The US dialogue around Chinese power projection

2 nice articles just came out that I’d like to build upon:

WSJ: No more Mr. Nice guy
The Diplomat: Can the Chinese Dream & American Dream coexist?

China testing and flexing its new found power is a natural, historically consistent behaviour, yet qualitatively new to the US for two reasons:

1. The Chinese mindset and methods of dialogue
2. The amount of information from both citizenry and officials, and that the flow is more towards China, despite censorship by their own government.

When the US expresses its indignation at the each new affront to sovereignty, it would do well to recall that global citizens who dislike America are primarily speaking to its foreign policy, and perhaps more importantly, a breathtaking hypocrisy/ignorance. Ask a Canadian what they think of the US position on the arctic oil reserves, and I think I don’t need to go into the Middle East.

Was your gut reaction, “Who cares what Canada thinks?” You’re both proving my point and manifesting China’s position in the South China Sea.

This well-known US attitude provides such rich tracts for ad hominem, it is simply naive to release statements and opinion without it informing our style. But that’s precisely what our talking heads do. In my most cynical view, it can be seen as pandering to the base, but I think more seriously, genuine ignorance.

Mr. Wang quoted in the WSJ article is correct but perhaps doesn’t state the point clearly enough: with the AIIB (another recent article here) and wildly unfair domestic treatment of certain international brands as examples, the Chinese military is just one tool of many to consolidate economic power. This should sound familiar to fans of our military-industrial complex, except China would very much prefer to execute their own version without ever firing a shot.

Don’t read me wrong: China is playing for keeps on all fronts. In this case whether that’s for influence or territory remains to be seen, although most Asia watchers are banking on the former. And as muted as official channels are in positioning, the sentiment of the average person on the street can easily be as confrontational as what US pundits say.

And here’s the difference I’d like to point out: we as a nation don’t have access to that dialogue, but they have access to ours. If we could capture attention without vitriol, and put weight not dull teeth into our positions (ahem, pivot to Asia) we might just project enough stature to be taken seriously. As it is, we can be caricatured both as bully publicly and weak secretly, given that we don’t seem to have the passive-aggressive chops to deal with anything from cyber-espionage to currency manipulation.

We’re still a few generations away from a cohort in China that truly has no memory of the horrors of war to hold the reins of power. This is a critical window to arrive at the reality of a local hegemony peacefully, but tough talk and no action is precisely the wrong way to go about it, playing right into the hands of the most nationalistic in their party, and to use a Western concept: lose.

S. China sea map.
Source: cfr.org via globalgisdata.com

On private conversations in public

Have you ever had the feeling people were talking about you even though you didn’t know what they were saying? Guess what? Chinese people also have this incredible power. And what’s more, they almost certainly know more English than you know Chinese.

So I’m always amazed at what visitors will say right in the front of their hosts, waiters, or strangers. Looking Chinese (to a foreigner) has given me plenty of truck with what is said even when there are nominally conversant locals present. It’s quite frankly disgusting, and worse, the illusion of refuge in your native language reinforces the otherness of each party. Plus it just plain pisses them off.

Is there anything more dismissive and imperialistic than talking as if someone were not in the room? Or worse, not caring? Try that in Louisiana and see if they rush to bring you your iced tea.

Pursuing even an unrelated personal conversation during the hours you’re kept waiting in your supplier’s board room is easily discernible from the heaps of scorn hoisted on everything from the shoddy workmanship to the smell of the lunch they brought you. Good intentions, as I mentioned in my last post, is key over almost everything, and nothing destroys the relationship faster than letting loose your frustration right in front of them.

If you can’t open your mind, at least bite your tongue. One step at a time, but the goal of course is to be able to take things in stride, laugh at what’s funny but not at them. And stop taking things as an affront to your ego. Nothing that happens to you in China is anymore personal or vicious than anywhere else in the world. If you can get over yourself, you can get over the task in front of you.

It’s funny. Doesn’t make him any worse of a person than your 44-inch waistline does.

China’s retirement crunch and what that can mean for site selection

I was asked by my wife to write about China’s coming retirement issues, and realized it would roll nicely into a comment on factory site selection.

First the NPR and a related story.

In the simplest analysis, China’s one-child policy means that one couple is responsible for eight grandparents. Chinese rightly place no faith in social security, so it’s up to individual savings and grandchildren to bear the brunt. This explains some of the incredible savings rates of older Chinese.

The fatalistic penchant for younger generations to spend all their earnings, combined with the fact that over half now live in different cities from their grandparents means that the calculus has changed dramatically. The government has taken notice, but it will likely be too little too late.

There was some buzz around legislation ordering people to spend time and support grandparents, but by and large, it has no teeth or specifics, at least at this time. I don’t think it would be practical to enforce anyway.

The government currently provisions for under 2% of senior care needs but has indicated they will ramp this to 10%. However when the demographics say by 2025 there will be over 60 retirees per 100 workers (compare to the 33 projected for the US, which is already to be a strain) it’s clear that filial piety even with government support is not going to be enough.

I know you must be asking yourself what you can do to help by now, so I’ll tell you. If you’re doing anything other than high value-add manufacturing/services, consider locating in Tier 2/3 (or Tier 4) cities. This is already a fairly popular trend with many on the Fortune 500. I’ll list some of the benefits and challenges below, but the salient point is this: managed properly you may be able to sustain a happier workforce with lower turnover at lower wages than in other areas of the country.

• Locating in China rather than Thailand or the Philippines means you still have access to the world’s largest market.
• While local governments have less experience dealing with foreign companies, it gives you both more leverage and a chance to influence the rules.
• Wages perhaps 40% lower than in Tier 1 cities such as Beijing
• Employees who can live with at least one set of extended family lowers their requirements for income, personal leave, and no risk of moving home
• A stronger network for talent acquisition, sales, and just getting things done
• Lower taxes and expenses

  

  Changchun, a Tier 3 city with over 3 million people.

• Inferior infrastructure, although in development across the country. You could probably still pick an ideal spot in many lower tier cities. Beware as this can include electricity and water, à la India.
• Less skilled talent pool. Both for your own staff as well as contractors doing your plumbing, painting, and IT. More supervision and training is required, but they should be grateful for it if done well.
• Less motivated talent pool. Don’t sell this one short–you have to adjust expectations. More than one company has been blindsided by putting a factory in Sichuan and realizing you can’t squeeze overtime or even diligence out of your staff like you can in Guangdong.
• Fewer comforts of home, less cosmopolitan. When I look at why some companies are located where they are, I believe they are mainly addressing this factor, which for many people can be a deal breaker, especially if you own a SME and feel that you or a trusted family member will be stuck out East forever. There are ways of dealing with this, which I’ll gradually write about.

I visited a VW plant in Changchun once. The quality of the workers surprised me quite frankly, and a colleague pointed this out to me: “They pay the highest local wage for unskilled labour, and offer the nicest environment. You can’t go home and tell your spouse you got canned from this job, so you just do what you’re told.” Meanwhile, some of their German overlords were frustrated to tears, a classic cultural clash, but at the end of the day, they got the job done.

For those in China for the long haul, Jack Perkowski writing for Forbes put it very well way back in 2012, “… names like Mianyang will soon become household words, just like Chicago, Minneapolis and Atlanta are today.” Don’t you wish you had bought up some of the Magnificent Mile back in the day?