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Archive for May, 2008

We’re not dead

Just a quick post to let everyone know that, despite the earthquake in the Sichuan province of China, we’re just fine.

Just before lunch yesterday I noticed a slight swaying at my desk. I figured that it was just a slight dizziness as a result of dehydration, however a fellow colleague noticed the same thing at the same time. The earthquake was felt or measured far and wide, causing the evacuation of some very tall buildings.

Gail’s dad is currently on holidays in China in the Sichuan province. He was in Chongqing, near Chengdu, lying in his 8th floor bunk when the earthquake struck. He had this to say:

Was lying on the bed .. no air con in this cheap dorm when things started swaying.
A bit like the top bunk on an O/N train… not sharply..but a swaying motion..Something as you might expect a heavy weight to do on top of a thin cane.
It took my interest…
I heard a few rattles, got off the bed & looked at the swinging light fittings on the ceiling.
The hum of the city below had changed .. & moved up in pitch..
People were flooding out of the buildings into the open mall & clear street areas below..
I could see it well through the open window I had on the 8th floor..
After a minute or so the building stopped swaying & the square & open mall area below & in the distance were full of people.
I heard a siren or two in the distance..
Had a few after-shocks 10 & 20 minutes later..
See if it makes your News bullitins….
Havent seen any damage any where either to property or person.
Probably 3 or 4 on Reichter scale

Thanks to those who emailed us to make sure we were OK.

Every which way but lose

On Sunday we were travelling along one of Shenzhen’s major arterial roads on the bus. All of a sudden, the traffic just stopped and we were knee-deep in cars pointing in practically every direction on the compass.

SZ Freeway jam

It seemed that there’d been a jam of some sorts up ahead and, rather than wait, most motorists were doing U-turns or reversing back along the free way to the nearest on ramp, trying to get onto the access road. From where we were, we couldn’t see what caused the chaos, but the actions of all the drivers were certainly contributing nicely. Strangely, the outer-most lane was flowing, albeit slowly.

It was a bit of an obscure feeling to be in a bus on a free way with a car pointing in the opposite direction alongside you, whilst your bus driver is reversing it over the median strip with the ticket lady calling out how close he is to the other cars around him.

China low-ball pricing

I received a most interesting email from a friend recently, containing a link to a Jim Pinto article about how China plays the capitalist game. Whilst none of this is old hat it was quite succinctly put, and therefore worthy of a mention. Below is the article (my emphasis added) but you can view the original here. There’s also some useful links at the end of the article.

China low-ball pricing

In the early 1990s, China was merely a low cost place to make labor-intensive products. Now the country with the world’s largest population has become the most powerful force in manufacturing. Prices for Chinese manufactured goods are typically half of comparable U.S. and European products, which gives China a strong competitive advantage. But here’s something most people don’t realize - it’s not low-cost labor - it’s low-ball pricing. China simply accepts much lower profit margins.

U.S. businesses develop products with 50-60% gross profit margins and 10-15% net profit. Developing countries (other than China) look for 30-35% gross-profit, or 5-10% net-profit. China accepts gross-profit margins of only 5-7%, with 0-2% net-profit. Therefore, even with comparable manufacturing costs, Chinese products are the cheapest.

Here’s a simple example to illustrate the point: Let’s say a product costs $40 to manufacture. In the US the target selling price will be $80; in other countries, typically $60.

The Chinese would sell that product for just $45, maybe even $ 40 (zero margin). This astounds most outside observers-how can a profit making enterprise survive (capital and cash flow) with no profit?

The answer: In China, short- and medium-term operating deficits are acceptable since the government manipulates and controls capital. Chinese planners recognize the demand for short-term profit as the Achilles’ heel of Capitalism. Their own primary strategic objective is long-term global market share. The tactics: a/ High volume; b/ Fast response; c/ Immediate local employment; d/ High investment in automation and quality to maintain price leadership.

For America, the remedies require significant attitude shifts. Our short-term financial mind-set must change. Business needs to realize continual quarter-to-quarter increases in revenue and profits cannot continue on and on with work that is done elsewhere in the world.

It must be recognized that manufacturing and job creation are not just political or business manipulations, but the building blocks of society. To be competitive in global markets, it’s important to keep investing in jobs, to upgrade factories. Entrepreneurship and talent must be encouraged and stimulated to thrive in the manufacturing sector.

Deja Vu

Yesterday (Sunday) we took a bus ride for about an hour and there was a 40-ish year old man on the bus. Nothing unusual about that, nearly half the people in Shenzhen are male ) .

A few hours later we got back on the same bus for the return journey and, lo and behold, this same guy was on the same bus, boarding with us at the same stop. Interestingly, our alighting and boarding bus stops were different at our destination, but within walking distance of each other.

This morning, after passing through the metro subway gates, I passed the same man walking in the opposite direction!

Now the controversial ‘cigarette lighter on a stick’ will be in Shenzhen in 3 days time (May 8th). Coincidence? You be the judge.

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