Post Script

So, with the flurry of emails amongst the grads regarding the recent Chinese economic news, I thought I would add an editorial on my observations. First, please consider this as advice.

Believe your eyes, trust your gut. Things actually are what they appear.


The visit to Xi'an said it all. What we heard was that the Chinese economy was roaring forward at a 9% per year GDP growth, and is expected to do the same for many years to come. What I saw were hundreds of large housing and commercial complexes whose shells were built, or in the process of being built. What I did not see was anyone on these sites continuing the building work, as these projects sit unoccupied. What I saw was a commercial/industrial technology center that had very big plans, in the basement of a very large, almost empty building. Where I come from, that's called a real estate bubble that has burst. What we heard was that China was a currency manipulator, unwilling to strengthen their currency versus the U. S. dollar, thus making Chinese manufactured export goods cheaper. What we saw was China ignoring these claims, expressing concerns over an over heated real estate market, while touting a robust economy. So why then, if the economy was so robust, wouldn't China strengthen their currency? In fact, they made a half hearted political move on June 21 to "make their currency more flexible in the currency market", ahead of the G20 summit later in the week. The announcement lead to a move of .0386 in the Yuan to Dollar , or about .6% (that's pronounced "point 6 percent" - yes, less than 1% change). Why such a small move? Because Chinese officials see that the real estate boom is quickly becoming a bubble, with too much speculation driving up prices. Credit is tightening, constricting the ability for expansion of manufacturing and infrastructure. If they strengthen the Yuan, they hurt their already fragile economy. If China does not announce that they want the currency more flexible, they contradict their own claims of a robust Chinese economy in the process. So finally today, an admission of not so hot GDP growth as forecast (see link below). Back to my original point, believe what you SEE, not what you HEAR. We saw Xi'an and the bubble, all the while hearing about this robust economy and growth in Xi'an. This reminds me of two other situations in which I should have trusted my gut. On one summer day in August of 2004, I was signing my mortgage paperwork to buy my home in New Jersey at the peak of the market. As prices were jumping up by the minute, and bidding wars were the order of the day, and as I signed the mortgage, I remember saying to myself "how can people afford to pay so much of their weekly income on mortgages of this size"? Then I would say "well, they must know what they are doing" (Fanny and Freddie). Then, one day in October of 2007 I was looking at my 401(K) portfolio and saying to myself "jeez, this market is really hot - this is almost unbelievable - is this really sustainable"? I then thought, oh well, "they must know what they're doing" (hedge fund and mutual fund managers). From that day on, the stock market plummeted and did not stop declining until March of 2009.

So you see, trust what you SEE, not what you hear. If it looks like a bubble, chances are it is a bubble. If it looks like speculation, chances are it is. If that voice in your head says "this can't be right", you're probably right.

http://www.reuters.com/article/idUSTRE6600S820100701

Mike in China

Just click on either emblem on this fancy Ralph Lauren shirt and you will be taken to the photo album. Thanks, and see you soon!

Great Trip – I Shall Return

Overall, this was a trip of a lifetime. I had been to PAC countries before, but never had I experienced the blend of cultural education with the team building, and the in depth business education. Dr. Lauren Eder did a fine job preparing everyone for this experience, and I am grateful for having had the opportunity to experience it. Finally, I do not know where this experience will fit into my personal life, and professional career. I do know that I will come back to China, likely to the Shanghai area, as well as visit Vietnam again. I do not wish to waste the in depth knowledge we experienced here, or the great contacts we made. Either way, I feel I am so much better off for having visited these countries and I can’t wait to return. Thank you, Rider.

Scooters, Mopeds and Gas Powered Bikes in Hanoi

CLICK ON THE LINK BELOW TO VIEW THE VIDEO FROM THE STREETS OF HANOI!

http://www.youtube.com/watch?v=OyWXth5NDs8

What Types of scooters did you see? : Kawasaki, Susuki, Vespa and mostly Honda.

How many are sold in one year in Vietnam? 7 - 8 million per year

How many people can fit on one scooter? I saw mostly single rider scooters, however sometimes two people, at times three people - a couple and their young child, sometimes four people - couple and two children, but one time I saw 5 people on one scooter which reminded me of the acrobat show I saw in Hanoi that held 12 women on one bicycle.

Cargo they carry: anything that can be balanced by the driver or the rider - I saw a couch and television on one, 500 pounds of cement on another, pipes, ladders, you name it.

What does the rider/driver wear? Comfortable clothes for the hot daytime, sometimes a helmet, sometimes a breathing mask, at times a riding suit that covers the head, body and hands. When it rains, I saw ponchos coming out of no where - there are ponchos that are made for two people. Footwear is optional, although I did see everything from sandals to high heeled pumps on several business women.

How do they get gas? They get in a long line at the gas station, that moves along very quickly.

What rules of the road do they follow? Very simply, they are bigger than a pedestrian, so they hold the power. However, they must yield to anything larger than they are. I saw two mishaps. They brush themselves off and move on.

Where are all these scooters going? There seems to be millions of them parked at or near places of business in Hanoi. And there seems to be millions of them riding the streets. However, I do not know exactly where they are coming from as I never followed one from point to point. They just seem to appear everywhere when the sun comes up.

Anything else you noticed about scooters? The drivers were looking at me looking at them. They appear very friendly, most of the time waving hello. They do not appear to be in a rush, although they rarely stop for anything even if they have to move laterally in order to avoid obstacles. Once you stop, someone will hit you because no one else stops. Watching them ride is like watching a video game where the object is to meander through traffic without stopping, and without getting killed. Still, I couldn't help wanting to know what it would be like to ride one. The closest I came was to ride in the bicycle rickshaw.

Last Day - Tuesday Transparency International and The United States Embassy

On our last official day in Vietnam, we visited Transparency International, an organization that attempts to assist in curbing corruption in government and business. What was most enlightening was that efforts to change the situation in Vietnam have met with some acceptance, but progress is very slow. Support from interested parties is strong on the surface, but very slow to move toward reform in the real world. We then had another great lunch, and went to the United States Embassy in Hanoi. I must admit it was a great feeling to see the Great Seal of the United States of America on the building, and once inside, it was indeed a great pleasure to see all things U. S., including photos on the walls of landmarks, as well as pictures of our President, V. P. and Secretary of State. What I remember most was the feeling when I saw the American Flag inside the offices. We met with Brent E. Omdahl. He is the commercial attaché in the U. S. Commercial Services Department, and at one time had worked for Amcham. Brent explained that his role is that of support for and creation of U. S. jobs. His office is also responsible for trade promotion portfolio, including services to help U. S. companies sell in Vietnam, commercial advocacy, and commercial diplomacy, including improvement of the business climate for doing business. He cited his work with Lockheed Martin in getting a contract selling to Vietnam, as well as work with the telecommunications industry. He described Vietnam as a “hot market” (where have I heard that before – only everywhere we’ve gone in Vietnam so far). President Obama’s National Export Initiative has a goal of doubling exports in five years, and while that may be aggressive, it is nevertheless a goal to work towards. He mentioned telecommunications and education as two growth exports from the U. S. Brent noted that there is a still developmental need in health care, infrastructure, environmental regulations and assistance programs. He also noted issues with energy, and the need for Vietnam to recognize the value of public-private partnerships in the development of Vietnam. Brent noted that state owned entities make up over 25% of the economy, and Hanoi and Saigon are the two fastest growing cities by populating in the world (WOW), and poverty has dropped in Vietnam to below 11%. This visit was an eye opener, and rounded out our Vietnam tour, building on what we had already learned about the country. I mentioned it before, Vietnam is a country that grabs you and cannot let go. Later that evening, a water puppet show, a trip through the city on the pedacycle, dinner and pack up for the 30 hour trip home (Hanoi to Hong Kong, to Philly).

Everyone is an Entrepreneur in Vietnam

All the homes in Vietnam look like this one. Most families live all generations in one home, each generation on one of the floors. The first floor is built with a wide open front so that the owner may open it up as a place to sell products or services. Everyone in Vietnam is an entrepreneur, and usually works more than one job, and all family members bring home income to be shared by the family. There is very little debt, and like China the savings rate is very high among individuals. Dury our (very hot) tour of the city, we saw the old quarter where street after street was filled with small shops and street vendors selling everything from shoes to paint, to picture frames, to furniture. I would describe it as a horizontal Macy's. We would drive up "shoe street", then turn down "plumbing street", then a left on "electrical wire street". The "please haggle" policy was in effect. Offer one tenth or one twentieth the price and go from there. We saw many important landmarks in Hanoi, including the Ho Chi Minh Mausoleum, the One Pillar Pagoda and the Hanoi Opera House.

Vietnam - Monday May 31 Vietnam Partners Visit

On Monday it was back to work. The team visited with Bradley LaLonde, founder and partner in Vietnam Partners, LLC an investment bank and investment company specializing in the Vietnam market. He was a founding member of the American Chamber of Commerce in China which we visited last week. He described his company as a boutique investment bank with offices in New York, Hanoi and Saigon (Ho Chi Min City). Vietnam has almost 90 million people, with 7 million in Hanoi and 9 million in Saigon. Vietnam’s trade (exports and imports) exceeds their GDP. Major exports include rice, coffee (number one in the world in fact..), pepper and seafood. More people have entered the middle class in Vietnam, and bank accounts have gone from 10,000 in 1995 to over 20 million today. 60% of the population of Vietnam is under 30. The people and the country have almost no debt, and got through the economic crisis almost unscathed. The country is, as Bradley puts it, more open than in China. Japan and Korea have invested heavily in Vietnam with most foreign direct investment going into Vietnamese exports. The banking business is booming here in Vietnam, as is the seafood export business. Taxes are a major problem. There are all kinds of taxes, that make the price of, for example, a General Motors car almost twice the price that is paid in the U. S. Vietnam partners are nevertheless invested in Chrysler Vietnam, and are opening up dealerships to keep up with the skyrocketing demand for cars in this country. They are also involved in residential real estate, which has also been booming. In Vietnam, a citizen may own a home “freehold”, but non citizens can only lease, and even then only up to 50 years after which, like in China, the property goes back to the government, or sell the property to a citizen “freehold”. Vietnam Partners manages two funds, one of which involves large institutional investors. V. P. takes a minority shareholder position in high growth companies that have a competitive or comparative advantage to other countries. They are also involved in bringing in brands like Bugatti motorbikes and Sea-Do personal watercraft, as well as furniture companies and farmed seafood companies. V. P also does consulting and advisory work with respect to regulations in Vietnam. They have created a platform for companies that would like to introduce products into the Vietnam market. Instead of investing in Vietnamese exporting (which V. P does to a smaller extent), V. P. goes the opposite direction, investing in importing and selling to the Vietnamese domestic market. Franchising laws have created an opportunity for franchisers to enter the market with a bit more ease. The biggest difficulty is in finding good managers to run the business. According to Bradley, the biggest opportunities are in the seafood, real estate, furniture markets, or consumer products and services that cater to the fast growing middle class. After this visit, we went to the Temple of Liturature. By this part of the day, the it was getting quite hot out. It is a heat and humidity that make you wet almost instantly when going outdoors. We had a nice dinner, and enjoyed after dinner cocktails at the top floor of the hotel with beutiful panaramic views of the entire city. Hanoi is a city that grows on you. I did not like it immediately, but after being here for some time, it really grabbed me.

Sunday - Another Day Another City

Hanoi, Vietnam - where we landed late Saturday night. Sunday morning off early to Ha long Bay for a cultural event. The bus trip from Hanoi to Ha long Bay was 4 hours, but worth every minute. Once in Ha long Bay, we were treated to a four hour cruise aboard a junk ship - just our group on the boat - a fantastic lunch, followed by a tour through a cave that was discovered by e fisherman in 1996. These caves had it all - stalagmites, stalactites, full columns of limestone and deep caves within the cave. The tour of Ha long bay included the viewing of almost 2000 rock formations that rise up out of the water. In fact, many have names that resemble the shape of the formation. Lauren named one "ski boot island" (see photo in the album). This was a great way to start the week in Vietnam, as we had been travelling almost all the day before. The four hour bus trip went through the countryside where we saw many rice paddies, villages and roadside tent markets. We had a lot of sun (and a lot of wine).

Still Friday Day 8

We visited Kingway Beer, a "joint venture" with Heineken here in Xi'an. We took a tour of a sort of museum of beer, discussing the history, as well as the methods of making, and the different types. We then saw a very large and impressive bottling facility. The number of beer manufacturers in China was on the rise until the early 90's, when the government installed stricter regulations on the process, thus making the product safer. Larger companies thrived, and the smaller, and more risky product manufacturers went away. Just like in the U. S., China makes use of regulation to improve standard of living by protecting the people from unsafe products. Not perfect, but progress is being made. We then had a great dumpling dinner, and then a visit to the largest water/music show in the world. The next morning (Saturday) we took a bike ride on the City Wall in Xi'an. The City Wall is the only wall in China to be completely standing, and surrounds the area of Xi'an known as the inner city. Tunnels all around the wall provide easy access. We witnessed from up on the wall several weddings in the area, which are celebrated by fireworks, dinner and dance. We then visited a market near the Bell Tower at The City Wall, and bought more stuff. It was there that I realized how clean the entire city is, even in the poorer areas. I also noted how friendly the merchants were, even when haggling for price. I think Xi'an is a beautiful city, and one that I would love to have the opportunity to return to. Then it was a full day of travel to Vietnam on Saturday afternoon.

Chinese Culture

The difference was noticeable - if you greet Chinese people with the traditional greeting (handing business cards with two hands, exchanging money with two hands, bowing, etc.) and make an attempt to speak their language, you will be almost immediately and very warmly accepted. Also, even in the market where some "tough negotiating" took place, there was a sense of respect and levity in the process. Why is this important? Trust is the entrance fee to building strong business relationships, so once step one is complete, this leaves steps two and three in relationship building much easier and more secure. I also noticed that our hosts at the convention center were highly sensitized to our interest in a greener world. They went out of thier way to describe the use of recycled materials in the construction, as well as methods for reducing the carbon footprint.

China Day 7, I think

We had a busy Friday in Xi’an, which here is called the birthplace of China. In the morning, we went to the Hongdao Art Museum where we viewed the history of China through artwork. We viewed each dynasty through the artwork of each period, and then had an opportunity to purchase some artwork from local artists. We all remembered to step over the thresholds (some as high as a foot) that cross every door – men go left foot over first, women right foot over first. This tradition is said to keep away evil spirits (who do not have knees, you see…) from entering any doorway. We learned that water colors are a reflection of Taoism, that is, nature is great, and people should be humble. After, we went to the Xi’an Qujiang New District Conference and Exhibit Center. This entire center was built to house trade shows, conferences, etc. and is only a few years old. We saw a floor model of the entire development area of Xi’an (which by the way directly translates to mean “western peace”), which was very impressive as it took up a large part of the floor. It showed the parks, cultural centers, and many tourist areas that focus on the Tang dynasty. We then went to the Xi’an Hi-Tech Industries Development Zone where we saw another floor model, this one gigantic, with lights, movement, etc. It is clear that this city is one that China has invested heavily in. As you drive through and around the city, cranes are everywhere. Building is going on everywhere. This city of 7 million people is growing quickly. It is considered a tier two city, but I believe it has a chance to rival Beijing in attracting tourists and business because it is a very livable city. Also, there is much talk about indigenous innovation – that is innovation by Chinese, for Chinese and the world. China wants to stop making things, and start innovating things. According to The Economist, more companies are turning to “frugal innovation” which our Johnson and Johnson host referred to. This is the “de-featuring” of products in order to make them more affordable to more people. Tata motors did this with the car that now can cost less than $3000 U. S. D. This tech center was a demonstration of how serious China is about shifting their economy to a more innovative one. Italian dinner, then cool Jazz with Clifford at the instruments and Trebecca at the microphone.

Quotable Quotes - watch for more...

"It is like this", "it is amazing" and "it is crazy" .. Pierre from Carrefour when describing the growth in China

"Use your horn, not your brake" - Adriana instructing Dinesh on how to drive in China (street signs, road markers, painted lines are all just "suggestions")

"The class of 2010 is the best EMBA class to travel with" - Paul Benchener - Director of the Rider EMBA program - Yes!!

"It doesn't matter how big the suitcase is, you'll always fill it" - Bradley C. LaLonde - Partner and Co-Founder of Vietnam Partners LLC on investment in Vietnam

Other Observations in China

After observing some of the "touristy" things we did, blended with the discussions we had with agencies and businesses here, several things are apparent. China wishes to share its long history and culture with the world. However, talk to the people specifically, and they are very open about the problems and mistakes made under communist rule. Still, after seeing the Great Wall, the Beijing Wall, and the Xian City Wall, they appear to be attempting to hold the history of these walls, while breaking them down through a society that is more and more open in terms of moving to a market driven system. Also, while here, another suicide (11 in total) at Apple supplier Foxconn occurred. The state reports that the suicide rate for the percent of workers at Foxconn is one fifth the national number. The media is raising questions about the factory culture here in China, with the workplace dorms and young workers hundreds, even thousands of miles from family.

One other observation - while the people are in a high context society, they are still very individualistic and even more forward or aggressive than most would think. Just walk the market, try to stand in a line for anything, or try to cross the street and it becomes clear that they look out for number one. Still, i find in general that customs of tact and respect still exist. These customs, including handing cards, money, passport, gifts and other things with two hands to the other person, or bowing to someone as you are greeted are responded to with great pleasure by our Chinese hosts.

Robby is our new guide and will take us to several points of interest today. Lots written about "Indigenous Innovation, which will go on my next posting...

China Days 5 and 6 - A lot of culture!

Great Acrobatics show Tuesday Evening - some amazing video below. Wednesday we paid a cultural visit to Tienanmen Square and the Forbidden City in Beijing. Then we went to the market and purchased some goods. The Pearl Street Market is capitalism on steroids. Merchants push their wares, shirts, jewelry, toys, you name it. Nothing has a price tag. They tell you a price on a calculator, in Yuan, and you put your price on the calculator as a negotiation. Supply, demand, behavioural economics, utility, all of the economic theories are tested in each transaction. In one, I made an offer, and was turned down, so I walked away. I came back a half hour later and offered the same price. The saleswoman said "don't you think I would have taken that offer when you said it the first time. why do you think I would take it now"? These merchants are real merchants who know how to sell, and maximize profit.

The forbidden city was amazing - over 500 years old, housing emperors until the early 1900's. Tienanmen Square is a fascinating place - home of the central government of China, and the mausoleum of Chairman Mao.

We ended the night at the Ritz Carlton, where we listened to Clifford play Jazz and Blues...

Today we flew from Beijing to Xian, and saw the eighth wonder of the world, the Terra Cotta Warriors. Made to protect Emperor Qin Shi Huang over 2200 years ago, these large figures were made by over 720,000 slaves and buried with Qin to protect him in the after life. Discovered in 1974, this find would represent one of the most significant archaeological finds in history. The pictures tell all. Each figure represents an actual warrior who lived during Qin's time. We then saw a show which depicted traditional dance and music from the Tang dynasty circa 618 AD - 907 AD. All very fascinating. More to come... pics are latest from recent adventures..

China Day 4 - U. S Chamber of Commerce, and Carrefour

Today we visited the U. S. Amcham - AMerican Chamber of Commerce here in Beijing. We learned quite a bit about the business climate for American companies doing business here in China. Ancham helps companies through networking, providing information and access, as well as provides advocacy to U. S. companies. There are many challenges facing companies attmepting to do business in China, the largest being the protection of intellectual property. Other issues are inconsistent interpretations of governmantal regulations and human resource management including retaining employees and finding skilled managers. Competition from Chinese comopanies is growing at a fast pace making it more and more difficult for entrants from other countries to succeed. Interestingly, many foreign companies are hiring more women than men becuase of a work ethic gap between the two genders. The Chinese culturally and hitorically work in silos, and do not work in teams, like those in the U. S. There have been many changes in the past 30 years here, and the landscape will drastically change over the next 30 as well. One large dilemma are the 700 million or so people that live on very modest salary living in the rural villages outside of the large cities, and in the countryside. There is an extremely widening gap between rich and poor here in China, even though so many people have been pulled out of poverty.

Our Carrefour visit with "Pierre", the store manager of one of about 16 stores in Beijing was also enlightining. Pierre is a "resident Ex-patriot" from France, and has worked in China for 13 years. He is possibly one of the smartest "store managers" I have ever met. He knows about his business, and the businesses of his 50 or so competitors, each of which have multiple locations throughout Beijing, and China, including Wal Mart which has about 7 stores around Beijing. Pierre told us all about the diffuculties in hiring and retaining help, the theft problem, and the lack of supply chain that Carrefour has, which he claims actually makes them more nible than someone like a Wal Mart (we'll see about that..)..The store has about 8 million transactions per year, and during Chinese new year, January and February make up 25% of the store's yearly sales.

Got to run - off to the next visit - more later..

May 24th - L'Oreal and J n J

Great trip to two of the most important consumer products brands in the world. What we learned about China is: Development in tier 2 and 3 areas is a high priority, China has a head start on the U S in regards to health care reform, Innovation, R&D, Channel Management, acquisition of local companies and licensing agreements are all key strategies. China has an aging population problem like the U S, and the tax base from this demographic will likely cause future problems.. Products must be "de-featured" when entering tier two and three markets (poorer and more rural markets, not the major capital cities in China). Beijing is a beautiful city - spotless - 16 million people and much larger in square meters than most world cities. Of course, after dinner, there was much discussion about many important issues - and we all got to speak our mind - I bought a fabulous Ralph Lauren shirt that everyone loved, well almost everyone, well, really nobody did, but it was $11 US... pic forthcoming...

Day 2 - The Great Wall

Cultural trip to theGreat Wall, the Ming Tombs and a drive by of the Olympic Park area, including the "Bird's Nest", culminating in a dinner of Peking Duck. One cannot be amazed by the senseof history and pride in this country. Our tour guide, Tiger, a 36 year old man who lives in the area, gave the rider group a lesson in culture and history of the local area, as well as China itself. He is very proud of its history, but recognizes the mis steps that the government has taken over the years. He believe China is on the right path now, as they move more people out of poverty, and move up the standard of living. Still problems exist, as in any society. The Great Wall is beautiful, and gives a sense of the awesome task that was taken hundreds of years ago to erect this 4000 mile wall. Today, its on to J and J, and L'Oreal.

We are finally in China...

I am here and trying to get all my electonics right. We have been traveling 24 hours and are finally back in the hotel room. We wake up tomorrow AM and head to the Great Wall. Should be fin and interesting. We did celebrate tonight with three bottles of vina - now I am getting all the electronics all set up - skype works, as does my blackberry. This blog works, and I have some fun vids up there, or go to mallonserv and find them in youtube...cheers Now I ave to get some sleep...

Day Before China

It's the day before I leave for China, and I just realized that Google departed China several months ago, which means that I may or may not have access to my google account, or even my you tube account. I will may have to wait until I reach Vietnam before I can upload everything...Oh well - all starts with the best of intentions. There's always email....