Preparing for the Worst

As I mentioned earlier today, I’m attending a conference at the Renaissance Tianjin TEDA Hotel & Convention Centre, roughly 30 miles outside of Tianjin, about 100 miles southeast of Beijing. This is a big facility, and like most big conference facilities, it hosts more than one conference at a time. Such as this one:

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Unfortunately, by the time I noticed that the third largest American oil company was hosting a forum – in China – on how to prepare for a flu pandemic, the seminar was already over. A pity. I might have tried to sneak my way into that one. If I have time next week, I may follow-up on this. It’d be interesting to know how many other foreign multi-nationals are making the same preparations.

Not dead yet.

I’m in Tianjin this week, attending a conference that I’ll be writing about soon. Like most Chinese trade conferences attended by government officials, this one is a very long snooze: speeches and presentations are submitted and vetted in advance, bound in a book, and distributed to conference participants who have very little incentive to attend the actual presentations, but instead spend their time networking outside of the hall. But for experienced conference attendees (say, me), the long snooze poses its own challenges, precisely because attendees with something worthwhile to say will often leave it out of the submitted version of their remarks, and instead insert it into their actual presentations. Thus, unlike most conference attendees, I sit and wait for these moments.

Anyway, perhaps my most treasured moment of this conference was backhanded. Late yesterday afternoon, Professor Lu Zhongwu of China’s Northeastern University stepped up to the podium. As he prepared his Powerpoint, he was introduced by Wei Jiahong, Specialized Vice-chair of the China National Resources Recycling Association. “Professor Lu is an expert in his field,” Wei noted. “And though he is eighty years old, he is still lively and energetic.”

So far as I could tell, Professor Lu took this without a flinch.

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It didn’t stop there. After his 30 minute presentation, Lu returned to his seat of honor at the front of the conference hall. As he sat, Wei asked him to stand, and encouraged the audience to wish him “many more years of life.” In response, Lu clasped his hands together and shook them over his head, Olympic champion style.

Northwest’s passage to China

From a purely selfish point of view, I think the best news to come out of Wu Yi’s visit to Washington was a deal to add 13 more daily flights to China by US carriers by 2012. Currently, there are only 10 routes per day, and so the competition for new ones is always ferocious. For example, last year, the FAA awarded a Beijing-Washington, D.C. route to United Airlines after a bitter contest between carriers that included online petitions with thousands of signatories.

It’s not entirely clear to me how the FAA chooses carriers and routes, but my impression is that the agency evaluates the proposals on the basis of whether they fulfill an actual market or political need. Thus, during the last round, a proposed China route originating from Dallas/Forth Worth didn’t make the cut, but one connecting the two national capitols did.

That’s all fine and good. Markets and politics should play a role in the choice of new routes. But I think that there’s a role for other criteria, as well: namely, past performance and customer service by the bidding airlines.

So I sincerely hope that the FAA does not award Northwest Airlines any of the new China routes until it makes a concerted effort to improve its services on its current China routes (recent reports in the Minneapolis Star Tribune suggest that Northwest would like the new routes very much, indeed). Two areas of needed improvement:

1. Northwest currently operates a Detroit-Shanghai round-trip, and though it has the right to operate it non-stop, the flight stops in Tokyo, where passengers must disembark the plane, go through airport security, and then find the gate for the new plane. This is not a non-stop, and in my opinion, if Northwest wants receive the right to new routes, it should have to operate this one as non-stop.

2. Northwest’s daily flights in and out of Shanghai’s Pudong Airport are flown on aging 747s that look like they could have been used as the set for Airplane (1980). The upholstery is often worn and ragged, headphone jacks barely work, and the flight attendants … well, I’ll leave that for another post. These same planes are used for – in my experience – the Tokyo routes to Minneapolis, Los Angeles, and Detroit (the aforementioned “direct” flight between Shanghai and Detroit). Unlike most other international carriers and routes- including those run by Northwest’s competitors – the 747s do not have seat-back in-flight entertainment for coach passengers. In fact, I’ve found that Chinese airlines operate newer aircraft on their China-US than the ones that Northwest operates!

In other words, Northwest is shamelessly milking these routes for every last penny of trans-Pacific revenue, customer comfort be damned. Profiteering is the right of all American airlines, and lord knows they do it with impunity.

So, just this once, couldn’t the FAA exercise its right to take into consideration ever aspect of an airline’s service record when awarding new business? Theoretically, at least, the agency should be choosing the routes on the basis of what passengers need – comfort, quality, safety, and convenience – and not on the basis of what the airlines need. Naive, I know, but as a Northwest frequent flier, I can hope.

Preferential Recruitment, Chinese-style

In late April, Xinhua ran a brief item on new drug and psychological testing requirements for People’s Liberation Army officer candidates. At the time, I was most surprised by the open acknowledgment that drug use is a growing problem among young Chinese. That, and the obvious use of a modified MMPI (“700 to 800 questions in a one hour written exam”) in the PLA. What I would pay to see a copy of that!

Anyway, this morning SCMP ran a sort-of follow-up story that pointed out an entirely different aspect of the Xinhua release that I’d overlooked:

Mainland military colleges have relaxed bans on tattoos and height requirements for recruits from ethnic minorities, a move one military analyst has described as an extension of preferential policies for minority groups.

The story goes on to describe how, though tatoos are prohibited for candidates from the Han majority (92% of China’s population), they are allowed on minority candidates so long as they “do not detract from the military’s overall image.” Meanwhile, minority candidates are allowed to be two centimeters shorter than Han candidates.

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Though little remarked outside of China, China’s ethnic minorities often face significant discrimination, particularly in the country’s largest municipalities. This continues despite the fact that Beijing has long favored preferential policies for these groups (presumably, to placate them in hope of preventing ethnically-based insurrections), including exemptions from the “one-child” policy, the grant of autonomous governing units, and greater degrees of religious freedom. Still, it is no small development when China’s most Chinese, most Communist, and most conservative institution – the People’s Liberation Army – decides to start exercising preferential policies on behalf of ethnic minority groups. As an American, I am reminded of the US military’s de-segregation and integration of black American during and following World War II, and the important role it played in spurring the Civil Rights movement. China doesn’t need – and won’t have – a race-based civil rights movement along the lines of what happened in the United States. That said, I think it’s a socially significant moment when the Chinese military announces that it will allow – on paper, at least – a certain degree of diversity in its officer ranks.

One final note on this. SCMP also reports that online discussions (on sina.com) of this issue trend strongly against the preferential policies, with many posters arguing that “the policies amounted to discrimation against Han people.” For Americans, this argument should sound familiar: it is the same one employed by white Americans to oppose affirmative action policies.

Toy Story

The quality control crisis in Chinese manufacturing may be on the verge of getting some high-level attention, if recent news coverage is any indication. In a stunning acknowledgement, China’s General Administration of Quality Supervision, Inspection and Quarantine [AQSIQ] yesterday released figures showing that 23% of non-export toys manufactured in six major provinces, do not meet national safety standards. Subscriber only South China Morning Post has the full story, with stats, but a softer version can be found on Xinhua. I have been unable to find the raw stats on the AQSIQ site.

The SCMP story describes stuffed toys filled with “unsterilised industrial materials – mainly cotton leftover from rug making.” These stuffed items, the story makes clear, were destined for China’s domestic market. As I read this, however, I could not help but reflect upon a conversation that I had at the gym last week with a sourcing agent for an American sporting goods company. The primary product of this company requires foam stuffing, and typically that stuffing is made up of shredded foam from automobile seats and old furniture. The sporting goods company, I was told, has a strict standard for the quantity of metals that can detected in the foam – not just fragments, but also traces of lead and other materials that have seeped into the foam itself – and as of a few weeks ago, those standards were no longer being met.

The sourcing agent blamed the falling dollar for forcing manufacturers in China to seek cheaper means of ensuring a “China price.” But now that we know the situation is affecting production on the domestic market, I think we have to look deeper.

Though unremarked in the Xinhua or SCMP stories, the stuffing used in Chinese toys purchased on informal scrap markets that are sprouting up all over China (initially sourced by scrap buyers from factories that prefer not to pay for disposal). This is not a new phenomenon when it comes to metals and paper, but it is relatively new as applied to textiles and foam. As that market grows, participants will be inclined to find markets for material that would otherwise be burned or landfilled – such as the material described in the SCMP story. This is a well-remarked phenomenon in the scrap metal and paper trade, and there’s no reason it won’t repeat in foam and textiles.

There are no reliable statistics on the size of China’s domestic recycling industry, its output, or even its organization. But as I’ve noted over the last four years in writings for Scrap and Recycling International, bringing “order” to that marketplace has been a top priority for market participants and, increasingly, the national government. Since 2000, most of the order has been imposed on China’s thriving scrap import markets. Later this year, the Chinese government is going to release several laws related to its domestic recycling industry, and presumably some kind of regulation and quality control will be imposed on new materials being cycled into manufacturing without any pre-processing.

Now, to be honest, I am as skeptical as anyone about the ability of China’s government to impose order on a market that likely has millions of participants, and where the lowest market entry barrier is owning a scale. But we’ll see. Tomorrow I fly up to Tianjin for three days of presentations on this very topic.dsc01090.JPG

Friday Night Rights

Just what national interest of the United States is served by trying to keep pirated versions of an American television series about Texas highschool football off the streets of China? Not to mention, one that comes with Chinese subtitles?

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Hollywood’s usual argument, the bogus one, is that Chinese piracy costs the studios hundreds of millions of dollars. I’ve never seen an analysis of just how those figures are tabulated, but I’ve long suspected that they involve lots of hand waving and time spent browsing the pirate shops of Beijing and Shanghai. Whatever the source, I challenge Hollywood to find one – just one – Chinese consumer willing to pay American retail for the 8 DVD box of ‘Friday Night Lights.’ In my usual pirate shop, it cost RMB 60, or roughly US$7.89. That may be cheap by US standards, but in China, where per capita income only recently exceeded US$1000, that’s outrageously expensive – especially for an exotic foreign entertainment that will be barely comprehensible on a cultural level.

Of course, I don’t expect Hollywood to buy my argument that movie piracy is actually creating future market share that the studios can harvest when Chinese incomes finally rise enough to afford US mass market entertainment (mid-century, maybe) at US prices. But on the other hand, I have to wonder: what would the studios really prefer the Chinese watch for free in the comfort of their own homes? Chinese network television? Really?

Contact

It’s come to my attention that emails sent from the contact form on this site are not reaching me. The problem appears to be associated with the hosting company and, unfortunately, the hosting company is in the US, and enjoying a long Memorial Day weekend. I’ve pulled the contact form for now, but hopefully it’ll be back up soon.

***Update: I think that the problem is resolved, but I’m not 100% convinced. So, if you send something through the contact link and don’t receive a reply, the issue remains technical (and not bad manners). I hope to have this resolved soon.***