Smog Descends on China, Literally and Figuratively
Yesterday morning I spoke on a panel at the Confucius Institute for Business at SUNY Levin in Midtown Manhattan. The subject was fashion and luxury in China and how language and culture play a role. The event was a success thanks to the excellent panelists and the enthusiasm and participation of the audience.
One question stood out. I said hopefully China will be successful in its transition from a commodity/export based economy, lacking innovation, to an economy driven by innovation, consumer spending and services.
I was asked why I said hopefully. My answer. This type of transition is difficult under the best of circumstances. Never mind if: you have 1.3 billion people to employ, feed and take care of, an environment that is poisoned, a populace that needs to pay for its own health care and education, a looming change in leadership, shifting Geo-political winds, a neighborhood that is increasingly wary of your intentions, a need to keep growth at at least 8%, an educational and political system that discourages original thinking and risk taking, an aging population etc. etc. etc.
Many people in the Chinosphere are talking about these being particularly gloomy times for China and many others are questioning the sustainability of Chinas rise. See Dan Harris post from the
I tend to balance the positives with the negatives and never get too high or too low on Chinas prospects.
That said there are a few stories circulating now that I think businesses, governments, NGOs and all those who have an interest in China must pay attention to as they point to some worrying trends.
They are:
The Issue: Apple Loses the Right to use the name iPAd in China
What it Means for the Future: One of the great bugaboos of doing business in China is the lack of respect for intellectual property. In the past Chinas trademark and copyright laws were to loose. They have come the other way now and are among the strictest, and most complicated on Earth.
One of the g! reatest challenges to doing business in a first to file country like China is protecting your IP. Chinese companies have every right to use the name of your company, product, slogan etc. if you do not file first. If Apple cant keep the iPad name in China it does not bode well form smaller players. It also sends mixed signals on the sanctity as well as the disposable nature of IP in China.
The Issue: Beijings Polluted Air
The huge controversy developing around Beijings air quality and the governments commitment to telling the truth and taking corrective actions. This has reached emergency proportions. The air in Beijing right now will actually take 6 years off of your life.
Please see James Fallows coverage of the story for The Atlantic. He has all the details and has been semi-obsessed with Beijings air for the better part of 5 years.
What it Means for The Future: As I have explained in my Wealth Through Health analysis of the 12th 5 Year Plan, cleaning up the environmental mess in China and preventing further degradation is a major focus of the the government. That said, one has to wonder how much of this is just talk if the air in the countrys capital is the most polluted on earth. The Chinese people cannot prosper, nor can foreign businesses, if the air, water and land are poisoned.
The Issue: Companies Employing Foreigners in China To New Pay Taxes, Surcharges
Beijing seems to be tightening controls on foreign companies operating in China. These new regulations will make it much more expensive for local and foreign companies to employ foreigners in China.
What it Means for The Future: China still needs the experience, expertise, technologies and best practices that foreign companies bring with them. This m! ay dissu ade some companies from entering or expanding in China, thus depriving China of what it needs most. It also seems unfair that employers have to pay these taxes and charges for employees that will never collect the social benefits they are supposed to provide.
It may also signals that China may be souring on some foreign enterprises and FDI and that they want to concentrate ever more on Going Global with their companies and investments.
MSNBC covers the story well here
What are you seeing, hearing, feeling out there? Any stories that worry you?
Comments