tag:blogger.com,1999:blog-59504464720106927232024-03-06T12:00:45.231-08:00THE CHINA PRICEThe True Cost of Chinese Competitive AdvantageAlexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.comBlogger144125tag:blogger.com,1999:blog-5950446472010692723.post-6444307055086890012011-08-16T22:44:00.001-07:002011-08-16T23:52:15.717-07:00Wanted: Good Jobs, Made in AmericaThere has been much talk of late about how much of what Americans consume is actually made in China. This latest round of debate was sparked<span style="text-decoration: underline;"></span> by an August 8 <a href="http://www.frbsf.org/publications/economics/letter/2011/el2011-25.html?utm_source=home">report </a>by San Francisco Federal Reserve economists Galina Hale and Bart Hobijn that basically said - don't worry about importing China's inflation! China only accounted for 2.7% of what Americans consumed last year! The report created a stir on some of the blogs I read - see <a href="http://economix.blogs.nytimes.com/2011/08/15/made-in-china-but-still-profiting-americans/#more-128757">here </a>and <a href="http://blogs.ft.com/beyond-brics/2011/08/10/the-made-in-china-myth-its-all-american/">here </a>and <a href="http://www.fastcompany.com/1773403/made-in-china-the-3-that-would-save-our-economy?partner=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fastcompany%2Fheadlines+%28Fast+Company+Headlines%29">here</a>.
<br />
<br />It's important to note that the report specifically aims to address the link between Chinese inflation and the prices Americans pay for products like iPads, auto parts and window frames. Most of what Americans consume, the report argues, is made in America. That's because most (two-thirds) of what we consume is services.
<br />
<br />They also argue:
<br />
<br />"Obviously, if a pair of sneakers made in China costs $70 in the United States, not all of that retail price goes to the Chinese manufacturer. In fact, the bulk of the retail price pays for transportation of the sneakers in the United States, rent for the store where they are sold, profits for shareholders of the U.S. retailer, and the cost of marketing the sneakers. These costs include the salaries, wages, and benefits paid to the U.S. workers and managers who staff these operations. "
<br />
<br />A few thoughts:
<br />
<br />1. All of this underscores the "total package" argument that US sourcing agents and brands describe. It doesn't matter if it's just Chinese wages that are rising. What matters for US retail prices and the viability of individual Chinese factories is the total package - commodities and other input costs, electricity costs, shipping costs, land costs, warehousing costs AND wage costs. While Hale and Hobjin argue that the Chinese are not yet passing on their inflation to us, when these perfect storms of higher costs hit, the Chinese do pass on some of their higher costs. And they will again.
<br />
<br />2. The argument that most of what we consume is made-in-America because it's services doesn't reassure me, because I'm not sure whether these are really such great services jobs. I've long been concerned about the "Work at Wal-Mart in order to be able to afford to shop at Wal-Mart" economy that US companies seem to creating. Can these vaunted service jobs cover all the costs of public services that we're going to have to scale back, UK-style, over the coming years? And aren't we as investors rewarding companies that keep costs down by cutting jobs?
<br />
<br />3. Smart people like Gary Pisano and Willy Shih at Harvard have <a href="http://hbr.org/2009/07/restoring-american-competitiveness/ar/1">made the argument</a> that we are losing the "special sauce" of competitiveness and innovation by outsourcing manufacturing to other countries. I think they have a point, though that train left the station decades ago, again with American investors on the platform waving it off.
<br />
<br />4. What really bothers me is that it's not obvious how to create good jobs for Americans anymore. This problem is not just the result of Japanese-style mindless gridlock in Washington, though that clearly plays a role. It's also, I believe, embedded deeply in the way we reward companies (in America at least) for cutting back their workforces and outsourcing as much as they can to the cheapest possible country. (James Fallows <a href="http://www.theatlantic.com/business/archive/2011/08/is-america-hardwired-for-widening-inequality/243231/">made a similar point</a> on his blog recently.)
<br />
<br />Technology start-ups are not the font of job creation they once were, though my brother in San Francisco tells me that we are so short of engineers that there are now billboards to recruit them (so there ARE jobs in America, just not the kind most people can do).
<br />
<br />As Tyler Cowen has <a href="http://www.amazon.com/Great-Stagnation-Low-Hanging-Eventually-ebook/dp/B004H0M8QS">said</a>, we have plucked all the low-hanging fruit of economic growth. Most ominously, China is taking hold of the playing field with both hands and shaking it violently through its<a href="www.uschamber.com/sites/default/files/reports/100728chinareport_0.pdf"> indigenous innovation policies</a>. Despite the blow to China's innovation plans from the recent high-speed rail debacle in Wenzhou, these policies should be at the top of every American CEO's and politician's agenda.<span style="display: block;" id="formatbar_Buttons"><span class=" down" style="display: block;" id="formatbar_CreateLink" title="Link" onmouseover="ButtonHoverOn(this);" onmouseout="ButtonHoverOff(this);" onmouseup="" onmousedown="CheckFormatting(event);FormatbarButton('richeditorframe', this, 8);ButtonMouseDown(this);"><img src="img/blank.gif" alt="Link" class="gl_link" border="0" /></span></span>
<br />My question is: what do we need to do to create more (ideally many) better jobs in America? And what do we need to do to ensure that we have a workforce that can do those jobs?
<br />
<br />As some Chinese government officials understand, this is as much a problem for China as it is for America, since China depends on the US to consume the fruits of its labor. Even a massive increase in government jobs, <a href="http://www.npr.org/2011/08/15/139652124/why-has-texas-seen-a-rise-in-new-jobs">as we've seen in Texas</a>, is not a viable solution. Do we <a href="http://www.fastcompany.com/1773403/made-in-china-the-3-that-would-save-our-economy?partner=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fastcompany%2Fheadlines+%28Fast+Company+Headlines%29">bring back manufacturing to America</a>? Are the cost increases in China really<a href="http://www.bcg.com/media/PressReleaseDetails.aspx?id=tcm:12-75973"> narrowing the gap between the cost of Made in China and Made in America</a>, or is the lure of the Chinese consumer (and the US investor) too strong to dissuade most companies from leaving? Is<a href="http://www.project-syndicate.org/commentary/roubini41/English"> infrastructure investment</a> - again, an old Japanese stand-by - the answer, or will that, too, be hijacked by political concerns that leave America with the equivalent of <a href="http://www.nytimes.com/books/first/k/kerr-dogs.html">bridges to nowhere</a>?
<br />
<br />
<br />
<br />Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com6tag:blogger.com,1999:blog-5950446472010692723.post-13810718492060890802011-04-24T19:36:00.000-07:002011-04-24T21:10:39.576-07:00Is higher education broken?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuxZH9z5BlxnluHILl5Mc46zzZT17gbm1ne2S1pWgKyEnv4Udk_5pEWvF2grIHkNQAtONTmLiRcd0xw3P5BIPS_AePfvZ4_zpXVtk4hDDgL33uckUEJgqSj4mf1V2XzKjbtdiyKaQcUuY/s1600/HarveyMuddstudents"><img style="float: right; margin: 0pt 0pt 10px 10px; cursor: pointer; width: 320px; height: 262px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuxZH9z5BlxnluHILl5Mc46zzZT17gbm1ne2S1pWgKyEnv4Udk_5pEWvF2grIHkNQAtONTmLiRcd0xw3P5BIPS_AePfvZ4_zpXVtk4hDDgL33uckUEJgqSj4mf1V2XzKjbtdiyKaQcUuY/s320/HarveyMuddstudents" alt="" id="BLOGGER_PHOTO_ID_5599368437016018178" border="0" /></a>Education is how countries catapult themselves out of one economic model and into another, as much as it helps individuals and families do the same. But high unemployment and underemployment rates of young people around the world - even as rates of participation in higher education rise to all-time highs - suggests that our higher education systems have become more problem than solution.<br /><br />Chinese companies complain about the quality of the young workforce, and demand master's degrees as a hiring prerequisite. Japan's highly efficient express delivery services (their equivalent of UPS and FedEx, but better*) refuse to hire high school graduates because only university degree holders can read maps well enough to make deliveries. In America, <a href="http://www.epi.org/publications/entry/bp306-class-of-2011/">this report</a> argues that the unemployment rate for Americans aged 16-24 is the highest in six decades. Nearly one in five are out of work.<br /><br />In all three countries, there is a great divergence between the fortunes of graduates from elite schools and (basically) everyone else that reflects a broader widening inequality discussed in pieces like <a href="http://www.theatlantic.com/magazine/archive/2011/01/the-rise-of-the-new-global-elite/8343/">this</a> and <a href="http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105?currentPage=all">this</a> and <a href="http://www.economist.com/blogs/democracyinamerica/2011/04/inequality">this</a>. People with brand-name degrees from the US ivies, Todai or Keio, Tsinghua or Beida don't have much trouble finding work. But for the vast majority of graduates, good jobs are increasingly hard to come by.<br /><br />Why is this, and what are universities around the world missing?<br /><br />This past week, there were a few disturbing signs coming out of the US. The state of Ohio is <a href="http://www.npr.org/2011/04/19/135545481/ohio-universities-told-to-develop-3-year-degrees?sc=17&f=1001">moving toward</a> a three-year university system, in hopes of saving young people (and families) money and getting them out in the workforce sooner. But with so few good jobs for young people anyway (I'm not counting the 50,000 new McJobs that got <a href="http://www.washingtonpost.com/business/is-the-nation-headed-for-a-mcrecovery/2011/04/20/AFWGjtWE_story.html">so much press</a> last week) maybe putting kids out on the street sooner isn't such a great idea. As we know, <a href="http://online.wsj.com/article/SB10001424052748704821704576270783611823972.html?mod=googlenews_wsj">US multinationals aren't hiring at home</a>; they're hiring overseas.<br /><br />What, exactly, is broken in higher ed and what can be done to fix it?<br /><br />The anonymous adjunct Professor X argued first in an Atlantic piece and more recently in a book called <a href="http://www.nytimes.com/2011/04/06/books/in-the-basement-of-the-ivory-tower-by-professor-x-review.html">In the Basement of the Ivory Tower</a> that sending fewer kids to college wouldn't be a bad idea.<br /><br />Reform-minded Chinese professors <a href="http://www.ep-china.net/meeting/20030103/topic2%5C20021216125620.htm">argue</a> that their education system should be more multidisciplinary and incorporate more innovation-related training.<br /><br />Ironically, even as young American university graduates struggle to find jobs, Chinese students are climbing over each other to get to US schools. A Chinese friend with connections at a prominent Shanghai high school tells me <span style="font-style: italic;">a third</span> of students are not taking the <span style="font-style: italic;">gaokao</span>, the entrance exam for all Chinese universities, in hopes of heading to US universities. A Mexican friend working at a US multinational in China says that his company and others prefer to hire foreigners with US university degrees.<br /><br />What this suggests is that US universities are not broken as brand-issuing institutions, and the farther you travel from America's shores, the higher the value of a US university degree. If you are an American-born-and-bred university student in the US, time abroad and fluency in the language of a <a href="http://en.wikipedia.org/wiki/BRIC">BRIC country</a> might now be essential. If you want to compete with the surge of people your age coming onto the global labor market, you have to meet them at least halfway.<br /><br />The good news is that (unlike Japan, where the numbers of students going abroad has been falling for years) the number of Americans studying abroad has quadrupled over the last two decades, and China was among the top five destinations for US foreign exchange students. But still, <a href="http://www2.ed.gov/about/offices/list/ous/international/usnei/international/edlite-study-abroad.html">only 80,000 American university students go abroad</a> each year, the <a href="http://nces.ed.gov/programs/coe/2010/section5/indicator40.asp">majority (56%) to Europe</a>.<br /><br />The less good news: the UK, Italy, Spain and France came before China (or any BRIC country) as destinations of choice.<br /><br />I spent a summer during high school in France, where I studied the pleasure of chain-gobbling pain au chocolat on a balcony at mid-morning and drinking a gin and tonic at 5pm. These might be fun places to spend a semester, but they are unlikely to help students compete globally.<br /><br />* By better, I mean: customers can drop off and pick up their express delivery parcels at any convenience store in Japan; Japanese express delivery services don't blink at taking your skis or snowobard from your hotel and delivering them to your door for very little money; refrigerated delivery services are so common and affordable that mothers use them to send meals to their children halfway across the country. Just better.<br /><br /><span style="font-style: italic;">Photo of Harvey Mudd student council, 1960-61, courtesy of Claremont Colleges Photo Archive.</span>Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com3tag:blogger.com,1999:blog-5950446472010692723.post-78591240674371046582011-03-27T23:03:00.000-07:002011-03-27T23:41:31.433-07:00Disaster profiteersA few days after the devastating earthquake and tsunami destroyed cities and killed thousands across northern Japan, I got a note through LinkedIn from an acquaintance in Canada that seemed innocuous enough. <br /><br />"Hi Alex,<br /><br />I and a friend in China would like to supply the Japanese government with goods for their relief effort. I wondered if you have any Japanese government contacts who can either contract with him directly or steer him in the right direction."<br /><br />At the time, I was touched at the number of emails I was receiving from friends around the world who knew my connection to Japan and wanted to help the hundreds of thousands of people whose homes had been destroyed and were now huddled in shelters without adequate food, heat or medicine.<br /><br />The Canadian's response to my email saying I would do what I could to help was straightforward. He looped in his friend, whom we'll call Kevin, in China, and outlined what they might be able to provide: blankets, food, all "on short notice". That should have been my first clue - of course it's on short notice. These are donations to a disaster zone.<br /><br />Then Kevin wrote.<br /><br />"Hi Alex,<br /><br />i can provide both canned and bulk packed food stuffs. as for the logistics i need to get a better idea of the conditions of the ports as well as the airstrips in the affected zones, if necessary i can go myself to asses this. as for the issue of the jammed roads i can assist with the arrangements and logistics for temporary landing zones for aid helicopters and coordination of air drops, as well as work out a means of opening the roads and coastal shipping channels so that we may move supplies through and around japan. As [the Canadian] mentioned i am available on short notice to meet with Japanese authorities, i can be in japan by early evening if necessary so that we can begin to coordinate our part for the relief effort."<br /><br />I was a little taken aback by Kevin's note - he needs to "get a better idea of the conditions of the ports"? didn't he have a television? - but this still didn't set any alarm bells ringing. As I had done with other requests, I sent out a note to a network of friends in Japan and the US asking for contacts in Japan who could help facilitate what sounded like a generous donation of much-needed supplies, from China no less. I even introduced him to a Japanese businessman friend who had found a way to donate the products his company made and get them up to the quake zone.<br /><br />Kevin then emailed my friend:<br /><br />"Hi Daisuke,<br />>><br />>> firstly i would like to commend you on your tremendous efforts thus far,<br />>> it is rare to meet people such as yourself and i only wish it could have<br />>> been under better circumstances. If you will be willing to work with me,<br />>> and help put me in contact with the right people to organize large scale<br />>> shipments of supplies to Japan i can also assist you with the logistical<br />>> aspects of distributing the goods to all the victims. first i must come to<br />>> japan to asses the status of the air strips, roads, and ports: i will need<br />>> your help to gain permission from the local authorities to travel to these<br />>> areas. at the same time i can arrange for fast shipments of goods such as<br />>> blankets, clothes, shoes, batteries, flashlights, and raw dried foodstuffs<br />>> such as rice, red beans, and dried corn. I will need your assistance with<br />>> finding out the budget for these supplies as well as arranging the<br />>> contracts etc. depending on the status of the ports and air strips i will<br />>> determine the quickest way possible to get goods into the country. if you<br />>> will be able to help me arrange a meeting with some of the coordinators of<br />>> the relief effort i can be on the next flight to japan. once in japan i<br />>> will be able to better coordinate the air drop sites as well as the<br />>> alternative routes for getting supplies to victims in all areas. please<br />>> feel free to contact me any time day or night ..."<br /><br />It was only with this email that Kevin's real game became obvious to me. Kevin and the Canadian saw the earthquake as a perfect business opportunity for their sourcing company. Though they clearly had no experience in selling goods into a disaster zone (if they did, they never would have asked me for help) they were perfectly happy to monopolize the time of local officials, the military and others who were working around the clock to help - all in order to make a quick buck. This, while people who actually knew what they were doing were rushing to get donations to the affected areas.<br /><br />When I wrote Kevin to ask if this was his intention, he insisted that he was not trying to make any money at all, but that this was "billions of dollars worth of supplies" that needed to be paid for, and the Japanese government had the money. He even thought this a good moment to plug his own business. "now," he wrote, "i am able to get the cheapest prices and the quickest ship dates ...".<br /><br />Yes, after a decade and a half of writing about business, even having spent time working with hedge fund managers, I was still surprised at the complete absence of a moral calculus here. I told Kevin and the Canadian that I was only helping people who were making donations, not trying to profit from disaster.<br /><br />A week later, I received an email from the Canadian with the subject line "You are right". As an elected local official, he said, he proposed a fund-raising event to offer donations to Japan. Would I be interested to help?<br /><br />Would you have helped him?Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1tag:blogger.com,1999:blog-5950446472010692723.post-52188031578017595972011-01-07T17:41:00.000-08:002011-01-07T18:01:22.475-08:00State in statis: JapanIn Osaka again for Yomiuri's <a href="http://www.ytv.co.jp/wakeup/index_main.html">Wake Up Plus!</a>, and once again the topic of the hour is Japanese politics. I suspect most people's eyes glaze over at those two words (with good reason - Japanese politics have almost no international relevance anymore) but as often happens, I have lots more to say that I didn't get to say on the show.<br /><br />Today's debate focused on the tough year ahead for the Kan administration. It's hard to find people who say nice things about Naoto Kan and his team - even the show's makeup artist was furious. Kan is trying to push through several hard policies at once: a tax hike to cover mounting social insurance costs, entry into the free trade agreement known as the <a href="http://en.wikipedia.org/wiki/Trans-Pacific_Strategic_Economic_Partnership">Trans-Pacific Partnership (TPP)</a> and the agricultural policy changes it will necessitate, and a cabinet reshuffle. And of course amendments to the alliance with the US.<br /><br />The things that struck me about the debate is how infrequently Japanese politicians (including members of the administration) use numbers to justify their policies. There is so little persuading the public here compared to the US - politicians and cabinet ministers all appear to be talking to each other, rather than to the public. And nobody uses numbers to explain precisely what the costs and benefits of a program (like TPP or the consumption tax hike) are.<br /><br />Another thing that stands out is how Japan's frequently changing administrations (Kan's most recent cabinet reshuffle was in September last year) take a toll on the country, both domestically and internationally. Domestically, constant change contributes to a commonly held public perception that all politicians are equally corrupt and useless. Internationally, these changes make Japan harder to read and more irrelevant. If there are different people in power all the time, how can Japan craft a solid vision on any foreign policy issue and make its voice heard overseas?<br /><br />The last thing that everyone - even politicians themselves - seem to agree on is that Japanese politics doesn't attract the most promising members of society. Smart, ambitious, public-minded Japanese people these days don't go into politics. They go into business. Politics has such a bad reputation - and so demonstrably doesn't change anything that ails Japan - that clever young people don't even consider it as a career. <br /><br />Sometimes I wonder whether Japan doesn't need a crisis (domestic or abroad) to wake up to the size of its problems. I wouldn't wish a major crisis on any country, but for a state in stasis, a wake-up call might be just what Japan needs to save itself.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com2tag:blogger.com,1999:blog-5950446472010692723.post-5560548790644060092010-11-22T19:18:00.001-08:002010-11-22T19:50:58.710-08:00Who earns more in China, college or junior high school graduates?The Wall Street Journal's China Real Time blog has <a href="http://blogs.wsj.com/chinarealtime/2010/11/22/value-of-a-chinese-college-degree-44/?blog_id=72&post_id=11852">written up research</a> on a subject I've been mentioning for a while in talks: the tiny premium a university education may offer in China today. <br /><br />The research, by a giant in the field of demographic research in China, Cai Fang of the Chinese Academy of Social Sciences, finds that Chinese university graduates earn, on average, only RMB300 or about US$44 more than migrant workers. Migrant worker earnings are converging with university graduate earnings. Remember that many workers in China's export factories didn't even graduate from high school - many often stop after junior high. In Guangdong province, the situation may be even more extreme: According to my own unscientific studies, in Guangzhou today, you can hire a university graduate with good, serviceable English for RMB2200 or US$331 a month. Factory workers in the same city or nearby Foshan might earn the same. (On an hourly basis, migrants still likely earn less, because they work longer hours.)<br /><br />Given what we know about Chinese factory worker wages lagging behind economic growth, I have long been fascinated to know how this situation compares with the US. We know <a href="http://www.bloomberg.com/news/2010-09-16/workers-paradise-missing-personal-growth-alexandra-harney.html">there is an emerging shortage of people who see work on a Chinese assembly line as a career</a> - this is driven by demographics, in part, but also by a shift in worker mentality (that is itself difficult to separate from the demographic change). And we know that there are lots more people going to university in China, as there are in lots of other countries.<br /><br />How does this compare with the situation in the US? Are wages for comparable jobs in the US already the same? It's very hard to do an apples to apples comparison, given how different these economies are, and how many possible professions there are to compare. But the US Bureau of Labor Statistics does conduct surveys of annual wages. Taking two jobs that might be similar to the ones I'm thinking of in China (factory worker and entry-level white collar administration job), the salaries are not that different, according to <a href="http://www.bls.gov/news.release/ocwage.t01.htm">this data</a>: They're both around US$31,000 a year.<br /><br />I'm loathe to draw larger conclusions yet, but given what we know about what's happening with Chinese factory wages, it's likely that Chinese factory wages will soon exceed those of the entry level administration positions, at least in shortage-prone areas like Guangdong. Depending on where you sit (in Bentonville, Arkansas, say, or the offices of a labor advocacy group in Hong Kong), this might be a good thing or a bad thing. But it does put the value of a university education in China in a new light. What do you think?Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1tag:blogger.com,1999:blog-5950446472010692723.post-56913061938007742032010-11-12T17:34:00.000-08:002010-11-12T17:53:55.720-08:00Japan's Pentagon PapersI'm in Osaka for Yomiuri TV's Wake Up Plus! again, and the theme of the hour is the posting on You Tube by a member of the Japanese Coast Guard of the entire video of the September collision between a Chinese fishing trawler and a Japanese Coast Guard boat. <br /><br />Yomiuri TV is playing a central role in this story, because the Coast Guard member, who is male and 43 but whose name is not yet public, recently called YTV and told his side of the story before coming clean to his boss. The Coast Guard member (whom I'll identify by the handle he used on You Tube, sengoku38) is now in his second day of questioning, though he has not been arrested.<br /><br />There are lots of issues wrapped up in this story, but a few thoughts:<br /><br />1. This story has the potential to become Japan's Pentagon Papers. While Americans and Europeans are familiar with WikiLeaks, Japan hasn't had to contend with this kind of leak before. <br />2. If I were a Japanese potential whistle-blower, this event would give me a degree of confidence. My hope is that there will be a trickle-down effect in other areas, such as companies and government organizations, where Japanese come forward with evidence of misconduct.<br />3. Acting against point two is that the Japanese public, from what I can tell, is not entirely supportive of sengoku38. Many of the people YTV found on the street were critical of sengoku38's decision to release secret information (though some questioned why the video itself should have been a secret).<br />4. There are a lot of contradictions in the Japanese government's response to the collision, as the lovely <a href="http://en.wikipedia.org/wiki/Heiz%C5%8D_Takenaka">Takenaka Heizo</a>, who sat to my right, pointed out. They arrested and detained for two weeks the captain of the Chinese trawler, and insisted they had grounds to do that. Then they set him free, all the while insisting they had video of the event that would make the situation clear. Instead of showing this video to the public, they showed a brief portion to Diet members. Now they are questioning for two days the man who has from the beginning said he posted the video on You Tube. How could there possibly be two days worth of questions in this situation?<br />5. Whether or not sengoku38 is arrested appears to be a political decision. The Kan government is watching public opinion closely. There is no consensus among lawyers and other academics I have seen interviewed on whether sengoku38 broke laws.<br /><br />Initially, I felt this story was another distraction, another example of Japanese politicians playing domestic games with international consequences. To a certain extent, I still agree with that, but I am more in favor of a rigorous domestic debate about this story. As Jeff Rosen, a professor at George Washington University and an expert in this area, put it to me in an email overnight: "I hope this case will provoke widespread reflection in Japan about the values of free expression versus the government's interest in avoiding embarrassment in foreign policy: in practice, plugging leaks is difficult today, even if the Japanese government wants to take a hard line."<br /><br />This will not be the last time a Japanese person leaks politically sensitive information to You Tube. A new era has begun, a little later in Japan than elsewhere.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1tag:blogger.com,1999:blog-5950446472010692723.post-59915249050443486632010-10-09T20:14:00.000-07:002010-10-09T20:53:44.809-07:00Could better logistics revive American factories?Could logistics help revive American manufacturing? I have been thinking about this question since my latest meeting with Bill, a Canadian inventor. I'll keep his full name out of this for now, but the basic outline of his story is simple: A couple years ago, Bill invented a new kind of shower head. He had hoped to have it manufactured in the US, but all the factories he spoke to insisted Bill pay up front the tooling costs to build a prototype. <br /><br />Through a personal connection, Bill found his way to Sichuan province, China. A giant factory there was happy to cover tooling costs and make him a prototype. Soon, though, it became clear that there were some parts of the shower head that the Sichuan plan couldn't produce. Bill shopped around, exclusively in China at first. Nobody could do it. For all their strengths, Chinese factories are not always kind to small inventors - they're all about volume, and often about the quick win rather than building a long-term relationship. (This is a chicken-and-egg problem, it seems to me, since Western companies have also churned through their factories quickly. Who was teaching whom to think short term?)<br /><br />Bill ended up buying the two components he needed from American factories, both in Pennsylvania. American factories are still competitive - hooray! But the final assembly was still going to be done in Sichuan. These two components - both rubber, very light and small - were going to need to be shipped by air to China. The factories suggested FedEx or UPS. Bill did a cost analysis and realized that FedEx and its brethren were going to eat up any profit he made from his shower head. FedEx was asking 75 cents per item. The US Postal Service, by contrast, was only charging 30 cents. Plus, the USPS offered the same tracking number system that FedEx and other express carriers did. For Bill, it was a no-brainer. He chose the postal service. "America has got an untapped resource, and that is its postal service," he told me recently in Hong Kong. <br /><br />This all sounds hopeful, right? American factories, American services have a crucial role to play in global supply chains. Without those two parts, Bill would not have a shower head. <br /><br />But that's when things started to break down. Both of the US factories he was buying from refused to ship by the US Postal Service. Part of the problem appeared to be concern about reliability; another was a fairly off-the-wall worry that the USPS, as part of the government, was evil. In <a href="http://www.npr.org/blogs/money/2010/10/08/130436221/the-friday-podcast-buttons-and-other-connectors">the grim, shrinking world of small US manufacturers</a>, managers are still willing to impale their businesses on these kinds of opinions.<br /><br />Bill now has a friend physically pick up his components and hand-deliver them to the post office in Pennsylvania. He hasn't had a single problem with delivery to Sichuan. He thinks this is because government services - the US Postal Service and China Post - design their schedules to fit well together. <br /><br />It sounds far fetched, I'll admit, but it did get me thinking. I asked a friend in the US, a very sharp veteran board member in tech and other sectors, and he asked some of his colleagues what they used to ship out of the US. They preferred DHL, and used the other services selectively by region, depending on their network. "The USPS. . .that got a head scratch," he wrote, describing his conversation with his logistics colleagues. "'If we were sending letters,' my logistics friend said, 'we might look. But anything with any size--it's hard to think the Post Office would be competitive.'" In short, the USPS is missing a trick. Nobody trusts them.<br /><br />My friend feels the problem goes even deeper. He wrote: "From my own perspective, the USPS feels like it's running under 20th-century rules. Their revenues and market share are falling so they are raising rates and cutting services. 25 years of technology marketing should have convinced them that protecting share is all about lowering prices and adding services." <br /><br />Talking to someone in the furniture industry this past week, he said nothing short of a major terrorist attack in a port or $250 oil would shift manufacturing back to the US. The Planet Money podcast in the link above describes 70-employee high-tech, R&D-intensive factories in New York as the model for prosperous American manufacturing. They are better than nothing, but they don't seem to be, in and of themselves, very big job creators.<br /><br />A lot of American industries have simply lost the capability to make things they used to produce. A friend here in Hong Kong just raised his prices 25% for Chinese-made building materials and got no pushback from his US customers. Why? Because the US customer had nowhere else to go. They couldn't bring production of that component back in-house because they had sold the machines, closed that line, fired those workers. And who, in this environment, was going to invest in restarting manufacture of a low value-added product?Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com2tag:blogger.com,1999:blog-5950446472010692723.post-50889298143609514972010-09-20T23:36:00.000-07:002010-09-21T00:15:45.293-07:00The temporary economy<a href="http://www.npr.org/templates/story/story.php?storyId=129945985">This NPR story</a> on retailers hiring temporary workers reminded me of a conversation I had yesterday with the head of a big sourcing company based here in Hong Kong. The executive mentioned how the Great Recession had accelerated the trend towards retailers shunning inventory. <br /><br />(To his credit, wise Liam Casey of <a href="http://www.pchintl.com/">PCH International</a> has been telling me about this for years. I suspect that the electronics industry is way ahead on this no-inventory rule.) <br /><br />Retailers are asking vendors and factories to produce as close as possible to the moment the products will be needed in stores, or to hold the inventory themselves, if they wouldn't mind, until then. Order quantities are getting smaller, product updates more frequent. (See <a href="http://www.bloomberg.com/news/2010-09-16/workers-paradise-missing-personal-growth-alexandra-harney.html">my Bloomberg column</a> for more on this.)<br /><br />The NPR story above points out that retailers are waiting until the last possible moment to hire additional staff for the Christmas season, which accounts for 40-50% of retail sales in the US.<br /><br />And <a href="http://www.npr.org/templates/story/story.php?storyId=129813798">this NPR story</a> talks about Harley-Davidson's attempts to keep costs down and keep manufacturing in America by making its workforce as flexible as possible. Owners of factories in southern China, who protested vigorously Beijing's attempts to make firing workers more costly in the 2008 Labor Contract Law, already operate precisely as Harley-Davidson would like, staffing up and down in response to order volumes.<br /><br />It all makes me feel like we are living in a temporary economy, where goods and labor are applied only in bursts, in response to market needs. One could argue that companies devastated in the downturn have rightly become more conservative, or that Wall Street's demands for quarterly improvements have goaded companies in this direction, or even that this is simply an inevitable extension of the Japanese <a href="http://en.wikipedia.org/wiki/Just-in-time_%28business%29">just-in-time</a> model. Or that globalization, or the arrival of lots of fresh-faced Chinese workers on the global labor market, drove us to this point. What seems clear is that, for a certain and likely growing percentage of people in America, China and elsewhere, the temporary economy is the new normal.<br /><br />It does make me wonder where it leaves us economically in the long run. China, with its migrant workforce, has been perfectly suited to the temporary economy. Maybe this is part of the global contribution of Chinese labor - that it has given the world the flexibility to create temporary economies.<br /><br />In the US, the picture is more muddied. In the long run, the economy should be more efficient, and in theory, those people who are working seasonally are free to do other jobs when they aren't making Harleys or selling e-book readers to put under the Christmas tree. <br /><br />But even if the economy this ultimately creates is more efficient, it does make me wonder about our ability to create good temporary jobs, and whether those jobs can pay people enough to maintain their standard of living.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com3tag:blogger.com,1999:blog-5950446472010692723.post-36279785035088516822010-08-17T17:33:00.000-07:002010-08-17T17:58:00.331-07:00Bee in my bonnetThis is not in any way to toot my own horn, but to make a point. In the last two weeks, I have twice been introduced to big multinationals as a speaker about China and Japan. These are both companies with operations in China, and one is definitely a group you've heard of. Both times, the conversation has gone like this: The company and I chat about what kinds of issues I think are interesting going forward as China tries to move away from an export-dependent model to a more consumption-oriented economy. <br /><br />They listen politely, express enthusiasm, and then say: many of our staff are in other countries, so we're not sure they're really interested in China. Or, to quote directly from an email sent to the person acting as my representative in this: "Alex sounds great! Very interesting background. Just thinking, as the audience is from all over Asia. It would be useful if it was something that has relevance/interest to people across the region rather than just those in China and Japan.” The other company mentioned that they had staff in South America, where staff definitely didn't care about China.<br /><br />What amazes me is that anyone today sees economic and business issues in China as somehow only relevant within Chinese borders. It feels kind of moronic to repeat here, as I know my readers already know this, but pick a subject - commodities markets, cars, America's debt, industrial design, innovation, manufacturing, inflation or deflation - and China's fingerprints (and sometimes its whole paw) are all over it. Officially now the world's second largest economy, China is a driving force in most industries. <br /><br />There is a debate underway about the gap in understanding or knowledge of each other between China and the US, or China and the West. The Chinese migrant workers I speak to don't have a very sophisticated understanding of the US, but I am starting to wonder how different this is from the executives at these big multinationals.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com0tag:blogger.com,1999:blog-5950446472010692723.post-15234055647502826302010-08-06T18:36:00.001-07:002010-08-06T19:05:24.277-07:00The mummification of JapanI'm in Osaka this weekend to appear on <a href="http://www.ytv.co.jp/wakeup/index_main.html">Yomiuri TV's Wake Up Plus</a>, that rare beast: an intelligent TV show. The story of the moment in Japan is the nationwide <a href="http://www.google.com/hostednews/afp/article/ALeqM5hjUH1AWl9j0lwNN2cGT1Kcfc9wjw">hunt for missing centenarians</a>, following the discovery of a modern-day mummy in his bed, 30 years after his death. Officials suspect that a relative did not notify the government of his passing in order to receive the man's benefits.<br /><br />For the moment, the debate in the Japanese media (including Wake Up Plus) is focused on three main elements: the government's failure to detect which of its benefit-receiving citizens are living and which are dead; the Japanese tendency to leave family matters to the family; and the fact that Japan's privacy laws hinder investigations into this kind of fraud. To me, the tenor of the debate itself reflects Japan's self-flagellating tendency to blame the government and politicians in the first instance. <br /><br />The fact is that these missing pensioners are a reflection of how deeply and painfully Japan's long stagnation has affected its oldest and youngest citizens. Trite as it sounds, I'll recount a conversation I had with a taxi driver here in Osaka yesterday: at 65, he receives about US$1200 a month in pension benefits from the government. His rent accounts for half of this, and after utilities, his cell phone bill and food, there isn't much left. So he continues to work as a taxi driver, taking home about $1800 a month. (One might wonder how he is allowed to work while receiving public benefits, but the benefits, like the minimum wage, were not meant for people to depend on entirely, I believe.) $36,000 a year isn't bad by global standards, but consider that this man might live for another 30 years and this is as good as it will get for him. While he is clearly putting money aside for his retirement, he expects he will have to move into a smaller apartment when he retires. This is not the fancy globe-trotting retirement that I, at least, had imagined for Japan.<br /><br />While we hear much talk about China getting old before it gets rich, Japanese people are getting poor before they get old. Younger Japanese will not receive the $1200 a month that that taxi driver gets; they will likely receive much less.<br /><br />Putting aside the fact that pension fraud is a crime, one larger issue behind these missing old people and their mummified remains is that younger Japanese need to rely on their parents' retirement benefits because the economy is not providing sufficient job opportunities. <br /><br />Every trip to Japan is more depressing than the last these days; I stay in hotels that will, without the help of big spending Chinese tourists, likely lay fallow, listen to music from pianos that play themselves, pass through ghostly tourist districts designed for a wealthier country. Japan is no longer the country it once was. Policymakers in other rapidly aging countries (and those that struggle to create new jobs, like the US) should take notice.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com4tag:blogger.com,1999:blog-5950446472010692723.post-1072796934615282822010-08-03T20:50:00.000-07:002010-08-03T21:18:03.062-07:00TechimericaIf there is anyone out there still reading, I apologize for the long silence. Since I last posted, the issues I raised in The China Price have become headline news internationally. I’ve been traveling for most of that time, mostly in China and the US. I have become increasingly worried, in my travels back and forth to the US, about the lack of debate about one of the consequences of China’s rise for the rest of the world: the increasing difficulty developed countries will have creating jobs. <br /><br />A brief conversation I had yesterday with two business types – one an investor, the other the CFO of a coal company heavily involved in China – underscores the point. I said I was worried about the way that China’s economic growth, the flypaper nature of manufacturing and technology combined to make creating jobs for ordinary Americans substantially more difficult. They swiftly changed the subject.<br /><br />What I was talking about is not just “<a href="http://www.youtube.com/watch?v=-DeQYWro8YU">Chimerica</a>”, but “Techimerica”, or China + America + technology. I haven’t drawn any grand conclusions on this subject, but it seems to me that as China’s manufacturing engine draws in more (not less, ye “rising wage rates will drive factories out of China” enthusiasts) jobs, the Chinese consumer becomes more important to the global economy, and American companies become ever more focused on cutting costs by eliminating jobs at home, there will be less and less for Americans to do. Technology accelerates this trend, in part because so much of manufacturing is related to technology, and so much of that manufacturing now happens in China, but also because technology makes the economy more efficient. We no longer need as many people to get the same job done (that’s the old “increasing productivity” chestnut-argument about US manufacturing, but it applies more broadly to things like the iPod, which has created more jobs in China than in the US.)<br /><br />What I’m describing on the cost-cutting side is the same kind of full-throated capitalism that daily leads to the excesses of “the China price” for Chinese people. But despite all the rhetoric about creating “green jobs”, the larger problem is that there is not a greater sense of urgency about the long-term consequences of these factors for American job creation, and therefore for the standard of living for many Americans. Anyone who wants a preview of what this will look like can visit the people I talk to in Japan, who, after years of standing elbow-to-elbow with mainland Chinese on factory lines in Chiba (competing with the Chinese factory worker in their own country), are giving up hope of ever making a living above the poverty line. Or talk to some of the ordinary Americans who already have little choice but to work at Wal-Mart in order to be able to shop at Wal-Mart.<br /> <br />Andy Grove <a href="http://www.businessweek.com/magazine/content/10_28/b4186048358596.htm">wrote eloquently of this problem</a> in Bloomberg BusinessWeek last month, describing how Silicon Valley start-ups don't create American jobs the way they used to, how that mechanism is broken, and thus how this blind faith that innovation will save the US economy is a fallacy. Grove asks: “what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?” The US has become “wildly inefficient” at creating technology jobs, he says, citing compelling calculations. Bob Herbert also <a href="http://www.nytimes.com/2010/07/31/opinion/31herbert.html?_r=1&ref=bobherbert">wrote passionately</a> about this subject in the New York Times last week.<br /><br />One luxury of blogging, as opposed to writing papers, books or newspaper articles, is that you don’t have to strain for policy recommendations. Commentary suffices. Though I have no grand plan for creating American jobs, I will say that while I agree with the arguments that both Grove and Herbert make, I am interested in the arguments Matthew B. Crawford makes in <a href="http://www.matthewbcrawford.com/">Shop Class as Soulcraft</a>. I worry about the policies Grove and Herbert propose. Grove wants to tax American companies that rely on offshore labor (good luck with that protectionist gambit). Herbert, in an outro so vague that if written by an external contributor it would never pass the New York Times op-ed editors’ muster, suggests that we follow the examples of Germany and Japan and “value our workers”. Anyone who has spent any time in Japan in the last few years can tell you <a href="http://www.rieti.go.jp/en/publications/summary/04040005.html">Japanese workers don't feel valued</a>.<br /><br />I don’t know what the solution is, but to return to my discussion with the investor and the coal man, I can say that very few people want to talk about it. It’s a lot more fashionable to opine about the US deficit and the Krugman-Ferguson spat.<br /><br />American companies and investors (not workers) are benefiting so hugely from Techimerica in the short and medium term (and who really wants to think about the long term?) that it will require discussions as painful as the ones we had about “death panels” in the health care reform discussion to address it. But, as I meet American aerospace engineers helping the Chinese design airplanes and talk to my brother, a talented industrial designer whose work is increasingly being outsourced to Chinese engineers at a fraction of the cost, I know that this is a debate we must have, and soon.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1tag:blogger.com,1999:blog-5950446472010692723.post-82094221535328345712010-03-29T23:59:00.000-07:002010-03-30T00:03:43.530-07:00Leveling the playing field<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAY0TrIVL0jnt2dod43EhEImowJc_h-Zdu5SZ-DLn1Hw1gu_RacfVEaWgdxpCZ7WPQIAUuUcySdK-nihFHG5lkg8sZenySkg04c1nT5uqBkYanVVU_SgjCyAHjwdGi2PAPbJ1Av9ODWLE/s1600/Mugfactory.jpg"><img style="float:right; margin:0 0 10px 10px;cursor:pointer; cursor:hand;width: 200px; height: 146px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAY0TrIVL0jnt2dod43EhEImowJc_h-Zdu5SZ-DLn1Hw1gu_RacfVEaWgdxpCZ7WPQIAUuUcySdK-nihFHG5lkg8sZenySkg04c1nT5uqBkYanVVU_SgjCyAHjwdGi2PAPbJ1Av9ODWLE/s200/Mugfactory.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5454319029973746594" /></a>In the great debates about international trade, the voices of ordinary people get drowned out by politicians, executives and economists. I wrote The China Price to put a face on Chinese workers for people in the West. Starting today, I hope to add to that discussion the voices of other workers.<br /><br />Matt is about my age and works at a unionized Ford transmission plant in the Detroit area. A Michigan native and the son of a General Motors employee, he has always worked at car component factories. Matt and his wife, an employee of the same Ford factory, earn about US$30 an hour, 45 hours a week. They are about to have their first child.<br /><br />I wanted to speak to Matt, who asked that I not use his real name, to see what it was like to work at an American factory and what people in America’s industrial heartland thought about China. It wasn’t easy to find him. I emailed friends and contacts in the US and Asia, and found only two people who knew anyone who worked in a factory. As a friend who lives in Washington, DC wrote: “Man, you really made me realize how far removed I am from mainstream USA in DC. We don't make ANYTHING here (besides bad policy), do we?”<br /><br />Matt’s factory proves that contrary to what a lot of executives out here in China say privately, unionized American manufacturing can still be extremely competitive. The question is for how long.<br /><br />Matt first applied to work at Ford in 1993. “I’ve been waiting since I graduated from high school to get in,” he says. Ford jobs were scarce, and even the application forms were prized. Matt’s uncle, who worked at the plant where he works today, brought him the application form. Then as now, the unionized plant only hired when enough older workers retire to justify new additions. Today, there are people on the floor next to Matt who have been working there for more than five decades. Many were hired in the late 1970s. There is another, smaller cohort that joined in 1995. The plant hasn’t hired a single new employee since 2000.<br /><br />Being a union member guarantees Matt benefits and job security – almost antiquated privileges in today’s economy. Manufacturing has lost more jobs than any other non-agricultural sector in the US except construction since December 2007, according to the Bureau of Labor Statistics. <br /><br />Production at Matt’s factory is expanding, not shrinking. The main reason is trade. About 60 percent of the transmissions Matt and his colleagues make are exported, mostly to BRIC countries – Brazil, Russia and China. It’s still cheaper to make them in Michigan and ship them overseas than to make the transmissions abroad.<br /><br />China is Michigan’s third largest export market, after Canada and Mexico. Some 43 percent of the state’s exports are transportation equipment (cars and trucks). About 28 percent of Michigan manufacturing workers depend on exports for their jobs, according to the US Department of Commerce.<br /><br />As grateful Matt is for his job security, he admits that “some of the stuff [about the union] is not the greatest.” Employees who regularly miss work get the same paycheck as Matt, who is rarely absent. “There’s no bonus for working harder than another person,” he says. “Everybody’s equal, whether or not they’re equally efficient.”<br /><br />There’s little incentive to go the extra mile to get the job done better or faster. “In a place like this, nobody’s going to give you a kudos, nobody’s going to give you a promotion. Everybody is on a level playing field.”<br /><br />Although China’s one national union is the world’s largest, at the coastal consumer goods factories I visit in China, factory workers are paid by the piece and almost never unionized. If they’re lucky, they work 11 or 12 hour days, six days a week (a 72 hour work week). They don’t even necessarily want job security. When orders slow, many resign to take time off and find another job elsewhere. Average wages in China were 81 US cents an hour in 2006, 3 percent of the average US hourly wage of $30.<br /><br />Auto workers in China may be better paid and thus less flighty than those in electronics and apparel factories, but maybe not. An economist friend tells me that even the International Monetary Fund struggles to hold on to its Chinese economists because so many leave for better pay at foreign investment banks. To me, this seems not cultural but rational: there are inevitably more job openings in the world’s fastest-growing economy. In an economy that is growing 8.7 percent a year, people are naturally less interested in job security than the freedom to switch jobs and earn more elsewhere.<br /><br />But in my conversations with Matt as well as Chinese and Japanese workers over the last few months, I have been surprised by the contrast between the desire for stasis in the US and Japan (the desire to hold on to what we used to have) and the hunger for movement in China. Chinese people’s appetite for mobility – whether it be leaving your children and moving across the country for a job on the coasts, or forgoing the relative security of a factory or white collar job to start your own business, or switching jobs once a year – is part of what makes China such an attractive place to manufacture consumer goods.<br /><br />I wonder whether those same qualities make China any more attractive as a place to manufacture transmissions. I also wonder whether you could make the case that trade is not a zero sum game, that the more transmissions Chinese people need, the more Matt will make, regardless of whether Ford starts producing the same transmission in China.<br /><br />Turns out, what Matt and his neighbors talk about over lunch and across their lawns in Michigan isn’t China – it’s Japan.<br /><br />“Japan doesn’t allow many American cars to be sold in their country,” he said. “If a country’s not going to accept our imports, we should cut down on the stuff they’re allowed to import to us.”Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1tag:blogger.com,1999:blog-5950446472010692723.post-48830766215405063772010-02-02T17:17:00.000-08:002010-02-02T17:29:08.691-08:00China's export advantage<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihtF5lNaXmJ7shdTsxkT4CkE9fD2zrPBMLyiC-N1yIEbwB3XGSTtsZC2CM476UhBO54pz1pEMVG-5edZset-BkdkdZ_2T9IZ8gbboUiB-Nqy6PVWtVTfIx-re01lFaNHR1vIYiK7xhCwg/s1600-h/Lou-Longo.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 45px; height: 45px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEihtF5lNaXmJ7shdTsxkT4CkE9fD2zrPBMLyiC-N1yIEbwB3XGSTtsZC2CM476UhBO54pz1pEMVG-5edZset-BkdkdZ_2T9IZ8gbboUiB-Nqy6PVWtVTfIx-re01lFaNHR1vIYiK7xhCwg/s320/Lou-Longo.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5433822799683858066" /></a>I've got <a href="http://online.wsj.com/article/SB10001424052748704107204575038453800945576.html?mod=WSJ_latestheadlines&mg=com-wsj">an oped</a> in this morning's Wall Street Journal Asia about China's export advantage. I spoke to a lot of people whose insights didn't make it into the piece, so I'm going to include a couple here. The first is an email interview with Lou Longo, practice head of global services at Chicago-based advisory group Plante & Moran (pictured on the left). He advises mid-sized mid-Western firms in American's industrial heartland. With his approval, I include his comments below verbatim. My questions in <span style="font-style:italic;">italics</span>.<br /><br /><span style="font-style:italic;">1. In your practice, what sectors have you seen the Chinese gaining market share in over the last year? (This can be very specific.)</span><br /><br />Machine tooling industry specifically stamping dies and plastic injection molds. Durable medical devices including hospital and home care machines, hospital med components, diagnostic equipment and surgical tools. Automotive machined components such as castings machines into body frame components and structural members. Aircraft components especially large body components such as aircraft door and nose assemblies.<br /><br /><span style="font-style:italic;">2. What reasons can you find for this expansion of market share? If the answer is simply that the Chinese are cheaper, perhaps you can be specific about how cheap, and why the customers weren't buying from the Chinese (who have obviously been cheap for years, and are more expensive in some categories now than they were two years ago). Do you see any reasons beyond them simply being cheap?</span><br /><br />In the case of machine tools, it is the significant labor savings and lack of work rules which allow the manufacturing time to produce a tool to be as much as 30% less in time (meaning customers can shorten their manufacturing lead times ) than what it takes U.S. and EU tooling shops to produce a tool. In medical device, it is a combination of the industry being late to follow an off-shoring production strategy as well as the belief that China has a huge, undeveloped market for the use of such products in the future. In automotive, it has shifted from an export, low-cost country expansion into China being the most significant vehicle market with the strongest growth prospects in the world. As a result, automotive companies and their suppliers are investing in world class technology in China allowing the quality of production to be the best as well as cheaper based on labor and input savings. In aerospace and aircraft, it is specifically a function of cost but mostly it is in negotiation by the aircraft manufacturers in competition to serve the growing airline business in China the Chinese government is expecting if not requiring that a certain amount of content be China sourced. For example, if Boeing hopes to beat Airbus, one method is to show it has a higher China content in the airplanes it wishes to sell to the China airlines. A critical difference in the China low-cost model to other low-cost locations (e.g., Vietnam, Thailand, Sub Sahara Africa) is that China is the only one with strong manufacturing infrastructure (transportation, education, raw materials, etc.) and the world’s largest potential domestic market. I am seeing sourcing decisions being made where China is a lower cost than the U.S. but not the lowest cost yet the sourcing decision is made for China since it gives the added perceived benefit of learning the domestic market for future sales and growth.<br /><br /><span style="font-style:italic;">3. Have you dealt with any cases of Chinese companies which previously exported to the US setting up manufacturing operations in the US? Can you tell us more about whether that is helping these companies gain market share?</span><br /><br />Yes – in machine tools and automotive components. The financial distress that the U.S. automotive market has gone through has allowed Chinese companies to buy market share in the U.S. and a beach head through acquisition of suppliers and manufacturers of vehicles. Three years ago I was involved in assisting several clients in looking for target Chinese acquirers as the U.S. companies were starting to face financial difficulties and they weren’t successful in attracting U.S. or EU buyers for the companies. In several discussions I had in China with the Chairman of China automotive companies, they listened to the opportunity I presented and respectfully told me they would be interested only at liquidation pricing. In effect, what they told me was there was no reason to pay a fair on-going value for the business since eventually they would be able to acquire it or a similar company when it was liquidated through bankruptcy or a last ditch sale. We are seeing that come true today.<br /><br /><span style="font-style:italic;">4. What sectors do you expect to see Chinese market share gain in the future and why?</span><br /><br />Life sciences, agriculture, medical device, aerospace and heavy equipment both off highway construction and farm-related. Life sciences because the cost of educated scientist is low and the Chinese have little external pressure on western morality based matters such as animal testing, stem cell research and the like. Agriculture because as the economic influence of China increases, more people will want to eat better and will demand local availability of meat, dairy and produce which is expensive and is currently leading to eventual export capacity of these items. Medical device and aerospace because these industries are behind consumer goods and automotive in the development of a low cost sourcing base so this will drive some growth regardless of China’s direct efforts. Heavy equipment since labor is cheap and most of the development in terms of mechanizing construction and agriculture will occur outside of the U.S. and EU driving local or more regional supply chains offering China base to grow this sector.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com3tag:blogger.com,1999:blog-5950446472010692723.post-78487164553728963872009-12-13T19:27:00.001-08:002009-12-14T01:57:55.227-08:00Beyond grass-eating men and meat-eating women<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMe1_eYMgTjSZ7P8PhW_pDpQ050ZUDPtUEznMZUMfB5idLaXQF8jej-o44FYP8RcXLCwj-RqaZq5Ud7vdoTeHh11cDD01CwDlkvU0TRZ1EQuvIy-BhYbmwKJDoCTnHPawstz1aNLzTKfU/s1600-h/Mikaandanother109girl.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 240px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjMe1_eYMgTjSZ7P8PhW_pDpQ050ZUDPtUEznMZUMfB5idLaXQF8jej-o44FYP8RcXLCwj-RqaZq5Ud7vdoTeHh11cDD01CwDlkvU0TRZ1EQuvIy-BhYbmwKJDoCTnHPawstz1aNLzTKfU/s320/Mikaandanother109girl.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5414937068801876690" /></a>I've been doing some research on Japanese social trends, and came across a fascinating article that I thought was worth sharing. The <a href="http://www.nikkeibp.co.jp/article/nba/20091109/194218/">piece</a>, by the astute social commentator Maki Fukasawa (who coined the term <a href="http://www.slate.com/id/2220535/">"grass-eating men"</a>), is in Japanese, so I will summarize it here.<br /><br />Fukasawa's piece, part of a <a href="http://www.nikkeibp.co.jp/article/nba/20090916/181800/">column</a> she does for <a href="http://www.nikkeibp.co.jp/associe/">Nikkei BP's Associe</a>, a smart Japanese website aimed at working women, is ostensibly about the gap in male and female views on marriage, but it covers a lot more territory that has relevance to anyone interested in the Japanese economy. (As an aside, why are so many women's sites in America so trivial and fluffy?)<br /><br />It won't be surprising for anyone who has been to Japan and been served tea by a female secretary before meeting with a male executive that Japanese women earn, on average, just over half of what men make. What was new to me was that Japanese women's average income peaks in their early 30s at just under US$34,000, and falls for the rest of their lives. By their early 50s, women are earning just US$30,000. Japanese men, by contrast, see their income rise over the same period. Men's income peaks in their early 50s at more than twice what women the same age earn, at almost US$75,000. Unsurprisingly, women represent just 10 percent of Japanese managers, compared with more than 40 percent in the US, according to Fukasawa.<br /><br />These data reflect the "M-pattern" of Japanese female workforce participation, which climbs in their 20s, falls in their 30s and picks up again in their 40s. Lest you think that this is changing, Fukasawa reminds us that the M-pattern has been in place, essentially unchanged, since the 1980s. While clearly women in many countries struggle to balance work and home life, Japanese women are handicapped in their advance in the workforce by local prejudices (many carried by women themselves) but also the ridiculous shortage of nursery school places. There are 20,000 children on waiting lists for day-care centers in Japan. Only 28.5 percent of women with children under three work; by the time these kids are 6, 48.2 percent of their mothers work. <br /><br />And I'd be willing to bet that many of those women aren't working full time. Women, like young men, are much more likely to be on non-staff contracts. Women accounted for 30 percent of Japan's non-staff workforce in the 1980s. Today, they account for more than 50 percent. I suppose you could argue that this reflects a higher total workforce participation for women today.<br /><br />Fukasawa argues that these data support why men and women in Japan are so far apart on marriage. Women, including the "meat-eating" hunter women Fukasawa talks about, are very keen to get married, but men are shying away from this rite of passage. (This might explain why 25 percent of first children in Japan are conceived out of wedlock, according to Japanese government data, and why wedding planners now cater to pregnant brides, something that would have been unheard of as a business model a decade ago.)<br /><br /><span style="font-weight:bold;">The problem isn't hidden, Fukasawa says. It's obvious. That's why women care so much more about marriage - it's their best shot at financial security. And it's why men, concerned about being laid off, are even more reluctant to get married, since that means supporting another person (and likely a child as well) economically for the rest of their lives.</span>Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com3tag:blogger.com,1999:blog-5950446472010692723.post-58584147841857038252009-12-10T17:44:00.000-08:002009-12-10T18:05:37.837-08:00China will be having the red, thank youAs I write, <a href="http://www.nytimes.com/2009/12/11/business/global/11wine.html?em">my piece on New Zealand wine</a> is running at the second most read on the New York Times' Global Business section. I'm sure this won't last, but I did want to add a few things for anyone interested in the China market, one of the future growth opportunities New Zealand is targeting for its wines. <br /><br />I did some research on Hong Kong's wine market as part of this piece, and learned that a whopping 78 percent of wine imported into Hong Kong is red. Japanese wine drinkers, I was told recently by a well known wine writer, apparently also prefer red, in part because it's obvious to passerby what it is in their glass - the whole point of conspicuous consumption. I don't know if Japanese (or Chinese) wine drinkers are that facile, and I haven't done any specific research on wine in the mainland, but I'd be willing to bet there is a similar preference for red, and probably (at least once you get out of the weeds of mainland-produced wines) for famous French red in China. <br /><br />All of this makes New Zealand's attempt to transition out of sauvignon blanc, which accounted for 81 percent of exports last year, that much more important. New Zealand's pinot noirs are not well known in Asia, though to me at least, many are excellent (she says as though she knows anything about wine!). There is a long marketing and brand-building road ahead, and maybe one conclusion is: as New Zealand's wine industry looks to the Chinese market, the more boutique, the more exclusive, the more expensive, the better. <br /><br />For evidence that the New Zealand wine industry is hungry for better international exposure, see <a href="http://www.nbr.co.nz/article/new-zealand-wines-hit-new-york-front-pages-116292">here</a>.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com0tag:blogger.com,1999:blog-5950446472010692723.post-26908228051483364212009-12-08T17:00:00.000-08:002009-12-08T18:00:12.657-08:00The risks of remaking ourselves in China's image<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-aC6FzKpFXTg531LQFd8FryweFRFAWsPJ8qO2VekuzmCDAINhberMzLJvQlbZwjdg4YVhRX6uWoaxK3QeLvT_Q8tv3BtyLwhyH5hry_SOUiO4WYQOADhl5BebravmW9Fd8l-srho4Fuo/s1600-h/chinafactory2.jpg"><img style="float:right; margin:0 0 10px 10px;cursor:pointer; cursor:hand;width: 200px; height: 128px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-aC6FzKpFXTg531LQFd8FryweFRFAWsPJ8qO2VekuzmCDAINhberMzLJvQlbZwjdg4YVhRX6uWoaxK3QeLvT_Q8tv3BtyLwhyH5hry_SOUiO4WYQOADhl5BebravmW9Fd8l-srho4Fuo/s200/chinafactory2.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5413050235165061010" /></a>In the wake of the financial crisis, there has been a lot of justified hand-wringing in America about our economic prospects. Some of this criticism has pointed to China, and particularly China's industrial policy, as an example we should follow. “In China, shovel-ready means shovel ready,” James Owens, Caterpillar’s chief executive, said in April, lauding the country’s quick mobilization of resources. Fareed Zakaria, editor of Newsweek, declared China “the winner of the global economic crisis.” While it's clear that China's political system allows it to respond more quickly in a crisis, it isn't clear to me that China's industrial policy is the reason for its prolonged and rapid economic growth. Other factors - foreign investment, a cheap renminbi, zealous local governments where officials are promoted on the basis of how much economic growth they can chalk up - these seem more important in driving growth than the policy of propping up a few industries with state bank loans. There are plenty of lessons we can learn from China, as Bill Powell of Time argues articulately <a href="http://www.time.com/time/world/article/0,8599,1938671,00.html">here</a>, but they aren't in the realm of big, unwieldy policies to stimulate development (and sometimes overdevelopment) in certain sectors. China has changed the competitive landscape. Revaluing its renminbi, while long overdue and important for addressing some global imbalances, is not going to bring back any significant number of manufacturing jobs. America needs to look carefully at preserving and building on what has made our economy so competitive in the past, and how we can ensure that our future growth trajectory brings as many people as possible into the fold. For more of my thoughts on this, see my piece on Foreign Policy's website published this week <a href="http://www.foreignpolicy.com/articles/2009/12/08/wheres_the_chinese_toyota">here</a>.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com0tag:blogger.com,1999:blog-5950446472010692723.post-10540516119707882562009-11-30T21:17:00.000-08:002009-11-30T22:46:08.140-08:00Kicking America while it's down?More than a year after the product scandals that shook China's international brand image, Beijing has paid for a <a href="http://www.youtube.com/watch?v=7Dk6247P184">TV advertisement</a> intended to put the record straight. The 30-second ad, now playing on CNN and commissioned by the Ministry of Commerce with "participation" (=money) from four industry groups, is already stirring up debate in China. International debate, I'm sure, is not long behind. <br /><br />Created by DDB Guoan and hailed by unnamed experts in the China Daily as <a href="http://www.chinadaily.com.cn/china/2009-12/01/content_9081941.htm">"a PR breakthrough"</a>, the ad shows how widespread Chinese-made goods are in everyday Western life. An Ipod is "Made in China with software from Silicon Valley"; a pink dress is "Made in China with French designers", an airplane is "Made in China with engineers from all over the world", running shoes are "Made in China with American Sports Technology". <br /><br />The ad is fascinating on multiple levels. For one, it's the first attempt I've seen by a Chinese government ministry to defend Chinese products to the English-speaking world using a TV advertisement. I remember covering CNOOC's bid for Unocal and seeing how the Chinese failed to make their case to the Americans. So at first glance, this ad might suggest China had learned its lesson. <br /><br />But the timing and message of the ad could well be unfortunate. While it's absolutely accurate to say that the world is bringing more of its design and manufacturing to China, I wonder if viewers in America will feel like China is kicking America while it's down. Americans are understandably anxious about our economic prospects right now, and to me at least, this ad seems to touch that nerve. Made in China with American technology? Factually, totally accurate. But to the average American, could it be a reminder of what America no longer does, of the fading of our own industrial glory. And could it even bring to mind some of the less savory ways that China was able to win this business? Its poor track record on the protecting the environment, labor and intellectual property rights and its management of its currency to keep its exports competitively priced, to name a few?<br /><br />The most disturbing part might well turn out to be the airplane - given the national significance and economic importance of companies like Boeing and Airbus, the obvious military carryovers from the aircraft industry, and China's recent product safety scandals, I'm not sure how comfortable ordinary Americans would be with the idea that China wants to dominate airplane manufacturing the same way it has shoe making. Again, what the ad says is right: China is playing a larger role in airplane manufacturing, and it is doing it with help from foreign engineers.<br /><br />Still, the commercial demonstrates the challenge China faces in crafting an intelligent message about its products, and the inherent mutual suspicions that lurk within China's relations with its major trading partners. China can speak the truth, as it does in this ad, and it can still strike the wrong chord with some people. China should be able to promote its own products without seeming to do so at the West's expense. <br /><br />The ad is <a href="http://www.youtube.com/watch?v=7Dk6247P184">here</a> and <a href="http://english.cctv.com/program/bizchina/20091201/102132.shtml">here</a>. What do you think?Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com2tag:blogger.com,1999:blog-5950446472010692723.post-60084486463103077952009-11-30T16:13:00.000-08:002009-11-30T16:19:46.983-08:00China Quality IssuesThe University of Southern California's <a href="http://www.uschina.usc.edu/">US-China Today</a> has a piece out yesterday on product safety issues in China quoting me and a range of other non-Chinese people. I wish the reporter had talked to an actual factory manager or an actual Chinese person involved in global supply chains to get their perspective. Anyway, the piece is <a href="http://uschina.usc.edu/%28A%28MOuji5uoygEkAAAAMWNjMjM4YzAtODI2NC00ZWU1LTg4NjktMmFmNDRjODZhZThlH_obhX-9dimuPNFmqmuOEmXHMNU1%29S%28oaurkv2bpw2qse2mh3dq32r0%29%29/ShowFeature.aspx?articleID=4557&AspxAutoDetectCookieSupport=1">here</a>.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com0tag:blogger.com,1999:blog-5950446472010692723.post-26991565374217587682009-11-24T05:53:00.000-08:002009-11-24T06:19:25.960-08:00Coming to a neighborhood near you<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitsKMz88l0HaDCe4ZvWqJeMOMjivPoeTTr0hYOa6_DD73EzupoIf1WRYhLCur9toCsE-MNW1QeeRdudZOMoUbZKhkL6lykPxp_duQCpI_2pi2BH1Dok3arbOXU_0qtcXZQzVChlTsyMkY/s1600/chinesekid.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 150px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitsKMz88l0HaDCe4ZvWqJeMOMjivPoeTTr0hYOa6_DD73EzupoIf1WRYhLCur9toCsE-MNW1QeeRdudZOMoUbZKhkL6lykPxp_duQCpI_2pi2BH1Dok3arbOXU_0qtcXZQzVChlTsyMkY/s200/chinesekid.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5407673579267074290" /></a>What do the Chinese want? This simple question has roiled global commodity and equity markets for years. The macro answer is found in places like Newcastle, Australia, where China’s appetite for coal created a port-side traffic jam. The micro answer can be found in Causeway Bay, my neighborhood and one of Hong Kong’s busiest shopping districts.<br /><br />As one of the most popular spots for visitors from mainland China, hosting some 15 million tourists in 2007, Causeway Bay is a leading indicator of what Times Square in New York, Paris’s Champs Elysees or Leicester Square in London might look like in 10 years’ time.<br /><br />If my neighborhood is anything to go by, mainland Chinese want luxury watches, branded cosmetics, and skin creams. Maybe a little jewelry, and of course medicine and baby milk powder. Almost every day, shops that sell anything else are being replaced by those that cater to the mainlanders. And it's not just my neighborhood: IFC, a big shopping mall in central Hong Kong connected to two office buildings filled with investment banks, is gradually converting its tenants to stores that absorb the maximum amount of mainland money. It wouldn't surprise me one bit if the reason Pret a Manger, the UK sandwich chain that filled each day with suited financial drones, closed its convenient IFC branch recently was because a jewelry store that catered to mainland visitors could pay a higher rent. <br /><br />Mainland shoppers are here to stay in Hong Kong, and they are heading overseas. As increasingly wealthy Chinese tourists fan out around the world, they will have a similar impact on the shopping landscape of big cities, just as the Japanese did before them. Already, there are lines most days outside the Louis Vuitton shop in Causeway Bay. And it's a safe bet the big luxury groups all now design with Chinese shoppers in mind.<br /><br />As the Chinese shoppers head your way, here are a few things I've noticed that have changed in Causeway Bay that you might observe eventually in New York or London: signs have cropped up on cosmetics saying "fixed price" (no bargaining!), stores have started to promote payment in renminbi, stores install ropes outside to give the impression of exclusivity, and of course, every possible store gets turned into a watch or cosmetics shop.<br /><br />By 2020, the World Tourism Organization is predicting 100 million Chinese will travel overseas. When they come, the Chinese will leave their mark. While they may be shy about spending at home, the Chinese are shopaholics overseas, spending $6,000 per trip to the US, more than visitors from any other country.<br /><br />Tell that to the economists and politicians who complain about the Chinese not spending enough. They'd just rather shop overseas.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1tag:blogger.com,1999:blog-5950446472010692723.post-15247511454986321002009-10-16T15:09:00.000-07:002009-10-16T15:21:22.450-07:00Shell, Nestle and Motorola's dirty secretGreenpeace has a <a href="http://www.greenpeace.org/china/en/press/release/silent-giants">new report</a> out this week about big companies, including Nestle, Samsung, Motorola, Shell and Kraft Foods, that are failing to comply with China's environmental disclosure regulations. What's great about the report (called "Silent Giants") is that it only asks if companies (both foreign and Chinese) are complying with Chinese regulations - it's not demanding they adhere to a higher international standard. In particular, Greenpeace investigated companies' compliance with a 2008 regulation that said companies blacklisted by local governments in China for spewing pollutants into the environment must disclose precisely what they are spewing. What Greenpeace found was "[n]one of the 25 factories belonging to the 18 companies that were required to disclose environmental information for exceeding discharge standards disclosed information within the stipulated time limit." Interestingly, all of the eight multinationals cited in the report regularly disclose information about emissions at their plants OUTSIDE China. What do you think?Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com0tag:blogger.com,1999:blog-5950446472010692723.post-18359746500374429792009-10-08T01:04:00.000-07:002009-10-08T01:31:50.923-07:00Notes from my career crypt<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgK1r7QotVWqkhhwtPOMe8RjaLHdV63AhuYTmIyNP4LISJLh77eqje1WPKoD9q64BF_ycGzONLsxjrW04ZjHSOBoyEWCVPM0SNLeA56q8DVsg5EkdTvJIesbbMR0TGdhnZPTRsBa63APW0/s1600-h/Mestrugglingwithpaperswhatsurprise.JPG"><img style="float:right; margin:0 0 10px 10px;cursor:pointer; cursor:hand;width: 240px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgK1r7QotVWqkhhwtPOMe8RjaLHdV63AhuYTmIyNP4LISJLh77eqje1WPKoD9q64BF_ycGzONLsxjrW04ZjHSOBoyEWCVPM0SNLeA56q8DVsg5EkdTvJIesbbMR0TGdhnZPTRsBa63APW0/s320/Mestrugglingwithpaperswhatsurprise.JPG" border="0" alt=""id="BLOGGER_PHOTO_ID_5390143771512638594" /></a>I'm always fascinated to hear about the short cuts people take to do their jobs better. I don't mean cutting corners on health and safety or anything pernicious - not today. I mean the ways that people do their jobs better ... like the Silicon Valley entrepreneur who said that he never helped anyone above him in the dotcom hierarchy; he always helped people junior to him. Anyway, partly because I've had to deal with a public relations executive recently (I say "had to" because I basically swore off dealing with PR after I left the FT because so many were unhelpful, poorly informed, or just liars), I have been thinking about the ways people screw up their relationships with journalists, sometimes to the detriment of their employers or clients. I've also been cleaning out my contacts file. Looking through the notes I kept, most people merited a "nice" or no note at all. But a good number got freaked out by just meeting a foreign journalist - not even doing an interview. I share some of these notes here, if not for your amusement, then for insight into how journalists (or maybe it's just I) think:<br /><br />"A little scary" (human rights activist)<br />"Sucks. Never around. Never returns phone calls." (can't recall who this was)<br />"Beautiful eyelashes. Great English. Kind of cute." (senior police officer)<br />"Allegedly does not have an email account" (Steve Wynn, gambling mogul)<br />"Condescending. Ex-Goldman. Yuck." (banker)<br />"[Has a] pet pig." (news assistant)<br />"Didn't eat anything or say anything." (financial PR)<br />"'If it rusts, pollutes, or you can eat it, it's mine.'" (Morgan Stanley banker)<br />"Anal about quotes, but in a good way." (consultant)<br /><br />The photo is of me in a classic pose from my days as a reporter: juggling too many notebooks and material on the street in Tokyo.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1tag:blogger.com,1999:blog-5950446472010692723.post-49793890563126946872009-09-15T21:19:00.000-07:002009-09-15T21:39:34.229-07:00Japan vs China, take oneI've been in Shanghai and Tokyo this week giving speeches and presentations, and moving between these two cosmopolitan but very different cities has left me with plenty of food for thought. To start: while Japan has in many ways become an easier place for foreigners to navigate than it was a decade ago, it still has a long way to go. For example: unless you have a business here that can keep a mobile phone contract rolling over every month in someone else's name, you have to rent a phone on arrival at the airport. To get a local mobile number as a foreigner in Japan, you have to have a foreigner registration card. (By contrast, in China, like most of the world, you just show up, buy a local SIM card, and pop it in your phone - in China, SIM cards are sold at newspaper kiosks on street corners.) I'm going to go out on a limb on this one and blame Japanese bureaucrats for this situation. Another problem: Japanese banks, not so friendly to foreign cards. American friends visiting Tokyo this summer could not believe how difficult it was to find an ATM machine that would accept their cash cards. Because I used to live here, I know where the Citibanks are, so I don't normally spend much time thinking about this problem, but it's silly. It's much easier to find a place to withdraw money in Shanghai than Tokyo. Finally, getting paid for services rendered in Japan without a Japanese bank account is not easy. Like a street performer, I am paid in cash for my speeches and TV appearances. Wiring overseas is too complicated at Japanese banks, or so my clients tell me. Banking and telecoms, two service industries that should, in theory, be more international in the country with a longer experience with capitalism and global commerce, illustrate perfectly how Japan has been happy to keep itself at arm's length from the rest of the world. Granted, accessibility to foreigners is not a perfect index for measuring a country's prospects - but how could being more open to skilled foreigners be a bad idea for Japan?Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com2tag:blogger.com,1999:blog-5950446472010692723.post-73040911225227046752009-09-10T18:03:00.000-07:002009-09-10T18:33:14.683-07:00Changing of the guard?<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeSlcsAjQu7DMOrZRXNrWSgZqN2WX6WcDvlQsGA6G-_sRyeRDG84FpDFjFbgR8za9M_UPMzuzZQO-yehgZqxtsZKPZZkrdxxJHpaMV0614Itfwo4g2TvBDd8VgdNW0639sgt0uf-sPT54/s1600-h/Luyuan+Picture.jpg"><img style="float:right; margin:0 0 10px 10px;cursor:pointer; cursor:hand;width: 246px; height: 320px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjeSlcsAjQu7DMOrZRXNrWSgZqN2WX6WcDvlQsGA6G-_sRyeRDG84FpDFjFbgR8za9M_UPMzuzZQO-yehgZqxtsZKPZZkrdxxJHpaMV0614Itfwo4g2TvBDd8VgdNW0639sgt0uf-sPT54/s320/Luyuan+Picture.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5380014081652049586" /></a>I met up with a friend yesterday who teaches business to graduate students here in Hong Kong. These kind of programs have grown in popularity while I've been living in Hong Kong, presumably because they are extremely profitable for the universities. They draw students from around the world - India, the US, the UK, and the mainland. Because I'll be giving a talk to a class of these students again this year, I asked the professor whether there was anything different about this class. Yes, he said. This year, the mainland students have arrived much more confident and even nationalistic. The financial crisis has emboldened them to feel that China's system is superior, and they could be very vocal in response to what you say about their country. Putting aside for the moment the question of system superiority, we all know that the environment you graduate into (whether from high school, college or grad school) affects how you see the world: graduating into Japan's big bang permanently altered the expectations of a generation of Japanese my age, for instance. And for Brits who graduated around the time my husband did, their troubles finding work dimmed their views of their country. What I hadn't considered is how the humbling of America, Inc over the past year will affect the way young Chinese see themselves - not just university students, but also middle class people like Lu Yuan, the woman in this photo. It's been a matter of hot debate among academics and business people here over the last few weeks: the shifting of the world order. While I haven't seen a definite rise in swagger among the Chinese students I know, this financial crisis has no doubt affected their views of the world and how they fit into it. I'm interested to see what, if anything, that means for China's policy and economy five, 10, 20 years down the line.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com0tag:blogger.com,1999:blog-5950446472010692723.post-16233375960730275672009-08-20T00:48:00.000-07:002009-08-20T01:19:53.529-07:00Rise of the $1 censors?There's been a lot of talk on some China blogs lately about China's so-called <a href="http://cmp.hku.hk/2009/08/17/1706/">public opinion crisis</a>, where public opinion spirals out of the government's control. To Western readers, this is a natural part of civil society - people express their views openly. But not so in China, where Rebecca MacKinnon has dubbed the government's strategy to control public debate "<a href="http://rconversation.blogs.com/rconversation/2009/04/cybertarianism-china-and-the-global-internet.html">cybertarianism</a>". The Chinese government pays bloggers to weigh in on online debates in Chinese - these so-called <a href="http://www.youtube.com/watch?v=CpEcMP0O7XQ">"50-cent censors"</a> advance the government's view of situations without declaring who is paying them to do so. I haven't yet heard of 50-cent censors operating in the comment sections of English-language websites, but I wonder if they already exist. I have met some incredible English speakers in my travels in rural China, people who asked me about George W. Bush's frequent use of certain words like "robust" to describe the economy because they spent so much time on <a href="http://www.whitehouse.gov/">Whitehouse.gov</a>. The initial responses to the always excellent Arthur Kroeber's <a href="http://blogs.ft.com/dragonbeat/2009/08/18/rio-tinto-arrests-reveal-china-has-growing-up-to-do/">piece on FT.com about the Rio Tinto case</a> made me wonder whether there weren't $1 censors (surely they get paid more for posting in English) at work. Arthur's piece actually comes out fairly positive for China, saying it's not as bad as Russia; the piece doesn't directly address the question of what crimes were at stake, as commentators immediately pointed out. I'm assuming (as perhaps Arthur does, though I haven't asked him directly) that bribery is widespread in China, among both foreigners and locals, and that the larger issue at stake is the consistent application of the rule of law. As the public debate (see Niall Ferguson's <a href="http://www.newsweek.com/id/212143">piece</a> in Newsweek, as one example) continues to heat up about China's rise and the resulting shifts in the world order, it will be interesting to see how the online chatter develops.Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com0tag:blogger.com,1999:blog-5950446472010692723.post-18245359349806668632009-08-13T00:56:00.000-07:002009-08-13T01:25:28.783-07:00The China Daily on The China Price<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuf6BbYujPZOknQ-VhylYdZqEDLmCpxWcD2f6IqA0jjV1rh-9e-egs8sKGTHURS_vrFZwqD7_JYp-njd8ELGqKZqR9czXuLW_1yVRgv7E3C0XMakOkjNmlFpFzntWYyP_qe7JG1n8Zhq4/s1600-h/china-daily-page.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 141px; height: 200px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhuf6BbYujPZOknQ-VhylYdZqEDLmCpxWcD2f6IqA0jjV1rh-9e-egs8sKGTHURS_vrFZwqD7_JYp-njd8ELGqKZqR9czXuLW_1yVRgv7E3C0XMakOkjNmlFpFzntWYyP_qe7JG1n8Zhq4/s200/china-daily-page.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5369361169395557938" /></a>Much to my surprise, the China Daily has reviewed my book in a favorable light. <a href="http://www.chinadaily.com.cn/cndy/2009-08/13/content_8563158.htm">The review</a>, published in today's China Daily, argues that "Harney's book certainly has plenty of grim material providing grist for the China-critic mills. But Harney has too much integrity and objectivity as a reporter to altogether ignore the positive side of China's export economy." William Daniel Garst, the reviewer, liked the story of the girls of room 817 (pictured on <a href="http://twitter.com/thechinaprice">my Twitter page</a>) and agrees with my argument that the China price is unsustainable. He does take a more sanguine view than I do in the book, where I argue that while China is changing and worker expectations are rising, not much will change until Western consumers do. If anything, the financial crisis has deepened Western consumers' appetite for cheap goods. But recent books like Ellen Ruppel Shell's <a href="http://us.penguingroup.com/nf/Book/BookDisplay/0,,9781594202155,00.html">Cheap</a>, which generated good press coverage, suggest that at least coastal American pundits are willing to discuss the question that lies at the heart of The China Price: are we really okay with prices this low, even if they mean unsafe working conditions, unsafe products and the decampment of our entire manufacturing sector to cheaper locales abroad?Alexandra Harneyhttp://www.blogger.com/profile/08485101987176737856noreply@blogger.com1