Shanghai Expo 2010

Shanghai Expo just kicked-off on May 1, 2010. As usual, when China organizes an international event, the opening ceremony is spectacular. Both the outdoor display along the Huang Pu River and the indoor ceremony in the China pavilion are memorable for the people who watch the show, and of course they have a dazzling display of fireworks. Shanghai Expo is, without a question, is the biggest expo ever held by any country/city.

Some of you might have never heard about the World Expo, which is held twice a year. It is an international organization governed by the Bureau International des Expositions, and it started on 1851 (older than the Olympics). Some of the notable expos in the past are; 1915 Panama World Expo: Inauguration of Panama Canal, 1939 New York Expo: Building The World of tomorrow, 1962 21st Century Seattle Expo: Man in the Space Age, and 1988 Brisbane Expo: The Era of Discovery. The World Expo is not only a showcase and a mode of advertising of the tourism in the city where the event is held, but it also tries to get all the participating countries in the same page regarding the theme of each expo so that the message is delivered to all countries in the world. All participants will have their own pavilions and show to the visitors their ability in representing the theme of each expo.

After a great success with the Beijing Olympic in 2008, China is once again at the center of the world’s attention. Through this event China will not only be able to promote its tourism, its readiness to be a "superpower", but also to show the world that it is ready to show the world that it cares about the environment. The theme of the expo literally represent China's main goal for hosting this huge event: "Better City, Better Life".

Up to this point, I think China has been really successful promoting the event. Aside from the eviction issues, this is the only World Expo that is well-advertised in the last decade. The choice of city is also great because Shanghai, like New York in the United States, is the capital of financial activities in China. It is the largest city, and it has the best infrastructure in China before Beijing was totally restructured for the Olympics.

Shanghai Expo 2010 is a bigger event than the Beijing Olympics 2008 in terms of the length and the area used for the events, also most importantly number of visitors. The event is 5 months long from the beginning of May until the end of October, it is using up 5.3 kilometer square of land and, the organizer is expecting 70-100 million people would come to the event and many more will be exposed through television and other media coverage. This year Expo is BIG in a lot of aspects: number of countries participating, the total area being used, money involved, advertising, and what not. And as always China tries to make everything it does look flashy, and big.

Ok, so China is the main purpose of China hosting this event is to showing off its ability to arrange international event and make it the largest, the most expensive and the most fabulous and the most flamboyant in the history.
WRONG

I think the government’s main goal is not that explicit. There is no doubt that China will make this event flashy just like what they did with the Olympics. But, being flashy is not their main goal. In my opinion they have two goals: helping third world countries to get involved in the world-wide event, and promote its awareness of environmental issue.

China is trying to bring as many countries as possible in order to create such impact to the “forgettable” and overlooked countries such as Timor Leste, Mauritius, Armenia, Gabon, Chad, etc. This is one way China could promote its “superpower-wannabe” campaign. China government has also been actively helping African countries and other third world countries for their developments. China has been actively helping poor or small countries by lending them money and helping them developing infrastructure and technology.

The bottom line of this expo is that China tries to showcase its beauty and its goodwill. It seems like China is trying to say to those small countries (who have never been invited to any expo before), “Hey no one cares about you in this world, but I do! Let’s joint the party!” This is a very sympathetic political move. Put it this way – those small countries must feel like an NBA rookie player who gets invited to Kenny Smith’s NBA all-star weekend party. And of course, those countries would not come out with the most lavish pavilions or with the most advanced technology, but at least the visitors (remember, there will be 70-100 million people) will see them. All African countries’ pavilions would actually be in the same zone as the pavilions of the United States and some European countries, where they expect a very high human traffic throughout the Expo. Moreover, China also has a message to oil-rich African countries such as, Angola, Guinea, Nigeria, the Republic of Congo, and Sudan, “Hey I am taking care of your little brothers (mean: poor African countries) here, can you also share some of your oil??”

There are two issues that China has been continuously accused for: human rights and environmental issue. The Expo gives China an opportunity to fix its reputation on the environmental issue. It is explicitly stated in the logo and the slogan of the Expo. “Better City, Better Life”. The logo of the event is a character of the world “shi” means earth, and is modified so that it looks like three people holding on.

China government has issued a lot of regulation regarding the environment, but there is still plenty of doubt and uncertainties regarding the government’s seriousness on this issue. With this event, the government is trying to send a message to the whole world that they actually cares about the environment and showing the world that it also tries to save the world from the global warming and other scary issue about the sustainability of the Earth. Also, with a lot of pavilion, especially from European countries, proposing new technologies of how to live “green”, China would have a lot of new ideas to make their industry-packed cities (i.e. Shenzhen, Shanghai, Wuhan, Tianjin) better cities for their people and thus would be more attractive for foreign investors as well, which leads to the ultimate goal that this country has, to be an economic super power.

Well, I am very excited for this expo and I might be there in late July, so I could probably report some deeper insights as I get there, see you guys!

The Obama Club

For all the party goers around who happens to be in China (particularly in Shanghai) right now, you may want to check the newly opened club, "The Obama". Yes! the club use the name of U.S. president, Barack Obama. This is a very great yet risky move. Nonetheless, the club has already gotten a lot of attention from the media just by putting "Obama" as its name. Often affiliated with "change", the club would also like to bring change to the clubbing atmosphere in the biggest city in China, and it is currently the largest club in Shanghai.

I'm just wondering whether the White House would do something about this or maybe Obama would have some dance in the club that uses his name? You never know.

China is still open!

When I said that there was a series of bad receptions toward investors in Wuhan couple months ago, I did not mean to say that China is now closed for businesses. The fact is China is still open for investors who want to start doing business in China. However, because all eyes are on China's growth now, the local government also wants to be more selective and tries to create such a business environment that is environmentally friendly and aligned with the goal of developing the Western China.
So for all the companies who see China as a potential market, my suggestion is to give it a shot and try to understand what the local government really wants.

Amusement

I found this amusing article in James fallow's blog. It's about a serious issue--prediction of China overtaking the United States as the world's dominant ****ole by 2020, but it was written with profanities, and I found it very amusing. Enjoy guys!

Yum! yum...yum...

Based on this report I found today, Yum! is doing very well in China. It's, of course, a good news for the company, which is not doing that well in its home country.
And I would like to take this opportunity to share a little bit of my experience with Pizza Hut in China:



Basically, Pizza Hut has a different strategy in Asia Pacific region. They try to bring a "fine-dining" concept to the region for their products. So Pizza Hut restaurants in Asia is the place where you can take your girlfriend out to diner, not like in the Unites States where Pizza Hut is a place where you want to "save" some money by eating the same food for your diner and breakfast the next morning (that's what I did when I'm on a tight budget).

The bottom line is that I was not surprised that Pizza Hut (Yum!) is doing well in China and Asian countries because they have been able to create such brand recognitions so that people are willing to spend some of their disposable income to get a "luxury" food and services from the "American" restaurants. This is also supported with the growth of middle class population in the Asian countries.

Should We Worry?

One of my professors made a statement about two weeks ago in class that really intrigued me. He said when he was in college studying business back in the late 1980s, his professors used to relate any problems that U.S. companies faced to surging Japanese companies, but now that he is teaching, he feels that problems that U.S. companies face are all about Chinese companies.

Japanese companies clearly were not able to dethrone U.S. companies from their domination, which contributes to a huge GDP for the nation. Chinese companies have been outstanding recently and helped the country to keep its economic growth going during the most recent recession. This situation has really made many people (including my professor and I) think that Chinese companies could seize some market share from the U.S. companies.

Well, with all the tensions – started from the application of high tariffs for China tires to Google’s withdrawal from the China market – the relationship between American companies and Chinese companies has been awkward. However, aside from all of the disputes, the U.S. and China still respect each other; part of the reason is because China holds a high fraction of the U.S. national debt so that the relationship between the two powerful countries is just too important to be broken.

Most the facts and statistics seem to favor Chinese companies, but are Chinese companies really that dangerous to American companies’ supremacy?

Here’s a list of some of the reasons why American companies should worry about the growth in China
1. Chinese companies are trying to produce virtually all goods and services.
2. The stock price has been growing against the gravity of the world financial crisis.
3. China is not that welcoming anymore to foreign companies.
4. Chinese companies are attempting to overtake some of the major businesses in the world, especially in Auto and computer industry.

China has been known as the heaven of outsourcing by many multinational companies around the world, mainly because of its cheap labor and ability to mass-produce so many goods to help companies reach economies of scale to maximize their efficiencies and thus profit. Last year, China's outsourcing market grew by 25% to reach $25 billion in revenues. Believe it or not? Almost all of the goods we consume today are made in China. Sure, there are some predictions that labor costs in China could increase rapidly, which would result in some companies pulling their production out of China. However, I am sure that there is still plenty of room to grow in China’s outsourcing market too given the unemployment rate and the infrastructure development that the country is having now.

The stock market is one of the best measurements of how optimistic are investors to industries or businesses in a certain region. The number has shown that investors around the world have been investing heavily in China market in the recent years. While Hong Kong exchange market was sensational last year with a record of number of IPOs (Initial Public Offering) in one year period; Shenzhen stock market performed as well as Hong Kong stock market in terms of the growth; and Shanghai stock market is being predicted to surpass Hong Kong stock market’s record in this year. The number and growth that have been generated are just showing the optimism that people have for the economy in general.

The optimism, perhaps, is also the motive behind immodest receptions to the investors recently. In early 2010, some of multinational companies’ representatives in China experienced a series of unwelcoming manners by the Chinese officials in Wuhan province – where local industry is emerging. This is contradictory to what happened 5-15 years ago when China officials are ordered to give their warmest welcome to the multinational companies in order to draw investors in. Last year, China government put a lot of regulations for hundreds of products (e.g. PC, cell phones, and cars) in favor of domestic producers. The parliament of China also revised the patent law so that foreign companies are “forced” to pass over their key technologies to the Chinese bureaucrats. The U.S. chamber of commerce had sent a letter to the white house regarding this situation. Getting support from the large companies like Microsoft, Boeing, and Caterpillar, it alerted the U.S. government that China was developing policies to establish her domestic enterprises in expense of U.S. firms. China is trying hard to expunge her bad reputation in making global brands—something that China has not been able to do successfully. After successfully drawing investors into their house, China is now asking for some return. And because of the growth and the optimism toward the economy, Chinese officials start to show some arrogance to the investors coming in.

One method that Chinese companies have been doing in order to get global recognition is by buying or imitating global brands. China government banned global social-networking website such as YouTube and Facebook and promoted similar local websites on YouKu and RenRen to make sure the 400 million internet users in the nation do not give the business out to the foreign websites. Another attempt of taking a major business is the fight against Google. China regulation ‘persuaded’ Google to pull its operation out of the country – giving the local search engine giant, Baidu, a very good opportunity to dominate the web-advertising market. Moreover, China is trying to take a big chunk in the PC market. Lenovo acquired IBM’s PC department in a blockbuster acquirement worth $1.75 Billion. Outside the computer-related industry, as I reported on my previous post, Chinese auto companies are attempting to make their presence known globally. Now that Volvo deal went through, Chinese auto companies have a good chance to keep increasing its auto sales – and their products’ quality – which had been the world’s largest since the year 2009 (surpassing the United States in the category). All industries (the Internet, computer and auto) are the industries in which U.S. companies have been showing their dominations, but now Chinese companies are trying to keep the money flow within their own people and the government has been successfully helping them.

All the aforementioned facts are true and encouraging for Chinese companies’ supporters. But, I think that Chinese companies still need to fix some fundamental issues if they wish to, at least, provide some serious threats to U.S. companies.

First, I think Chinese companies have not been able to create products that are ‘cultural-free’ in order to compete in the global market. One of the key success U.S. companies have had over the years is that their products are not affiliated with any culture, but they sort of created their own culture with their products. This make their products easily used or adapted by consumers around the world. Meanwhile, Chinese culture has 5000 years of history and it is not a secret that Chinese people are so loyal to their culture and language, which, I think, is one of the main obstacles for Chinese companies to create global brands.

Secondly, the education system in China is arguably not as good as the education system in the United States. One of the main complaints from executives in China to the younger workers is that they do not think analytically enough. This phenomenon happens because in school, students in China learn more through theoretical approach rather than practical approach. This is also one of the reasons some companies choose India over China when it comes to manufacturing products that are skill –intensive such as pharmaceuticals. This may also be the reason why Chinese companies are so good in imitating products but not genuinely creating one.

So I think U.S. companies do not have to be too worry, just yet, about their Chinese counterparts, but of course they need to keep their composure in producing great products so they can keep their reputation as the leading global brands maker OR maybe work together with Chinese companies to make the world a better place. Peace.

New Regulation

Related to my previous post on the pollution in China, the government just released a new set of regulation regarding foreign investment. It emphasizes on avoiding polluting and energy-wasting industries. Also, it encourages companies to make investment in Central and Western China, something that the government has been working on in the past couple years.

This is another bold step made by the government in order to control the inundation of industries coming in to the country so that it can also be environmentally friendly. I hope the strategy would work and not just written in a piece of paper.

Break Time

Let's take a break from all the serious stuff. Here's a very nice video clip from Lin Yu Chun, "Taiwanese Whitney Houston", or you can also call him "Taiwanese-Susan Boyle".

Clear the Sky, Please..

It's a not a new news that China has problem with pollution. The question has been raised since the preparation of Olympic 2008 in Beijing, and it-along with riot in Tibet- almost got several countries boycott the Olympic.

Recently, one of the richest guy in Hong Kong raised his concern to the media. He is right. During my stint in Hong Kong for 4 months, I was always wondering why the sky was never clear in Hong Kong. And when I asked several local students, they always blamed China for the pollution, saying that the pollution came from Shen Zhen, a very high-industrialized city next to Hong Kong.

I really think that China or Hong Kong government should take this problem seriously in order to keep her ambition to be the largest economy power in the world. The government should really make a new law regulating the pollution in industrial area and capaign hard regarding this issue.

China is Big on Infrastructure

Recently, China launched the world's fastest train runs from city of Wuhan to Guangzhou covering 968 in distance. With this super-fast train, people only need 3 hours to travel from Wuhan to Guangzhou, compared to 9 hours by the previous service.



This service is threatening the airlines industry because it is cheaper and also, practically, faster than traveling with place, which require passengers to arrive in the airport earlier.

China is also planning to build even more high speed railways with 42 additional cities covering more than 13,000 kilometers (about 8300 miles). The structure, which will be finished by 2012, will be larger than all the high-speed railways in the world combined.
PHE-NO-ME-NAL!

This shows how serious the government in building infrastructure to support the mobility of its people and create convenience for the business travelers.

Developing Story

Following my previous report, Geely Automobile will complete its purchase of Volvo Brand soon based on the report. It will be interesting to see how the market reacts to the action. Geely stock has been performing well the last 12 months. The acquisition also reawakens China ambition to dominate the auto industry after the Hummer deal fell through.

Google's Gone

Google "finalizes" its exit from China market after long battle with the government over the regulation. The exit left alone local search engine website, Baidu, as the largest search engine in the country. In result, Baidu could dominate the online advertising market in the future.

With its departure from the China market, Google would probably seek an opportunity in other potential Asia countries, such as, India, Singapore,etc.

More Auto News

I was skimming through list of new 'super-rich' people the Forbes' new Billionaire list and there was one name really caught my attention. He is Li ShuFu, the owner of China Automaker Geely. On the description in Forbes, it says that Geely is planning to buy the brand Volvo from Ford. So I tried to research about this issue since I never heard of such news.

Not surprisingly, I only find an article about the intention of buying the Volvo dated back on January, 2010. This awes me because I just realized how aggressive China automakers are. On my previous post, "Fail Attempt", it was the Sichuan Tengzhong, which was gonna purchased Hummer from GM, and now its a Zhejiang-based Geely planning to take over yet another US's business. Well, it makes sense in a way that China government is very willing to increase the sales of the cars, and the sales figure in China had actually surpassed the US's as the largest auto market in the world.
On the other hand, the deal is kind of fading away like the Hummer deal. There is an issue that "something" from Geely side has postponed the deal and the officer from Geely refused to give the detail on the delay.

Is it the visit of Dalai Lama to the US? the Google threat to leave China? Whatever the reason is, it must have something to do with the ambition of China overtaking the US as the largest economy in the world and the US is certainly won't let that happen anytime soon by letting China automakers claiming its car brands.

iPad on Sale SOON!!

Finally they announced the date, April 3rd. I can't wait to see the real reaction of the market toward the 'revolutionary' product. Competitors, be ready!

HongKong richest list

Forbes just released the list of richest people in HongKong last week. There is not many changes in the top 10 list from the last year's list. Li Ka hing, the real estate mogul, is still the richest, Lee Sau Kee 2nd and Fung Brothers (William and Victor), who just signed a deal with Wallmart, completes top 10.

Fail Attempt

Hummer is not going overseas (yet)! As reported on the Wall Street Journal earlier today, the deal falls through because of 'some government interventions'. It's a same old story in China, but the ministry of commerce denied. Some officer even said that the department did not even receive any application from the would be buyer, Sichuan Tengzhong Heavy Industrial Machinery Co. So who were involved in this deal was still unknown.
The loser of this bad news is for sure the GM who still needs to take the burden of losing money from Hummer, which sales drop more than 80% since 2006. Poor GM.

Preamble

East Asia, especially China, has been a place to go for a lot of investors in the world. With This blog hopefully would be helpful for any opportunity seeker to get some insights of what business in China is like and what might be the obstacles of doing business in China.