China / Vietnam


I just got back from 2 weeks in China and Vietnam, travelling with 50 awesome folks from b-school. Amazing amazing places. Travelling with 50 people naturally constrains the kind of trip you can have. The school can basically never let you get into a situation with actual danger on a trip they organize. So the parts of travel where you think to yourself, “Man, I’m really not sure what I’m going to do” (and that really turn out to be a ton of fun) basically don’t happen on a trip like this and getting out of the cities in general was pretty limited. On the other hand, we met with government officials, toured a Nike factory, a Mattell factory and a farm and met with a ton of local business people; all things you could not do traveling on your own.

The pace of change in China truly needs to be seen to be believed and honestly is somewhat frightening. Shanghai just added a Manhattan worth of construction in the last 5 years. Pudong (the famous part of Shanghai with all the iconic looking skyscrapers) just wasn’t there 7 years ago. The relationship of the people and their government is very different than we are used to. When a decision is made to develop a particular area, the people living there are summarily moved or compensated with little dissent. We met with a real-estate firm that has a downtown project measured at 3.5 square kilometers. That size of development downtown is unthinkable in the West.

The pollution is pretty unbearable (bad enough in Beijing that I really wouldn’t want to live there) but I sense that it’s something else that the Chinese will get under control before too long. The same sort of autocratic control that lets them move people will let them just announce new pollution standards that are to be followed. The situation today is a conscious choice.

One is left wondering at the wisdom of the level of investment the West has made. The cost advantages of China create a prisoners dilemma of sorts for Western firms. If you assume your competitors are going to take advantage then you need to as well to stay competitive. And of course the allure of a 1.5B strong market is pretty strong. But investing comes at a high price. The weak state of IP laws seem like no accident. There is a very conscious effort to extract IP broadly speaking (know-how, expertise, etc…) and I have no doubt that China will one day have very strong IP laws, except they will flow the other way. They will protect China from the West. Many of the Western firms we spoke to seemed to have an increasing leeriness, that perhaps they hadn’t gotten as good a long-term bargain out of moving operations to China as they’d initially believed.

One of the most interesting things I saw was a local company called Li Ning. If the products, logo and general positioning seem familar, that’s because they are. Everything is virtually cloned from Nike, including the stores which very much resemble Niketown. They’ve even signed Shaquille O’Neal as a spokesperson. This kind of development represents a new and especially frightening kind of IP infringement because their products are not exactly counterfeit. They are “legitimate” clones that resemble Nike products in almost every way except that they cost much less. I expect we will see a lot more of this type of thing in the coming years.

Obviously lots more interesting stuff to talk about, including wonderful Vietnam, but I’ll have to save that post for another day. A bunch of photos from the trip are here and also on Facebook.