Getting on a plane really isn’t an option

Saturday, November 30, 2013 22:45

As the GSK “led” scandal subsides, and CCTV takes a knee to figure out which brand they should skewer investigate next, brands have been huddling up to work out the “what ifs” should hey in fact find themselves in the cross hairs.

It is an interesting time as brands are starting to see the risks of doing business in a far different light, and over the last couple of weeks I have been involved with some interesting discussion about how the government has begun to align a number of their resources to make their process easier. Which was for many years the big gap.

Sadly though, even with this recognized change in capacity to investigate, and prosecute, there are still some executives. Who think he can deploy the same tools in response.

Two quotes (without attribution) from SENIOR executives of FOREIGN brands to highlight he point:

“The recent scandal involving our industry started with a Nike whistleblower, who was known to be unhappy. in my experience, the best way to handle that situation would have been to offer that person (and any other potential whistleblower) and overseas MBA experience”

and…

“I understand that these issues are serious, but if “that” were to happen to “me”, my first objective would be to get me and my family on the first plane out of china”

Now, I realize that these quotes are out of context, but I would like to simply offer them up as a mindset that represents a way that executives view, and manage risk, in China. Particularly as both of these executives were foreigners from industries that are seeing increased pressure from scandal surrounding their products, pricing, and the mediums of distribution… and yet both of them clearly have yet to fully grasp the reality of their own situations.

GSK’s Mark Reilly barred from leaving China

 The British former chief of GlaxoSmithKline’s operation in China has returned to the country to “help” police with bribery investigations but has been barred from leaving.   [....]Mr Reilly left China in July, shortly before the Chinese police revealed the investigation and arrested four Chinese GSK executives

Which leads me to the article Thirty Glaxo Employees Under China House Arrest., and the general comment that regardless of whether or not one thinks they can simply get on a plane and escape the issues…. as the executive above believed.

Ultimately you cannot.  As I am sure most readers understand this. The Chinese government has a number of tools that they will bring to their disposal before you make it to the airport, and even if you make it, they have a number of tools that they can leverage to bring you back…

So, go ahead.

Flaunt the law.

They dare you.. they DOUBLE dog dare you

Today was a “good” day at school

Thursday, November 28, 2013 4:24
Posted in category The Big Picture

Thorium to Power Chinese Cities, Economies, and Cars

Sunday, November 24, 2013 9:54

Refocusing for a minute on the energy issue again, one of the more interesting presentations I came across earlier in the year was of Jiang Zimin’s son presenting China’s case for Thorium at a recent conference. A source of “clean” energy that is rarely mentioned, as compared to solar, wind, etc, Thorium has been receiving a lot of interest fro mthe Chinese who see this as an alternative to the standard nuclear options at the grid level… but in a recent article on the ability to harness Thorium as a fuel for cars as well. Another area where China is struggling.

Could Thorium be the answer to China’s energy insecurities, oil and coal? There are some interesting tidbits floating around that I thought I would bring together.

In the article, Thorium-Fueled Automobile Engine Needs Refueling Once a Century, that profiled the firm who brought the concept car you see above, the CEO says that a car could run for 100 years on just 8 grams of Thorium.  A fuel source that would not only enable China to step way from oil imports, but would also have the added benefit of reduced auto, truck, and bus emissions.

A moon shot for some, but according to The Telegraph’s article China blazes trail for ‘clean’ nuclear power from thorium, China is putting serious resources to the effort:

Princeling Jiang Mianheng, son of former leader Jiang Zemin, is spearheading a project for China’s National Academy of Sciences with a start-up budget of $350m.  He has already recruited 140 PhD scientists, working full-time on thorium power at the Shanghai Institute of Nuclear and Applied Physics. He will have 750 staff by 2015.

A search fueled by a very simple fact.  One that I have been trying to make more clear over the last few months:

Mr Jiang says China’s energy shortage is becoming “scary” and will soon pose a threat to national security. It is no secret what he means. Escalating disputes with with India, Vietnam, the Philippines, and above all Japan, are quickly becoming the biggest threat to world peace. It is a resource race compounded by a geo-strategic struggle, with echoes of the 1930s.

And, according to the  Energy and Capital piece China Thorium Investing, Jiang has made quite the impression on others in bringing Thorium online:

a report was released a few weeks ago by a Labour member of the House of Lords in London. Bryony Worthington, the Labour’s climate change spokeswoman, announced China is moving to thorium as a nuclear fuel.

[...] Bottom line: If China’s looking to land 200 gigawatts of nuclear, it’s going to do so using the most advanced technology it can get its hands on. And when it comes to safety and efficiency, thorium is a serious contender.

Bringing it all together, where this is interesting (even if it is very very premature) is that China sees their fossil fuel economy as a dinosaur waiting for the meteor, and regardless of how “out there” the technology may seem right now, there is clearly an ongoing effort to develop Thorium by those in China’s inner circles.

All the reason in the world to continue watching this space…

Is China a Model For Others? Should it be?

Friday, November 22, 2013 6:15
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An interesting TED presentation from Dambisa Moyo on the fact that more and more developing nations are looking at China as a role model to learn from. One that reflects conversations that have been taking place for a while, she has certainly sharpened the pencil on the fact that the US’s position as a model to the world is waning.

Where the message is interesting is in that it follows the message that Eric Xi has become known for, and sounds good, but one that I am not  buying into given (1) this economy has not really been tested.  It has not “survived” a true scare, and as such, it’s greatness is far fro proven and (2) looking in APAC region, and even in some areas of Africa, it is clear that China is not the partner that some thought it would be.

That being said, and ignoring all the “messy” bits, China has done a wonderful job at building an economic engine that has brought hundreds of millions above the poverty line, paid for infrastructure, brought in high end R&D investments from some of the world’s leading companies, and created massive amounts of wealth for those who occupy/ access the ecosystems at the top.

Today was a “bad” day at school

Wednesday, November 20, 2013 0:44
Posted in category Uncategorized

Sustained Exposure to Air Pollutants Proven to REDUCE Life Expectency in China

Tuesday, November 19, 2013 20:48
Posted in category The Big Picture

As you may have noticed, there is a bit of a theme around air pollution in China lately.  For me, it is an issue that I view as CHINA wide, which is to say that you will not catch my taking selfies out of a window in Beijing and framing the issue on that level, and the recently released study Evidence on the impact of sustained exposure to air pollution on life expectancy from China’s Huai River policy is why

For me, it has ALWAYS been a systemic issue that is about urbanization (incl manufacturing), and more widely the energy that China’s economy requires to propel itself towards a US level of GDP.

The study begins:

The estimates suggest that the 500 million residents of Northern China during the 1990s experienced a loss of more than 2.5 billion life years owing to the Huai River policy. Furthermore, a research design based on this policy allows for a unique opportunity to estimate the effect of TSPs on human health, which can be applied to other countries, time periods, and settings.

The resulting estimates suggest that long-term exposure to an additional 100 μg/m3 of TSPs is associated with a reduction in life expectancy at birth of about 3.0 y (95%CI: 0.4, 5.6). This estimate is more than five times larger than the estimated impact of TSPs on life expectancy from fitting a conventional ordinary leastsquares equation on the same data.

And ends (emphasis mine):

The analysis suggests that the Huai River policy, which had the laudable goal of providing indoor heat, had disastrous consequences for health, presumably due to the failure to require the installation of sufficient pollution abatement equipment. Specifically, it led to TSP concentrations that were 184 μg/m3 higher (95% CI: 60, 308) or 55% higher in the North and reductions in life expectancies of 5.52 y (95% CI: 0.8, 10.2) in the North due to elevated rates of cardiorespiratory mortality.

Furthermore, data from 2003 to 2008 indicate that PM10 (particulate matter smaller than 10 μm) concentrations are 22.9
μg/m3 higher (95% CI: 13.5, 23.3) or 26%higher north of the Huai River, suggesting that residents of the North continue to have shortened lifespans. The TSP concentrations that prevailed during the study period greatly exceed the current concentrations in developed countries but are not atypical for many cities in developing countries today, such as India and China.

These results may help explain why China’s explosive economic growth has led to relatively anemic growth in life expectancy.

To read the full report, you can right click here, but a few of takeaways for those of you who are just looking for top line:

  • Using government data alone, the correlation between pollution and disease is clear.
  • PMI 2.5 may be all the rage, but PMI10 is also an important factor
  • Beijing’s efforts to remove coal boiler/ heaters from urban environments will have a positive impact, but true impact may be negated as cities themselves require more coal fired energy.
  • Filters are important.  At the source of energy production, and at the user level.

With the most important takeaway being that this system cannot continue along the same trajectory over the short to medium term.  Solutions will be sought out, and firms will be funded, to bring proven / scalable solutions to China.

There is no other way, regardless of what anyone in Beijing says, or what firms are seeing right now.  The economics don’t work otherwise, and there are firms already working the niche into a very strong position for when the market rips wide open.

Which it will.

A fact guaranteed by the fact that in the next 15 years, China is estimated to require another 400% more energy than current levels.  Which regardless of “intensity” targets ensures that the struggle to contain the smog continues.

Is it Too Late to Enter China?

Monday, November 18, 2013 4:43

In his recent piece for the Huffington Post entitled China 2014: Too Little, Too Late for Newbies, Tom Doctroff starts off with a bang

2014 will be the year leaders of consumer goods producers realize that it may be too late to enter China. If you haven’t established significant scale already, you probably never will. The PRC will not be an option for turbo-charging future growth plans for current non-players.

and ends it with his pitch:

So the pockets of new players must be deep, lest they consign themselves to competing in lower-tier markets at lower prices against very aggressive, operationally-savvy local competition or newbie international also-rans.

I have to admit that I have been out of the consumer game for a while now, but this to me like Tom is fishing for business because his own business is starting to dry up. Sure, as I wrote about a couple weeks ago, it is getting tougher in China.

YES, he is probably right that there is a measure of saturation here, and YES, he is probably right that it would be more expensive now than it was 10 years ago, but that is making a whole host of assumptions about how a firm would look to compete as a new entrant to begin with. As I see it,  China as being ripe for new entrants. Particularly those that are happy being niche players with a story that is wrapped around product safety/ quality, family values, improved livelihoods, or somewhere in between.

One of the best examples that has done this well recently, is Disney English.  They started their operations 5 years ago, in a saturated market, yet in those 5 years, they have grown to 44 centers and beat up the competition that once “owned” the market… and my guess is that they have done so at a lower (marketing) cost than their competitors.

Another would be Fields, a Shanghai based grocery delivery service, that started when its founder was tired of eating suspect food and wanted to build a solution.  Word on the street is that earlier this year Steve raised 20+ million USD and will be rolling out into a number of new cities next year.

Last but not least would be both the Naked Retreat and Linden Center, who boutique resorts not only a huge customer base, and found profitability, but are regularly courted by governments around China to develop their next properties

All of which prove, at least to me, that it is no too late to enter… or perhaps, that while it may be too late to enter as a manufacturer of textiles, or as a retailer of model figurines, there are still plenty of markets to be explored in China.  Particularly in China’s “other” cities.

Reimagining China’s Cities

Friday, November 15, 2013 7:22
Posted in category The Big Picture

Regardless of whether or not you are a regular reader of China Dialogue, the recently released Reimagining China’s Cities is a MUST READ.

At 411 pages (200 English / 200 Chinese), this is report has brought together dozens of experts (foreign and Chinese) on their thought about where China is headed, and the corrections that need to be made.

No subject matter is left uncovered, and whether you are interested in urban planning, migrant/ Hukou policy reform, or the future of China’s middle class dreams (and realities)

Download it here