Interview with Ramesh from Business Musings

Anyone who's ever clicked on the "Comments" section of this blog should be familiar with Ramesh from the blog, Business Musings. Ramesh has been reading and commenting here frequently for a couple years now.

Whether it's on his own blog or commenting on what I've written, I always enjoy reading what Ramesh has to say. His perspective - which comes from being an Indian with extensive work experience abroad in China, Europe, and the US - is one-of-a-kind. Add on to that point-of-view the positive and constructive attitude he brings (something that can be tough at times to find on the internet) and I'm really glad that I've been able to get to know him through his writing these past couple years.

I asked Ramesh for an interview several days ago. I wanted to pick his brain on a number of big issues and questions I've had about China, India, and the US.

His responses did not disappoint:

On China
Where did you work and how long did you live in China?

Ramesh: I lived in Guangzhou for 3 years and a bit.

What are some of the positives and negative aspects of doing business in the Pearl River Delta region?

Ramesh: Positives of doing business in the PRD were:

- Huge government support. I am in the outsourcing industry and Guangdong had realised that it was overweighted in manufacturing and underweighted in services. So the government was willing to do a lot to get services to grow. Professionally – not pork barrel.
- Talent availability and their proficiency in multiple Asian languages. China is unbeatable in sheer proficiency in every imaginable Asian language
- Great infrastructure as everywhere else in China
- Proximity to Hong Kong . We often underestimate the influence of Hong Kong in the economic growth of China. You see it for real in the PRD

Negatives of doing business in the PRD

- Surprisingly, educated talent from other parts of China don’t want to come to Guangdong. Climate, “funny language” (real quote !), miss home, all sorts of reasons. While workers are incredibly mobile in China, the educated elite don’t want to move !
- Unwillingness to go global. This amazed me as Chinese have traveled everywhere in the world. The worker still goes anywhere. The educated elite wants to stay – in three years I couldn’t coax a single guy to work outside China
- Too much factory mindset. Aptitude for the service industry is still in its infancy
- Not a specific PRD problem, but English is a huge huge challenge. This is where I don’t see China competing with India for the next 50 years.

Did you have a chance to work in any other regions in China? Do you have a feel for how business operates in Guangzhou compared to the rest of the country?

Ramesh: I think PRD has a much higher Hong Kong influence and hence much more global. The Canton fair is really one of a kind. Otherwise I think business up and down the Eastern coast is not very different. I have no experience inland.

Is there any advice that you would give to a foreigner moving to China for a new work opportunity?

Ramesh: Learn Chinese before coming !! I didn’t do that and really suffered in the first year. Otherwise an open mind and willingness to make the effort to accept the culture will do wonders. The Chinese are so friendly that its easy to get well settled.

What were the greatest positives and negatives you found in Chinese workers? Management?

Ramesh: While generalisations are never correct, I’ll attempt some anyway. Easily the biggest positive was the work ethic. Everybody works hard without supervision. It was easy to bond a team – much less distraction, politics, etc. There was a sense of pride in what they do; so easy to motivate.

Greatest negative was a real paucity of creativity. Innovation comes very hard and unless really driven , does not happen. But my biggest surprise was the difference between the factory worker and the educated elite. I noticed the educated elite starting to become soft. The virtues of hard work, ambition, drive all seem to be waning away. This was a shock to me ; totally unexpected. Maybe just my experience, but I could see it big.

On India
Where in India are you now? Are you planning on staying indefinitely?

Ramesh: I am now in the southern Indian city of Bangalore, famous for its IT companies. It has a population of about 5.5 million, has a big economy because of IT and is fast growing. Yes, I plan to stay in India for the foreseeable future – don’t think I’ll live in another country for at least the next 5-10 years.

Does India's growing economic growth trickle down to all? Or is opportunity limited to major urban centers?

Ramesh: The answer is a paradoxical Yes and No. The rich poor divide in India is extreme. For the rich and upper middle class it has been a bonanza time. The lower middle class has also risen, but compared to those above, less so. The challenge in India is the poor – both urban and rural. The benefits of growth are trickling down, but slowly. The problem is that the majority of the population is dependent on agriculture which hasn’t grown all that much. Having said that, there has been significant improvement for all; but human nature is such that it’s easy to look at somebody who has benefited more and feel having been left behind.

Why has China grown faster than India? Can India be competitive with China in the global economy?

Ramesh: China has grown faster because it started reforms earlier and has implemented them far better. One major difference is the public vs private ownership of land. China has financed much of its growth from government ownership of land. Its far more difficult to do so when faced with private ownership in India. India and China will compete and in some areas where there is natural competitive advantage India may score. But by and large my belief is that for the next 20-30 years, China will be significantly ahead of India. After that, who knows !

Do you feel India's democracy in anyway puts it at a disadvantage to China? I've heard pundits in the past say China's "decisiveness" has helped put it ahead of India. Does India's leadership put the country in a position to succeed?

Ramesh: Yes, India’s democracy does put it at a disadvantage when it comes to economic growth. China can implement better. India for example struggles with getting big factories up and running, because there is always opposition to land acquisition, especially in agricultural communities. Land being privately owned, there is always opposition, so starting a factory takes much much longer. Another problem with India is that there isn’t a single party government, but a coalition. That’s the worst case scenario for reforms. I believe democracy with a single party in government is the ideal solution for India. If that happens, then democracy will not be a major deterrent to growth. Unfortunately that’s an unlikely situation given the fractious nature of Indian democracy.

On the US
When did you work in the US and for how long?

Ramesh: I have been on and off to the US for the past 15 years. Never lived permanently, only a few weeks and months at a time, mostly in the East coast. I have probably been to 20 out of the 50 states.

In the past, on posts on your blog and on comments on my blog, you've spoken very optimistically about the US and the entrepreneurial attitude of its people. Could you expand on this a bit more? In a globalized world, is there still something that sets the US apart from other countries?

Ramesh: I could go on and on. The US is in my opinion unique in the world. There is an absolute meritocracy that I haven’t seen anywhere, and I’ve worked in Europe too in addition to Asia. It’s the easiest culture in the world to assimilate in or do business with, because most Americans respect people for their ability, not their background. The US is the freest country in the world to do business in and that’s why it attracts the best talent in the world. Work ethic in the US is miles ahead of Europe and on par with Asia. For sheer creativity no country even comes anywhere close.

Its reflected simply in one undisguised fact. Ask anybody where he would live, if not in his own country, most people would say the US. The Economist once carried a brilliant piece. Covering street protests in Iran against the US the reporter said – the chants were Death to America, Privately the protesters asked him – How can I get a green card !!

What are some differences you found doing business in the US as a foreigner compared to China?

Ramesh: There is almost no comparison ! In the US, I came and simply did business – the system is familiar, the language is familiar, the business practices are familiar, what you see is what you get, I am not a lao wai, and there isn’t a stacked deck when competing against a local company.

In China, I had to learn to do business. And by the time I left, I don’t think I learnt half of what I had to !
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I want to thank to Ramesh for taking the time to share his thoughts with me. Be sure to keep up with his blog here.

Chinatravel.net Interview

An interview I had with David Perry at Chinatravel.net is on the front page of their website right now. You can read the whole thing here. We discuss photography, putting my book together, travel, and life in China as a foreigner. A lot of the photos from my book are featured as well.



Expressing the Orient is a prize for Chinatravel.net's Ctrip China Travel Photo Contest. Check out what the contest is all about and sign up if you have a nice collection of pictures from China. You might just win a free copy of my book!

Superfusion by Zachary Karabell: Interview

Last week, author Zachary Karabell was generous enough to take some time out of his busy schedule to discuss his new book - Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It - with me.

Here is Mr. Karabell's bio from the back jacket of his book:

Zachary Karabell is president of River Twice Research, where he analyzes economic and political trends, and is a senior adviser for Business for Social Responsibility. He received a Ph.D. from Harvard University and was formerly chief economist and president of a New York-based asset management firm. He is the author of Parting the Desert, The Last Campaign, and Peace Be Upon You. He is a regular commentator on CNBC and a contributor to Newsweek, The Wall St. Journal, The Los Angeles Times, The New York Times, Foreign Affairs, and The Washington Post.

Below is a transcript of my discussion with Mr. Karabell:



Mark's China Blog (MCB): Early in Superfusion, you say we have two paths - working with China to refine and develop the system for mutual benefit or falling back to "us and them." You then say that the world of nation-states with national economies is uncertain and that 2050 won't look like 1950. Could you explain what this world you envision looks like and how we could get there?

Zachary Karabell (ZK): Imagine telling a Parisian in 1950 that, in the year 2000, decisions regarding France would be made in Brussels. Nobody back then would've believed that Europe, a collection of nation-states, would be a cohesive unit known as the European Union. My point is that America could very well be tied to China in 2050 in a way that seems unimaginable now.

MCB: About Deng's quote - "Black cat, white cat, what does it matter as long as it catches mice?" - and his ideology in general, you say, "his ability to hold such contradictory beliefs shows he is either a genius or a madman." China, for the most part, has stuck with Deng's system. Towards the end of the book, you question whether the Chinese children of today - who've grown up with a remarkably comfortable and stable life - will demand more political freedom when they are adults. How long do you see Deng's contradiction being sustainable?

ZK: It's a mistake to assume that Jeffersonian liberal democracy is the only system that can meet people's needs and that the Chinese people will demand elections. People need to feel security and in control of their lives. As long as that occurs, the specific form could look like a lot of different things. The Chinese Communist Party needs to be responsible to its citizens and, for the time being, appears to be.

MCB: Your section about data and figures reminded me a lot of one of my all-time favorite books, Moneyball, by Michael Lewis. In that book, Lewis highlights the thinkers in baseball who challenged baseball's conventional wisdom. In Superfusion, you challenge a lot of the numbers - balance of trade, the consumer price index, and productivity - that people use to interpret contemporary national economies. When it comes to understanding the world economy, what numbers do you trust?

ZK: Very few numbers give us a good picture. It's not that I distrust numbers, I don't think they're made up, it's just that I see data as being incapable of telling us a complete story. Official numbers miss capital and idea flow. They miss how businesses are run.

Consumption of raw materials is a number that I look at. Numbers on trade can tell us a lot. One needs to go beneath the newspaper headlines. Look at the numbers used to compile official statistics.

MCB: I found your section on Chinese banks really good. On my blog, I've written a lot about the massive loans given out by Chinese banks this year. You say that a lot of the concerns about such lending is misguided and that loans are simply a means for modernization from the state and that the Chinese believe repayment isn't as important as "getting things done." Is China concerned about the repayment of loans given out this year? And if the US - and the rest of the West - stays in a funk for a year or two longer, can this kind of lending be sustained?

ZK: Comparing Chinese banks to western banks is a mistake. It's not that China doesn't care about repayment. They want the loans to be repaid. But right now, China is building its infrastructure. Internal loans to build up the country are going to be productive no matter what happens.

MCB: In the book, you write, "What China did in the 90s took the states of western Europe more than a century and the US more than five decades." Obviously, the costs of China's industrial revolution are being felt in the form of unfathomable pollution. The thing that concerns me most, having Xi'an as my home base in China, is north China's lack of water. The Himalayas' glaciers are melting. The Yellow River is dying. Northern Chinese cities are being built on falling water tables. How can this dire situation be resolved?

ZK: North China has the double whammy of being the site of the communist industrial revolution under Mao as well as a site of the '90s industrial revolution.

There is a huge draw on the resources there. I can't discount the severity of the situation. Alternative energy isn't an alternative to coal in northern China. But the government seems to have a grasp for where the crisis point is. I sense urgency from the government. They are moving quickly.

One thing about an autocratic government is that when faced with a sense of urgency, they have a much greater ability to address these problems than democratic governments.

MCB: You say, "China's transtition from Maoism to the market has been met with skepticism and mistrust rather than embrace." What does this say about America and the American people?

ZK: Our skepticism and mistrust say that we are having trouble dealing with losing the status of being "on top."

MCB: When the debate about China joining the WTO was going on in '99, the US was obsessed with Lewinski. You talk about how the world missed the development of Chimerica since "nobody analyzes the global economy as a system and because nobody developed a theoretical framework to predict it." Now, after coming back to America after three and a half years in China, I'm hearing reports about China all the time on NPR (National Public Radio). I haven't fully jumped back into the US media though. Does the US know what's going on in China and with Chimerica?

ZK: Americans aren't clueless that China's become a much bigger deal. People are mostly familiar with the populist rhetoric and not much else though. The implications of Chimerica are pretty beneath the radar. Americans, by and large, don't understand the greater meaning of its relationship with China.

MCB: Your discussion of US businesses being lenient on property infractions in the hopes of cashing in on the Chinese market was very interesting. I've written on my blog several times about "shanzhai culture" and the deep and intricate networks of intellectual property infractions in China. Can this shanzhai culture be overcome?

ZK: Complaining about shanzhai has been en vogue for years now. Innovation is going to be key in overcoming the intellectual property infractions occurring in China. Companies are going to have to make it difficult for people to extract income off of the Chinese copy of the product.

MCB: You say that the big difference between China and Japan's rise is that the Chinese have a culture of consumption. If you spend time at a Chinese night club or mall, this embrace of consumption is abundantly clear. But when I lived in China and told Chinese people about buying a house with a mortgage or having a wallet full of credit cards, they usually cringed. Can Chinese consumers come to embrace the culture of credit cards and debt?

ZK: Chinese people are already embracing credit cards and using debt. In fact, not enough companies are offering Chinese people credit cards. Once the Chinese trust paying online, that will also help encourage their consumptive culture.

MCB: For a long time, China's used "poverty alleviation" as an excuse for human rights abuses. Tibetans and Uighurs are obviously getting fed up though. Are these "harmony" issues critical to China's long-term, big-picture goals?

ZK: China needs to be "harmonious enough." Security of the Chinese people matters. The Chinese government understands that keeping people happy is a balancing act. Simply suppressing those angry with the system is not a viable long-term answer.

MCB: You talk extensively about the "feel" in cities like Shanghai and the general optimism of the country. Is China the new "land of opportunity?" Does that "feel" extend to those in the countryside or to migrant workers who've gone to the big city?

ZK: Well, I don't think anyone in China would use the word "land of opportunity." Those words are uniquely American. But the simple fact that migrants are doing everything they can to get out of the countryside and to the cities shows that the "feel" does extend to the entire country.

MCB: The Chinese stock market was up 90% on the year back in August. Housing prices in many cities are at all-time highs. Is there a bubble going on right now?

ZK: It doesn't matter if there is a bubble being created right now. The government popped a bubble in Shanghai in '04. They'll blow them up and pop them as they see fit. The government isn't afraid to intervene and pop. Popping bubbles isn't going to be a derailing phenomenon.

MCB: Does Obama have a coherent China policy?

ZK: Yes, Obama has a coherent China policy. Neither Obama nor the Chinese government seems ready to confront the existence of Chimerica though. Obama is going to China in November. He should have America's top business leaders with him on that trip. Another major need between the Obama administration and the Chinese government is better interest rate coordination.

MCB: I know you're very busy right now, Mr. Karabell. Thank you for sharing your time with me.

ZK: You're very welcome.

I want to thank Mr. Karabell and his publishing company, Simon and Shuster, for arranging this interview and asking me to review Superfusion.

Win in China - Interview With Robert A. Compton

I reviewed the documentary Win in China yesterday. Today, I'm going to post a transcript of the discussion I had with the producer of the film, Robert A. Compton.

Compton is a businessman with lots of experience in entrepreneurship and venture capitalism. In recent years, he's had a lot of interaction with both China and India.

In addition to business dealings, he has also produced two films. His first was Two Million Minutes, which is about the state of high schools in the US, China, and India. Encouraged by the huge success of 2mm, he's continued to make films. His second is Win in China.

Last week, I had a very insightful discussion with Mr. Compton about his film and China in general. Here is what he had to say:



Mark's China Blog (MCB): How did you find out about the reality show "赢在中国?" What about the show drew you in and made you want to make a film about it?

Robert A. Compton (RAC): I heard about the show from a Chinese interpreter of mine. He knew someone who was working on the show. He told me the premise and it sounded like a great way to get in tune with China's huge growth in entrepreneurship.

China is the most entrepreneurially active country in the world. But the thing is that they keep things close to the vest. Americans, by and large, don't know what is going on there. Many Americans still have this view that China is exclusively an agrarian society. We don't understand the massive government investment in business infrastructure that is going on over there.

MCB: The simple fact that the show 赢在中国 happened shows just how comfortable China's leadership is with promoting capitalism. Tell me more about the investment in businesses and entrepreneurs that the Chinese government is making.

RAC: With the mass migration from the countryside to the cities, China needs to absorb twenty million jobs every year just to break even. China doesn't want entrepreneurs, it needs entrepreneurs.

The show, 赢在中国, was one way of encouraging more people to get involved in the process of creating businesses. But the investment runs much deeper than mere encouragement. Every university in China has a strong entrepreneurship department. Most have at least ten professors on faculty.

Developing entrepreneurship is part of a broad plan. The Chinese are very serious about developing a nation of risk-takers and business owners. As a filmmaker, this is something I want the rest of the world to know about.

MCB: The theme of China's change from collectivism to individualism is featured throughout "Win in China." How do you understand this change from "Mao to the market" took place? How far into the transition do you think the country is?

RAC: The real trigger was Deng Xiaoping. It was a series of baby steps, really. Deng pushed it along. His endorsement of the private sector was a green light for the entire country to begin making money.

The turn of the millenium saw another important step. That's when the government came in and stepped up its investment in education and entrepreneurship. Ten years ago, most people couldn't send their kids to a university. Now, Chinese universities are open to a much larger segment of the population. And in addition to simply making higher education more affordable, the government has also made it a priority to make sure that those universities, which more people are going to, are developing a new generation of business leaders.

There are over 120 million Chinese people involved in entrepreneurial activity. That's nearly the size of the entire US workforce. Patent filings are on the rise. Students at Qinghua University are switching majors from engineering to business in droves. China has made remarkable strides in accepting capitalism in a very short period of time.

MCB: I found the training aspects of the show very interesting. Jack Ma and other industry leaders came in to teach the contestants about IPOs, "start-up capital," and other financial concepts. Education of the audience was a key part of the show. What does the average 老百姓 (common man) know about entrepreneurship and/or business. What did they learn from the program 赢在中国?

RAC: Despite being repressed a few decades ago, the Chinese people have a long history of business and entrepreneurship. It's hard for me to say how much the average person knows. What exactly does the average American know about these things? I think that, despite China's recent history of repression and state-run industries, their knowledge of business and finance is about the same as an American's.

赢在中国 was wildly popular. Millions upon millions of people tuned into the show. It had to have had a big impact on those viewing. It's astounding to think that the sentiment in China has changed to the point where watching people compete for millions of dollars on CCTV is acceptable. The mere fact that the government signed off on the show is a huge endorsement of capitalism. Add on top of that that the show was a runaway success and it shows that the average Chinese person is hungry for the opportunity to get rich.

Throughout the show, CEOs and business leaders were called "heroes." Chinese people aspire to do the same things in business that these people have done. Jack Ma is a rock star in China.

MCB: One of the judges/creators of the show was quoted in the film saying, "In today's China, anyone can win." Zhou Yu (the Wolf) was the personification of this. His character is the most memorable from the television show and your movie. His name is "the Wolf" because of his cut-throat approach. Throughout the show he implemented questionable business ethics and bent the rules for his advantage. Later in the show on the finale, one of the judges said he "represents the Chinese spirit" and he also won the popular vote of the viewers.

Why was "the Wolf" so popular? Do you think he represents the ethos of the Chinese entrepreneur?

RAC: I believe the Wolf does personify China's entrepreneurship ideals. Watching the Wolf, seeing his aggressiveness, it really did make people uncomfortable. Yet he captures the spirit of today's Chinese business people.

The Wolf probably didn't finish high school. He would never say exactly what his education level was. This appealed to the common Chinese person watching the show. He truly pulled himself up by his bootstraps. The Wolf helped everyone, even those who haven't yet been lifted by China's booming economy, feel as though they have a chance to get rich and have a better life.

If I had been a judge on the show, I would've chosen the Wolf to win the competition. Great entrepreneurs are strong willed. Now, I'm not sure how well he'd do in a Board of Directors meeting. But I do know that since the show completed in 2007, his business is absolutely booming whereas the other finalist on the show is struggling.

MCB: Talk about China's growth and what it means for America.

RAC: We've never faced an entrepreneurial competitor that's four times as large as us. There's an old Red Army saying, "Quantity has a quality all its own." There are over two hundred venture capital firms in Beijing. Now, we have to look at competition coming from Asia where in the past, we only had to worry about domestic firms.

China is already killing us on battery technology and electric cars. Warren Buffet invested $250 million in BYD last year. Now that investment is worth $9 billion. BYD electric cars are all getting between one hundred and one hundred and forth miles a charge and cost $10,000. GM just announced that its Volt will be released soon. It's going to get about forty miles a charge and will cost $40,000.

The Chinese economy is here to stay. We need to be prepared to meet its challenge.

MCB: What do you think about China and America's responses to the financial crisis?

RAC: With its stimulus, China is currently doubling the size of its ports, expanding its rail lines, and rebuilding its energy grid. Compare that to America. We're pouring billions of dollars on failed twentieth century businesses and industries. Their package is building while ours is bailing.

Which country do you think is preparing better for tomorrow?

There are a lot of problems with China's leadership and I certainly don't endorse one-party rule. But there is something to be said for what they're doing. The top leaders in China are all engineers. How many engineers are in our Congress? I know we have a lot of lawyers, but I'm pretty sure there aren't many engineers. Engineers approach economics and growth very methodically. Chinese leadership is proving to be very analytical. Their planning can be seen in the fact that the economic crisis for them means only 8% growth.

MCB: Do you think that these stimulus projects, not being driven by markets but instead by government, could be fueling mis-allocation?

RAC: I'm not sensing over-heating. I feel like China will be able to grow into over-capacity it is creating. But I'm not an economist and I don't study macro-economic numbers. I'm speaking from what I'm seeing in the business community.

MCB: What will China look like in 25 years?

RAC: China's economy will pass the United States' in about twenty five or thirty years. That seems to be the consensus from economists. Another 400 million people will be brought out of poverty. They will join the 400 million who have already been brought out of poverty in the past couple decades.

China is going to dominate battery technology and electric cars. They're doing great in green technology across the board right now.

Once Chinese become consumers, China will be the largest market. This will present a challenge to US companies. Business in China is a very subtle and complex proposition.

MCB: Thanks a lot for your time, Mr. Compton. It's been a pleasure speaking with you.

RAC: Thank you.

I'd like to thank Mr. Compton for sharing his time with me. I really enjoyed hearing his take on what is going on in China right now. Again, you can find out more about his film here.