Most China watchers (as well as the Media) focus on Mainland problems such as the property bubble in many major cities, or the lack of working capital for small businesses, or continued softness in Euro exports as the major signals for trouble ahead. And, at least for the short term, those are critical roadblocks to hitting growth forecasts for perhaps as long as the next 4 quarters. Then, really, who knows? But, the biggest mid to long term issues revolve around the labor force demographics and societal change within that labor force. It is no secret that China has an... Continue reading

"Mianzi"* is one of many Chinese words trying to describe the important concept of "Face". There really is not a direct correlation to the Asian meaning of Face in the West. But, the closest we come are in terms of respect, self-esteem, social standing, ego, or the loss of respect, social esteem, or a general movement downward in one's self-image. However, ego is not really adequate; loss of Face can encompass more than person, and impact all the way to the entire country. There are numerous words that translate into similar concepts, but with important nuances and emphasis. "Lian" for... Continue reading

According to Dr. Edmund Phelps, the 2006 Nobel Laureate in Economics, China's current path focusing on property market growth and consumerism, away from the prior 25 years of export driven growth will simply not work and is not sustainable. Phelps blames most of the current global recession on unregulated low cost consumer financing in the US, poor fiscal controls in Europe, and an increasing gulf between the rich and poor in all countries, including China. In the case of China, with its high savings rate, aging population and lack of an established national retailer base in the mainland, he feels... Continue reading

So, what's more important in the New China, saving face or saving your butt? Continue reading

Greetings after a 31 flights from the US to China over the past 12 months, re- and pro- acting to the rapidly changing world of rising costs, more labor activism and, most importantly, on-going export slow-down to the US and Europe (particularly Europe). Over the past 18 months, thousands of small to mid-size manufacturers in the southern China have either drastically downsized or, more commonly, simply gone out of business. Why? Well, mostly the global grinder of the fundamental, universal laws of supply versus demand, coupled with more regulation. On the surface, much could be blamed on the well-publicized movement... Continue reading

The hatchling of the "New China" is voraciously eating its parents. Continue reading

The End of Cheap Chinese Goods By FLOYD NORRIS Published: October 21, 2011/ New York Times Off the Charts: The End of Cheap Chinese Goods The great Chinese-led deflation in goods prices may have come to an end. Multimedia Interactive Feature Off the Charts: In Apparel, Inflation Is Back Beginning in the 1990s, the emergence of China as a major exporter first depressed and then held down the prices of many goods, helping to improve living standards in the United States. But recently, prices have begun to rise. The change can be seen clearly in the accompanying charts showing the... Continue reading

The BBC reports in the following link that the China government is beginning a more aggressive enforcement of "private" banking. http://www.bbc.co.uk/news/business-15380188 In this case, private banking includes the individuals that lend money to anyone willing to pay interest rates high enough for the lenders to need personal "collectors" that stay outside your factory just as a friendly reminder to pay (or else). This enforcement announcement puts an official spin to the reality that has been already happening as both traditional and street lenders shut off the cash. The fact, however, is that the under or non -performing traditional loans are... Continue reading

The changes in the South China/Pearl Delta manufacturing region, and China, in general, continue to accelerate. Sinking in a perfect storm of more consistent government regulation, increasing labor and material costs, the export burden of the appreciating RMB, is this really the middle phase of the end of the South China export manufacturing region and that part of the China miracle of the past 25 years? The answer is a qualified "yes". It seems relatively recently (within the past four months) that the external capital sources for the region are drying up rapidly. From the traditional asset based lenders in... Continue reading

As 100's of small to mid-size manufacturers close in the Pearl Delta region, is it all about the economy, higher labor costs, RMB appreciation and more Mainland laws? Well, yes and no. Sure the gross margins keep falling and the poorly managed companies go out of business. But, there are tremendous opportunities to increase profits, particularly in reducing waste and inefficiencies. So, why not just focus on improving the facilities and adding better processes? A big part of the decline is related to those Hong Kong owners who don't want to put capital into their Mainland factories. Many times, Mainland... Continue reading

Being a foreigner (or anyone for that matter), having an accident or emergency medical event in the Mainland, can create a potentially deadly chain of events. If you are traveling with someone speaking Mandarin and have a pocket full of RMBs, you could potentially at least get taken to a hospital (which creates of whole new range of issues, from dirty needles, to emergency rooms so bad, you may be exposed to an unknown number of germs and diseases). Even Southern Mainlanders would prefer a hospital in Hong Kong than a local hospital. Of course, there are always exceptions; you... Continue reading

So, now, back to Hecho in Mexico instead of Made in China next? Maybe, but not likely... More discussion tomorrow. Continue reading

The Sunday edition of the Asian Wall Street Journal and a commentary in last Friday's Financial Times take opposing views of the impact of the on-going labor unrest situation in the mainland. Both articles focused on strikes at Foxconn and Honda subcontractors, but offered different perspectives on the long-term impact. From the WSJ view, the real, potent issue at the current Honda subcontractor strike is not the increase in wages, but the increasing strength of non-government unions. As the push for higher wages and better working conditions continue, the central government has been relatively silent. Ultimately, if the labor unrest... Continue reading

One of the most overused, misused and misunderstood important words in China is Guanxi. Guanxi, depending on the situation and to whom you are speaking, and the age and sex of the person you are speaking to, has a variety of meanings. The easiest, purest understanding for most Westerners, of Guanxi (pronounced Gwan Shee), is Relationship But Guanxi means and implies much more at times. First, it is the core of what makes business work around the world; the interpersonal relationships of trust and mutual understanding that provide the platform for many business decisions. The old "it's not what you... Continue reading

In the midst of a world focused on oil spewing in the Gulf, some of the most important shifts in recent Chinese manufacturing history are taking place. Although, getting a lot more coverage in the European press (such as The Financial Times), not usually headline news here in the US. In a normal news world, wage increases of almost 100% and the potential nationalization of portions of privately held factories would be the core topic of discussion. But, there are always distractions, from the important news of historic marine life damage in the Gulf to the latest Lohan stupidities in... Continue reading

Chinese New Year (or the more politically correct Lunar New Year) is the one time each year virtually everything comes to a grinding halt many parts of Asia (and particularly China). The Chinese New Year (CNY) is the traditional beginning of the Chinese calendar and creates the largest global migration of workers going to and from southern China to see family and friends. There are a surprising number of holidays in China (and even more in Hong Kong), but CNY is the only time most factories in the mainland are closed. Depending on the level of factory backlog (or lack... Continue reading

A short detour from Asia for a moving note from one of our staff regarding the recent passing of a close friend's son. A good reminder how transitory our journey can be, how just being in the wrong place at the wrong time is a big part of fate, and how we should all live in the moment, since we don't know how many moments we have... If you have any interest in learning more about how you might be able to support the memory of this fine young man, contact Paul Dietz at [email protected]. Last Friday morning we received... Continue reading

Wal-Mart has reversed its China sourcing strategy over the past weeks with its new alliance with HK based Li & Fung Ltd. Almost back to buying (on a much larger scale) as it did with 3rd party Prel sourcing before the corporate movement to buying direct a number of years ago. Why? Continue reading

A reprint from a recent WSJ US article on the new sourcing alliance between Wal-Mart and Li & Fung Ltd. NEW YORK—Wal-Mart Stores Inc. on Thursday said it signed a sourcing deal with giant merchandise provider Li & Fung Ltd., with expectations the U.S. retailer could buy $2 billion worth of goods through the Hong Kong firm in the deal's first year. "We are redefining how we source products that are imported into Wal-Mart retail markets around the globe," said Wal-Mart Vice Chairman Eduardo Castro-Wright, adding the new approach should drive "significant" savings across Wal-Mart's supply chain. The move should... Continue reading

So, does Hong Kong really have a design community or is everything from somewhere else? Continue reading

For such an innovative city, Hong Kong design and designers, many times, seem to be at the bottom of the food chain. Well, first, is it true, and, if so, what can be done to change the attitude? Perhaps some of the issue is cultural. Not too many Hong Kong families dream of having their sons or daughters grow up to be a designer. The push is become a doctor, business person, or any kind of professional that would more likely guarantee a consistent income. Designers are viewed as being not so respected and with an unclear career path. You... Continue reading