FAT RATS

When I first came to China, I was quickly made aware of the “guanxi” business model whereby business people in China like to cooperate with friends and family in order to gain some “personal benefit” from the transaction. Typically, this would be about 10% of the value of the deal, which would be paid in cash or kind (luxury item, holiday, car, etc).

Whilst this habit is culturally ingrained in Chinese society, 8 years ago it was not a major barrier to business in advertising and marketing. Back then, the Marketing Directors of the International companies trading in China were still ex-pats who played the game with a straight bat, awarding work fairly to the most deserving agencies.

However, times have changed. Now, the marketing directors of most International companies are Chinese, who have climbed the internal ranks. Wielding the power of the marketing budgets that they now control, some have become “Fat Rats”.

No longer satisfied with the occasional 10% they may have been able to skim off the budget of a local field marketing program or some other small scale project still under their control when they were Brand Managers, these purse holders have changed the rules of the game. The new rules play out as follows:

• Client briefs agency

• Agency presents proposal and budget

• Client doubles budget

• Agency implements the work to the original budget

• Client receives the balance in cash or kind

Only the local agencies are prepared (and able) to play by these rules. With the restrictions of Sarbanes-Oxley, the Foreign Corrupt Practices Act and various other legal governance that the global advertising networks must abide by, an increasing amount of business will become untouchable in China.

There is only one solution, and that is the hands on involvement of the C-Suite in major marketing procurement decisions. I realise that many of these guys feel that they have no need to get their hands so dirty anymore. But the reality is that the financial laws that restrict us agencies from playing these games also apply to these big multi-national corporations.

It is time for some heads to be pulled out of the sand in China. Addressing this issue at the highest level will remove both mediocrity and financial waste from these firms’ Chinese marketing initiatives at a stroke.

So much food, but nothing to eat

The Chinese love their food. And now they can't stop talking about it...

From rumours of bio-engineered 6 wing chickens to 100kg pigs fattened in just 50 days, the Chinese chattering classes are seriously worried about what they are putting in their mounths.

And it seems nothing is safe. Even Fish and Prawns are said to be swimming in hormones to promote growth. And fruit is said to be coloured (inside and out) and sweetened.

One of my previous blogs talked about the exodus of the smartest Chinese to other countries...this is one of the reasons

Nose in Front

The image below tells us so much about Chinese society and culture.
Everyone is driven by their own self interest and desires, and it
would be rare to see allowances or provisions for others along the way.


Whereas an intelligent assessment of the situation pictured would be
to wait, and to allow another car to pass in front to ease the flow,
this would require a gesture so alien to the culture that it cannot be
done; Lose face by letting another person have any priority or
preference over you?


The result, a 30 minute log jam for the drivers (only finally
resolved by face-immune Police) and an amusing yet telling scene of
China for me.

China's Latest Export: Rich Chinese People

In the lift in my Shanghai apartment building is a Focus Media LED screen which usually displays ads for luxury cars, villa, holidays and banking services. However, what caught my eye today was an ad to leave China - forever! 700,000 rmb (about US$100,000) for Canadian residency.

It seems that the days of the "returning Chinese" are over. 8 years ago they were returning in droves...born in China, educated and trained overseas, and then returning to China in the early 2000's to make their fortune. Now, it seems, the smart money is looking for the financial security, quality education, healthcare and pollution-free alternatives of Australia, Canada and USA. With wife and kid in tow, these newly rich Chinese are off - for good.

This is not some short term fad. This is a growing trend. And it will become an increasingly worrying one for the Chinese government. Not only is this a flight of wealth, but also a brain drain. Unfortunately for China, it seems that not even the Great Wall will be able to stop this exodus.

UPSIDE DOWN CHINA

I was enjoying a very fine pizza at HuTong Pizza in HouHai, Beijing this evening when I observed a fascinating truism about modern China...it is upside down!

Sitting next to us was a table consisting of three generations of a Beijingnese family: Grandama, Daughter and her husband, their child, and her friend.

THE GRANDMOTHER was bewildered by the whole experience. She clearly failed to understand why her middle class daughter had brought her down a dirty little side street into an old and run down HuTong to sit on hard wooden chairs to eat a round piece of hard bread with stuff on it. She also clearly was struggling with the concept of a knife and fork (but to be fair, I also prefer my fingers for pizza!)

THE MOTHER was also a little wary, but obviously her husband is a pizza fan so she was going along with the plan. However, the green carton of Kraft Parmesan cheese was a step too far. Why was there something on the table that smells of old socks, and what should she do with it? For advice she turned to her 10 year old...

THE DAUGHTER and her friend were in their element. Clearly knowing immediately that this was cheese, and that this should be sprinkled on top of the pizza, she showed her mum, then deftly picked up a slice of the pizza and popped it in her mouth. All washed down with a glass of iced Coke, clearly this generation knows what it wants, and wants what it likes.


Surely, there has never before been a country that has created such an upside down understanding of the world, nor one where respect appears to go to the youngest, rather than to the oldest. Knowledge is power.

Reaction versus Anticipation

After 8 years here, I continue to be intrigued and amazed by China's reaction to events rather than anticipation of events. This happens at all levels of society, from the government leaders to workmen. Even if by anticipating any given problem the amount of work would obviously be less, the preferred and default solution is to do nothing until the problem has arisen.

There are a number of examples of this which come to mind:
• China's resolution to the housing bubble, where instead of carefully considered economic policies over a number of years there has been multiple large boots applied to the neck of the problem over the last few weeks
• China's stance on Iran and North Korea (why worry about what MIGHT happen when it hasn't?)
• China's driving test. A key part of the test is to measure your physical strength and your reaction times. This is to be sure that you are fully qualified to react, rather than to anticipate. (I don't recall being asked about the shortest stopping distances from any given speed?)
• Building roads. I drove to Suzhou on Saturday and 15 km stretch of the 5 year old A30 motorway between Sonjiang and Qingpu was almost undrivable due to subsidance. A crew of workman were digging up one 10 metre stretch in an effort to smooth one lumpy bit.

I have a theory about all this. It comes down to the controlling culture instilled by Mao which continues to be present in government, state-owned business and all state-owned services such as education. Everyone is told what to do, with little or no opportunity (nor encouragement) to find a better way. Consequently, with nothing to gain from suggesting that something could be improved, why improve it?

This, I believe, is also why China has become a nation that copies rather than creates. Gone is the creative spark that brought us gunpowder, paper, the compass and the clock. And until China changes the way that its children are taught and finally has the courage to empower its People, nothing will change.

David King
Shanghai, 17th May 2010

IKEA: no kitchen knives for 6 months!

So, there I was in IKEA this afternoon ready to invest in a fine new set of kitchen knives. But no! The Shanghai Public Security Bureau has decreed that no knives should be sold for the duration of the Shanghai EXPO.

Clearly, Shanghai's undesirables wishing to obtain a kitchen knife for reasons other than vegetable chopping will have to revert to one they may already have in their collection, rather than select from the latest Swedish designs.

Better City, Better Life...unless you want to prepare fresh ingredients for cooking!

David King
Shanghai, 3rd May 2010