the next five years (see Business at the Speed of Thought). I wonder: will there be a stampede to ebook readers in the next half decade?

5. When you add up nos. 1-4, not surprising but largely unnoticed in the business community, hundreds of Chinese factories are closing every month. Profit margins and Return on Investment (ROI) are so slim that the Chinese entrepreneurial class is looking for new and greener opportunities. Marching alongside the issue of ROI , the first true generation of entrepreneurs in China is hitting retirement age and the heirs don’t want to run factories–or in some cases can’t afford to run existing operations–so they’re selling off equipment and boarding up buildings. Some argue that this is simple Economic Darwinism and is a positive case of natural selection with inefficient operations falling by the wayside. Perhaps; but it should not come as a shock that as once or emerging third world economies develop, they no longer take on environmentally toxic projects with no questions asked.

Two questions that I predict will become more acute for U.S. (and world) companies that do manufacturing in China in the days ahead will be: are we anticipating and ready for continued rising costs? and are the vendors we are currently relying on going to be in business for the foreseeable future?
Stay tuned for Part 2 of things I observed and overheard in China …

Overheard and Observed in China: Part 3: Odds and Ends

Time to move on to topics I’m less ignorant on, but after one more quick glance at my pictures and journal from China, I thought I’d throw a few odds and ends for your consideration.

1. Just a few miles from Hong Kong, part of the same country but a full border crossing away, stands Shenzhen. A fishing port of 300 thousand, it was singled out by Deng Xiaoping in 1979 as China’s first Special Economic Zone. Since then, 30 billion (U.S.) has flowed into the city and the population has grown to more than 10 million residents–with commuters and “invisible” people” causing estimates to fluctuate up to as many as 15 million)–and still growing. It is the most densely populated area of China. And you thought overcrowding was a problem in your city?

2. The level of “deferentialism” extended to American and other foreign business visitors to China is almost overwhelming. It’s hard to carry your own briefcase from the car to the meeting area without a young lady who probably doesn’t weigh 90 pounds wanting to lug it for you. We all like to be treated with courtesy and respect–and much more so when we are in a new environment–but the amount of attention given to helping one with their every move can create feelings of guilt. I’m over the guilt, however, so I’m not complaining–just observing!

3. In Shanghai, I’m pretty sure there is a ratio of one billboard for every resident–and visitor. And maybe for each panda, too!

4. Speaking of billboards, I was surprised that most of the signage in Hong Kong depicted Western models. The rule of thumb in advertising is that you strive for cultural relevance. I do have one idea on why the city’s signage looked a lot like New York City’s. Since Brand America is still the icon of wealth and prosperity, ad agencies in Hong Kong have played the “aspirational” card to the hilt. Of course, if the U.S. dollar drops any further, there may be job openings for billboard hangers in the near future!

5. China has long been viewed as a homogeneous people, which has probably always been a myth. If you look a the under-20 fashion statements even on the Mainland, China is rapidly becoming a diverse country.

6. I had dinner at the Peninsula Hotel in Hong Kong. A fleet of about 15 Rolls Royce Silver Shadows are arrayed in front to whisk guests to shopping and tourist destinations. I still haven’t figured out why my company’s travel manager didn’t book me there.

7. I talked to several business people there and in route who have a very strong non-financial motivation to doing business in China. It goes like this. China is not open to Christian missionary work. China is very open to Christian business men and women (and teachers). Once in China, there is plenty of freedom for religious expression (more so for foreigners but increasingly for the entire population as long as the topic isn’t Thailand or Tibet) combined with a keen interest in people from other countries, with America at or near the top of the list. Who knows how many “tent makers” are doing a good work in sharing their faith in China.