Shenzhen's Greater Plan: No Manufacturing, No Problem.

There has been a recent plethora of news regarding the effects of the global recession on the Chinese export industry, especially in Shenzhen. Many articles have been devoted to bigger factories that used to produce toys, furniture, other consumer products while employing thousands and thousands of workers closing down. One even says it will cost the Pearl River Delta area "millions of jobs".

In reality, this situation has been going on for a while now. The downturn in the US economy many months ago changed the dynamics of manufacturing. With changes in regulations and demands, rising RMB vs. the Dollar exchange rate and other factors, previous factories that employed 100-200 workers couldnt maintain cash flow and pay for their workers.

While talking to managers at plants, some said that it was better for them to go idle than to manufacture something because the things they made was almost always at a loss. Other factories didnt even have the convenience of deciding to manufacturer or not. Once booming factories couldn't get any new orders from their clients in Europe and the US. No orders = no work = no jobs = plants closing down. Fast forward to the present and we see factories with 2000 workers collapse. That's intense. I've seen recent stats that more than 50% of all toy companies in Shenzhen have closed down.

The thing is, as much as this economic downturn in the globalized economy has hurt a lot of export-driven businesses, and its workers in Shenzhen, it's really helping Shenzhen transform itself to what it wants to become. For the past 2 years since I've been living here, there has been a constant trend and push by local officials to develop Shenzhen as a city dominated by high-tech research rather than lower value-added manufacturing. It wants to go from labor intensive, basic and easy things like the toy industry to industries higher on the totem pole of innovation.

As much as Shenzhen was able to get its start from being that factory town "across the border" for Hong Kong businessmen, its goal is to move away from that persona into an international city of something other than toys, eye glass frames and furniture. It wants to be a city on the same scale as Beijing and Shanghai, or better than Singapore.

So while Shenzhen has slowly tried to shed its own manufacturing persona (these are well documented and that I wont go through), it has done many things to promote innovation, whether its opening a office in NYC or being ranked a leader of innovation in Asia in a recent study. Other things include:

• Establishing favorable policies for high tech industries - this includes lower taxes and cheaper office buildings (among others)
• Attracting more and more Chinese people back from overseas, whether its recent graduates or seasoned professionals and intellectuals.
  
• Maintaining a high education work force. Supposedly more workers in Shenzhen have advanced degrees than any other city in China. I'm sure most of these are in fields of engineering, mathematics, ect.
• Increasing its financial clout. Shenzhen has developed the Nasdaq-style exchange for SMEs (adding to its current Shenzhen Stock Exchange) while more and more investment banks and financial companies are established here.
  
• Promoting greater cooperation with Hong Kong (which is definitely an international city). This work might culminate into a "mega city" metropolis of 20 million people that combines both cities.
• Investing in an amazing, state of the art Terminal C at Shenzhen Airport.
• There has been recent emphasis on art, music and culture in the predominantly money-hungry and business rich environment.
• Focusing on the legal industry. Peking University recently opened a regional campus in Shenzhen as the 1st American-type law school in China. They even invited Justice Anthony Kennedy from the US Supreme court to give the Keynote at the dedication ceremony.
  

Shenzhen already can be considered one of the most expensive Chinese cities and its development for the future looks bright. Even with the global economic downturn, UPS has just started construction on its new Intra-Asian hub in Shenzhen and it has been ranked 10th on the list of "most powerful emerging cities in the world."

I don’t think anything will stop the development of Shenzhen into the international power city it wants to become. As long as there are no unforeseen problems with the unskilled laborers who have been getting laid off at factories. If you want to get in on the Shenzhen story, better buy a house now before the prices start going up again.

Shenzhen Opens Office in NYC to Promote Trade & Relations

In a recent press release published online by Marketwatch, on Oct. 27, 2008, Shenzhen will officially opened a office in New York City.

The City of Shenzhen, China announced today that it will be hosting a luncheon ceremony on October 27 at the Marriott Marquis in New York, to celebrate the opening of the New York Representative Office of Shenzhen and to discuss key economic developments as well as business opportunities between Shenzhen and the U.S.

The opening ceremony will not only include government officials and representatives of Shenzhen and the Chinese consulate in NYC, but it will also include prominent leaders of major electronics and financial firms based in Shenzhen.

What seems most likely is the continued expansion of ties in the financial and high tech industries. Shenzhen has already planned a NASDAQ exchange for small and medium sized companies that can supplement the already existing Shenzhen Exchange. It is also focused on decreasing the number of value-added companies (that produce toys for example) and promote the high tech industry. This would push it away from just a factory town to a city of innovation, design and creatvity.

Great move by Shenzhen. Silicon Valley anyone?

Shezhen Investing $200 Million in Vietnam

For the past year a lot of factors have been hurting Shenzhen factories manufacturers.

1. Huge increases in the cost of commodities, from plastics to iron and everything in between
2. Inflation in China
3. Appreciation of the RMB - making products less competitive when exporting to the US
4. New worker standards in China = higher wages for the same jobs
5. The inability to pass the rising costs to the clients overseas
6. Tax breaks and customs tax rebates to Chinese companies exporting internationally have been repealed

All of these factors have severely hurt once profitable businesses into lagging money-losing enterprises. The owner of my new apartment i'm renting in Nanshan is a part owner of a factory who does business with western clients like Walmart. He said that every month he loses 400,000 RMB on workers salaries and factory overhead costs. However, if he actually worked on any orders, his loses would INCREASE to 600,000 RMB. He loses money if his factory makes product. This means that the factory stays idle while he and his partners look for new sources of income.

In the west, companies are already exploring other sources of low cost labor. Vietnam is supposed to be the Next Guangdong province. A lot of foreign companies have already left China for greener pastures in Vietnam. Realizing this trend, Shenzhen is taking action. In a recent Thanhnien News article, Shenzhen is reportedly investing $200 million in a economic trade zone.

The park, 125 kilometers from the Vietnamese capital, aims to attract 170 Chinese manufacturing companies in the clothing and electronics industries to take advantage of the country’s cheap labor and the government’s preferential policies and tax incentives...

So it seems, not only are western companies leaving Shenzhen for more inland provinces and other southeast asian countries, so are Shenzhen factories themselves. Maybe in a few years, the same factories will be doing business with the same clients only in Vietnam instead of Shenzhen.

Wal-Mart Bringing Sexy Back to Chinese Girls

I love Wal-Mart. If you are able to look past their contributions in the deterioration of small communities, aid in shutting down mom & pop stores, as well as not giving their employees livable wages, you find a place with “everyday low prices, always.”

Look, they even got the #1 Ranking on the CNN Fortune 500 List of American Companies with $351,139,000,000 of revenue in 2006.

While I have never gone to Wal-Mart as much as it’s shown on Paris Hilton’s show, The Simple Life, many people go there for everything. This trend has now spread to the Chinese market. Wal-Mart and its comparable hypermarket brethren, Carrefour, Trust-Mart and Tesco are dotting the Chinese urban landscape. Cheap and (usually) dependable products have made shopping at these hypermarkets are very popular.

Recently, at the factory, I have seen many of my colleagues wearing a different variety of English t-shirts. Since we are without a standardized dress code in the office, many people come to work in random and interesting attire…most usually from Wal-Mart.

Today, I held my weekly meeting regarding new projects with members of various factory departments. A good friend of mine, 阿花, who is usually decently well dressed, came into the meeting with a very interesting t-shirt on. The white girl t-shirt had “I (heart) backseats.”

What?!... I immediately burst out laughing...while everyone at the meeting looked at me strangely. Of course no one knew what it meant or the connotations behind it.

After the meeting, during lunch, I was able to ask阿花 about what she was wearing. It turns out that she bought the shirt because she liked the sparkly accessories and the red heart. She had bought the shirt at Wal-Mart with a few other friends. She knew the basic meaning of “backseat” but didn't know the connotation behind it. After I explained it to her, she promised to never again wear the shirt.

While thinking about it, I can’t imagine what Wal-Mart was thinking in selling these sexually-provocative t-shirts to a population who is 1. considered sexually repressed and 2. have no idea what they are wearing. In my 6 months in China, I have seen many other girl shirts that have “slut”, “bitch” or “hot stuff” on it. Maybe they were all bought from Wal-Mart, maybe not.

I would like to personally thank Wal-Mart for giving the Chinese population more subliminal sexual undertones while pursuing their profits. Maybe in the near future you can convince Chinese people to get random English words tattooed on them like current Americans are doing with Chinese characters.

That will be the day.

McDonald's Goes Wireless Ordering in Shenzhen

Last Saturday I was in the 东门 shopping area to buy some bootleg DVDs. It was actually the first time I’ve bought DVDs since I’ve lived in Shenzhen. Not only was it cheaper than in other places (it was 5RMB compared to 7RMB or 8RMB in the north), but there was really good selection as well. They even had Spiderman 3! I didn't even know that they finished filming that yet!

There has been greater regulation recently on the sale of fake DVDs in China. Many of the old shops that sold them were disbanded by the government and now run mobile, makeshift stores in the middle of nowhere. Although the market is still there, it is much harder to sell it in the open.

After buying the DVDs, I went to McDonald’s to grab some food for my friend, Jason, who had thrown up in my bathroom the previous night. The 东门 McDonald’s that I went to was actually the 1^st McDonald’s opened in China. There is a big plaque in the store. It’s kind of cool.

McDonald’s (and KFC) has been in the news lately regarding being cheap and not even following the Chinese minimum wage of 7.50RMB/hour for its workers. Capitalist pigs! Articles here, here and even CNN discussed this issue.

Well, I completely agree that McDonald’s and Yum Foods suck ass for not giving their workers even $1 per hour, especially for such a fast paced and demanding job their doing.

When I was standing in line, I saw something very interesting. There were tons of people in the restaurant that Sunday. All of the registers were overcapacity with more than 4 people in line. To deal with the huge demand, there were many McDonald’s employees walking around the back of the line to take people’s orders. What was beautiful was that this was done wirelessly through a handheld device!

Here’s how it went:

• Employees walked in the back of the lines to take the orders of people waiting in line.
• The used a wireless PDA-sized device and quickly entered their order into the touchpad buttons.
• At the end of their order, the employee wrote down a number for the customer to tell the cashier so that he/she could access what the person had ordered and receive payment.
• There were employees also walking around by the open seats to take orders as well. This is because since the restaurants are usually full, people often find seats before they order.

I looked it up online later and found the company called Infologix that provided this.

Infologix states that this wireless ordering system:

Increases sales by serving more drive-through customers (or waiting customers), improves McDonald's order accuracy, and makes everything more efficient."

I would agree. This is a innovative, thoughtful and much needed way for ordering in a lot of busy restaurants.

Has anyone else seen it?

Chinese Random Roadside Construction

I read recently that the average commute time for a typical person in a major US city is 35 minutes. The major news magazine shows have even featured new neighborhoods in California that are specially designed for airplanes. Instead of sitting in traffic jams, commuters to Silicon Valley or San Francisco fly to and from work. How cool is that? Check out stories about that here, here and here.

Like any modern person, I have a commute as well. Typically I take the bus 106 from my 东门中 stop to 南岭村. The trip usually takes about 25 minutes in the morning without traffic and 30+ minutes in the afternoon, depending on traffic. In general, it is a pretty good ride. One stretch of the road is a narrow highway next to the Shenzhen Reservoir. The early sun shining on the water is a pretty sight.

One of the recent things I’m noticed are big mounds of dirt on my route. Everyone who has been to China knows that there is constant construction everywhere. New buildings are appearing every 5 months. I’ve heard of a stat saying that China has 1/3 of the world’s construction cranes. Crazy stat. If you look at the Beijing skyline, it is filled with cranes.

After 5 months in Shenzhen, I have rarely seen any big construction cranes. I’ve only seen big mounds of dirt and road construction/repair, particularly outside of main Shenzhen city (深圳关外 instead of 关内, my work is located just outside of Shenzhen city).

The 30 minute commute in the morning and afternoon has now been extended to about 45 minutes. There are not more cars on the road. There are just, what seems to be mom & pop construction jobs going on everywhere. Here are the characteristics:

• New road construction projects (I’ll call RCPs) can pop up anywhere and everywhere. It doest matter if it’s in the middle of a parking lot or in a major intersection.
• RCPs are dug out with complete disregard for pedestrian or car traffic.
• Most RCPs happen outside of the main part of Shenzhen. The suburbs, in general, are crazy (很乱). Higher crime rate, prostitution, ect. I guess that also applies to road construction.
• The Chinese workers for these RCPs all work at night. You never see anyone working during the day.
• There are no signs to warn you. There are no detour routes or anything else to direct traffic. There is only a small little makeshift gate or fence around it. (Think about this happening on your local highway in the US. Just unimaginable.)
• The dirt dug out of the ground goes everywhere. There are mini dust storms almost like ones seen in old westerns with John Wayne.
• Contracts to work on roads are very competitive and lucrative. The profits from getting a construction projection from the gov’t are huge!
• Quality is iffy.

For now, I just want to thank China for making my commute longer. You can be blamed for me being late to work today. I'm also blaming you for my dirty shoes too.

Addition 2 (3/26/07): To respond the the 2nd comment made my Anonymous... In my opinion, it is important to look at the public face of China and differentiate it from its private attributes. The Shanghai Pudong airport is a state of the art airport in what is considered the most modern and "best" Chinese city. This means that the Pudong airport is a national treasure. This is why it is important that there was a international design competition and very international press on it. The same is true for the new buildings in Beijing, such as the National Theatre (Egg-shell), new Olympic Stadium (Birdnest) and Olympic Water Sports Arena (Water Cube).

My question is: does anyone know what company was has been hired to not design it, but actually construct it? As well, what was the bidding process behind that.

Addition 1 (3/22/07): To respond to the comment made by Anonymous, China's large road construction projects are indeed very competitive to obtain. This competition isn't direct or indirect bribery. It exists almost in the form of traditional US competition. There are many bids and proposals for the project and one is chosen. The only difference is that the bidding parties in China need to have some kind of high level connection (关系) in the local government to successfully bid. In the US, you need to have huge resources, a reputation and track record to successfully bid.

Business Trip

I'm on my 3rd business trip to the company office at Norwood, MA for company strategy meetings all next week. It's gonna be interesting.

Since i'm in the US, i'm gonna switch it up a little bit and try to observe the US through the eyes of a Chinese.

Let's see how it goes

The Chinese Worker: Part 1

The Chinese Worker, Part I:

Guangdong province is the factory of the world. This is a easily proven statement. Something like 60% of the world’s underwear, 80% of the glass frames, 30% of the computer chips, electronics, ect. ect. ect. are made in this single southern province. I don't know how many toys are manufactured and made here, but I do work at a toy factory that employs more than 2000 workers. That may seem like a lot of workers but in actuality, my factory is quite average. There are much bigger ones that employ 20,000 to 50,000 and even 100,000 workers!!! That’s crazy. Combine that with the amount of factories in this vicinity (CONAIR and Privatex are right down the street from me) and you can have an idea of what’s going on here. The shear scale and scope of this operation is just tremendous.

My mom was here a couple of weeks ago to visit me. When she was here, I invited her over to the factory to check out what I’ve been doing. When I was touring the factory floor with her, showing her the different assembly lines and machine shops, she mentioned that someone should look into this more specifically… especially into the lives of the workers who make all of this possible. I agree. These migrant workers, who are from all parts of China, are the untold story of the factory of the world.

In my 3 months at the factory, I’ve had various social interactions with my coworkers. Of the 300 office “management” colleagues, I’ve hung out with about 50 of them so far. In two different occasions, I invited them out for drinks (to get them wasted at a bar) and dinner (to get them wasted, while eating food). From these interactions, I’ve observed a few things:

1. Most of the workers who are employed in the companies and factories are from the countryside. Very few of them are from the cities.

This is an interesting revelation. There are many studies out there that state how most of the Chinese population is still in the countryside rather than cities (about a 35% to 65% ratio). I had never realized this fact before.

There is a definite hierarchy in the China between city people and rural people. The hierarchy is rather stupid considering it’s based upon the rural person’s lack of experience in the city. Ultimately, “country bumpkins” are discriminated against and looked upon by the city folk as ignorant and dumb.

2. These workers take life as it comes and don't really expect anything. They rarely have future goals and aspirations.

In my conversations with my fellow colleagues, I have always asked “as a kid, what did you want to be when you grew up” to have a semi-comparison between Chinese and Western children (that I grew up with). The answers were very similar across the cultural divide. Doctors, sports stars, astronauts, teachers… everything was the same. However, when I asked them: “what do you want to be now, what do you want to do in the future,” the answers change dramatically. In the US, I believe people have a basic idea of what they’re doing. Maybe they like medical school and law school and business, but cant decide between them, but they definitely have future goals and aspirations that they have a desire to achieve. In China, this question has only been answered in 2 different ways among the people I work with:

“I don't know, I’ve never thought about it before.”

or

“I want to be my own boss.”

It is quite amazing that no one seems to have any desires, any plan, any agency to work and achieve for the future. Instead, they are only working for working’s sake. They make their money, hang out in 4 person dorm rooms and are perfectly content with life. The people who have thought about it don't know what they want to do, but do know that they like money and hope to make lots of it. Isn’t that amazing?

3. The workers are good people and whole-heartedly appreciate anything other people give them.

All of the people I’ve interacted with, who are “lower” on the social scale and from the “countryside” have been all incredibly generous and have treated me wonderfully. They live in non-air conditioned dorm rooms with no hot water and 3 other people. The lighting is shabby and the floors are dirty. Nothing is ever given to them and only in a few instances are their interests “taken care of”.

Whenever I have visited a friend or had food with one of them, it seemed like none of that mattered. They opened up their rooms and generally offered to pay for the meals. It can be said that although they do not have that much money or the best apartment, they offer things that money can’t buy: their help, their time, their strength, their knowledge, and sometimes, even their money in a genuine caring manner that is incredibly endearing and good.

Shenzhen, here we go

Working in any company is an interesting experience. However, when it's a random toy company in the heart of Shenzhen’s Special Economic Zone miracle, it gives a unique frame of reference.

I have been fortunate enough to be given the unique opportunity to go directly from graduation to a position of influence and decision making. As the head of foreign communications and a manager in the R&D department, I have began to see, experience and to be apart of many interesting aspects of business, production, and the corporate lifestyle. Also, as a yuppie, living in the vibrant dong-men area of Shenzhen, I will learn and experience many of the social and cultural aspects of Chinese modern life that is unknown to me. Through my friends and relatives in around Shenzhen, I will be given many opportunities to interact with the local population as locals do.

It is my goal to document these situations. Not only will I document them, I will also attempt to analyze these experiences in the context of globalization, culture, society, the global economy and personal relations and interactions between people. Ultimately, I hope to bring a little more light to the world behind the great wall.

Enjoy.