China Day 2

China Day 2: Shanghai

Today marked our first full day in China. Our hotel (the Westin Bund) is gorgeous – sweeping glass staircases and skylights in the lobby (below left), a bathroom covered literally floor to ceiling in granite, and buffet meals mixing both Asian and Western foods.

Our morning began with a class session from 9am-noon. It seems a bit odd to travel halfway around the world and then spend time in an interior hotel conference room listening to lecture, but it seems that most sessions will be fairly interactive with guest speakers, etc. Today’s lecture focused more on 20^th Century Chinese history (Mao and Deng Xiaoping), and the range from economic disasters (the Great Famine in 1961-1963 which created the most deaths of any known famine in history) to skyrocketing growth in more recent years.

After the morning session, we divided into groups to visit local businesses.  Some groups visited IBM, Glaxo Smith Kline, and others – I joined the GM group. China holds strict rules about foreign investments, essentially requiring that any foreign company partner with a Chinese company in order to do business in China. GM here is therefore Shanghai GM (“SGM”), a 50/50 joint venture between GM and the Shanghai Automotive Industry Corp. We meandered through the SGM showroom, where the primary brands are Buick, Cadillac, and Chevrolet. Some models not produced in China were considerably more expensive than in the US – for example, the Escalade, which is about $85k in the US was listed at ¥1.58 M RMB, roughly $250,000 USD. Other models produced in China are more consistently, if not less expensively priced.

One of the head executives spoke about SGM’s experience in China, and we spent about an hour walking through the plant itself. The plant looks similar to what I imagine a US plant to be – large lines of cars, with a variety of workers repeating similar tasks to the cars along the assembly line. Some process appeared more manual (workers hand-sorted stacks of auto parts to deliver to assembly line workers), other parts impressively automated (robots drove several rolling carts of supplies around the plant themselves).

The SGM executive also spent several years before Shanghai establishing a plant in India, and mentioned that the difference in worker mentality had been a significant between the two places. His experience in India was that the worker mentality was much more individual, with workers becoming intensely competitive against their colleagues, sometimes to the detriment of the firm’s goals. In China, he explained, the stronger group mentality helps the firm move with more focus towards a goal once a decision is made. The infrastructure approach between the two countries is also quite different. The strong power of the Chinese government in business was actually a positive many ways from the exec’s perspective; if your firm’s goal (such as building a new plant) aligns with the government’s economic goals (i.e. expanding the Chinese economy), then the ‘strong hand’ of the government makes sure that infrastructure and other barriers are quickly overcome. Of course, if your purpose runs counter to what is in the government’s best interest, beware.

An interesting point brought up in our lectures this morning is that the majority of politicians in the US and other western countries tend to have first been lawyers. In China, most tend to have been engineers. This can be a good thing, in that the Chinese government is very willing to try new things to test what works best and adopt it, but also a weak point as they tend to approach laws/regulations as pieces of paper that can be worked around.

This is particularly evident in the IP world. IP is one of SGM’s most complex issues, because any R&D done in China belongs to SGM, not solely to GM, and SAIC has joint ventures with many other car companies, including GM competitors like Volkswagon. GM therefore has to firewall IP between what is developed in the US (belonging to GM only) and what is developed in China (and jointly owned by GM/SAIC).

I left the hotel around 8pm for dinner with EMBA friends at Shanghai Citizen, a popular ex-pat restaurant (left), then drinks on the rooftop Bar Rouge (right) on the Bund, a popular section of the city featuring old architecture and swanky hotels.

There seems to be an odd mix of censorship here – I can access gmail, but not blogspot; cnn, but not the Wall Street Journal. Then again, when I clicked on the Asia section of the cnn webpage, I could see a headline about the latest news on the Chinese human rights activist, but the article link itself returned a “page could not be found” error.

The smog here is also mind-boggling; it has been so bad that it is literally difficult to see two blocks away. The forecast calls for sunny weather, but the smog creates a constant thick, pea soup surrounding the city (views from Bar Rouge… and no, the giant cloud is not a rainstorm):