China Drywall Woes And Manufacturing In China

I haven’t followed very closely the issue of the Chinese drywall; however, I came across an article over the weekend entitled Chinese Drywall Found to Differ Chemically.  As you can guess, this article speaks about how the made in China drywall has different chemicals that has caused some owners whose homes used this drywall to become sick.  According to this article:

The investigators, however, were unable to link the chemicals, sulfur and strontium, to the health problems and smells in thousands of homes built during the recent housing boom, and said further testing was under way to determine any possible connection.

It will be very interesting to find out what the result of the investigation will be and whether or not there really are chemical differences in the Chinese drywall compared to the others.

One part of the article I disagreed with was the following paragraph:

It [The Chinese Drywall] also puts a renewed spotlight on problems related to all types of products imported from China. Millions of tainted toys made in China had to be recalled in 2007 and 2008; problems were also reported with imported pet food. The issue has become a source of trade tension between the United States and China.

About a year ago, I did a series of seminars that discussed the issues with the tainted toys, particularly the Mattel toy recall of 2007. I did quite a lot of research in to this topic, because I felt that China was and has often taken a lot of heat for the quality of their products.

In the Mattel toy recall, there were 20 million toys involved in the recall and of these recalled toys:

• 2.2 Million were Lead-Related Recalls
• 17.4 Million were Design-Related Recalls

While it is true that there are products in China whose quality is terrible, but the Mattel toy recall was definitely misrepresented. A study completed by two Canadian business school professors found that:

• 80% of the world’s toys are manufactured in China
• There have been 550 toy recalls since 1988
• 76% of these recalls were Design-Related Flaws
• 10% of the recalls were Manufacturing Defects

Hari Bapuji, one of the two Canadian business-school professors who conducted the recent recall study, “the problem of unsafe toys won’t be solved simply by stepped-up inspections. Toy manufacturers will have to do a far better job designing the toys from the start.”

In a previous blog post, I shared information on what manufactures can do to produce a higher quality product.

The Ghost Festival – The Chinese Halloween

On this Halloween in the United States, I thought it would be appropriate to share the story of China’s Halloween also known as the Ghost Festival. This festival does not occur on October 31 and it is not the traditional pagan holiday celebrated in the United States.

According to Wikipedia:

The Ghost Festival (simplified Chinese: 中元节; traditional Chinese: 中元節; pinyin: zhōngyuánjié, alternatively simplified Chinese: 鬼节; traditional Chinese: 鬼節; pinyin: guǐjié) is a traditional Chinese festival and holiday, which is celebrated by Chinese in many countries. In the Chinese calendar (a lunisolar calendar), the Ghost Festival is on the 14th night of the seventh lunar month.

In Chinese tradition, the fifteenth day of the seventh month in the lunar calendar is called Ghost Day and the seventh month in general is regarded as the Ghost Month (鬼月), in which ghosts and spirits, including those of the deceased ancestors, come out from the lower realm. During the Qingming Festival the living descendants pay homage to their ancestors and on Ghost Day, the deceased visit the living.

On the fifteenth day the realms of Heaven and Hell and the realm of the living are open and both Taoists and Buddhists would perform rituals to transmute and absolve the sufferings of the deceased. Intrinsic to the Ghost Month is ancestor worship, where traditionally the filial piety of descendants extends to their ancestors even after their deaths. Activities during the month would include preparing ritualistic food offerings, burning incense, and burning joss paper, a papier-mache form of material items such as clothes, gold and other fine goods for the visiting spirits of the ancestors. Elaborate meals would be served with empty seats for each of the deceased in the family treating the deceased as if they are still living. Ancestor worship is what distinguishes Qingming Festival from Ghost Festival because the latter includes paying respects to all deceased, including the same and younger generations, while the former only includes older generations. Other festivities may include, buying and releasing miniature paper boats and lanterns on water, which signifies giving directions to the lost ghosts and spirits of the ancestors and other deities.

The Ghost Festival shares some similarities with the predominantly Mexican observance of El Día de los Muertos. Due to theme of ghosts and spirits, the festival is sometimes also known as the Chinese Halloween, though many have debated the difference between the two.

I can’t say I have ever celebrated this festival in my family, but I am certain it is still celebrated by the more traditional people in Asia.

Being Asian And Looking Young Can Be A Misfortune

I often hear people tell me that Asians always look so young and wonder how they can also look young.

Let me tell you that looking young is not all it makes itself out to be. Sure there is soft and wrinkle-less skin, but do you realize how annoying it can be to always be thought of as a pre-teen?

Just a couple of days ago I was running at a local high school track. After completing my workout, I was walking to my car and a nice man with his daughter approached me and said “do you go to school here?” I was thinking in my mind, “do I look like am still in high school?”, but I kindly told him I did not and that I had graduated from high school over a decade ago.

Another experience was when I was living in Sydney, Australia. At that time, I was 20 years old and I remember speaking with another Chinese gentleman on the streets of Sydney and him asking me “How old are you? 13? How can your parents allow you to come all the way from America by yourself?”

These are just two of the many people who think I am just a teenager trying to find my way in life. This does not count the hundreds of people I come in contact with each day who don’t openly ask me how old I am, but are really thinking it.

At times, this has affected the way I do business. The Chinese like to do business with someone that “looks” older, because they are a sign of wisdom. I am often asked by Chinese partners how old I am and that I look really young. Even to my own race, the Chinese, I look young! However, once I am able to show them what I can do, the doubts go away as to my skills.

I have been working very hard on trying to look “older”, but for some reason my soft skin and lack of wrinkles makes me look like I am just a teenager.

Maybe when I get older I will be ecstatic to look young, but for now I think of it as more of an annoyance than anything else.

The Blessing and Curse of Being ABC – Part II

In a recent blog post I spoke about how being an ABC (American Born Chinese) that there are things I can get away with, but there are also things I cannot get away with that Caucasians can.

Things I can get away with:

• Walking around and not being stared at like a foreigner: This can be a bad thing if I am attention-hungry and want people to notice me, which I am not.
• Tougher negotiations: The Chinese are master negotiators and bargain for just about anything.? While it is expected even for foreigners to bargain and negotiate in China, I have been able to push the envelope a little bit more without being seen as a greedy outsider.? At times foreigners can be a little more “pushy” than they in their negotiations.? A few years back I went to China with a friend of mine who is a 6′4″ Caucasian with blond hair and blue eyes.? He speaks China, but we wanted to try an experiment.? He would walk up to a street vendor and ask for the price of something and then I would come up behind him and ask for the price of the same product.? Every single person we asked consistently gave a starting price to my friend that was 20% higher than what I got.? However, a portion of the negotiated prices were almost identical to what I was able to get for most of these vendors.
  

Things I can’t get away with:

• Speaking poor Chinese: As I mentioned before, this is a huge slap in the face when your Chinese is terrible. You lose a lot of respect by your Chinese counterparts. When I first began studying Chinese, I lost a lot of respect because I did not speak the language well enough. The Chinese are proud of their language with its long history.
• Not understanding the nuances of the Chinese culture: The Chinese culture can be very complex with the concept of face and hierarchy. Little nuances that can easily offend if not observed. Most foreigners can get away with not knowing this, but as someone who “looks” the part of being full Chinese, it is not the case.
• Not having an opinion on Taiwan and Chinese relations: This is especially true since my wife is from Taiwan. You don’t necessarily have to go around telling people your opinion, but to have an opinion is important. When my wife first met my family, my grandparents would proudly tell her that Taiwan was a part of China. My wife would just smile, but I knew on the inside she was boiling as she is very proud of being “Taiwanese”.
  

Taiwan Approves Dalai Lama's Visit… Wow!

Taiwan’s President Ma has approved the visit by the controversial Dalai Lama in a very surprising move which China has denounced. The Xinhua News Agency, China’s official news agency, did not place blame directly on Ma, but on the opposition Democratic Progressive Party (DPP) who formally invited the Dalai Lama for this visit.

This is a surprising move since Ma denied a requested visit by this same Dalai Lama back in December. As I mentioned in my previous blog post “The Dalai Lama Visit To Taiwan Is Another Issue In An Already Full Bucket”, this current administration in Taiwan has been unpredictable at times in their decision making. This is not necessarily a bad thing as it may show that President Ma is looking out for Taiwan collectively and not just for his Party. On the other hand, it could also be to show China that Taiwan is still a separate entity in the eyes of Taiwan and will not completely give up what they have stood for the past 60 years in the name of economic and political ties.

The Dalai Lama Visit To Taiwan Is Another Issue In An Already Full Bucket

The Dalai Lama, the Tibetan spiritual leader exiled from Tibet in 1959 after a failed revolt, has accepted an invitation to visit Taiwan from August 31 to September 4 to visit disaster victims of Typhoon Morakot and bless the area. As you can imagine, the Communist Party in China is absolutely against this and will certainly be even more vehemently opposed to his visit to Taiwan, since they consider Taiwan still a part of China. China has not been very friendly to countries, no matter how established the relationship, who make contact with individual or groups they consider a threat to China. For example, when Australia invited exiled Uighur leader Rebiya Kadeer to visit a few weeks ago Vice-Foreign Minister He Yafei pulled out of the Pacific Islands Forum (PIF) and was replaced by a more junior envoy, according to the AFP.

This puts Taiwan President Ma in quite a predicament. Since coming to office last year, Taiwan and China’s relations have improved immensely with the two sides resuming shipping and postal services, and direct flights across the Strait for the first time in nearly 60 years.

President Ma does not sit in a good position right now as his approval rating has reached its lowest level (26%) compared to when he came to office in May 2008 (66%). One of the factors in his low approval rating is the way this administration has handled the rescue work after typhoon Morakot. According to the National Fire Agency, “At least 461 people were killed and 192 are missing after Morakot pummeled Taiwan Aug. 6-9. The storm?s record rainfall caused floods and landslides, burying villages and destroying roads.” This is the worst typhoon disaster in Taiwan in 50 years. 3 cabinet members have resigned after there was overwhelming public scrutiny of rescue efforts.

What is President Ma to do? This Dalai Lama visit is just another issue in an overfilled basket full of issues they are facing at this time including the economy and unemployment. President Ma has been criticized as being too soft in his politics and too easily in giving in to China. One thing you have to admire with the previous administration is that they were passionate and stuck to their guns. It was almost predictable what the previous DPP (Democratic Progressive Party) administration was going to do before they did it. Their basic philosophy was if it had anything to do with or had any reminder of China, then get rid of it. With this administration, it is hard to really know.

In the end, President Ma will more than likely reject the visit by the Dalai Lama and continue the path of building economic relations with China. Ma has been committed to improving relations with China and will more than likely rule in favor of maintaining good relations with their Cross Strait “rival”. In fact, President Ma’s administration rejected a visit by the Dalai Lama back in December in favor of developing relationships with China. It will be expected the same thing will happen with this visit. Andrew Yang of Taipei’s Council of Advanced Political Studies has said, “I don’t think the Ma administration will let Dalai Lama come, as Ma has already rejected the possibility of such a visit. The DPP municipal chiefs are just trying to lash out at Ma when his approval ratings are down.”

Before China, Think Taiwan

When thinking about doing business in Asia, the markets immediately on most everyone?s list is China. What needs to be realized is that China is gigantic, complex, and often times unpredictable. Mix this in with cultural and language barriers and without the right preparations and plans an organization is bound to fail. It is important to remember that not all products or services are fit for Asia, particularly China, Taiwan, and Hong Kong. The famous line from Field of Dreams ?if you build it, they will come? may have been true a decade ago and many times if it was Made in the USA, it was often a success. Chinese government regulations many times hinder the foreign company trying to do business in China as they work to develop their own domestic powerhouses.

Instead of spending a large majority of resources trying to take a product or service into such a ginormous and complex economy that could fail very quickly, we often suggest that international business managers first pick a test market that have some of the characteristics of China, but has a largely open economy easier for foreign entities to enter. One such market is Taiwan.

Here are 4 factors why Taiwan should either be a test market or a pre-China market for those organizations who want to expand internationally:

Consumer Market

Taiwan has a population of nearly 23 million and its size is slightly smaller than Maryland and Delaware combined (CIA World Factbook) with few natural resources. It is one of the top 12 export markets for the US. With one of the highest household disposable incomes in Asia, Taiwan is a very attractive market for consumer goods.

The consumer market in Taiwan is trendy and generally young. They follow many of the trends found in Japan and Korea, hence the popularity of Japanese and Korean soap operas and other TV shows. The Taiwanese are also well aware of the trends happening in the United States and other Western countries, and are generally more enthusiastic of these products and trends.

On the other hand, the Taiwanese hold many of the traditional Chinese ways of being very price-sensitive; however, have a stronger understanding of brands that is only starting to be established in China.

Opportunities

Being a small island area, Taiwan imports many resources for consumption. This provides many opportunities for interested exporters. The US Commercial Service put together a list of the following industries with the greatest opportunities in Taiwan:

Non-Agricultural Electronic Components Electronics Industry Production/ Test Equipment Industrial Chemicals Computer Services & Software Overseas Travel and Tourism Laboratory Scientific Instruments Electrical Power Equipment Medical Devices & Supplies Pet Products Telecommunications Equipment Household Consumer Goods Pollution Control Equipment Education Financial Services

Agricultural Beef Pork Poultry Fresh Fruit Dried and Frozen Fruit Ready-to-Use Ingredients Cheese Engineered Wood Chocolate and Other Candy Pet Food Wine and Spirits Fish and Seafood Products Ginseng

Banking System and Investment Climate

According to the US Commercial Service, ?Taiwan?s banking and international remittance systems are well developed, and there are no foreign exchange regulations that would significantly hamper a U.S. exporter from getting paid. Irrevocable letters of credit are widely used and ?L/Cs? from leading Taiwan financial institutions can generally be confirmed by U.S. banks?.Taiwan officially welcomes foreign direct investment. Taiwan?s science-based industrial parks, export processing zones, and free trade zones offer streamlined procedures. Taiwan has made significant improvement in protecting intellectual property. As part of its efforts to improve the investment climate, Taiwan no longer has a list of permitted investments, but maintains a ?negative? list of industries closed to foreign investment to maintain security and environmental protection. Liberalization has reduced that list to less than one percent of manufacturing categories and less than five percent of service industries.?

Taiwan is one of the most powerful high-tech producing countries in the world. Famous names include Acer, D-Link, Foxconn (manufacturer of the Mac mini, iPod, iPhone, Intel motherboards, Playstation 2 and 3, Wii, and Xbox 360), HTC Corporation, and Taiwan Semiconductor Manufacturing Company (the world?s largest independent semiconductor foundry).

Economic and Political System

Based upon the CIA World Factbook, ?Taiwan has a dynamic capitalist economy with gradually decreasing government guidance of investment and foreign trade. In keeping with this trend, some large, state-owned banks and industrial firms have been privatized. Exports have provided the primary impetus for industrialization. The island runs a large trade surplus, and its foreign reserves are among the world’s largest. Recently opened cross-strait travel, transportation, and tourism links are likely to increase Taiwan and China’s economic interdependence. In 2008 China overtook the US to become Taiwan’s second-largest source of imports, after Japan. China is also the island’s number one destination for foreign direct investment. Growth fell below 2% in 2008 because of the global slowdown.?

Although they have not been exempt from the economic crisis, but their GDP has not contracted as much as economists have predicted in 2009 so far and an expected 4-5% growth in 2010 is widely forecasted.

Besides the above factors, there are many others that would be worthy of discussion. In short, Taiwan has a good mix of the Chinese culture, but in a more open environment. The government will largely stay out of your way as long as you are not doing anything illegal.

Is Taiwan Politics Getting In The Way Of Humanitarian Aid?

Reuters reports that a town in Taiwan where 700 people have been evacuated to is refusing humanitarian aid from China. 100 quick assembly mobile homes were being offered by China for residents in Chiatung Township.

Chung Chia-pin, the deputy county magistrate for Chiatung Township, said “Although the homes are a humanitarian donation, we need to consider safety first.” In trying to ease political tensions, Chung adds, ” Also, not just China, but other countries are also offering these donations.”

China says these homes have already been checked for their quality. Fan Liqing, spokeswoman for China’s Taiwan Affairs Office said at a press conferences that “[t]hese mobile homes are strictly produced according to Taiwan’s design requirements and technical standards by the mainland’s top producers.”

Now I can understand the fear of poor quality products that come from China, especially when the proper checks are not in place. However, it is a little ridiculous that residents are refusing good intentions by their cross strait neighbor. According to Reuters, “Taiwan residents’ distrust of Chinese goods shot up last year when dairy products by several firms in China were found to be contaminated with melamine, killing at least six babies and making tens of thousands sick.”

Are they flat out refusing this aid because they fear the quality or is it a political move? Chiatung is located in the heartland of the Democratic Progressive Party (DPP) and I would not put it past them to find ways to bring out anti-China sentiment.

Chiatung and all of Taiwan should accept all the aid they can get. It has taken them long enough to organize disaster relief and the people are getting very restless to the point of calling for resignations from those they look to for leadership. Two more apparent resignations over the typhoon response occured today and more will continue if the controlling Nationalist Party does not focus on the more pressing issues they face with the disaster clean up and establishing proper disaster plans.

Reader Email: What do you think is the best way of understanding a different culture even when you're not living in that country?

I recently received an email from a reader of one of the blog posts asking me a very profound question that would be a very interesting discussion topic. I have pasted her question and my answer to her below. Please let me know what you think!

QUESTION: Aaron – interesting posting – and very true. What do you think is the best way of understanding a different culture even when you’re not living in that country?

ANSWER: Thank you very much for your email and invitation to connect.

You ask a very interesting question. Culture and customs are constantly changing by the environment influencing it. For example, the overseas Chinese in the United States carry the customs and cultures with them from China, but through time slowly pick up US cultures and customs. Eventually, this leads to a hybrid US and Chinese culture, and at times a total Americanization of the person or group.

In my opinion, if you are looking to understand the culture of China, Taiwan, or Hong Kong, then you will need to actually travel to China, Taiwan, or Hong Kong, respectively, and be there for a long period of time to experience it for yourself. If, however, you want to understand the Chinese American culture and customs, then attend Chinese American events and groups. These groups typically do a pretty good job in celebrating and promoting their cultures and customs. This would also apply to other countries whether it is Asian, South American, Australian, European, etc.

One other thought would be to speak with those who have just arrived from overseas. These people typically still carry the customs and culture from their home country with them and have not been influenced by the US culture yet.

You could also speak with the elderly. My grandparents came from China over 40 years ago when they were in their 40s; however, they never really picked up on the US culture and were very traditional in their ways. This is a topic I could blog about sometime.

I hope this helps!

Is The WTO Ruling A Victory Worth Celebrating?

On Wednesday, August 12, 2009, the World Trade Organization (WTO) ruled in favor of the US on a complaint that China was breaching international trade rules by restricting the importation of American books, movies, and music recordings. In the eyes of the United States, this is a huge victory as China’s regulations, which largely channel distribution of foreign audio-visual material through state-owned companies, were inconsistent with its pledges on entering the WTO in 2001 and with the 1994 General Agreement on Tariffs and Trade, according to the Washington Post.

This case, 2 years in the making, will allow foreign distributors of books, movies, and music recordings to not need to be required to distribute their product through state-owned enterprises determined by the Chinese government. By working with these state-owned enterprises, foreign distributors took on unnecessary costs that put them at the disadvantage when selling product in China. In the mean time, local pirates were able to step in and sell their products cheaper, which took away profits from legitimate distributors.

Most anyone who has traveled to China knows that they are notoriously known for fake or pirated goods, such as DVDs or books. It is common to be able to find a new release on the streets the day after it opens in theaters. These counterfeit products have become so advanced that at times it is nearly impossible to tell what is real and what is fake. The US Customs and Border Protection Agency reports that 80 percent of all counterfeit goods seized in the United States are from China.

The Ministry of Commerce in China said in a statement Thursday that China “regrets a World Trade Organization dispute panel’s ruling on the import and distribution of film, DVDs and books”, according to the Wall Street Journal.

Before celebrating this “victory” too much, the US entertainment industry needs to keep in mind that the Chinese still have the opportunity to appeal this ruling, which would delay any immediate changes from occurring. The statement by the Ministry of Commerce also says they are seriously contemplating this appeal. If they do appeal, then it could be years before another decision would be made on this ruling.

China, however, has been much more cooperative when it comes to WTO rules and decisions as stated the Washington Post article saying “China chose not to appeal a separate WTO ruling issued in January that said it could not deny copyright protection to some goods and that it should have criminal sanctions in cases of intentional commercial piracy.” It would not be surprising if China was to accept this decision and carry out the ruling; however, it also would not be surprising if China was to appeal.

Even if China does accept the ruling, the leaders in China always find ways to still maintain some type of control over what comes in and what goes out of China. One consideration is that China may create a review panel that would have to approve of anything coming into the country before it can be distributed.

Even though this is definitely a victory for the United States and the entertainment industry, in the end it will be interesting to see just how much real affect it will have on curbing the real issue this ruling was intended to solve–copyright infringement.