Tag: china

is G’day China a good idea?

Can the proposed China Week be successful in promoting Australian business and trade?

Yesterday’s announcement by the Prime Minister’s  of an Australia Week in China may prove far more successful than the G’day USA events the idea is based upon.

G’day USA has been run for a decade and showcases Australia’s attractions, skills and businesses at events in Los Angeles and New York.

It’s been moderately successful but an emphasis on movie stars appearing at black tie Hollywood events illustrates Australian governments’ disproportionate focus in throwing money at US movie producers.

If China Week follows the US example we can expect private, exclusive dinners where Twiggy Forrest, Clive Palmer and the BHP board entertain Chinese plutocrats over bowls of shark fin soup and braised tigers’ testicles.

Should China Week follow that model then it will probably share G’day USA’s middling successes.

The opportunity to do it differently though is great as the Chinese-Australian relationship is far younger and hasn’t been locked into Crocodile Dundee type stereotypes on both sides.

As the Chinese economy matures and evolves, there’s an opportunity for Australian businesses and industries which haven’t been available for exporters to the US.

Done properly, G’day China could help the profile of Australian businesses in many sectors, particularly in those affected by the great Chinese rebalancing.

Let’s hope they do it properly.

Image of the Chinese embassy in Canberra, Australia from Alpha on Wikimedia

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Australia and the Chinese Mexican stand off

As China rebalances its economy, a new wave of change is about to sweep global trade.

Twenty years ago visitors to Sanya on the south coast of China’s Hainan Island could find themselves staying at the town’s infectious diseases clinic, converted into a backpackers hostel by a group of enterprising doctors.

The Prime Ministers and Presidents attending of Boao Asia Forum this week won’t get the privilege of staying at the infectious diseases hospital as Sanya’s hotel industry has boomed, bust and boomed again following the island being declared a tourism zone in 1999.

Instead, their focus is on the pecking order of nations and for the Australians the news is not good. As the Australian Financial Review reports, the Aussies have been seated well below the salt by their Chinese hosts.

On the Boao list, Australia is outranked by Brunei, Kazakhstan, Myanmar, Zambia, Mexico, and Cambodia – even New Zealand Prime Minister John Key gets higher billing.

Central and South East Asian countries make sense as countries like Myanmar and Kazakhstan are China’s  neighbours with strong trade ties.

That the Kiwis have been given priority over the Aussies by the Chinese government is not surprising in light of this.

An unspoken aspect for the Australian attendees to the Baoa conference is how long Canberra’s political classes can continue their forelock tugging fealty to the US without offending the nation’s most important trading partner.

Mexico’s entry on that list could be one of the most important with consequences for Australia and the world.

During the 1992 US Presidential campaign candidate Ross Perot coined the phrase “the great sucking sound” in his opposition to the North American Free Trade Agreement and the risk of losing jobs to lower cost Mexico.

As it turned out, the giant sucking sound was China – it turned out China’s admission into the World Trade Organisation had far greater consequences for the United States and Mexico than NAFTA.

Mexican manufacturing was one of the greatest victims of China’s rise as US companies found it easier to subcontract work to Chinese factories rather than setup their own plants in Mexico.

Now China is finding its own costs creeping up and labor shortages developing and Mexico is attractive once again. The Chinese and Mexican governments have been working on their relationships for some time.

As manufacturing moves out of China, the shifts in world trade we’ve seen in the last two decades are going to be repeated, this time with Chinese moving up the value chain the lower level work moving to Mexico and other nations.

The leaders at the Baoa conference have their work cut out for them in dealing with another decade of global change.

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Microsoft’s China crisis

Microsoft’s Chinese partner is blocking Skype messages and possibly passing user details onto PRC authorities. This security concern could damage both Microsoft and Skype.

That the Chinese Public Security Bureau is blocking your messages – and may even be reading them – would make anyone pause before they used a service.

Bloomberg Businessweek reports Microsoft Skype is doing exactly this with its Chinese customers. Anything deemed inappropriate is censored and referred to servers belonging to TOM Online, the company that runs the Skype service on behalf on Microsoft in China.

The Bloomberg story goes onto detail how one Canadian researcher is reverse engineering the Chinese blacklists, giving us a wonderful insight into the petty and touchy minds of China’s censors and political leaders.

What raises eyebrows about this story is how nonchalant Microsoft is about this issue, in a wonderful piece of corporate speak the software giant answered Bloomberg’s question with the following bland statement;

“Skype’s mission is to break down barriers to communications and enable conversations worldwide,” the statement said. “Skype is committed to continued improvement of end user transparency wherever our software is used.”

Microsoft’s statement also said that “in China, the Skype software is made available through a joint venture with TOM Online. As majority partner in the joint venture, TOM has established procedures to meet its obligations under local laws.”

Microsoft have to fix this problem quickly, glibly saying the Chinese government eavesdropping on conversations is a matter for partners is not going to be accepted by most customers.

It would be a shame should Microsoft’s Skype investment fail – Skype is a very good fit for Microsoft, particularly when the technology is coupled with the Linc corporate messaging platform, so squandering goodwill over protecting users’ conversation seems counterproductive.

One of the great business issues of this decade is the battle to protect users’ privacy. Those who don’t do this, or don’t understand the imperatives of doing so, are going to lose the trust of the marketplace.

Twenty years ago, Microsoft could have risked this. Today they can’t as they struggle with a poor response to their Windows 8 operating system and their mobile phone product.

Losing the trust of their customers may be the final straw.

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Revolution and disconnected leaders

Revolutions are unexpected, but the causes are often obvious to all. The West shouldn’t be too smug about the economies of other nations.

China expert Patrick Chovanec has a provocative blog post on What Causes Revolutions, building upon the Financial Times’ description of how the Chinese Communist Party is struggling with corruption.

In his article Chovanec quotes Richard Pipes’ Three “Whys” of the Russian Revolution which looked at how the fall of the Tsarist government was largely unexpected.

This is true with the fall of all great regimes, in the late 1980s the idea that the Soviet Union would cease to exist within a decade was unthinkable.

Chavonec quotes a key part of Pipes’ book;

In 1982 [Pipes writes], when I worked in the National Security Council, I was asked to contribute ideas to a major speech that President Reagan was scheduled to deliver in London.  My contribution consisted of a reference to Marx’s dictum that, when there develops a significant disparity between the political form and the socio-economic context, the prospect is revolution.

“A significant disparity between the political form and social-economic context” could be just as applicable to Western democracies.

The Economist article makes a point about the French revolution “the widely accepted theory now is that the French Revolution was one of rising expectations that eventually could not be met.”

As Stratfor’s George Freedman pointed out last week, a generation of Americans have expectations that are not going to be met. The same is true in Europe.

While there’s no doubt the China’s political structures – like those in all totalitarian nations – are more brittle than those in established democracies, it might not be a good idea for those of us in the West to be smug and complacent about our own systems.

Zapata image is courtesy of Ferferfer through SXC.

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Proudly designed in Gyeonggi

Asian manufacturers are moving up the value chain. Could Korea, China and Taiwan start competing with Apple?

“Designed by Apple in California ” is the boast on the box of every new iPad or Macbook. That the slogan says ‘designed’ rather than ‘made’ says everything about how manufacturing has fled the United States.

Last year the New York Times looked at Apple’s overseas manufacturing operations, pointing out that even if Apple wanted to make their product in the the US many of the necessary skills and infrastructure have been lost.

Now the US is facing the problem that Asian countries are looking at moving up the intellectual property food chain and doing their own designs.

In some ways this is expected as it’s exactly what Japan did with both the consumer electronics and car industries during the 1960s and 70s.

The big difference is that Japanese manufacturers travelled to the US and Europe to study the design and manufacturing methods of the world’s leading companies. In the 1990s and 2000s, the world’s leading companies gave their future competitors the skills through outsourcing and offshoring.

In the next decade we’ll see the latest consumer products coming with labels reading “Designed by Lenovo in Fujian” or “Developed by Samsung in Gyeonggi”.

For western countries, the question is what do we want to be proudly be putting our names to?

Image from Kristajo via SXC.HU

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Bringing manufacturing home

How GE is reviving its American manufacturing operations

In the 1980s General Electric, like most US companies, sent most of its appliance manufacturing offshore.

Now its coming home.

The Atlantic Magazine looks at how General Electric is resuscitating manufacturing at Kentucky’s Appliance Park as management finds US workers are more skilled and productive than their equivalents in Mexico or China.

An important part of the article is how critcal supply chains are; manufacturing hubs rely upon having a community of skilled service providers and suppliers around the factories while being close to customers improves and simplifies logistics.

In the latter case, it now take hours or days to deliver products to customers’ stores or warehouses rather than the five weeks it takes from China.

The cost of those goods is lower too, the Kansas made GeoSpring heater sells for $1299 while the Chinese product sells for $1599.

What is most notable though is how designers and managers now have a better understanding of the manufacturing process; where under the oustourced model the difficulties in assembly were none of their business, now they are far more deeper and directly involved.

This really goes to the core of what an organisation does – in the 1980s it was fashionable to talk of the “virtual corportation” where everything the business did was outsourced except for the managers who were employed solely to pocket their bonuses.

In the 1990s and early 2000s that “virtual corporation” became a reality as manufacturing and customer support were offshored and logistics was outsourced.

One of the best examples was customer support where looking after the needs of those who buy the company’s products were secondary to the need to cut costs.

This focus on cost cutting over customer service hurt Dell badly in the 2000s and it continues to hurt many organisations – particularly telcos and banks – today.

The weakness in the “virtual corporation” model was the company ended up adding little more value than the brand name and eventually those offshored manufacturers and call centres took control of the business’ goodwill and intellectual property.

Eventually the hidden costs of offshoring became too obvious for even the most craven, KPI driven manager to ignore and suddenly manufacturing in the Western world became competitive again.

Sadly, the fixation on dirt cheap labour has damaged many industries beyond the point where they can be salvaged with too many skilled workers lost and the ecosystem of capable suppliers destroyed. These are costs where tomorrow’s managers will rue the short sighted actions of yesterday’s corporate leaders.

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Australia in the Asian Century – Chapter 9: Deeper and broader relationships

Australia in the Asian Century concludes with a look at how we build relationships into Asia.

This post is one of the series of articles on the Australia in the Asian Century report.

Australia in the Asian Century’s final chapter looks at how Australia can deepen relationships with its Asian neighbours. The chapter is full of fine ideas which don’t quite match the reality of government policies and spending.

Early in the chapter the white paper proposes increasing the number of Australian diplomats in Asia along with opening a new embassy in Ulan Baator, a Jakarta based ambassador to ASEAN and consulates in Shenyang , Phuket and eastern Indonesia.

Fine words, however Australia’s diplomatic corps has been shrinking for the last twenty years so staffing these facilities will require a withdrawal from other regions. The white paper doesn’t identify which countries Australia’s representation would be cut from and the consequences of that.

More importantly, it doesn’t identify how Foreign Affairs and Trade staff will be skilled up to man these facilities, instead we get another worthy ambition.

National objective 22. Australia will have the necessary capabilities to promote Australian interests and maintain Australia’s influence.

  • Australia’s diplomatic network will have a larger footprint across Asia.

Again, one would surely expect that Australia would already have the necessary capabilities to promote its national interest and maintain influence. Is the white paper suggesting we don’t?

Which leads us to the next national objective;

National objective 23. Australia will have stronger and more comprehensive relationships with countries across the region, especially with key regional nations—China, India, Indonesia, Japan and South Korea.

If we accept the assumption which underlies the entire paper, that Asia is going to continue to grow both economically and in influence then this will happen regardless of what governments do. It’s a meaningless and silly statement which once again ignores most of Asia and simplifies the dynamics.

The Australia Network

One of the great wastes of the Howard years was the dismembering of Radio Australia which was a cheap and effective way of projecting ‘soft power’ across the region. I personally came across this as a backpacker in China where many manual workers in the hard seat carriages practiced their Australian accented English that they’d learned on Radio Australia’s programs.

This was shut down by one of the spiteful, stupid and poorly thought out decisions that were the hallmark of the Howard government.

Replacing this was a new Australia network that replaced the previous awful overseas television service which had been a niche product on Asian cable TV channels – I had it on my Thai cable subscription when I lived in Bangkok. It was rarely watched.

The Australia Network hasn’t been a great success and that is largely due to the funding – the 2011-21 contract was costed at $221 million in the budget papers.

A break out box in the white paper boasts about the Australia Channel and its “mandate to encourage awareness of Australia, promote cross-cultural communication and build regional partnerships.”

Listed is the funding for some other services – Al Jazeera, $359 million in 2009; CCTV, $280 million in 2009 and NHK World/Radio, $226 million in 2008.

With the Australia Network receiving less than a tenth of this funding, it’s no surprise the station looks amateurish and irrelevant. Once again we see the difference between government words and government deeds.

Which brings us to the final two national objectives;

National objective 24. Australia will have deeper and broader people to people links with Asian nations, across the entire community.

National objective 25. Australia will have stronger, deeper and broader cultural links with Asian nations.

Again these are more motherhood statements and barely worth considering. The section itself skates over some of Australia’s most important assets – the cultural diversity and immigrant communities.

That the final chapter spends just a few pages on this aspect probably sums up the entire project – simple, full of motherhood statements and missing the critical strengths and threats to Australia’s, and Asia’s growth.

Overall the paper is a disappointment that tells us little we didn’t already know while stating some big ambitions which successive governments have shown they aren’t capable of delivering.

The message for those building Australia’s 21st Century links with Asia is not to wait for government but to get on and do it.

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