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Quality Fade in China       

Quality fade is the behavior of progressively degrading the quality of products to earn more money. In doing this some Chinese manufacturers, over time, will gradually decrease the quality of the goods they manufacture by using cheaper materials, thereby increasing their profit margins.

I’ve toured quite a few manufacturing plants while I’ve been in China. Many of these plants are honestly run, and provide high quality goods to the buyer. However, there are also many manufacturing plants that don’t adhere to these high standards and resort to quality fade.

The mindset of the manager or owner of a Chinese factory involved in quality fade is in stark contrast to the owners and managers of a Western factory. In the West, factory owners and managers continually try to improve their efficiency so as to increase their profitability. The more efficient they become, the more money they make. In addition, the cheaper the labor, overhead, and cost of materials, the greater their profitability. In this cost cutting and improvement the quality of the materials used in the manufacture of goods, as well as the goods themselves, is constant.

In contrast, in China, quality fade factory owners take their efforts to increase profitability one step further. Once their product meets the buyer’s specifications they tend to focus on cutting costs by using lower quality, and therefore cheaper materials that may have an adverse effect on the quality of the end product. For instance, cheaper chemicals may be utilized in the manufacturing process and formulas may be altered by substituting cheaper substances for more expensive chemicals. These, and other short cuts, can materially impact the quality of the product produced. Moreover, quality fade doesn’t occur immediately, but is gradually implemented over a period of time so that the decrease in quality from order to order is almost imperceptible. The way most buyers find out about quality fade is when they’ve received their merchandise and discover the flaws.

One of the primary reasons that quality fade exists is that Chinese factories are typically paid before their goods are shipped. Therefore, cutting a few corners makes them even more money. In addition, they know it’s not easy for a foreigner to take a Chinese company into a Chinese court and prevail. It can be expensive and, even with a perfect Chinese contract in place, the foreigner will still have to obtain a verdict and, if they win, get that verdict enforced to get their money back. Depending on the company’s local influence, such as employing a great number of locals, enforcement of a verdict can be very difficult, if not impossible. Chinese companies know this and they also know that the government is unlikely to take action against them. The only time the government is likely to become involved is when the problem of quality fade affects domestic tranquility, such as the story you’ve probably read about where babies were sickened, and some died, by melamine tainted milk. When the news of what happened was exposed, domestically and internationally, the government was quick to act.

In addition, don’t look to the US government for help. The Chinese Embassy doesn’t get involved in civil disputes. They’ll tell you to get a lawyer and wish you good luck.

Chinese companies, for their part, know they’re the global low cost manufacturer and have an infrastructure that most other countries can’t duplicate. As a result, they have no issue with quality fade, especially with companies which have short-term or limited production contracts. If a Chinese manufacturer knows that this is the only order you’re probably going to place with them, then quality fade is likely to be far more prevalent. However, if they know that you’re a longer term buyer, and that you’ll require contract manufacturing on a continual basis, then quality fade is far less likely to occur.

There are a number of ways companies have used to limit or prevent quality fade. To start, a company should specify in their contract the quality of the substances, materials, and other components that are to be used in the manufacturing process. This should be as technical and as specific as possible in order to avoid any ambiguity. Once that’s in place, the company should have their own quality control staff do a raw material and outsourced parts inspection. In the event the company doesn’t have the resources or requisite quality control staff, professional third party companies can utilized for these tasks. In addition, buyers can conduct factory audits, pre-production monitoring, production monitoring, and pre-shipment inspection to ensure the quality of their product.

I should also mention that some Chinese manufacturers have been using a novel approach to create greater profits, irrespective of the size of the company placing the order. In this approach some factories give favorable pricing, in an effort to attract foreign companies whose products have intellectual property protection. However, some Chinese manufacturers will then take this same product off their manufacturing line, irrespective of the intellectual property protection, and sell knock-offs of these products in countries which have weak intellectual property enforcement. In many instances, even if the company discovers their manufacturer is the source of these knock-offs and terminates the manufacturing contract, the Chinese company will continue to sell and even export the knock-offs, as China is one of the countries which has weak intellectual property protection.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

The Various Poses of Buddha

One of the things that surprised me in my travels throughout China was that there were quite a number of images for Buddha, many of which didn’t fit the stereotypical image of Buddha that most Westerners are familiar with. In Beijing, for instance, I saw statues of Buddha that were thin and unsmiling, alongside those that were jovial and weight-challenged. All in all I probably saw more than 100 different poses of Buddha in the museum that day, with each Buddha correspondingly having a different meaning.

Photo from buddhablais.wordpress.com

Photo from buddhablais.wordpress.com

Buddha is actually not the name of a person, although today we associate the name Buddha with a specific person, Siddhartha Gautama. Instead, Buddha is a title which means enlightened or awakened one. The historical Buddha (Siddhartha Gautama) was born in northern India, which is now in Nepal, around 500 B.C. He was born into wealth and was a prince. Concerned about the suffering of his fellow man and for the human condition, he walked away from his status and wealth. He traveled extensively and studied under a number of teachers. After nearly starving to death, he was said to become enlightened while sitting under a Bodhi tree. He subsequently assumed the title of Buddha.

There are predominately two styles of Buddhism. The first is Mahayana Buddhism, which is prevalent in China, Japan, Korea, Tibet, and Mongolia. This style of Buddhism teaches that anyone can achieve enlightenment. This is why we see so many different statues of Buddha, from those of the jovial weight-challenged Buddha, to that of the heavily armed warrior clad figure.

The other style of Buddhism, Theravada Buddhism, is primarily practiced in Southeast Asia. It emphasizes insight gained through critical analysis and personal experience rather than blind faith. This style of Buddhism always displays Buddha as being thin.

The Laughing Buddha that we frequently see is thought to be modeled after an overweight Chinese Zen monk who wondered the countryside around 950 A.D.

In Asia, the belly is considered a source of power. Therefore, rubbing Buddha’s belly is thought to bring one good luck. But don’t try rubbing his head, that’s a no-no in Asian cultures. A person’s feet is also a no-no area. The feet are considered an impure region of the body and it’s a sign of disrespect to show the bottom of your feet to an image of Buddha.

In addition, Buddhist monks are often seen with shaved heads. The reason for this is that shaving one’s head separates a person from vanity, which is a distraction on the road to enlightenment.

One of the questions most commonly asked is why are there so many different poses for Buddha? Why is that important? The answer quite simply is that the various poses have distinct meanings. For instance, hand gestures, or mudras, in and of themselves, convey different meanings to a Buddhist. For example:

Buddha has his right hand raised and his palm facing out, with his left hand down near his hips, but also facing out. This symbolizes peaceful intentions and peacemaking.

Buddha has all five fingers of his right hand reaching to touch the ground. This symbolizes enlightenment.

Buddha with one or both hands on his lap. This symbolizes wisdom, emotional balance, and clarity. This pose is most often associated with meditation.

Buddha with the thumb and index finger of both hands touching at their tips to form a circle. This symbolizes the Wheel of Darma, or the Wheel of Life. In other words, fate.

Buddha with both hands at waist level, with the palms outward and the left hand pointing down and the right hand pointing up. This symbolizes balance.

In addition, various poses of Buddha may have descriptive names associated with them. For example:

A Protection Buddha will be seated in a single or double lotus position, with a mudra of his right hand raised, facing outward, and his left hand resting in his lap. This is meant to signify courage and offer protection from fear, delusion, and anger.

A Teaching Buddha will be seated in a double lotus position, with a mudra of both hands at chest level, with thumb and index finger forming a circle, and his right palm in and left palm out. This is meant to signify wisdom, understanding, and fulfilling destiny.

A Medicine Buddha will be seated in a double lotus and have his right hand facing downward with fingers extended towards the ground, palm facing outward, and a bowl of herbs resting in his left hand which is upon his lap. This is meant to signify healing.

A Walking Buddha will be standing with his right foot forward and have his right hand raised, facing outward, and his left hand along the left side of his body. This is meant to signify grace and internal beauty.

In Thailand, each day of the week is associated with a different Buddha pose. In the Thai zodiac, what day of the week you’re born on is more important than the month.

There are actually 8 Buddha poses in Thailand, as Wednesday is broken up into two poses. One pose if you’re born prior to noon, and another for those born after noon. Here are the various poses for a Thai Buddha:

Sunday: A standing Buddha with his arms crossed over his stomach, right hand over left, and the back of his hands facing outward. His eyes are also open. This pose signifies mental insight.

Monday: The right hand is raised as a symbol of preventing calamities or preventing relatives from fighting.

Tuesday: A reclining Buddha lies on his right side with his right hand tucked under his head, and his left hand along the side of his body.

Wednesday before noon: Buddha is collecting alms where both hands carry an alms bowl in front of his chest.

Wednesday after noon: Buddha is sitting with an elephant or monkey giving him offerings.

Thursday: Buddha is in meditation and sits in a lotus position with his hands resting on his lap and both palms facing upward.

Friday: Buddha is in contemplation with both hands crossing his chest, his right hand over his left, and the backs of his hand facing outward.

Saturday: Buddha is seated under a Naga (a seven headed serpent) and is in meditation. In this pose Buddha is being protected while he’s meditating under the spread out hood of the Naga.

After I received these insights, I never thought of Buddha as a single person again. Instead, I think of the image of Buddha, portrayed by various poses, as symbology meant to represent specific attributes attained by someone who has reached enlightenment. A Buddhist will tell you that this leads to salvation, liberation, satisfaction, and happiness.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Smoking in China

If you’ve ever been to China one of the first things you’re likely to notice is that a great many people smoke. China is the largest tobacco-producing and consuming country in the world with 300 million smokers, or one quarter of the world’s total. In addition, there are reportedly 740 million Chinese exposed to second-hand smoke. In my book The Wild Wild East I touch on this, but let me now go into more detail.

Photo from cigarbrandsinfo.blog.com

Photo from cigarbrandsinfo.blog.com

A typical Chinese smoker lights up an average of 15.8 cigarettes a day which, for a national total, works out to be about 2 trillion cigarettes a year. Smoking and the resulting second-hand smoke has caused severe health problems with approximately 1 million Chinese dying from tobacco-related illnesses annually. Although the country has instituted anti-smoking laws and campaigns in an effort to combat the effects of secondary smoke, those efforts have largely failed. In fact, China enacted an indoor smoking ban in public places in May, 2011 but no one is paying attention. According to China Daily, 89% of restaurants, 58 percent of office buildings, and 35 percent of schools, hospitals, and public transportation still have smoking on the premises and therefore also have a secondary smoke hazard. China’s Ministry of Health acknowledges the problem of smokers lighting up in public places, in disregard of the indoor smoking ban, but blames this on enforcement of the law. One reason for this, as explained to me by an attorney in China, is that there’s only vague enforcement procedures and penalties in place for violators. People light up because there’s basically no reprisals.

Fifty percent of the men in China smoke versus about 5 percent of the women. As strange as it may sound today, those statistics also applied to the United States in the 1950s, and they currently apply to other Asian countries such as Japan. Why is that? There are thought to be two primary reasons why men account for ten times the number of women smokers. The first is that men try to act cool in their teens and get hooked on cigarettes early. Second, America’s 1950s business culture, and China’s current business environment, is one in which men drink and smoke, especially when they’re in meetings. In addition, China’s role models, Mao Zedong and Deng Xiaoping, for instance, were heavy smokers and were frequently photographed smoking. It normally takes decades to transcend through stereotypes, a business culture, and to educate people on the health associated problems of smoking. The United States has done that in the past half century. China is currently in the process of change, but change never occurs quickly with the Chinese people.

The government, for its part, doesn’t seem to be in a hurry to strictly enforce the law with only 6.1 percent of Chinese businesses having required designated smoking areas and only 1.4 percent having anti-smoking warning signs. One reason for this could be that tobacco accounts for more than 7.5 percent of China’s total central government revenue. The government, therefore, appears to be in no hurry to change the smoking habits of its people overnight.

When I’ve attended banquets and government functions in China, it’s not unusual to find a pack of cigarettes on the banquet table next to my place setting. If you don’t smoke you almost feel that you should, as most of those around you will be smoking and the air you’re breathing will probably make you an instant two pack a day person. I don’t smoke, so I usually give the pack of cigarettes in front of me to someone else who does smoke. But government officials, in particular, don’t buy off on this. They want you to participate in the carcinogenic haze. They’ll hand you a cigarette and then flick their Bic in an effort to get you to smoke. If you’re Chinese you almost always have to accept this offer from a government official. If you’re American, well, you’re American and culturally the Chinese don’t expect much from us. Americans can usually get away with not accepting the government official’s offer to smoke by claiming some malady. This will give the government official and you both an out and let the official save face. When this happens it would be good form for you to toast him. This will usually put both of you back on an even keel again. I’ve done this a number of times and it’s always worked.

I believe the Chinese will decrease their smoking habit, but it will be a slow process as smoking is much more ingrained in their culture than in Westernized societies. Until then, the only truly non-smoking area you’re likely to find is your hotel room hoping, of course, that your housekeeper doesn’t smoke.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

New Book Coming Soon

My latest book on China, Conducting Business in the Land of the Dragon, which is likely to be the title that meets with the publisher’s approval, is proceeding rapidly through the editing process. In the editing process the author (myself) has an independent set of eyes looking at their manuscript, which is how they refer to the book prior to its publication. The editor then provides the author with feedback on which areas might need tweaking.

I should receive the editor’s comments within the next two weeks and then will evaluate what tweaks the editors believes are necessary to increase clarity. The final decision on which changes to make is up to the author, but I’ve found that the editor is usually spot on. When you’re writing a book you very often can’t see the forest from the trees. The editor can.

Once the editing process is done the book will go to cover design, which composes a cover that accurately represents the books contents. My publisher has an extremely good cover design department that never ceases to amaze me. At the same time the cover is being designed, the publisher will initiate a cover polish. What this means is that someone will take a look at what I’ve written for a summary of the book’s contents, which will appear on the dust cover flaps and back of the hardbound editions, and the back of the softbound version. When the cover design and cover polish are complete and approved by me, or modified after a discussion with the publisher, a proofreader will have a last look at the book and make sure the copy going to press is as good as it can be. Then, it’s off to the printer which will print me one copy of both the hardbound and softbound book. If I like what I see then I give my final approval and the book is cleared for production.

Look for Conducting Business in the Land of the Dragon to come out the end of October or first week of November. It’s a good read. I’ve given it to a few people to get their feedback and they’ve all told me they couldn’t put it down. Hopefully that will be true for you.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

China’s Fondness for Gambling

Most of the information for writing both of my books, The Wild Wild East and Doing the China Tango, came from interacting with the Chinese people for over a decade. During that time I’ve had a chance to observe and socialize with them at the grass roots level. One thing that surprised me when I really got to know them is their propensity to gamble. This transcends age groups, socio-economic barriers, and other societal delineations. Perhaps no other culture has an affinity for gambling more than the Chinese. I asked the CEO of a company I was visiting why the Chinese people loved to gamble so much. His reply: we’re an optimistic people and this optimism leads us to believe that everything will turn out fine in the end. Even when things seem to be going against us, we believe a change of luck is just around the corner.

Although gambling is illegal in China, the law against gambling isn’t enforced and is generally ignored, unless you plan to open a casino. It’s estimated that, outside of the country’s two sanctioned lotteries, an estimated over $146 billion is wagered illegally in China each year. This is a staggering figure considering that 700 million people, or more than half of the population, live in rural areas where the average annual income is approximately $770 per year. Most of this gambling seems to be in the form of card games and Mahjong, a game played with small tiles based on Chinese characters and symbols.

Mainland China has only one legal form of gambling – two lotteries which generate about $40 billion per year in gross sales revenue. Outside of these national lotteries, the country has no sanctioned form of gambling.

Legalized gambling, outside of these two lotteries, can only take place in Macau, which is a special administrative region (SAR) of China. Prior to becoming an SAR, Macau was a Portuguese territory until it was handed over to China in 1999. When China assumed control it elected to maintain gambling in Macau. Asians now view it as the Monte Carlo of the Orient since gambling has been legal there since the 1850s.

Macau is a short hydrofoil ride from Hong Kong, and it’s also accessible by flying from one of one of a number of Chinese and international cities. When the Chinese assumed control of Macau it encouraged Las Vegas casino owners to come and open up Las Vegas style gambling there. Many did so and, with the advent of these casinos, Macau overtook Las Vegas in gaming revenue in 2007 and has never looked back since. This is in spite of the fact that Macau only attracts 27 million tourists a year versus 39.7 million for Las Vegas. However, the reason Macau, with 33 casinos, makes so much more money than Las Vegas, with 122 casinos, is that the average person gambling in Macau will gamble with three times more money than the average gambler in Las Vegas. In addition, numbers can be deceiving. Macau casinos tend to be very large and, on occasion, I’ve seen gamblers stacked three deep at tables placing their bets. In fact, 70% of Macau’s government income is a result of gambling tourism, primarily from mainland Chinese and Hong Kong residents.

One of the first things I noticed when I went to Macau is that it’s totally different from Las Vegas. It has no Strip. In Macau everything is spread out and you need a taxi to go from one cluster of casinos to the other. The second thing I noticed is that there are few fine dining restaurants at the Casino hotels, and that the few sit-down casual restaurants they have, such as I saw on the bottom floor of the Venetian Macau, for example, had very few customers. I viewed the same lack of attendance for Cirque du Soleil’s show, which I went to at the Venetian. The show there seemed unique to Macau, but every bit as fantastic as I’ve seen in the U.S. However, the theatre was only about a third filled.

The reason this is that the Chinese love to gamble and the average Chinese person is not going to sit in a fine restaurant for an appropriately long dinner, or go to a show, when they could be gambling. Moreover, they’re not going to spend money on a fine dining restaurant or a show when they could use that money to gamble. That’s the average person’s mindset. When they do eat they usually choose the food court which can get them in and out quickly and inexpensively. The food court is pretty basic, even at the Venetian, with Fat Burger occupying a prominent space. I plead guilty to eating there myself and the burger was great!

Gambling in Asia is a growing industry with Asia-Pacific casino gaming projected to increase from $34 billion in 2010 to $80 billion by 2015.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

China’s Mid-Autumn Festival

From blogs.sacbee.com

From blogs.sacbee.com

In Chapter 6 of my book, The Wild Wild East, I mentioned the Mid-Autumn Festival, but didn’t have an opportunity to explain what it was as the chapter had a different focus. Let me do that now. Most people don’t know about China’s Mid-Autumn Festival, but it’s the second grandest festival next to the Chinese New Year, also known as the Spring Festival. For those of us who speak with Chinese staff and companies on a daily basis, this means that the country is basically shut down for four days. This year the Mid-Autumn Festival fell on Thursday September 19th and, just as with our Thanksgiving holiday, everyone will return to work the following Monday, even though the official holiday period is just one day. Technically, this festival always falls on the 15th day of the 8th month according to the Chinese lunar calendar. Therefore, the date of the festival is a moving target and next year it will fall on September 6th.

The Mid-Autumn Festival originated in ancient China around 1046 BC. At that time it was generally accepted that seasonal changes were related to the lunar cycle. As a result, crops were planted and also harvested at a certain time during this cycle. People at this time were also very superstitious, and China’s ruling class was no exception. They would traditionally make a sacrifice to the Moon Goddess on the Autumnal Equinox, a time when the crops were nurturing and the weather pleasant, for a prosperous harvest. But this practice by the ruling class was not a festival, it was just an individualistic offering of thanks by a ruler. The festival itself didn’t start until around 618 AD when farmers started to give thanks to the Moon Goddess for their harvest. At that time the festival by the farmers, and the sacrifice by the ruler, merged into a single festival held on the Autumnal Equinox.

When I’m in China around the time of the festival, I can sense that the entire country is in a holiday mood. China is big on symbolism and, during this time, moon cakes, are sold throughout the country. Moon cakes are flat round pastries that supposedly resemble the moon, and are the symbolic food for this festival. They’re given to both friends and relatives to wish them a happy life. Over time the festival has shifted its meaning to where it’s now considered a time when families and friends reunite and renew their relationships. In fact, many people refer to the Mid-Autumn Festival as the Festival of Reunion.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Catching a Domestic Flight in China

Catching a domestic flight in China is usually an eye-opening experience for most foreigners. It starts when you get to the airport, as most domestic airlines won’t let you check in until two hours ahead of time. They also don’t give you your seat assignments, unless you’re in a tour group or in first class, before you check in. With 1.3 billion people and an increasingly mobile society, most Chinese planes are larger than most countries typically use for domestic flights. When going between Beijing and Shanghai, for example, I’m frequently on an Airbus A330, a fairly large plane for a three hour flight. As a result, since the check-in counter usually closes 30 minutes prior to the flight, in the space of one and a half hours you have lot of people trying to check in. The check-in counters are jammed, especially the closer you get to flight time.

The second obstacle you’ll encounter in catching a domestic flight is boarding the plane. Unlike most countries, Chinese airlines don’t use zone numbers to board the aircraft. They usually board first class, and then everyone else. As I said, China uses big aircraft and the lines can be very long. The Chinese people’s solution to avoiding long lines is to simply cut in front of the person at the head of the line and thrust their ticket at the gate agent. I prepared my wife Kerry for this by informing her the scene when boarding a Chinese domestic flight would be reminiscent of the last flight out of Saigon. She told me afterwards that it was a pretty good description. To be clear, not everyone cuts in line and tries to hip check you out of their way, but enough people do that it’s considered that way it is within China. Gate agents, for their part, don’t care as they just want to get everyone onboard.

Now that you’ve gone past the gate agent you might believe you’re through your last hurdle and can relax. You’re wrong. Once you’re on the plane it’s common to see people going up and down the aisles looking for their seats. I have no explanation for this as you’d believe that seat numbers are sequential and only a few people would have their mind somewhere else and pass their seat. I’m wrong. On most Chinese flights two way aisle traffic isn’t unusual once you board, as well as having people stand in the aisle and talking with their friends. As a result, the aisles are always crowded and you frequently have to “squeeze” between people to get to your seat.

Mercifully, you sit down and eventually everyone’s seated. There’s no aisle traffic and you believe they’re ready to close the cabin door and depart. Wrong. In China, if someone checks in for a flight and receives their boarding pass, they wait for them! I’ve sat on board a number of flights where the infringing parties have come onto the aircraft 10-15+ minutes late. It seems that if you have a boarding pass, the airline will wait for you.

Finally you’re airborne. Chinese airlines almost always serve some sort of meal or snack on the flight. The flight attendants are courteous, young, and attractive and you now begin to relax. However, the finale is about to occur. When the flight lands, and begins to approach the gate, people start getting up from their seats, step into the aisle, and start taking their bags from the overhead. To be clear, we’re creeping towards the gate and still moving. It’s the last flight out of Saigon in reverse. By the time the plane stops the aisles are jammed and people want to get off. If you snooze you lose in getting off a Chinese plane.

Therefore, when I write in one of my books that I took a flight from one city to the next you can see that there’s substantially more drama involved than taking a domestic U.S. flight.

On a positive note I should mention that in the hundreds of flights I’ve taken within China I’ve never once had my luggage not make the flight, even when I’ve checked in 30 minutes beforehand. No one is better than the Chinese at luggage handling and, at least in this, they can give any U.S. carrier a lesson.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Catching a Taxi in China

new_beijing_taxi1Taxis are everywhere in China. They’re inexpensive and easy to catch. However, as a foreigner, directing them to where you want to go can sometimes be challenging. In Doing the China Tango I mentioned that I frequently traveled within a city by taxi, but I never went into the problems a foreigner can encounter by using this ubiquitous form of transportation. Let me do that for you now.

The first problem you’re likely to encounter is, of course, language. Outside of Hong Kong, taxi drivers know very little English. In fact, the further north you go in China the less English will be understood by the Chinese people, especially taxi drivers. For example, if you were in Hong Kong you can almost always get to your destination by giving the taxi driver instructions in English. Beijing, in the northern part of China, is different. If you were at the Beijing airport and wanted to go to the Sheraton hotel, for example, you may instead to be taken to the Hilton as, surprisingly, both words in Chinese sound very similar. If you asked to be taken to the St. Regis you’re likely not to go anywhere as, I’m told by my translator, that St. Regis translated into Chinese comes out as International Club. If you’re already at your Chinese hotel you can get a small card from the concierge which will have the name and address of your hotel in Chinese and you can then hand this to the taxi driver. The same for major shopping and tourist destinations.

I’ve handled getting from the Beijing airport, or from one destination to another, for example, in one of two ways. The first method I use is to have the phone number of the hotel, or business person I’m meeting with, loaded into my cell phone. When I get into the taxi I dial up the hotel operator or party I’m meeting with and simply hand the phone to the taxi driver. It works every time. The second method I use is to e-mail the hotel or other party ahead of time and ask them to put their address and driving instructions in Chinese and send it to me in an e-mail. This also works every time.

Getting around in China by taxi sounds easy in my books but if you can’t communicate the address in Chinese you may have a difficult time getting to your destination, depending on the city you’re in.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Having a Beer in China

la-fi-mo-10-biggest-beer-brands-20120926-010People don’t normally think of China as a nation of beer drinkers. I think of Britain, the United States, and possibly a number of other countries as being beer aficionados, but not China. Most people place China in the category of a nation of tea drinkers. In Doing the China Tango I mentioned that the Chinese often drink beer with their meals. The beer is generally served warm and it’s usually consumed from a glass rather than directly from the bottle. But until I got to really know the Chinese people outside of my business meetings, I didn’t have any idea that China was indeed a nation of beer drinkers. In fact, the Chinese beer market is growing at 10% a year.

From this you might assume that the beer of choice would be Tsingtao, which is synonymous with Chinese beer in the United States. That’s because Tsingtao, which is 27% owned by Anheuser-Busch, accounts for 50% of China’s beer exports. However, in China Tsingtao is not the beer of choice and only has a 15% domestic market share. It’s actually Snow beer that’s the #1 beer in China. I confess that don’t know of anyone outside of China that’s even heard of Snow beer, but if you live in China it’s THE beer. The Chinese consumed 16.5 billion pints of Snow beer last year. To give you an idea of how much beer that is it’s twice the amount of Bud Light that’s consumed globally.

Snow beer was formed in 1993 as a joint venture between SABMiller, the same company that manufactures Miller Lite, and China Resources. In 2011 it brewed 50.8 million barrels of Snow Beer, which is only sold in China, not even in Hong Kong. Snow beer is considered bland tasting by most Westerners. Since beer in China is usually consumed at meals, with 50% being drunk on restaurants, the Chinese prefer a beer that’s less filing and has a low alcohol content, typically between 3% and 4%. Therefore, for the Chinese palate, it fits the bill: it’s bland, not filling, and with a low alcohol content.

The next time you think of a Chinese beer, erase the image of Tsingtao, and think Snow.

Alan Refkin

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Walking Your Dog in China

Photo from animal.discovery.com

Photo from animal.discovery.com

A short time ago I was just putting the finishing touches on my newest book, Conducting Business in the Land of the Dragon (formerly Doing the China Tango II: Advanced studies), a title my editor seems to like better than my previous working title. In this book I wrote a chapter on China’s pollution problems and what they’re doing to try and address these serious issues. Contained in this chapter is a section on water pollution. What influenced this section of the book was a conversation I had with my assistant Maria, and which I didn’t mention in the book.

Every morning I take my dog Halle out for a walk and a swim in the lake a stone’s throw from where I live. Since I live in Florida it never really gets cold and the lake is also netted and protected from reptiles that try and eat you, such as alligators. Halle is a flat coated retriever, loves to swim, and can’t get enough of the water. On our excursions I usually oblige her by throwing a soft rubber ball a short distance into the water, which she delights in endlessly bringing back to me. This routine goes on until she gets tired and her man-servant, me, dries her off and takes her home.

One day I happened to mention my routine to Maria when she asked, to my surprise, if I gave Halle a shampoo when I returned. I told her I didn’t as it was a fresh water lake and didn’t have any salt in it. You can see the sandy bottom below the surface and, while it isn’t Minnesota quality water, it’s not the Mississippi River either.

In China taking a dog for a swim wouldn’t be possible and it’s questionable whether any dog could survive a swim in most of the fresh bodies of water in China. The reason is that the underground water supplies in 90% of Chinese cities are contaminated by industrial effluent, sewage, and agricultural run-off. In addition, 43% of state-monitored rivers are so polluted that they’re unsuitable for human contact. In an example I use in my book a frustrated Chinese businessman offered the U.S. equivalent of $32,000 to the environmental official from the local government if he would swim in his town’s river for just 20 minutes. The official refused.  This is why Maria was so surprised when I told her I was taking Halle for a swim and why taking even yourself for a swim in China is probably hazardous to your health and doesn’t work.

When you’re in China the only water you should make contact with is that inside a plastic bottle or water that’s been boiled (hot tea is generally safe to drink). I’ve followed this rule and, as a result, have never had a problem. Stray from this rule and you’ll undoubtedly need a trip to the local drug store for a little intestinal fortitude!

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Chinese Karaoke

s-KARAOKE-largeIn my books I’ve mentioned that it’s not uncommon, following a business dinner, for everyone to go to one of the numerous Karaoke bars that dot all Chinese cities. Known as KTV studios, these Karaoke bars have little resemblance to those found in the U.S. where everyone is in one large room watching the person holding the microphone sing. In China Karaoke bars have numerous private rooms, of various-sizes, with thick padded walls to insulate them from sound intrusion. The rooms are rented by the hour and range in size from those that can accommodate only a few to ones that can accommodate a large group. These often come with a raised dance floor, chandeliers, couches, and multiple synced flat screens.

All rooms have a big screen TV that plays music videos which are selected from an extensive music library, many of which are in English. The rooms I’ve been to also have a Western-style bathroom. There’s a menu in each room where you can order drinks as well as both foreign and Chinese food. Each room usually has a female attendant who keeps the place clean, places your food and drink orders, and solves any technical problems that occur.

Everyone lets their hair down at Karaoke bars. From the CEO of the company on down everyone sings, laughs, drinks, and has a good time. In fact everyone is expected to sing which, for most Westerners, is something we’re not prepared for. I have a voice like a frog and have no musical talent. Nevertheless, the host will select Western songs which even I can sing. They don’t care how you sound, just that everyone is enjoying themselves. In a society that’s hierarchical and regimented, Karaoke gives everyone a chance to relax, enjoy, and freely express themselves without social consequence.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Fast Food in China

In both my books, The Wild Wild East and Doing the China Tango, I described the elaborate Chinese banquets that foreign businessmen are invited to as part of their interaction with Chinese companies. What I didn’t mention, however, was the Chinese people’s love of fast food. It doesn’t seem to matter if it’s Chinese, American, or another country’s fast food. The fact is that Chinese people seem to embrace fast foods even more than we do in the U.S. One reason for this is that China has always had food carts where local vendors would sell noodles, dumplings, and other easy to consume Chinese food items. These carts can be found along sidewalks and roads throughout China and provide, for the most part, inexpensive and tasty food items. I’ve eaten at a number of them and found the food to be good with no emergency trips to the bathroom were required. Although food sanitation standards are relatively lax with food carts, choose those with the longest line. My staff has told me that this is one of the better indicators to use when selecting a food cart and one where you probably won’t have to have a bottle of Imodium for your after-dinner drink.According to Mintel, a media intelligence company, it’s estimated that 71% of Chinese consumers prefer to eat fast food for lunch. Dinner is the second most popular meal for fast food consumption with 54% of Chinese consuming fast food at this time. Chinese Fast food outlets have shown an 80% growth in numbers since 2007 and in 2013 they’re expected to generate sales of $94.2 billion, up 8% from 2012. Much of the reason for this growth is that fast food franchises are spreading to smaller Chinese cities. In the past you could only eat at McDonalds or KFC in larger Chinese cities. Now foreign fast food franchises are ubiquitous across China. The largest industry player is Yum! Brands, Inc. which operate both KFC and Pizza Hut with 5,275 outlets in 2012. McDonalds currently has about half as many locations. Subway, Burger King, and other foreign outlets are also planning hundreds of new fast food outlets across the country. In fact, if you go to the Shanghai’s Pudong airport, on the bottom level arrivals hall you’ll find Burger King at one end, open 24 hours a day, and KC anchoring the other! Fast food is everywhere in China.

As Chinese people have more disposable income fast food franchises are expected to continue expanding across China. Not long ago I ate at a Papa John’s in Chongqing and found the pizza to be every bit as good at that in the U.S. That consistency and quality is what attracts a great many Chinese to foreign fast food restaurants. In a country where food safety is the number one social issue Chinese believe that foreign fast food, while slightly more expensive, is safe, of good quality, and suits their busy lifestyle.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Traffic in China

Traffic in China’s major cities is so bad that it makes Los Angeles traffic seem turbocharged by comparison. I know, I’ve been caught in it so many times it’s not irritating anymore, but expected. In fact, it’s not unusual in Beijing for business meetings to be delayed by an hour or more due to the cities huge traffic jams. I’ve sipped more than a few cups of tea waiting for my appointment to arrive and I know others have done the same waiting for me. In Doing the China Tango I briefly mentioned China’s traffic, but I didn’t really go into great detail because it wasn’t the focus of the chapter. But since my book came out a number of readers have e-mailed and asked me to go into more detail on China’s growing traffic problems. Hopefully what I’ve written below will provide more detail.

There’s a number of reasons for China’s increasing heavy urban traffic. The first is that there’s a continuing migration from China’s rural to urban areas. With this urbanization there’s also a corresponding increase in vehicular traffic. Another reason for China’s urban traffic congestion is that people in China are becoming wealthier and there’s now a large middle class. This increase in wealth has enabled more Chinese to purchase cars whereas, even a decade or two ago, this would have been out of the reach of most Chinese citizens.

xin_360104042217634273322In Beijing, known as China’s capital of traffic congestion, the average weekday congestion time is 100 minutes, 30 minutes longer than just a year ago. On rainy days traffic jams can last as long as three to four hours. Beijing just has too many cars on the road. On July 10 of this year, according to the South China Morning Post, there were 5.53 million cars registered in Beijing, a 330,000 increase over 2012. The world’s longest traffic jam, according to Forbes, occurred in Beijing in August of 2010. In that month cars and trucks trying to travel on the Beijing-Tibet expressway created a massive 62 mile traffic jam that lasted for 12 days. This is not a typo – 12 days! The reason for this wasn’t a natural disaster. Instead it was that a lot of vehicles, combined with a great many very slow moving trucks carrying an extensive amount of construction materials and equipment into Beijing, all came together at the same time.

China’s rapid transit system isn’t much help as it hasn’t kept pace with urbanization. Subway and bus lines are jammed and railway lines are used mainly for intra-city transit. China could begin to control traffic congestion by limiting automobile purchases, but not everyone is behind this plan, especially automobile manufacturers. Therefore, most cities have limited the number of cars allowed into the more densely populated areas of the city by enforcing either odd or even license plate numbers on certain days, or certain license plate end numbers on specific days. Beijing, Shanghai, and other major cities have also gone one step further and instituted a lottery or auction for new license plates in an effort to put the brakes on the increasing number of cars entering the city.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

There are no Speeding Tickets in China

In Doing the China Tango I discussed the driving habits of a great many Chinese drivers. But, as with all authors, you sometimes can’t get into the level of detail you like in the few lines or paragraphs you have to get your point across and move on. If we get too descriptive the book tends to drag and move in a number of directions. Editors hate this have the author re-write those areas of the book. Therefore authors try and be descriptive, succinct, and then move on. The lack of speeding tickets in China, therefore, is something I’ve always wanted to add a couple of more paragraphs on and I’m now glad to discuss it in a little more detail.

2308598738_7d22d99435First off, Chinese drivers are not stopped for speeding on the highway. There’s no highway patrol car, with lights and siren, pulling someone over. As a result you’ll see cars weaving through traffic at high rates of speed and passing police cars in the process! This was something I couldn’t believe when I first came to China and, on my way from the airport, saw my driver in fact weaving between cars and cutting office a police cruiser. In the U.S. that would undoubtedly get you the bed and breakfast plan at the local jail. In China, nobody thinks twice about it.

The reason for this, as I soon learned, was that speeding is determined by radar detection and a photo of the speeding cars license plate. The police therefore know who the infringer is and tickets are then sent in the mail, with the average ticket costing around $32. The radar is usually, but not always, placed on overpasses so you’ll often see drivers brake hard before getting to them and then speed up afterwards. Chinese drivers know where the police radar is located and this practice of slowing down before you come to the radar is a common practice in China’s major cities.

Some drivers, however, get a little more creative and either cover up part of their license plates or else place false license-place stickers (which are widely available) over their original license plate numbers. The police seem to draw the line with license plate stickers and violators can get thrown in jail for two weeks if caught. However, for the most part, drivers rely on knowing the location of police radar and adapt their driving habits accordingly.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

My future books

My partner Dave Dodge and I have been diligently working on our new book, which will be my first collaborative effort with Dave, and my fourth published book. The book has the working title of Piercing the Great Wall of Corporate China: How to Perform Forensic Due Diligence on Chinese Companies. We hope to get this book published by the early part of next year Dave is an excellent writer in his own right and has the amazing ability to explain the complicated in language that anyone can understand. Not many CPAs can accomplish this, especially when discussing forensic accounting. Therefore, don’t let the title of the book scare you, it’s written in such a way that almost anyone can pick it up and learn how to really evaluate a Chinese company. Most corporate joint ventures in China fail because one or both sides don’t know what they’re getting into. When expectations are misaligned, joint ventures fail. What we’ll show you is how to thoroughly evaluate your Chinese partner so that you can make the best possible decisions.

Next year my focus for a short time has expanded to include the writing of my first two works of fiction. One of them will incorporate some aspects of ancient China, while the other will initially take place in the U.S. I will again be published by iUniverse which is owned by Pearson Publishing. My business postings won’t stop during the writing of these two books as I’ll still publish my bi-weekly Thornhill Capital blogs along with my monthly newsletter. Of course, my bi-weekly author blogs will continue unabated.

The reason I’m writing these fiction books is that a number of years ago I wrote some works of fiction but didn’t have enough time to entirely complete them to my satisfaction. I have that time now and I’m excited to get these re-started and have my great editing team evaluate the books and give me their critiques.  Stay tuned.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

My third book

shutterstock_65263741Just recently I received the first set of comments back from the editors on my third book. As an author, you always expect comments back from the editors that examine your work. If they’re doing their job they’ll give you what changes are necessary in order to make your book even stronger. Usually, recommended changes involve the addition of something for clarification, consolidating items that are mentioned in several sections of the book into a major section so the reader gets the full impact of your idea, and other modifications that provide a smooth flow of the authors ideas. The changes almost never involve changing data, as the editors publishing your book already consider you to be an expert in your business area.

The editor has one advantage over the author in that they’ve never seen the entire manuscript before and therefore can view the book much as a first time reader. The author, on the other, almost has the manuscript memorized. Therefore, it’s difficult to be the editor of your book.

One of the changes the editor asked me to make was to delete some of the extensive Chinese history I provided. In doing so, the editors felt, those using the book as a reference would be better able to access the business information they were looking without first immersing themselves in historical context. The editors still wanted the background history, just not as much. They were right, of course. Therefore, I’ve been shortening up the history lessons within the book and keeping my narrative on historical events much shorter. I’m through chapter 8 of the 14 chapters in the manuscript and hope to have the remainder of the revisions done in a week or two. After that, on to the next editor as I’m still hoping to make my end of September or beginning of October publication date.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

The use of time pressure

In chapter 4 of The Wild Wild East I noted in Refkin’s Rule #7 that Chinese businessmen love to use time pressure. This is a common tactic used against foreigners in China. A Chinese businessperson doesn’t want to give you time to think. He needs a specific response from you and, if he gives you too long to think about it, he may not receive the answer he wants. Sometimes there’s a dose of deception also thrown in with the time pressure. Take, for example, a situation that happened to me in Beijing. The CEO of a company wanted to expedite the money he was to receive from a fund. However, in order to receive it he had to meet certain milestones on profitability. If he did, the money would come to his company over a period of a year. However, the CEO wanted the money sooner. Therefore, he told me that the government had changed the rules and that all joint ventures in China now had to be completely funded by a certain date or they would become invalid. To prove his point he produced a thick document in Chinese with a number of official looking stamps on it. But when one of my staff checked the government documentation online, his statement proved to be false. The reason for this deception, as it turned out, was that he knew he wouldn’t meet his profitability milestones and consequently wouldn’t receive the rest of his money. Therefore he hoped that a little deception, along with time pressure, would get him the funds. If you think this unusual, it’s not. Chinese businesspeople know that time pressure is not uncommon in American business culture and that Americans are individualistic in contrast to Chinese collectivism. Therefore, they try to employ time pressure when it suits their objective. When I wrote Refkin’s Rule #7, I had this specific instance in mind, along with the example given in the book. Time pressure is still a tactic used by Chinese companies today. Old habits die hard!

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Ceremonial contracts

When I wrote Doing the China Tango, I tried to incorporate a great many of my experiences in China. Some of these experiences were good and resulted in a profitable business relationship. Others were the opposite, and I still have the scars from those learning experiences. One basic rule of thumb that I always provide to those doing business in China is that the better you understand China’s culture, history, business conduct, and societal prejudices, the more successful you’ll be.

Take, for example, Chapter 15 of Doing the China Tango. In it I mention that Chinese companies frequently employ the use of ceremonial contracts, or contracts that neither side is expected to honor. Not only do companies utilize ceremonial contracts, but they’re also utilized to a great extent by the government to show the Chinese people that positive things are happening. In China, that’s important as social harmony is the key to the government maintaining its power base and control. Subsequently, whenever I see an announcement that a huge government contract has been awarded, or there’s been a technology breakthrough, or that China has signed a trade agreement, and so on, I take it with a grain of salt. Is there a contract? Almost certainly the answer to that is yes. Does the contract bind both parties tightly together like most agreements? Almost certainly not if it’s a ceremonial contract. It’s not meant to. These ceremonial contracts are meant to convey a message rather than setting forth binding terms and conditions. They’re meant to be splashed in the news and put on the Internet. However, there’s so many holes designed into a ceremonial contract that even a member of the U.S. Congress would be proud. When you see the Chinese government announce a major contract, don’t give it too much credence. It may or may not be real. Many of these contracts are ceremonial and are meant for home-consumption.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

Fourth book coming later this year

 Just sending my third book off to my publisher, which is owned by British publishing company Pearson PLC, the same company that owns Penguin Radom House, you’d assume that my next book would be about a year or more away. That’s about how long it takes to research and write your average business book and the time it took to write each of my first two books. However, in this case I’ve also been working on a fourth book, with my co-author David Dodge, for about the last year. The working title is Piercing the Great Wall of Corporate China: How to perform forensic due diligence on Chinese companies. Of course, the publisher will also have their idea of what the title of the book should be, but I tend to like this working title and hope that we’ll all decide to make it the title of the book. The book is designed to help those companies, entrepreneurs, and individuals who have difficulty performing due diligence on a Chinese company. Thornhill Capital, the company where I’m the Chairman and CEO and Dave is the CFO, has been performing due diligence in China for over a decade and has developed protocols and checklists for almost any type of company, both public and private.

Dave Dodge and I have talked about writing this book for years and finally, around July of last year, we decided to just budget our time and do it. The book will actually teach, in depth, how someone should look at a Chinese company and determine what’s actually there. Chinese companies have a history of revealing as little as possible as well as creating books and records that would be placed in the fiction section of a public library. We wanted to enable the average person to expertly get beyond the great wall these companies create that prevents someone from knowing exactly what they’re getting into. Subsequently, we decided to utilize our corporate expertise and detail how to perform due diligence on a Chinese company.

We hope to come out with the book at the end of this year. However, with the Thanksgiving and Christmas holidays at the end of the year, it’s possible the publishing process may force publication in the first month or two of next year.

Below is an unedited portion from this book from the introduction.

Philosophically, culturally, and business-wise, Chinese companies seem to operate on a different plane than businesses in most other countries. Even seasoned business professionals, with decades of successful experience in other global markets, have found their ability to perform due diligence, and evaluate Chinese companies, to be woefully inadequate. One of the reasons for this is the existence of a Chinese wall, a cultural-philosophical-business barrier that prevents foreigners from discovering deficiencies, or obtaining required information, during their due diligence. China is not as open as the West, having historically been an isolationist country and cut off from interaction with the global business community for all but the last thirty-five years.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

7-29-23

Selecting the title and cover design for the Wild Wild East

Selecting the title for a book, as well as the cover, is an important part of the publishing process. It says to the potential reader: pick me up, I’m interesting to read.

ResizeImageHandler-1Most authors, myself included, always have, what I refer to, as a working title for the book they’re writing. In my case, this gives me a sense of focus and also shows the publisher’s editorial staff the type of title I find appealing. For my first book, my working title was: The Wild Wild East: A chronicle of the Life and Times of an American Investment Banker in Modern Capitalist China. This title seemed to reflect the primary theme of the book: a financier telling the story of how an investment in a Chinese company slowly disappeared through cultural disconnects and business deception.

This title seemed to work for a while, but what I also wanted to tell the reader was how they could avoid some of the pitfalls this financier experienced in China. Everyone doesn’t lose money in China. In fact, many companies generate huge profits there. They just know what to do. Subsequently, as I was about half way through the manuscript, I changed the title to The Wild Wild East: Refkin’s Rules for Successfully Navigating the Business Minefields of Modern Capitalist China. This seemed to better reflect the message that, if you adhere to some basic rules and stay informed, you have a much better chance for success in modern-day capitalist China. Eventually the final title of book was transformed, thanks in part of my editor, into The Wild Wild East: Lessons for success in business in contemporary capitalist China.

Now that I had the title for my book I wanted to have a knock-out cover. My publisher has a fantastic cover design department and they usually nail it when it comes to having the cover reflect the theme of the book. But they also like to receive input from the author to see if we have any ideas. At this point, I didn’t. I was still trying to put together my thoughts. One night, when I was at dinner with some friends, someone asked me what it was like to do business in China. Without any forethought I said it was like the wild, wild east and that everyone should be in cowboy garb instead of business suits. It was bustling, energetic, uncontrollable in many ways, and rules and laws were, to a great extent, reactionary. The only thing missing in Beijing, I added, was Wyatt Earp. It was at this point that I thought why not a Chinese person in western attire? That’s exactly the image I’m trying to convey.

When I got home from dinner I was excited. Even though it was late I went into my office and performed a Google search, looking for Chinese wearing western attire. But I didn’t find what I wanted. The next few days my searches produced the same results. I had almost given up hope, and was starting to work with cover design on an alternate cover when, fortunately, the answer fell into my lap. On that day I was reviewing the picture archives from the Museum of Performance and Design in San Francisco, where I’m a member. In their archives I happened on two photos of a Chinese man in western attire. Both were holding a lasso. Perfect! These photos were exactly what I’d been searching for. I contacted the museum and obtained their permission to use the photos as covers for my book. My publisher loved them, cover design loved them and the rest, as they say, is history.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

7-24-23

A New Book is born

Name: Pending approval, or name change, from the earthly version of God (the publisher): Doing the China Tango II, Advanced Studies. How to Dance around pitfalls in Chinese Business Relationships

Estimated Publishing Date: September – October, 2013

Today I sent a new book, a manuscript as it’s called, to my publisher. As a writer, it’s always exciting when you finish a manuscript. It’s a long and time-consuming process and takes, on average, between 6 months and one year of writing, depending on the complexity of the subject and the desired length, to produce a manuscript. This manuscript took nearly a year to write and cites nearly 400 references, which are included at the back of the book, to help the reader delve deeper into a specific subject if they choose. This book will be more than twice the length of my previous books, and will cover timely subjects for anyone wishing to conduct business in China. These subjects range from how one can protect their intellectual property in China to how you can negotiate with the Chinese and win!

alanscottThe publishing process is fairly straightforward. Once the editor receives the book from me, which is in an MS Word format, she’ll slice and dice it and return it with comments in 2-3 weeks. These comments can range from changing the title, which happened on my second book, to suggesting a more, or less, substantive explanation to various subjects discussed, to re-arranging the order of the chapters. You get the idea. Everything’s on the table. One of the reasons that this is so important in producing a great book is that, as a writer, you’re too close to the book. Believe me when I say that you almost have the book memorized by the time it goes to the editor. You’ve gone over the manuscript and subject matter so many times that you can’t see the forest from the trees. An editor, in contrast, is seeing the manuscript for the first time, much like the reader who’ll purchase the book. She doesn’t see the forest, she sees the tree and will tell me what changes, if any, need to be made in order to make the book razor sharp.

I’ll also send a copy of the manuscript, even though it’s not finalized, to a number of industry associates to get their input on its content. The idea here to that I want to see if they can spot any holes or errors I’ve made in the various subject matters discussed in the book. Usually I give them 1-2 weeks to get back to me while the book is in cover design, which is the next step in the publishing process.

Cover design tries to come up with a book cover, and dust cover for hard cover books, which visually reflects the books subject matter. Usually one, and possibly two, suggested covers will be sent to me and I can accept, reject, or modify these as I like. The cover design department has always surpassed my expectations and I’m always impressed with their work product. They seem to know what I like and usually nail it.

Once the editor’s comments come back to me I’ll look at the recommended changes, review the comments from my industry associates, and I will discuss every comment with the editor. Although the final decision on what changes to accept or reject is ultimately left up to the author, the editor is normally an experienced professional who is spot on with her comments. Again, her job is to make the book razor sharp. Therefore, after discussing every comment, we both agree on what needs to be done and, in 2-3 weeks max, the final manuscript is then sent back to the publisher. It’s at this point that I sign (electronically) a form from the publisher saying that I’ve reviewed the final manuscript, agreed with its content, and it’s ready for the presses.

When the publisher receives my approval form, the manuscript is sent to typeset and an initial copy of the book, hard and soft cover, is printed and sent to me for final approval before the actual print run is initiated. The e-book version is also constructed by the publisher during this time and will be sent separately to Barnes and Noble, Amazon, and many other booksellers who will offer hard and soft cover copies of the book as well as a down-loadable e-version.

As you can see, the publishing process is collaborative and involves the input of many professionals.

Alan Refkin

If you are currently not receiving my newsletters or blogs and would like to, please sign up at http://thornhillcapital.info, or visit my corporate web site at www.thornhillcapital.net, which will also give you access to past editions of my blog’s and newsletters. I would also be pleased to answer any questions you may have by contacting me at info@thornhillcapital.net

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