Silicon Hutong

Whose Moral Relativism?

In the Hutong
Dry dry dry dry
1701 hrs

Uber-establishment public intellectual and Newsweek International editor Fareed Zakaria does a decent job calming the otherwise financially panicked in a pallative column from June 13.

What I found most intriguing about the article was the conclusion (proving, once again, that it does occasionally pay to read long essays all the way through,) where he explains that the West is in the throes of a crisis of morals as much (or arguably more) that a crisis of finance. When he first started this bit of his rant I shook my head. "Yes," I thought. "We've all heard this before - the old Wall Street is an Ethical Wasteland argument, with Bernie Madoff, Allen Stanford, Alan Greenspan, Wall Street traders, and subprime mortgage brokers all trotted out as poster children."

But then Zakaria pointed out that Wall Street was not alone.

"Most of what happened over the past decade across the world was legal. Bankers did what they were allowed to do under the law. Politicians did what they thought the system asked of them. Bureaucrats were not exchanging cash for favors. But very few people acted responsibly, honorably or nobly (the very word sounds odd today). This might sound like a small point, but it is not. No system—capitalism, socialism, whatever—can work without a sense of ethics and values at its core. No matter what reforms we put in place, without common sense, judgment and an ethical standard, they will prove inadequate. We will never know where the next bubble will form, what the next innovations will look like and where excesses will build up. But we can ask that people steer themselves and their institutions with a greater reliance on a moral compass."

(Italics mine)

Leave aside for a moment the problem that when you start blaming society, you deflect the blame from the bad guys. I do not get the impression that this is Zakaria's intent. 

No More Higher Ground

Zakaria makes two points, one implicit, one explicit but not sufficiently so, that we need to take into account for China.

The first is one I have discussed and heard from other China hands over the past year. Anyone who thinks that Chinese leaders and the Chinese people are blind to the malfunctioning moral compass in the West - especially in the wake of current events - is wrong. If we ever were in a position to preach, either at a systemic, enterprise, or personal level, we have lost that position.

And that means that any American who excoriates corruption in China will be dismissed as a hypocrite; any foreigner who tries to explain to a factory owner why it is better to make produts safer will be held to a higher burden of proof; and any executive trying to preach the importance of integrity and ethics to a recent recruit will face annoyed skepticism. 

The Law of Rules

But the larger point - the one I do not think Zakaria makes plain enough - is that rule of law is not all that we have made it to be. As we talk about China's development, we attach to the concept of "rule of law" a Holy Grail-like quality, as if the quest for the rule of law, as much as finally attaining it, will be the answers to many of China's major social challenges.

In pointing out that in America, the paragon of societies living under a fully developed body of law, legislative process, and criminal and civil court systems, is deeply socially flawed in spite of the rule of law, Zakaria sends us a warning about China, one that will discomfort many of us. Rule of law, as important a goal as that may be for China, is inadequate to ensure that leaders, enterprises, and people behave in ways that are not sociopathic.

A rule of law must be paired with what I would call a Law of Rules, a detailed code of behavior that is rigid enough to withstand relativism, is adaptable enough to stand despite massive social change, and is set forth by a body or entity that operates at a level removed from our own unlimited ability to rationalize almost any behavior.  Law of Rules is more than just a moral compass. It is a clear description of how to live, so that the rule of law - the nation-specific constitutional, criminal, and civil codes standards of behavior - need only come into play in exceptional cases. The rest of the time, it is our fear of doing wrong and our desire to do right that guide us, not the fear of the cop, the lawsuit, the jury.

The Law Gone Missing in China

Twice in the last hundred years, China has had its Law of Rules stripped away. The first was what might best be called Confucianism, an imperfect but longstanding code of behavior rooted in a system of rigid interpersonal obligations. Ripped away in the aftermath of the 1911 overthrow of the Manchus, it died a slow death, and was eventually replaced by Maoism.

Maoism was battered by almost continuous challenge and upheaval, until finally its precepts of egalitarianism, service, self-sacrifice, and patriotism were abandoned in the 1990s. What replaced them were two simple maxims: "To Get Rich is Glorious," and "It doesn't matter if the cat is black or white, as long as it catches mice."

Now, we are told, all that we need to lay upon this highly practical foundation is a legal system backed with apolitical courts, and everything will be fine. Not bloody likely. If the fear of prison and death are not enough to keep the chief executive of a dairy from making decisions that will kill babies, no rule of law can hope to end such behavior.

There is no silver bullet solution to this problem for China, no simple path to change, because the change that must take place is not in institutions but in individuals. This is not one battle, but 1.3 billion battles. And for that reason, it is the greatest single challenge facing China today. 

Where to begin?

Afghanistan 2009 = China 1945

In the Hutong

Contemplating Awareness

0936 hrs

Starting to catch up with my reading - I'm at least four years behind - I came across some of the writing CFR Fellow Elizabeth Rubin is doing from Afghanistan, in particular an August 4 piece in the New York Times Magazine called "Karzai in His Labyrinth." I spend less time than I should reading into the situation in China's neighbor to the southwest (an oversight, because much of China's thinking about the world is dictated by the "near abroad"), so this piece was something of an eye-opener. 

The more I read about the Afghan political scene in the midst of a brutal civil war, the more similarities I see with China in 1945. The United States is, once again, essentially supporting a leader who has forged a weak and tenuous polity out of an uneasy alliance of warlords and narco-barons that have emerged from the wreckage of a weak and brutal neo-feudal theocracy offers.

The U.S. has  done this in the name of expediency and ideology, preferring a corrupt, secular, and nominally democratic alliance to a centralized fundamentalist state. And, to be fair, the U.S. did so with the best of intentions but with painfully little care, planning, and expertise. 

As a result, it is working little better in Afghanistan than it did in China 65 years ago. 

None of this is to suggest that America and its NATO allies should throw in the towel and come home. It is, however, time for some realpolitik and some more creative thinking.

In World War II, the U.S. sent a combined military-civilian mission to Yan'an to investigate the possibility of working with the Communists after the war. Called  the "Dixie Mission," the three year effort was eventually undermined by a combination of McCarthyism, a failure to appreciate the latent rifts between the  Soviet Union and the Chinese Communist Party, and the policy myopia of the Truman Administration and specifically Ambassador Patrick J. Hurley. 

If there is an implicit message coming from the ground in Afghanistan, it is that we need to start looking for alternatives to the present situation rather than bolstering it. Even if the Taliban were to pack it in tomorrow, would what was left truly be the kind of government of which we could be proud - or that would promise stability for anything longer than a lunch break?

None of this is meant to suggest that the U.S. ally itself with the kind of regime that ruled Afghanistan prior to October 2001. Instead, it is time to start getting a little more creative in casting about for solutions, rather than "backing a horse and sticking to him." 

"Sticking to our horse" failed in China in 1946, in Cuba in 1959, in Vietnam in 1975, and in Iran in 1978. It has failed in Afghanistan for two centuries at least. History may not repeat itself, but it does echo, and this is an echo worth heeding. 

It is also an echo that suggests that China has as much - and perhaps more - at stake in the eventual outcomes in Afghanistan than the U.S. and NATO (as do Iran, Pakistan, India, and the Central Asian Republics), and that if there was ever an opportunity for China to begin exercising itself on the world stage, this is it.

That is, of course, unless China's strategy is to hang back, watch the U.S. make a mess of Afghanistan, and then swoop in and try to clean up the mess afterward. In which case, we can only hope they learn from the mistakes of their predecessors rather than repeat them. 

Questioning China's CyberLegions

In the Hutong

Not a Caveman

1045 hrs.

The Open Society Institute is not an organization you would classify among China's great supporters. But OSI Fellow Evgeny Morozov suggests in the Boston Review that our fears of "digital Pearl Harbors" and "cyber-Katrinas" launched from non-democratic countries are, at best, overblown, and at worst distract us from more worrisome threats. 

Not least of those in Morozov's mind would be the implicit threat to democratic regimes by their own governments who may curtail freedoms in the effort to secure their systems, driven by good intentions but hamepred by a misunderstanding  of the real threat.

Skynet? No...er, not YET 

Morozov does an excellent job taking apart some of the misperceptions and complexities around computer security and cyber-warfare, adding some balance to a discussion normally dominated by the voices or proxies of what we might call the Cybersecurity Industrial Complex (CIC, pronounced "sick.")

Morozov resists the temptation to turn China into a punching bag, choosing instead to take a wide-angle look at the issues, and in the process putting to rest much of the fear, uncertainty, and doubt around cyber-security. 

It is a superb article, and I agree with about 90% of it, especially his contentions that the most important targets for cyber warfare will (initially at least) not be militaries or governments but enterprises and NGOs, and that much cyber-conflict will take place in the realm of the criminal rather than the martial. 

What concerns me about Morozov is that in the course of his article he gently manages to sing us to sleep vis-a-vis information warfare. His offhanded dismissal of cyberwar sounds a bit like the U.S. Admirals who ridiculed General Billy Mitchell's contention in the early 1920s that aircraft would render battleships obsolete. The Admirals were absolutely right - at the time. On December 7, 1941 and dozens of occasions afterward, however, they were 100% wrong. 

History has proven that the premature dismissal of a new technology because of poor initial performance on the battlefield is as foolish as it is common. 

As difficult as it might be to separate calm, rational threat assessment from alarmist hyperbolic hucksterism, it would not do to allow Morozov to shrink military-class information security threats to the point of non-existence. Computers are commonplace and a billion people are online, but  we are only beginning to understand the full security implications of a connected world.

I am a still at the stage of "student" when it comes to information warfare. My greatest accomplishment to date on that score has been to assemble a fairly intimidating body of literature on the topic that by its very presence on my bookshelves tasks me to take it on. 

But it does not take an expert to discern that China's substantial budgetary challenges, balanced with a need to build a credible and modern national defense, will drive it to choose asymmetric strategies. China will build systems to deny advantages to its adversaries rather than try to match them. Put in concrete terms, that means building lots of anti-ship missiles rather than lots of aircraft carriers, anti-satellite missiles rather than its own constellation of GPS satellites, and hacks, cracks, viruses, and botnets rather than complex C4I networks. 

That there are technical, doctrinal, and practical challenges to these approaches should not make us think that they cannot constitute the pillars of a viable and potent defensive (and possibly offensive) capability.  Wisdom, not hype or hysteria, suggests that every military commander in the world begin to plumb the evolving possibilities of anti-network warfare, and by all accounts the PLA seems, wisely, to be doing so. 

China's Auto Reform: One Foot on the Gas, One Foot On the Brake

In the Hutong

Good grief, March already?

2111 hrs.

The Associated Press is reporting that we can expect China to undertake a reform of its largely state-owned auto manufacturing sector. The plan apparently calls for China to winnow the number of domestic auto manufacturers from 14 down to 10.

No, Not THAT Big 10...

The AP report refers to a Chinese "Big 10" made up of a top tier of auto makers with the capacity to make 2 million vehicles or more (Shanghai Automotive Industry Corporation (SAIC), First Automobile Works (FAW), Dongfeng Motor, and Changan Motor) and a second tier of six manufacturers with capacity of around 1 million cars per year.

First, some perspective: a million cars a year is not small, but Ford and GM will probably make around 9 million vehicles apiece this year, so "Big 10" is still relative.

Second, in an environment where the auto business is so difficult that even Toyota is starting to sweat, one might ask whether China is being a tad cautious in reforming the auto business. It would seem a tad ambitious to envision a global market with sufficient room for ten Chinese car brands.

In truth, China is being cautious about consolidating the country's auto business, and for good reasons.

Slow and Steady

The first and most important is the geographic dispersion of China's car makers, and the political challenges that implies. Unlike the U.S. car industry, which was traditionally concentrated in the state of Michigan, China's automakers are scattered around China.

Closing one - even if it is just eliminating the brand and keeping the factory - means favoring one region over another, and that is sensitive in an economy so careful with its local companies that domestic protectionism remains a major challenge to the country's development.

Edmunds Inside Line notes that if local governments want they can derail the process. Even if they do, that derailment won't be permanent - the central government will get its way, but the question will be the cost: each closure is going to demand negotiation and horse-trading among the governments, meaning more costs and delays.

Second, China does not want to undertake consolidation at the expense of market share. Foreign makes still take up over 60% of local vehicle sales by volume, and closing down too many local companies too fast will mean that foreign marks will gain ground. Given China's stated intention to create global auto marques of its own (rather than just being the factory for European, Japanese, Korean, and American brands.) Given that the ability of the remaining 10 automakers to increase capacity is limited, best to go slow.

Third, all of the industrial policy in the world does not make up for solid market performance. It is still too early to tell which automakers will be able to make the difficult shift into international markets and then be able to build that into global leadership. Picking candidates, not winners, is the wise approach now.

Upshift

Finally, there are the intertwined issues of technology and the environment. And for us here in the Hutong, this is a big one.

In the coming decade, China's auto industry is going to have to shift away from petroleum-fired internal combustion engines to something else: The country's air quality will not be able to take hundreds of millions of cars running on unleaded; simply fueling those cars would put China into a geopolitical face-off with the U.S. and Europe; and the global car manufacturers who remain after the global downturn will be producing their own low-emission or zero-emission vehicles in China.

That shift is going to mean investments so large in technologies so complex that it may force a rethinking of the entire automobile industry. The logic of a single vertically-integrated manufacturer starting with steel, plastic, and rubber and churning out cars may not hold is the industry makes its leap.

As such some companies in China's auto industry may well elect to specialize either in assembly or components, opening the door for one or more of the current players to ease their way out of making cars and into supplying China's remaining brands with motors, batteries, fuel cells, bodies, or other major components.

If that happens - and I suspect that at least in the case of second-tier brands it might - it makes more sense to allow that specialization to evolve and chivvying it with the visible hand of government, rather than making those choices now. The coming years, in fact, are likely to involve the government making the case to some manufacturers move to making parts and components.

Taking a "slow-cull" approach to reforming the industry is the wise approach for China's policy makers. The nation's auto industry will be reformed in stages rather than with the single stroke of a pen, and the speed of those reforms will depend not only on market growth and global finance, but on the demonstrated ability of China's automakers to withstand the successive waves of change they will face in the coming years.

The Yin, the Yang, and the Bang-Bang

Somewhere in East Wangjing

Watching people from Star Group prepare for a pitch

0931 hrs.

On the morning after the 40-story bonfire that turned Beijing's nearly finished Mandarin Oriental Hotel and Television Cultural Center (TVCC) (known locally as "the boot" for its shape) into a smoking, twisted hulk, speculation and accusation continue about the cause. Many suggest that errant fireworks are to blame. As the building was owned by one of China's most powerful state-owned entities, China Central Television, the investigation into the fire and the report on its causes will undoubtedly become a political football, so we may never know what truly happened.

Shooting Yourself in "the Boot"

If fireworks were a contributing factor, the Chinese government will face a dilemma. If it does nothing, it risks the continued (and growing, as the nation grows more prosperous) sequence of tragedies large and small that accompany the use of pyrotechnics and high explosives by the inexperienced and inebriated.

If, on the other hand, the government takes the logical step of restricting the manufacture, distribution, sale, and use of fireworks, it risks widespread popular discontent (fireworks are not only a cultural mainstay, they are arguably more of a national icon than the flag) and the decimation of a large seasonal industry.

In short, the entire issue places the two imperatives that guide Chinese policy making at odds with each other: the Confucian obligation for the ruler to act as parent to the nation on the one hand, and the growing importance of continued popular support as China's polity evolves on the other.

Between the economic downturn that is putting an estimated 20 million people out of work and the political sensitivity of key historic milestones in 2009, sustaining popular support is going to be a particular challenge this year.

As such, I do not expect a major crackdown on fireworks. Instead, I think the government will take what will amount to token action to restrict fireworks that in scope and enforcement will amount to just enough to avert a major calamity.

Rantings of a Pyrophobe

All of which is a pity. If there was ever any issue on which the government should behave in loco parentis, this is it.

For some perspective, this is what I wrote about the fireworks issue two years ago (and pardon me in advance for the rant):

Xinhua is reporting that fireworks in Beijing have killed one person and injured 270 over the Chinese New Year.

You see, this is where I start to have a serious problem with moral relativism. You say it is part of China's culture to set off fireworks and has been for a thousand years. I say it's wrong.

I say look at the pollution and litter caused by fireworks.

At the factory explosions that level entire city blocks.

At the fires that destroy homes and lives.

And, of course, the toll of dead and injured.

Fireworks are made of gunpowder. Gunpowder was created to kill people and break things. Fireworks are an accidental, incidental application of the material.

For a little perspective on what we're talking about, police in Beijing confiscated 560 million illegal fireworks this year. At an average of, say, one gram of high explosive per, that's about 1.3 million pounds of TNT. To put this into perspective, a fully-loaded B-52 Stratofortress bomber carries 51 500-lb Mk-82 Snake Eye bombs. That means that just the illegal fireworks confiscated in Beijing would fill 50 B-52 bombers. And that's not even taking into consideration the 380,000 crates of fireworks sold legally, which at (I'm guessing) 10 lbs per crate, would fill another 150 heavy bombers.

Allowing millions of pounds of high explosives into the hands of people who have neither training nor the understanding of pyrotechnics to handle them safely seems to me a pretty straightforward example of a really bad idea.

In any culture.

None of this means that fireworks have to go away. It just means that the handling of fireworks above a certain (very small) size would need to be left in the hands of well-trained, licensed, and insured technicians.

I suspect we will get there eventually. The only question is how many people must suffer in the meantime.

UPDATE:

Wire services are now reporting that the culprits were actually a "professional" fireworks company from Hunan province who were hired by CCTV to set off the pyrotechnics. See my point above about "well-trained, licensed" technicians.

As opposed, say, to those with a little guanxi and just enough competence to make them dangerous.

@rmack Agrees: Obama's Outreach to China Should be Social

Jingmi Road, Outbound

Dodging pyrotechnics

1344 hrs.

Former CNN Beijing bureau-chief turned eChina scholar Rebecca MacKinnon published an open letter to U.S. President Barack Obama on the Huffington Post earlier this week, echoing my essay on Obama, China, and Public Diplomacy published in AdAgeChina last November (which I revised and posted here).

Longtime readers of this blog know that while Ms. MacKinnon and I frequently agree on principle, we usually disagree on our approaches to addressing some of China's more vexing issues, in particular on the matter of Internet censorship.

But on this issue we agree: the new US administration needs to extend its diplomatic outreach to China beyond the nation's leadership, its foreign affairs apparatus, and elites by reaching out to the Chinese people, and social media is a way to do it.

Beyond the VOA

I recently had an opportunity to listen to a panel of distinguished speakers at George Washington University School of Media and Public Affairs bemoan the decline of the foreign correspondent in news today. The keynote speaker was D. Jeffrey Hirschberg of the Broadcast Board of Governors (the U.S. government agency responsible for Voice of America and all government-funded non-military broadcasting.)

While the BBG's component broadcasters have been trying to figure out how to use social media tools in its outreach, they have clearly been struggling for effectiveness. I realized halfway through the talk that their efforts to date were either halfhearted (which I think unlikely) or that the shift in thinking required to capture the potential of new media was simply too large for journalist-bureaucrats steeped in an old-media tradition. In fact, I was struck by the similarities between the words and frustrations of the government media leaders and those of their commercial counterparts.

So as much as it might seem to make sense on paper to leave the government's international social media outreach to the VOA or Radio Free Asia, doing so misses the point. Turning a conversation over to an agency that is seen as the de-facto propaganda arm of the government undermines their credibility and thus their ability to conduct conversations, but more important it limits the scope and effectiveness of the online public diplomacy effort.

Socialize the Aparatchiks!

EVERY office and agency of the federal government needs to be using these tools, and for international outreach that means every section of the State, Commerce, and Defense departments, plus dozens of independent agencies like the BBG. If public diplomacy is to be conducted over social media, we need hundreds, thousands, even tens of thousands of participants on both sides.

In each of those offices, the best approach is to hand responsibility over to people who genuinely understand how to use those tools, and give them the organizational authority to make them effective.

Ten days into the new administration, the White House itself is already setting an example. Not only have they brought in a new, sharp, and young site administrator and completely overhauled the site, they're also got a Twitter feed, and there is clearly more in the works. We do not as yet have a Blogger-in-Chief per se, but given his agenda, I think we can cut POTUS a little slack on that one.

That said, the site is as yet only available in English (the Spanish language site is a stub, really) and as such is not yet a tool for global outreach.

So the goal must not only be to make the government more accessible to the people, but to make the US government more accessible to the peoples of the world.

And we need to be doing this soon. Because if recent revelations that China is investing US$7 billion in an effort to expand and enhance its global media presence indicate anything, it is that influencing the people of the world - and America - is certainly on Beijing's mind. Who will win the global contest for hearts and minds depends on more than just media, but America cannot assume it will win that contest without an effort.

Al-Jazeera should be enough to prove that.

A Final Thought

Over the last few days, there have been several comments online remarking how strange it is that Ms. MacKinnon is apparently not yet tenured at the University of Hong Kong, where she is on the faculty of the Journalism and Media Studies Center . Those voices, while well meaning, should keep in mind that at least in the United States, Ms. MacKinnon would normally need 5-6 years as an assistant professor before being able to apply for a tenured position. I would imagine standards are not much different in Hong Kong, and Ms. MacKinnonhas only been at HKU for two.

Nonetheless, the point is well-taken. Again, I disagree with Ms. MacKinnon's opinions and recommendations far more often than I agree with them, but she plays in essential role in the debate about media in China. While university tenure might be a challenge for someone who has much practical experience but no degrees beyond a B.A., it would reflect badly on the quality of education in Hong Kong and on the independence of the SAR if she were to be denied tenure solely or primarily because her research and public positions cause discomfort in Zhongnanhai.

Being the Change: Fonterra and the Milk Crisis

In the Hutong

Missing my nonfat latte

1933 hrs.

Better writers have covered the Melamine Milk Crisis at great depth already (check out Imagethief's article here as an example, or China Law Blog's coverage) so I won't belabor the story. I do, however, have two points to add, germane to what we've been writing here till now.

The Joint Venture and Ethical Rot

Fonterra, the large New Zealand food cooperative that partnered with Sanlu to manufacture the formula, will be remembered for a long time as a company that allegedly knew about the contamination some weeks prior to the kidney stone outbreak, that, justly or otherwise, reputedly did nothing to either stop the sale of the product or alert authorities. I cannot speak for the veracity of these claims, but they are circulating as if they are the truth.

In the Court of Public Opinion, what Fonterra did and did not know is now immaterial, and if the allegations of inaction are false, the company is going to face an epic and expensive effort in China and elsewhere to repair their reputation. I will not speculate on the cost to the company if the allegations are true.

The lesson of Fonterra is plain: foreign partners in joint ventures have three choices:

1. Pick a China partner of unquestionable operational integrity, and then watch over them like a hawk to ensure they continue to operate in an ethical manner, especially in crises;

2. Pick a China partner of imperfect operational integrity, then cram into every employee the importance of maintaining the public trust over any other consideration;

or my favorite

3. Avoid the joint-venture question entirely to ensure you can set and enforce ethical standards with ease.

Readers of this blog know that I am fond of saying that the Sino-foreign joint venture is a lawyer's dream and a manager's nightmare. Maintaining a semblance of control and a consistent strategy are difficult enough in a JV. In an environment where business ethics and corporate governance are no longer of mere academic importance, yet where moral relativism and the Eleventh Commandment ("thou shalt not get caught") frame individual and corporate codes of conduct, the joint-venture does not lend itself to the cultivation of ethical leadership.

My point is not to absolve Fonterra, Sanlu, or anyone else of any action or inaction because of their corporate structure. Rather it is to sound a warning to companies who are in or are considering a joint venture that these are easy places for ethical lapses to fester unless both partners are committed to setting - and enforcing - high ethical standards. Articulating those standards, training to them, and sticking by them even when there will be hell to pay for doing so is the only way to prepare for a crisis like this, and to have much hope of long-term recovery in its wake.

Quality is Free

When I was fresh out of graduate school, I was thrust into a production management role for which I was somewhat under-qualified. (I'm being charitable, here.) My job was to spend six days a week supervising the outsourced production of accessory furniture across 30 factories in greater China. I had trained in marketing and logistics.

Two things saved me: a deep affection for factories and line workers I gained working teen summers in my dad's investment casting foundry, and Philip B. Crosby's book Quality Is Free: The Art of Making Quality Certain. In the space of less than three hundred readable pages, Crosby gave me a graduate course in managing quality. But what was important was his core point: ensuring quality - and the considerable time, attention, and costs associated with the effort - is where profits come from. Until you stop seeing quality control as a cost center, you will never have passable quality.

Or, as cookie-madam Debbie Fields once said, "good enough never is."

The end result of this upheaval (once the children are healed and the accused have done the perp walk) will be that a few smart companies across China's food sector will see this as an opportunity, and will make major investments in quality assurance, both human and technical. These companies will realize that if nothing else, making investments in inspectors and equipment will be cheaper than regularly yanking product off the shelves.

As Mattel and hundreds of toy retailers learned last year, though, you can't trust quality to the last guy up the supply chain. There has been far too much "trust" and not enough "verify" in handling quality issues out of The World's Factory of late. When I was inspecting furniture in Taiwan, I frequently did it alongside third-party inspectors and buyers from some of my company's largest customers - American retailers. It pissed me off, it was costly for the buyers, but it was the only way to ensure that nothing slipped through.

It would be easy to throw this whole issue on the government, but this crisis has proved once again that business cannot wait for government action. The real lesson of the Melamine Milk Crisis is that quality is everybody's problem, from the farmer to the retailer.

Nota Bene

If you haven't already, you have got to read what David Dayton over at the Silk Road blog is writing about all of this. David is a longtime China and Thailand factory guy. He knows the ugliness around the quality control business, including what it is like to go into a factory and get accused of racism (or worse) for rejecting a critical shipment for quality lapses. In his writing, he's pretty merciless about the issues, but he's absolutely right. I am a certified pollyanna when it comes to China, but not when it comes to quality control.

The price of quality is eternal vigilance. And it is really clear there are lots of people asleep at their posts - or just looking the other way.

Being the Change: The Ethics of Baidu

Starbucks Pinnacle

Desperately Seeking Bandwidth

1241 hrs.

Over the weekend, The Register ran an a special report on Baidu, alleging that the Chinese search giant is engaged in technological chicanery in order to keep users plugged into vast and illegal reservoirs of online music (h/t maths at Music 2.0). The report is here.

Searching for trouble

The report explains - in forensic detail - how Baidu allegedly continues to make money on illegal downloads while maintaining plausible deniability. A taste:

Baidu's MP3 Search was monitored for six months at the end of last year, analyzing search results using 600 songs spread across multiple genre. A number of areas that seemed incongruous to a pure and neutral search engine were discovered, and three details emerged.

Firstly, a network of mysterious sites with closely related domain names contributed more than 50 per cent of the search links returned by Baidu. The songs hosted on the mystery sites were unreachable except through the Baidu search engine. Furthermore, infringement notifications resulted in unlicensed songs simply moving from one of these domains to another.

Secondly, Baidu does not link to the two leading paid download sites in China, 9Sky and Top100. While Google for example will return results for a song search to licensed providers (7Digital, Amazon, eMusic or even iTunes) as well as Torrent trackers, Baidu is much more selective.

Thirdly, music blogs and forums naturally form a significant source of music search links for any search engine. But with Baidu, these contributed to only 30 per cent of the music search links on Baidu’s MP3 Search.

The cumulative effect is to keep the "free music flowing" for Baidu's users - with devastating consequences not just for creators, but for rival internet businesses.

Even more compelling, the report also suggests that Baidu bullies journalists, publications, and websites into silence about its practices by threats and coercion.

In a superb post, Maths, a digital music advocate and avid China-watcher, builds on The Register's report and asks some penetrating ethical questions, suggesting that if the above allegations are proven true, Baidu's advertisers, investors, advocates, and anyone else working with Baidu in its music efforts are soiled by association.

It matters if the cat is white or black

I'm not quite ready argue for Baidu's conviction in the court of public opinion. The Register's report is only three days old, and I cannot ignore that the company has a list of powerful rivals that grows as it expands its business. Time will tell how valid these allegations are. Their appearance on a global website demands further scrutiny by the music industry, the media and the Chinese authorities.

But let's leave the specific matter of Baidu aside for a moment and examine the larger question.

At what point, we need to ask, does it become unethical to deal with a company that appears to be actively violating the law? Do you take a zero-tolerance approach? Do you wait for a criminal indictment? Do you do your own due-diligence? Or do you simply shrug your shoulders and say "I really don't care what kind of people I do business with, as long as my company makes out on the deal?"

These are not easy questions, but they are an example of the kind of issues a company needs to deal with in advance of doing business in China, or failing that, right now. As I noted in my second post on the iTunes blockage, business in China is a moral and ethical wasteland, so moral quandaries are a part of doing business here. Smart companies address those issues up front with clear guidelines.

As something of a moral absolutist, I know where I'd draw the line, but I recognize that others prefer a more flexible approach. Being a moral relativist in your approach to international business ethics does not mean you don't have ethical standards, however: it just means that every company will have different standards. Each company still need to draw a line, and you need to be able to justify it not only to local audiences here in China, but to your full range of stakeholders around the world.

Failing to do so puts your reputation - and your business - at the mercy of your least ethical partner.

Why are we here?

More important, such issues also give us a precious opportunity to demonstrate that the presence of our companies in China exerts a positive influence on the healthy development of the country and its economy. Either we come to Rome and do as the Romans, or we show up determined to leave the place better than we left it.

Deciding who we will (and will not) do business with - and under what circumstances - lies at the heart of our effect on China.

Apple's bi-polar China disorder

In the Hutong

To breakfast, or not to breakfast

0936 hrs.

So here is the deal.

Apple starts selling an album called "Songs for Tibet" on its iTunes Music Store (iTMS), and they do it right in the middle of the Beijing Olympics. Coincidence, or passive-aggressive middle finger to China? Apple isn't saying anything about it, so we are left to reach our own conclusions.

Next, word gets around that a bunch of Olympic athletes staying here in China - reports say as many as 40 - have purchased and downloaded the album.

Yesterday, people around China began noticing that the iTMS is no longer accessible from China. A few of the more tech-minded actually decided to try to use traceroute to figure out why. They confirmed that access to iTMS was being blocked by China.

You mess with the bull...

Without getting into a debate over the politics, let's look at the business issue.

Apple is in the early stages of a much belated (and arguably long-overdue) push into China. After nearly two decades of near-invisibility, the company opened its first Apple store in China just three weeks before the Olympics. A second Beijing store is under construction, and Ron Johnson, Apple's senior vice-president of retail, said there are many more China stores to come.

At the same time, Apple is apparently deep into negotiations with at least one Chinese carrier to start selling a (fully-enabled) iPhone here in China.

And of course, Apple has finally begun making headway in the market against its rival computer, phone, and music player rivals.

By selling "Songs for Tibet," Apple has placed these efforts in jeopardy.

Apple has given the government all the excuse it needs, not only to block the iTunes Music Store, but to raise extra barriers on permits for further Apple retail stores, to throw barriers in the path of Apple's iPhone deals with state-controlled carriers, and to make the creation of a Chinese iTunes Music Store and App Store a distant dream (unless the let the carriers run it.)

Not to mention make the lives of thousands of dedicated Apple customers here in China just a little more miserable - especially those of us who count on iTMS as our sole source of legitimate (non-pirated) music.

And Apple is alienating the very market it is trying to create in all of these efforts, infuriating the legions of Chinese who believe that the situation in Tibet is far more nuanced than the media, activists, and general public outside of China understand.

...you get the horns.

I am sure there were valid marketing considerations behind the decision to sell "Songs for Tibet." I'll even grant the (specious) possibility that there was a good business reason to do so during the Olympics. If not, Apple was certainly within its rights to make a political statement.

But Apple - and its shareholders - must recognize that its own actions are sabotaging its efforts to build a market in China right as those efforts are showing fruit. Such a bi-polar approach to this market is not sustainable. Apple management needs to choose between developing China as a market or the freedom to engage in random acts of passive-aggressive panda-punching.

Making that choice, as much as real estate and labor expenses, is part of the cost of doing business in China.

Andrew Nathan and the Olympics

In the Hutong

Learning to type while horizontal

2040 hrs.

In the thin guise of reviewing six books about China and the Olympics, Columbia University professor Andrew Nathan writes a lengthy and impassioned critique of human rights in China. Nathan holds senior positions with Human Rights Watch and Human Rights in China, and in writing in The New Republic he is preaching his gospel to a receptive congregation.

Whether you agree with Nathan's opinions or not, the essay deserves a read, if nothing else because it spells out succinctly the position of human rights advocates on the nature of government in China. Nathan sees the Chinese government as a vast, crafty conspiracy serving interested in nothing but its own survival, and he sees the Chinese people as alternately cowed by corrupt government bullies and anesthetized by the superficial trappings of economic success.

(Nathan stops just short of acknowledging that the advocates of human rights - and he, by extension - engage in their own form of reality distorting propaganda. A nice touch.)

In short, it is not a balanced appraisal, but it is one that for the sake of balance demands our attention.

Quoted: The sign of the times is no signs

In the Hutong

Wondering how gross the weather can get

1724 hrs.

In part to prevent ambush advertising around the Olympics, and in part to tone down the level of in-your-face advertising in Beijing before the Games, the city's government has taken down over 30,000 outdoor advertisements in Beijing, including some of the most high-value billboards in the country. Normandy Madden gives a good rundown in the July 7 AdvertisingAge.

George Gallate, the Asia-Pacific CEO of Euro RSCG, is not happy.

"I'm quite surprised by the amount of control they are able to do [sic]. But this degree of control is one step too far in one of the most important aspects of an open economy, the right to advertise."

Leaving aside the fact that my most recent check of political science texts fails to turn up a mention of a "right to advertise," Mr. Gallate and his fellows in the ad business are understandably tweaked: some of those billboards list out at over US$50,000 a month, which would mean just under $9,000 in agency commissions at standard rates for a single billboard.

The ban doesn't stop at billboards - it includes the light-boxes along Beijing's main thoroughfares, bus shelters, and even the ads on buses and subways. Either the ads are being sold to Olympic sponsors at highly preferential rates, or they're being held back.

A Perspective on "Karma"

In the Hutong 

Straining air through my teeth 

2111 hrs. 

There is much being written tonight about the thinking of Ms. Sharon Stone and the feelings she expressed about the earthquake in Sichuan from the red carpet in Cannes. Before we get carried away, some perspective:

No matter how intelligent or famous someone is, they cannot possibly speak intelligently about an unlimited set of subjects. We all have opinions on subjects about which we know little, and for better or worse we venture our incompletely-informed points of view on a far wider range of subjects than we should. 

Usually, there is nothing wrong with that - for most of us, it gives us a chance to venture our opinions, have them shot down for very good reasons, and walk away having learned more about a subject. Not to mention had a good conversation (face-to-face, in a forum, or in a blog) in the process. 

For someone in the public eye, that kind of casual "hypothesis testing" tends to be a bit more problematic. It gets very easy to step in doo-doo, so usually they avoid it.

Much to the chagrin of the many people whose livelihoods depend on her continued popularity, Ms. Stone has stepped (some would say "leapt") into some very deep doo-doo.

I would venture to say that any religious leader - including the one she apparently deeply admires - or any true humanitarian would take her aside and inform her that whatever her opinions might be on Asian politics, her remarks were a blight not only on herself, her industry, and her cause, but on humanity. I daresay that in the interest of her own karma, her soul, or her own peace of mind they would counsel her to apologize, and to reach out with humility and take all reasonable steps to help ease some of the suffering of those she dismissed so flippantly. 

But that's not the larger issue.

What is truly important for us to remember is that there are - and will continue to be - people in the public eye who will speak out on issues related to China despite knowing very little or nothing of what they speak. Until they, or the world's public at large, know better, this will continue. 

There are, therefore, two correct responses to this situation:

1. Pointedly ignore Ms. Stone and others like her; or

2. Set out to clarify the record. 

I would never defend Ms. Stone and what she said. Personally, I find every word of her diatribe, the setting, and the political convictions that underlie it, utterly detestable. 

But by attacking her personally we miss an opportunity to debate the point. 

And the debate is what is important. Not the source of the opinion that begets it.

BOCOG's Edict to the Media

The Lanai in the Treetops
Grateful that the Fort DeRussy disco has quieted down
2153 hrs.

Among my vacation reads is BOCOG's guide for the foreign media covering the Olympics.

Admittedly, it's not quite a gripping as the rest of the stack of books I picked up while over here, but it provides some interesting clues about what we are going to see pumped out of Beijing this summer.

The entire 47mb tome can be downloaded from BOCOG by clicking the appropriate link on the press release page, if you're interested. Otherwise I'll be posting some thoughts once I slog though it.

A Tale of Two Actresses

In the Hutong
In search of a pain reliever
2027 hrs.

Whatever you may think about the relative merits of entertainers leaping from the screen and onto the world stage, we were treated this week to a profound contrast in the styles and approaches of two young actresses.

Exhibit A is Marion Cotillard, the 32-year-old French actress who won the Academy Award for Best Actress a little over a week ago for her apparently inspired performance as Edith Piaf (yes, I too am a philistine and had to Google it) in La Vie en Rose. In an interview from a year ago broadcast on a French website, she proclaimed that the 9/11 attacks were a hoax manufactured by the US government for political ends, and that the twin towers were demolished because they were obsolete.

Without supporting or debating the veracity of Ms. Cotillard's claims, suffice to say that we here in the Hutong appreciate a good conspiracy theory in the same way we appreciate good science fiction - great stuff with which to tickle the frontal lobes, maybe even ask a few hard questions. But as most bloggers learn fairly quickly, when one takes a public stand that is in direct opposition to popular perception, one had best be very, very sure of one's facts and be prepared to support one's stand through effort and action. Sadly, Ms. Cotillard goes no further than voicing an opinion that begs for support.

Exhibit B is Angelina Jolie, also 32, also an Oscar winner (Best Supporting Actress for 1999's Girl, Interrupted) who in her capacity as goodwill ambassador for the United Nations High Commission on Refugees decided that rather than snuggle up to the armchair activist crowd, she'd hop on a plane and head for Iraq and see what was going on. From her Thursday op/ed in the Washington Post:

"My visit left me even more deeply convinced that we not only have a moral obligation to help displaced Iraqi families, but also a serious, long-term, national security interest in ending this crisis."

She continues:

"As for the question of whether the surge is working, I can only state what I witnessed: U.N. staff and those of non-governmental organizations seem to feel they have the right set of circumstances to attempt to scale up their programs. And when I asked the troops if they wanted to go home as soon as possible, they said that they miss home but feel invested in Iraq. They have lost many friends and want to be a part fo the humanitarian progress they now feel is possible."

Her conclusions are hardly those of an expert, and her focus is exclusively on the issue of the 2.5 million Iraqi refugees for whom she seeks repatriation. More than one pundit has questioned her qualifications to speak on behalf of all of the troops deployed in Iraq. Nonetheless, they are startling because they come from an unexpected source, and because of the inevitable reverberations they will send through celebrity salons on both coasts - not least the circles in which she and husband Brad Pitt circulate.

(For the record, I don't feel qualified to make a call on Iraq either way, so I won't.)

Again, leave aside your own opinions on the specific matters at hand. To me what is germane is the difference in approach. Two young women, each given the opportunity because of fame earned on the screen to voice their opinions on larger matters to their audiences, chose to make use of their bully pulpits in incredibly different ways. One chose to make the kind of flippant, uninformed remark more appropriate to a conversation with close friends. The other chose to take the time and risk to journey to someplace she could learn more, then share her thoughts and findings - whatever they're worth - with others.

Regardless of what you may think about Ms. Jolie, her motivations, the appropriateness of her remarks, or her qualifications to even make them, you must applaud her quest to learn a little something of the subject before volunteering so public an opinion.

A wise old sergeant once told me: "Wolf, opinions are like a**holes: everyone's got one, and they all stink."

The only way I would dare to correct that is to say that the more informed your opinion, the less it stinks. That is the lesson I will take from Ms. Cotillard and Ms. Jolie.

Internet or eSludge?

Jingshun Road, inbound.
Any bets on the first sandstorm?
1028 hrs.

Living in China one gets so used to long lead times for web pages to load and email to download that when the Internet really slows down you don't trust your own senses. You sort of think to yourself, you know, the Internet is really slow today. Or maybe I just drank too much coffee.

But when the CTO of one of my clients grabbed my arm the other day and ask me if I've noticed that the Internet in China had slowed considerably lately, I had all the confirmation I needed that the issue had nothing to do with caffeine-induced impatience. The net IS slower, and not just with overseas connections.

There could be several explanations for this, some quite sinister, like "they're upgrading the GFW." (Part of the joy of living in China is that government conspiracy theorists who would be regarded as crackpots anywhere else tend to start sounding like realists here. It doesn't mean they're right about things, just that people actually have to consider what they are saying before discarding it as paranoia.)

But there are a lot of things going on in and around Beijing that could be contributing to this: network upgrades, Olympic-related projects, construction cutting cables.

Or, indeed, more careful and deliberate scrutiny of the Internet in the weeks ahead of the coming opening of the 11th National People's Congress.

Either way, it's making surfing more painful than it has been in years.

I want my VPN...

Indiana Jones and the Temple of Heaven

In the Hutong
Asking for a "do-over" for my CNY break
1035 hrs

This morning brings us another noble but empty gesture in the long history of political activism in Hollywood.

I regard Steven Spielberg as as one of the greatest filmmakers in the history of the craft, a fine humanitarian, and, really, one of the good guys. I understand what motivated him to turn down the invitation of the Beijing Organizing Committee for the Olympic Games to join Zhang Yimou's team charged with creating the opening and closing ceremonies for the Olympics. I applaud him for following his conscience in the matter.

At the same time, I cannot help but wonder if his gesture, however noble the intent, will do any real good.

A Little Trouble with Big China

If there is a single lesson to be drawn from history, it is that the Chinese government has a passive-aggressive streak that is both wide and deep. Public efforts by governments, organizations, or individuals from outside of China to coerce or embarrass Beijing into a policy change on matters either foreign or domestic do not work. Instead, they consistently provoke a visceral negative response that is often seen by outsiders as disproportionate or even extreme.

There are cultural, historical, and political reasons for this. One need only review with a measure of empathy the past two centuries of China's international relations, its serial humiliations at the hands of the European powers, Japan, Russia, the United States and even, briefly, Vietnam to understand why no Chinese leader, government, or party could be seen to cave to a foreign demand.

And it is not that the Party will not stand for it - the Chinese people will not. A little time in Internet chat rooms in China or actually speaking to people here would tell you as much.

None of this, of course, a justification of unconscionable policy - a history of conquest and oppression or a national or cultural inferiority complex does not excuse bad behavior in any form.

But it calls into question the competence - or sincerity - of self-appointed diplomats who ostensibly set out to change such behavior when they do so without considering the medium, the messenger, and the delivery as carefully as they do message. Failing to do so may make good copy, but it does not lay the groundwork for change.

The Spielberg Ultimatum

For the sake of argument, let us grant Mr. Spielberg, Mia Farrow, and the other well-meaning luminaries of the Save Darfur Coalition the highly questionable assertion that the warlords in Khartoum would play the lickspittle toadies and do whatever Chinese diplomats told them to do.

Building the necessary consensus within the Chinese government and among Chinese policy-makers in order to get China's envoys to issue those orders requires navigating not only the currents of international relations, but more critically the byzantine politics of the Communist Party and the Chinese government.

Either Mr. Spielberg, Ms. Farrow, and the Save Darfur Coalition do not know any of this - which calls into question their competence as activists and public advocates - or they are ignoring it, which makes them insincere and suggests other motives are at work. I believe in these people, so I think the problem is the former.

Mr. Spielberg certainly deserves credit for making an effort: for sending a letter (publicly - oops) to Hu Jintao; for stepping out of his director's chair long enough to meet with China's special envoy to Sudan and the Chinese Ambassador in New York last September; and once again with diplomats in Los Angeles a few weeks ago.

Alas, Mr. Spielberg's prodigious talents as a filmmaker and his huge compassion for the suffering people of Darfur are not matched with talent in international relations. Ten months later, things are still bad in Darfur, so in Mr. Spielberg's assessment, the Chinese carry the full blame. No credit for the effort, mind you. No appreciation for efforts followed by encouragement to do more. This is Hollywood, folks. If you can't make a miracle in 10 months, you're out.

A pity, then, that the world does not work by the rules that govern filmmaking.

As a result, all of Mr. Spielberg's efforts with Beijing have come to so much less than they might have. How wonderful it would have been to have Mr. Spielberg as a genuine public ambassador, someone with credibility and real pull in China who could help make things happen. Or, indeed, to see China active in the resolution of the Darfur situation, finding out later that Mr. Spielberg and Ms. Farrow played critical roles in driving the process.

It could have worked that way. But that won't happen now. Instead, Mr. Spielberg has slammed the door on China.

And, rather than rethink their position, the Chinese will certainly return the favor. In fact, it is entirely possible that Mr. Spielberg's gesture will undo much or all of the good that has been done to date.

The Third Way

It is useful to remember that the implicit in the concept of diplomacy - whether conducted by governments or activists - is the idea that reaching a mutually agreeable outcome need not entail either appeasement or coercion.

Making strident pronouncements and issuing public ultimata is as odious - and, ultimately, as ineffective - as being nice to the big dragon (or bear, or falcon) and hoping that it will do what you want. Effective diplomacy demands determination, but it also requires tact.

I am a great admirer of Mr. Spielberg, Ms. Farrow, George Clooney, Don Cheadle, and many of the people involved with the Save Darfur Coalition. I sincerely hope they understand that if things are worse there now than they were a year ago, perhaps a change in tactics is in order, because pumping up the volume is certain not to work, despite the great hopes of those good people to the contrary.

And I sincerely hope that whoever replaces Mr. Bush, Mr. Cheney, Dr. Rice, and Mr. Gates next November understands that as well.

For the sake of the people of Darfur.

The Talent Gap

In the Hutong
Watching Clint Eastwood in "Bronco Billy"
1803 hrs.

World Bank president Robert Zoellick told a group of reporters in Beijing yesterday that, while China has plenty of money, what it lacks is is the expertise to deal with its problems.

He wasn't kidding.

The single largest constraint on the growth of companies in China is a lack of talent. China is lacking adequate pilots to fly its planes, managers to lead its enterprises, and out-of-the-box types to drive its innovative and creative industries.

What holds true at the micro level holds is but a reflection of a broader national problem. The long-term growth of the world's most populous nation is more threatened by its yawning talent gap than by any other single factor.

Long term, the answer is education. But in the near and medium term, China will have to rely on a growing force of imported talent to keep the economy expanding, particularly in the high-value-added industries it needs so badly to develop before the world's youngest nation becomes the world's oldest.

China's Hobby Renaissance

In the Hutong
Minding the store
2018 hrs.

One of the profound trends that is taking place across China today that I haven't seen anybody pick up on is the rebirth of hobbies.

For much of China's history, hobbies have been limited to a tiny elite with a lot of extra time on their hands. Most hobbies were cultural in nature (brush painting, collecting, gardening), but some in the merchant and mandarin classes had some eclectic interests (I'm speaking of the non-prurient variety, here. This is a family blog.) Hobbies, in other words, were not a part of China's mainstream culture, and those that were - kite flying, bird raising, calligraphy - were considered by most Chinese to be something for old folks.

That has all begun to change over the past decade. Growing numbers of Chinese not only have the leisure time to pursue activities outside of work, family, and school, they also have the financial wherewithal to pursue their newfound avocations. Media are carrying more stories about hobbies, and the Internet makes information about their choice of hobbies readily accessible.

What is interesting about this is that hobbies create a new class of consumer for goods and services already available, and create entirely new markets for products that were never of much interest before.

Some examples:

• For the first time, it is possible to obtain a civil pilot's license as a non-professional, and to purchase and own an aircraft for private use.

• Collecting militaria and military uniforms is an increasingly popular hobby among a startlingly diverse group of collectors, most of whom network online. And they're not only buying Chinese items - they're collecting from overseas as well, either via eBay or as a part of their travels.

• Bicycling used to be about transportation in China, not recreation. No longer. Manufacturers from Giant to Trek have realized that a growing number of Chinese who ride to work in cars, busses, or trains want back on their bikes, either for exercise, competition, or adventure.

• A growing number of Chinese are taking up SCUBA diving, despite the fact that few Chinese have ever even had swimming lessons. International organizations like PADI, the British Sub-Aqua club, and NAUI are setting up representation in China to work with the Chinese Underwater Association.

• Outdoor activities generally are growing incredibly fast. Skiing, hiking, camping - all sports popular overseas but with little history in China - are growing quickly. Outside Magazine's China edition is now up to 200 pages per month, printed on what one reader described as "gorgeous, thick, glossy paper." North Face, Sony, and Motorola are but a few of the advertisers who are either reaching out to the lifestyle or who are producing products that appeal to the specific hobbies Outside covers.

Here is a simple truth: if there is a hobby somewhere, somebody in China is practicing it, and the numbers are probably growing.

Some of the other hobbies that are showing early signs of major growth:

• Gardening, both indoor and outdoor, is on the rise as more people buy homes and discover the value (both physical and therapeutic) of having plants in and around the home. The biggest issue here - knowledge, especially in the care and feeding of house plants.

• Salt water and fresh water aquariums are also growing in popularity in part because of feng-shui, and in part because the sound of the pump and the fish is so soothing.

• Scrapbooking, as a nation of people cut off from the memorabilia of their past by the paroxysms of the 20th century seeks to recapture and preserve what is left, and what they are creating now.

• Collecting generally is big, and if Hong Kong has proven anything, it is that Chinese are avid collectors. Almost any type of collecting is growing except for stamp and coin collecting, which many seem to see as old or passe. (At the same time, those who are collecting stamps and coins have more money to spend, and so the hobby will grow in real dollar terms for some time, even as the new generation eschews it.)

• Photography, which many are discovering through their cell phones, and which a growing number seek to step into more "pro-sumer" equipment.

• In keeping with the switch of bicycle from transportation tool to recreational gear, cars and motorcycles are heading that way as well. In particular, after-market performance parts, body kits, finishes, and the like are growing quickly. We're seeing the first modified cars on Beijing's freeways, and even though the customized motorcycles tend to be limited to the CJ 750 (the BMW R71 in disguise), can choppers be far behind?

Watch for this trend to grow in importance over the next five years, and to begin to change the nature of several industries.

The question each of us needs to ask is this: how are China's hobbyists going to change our business?

Forget the Great Firewall

The Airport Expressway, Beijing
Heading to my appointment at NBC
0931 hrs.

Sitting here prepping for an interview at the NBC bureau, I've realized that our metaphors are not keeping up with the time.

Bear with me.

The expression "Great Firewall of China" originated in the mid-1990s, when China's government was attempting to create an alternate Internet that was walled off from the rest of the world with the exception of a few select access points. Back then, it was fairly descriptive.

Today, however, the Internet in China is largely integrated into that of the rest of the world, with specific, increasingly pinpointed sites and services (Wikipedia, the BBC, some porn, and lately some RSS feeds) walled off from access.

It's not an ideal situation, but it is one far different than the one that a cute metaphor like "Great Firewall" conjures up.

It would be far more accurate to talk about "Checkpoint China," an image that conjures up a flow of traffic going in and out of the country, with restrictions being far more targeted than the kind of URL and keyword profiling that we used to have to deal with in the past.

I know, it may sound like a lot of semantics, but words are important. So many of us here in China complain when people outside of the country have outdated or inaccurate views on China. If we use inaccurate, inapt catchprases just because they sound good on the tongue, not only are we propagating the wrong impression, we are setting the rest of the world up to take actions vis-a-vis China that would be inappropriate and wrong.

I don't know about anyone else, but from my home, my office and public access points around Beijing, I can get onto 98% of the sites I want to reach at any given time, and its a lot better now than it was five years ago.

So please - give up on the "GFW." China's Internet restrictions are much more about neo-Confucian paternalists ("Net Nanny") and increasingly selective filtering ("Checkpoint China") than a general effort to keep the Internet away.

Windows and Hoops

In the Hutong
Slowly decompressing
1456 hrs.

As Tim Chen makes his move from the leadership of Microsoft China to his new chair running the NBA here in the PRC, everyone seems to be asking two things: how badly will this damage Microsoft, and why is Tim doing this?

To answer the first question, you have to look at why he was brought into Microsoft in the first place.

The People Artist

When Mr. Chen arrived at Microsoft four years ago, the company faced challenges on all fronts. They were seen as distant and arrogant by consumers and the channel, all of whom ; manufacturers resented the company and brazenly shipped computers loaded with pirated copies of Windows; the government was making noise about Microsoft's perceived monopoly and was openly supporting Linux and other free and open source software; the company was getting no credit for its research and development efforts in the PRC; and, to make things worse, relations between Microsoft's own people in Redmond and Beijing were hardly optimal, fraught by misunderstandings on both sides.

Certainly from an outsider's point of view, all of these things were getting worse - so much so, in fact, that many of us wondered if Mr. Chen had taken leave of his senses by leaving the rapidly-recovering Motorola to go to work for a sinking ship.

As it turned out, the move was a good one for all involved. The company's own press release suggests how things are getting better, but there is more to the story than Microsoft is giving away.

(Note, before I go on, that I am not what you would call a Microsoft fanboy, nor do I consider myself a particular Friend of Tim's. I'm speaking with an outsiders perspective here.)

Turning a Corner

In the space of four years, Mr. Chen ensured that the company reversed its slide with all of its critical audiences, not by micromanaging, but by catalyzing change in each problem area through personal attention and careful appointments of key managers.

Across China, the company began rebuilding its reputation with consumers, enlisting deeper support among the channel, getting key manufacturers to begin paying for pre-installed copies of Windows, reinvigorating its relationships with government across all portfolios and all levels, and making significant progress in its fight against piracy. The government's outspoken efforts to drive the adoption of Linux have faded, and the company is getting more credit for its R&D.

Internally, Mr. Chen pulled the company together by installing experienced, China-savvy leadership in each department. He built a bridge between Redmond and the "sub" in Beijing through increased contacts and an all-out effort to educate headquarters in the challenges - and opportunities - the company faced in China, while at the same time proffering solutions rather than making excuses.

After Tim

To credit Mr. Chen alone with all of the improvements in Microsoft's fortunes in China over the last four years may be stretching the point. But as my father was fond of pointing out, a fish stinks from the head. At the very least, Mr. Chen was a critical agent of change, applying effort and attention in those places where he saw that properly-applied effort would help turn specific problems around.

What he left behind was a company heading in a far different direction here than it was when he found it, with the people and systems in place to continue that momentum. Assuming Microsoft can choose a successor (whom, for the moment, remains The Player to be Named Later) with a vision that will ensure Microsoft continues to address its problems and grab its opportunities in China, the company's future in the PRC looks bright indeed.

After Microsoft

By all rights, Mr. Chen's efforts at Microsoft should have won him greater rewards and opportunities inside the company. In all likelihood, that was not in the cards. Growth for Microsoft is now a matter of adding and acquiring new businesses, and the company's senior leadership is fairly set in place. Mr. Chen's growth opportunities at Microsoft would probably have been largely limited to growing the China business incrementally. That's not a bad opportunity, but it's probably not the sort of thing to keep a guy with solid entrepreneurial/intrapreneurial instincts happy for long. Having to fly economy class on trans-Pacific business trips probably didn't help.

The NBA makes great sense. While people closer to Tim than I have joked that he was making the change to get Olympics tickets, my bet is that he is even more excited by the scope and depth of opportunity open to the NBA in China specifically and Asia generally:

• First, the NBA is seriously ramping up current activities, and they go way beyond player recruitment, licensing, and the occasional exhibition game. The NBA China Games, NBA Madness, NBA FIT Camp, Jr. NBA, and the NBA Cares Tour, plus all of the work with the Olympics, Special Olympics, and Paralympics should keep Mr. Chen busy for a bit.

• Care and feeding of sponsors like Haier (the official HDTV of the NBA), Lenovo, (the official PC Partner of the NBA), DHL Express (the offical Logistics Partner of the NBA in the Asia Pacific region) will be important, as will cultivating new sponsors the NBA wants and needs for its broadcasts and live activities in the region.

• Deeper licensing opportunities, extending past the NBA to include teams and individual players, would benefit greatly from someone like Tim with his experience fighting IPR violations.

• There are a host of unspoken opportunities implicit in cloning the NBA in China. The NBA's partnership with the Chinese Basketball Association has a lot of room to grow.

Plus, let's face it: the NBA is more than sports, it's show business. Hopefully, Mr. Chen will have a lot of fun.

Congratulations, Tim.