Learning from Las Vegas. In Shanghai. Notes on the 2010 World Expo.

Fireworks in New York on July 4?  Pretty enough. But I want more noise, more flash, bigger crowds, and an obvious historical context. Thanks to China, I’ve gotten used to having my symbolic moments more orchestrated.  Something more heavy-handed, over the top, and obvious. Like the Beijing 2008 Olympics or the Shanghai 2010 World Expo.

Those of us old enough to remember Montreal ’67’s monorail and geodesic dome, the magic of the Unisphere as touchstone of New York’s 1964 World’s Fair, the Crystal Palace in Kew Gardens…well no one is that old. You get the point: the adolescent flush of newly felt power, shiny and bold; the magic of symbol large enough to walk through. Back before we were all jaded by theme parks, it meant something to be part of a nation that built monuments to its own economy

Venturi/Scott Brown’s 1975 book Learning from Las Vegas – the Hidden Symbolism of Architecture, was, among other things, a launch pad for the post-modernist doctrine that “Less is a Bore”.  Architects of China’s powerful cities, fond of gimmick, doodad, gesture, and Flashing Lights, have learned indeed. Some takeaways on Chinese taste, culture, and mood, courtesy of the World Expo – a temporary Vegas on the Huangpu:

1.    China wants to be overwhelming.  If it isn’t Biggest and Most Expensive Ever, it’s not worth doing.  A site that would take a least a month to explore fully? Perfect.
2.    Aside from the tip top of the market, “Intimate” and “Quiet” aren’t the selling points.  “On a scale of 1 to 10, the crowds are a 37”  热闹renao: “hot and noisy – is the term describing a good party.  100 degrees Fahrenheit, 95% humidity,  blaring speakers, crowds nearing half a million daily for weeks on end, hour long queues in the hot sun?  Let’s get a bus together and go!
3.    The USA isn’t over. Despite coming together at the last minute, being architecturally uninspired in comparison to other country pavilions, and showcasing almost entirely - aside from the Committee of 100 exhibition on the Chinese experience in America –its own corporate sponsors, the USA Pavilion still draws the second highest number of daily visitors. Historical context and symbolism in play here. See point 6.
4.    Nationalism is far from over. China is still the most interesting thing to Chinese. The number one pavilion is...well, guess. The most expensive one and the biggest one are both…The China Pavilion!
5.    Chinese people are used to processing huge amounts of stimuli – so bring the bling. Flashy lights, a silly mascot, giant fiberglass animals, and the official China debut of World Wrestling.  Gimme your crass, make it big, or let’s forget about it.
6.    History is always the context, and everything is symbolic. One hundred years ago, the sunset of the Qing Dynasty and the dawning of Republican China,  China’s reformists wanted to hold a World’s Fair.  As the stability-seeking CCP has made ‘China’s 5000 years of continuity as a nation’ its ultimate Key Message,  so does the success of the Expo (Biggest and Most Expensive) symbolize that China Today can do what Dynastic and Republican China could not.  In the idealistic west we think that legitimacy breeds success. In China and other top-down situations, success often breeds legitimacy.

Speaking of historical context and symbolism, why was the World Expo, a concept more or less moribund in the developed world, worth throwing some $50 billion at?

History: The Great Exhibition: Britain’s declaration of global leadership, Chicago’s 1893 Columbian Expo:  coming out party.
New York 1939/redux 1964, Montreal Expo ’67: more Anglo American splashouts of power.
The French in 1928 formed the  Bureau International des Exhibitions (BIE) to spread – and regulate (what are the French without bureaucracy?) an apparently moneymaking concept beyond the Anglo-American world.

Trajectory: Shanghai has breathed life into the World Expo movement because this is the 21st Century, and it belongs to China as did the 19th Century to England and the 20th to America.  Also, Shanghai loves the French, and the Africans, and the Arab States, and Central Asians, and anyone they can do business with all over the world.

Bottom line: it’s FUN to drive nails into the coffin of Anglo American dominance using a symbolic mechanism the Brits and Americans pioneered. It’s FUN for Shanghai to compete with Beijing – you do an Olympics, we do an Expo. Besides, any city that would turn down $45 billion in infrastructure money and an opportunity to play insufferably ambitious showoff – well, it wouldn’t be Shanghai.

Learning from Pushback

I read in Peking Duck blog this morning a post about TCBN Charter Member David Wolf's latest piece in Ad Age China. Writing about increasing antipathy to foreign brands in China's domestic market, Wolf characteristically hit the nail on the head: "Suddenly, just as people in China were starting to wonder if they still needed foreign capital and know-how, we went and proved to the Chinese that we were greedy, dumb, and actually needed China’s help to pull us out of our own mess."

The emperor is looking pretty scantily clad in Chinese eyes. I am tempted to summarize the lessons learned - so far - from China's 30 years of rocketing from poverty and isolation to global superpower status in these terms: humility is the ultimate competitive advantage. By subordinating to the dominant power - adopting the maxim that 'the customer is always right' while building a customer base comprised of anyone who buys manufactured goods anywhere in the developed world; by seeking knowledge of the deep secrets of America's meteoric success in a few hundred short years by studying the esoteric wisdom of iconic institutions like Wall Street, Harvard, Silicon Valley and the WTO - China learned everything it could from the West about unleashing the forces of economic development in the modern economic infrastructure. What happens next, now that Wall Street has proven an unreliable compass point?

The era of China's enthusiastic learning from the West is clearly waning. That's a Yin Yang theory term - one aspect wanes, the other waxes. Once the former subordinate becomes powerful, it's time to learn about them and from them in order to deal effectively with them. The social values of the west are still powerful - the Chinese experiment with democracy for practical rather than moral reasons, even today appreciate that a diverse, educated and open civil society breeds great resilience, creativity, and ultimately, wealth and power. At the same time, China 1979-2009 is a case study without parallel: creating wealth by mirroring some behaviors and values of the people who have the money. Just saying - we can't out-Chinese the Chinese, but we can regain ground by being our smartest selves.

Meaning, deploy that "learning from other cultures" toolbox that tolerant, educated, and diverse nations give its citizens the conditions to develop. With that, I invite you to come visit our new China Networking Toolbox, doorway to meeting peers, mentors, consultants and prospects; tools to share learning, build projects and businesses.

The Power of the Collective

Much as I love Hong Kong, I might take a break from Ronnie Chan, Chairman of the Better Hong Kong Foundation. (Also Chairman of Hang Lung Properties Ltd, developer of Queensway, Grand Gateway and Plaza 66 - all milestones in the development of HKG and SH. And large, looming icons for me as a retailer in those cities.)

I like Chan’s emphasis on the importance of American confidence vis-a-vis China. But twice I have pressed him for the why and how underlying that confidence: in essence, based upon what strengths and what actions will America regain industrial, technological and economic leverage? Despite his conversations with central and commercial bankers, political leaders and captains of industry around the world, he has twice not answered my question except in these terms: a) when Americans lose confidence, we tend to pick an enemy. Since the China trade related proposals floating through Congress, if passed, would be counter-productive to the ship of American sovereignty and solvency, losing confidence isn’t an option; b) America’s bottom-up, entrepreneur-driven economic engine, with government in a supporting role, has delivered in the past, so it must still be our strength.

Hang Lung has placed $5 billion in bets on PRC real estate in the past few years. And a lot of us have careers that hinge on the continued economic relevance of the USA to China. We all hope the US government won't blow up our futures. Still, on Chan's point b), I disagree. I think that the foundation for America's emergence as an industrial & economic superpower was laid at a time when government and industry had a plan. I had been hoping Chan would tell me that there's a plan now, and he has pretty much told me that either there isn't one, or it's not the sort of thing one discusses at China business events. The way I see global trade and politics: friction builds and dissipates; competitive advantage waxes and wanes; and it’s not Game Over until money, people, and ideas stop moving. America in 2010 shows a few signs of stalling, and it concerns me.

Forgive me: because of cumulative decades spent playing ma jiang with family members who happen to be CCP officials; being a wife, ex-wife, and close friend to a PRC-born tech CEO; and acting as “Pet American” for a Ministry or two, I understand how China's economy moves forward - how entrepreneurs, money and power combine in patterns that are extremely effective in creating wealth. Western business people seeking greater leverage with China for their companies - most urgently, American managers open to Chinese investment or hungry to some claw back global competitiveness - might want to study how China built so much wealth, and take a page for the play book.

Put simply, we need to get on the same page with each other. We have to position more powerfully to win business from China. While economic magic does, in fact, spring from a bottom-up, innovative and confident approach, the lesson learned from China is: harness that magic to coordinated, regional, sector-focused initiatives, and you might get a miracle.

The USA doesn't do top-down. But for us as individuals in business, it's worth getting more collective in our approach anyway. Even if the government and academia in the USA have limited power and influence, they will never be completely irrelevant to commerce, especially in the eyes of the Chinese. Reach out and look for opportunities to present collectively. Where private companies are preoccupied with positioning for China-related business vis-a-vis their entrenched competitors, they lose the potential to map out a bigger circle of complementary collaborators, which could well give prospective Chinese customers, clients and investors a sense of security. Reach out...and look for ways to present collectively.

Members of TCBN, as in other online communities, get free-in system messaging and message forwarding, and member directory search by name, industry and location. Also relevant to the goal of connecting: members can use TCBN’s site and staff to post and promote their events.

Membership is free until June 30 with our China Connectors in Hot Sectors contest: anyone who submits a China business event listing gets a free profile membership, 5 free trial memberships to pass to friends, and a shot at the grand prize. In addition to psychic payoff: being part of a platform that gets more business opportunity and collective leverage for you and your allies.

The Origin of Wealth

My friend Xiu Xiaoping, who runs a huge domestic and international incubator program for the Ministry of Science & Technology, just sent me a shiny publication with her photo on every page: “Africa Invest” Magazine, published by the MoST, summarizes the November China Exhibition in Cairo, promotes the Africa Invest Internet Club, lists Chinese companies in energy, telecom, and health tech; and contains pages and pages of government officials in photo ops. I can’t tell you exactly how many deals were made, and for how much, but this is certain: a lot is happening, and the money is flowing.

In two ways, watching China’s money move is a bit like looking at an iceberg. First, because the money does tend to group itself into giant piles, which break off and float away - to Africa, Southeast Asia, Brazil, the gas-rich, geostrategic ‘stans; and very occasionally, to the northern hemisphere. Second, because everything that really happens is, more or less, invisible.

Understanding the invisible calculus of how China sees the USA in relation to its money is a skill that every American business person might consider investing in. For the simple reason that as the economic center of the world continues to shift eastward and southward, we’re going to have a work a bit harder to stay relevant.

Back to the iceberg: I have an analytic to understand Chinese behavior, which I call “The 8 Value Contrasts between China and the USA.” (Unit of Society, Domain of Scarcity, Practice of Heroism, Resolution of Conflict, Containment of Risk, Origin of Wealth, Framework of Trust, and Existence of Absolutes.) As far as understanding China’s ODI goes, let’s look at the Origin of Wealth.

      Western concept: Bottom-up entrepreneurship. Idea and execution unified, then publicized by external communication and mass media.

      Chinese concept: Top down industrial policy. Vision and strategy separate from execution. Announcement of plan by the center, response and execution by business and the people. Internal coordination, minimal external communication.

Bottom line - the Chinese are horrible at all external communication except propaganda. In propaganda, the center exhorts its vision. Communication presents an idea looking for buy-in. In the western style, buy-in follows a presentation that ties together vision, strategy, and proof points of execution together.

Americans create wealth by selling – mostly ideas and stories – because our business leaders had to start from scratch. Chinese investors aren’t used to selling their ideas. They aren’t even used to being sold so much as instructed or led. So – one way to attract a little iceberg: don't think of selling ideas; think of getting a plan, ideally one with government and academic as well as private sector backing. Then lead the way.

What a Superpower Wants

Over any considerable span of time, if you accept a Chinese view of the world, only two things hold value: gold and real estate.

Real estate is such a large part of China’s global expansion that we’re focusing, for the next six weeks, on interviews with senior people in the cross border real estate business, as a series in our China Going Global channel. We begin with Malcom Riddell’s interview. Watch for more in the coming weeks, and tune in as a Profile Member if you want to promote your own expertise or directly message other TCBN members in the field.

In keeping with the tag line of the Forbes China Tracker - What A Superpower Wants – I posted this week about Real Estate, and why it’s virtually the only segment of the North American economy to be collecting Chinese ODI. I’m hoping to attend two coming events featuring lions of the cross border real estate scene: the Harvard May 10 seminar on closing deals with Chinese real estate investors, featuring China Construction USA’s Yuan Ning, and Ronnie Chan’s May 18 kick-off of the Museum of the Chinese in the Americas brown bag lunch series.

Another thing a superpower wants, where western nations have strength: superior education for its people. Known for churning out scientists and engineers this past 60 years, China has now come to appreciate that great societies are also nurtured by people with open minds and a love of the arts. Moderating the education panel at the GCC-organized “China: A New Generation” conference a few weeks ago, I had a picture painted for me by the subject matter experts: within a decade or so, China will be graduating more liberal arts majors than the USA. So the China Going Global channel will also be looking in more depth at the business opportunity for western universities that China’s reforming educational system presents.

Finally: a superpower wants longevity in its regime. If its leaders are enlightened, that means a healthy and sustainable future for its people. The promise of international collaboration on renewable energy, clean tech, and biomedicine – despite the inherent political and structural difficulties relative to real estate and education - is the most important of motives driving everyone who works between China and the west.

Expanding content, community, and conversation in our China Going Global and Green Development sectors isn’t just something nice to do. It’s practical, even necessary, to connect as many people as possible who are active in these areas. When everyone - regardless of how they define their place in the cross border space - can work to his strengths, and as part of something collaborative and effective, we’ll succeed not only as individuals in business, but as part of a more vibrant and organized sector within which all of us are more valuable.

Show Me The Money!

In China the corporate savings rate is over 50%, and the government wants to encourage outbound investment. Assets in the USA are at a low point in price cycles. The USA is by far the world's biggest consumer market, and China the world's largest manufacturer, and for all their ability to cut cost, Chinese manufacturers are earning a fraction of the margin that USA-based marketers and retailers collect by selling Chinese made goods. They just don’t know how to run a consumer marketing and retail machine. Given all this, should we expect Chinese capital to be chasing bargains, building market access, acquiring more margin?

Nope. Because:

1. China runs top down - government policy rules.  Strategic necessities – are the priority: commodities, energy, and control of infrastructure; China needs iron ore and unobstructed energy imports a lot more than it needs drop-ship warehouses in Reno. Or cash.

2. The USA is too much work.  Media, government and regulatory can all kill a deal instantly. Worst of all: Chinese investors can't get visas.

It’s nothing like the way China treated western investors. "Welcome to China, Leave Your Money Here" platforms like investment zones; western-style housing compounds; government-run concierge for regulatory, recruitment, construction, water and power supply; tax holidays. African, Southeast Asian, Middle Eastern projects may not
offer the glamour of an American division, but they roll out the red carpet for Chinese.

The biggest help to Chinese companies in the USA is coming from China's own - check my interview this week with the North America Rep office of the City of Shenzhen, who helps Huawei, BYD, and their Pearl River Delta neighbors with their USA objectives.

The Chinese private sector is also working on it – like Vantone, ramping up The China Center in New York City.  Like Chinese i-bankers helping find energy deals for their clients from Shandong.

Otherwise, business people who want to play a role in Chinese inbound investment form discussion groups on social media, and join The China Business Network. It’s about getting up to speed so we can get some dollars and jobs back. Getting deals packaged and offered properly to attract the money; and then convincing the Chinese to hire smart lawyers and accountants, to talk to the people through the press so there’s back-up when the dragon slayers attack …it’s a long cultural gap to span. Especially when a denied visa can send the whole thing into the bin.

Hear that crashing sound, Homeland Security? It’s billions of yuan cascading into Australia.

See the original post here.

Let's Talk About You

Many thanks to China Law Blog's Dan Harris. Two hours into an overdue catch-up dinner with him this week he helped me see that I have never explained clearly enough what may be the single most important fact about the The China Business Network. Here it is: Got a China Deal? Need someone to advise or implement a China-related project? Don't call me.

The China Business Network does not do deals, does not do projects, does not do consulting. Past tense, I have done deals, projects, and consulting. But I stopped years ago because as I came to terms with China's growing power in the world, it became crystal clear to me that the stakes are high and the world is large and I am just one person. Instead, I decided to focus on something bigger.

Namely: to end the waste of cross border talent and opportunity that occurs when people in every sector, every geography and every phase approach their China work without adequate support. People walk into potentially great and sometimes dangerous opportunities with the wrong expectations, the wrong map, and the wrong team. Why? All the knowledge, wisdom and support imaginable is out there. It just needs to be organized.

If someone would build a credible, open, accessible space to aggregate and index all the China business talent and projects, everyone in cross border could find a straighter route to realistic expectations, an actionable map, and a crack team. If someone would build a searchable online directory to showcase all that talent, and organize a guide to all the reports, nonprofits, insights that lead to discovery of complimentary capabilities...then individually and collectively, everyone in China cross border could have more visibility, and voice, and value

No one else was crazy enough to build it. But here it is anyway: The China Business Network, where we build success and your place in the cross border space. All that speaking and writing I do about how Chinese organizations and people do business? It is not to build my consulting business or generate deal flow because I Don't Do Consulting and I Don't Do Deals. It's for one reason: to establish the credibility and enhance the visibility of The China Business Network. Which, if I may beat a dead horse, exists only to help you succeed in China-related work.

There's just one problem: it only works if you stop calling me for five minutes, which is how much time it takes to register as a Profile Member of The China Business Network. Set up your profile so others will know your expertise, what you offer, what you need, where you'll be travelling. Search for people who have skills in your sector. Log in with your username, hit the Send Message button and make a new contact.

We don't want a finder's fee, a piece of the deal, or a commission. All we want, really, is for this space to exist so that you can upload your credentials, promote your events, and find new peers, prospects, consultants and clients. We want you to forward this newsletter to others you know who are working in China crossborder. We want you to stop calling me and start finding and calling each other.

We also want your $5 per month membership fee, which we think is pretty reasonable, especially if you use the functions it provides.

Anyone going to be at Shanghai World Expo 2010? Put your dates on your profile so all the other members can find you. Of course I will be there. So, if you want to meet for a drink - as long as you're a member and you promise to take your deal flow and projects not just to me, but to the whole TCBN community - Please Call Me. Anytime.