The first time I played a board game in China was in 1995. I was crashing at a friends house in Xiamen. It was during the Labor Day holiday. I was sitting on my friend’s wood sofa watching TV. (I distinctly remember that it was a movie staring the actor from Highlander, Christopher Lambert, where in he played sort of a brain-washed bomber/assassin). I was drinking beer and was a little drunk. My friend’s girlfriend and her friends set up a Monopoly set and started playing. As I was watching my show while the girlfriend and her friends played the most friendly game of Monopoly I ever saw. Their game went on for about an hour without anyone winning. No one was bargaining. I politely asked them if they would mind if I played with them and we start the game over. They agreed.

I sat down with them and started to play. By about 30 minutes into the game, they were cursing at each other, using the Chinese words for mother f**ker repeatedly. I just did my thing. “What!? If you trade him Baltic and New York for Kentucky and a railroad, he will win. Do you really want him to win? Because if that’s what you want, its OK.”

I lost that game because of bad rolls at the beginning. I’m not so into Monopoly because the game tends to be too luck-based. I am likely to win most games in which luck is not the primary element. But it was a very fun game. I think my friends had fun too. However, I don’t think Monopoly is an ideal board game for Chinese people. I don’t think that they actually like the idea of screwing over their friends through bargaining and property speculation. Screwing over strangers is OK though. And I think high-drama games can be a little too intense for Chinese people to really enjoy.

Chinese people like hexie-hemu (和谐和睦 ) This means basically that everyone should just get along. It connotes that its not good to “rock the boat”. It connotes that it is not so good to stand-out. Its not good to cause trouble. My old boss talks about hexie-hemu in very derogatory terms. “No one wants to confront this asshole trouble-maker. They just want hexie-hemu.” My last boss is a very un-harmonious man… like myself.

Chinese people do play traditional PK games; Chess and Weiqi (“Go” to Americans). However, “modern” PK games – like “Magic: The Gathering” – have done poorly in China. Our Chinese distributors tell us that when talking about “hobby” games and “modern” games, they tend to like games with these characteristics:
- No chance of getting knocked out of the game early
- Opportunity for multiple people to win at the same time, possibly through sanctioned alliances
- Flexible player limit so a group of 5+ people can play the game at the same time
- Not a whole lot of bloody conflict; less drama
- Chinese people MUST be familiar with the background story of the game.

Funny thing is, this describes most of the team-building games I developed and/or ran for corporate teams while I was a consultant. Always win-win games. Many people or few could play. And people were often loath to confront the group-leaders who didn’t perform well.

As anyone who has followed this site (www.taikongren.net … not the family blog) for a while can tell, the site sort of died.  And that is in part because I am no longer a consultant.

Basically, I like being a consultant in China.  I like learning about business and sharing what I learn with my customers.  I like problem-solving my customer’s organizational development problems.  However, after much reflection, I came to the obvious conclusion that I’m not necessarily very suited to be a management consultant.  My communication style tends to be direct and somewhat aggressive, which puts some people off.  I often take the corporate back-stabbing personally and react with extreme impatience. As a consultant, I’m often in the middle of people who want to backstab each other; thus I’m an easy intermediary target.

More importantly, to be a consultant for factory managers, I need to develop relationships with said managers.  Sometimes this works out great and leads to long-ish relationships which benefit both my clients and myself.   However, even if I develop a great relationship with a General Manager of a company or factory, often he/she will move on to another position outside of China.  Then the replacement manager will not necessarily like me.  This happened at my last “gig” and it happened repeatedly over the last six years.  Furthermore, I really don’t like to form relationships for the sake of doing business; I like forming relationships because I generally like someone.  Often the people I like- who also like me- have some personality, temperament, or values similarities to myself.  This means they don’t always last long in any given corporate environment.

So I have *mostly* left the consulting business. At least, Management Consulting in China is not my main occupation at the moment.

Now I’m the CEO of my EOS (www.eos-sama.com), a small publisher which publishes table-top hobby games and table-top Role Playing Games.

I started at EOS last September.  My partner and friend is the founder of the company, Mr. Syn Chen. (below is his picture…he hates that picture). 

He started EOS about eight years ago.  He published two or three role-playing game books, a card-based game, and a few supplements.  Then stuff happened to him (military service, marriage, divorce, video games, etc) and the company died for two years.

This year, we are going to publish a Role Playing Game (RPG) book and board game in May (Nobilis and Trail of the Brotherhood), and an RPG (Legends of the Wulin) and a Nobilis supplement book in August. That’s all for the USA market.  If everything else goes right, we will also be publishing an Wuxia-genre card-based game in Hong Kong and Taiwan in July and September, followed by Mainland publication in November.  And we hope to publish a 5 part graphic novel set and a third RPG book this year too.

Next year, it is my hope to publish Japanese language versions of many of our products.  Japan is the second biggest market for RPG and boxed games.  And once in Japan, we can start also selling special hobby toys, like paintable Wuxia-action figurines modeled after Japanese adult video star, wearing school-girl costumes.

My long-term goal is to introduce RPG games to China.  Because I think Chinese young people could use this a tool to increase their creativity.

On the other hand, everything might fail, in which case, I would have blown the savings from my last year of work as a consultant, and I will have no career.  As I write this sentence, I start getting pains in my stomach.  Fortunately, I have several excellent (and one chewable) antacid medications available.

As for my former business blog site (www.taikongren.net) … I’m thinking about keeping it going, but start blogging more about the developing “game” market in China.  There really is no such thing at the moment… Its not a Chinese cultural norm to play Monopoly with the parents (although Wei-Qi / Go is pretty big).  But there are some things happening here.  And if I start blogging about this now, I guess my blog would be the first English-language blog about this market and industry.

That’s all for now.  One blog has come to an end.  A new blog at the same URL will begin.  And for those of you reading this on the Covners’-in-Asia family blog (www.taikongren.net/hard-boiled-shanghai/) … life goes on.  Miss you all.

Last week I posted about Android in China. I explained that I’m interested in mobile technology, and when that coincides with topics about China business, I get really excited. So… along these lines, I read articles in Engadget and GSMArena about HTC’s decision to sell phones in China under its own brand name.

Then I read this post in WSJ China Realtime Reports about this news article..

The article has several areas of ambiguity which should have been made more clear, so that readers can understand the significance of this business development. Just a sample…

Luckily for the Taiwanese company, Apple has been slow to launch its hot new products here, and has a relatively small presence with a 7.1% share of smartphone sales in the second quarter, according to Analysys International. Only a non-Wi-Fi version of the iPhone 3GS is officially available in China so far, and Apple hasn’t yet indicated when it might release a version with Wi-Fi or the iPhone 4… If HTC follows through on its promise to make an aggressive branding push, it could pose a bigger threat for Apple, analysts say. CK Cheng, an analyst at CLSA, said HTC is a key beneficiary of China’s carriers looking to offer handsets that can compete with the iPhone.

This overlooks that fact that iPhone has been a popular seller in China’s grey markets since it came out. As for posing a bigger threat to Apple because it is a “beneficiary of China’s carriers looking to offer handsets that can compete with the iPhone”, I would say this is true. As it is true for Samsung, Motorola, Lenovo, Huawei, Nokia, LG, and Sony. And some others probably.

However, my main question is…why does HTC now need to promote the HTC brand instead of its subsidiary brand Dopod, which has been in China for many years? Today HTC phones in China are grey-market smartphones with wifi. I presume that in the future, HTC will still make their branded phones in China (maybe in the Wuxi Dopod factory). But will the phones be any different? If not, then why re-brand?

I think of negative comparisons between HTC and Acer in 2000. Like HTC, Acer, makes technology and provides manufacturing services for other brand names, as well as promote their own brand. In 2001, Acer created BenQ, which sold computers and systems in China. I believe it was supposed to be the “China channel” for Acer. However, when I went into computer markets in Shanghai in 2003, I would see systems and components from both Acer and BenQ. Acer also had AOpen, which was supposed to provide components, but actually also made “white boxes”. In America, Acer bought the brands (and American manufacturing facilities) Gateway, Packard Bell, and eMachines. BenQ, meanwhile, bought Siemens mobile and produces mobile phones…as does Acer. Then Acer got rid of its remaining shares of BenQ. I’m pretty sure that today, Qisida (BenQ), Winstrom (Acer) and AUO (Acer) all make LCD panels and displays. Talk about sibling rivalry!

I studied Marketing in MBA school, but I don’t believe I’m a branding genius. On the other hand, I know obvious strategic level brand idiocy when I see it. I hope HTC does not make similar mistakes as Acer with big, seemingly meaningless brand positioning movements. On the other hand, maybe HTC plans to eliminate Dopod brand, so that it has one unified brand world-wide. If this is the strategy, I think it does make some sense.

(full disclosure: I used to work for Acer in the United States. I believe it is there that I developed an unhealthy prejudice against Taiwanese companies).

This is going to seem ridiculous to my readers (all 6 of the non-robot readers). Today I have read three minor news articles which give me hope. These news articles are not related to each other and not really related to business. But for some reason, these give me hope that China is progressing in the right direction.

1. Chongqing passes a law banning adults from snooping on kid’s computers and phones (h/t Shanghaiist).

2. China is exporting a domestically produced graphic novel (h/t Jing Daily)

3. Ministry of Public Security bans public shaming of prostitutes (again h/t Shanghaiist)

BTW, of point #1 and #3 above, they will probably not be enforced, and they merely expand on existing laws.

These items have nothing to do with each other. As I said above, this is ridiculous. But to me, these are all evidence of China’s growing civil society. Exporting original artistic content. Protecting the privacy rights of not just the rich, but those who do not have power. Each of these news items are astonishing to me because it just does not usually happen. China making original comics of quality? China caring about privacy of children? China moving against the supreme hypocrisy of humiliating prostitutes, who universally pay rent to the police who bust them in order to appease visiting superiors?

What’s next? PSB actually arresting corrupt township officials who appropriate land on behalf of developers? China enforcing labor laws and EHS standards equally on State Owned and Privately Owned Enterprises? Taiwanese companies investing in the development and growth of their human capital?…wait… now we are getting into the realm of science fiction.

China Law Blog (aka Best “Chinese Business Blog”) offered 3 posts recently about Chinese companies doing business in America: “Ten Reasons Chinese Companies Fail In The United States“, Why United States Lawsuits Against Chinese Companies Are Trending Up. Just Follow The Money, Why China Companies Are A Litigation Mark (As In Sucker), Part II. To summarize my take-aways, Dan basically is saying that Chinese companies in the US face problems because:

• Chinese companies purchase sub-standard consultation services on the cheap, which leads them to make many bad decisions.
• Chinese companies often do everything cheaply- including the hiring of employees – and with a short-term mindset. (More on this point, I recommend Bill Dodson’s article, “China’s Casino Economy“)
• Chinese companies are not marketing oriented, and hence don’t develop brands, don’t do good industrial design, don’t listen to customers, etc.
• Chinese companies are being sued more often, in part because they don’t know how to defend themselves in America (because of reasons above) and in part because they now have more business activity in America.

What interests me here is the implications for future business practices of Chinese companies.

I wrote before that I’m worried about the End of the World… about the coming trade war…about whether China will be open for business for foreigners. The above points give me hope. Not because it shows that Chinese companies will need people like me in the future (actually they won’t… they’ll need people like Dan at China Law Blog), but because this shows how the American legal system will help change Chinese business practices for the better.

Several people have commented that there will be two Internets in the future; the Internet and China’s Internet. The same appears to go for everything else; there will be a Market, and a China Market…and the two will never meet. Baidu is fine playing just in China. Just as Tencent. Just as Lenovo. Just as Haier.

Actually…no. Baidu maybe will stay in China. Obviously Haier cannot. Lenovo cannot. The Chinese electronics, automotive, white-box, and pharmaceutical industries cannot just stay in China. They, like their Western counterparts, must expand, or eventually die. By expanding, they will need to play by the rules of foreign law codes. I hypothesize that they will probably also need to internalize international business norms into their own China business practices because their China business will impact their expansion.

Past “sins” that Chinese companies commit in China may not open the company to risk with Chinese courts. But when the company steps outside of China, they are vulnerable for their past sins. The more Chinese companies realize this, the more they will work to correct past mistakes. An example that comes to mind is about China exporting their high-speed train technologies abroad. When Chinese technology companies get serious about bidding on international transportation projects, they will be challenged by foreign competitors, who own lots of international patent rights. This did not happen so much in the past in part because a) Chinese companies were not going abroad, and b) multi-nationals did not want to get into fights that could harm their activities in China’s “emerging market”.

Now, the Western companies are starting to see more benefit in litigation… in the United States. Therefore, I predict that as the companies expands, they will (in my theory) need to negotiate with Western companies in order to avoid litigation risk. In this way, Western companies may become gatekeepers to Western markets.

The post is about a China Daily article about how boat-ownership can be considered a business expense. Stan’s common-sense point is basically how stupid and hypocritical can people be to think that yacht ownership is anything other than an ostentatious display of wealth. Furthermore, how can people have the balls to claim a boat as a business expense.

I used to spend every weekend at a Western built-and-managed marina near Suzhou because my previous company used the facilities to host corporate off-sites for customers. At the marina, we got to see the local richy-rich guys drive up in Porsche SUVs, wearing popped-collars, a purse on one arm, and really nice eye-candy on the other arm. They would spend a few hours on their boats in the harbor. However, they often would not take the boats out, because the Marina never bothered to properly dredge the channel out to the lake (this is related to a large problem with lack of private waterway rules and regulations in China). So they would sit around in the hot hot sun, next to the humid lake, doing…nothing.

I completely understand Stan’s feelings about the super-rich boat owners. Now, to play Devil’s advocate:
1. What else are rich people going to spend money on? Another mistress? A Ferrari for the children? Another apartment to buy and leave empty until ready to flip? My point is that buying a boat at least produces jobs and lays the groundwork for recreational boating in China. As more Chinese achieve “middle class” status (assuming that really happens), this will help boating become more accessible to “the masses”. I think that there are far worse things for “The Rich” to do than buy a boat. (i.e. more golf courses)

2. Hot women on boats are cool. I would do this (if I was rich, and not married to a hot woman already).

Suzhou Covner's on a boat

Beginning with its first product, OICQ (the former incarnation of Tencent QQ), which copied ICQ, Tencent has never been able to bury its “copying gene.” First it brought in QQ Show and a line of value-added products from Korea, then it imitated Sina by building a portal website. In online gaming, it copied Ourgame (联众) by developing a platform, and then like Shanda brought in international players, started in-house development (like Netease). Then there was the C2C e-commerce site Paipai, and the third-party payment service TenPay (财付通). Without exception, these were “shanzhai” products, which lies at the root of the hatred for Tencent.

I agree with the sentiment. However, all of this were first copied from US high-tech companies. So, to me, Tencent’s competitors attacking Tencent because Tencent “copies” earlier entrants is sort of hypocritical.

Today I read that China’s middle class will reach 700 million

by 2020, according to Euromonitor. … 700 million out of the estimated 1.45 billion people of 2020 will have an income of roughly between 80,000RMB (11,800USD) to 120,000RMB (17,700USD) a year..

The obvious silliness of this figure is the definition of Middle Class. At the high-end, that’s 10,000 RMB / month. Which means that they are earning between 25% to 50% more than they are paying for rent. Assume ownership, its still only 60-70% more than mortgage payment in Shanghai. I specifically say Shanghai because if someone is making this salary level, chances are they live in a 1st tier city, which has overly inflated living costs. In 10 years (by 2020), I think its a safe bet to assume that there will be significant inflation. So this this middle class income level will be less relevant in the future.

The Shanghaiist post goes on to quote a translation from The Beijing Times:

The reasons for the study of the issue and people’s growing expectations basically come from the rational spirit, peaceful state of mind and conservative psychological condition that middle class status can bring. [...] In the last 10 years, middle class families assets have been increasing because of the rapid rise in housing prices. But the burdens on these families are also growing bigger. Most middle class families have become more and more nervous.

Although the increase of wealth is essential, a peaceful, rational and conservative state of mind is more crucial is to the middle class.

I hate the whole “conservative state of mind” which Chinese media promotes as a fake cultural norm. But the quoted opinion piece is correct. And it is correct not just because “middle class” people have more stressful lives because they have more to lose, but also because, at these income levels, they may actually not be true middle -class vis-a-vis the rising cost of living. Even today, at the middle class salary levels described above, families would not have such a comfortable, secure existence in one of the 1st tier cities.

I have said this before on my blog and several others: if a young person decides to extinguish his light that shine for just a small moment in time in the void which is this universe, then the fault of the tragedy lies with himself. I’m not defending a really stupid company BTW. I just think that if we MUST place blame somewhere (and I don’t think this type of thing needs blame placement), then it must be with the individual who did this to himself.

In the Shanghaiist post, they point out to a quote in Caixin (I don’t know if its an editorial or quoting someone) and another source which say:

But Caixin points out that “this policy has actually sidelined Foxconn’s real need to dramatically improve its out of date business model…” Namely, that using human workers to do everything machines do in the West or Japan, and then running off when there’s cheaper labor to be had is eventually going to leave Foxconn with nowhere else to go. Or as China CSR noted on Twitter, “Foxconn biz model is polar opposite of responsible. Exploit local conditions. get caught. move.”

I would like to ask a question to the person who wrote the content above. If companies used machines to do everything that people could do, then why would they need to manufacture in China? Yes the answer is obvious; they wouldn’t need to manufacture in China. But then what good is it for China if they are NOT here? And who should have the moral right to say that China would be better off without this development?

I have read quite a few other posts that had similar views about Foxconn and their business practices. From what I read, I do believe that they have labor management problems, just like many companies in China. But Foxconn’s business model is not different from most Chinese companies, and really not different at all from other CMS companies. Which is to say – focus on keeping every cost to down, systematize and standardize every possible transaction and operation, and don’t spend money on improving employees.

My bottom line is thus: lets give the big stupid evil company a break. After all, they are not different from all the other companies. They do not have an alternative China manufacturing business model which works. They make products which we all buy (so we share in their guilt). And they are not BP.

[even more unrelated side-point]
BTW, I love this cartoon:

Its on top of the Foxconn building. The sign says “Don’t jump! Jumping will hurt body health”. The man on the left says “We have already done all we can!”. The man on the right replies “Its still a problem of the fengshui.”

Taikongren's self-made Chinese Android graphic!

Not only interested in “China Business”, I am also interested in mobile technology. Before I moved to China, I was a Product Manager in charge of some mobile software solutions for “PDAs”. However, my interest in mobile technology is not an extension of my previous career choices, but rather an expectation of the day when petaflop-speed computing becomes a permanent augmentation of to my central nervous system. Until that day comes, I’ll settle for the coolest greatest smartphone on the market. So, this article in TechCrunch by Mr. Richard Yu about the future Android Market in China is really something for me to get excited about. (h/t Shanghaiist)

Richard’s main points are:
1. There are a lot of mobile internet users in China
2. In spite of the Google-China thang, which should have killed Android in China, Android – [actually OPhone] – is being adopted by the Chinese carriers
3. Chinese carriers will obtain 50% of the mobile app market revenue.
4. Google won’t get revenue from these Android devices (nor will they have a say in “information freedom” matters)
5.Big driver for this are low-cost chips and components, commonly found on the “bootleg” devices.

This is a cool article. However, there are parts which I believe are just wrong. In fact, its strange. I think the gist of the article is correct, but every point in it has a serious error which overlooks complexity of the real market trends.

Lets start out with the facts and figures for mobile internet users. The article says 957 million by 2014. I say “what’s a mobile internet user?” A “mobile internet user” who just checks the weather 3 times a month probably should not be classified as a user. In fact, a good definition could just describe those who subscribe to mobile data plans. If we use this definition, then unless China’s government enforces price controls on the carrier to make mobile internet very cheap, these plans will not become popular.

Next, lets look at the Google-China thing. I wrote about this too many times, but usually from the standpoint of business ethics and media criticism. I will now quote myself, on my first post about the Google issue, back in March:

I believe this has long-term implications to the development and success of Android. If most low-cost Chinese manufactures (and large ones) strip Google search/branding/services from their own version of Android OS, then eventually Google is going to ask, “what’s the point?” That in itself will not endanger Android… the danger is with OS branch fragmentation if Google does not take leadership.

Note that “China” has not tried to stop Gmail and Google’s “productivity apps”. The government is interested in regulating Google products that give access to- or allow publishing of – “mass information.” Which means search, social network, and blog platforms. But without the search and social networking “apps”, there is no profit for Google in Android.

Mr. Yu says:

Ophone OS from state-owned China Mobile. With the help of Lenovo, China’s tech darling, Ophone devices are moving full steam ahead with more Chinese integrated services like an app store, where China Mobile takes 50% of sales revenue.

I say… Ophone is not Android if Google is not making money on it. OK. Better to say… Ophone is not Android unless it gets updated along with Android. Same thing really. UNLESS Ophone is just a skin, like HTC’s Sense UI and Samsung’s Touchwiz. If its a skin, then it will be easy to update Ophone with new versions of the software. If its a real fork in the OS, then the innovations which Google creates will not be included into Ophone. Then we have market fragmentation. And we have apps for Android more and more incompatible with Ophone (and vice-versa).

Another thing… Ophone apps marketplace will not take off without strong intellectual property protections. We are talking about China now. In fact, I’m pretty sure that even if the carriers enact copywrite protection for their app stores, Chinese consumers will bring their Ophone’s to the shop inorder to install hacked copies of Android.

Richard goes on to give these figures:

Cost of an iPhone 4 in China: $1,285
- Cost of a Bootleg iPhone 4 “HiPhone”: $100
- Cost of a Bootleg Nokia E71 with internet connectivity: $14

What will crack this nut wide open is Mediatek’s new Android chipset, which is slated to hit the market later this year. As Moore’s law applies itself to mobile devices, and sub-$100 Chinese-flavored Android 2.2+ phones are released, the over-$600 gray market iPhone will only occupy a niche of the market in China.

Mnnnnnn no. I have never seen a “Bootleg” iPhone4 or Nokia E71. There are many Shanzhai versions of these. Some of the main differences are:
a) Shanzhai iPhone and Nokia phones don’t really run the smartphone OS. They may look close to the real thing. But functionally vastly different.
b) Shanzhai phones are almost always technically far inferior. The iPhone (and most Android phones) uses capacitive screen technology, which helps gives the phone that “smooth” fluid feel. Shanzhai touchscreen phones use resistive touchscreen technology. Hence, you can tell the difference by simply pushing on the screen. If the screen “gives”, it cannot be hard glass capacitive.

Truth is, Chinese brands of phones can be cheaper. But to make an Android phone that will be attractive for Chinese to actually use will cost much more for the Chinese manufacturers than it does for, say, Samsung. Big manufacturers like Samsung can attain huge economies of scale, and have great, established supplier networks. A cheap Shanzhai Android phone will be not be any more attractive to Chinese people than the Shanzhai phones of today. It will probably be less attractive because Android has much greater hardware requirements than the Shanzhai phone OS’s that are in use today. Maybe there will be a “low-end” fork of Ophone. But again, that’s not Android.

(side point: The article says that MTK provides 85% of the chipsets on Chinese phones. I don’t believe that either. From iSupply: “Foreign handset makers had 56 percent of the China market a last year with Nokia leading the market, with a 37 percent market share.” ¹ )

All this being, I do believe that Android phones, and the Ophone spin-off, will be very popular platforms for Chinese manufacturers, simply because they are good systems, and they are free to use. No licensing fee and easy to hack. Therefore perfect for Chinese market. This does not guarantee success though. When looking at the future of the smartphone market, in the near term I think the the biggest issues are the following:

1. Will Android / OPhone still be attractive without the tight integration to Google? I’m not sure that it will be. I certainly do not want to own a Baidu phone. But that could change depending on what special services Baidu can create for the platform. (hint: as the file system is not locked down, it would be very easy to download music from a Baidu search directly to the phone). Anyway, the OPhone has not really “taken off” yet. No one knows how popular it will be if at all. I have never seen anyone actually using an OPhone, though I have seen many people with HTC (and Dopod) devices. No matter what, grey-market Android phones will continue to gain popularity because those are good phones made by Samsung, HTC, and Motorola, which have Wifi and are cheaper than the regular market counterparts.

2. What will be the reception of Windows Mobile 7, and how will Microsoft price the license? I’m pretty sure Microsoft is going to give away its newest mobile OS, AND Microsoft will throw a lot of money around (pocket change for MS really) to get Chinese developers to make WM7 software. This can have a big impact on the market. Furthermore, Microsoft is experienced in China and will very likely get some government support which will have some influence on the Chinese carriers.

So much for my China Smartphone market analysis. Anyone have other opinions?