Economics 101 take 2

Although I never took an economics class I will try to give you a glimpse into the China economy and how it works.  For the past 30 years the China economy has been a direct result of their low wages and export opportunity.  As I am sure you know, they have really exploited this advantage to the point where the country was foreign cash rich.  So how do you keep your money and investment in your own country, you make your currency a soft currency making it worthless outside the country and then control how much is allowed to be converted and for what reason.  Anytime you want to buy a good or service outside the country you have to apply to the government to be allowed to convert the local currency into foreign currency.  You also have to justify why it cannot be purchased inside the country.  So if the government does allow you to purchase a foreign good, then the government keeps track of what the good was and if it sees advantage of producing it inside the country then it gives money to some internal company to copy it for future needs. 

The government also discourages imports and if it needs outside technology then it forces the outside company to build locally in China and to have a Chinese partner.  So if the foreign company then produces a good and popular product, then the government forces the Chinese partner company to produce a similar product to compete with the foreign partner’s product, thus keeping all the profits inside the Chinese company.  So as is the case with my company, you might wonder what happens to the profits, since the companies are not publically owned.  But you also have to realize that once the company becomes of a certain size, the government then takes it over, so as you can see, at some point all the profits go back to the government.  So what happens is that the companies are therefore forced to re-invest in itself so as to “hide” as much of the profit as possible.  This then fuels the economy because it of course purchases goods from other Chinese companies as it is too difficult to send money outside the country. 

The government has also been funding the infrastructure which makes the country more productive and more competitive.  But for the future it must transform itself into a country which sustains its own growth, and therefore it needs a strong middle class.  We are starting to see the emergence of this middle class with the growth in university graduates.  These highly schooled young people are now able to learn quickly and are becoming very technically capable.  This produces more and more people who are now demanding middle class wages and thus growing the middle class.  This will hurt exports but help local economic growth.  There are now more and more entrepreneurs who are starting their own companies and more and more people who are investing in the booming real estate market.

So now that we have the emergence of a middle class, the government will need to turn over control of the companies to the free enterprise system to be able to sustain the growth, this will be a difficult transition.  I say that because the government hierarchy is very powerful and very privileged.  So as the wages rise and China becomes less able to export, it will depend on it’s 30 billion people to earn wages significant enough to be able to continue to grown the economy.  I guess time will tell if this strategy will work but certainly the people are no strangers to hard work and do not seem to think that anyone owes them a living.  The only issue left to overcome is the same issue that I am trying to help them overcome, they have never focused on the future and do not seem to be able to envision what will be needed to compete.  Most people here have always been told what to do and have copied things that were invented in other countries.  The creative culture will have to become part of their DNA if they are truly to be a viable world competitor. 

F1

What a great day in Shanghai.  The weather was beautiful with nary a cloud in the sky and a temperature in the mid 70’s, almost heaven, west Shanghai!!  This was the setting for the Shanghai and I was there to see my 8^th Grand Prix race in my 7^th country.  As you can tell from the numbers I enjoy the formula 1 races.  When I decided to go to the race, everything seemed perfect.  I was going with a colleague of mine from work who is a racing enthusiast like myself and who has attended 4 of the shanghai races and David a friend we made at the “welcome to the community” meeting shortly after arriving.  But alas a challenge was brewing.  On the day before the race, my colleague backed out and I was told that I had to make a presentation to one of the Yanfeng board members on the morning of the race.  But you probably know me by now and therefore you know that this was not enough to put me off, so I decided to do it on my own (with David).  So after a great presentation from 8-11am on Sunday, I had my driver take us to the Shanghai Grand Prix, after all, if I had to work on Sunday then it was the least the company could do to take me to the race.  And it turned out to be a great plan because I am not sure we would have found the way ourselves.  We turned up 2 hours before race time, bought great tickets and enjoyed checking the place out and searching for souvenirs.

It was nice that David and I were both routing for the same team (McLaren) and the same driver (Hamilton) and we had a great time cheering him on.  After barely making it to the start due to engine trouble; Hamilton struggled for the first few laps and them started moving up on the field.  Our seats were great as we were sitting on the hairpin turn and saw a lot of overtaking action.  Although the stadium was not packed, there was a good crowd of 165,000 people and we were sitting closer to the track than I have ever been.  Needless to say, the sound was deafening even with ear plugs.  With less than 10 laps to go Hamilton passed Vettel to take over the lead and in the end took the checkered flag.  I still enjoy the thrill of the race and the excitement accelerated by the whine of the unmistakable formula 1 engine.  Hope you enjoy the pictures.

Facts and Figures.

That’s what I had thought this weekend would be all about, facts and figures, instead we were honored to be treated like family; maybe even royalty.  We spent this past weekend in Guangzhou visiting our good friends Kan and Joanne Lam.  Many of you have had the pleasure of meeting them and most of you will never forget them. We were introduced to her brother and his family as well and there is no doubt that they came from the same mold.  He works for the government where he is responsible for the city planning and he showed us some of the upcoming projects, they are doing a lot of restoration of the old town and making it into a great “new town”. 

After a wonderful “Dim Sum” breakfast (A Chinese tradition), we headed downtown to see the Foshan Zumiao temple.  It was built during the Northern Song Dynasty (1078-1085) and later rebuilt during the Ming Dynasty (1372).  It was built to honor the great “North God”.

 It is best known as the “Palace of the oriental Folk Art” and Palace of Lingnan Architecture.  To us “normal folk” it was wonderfully adorned with porcelain characters depicting important stories of life during the Ming Dynasty.  The area is known for it’s porcelain figures, its silk weaving and it’s food.  We can attest to the beautiful porcelain and the fantastic food.  The temple also houses the largest “original style” stage which is still active today.  It is beautifully decorated in gold leaf and carved wooden figures.  It also houses a museum in honor of “Wing Chun” the original and “Real” Kung Fu master.  He is the world’s most famous martial arts expert, and is known throughout the country.  And then there is one last temple, the Confucius temple.  It was built in the Qing Dynasty (1901) to honor the famous educator.

After another great meal, we walked along what looked like a reincarnation of the canals of Venice.  This area of town was restored in time for the 2010 Asian Games which were held at the Riverfront stadium in which China took home the top honors.

As evening fell we boarded a tour boat to cruise the riverfront of the downtown district.  The evening was perfect, a temperature in the mid 80s and a nice evening breeze.  The riverfront is adorned with magnificent new high rise buildings each with an evening personality of their own.  Each building has a unique active lightshow which makes the city come alive each evening.   After another excellent meal, it was time for a trip to the top of the TV tower, a mere 433meters about the river.  It afforded excellent views of the city and we enjoyed the aerial light show. 

As is typical for working here, I spent the next morning (Sunday) on a conference call making a presentation.  As one of my colleagues reminded me, you are always to be available for work even when on vacation.  It is not unusual to have to work on the weekend and well into the evening at least one day during the week.  This I must say is very difficult for someone who has already retired!!  Fortunately the presentation went well and by lunch time we were ready for another great meal.  After all, the place is know for its food and we had to try as much as possible. 

After lunch we went to the “botanical gardens”  It was the most amazing collection of bonsai trees of all shapes and sizes.  Most of the trees were over a hundred years old, and beautiful miniature examples of many varieties of trees.  We even came to discover that different regions have different styles of bonsai trees.  We seemed to prefer the “Canton style” but all are beautiful in their own right.  We really enjoyed our time in Guangzhou especially our friends, after all, isn’t that what really make great memories? 

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China’s new vision

Today (April 5, 2011) finds us standing in line to see the China Pavilion at the Shanghai Expo center (for 2 ½ hours).  Last year China staged the 2010 world expo (worlds fair) in Shanghai where the theme was urban living.  It was supported by over 25 nations and tried to showcase the history and future of urban living.  I was anxious to see what was left of it (only the China Pavilion) as it received world acclaim for its portrayal of urban life.

The China exhibit traced the modern transformation of Chinese life from the 70’s till now and showed how drastically life in Shanghai has changed in the past 20 years.  It has gone from the more traditional life style to that of a world class city in only 20 years.  Well in my opinion, the landscape has changed but the people, traditions and real lifestyle has changed but only slightly.  Obviously the creature comforts have changed a lot but it is difficult to change a way of life in only 20 years.  The people do work hard but leadership is still lacking, and therefore productivity suffers, which they try to make up for by using more people (which seems to be in limitless supply).  As you can see we found a few at expo.

One of the more awesome displays was a moving mural of an old Chinese style painting.  This seemed to combine the old ways with the new technology which was a great way to show the current transition of the people.  New technology aiding the old traditions.  The rest of the displays and movies were less impressive but it was obvious that the government was trying to focus on the need to more to “Green living”.  They had many examples showing how we can all use our resources more efficiently from using LED lights to using mass transportation to reduce the CO2 emissions.  Clearly the government has seen the tremendous advancements in construction and some parts of the infrastructure but now in order to have a better life for future generations, we must all think of ways to reduce our carbon footprint.  It is a great message and one that needs to be focused on for future growth and prosperity. 

It is interesting to see the government looking after the welfare of the people and directing the future of the country.  The people truly believe that the government is protecting their way of life and their traditions while looking out for the major issues affecting the country.  It is like having a big brother. 

The architecture of the China Pavilion was fantastic, it looked very much like a traditional Chinese structure which is an upside down building with the larger levels at the top.  I am sure many of us have made such a structure when building with Lincoln logs.  It was a beautiful day in the mid 60s with bright sunny skies.  We also saw the last of the Cherry Blossoms which I really love.  Unfortunately I missed seeing them in Japan once again due to the earthquake, but I guess I have one more chance next year.  Spring is now here and we enjoyed another great day out at the “Venice of Shanghai”. We have made the most of our Memorial Day holiday.  More on that on a later entry. 

A nice break with my colleagues

Although being separated from your loved one is difficult at the best of times, this week has been a great experience for me.  This week I am travelling with 9 of my colleagues from China.  Now normally I am not fond of travelling in a large group like this but this week has been an exception.  I have enjoyed getting to know my colleagues and introducing them my world. 

Work in Shanghai has been a bit difficult for me mainly due to the fact that the Chinese are not likely to accept you just because you are there.  In putting together this trip, it was the first time that I thought that they really needed and appreciated my help.  Unfortunately it was for logistics and contacts rather than the intellect that I bring to the workplace, but it is a start.

This week they seem be going out of their way to make feel part of the team and have chosen to speak English most of the time that I am with them.  I still spend a far amount of time daydreaming because they are speaking Chinese but they seem to be excited to keep me in their conversations.  I hope this attitude will continue once we are back in the office.  They can easily exclude you from key conversations if they want to.  And I do see a lot of this and I am happy to be part of Yanfeng rather than Visteon as they often do not include the Visteon people in their key conversations.

We started our trip in France after a 12.5 hour flight from Shanghai to Paris (in economy class) gone as the good old days!  Our visit to France was great and reinforced the plans that I have made for the group.  It was also good that the Chinese heard the same opinions from a source other than me.  I was privileged to spend one evening with my friend Jean-Marc, we had such a great time it was like we were never apart.  We went to dinner at our favorite restaurant where I was treated like a king, they even put a sign on the door welcoming me back.  Great friends make great times!

After leaving France we went to a couple of places in Germany where I felt very much at home.  It was nice to understand people after not being able to for more than 2 months.  I wish I felt this at home in China as I do in Germany; I am sure I will in time.

I was able to have dinner with my friend Bertrand from France while in Germany and we recounted many great times together.  It was nice that I couuld help my colleagues with the language since I depend on them so much while in Shanghai, they apreciated it very much.  We enjoyed experiencing this castle together in the north of Germany. It reminded me of Tommy's law school and of course I had to boast a little!

Catharine continues to be the “Rock of Gibraltar”, each time I talk with her she seems to be in great spirits and is doing well.  I am disappointed that I will miss her birthday tomorrow, it seems that I am not good about being supportive on special days.

The travel has been exhausting as we have of course made the most of our time in Europe.  I was very surprised that my colleagues have traveled in Europe many times before.  My impression of them being "locked into staying in China by their government" was another misconception, one that I am happy to say is not true.  They seem to like to travel and I was surprised at the amount of shopping that they did when we had time.  It seems that they like to buy "the real thing" and they did a lot of shopping at the designer stores.  They may not have a lot of money but I think they like to impress their friends back home.  It seems I learn more and more each day to dispell my many misconceptions.

We took an overnight train from Hanover to Vienna which brought back memories of the time that we took a train from Dusseldorf to Austria for skiing in the Alps, I wonder if Tommy and Allison remember that trip.  Only a couple of hours sleep and we were up and going again.  6:30am and we were on our way to another supplier.

On wednesday night our trip finally came to an end and we all "let our hair down" and had a great meal together.  We might have had a little too much fun but I really felt like I was part of the group.  One colleague even referred to me as his brother, and kept bringing me drinks all night, it was hard to refuse.  I am very tired but all in all I think this was an important stage in my tranistion.  I am now lookiing forward to going "home" and spending some time with Cath.  I just hope I can walk after the plane ride home! 

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