8 things I learned about China

In 2012, I spent 2.5 months working in the tech startup industry in Shanghai and Beijing. Below are some of my own learnings and reflections from my time there. 

Beihai Park, an imperial garden, in Beijing.

Pudong Skyline in Shanghai

1) Stability 
Stability is paramount to China.  Throughout history, Chinese leaders has been obsessed about keeping "social order" and rightly so, a politically unstable China is not good for anyone.  Where as in the West, it's about individual freedom and the realization of individual potential, in China, it's about maximizing the potential of a family/community/society, and to do this, a country must be stable.  For example, is it "fair" for the individual that "odd" and "even" numbered car plates can only drive on certain days of the week in Beijing? Absolutely not. Is it necessary as one of the many ways in an attempt to reduce traffic congestion? Probably. Would such a solution ever be implemented in a Western nation? Maybe, but I doubt that it would last longer than one election term. ;)

2) Survivalism
China is a developing nation. It was only a generation ago when familly often went months without meat (and not because they were vegetarian). Although the issue of sustenance has largely been resolved (the poverty line has moved more than 10 times in the last two decades in China), Chinese citizens are overwhelmingly driven by the need to SURVIVE. Although there are some social security, social safety nets are full of holes (no pun intended). Families furiously save in the fear of illness  and in preparation for their children's education. A large number of young women are attracted to single men with 3C's - car, condominium and cash (and lots of it), because the prospect of living in financial hardship is still very real.

3) Ownership
The Chinese love to own assets, especially new assets. That's why the secondhand goods market is virtually non-existent for a country of China's size.  And the ultimate asset to own is real estate.  Even though there is no concept of "freehold" in China (all real estate is on a 70 years renewable land lease), it is almost a rite of passage for Chinese families to buy an apartment before being able to start a family, despite the fact that it might take 3 generations worth of savings to just pay the DEPOSIT on the house. In fact, it'll take 40 years for an average young family to pay off their family home.

4) Family
A lot of what makes China "China" are the values of Confucianism.  At the center of Confucianism are the values of a family.  Although Confucianism has been heavily suppressed during the Cultural Revolution, it is so deeply ingrained in the Chinese culture that it still pervades society today.  The Chinese view the family as the single most important thing in their lives. Creating a better future for your children, looking after your parents and looking out for other extended family members often comes before wider societal interests. Here's an acid test on cultural differences: if your mother committed a crime that is punishable by death, would you turn her into the police? If you do, you'll be a good German (yes, I'm over generalizing, but I'm using Germany as an example of a rule based society), but a bad Chinese. The vice versa is true if you don't.

5) Shanzhai
Shanzhai literally means from "village in the countryside" - it has now come to represent the "copycat" culture that is often one of the first things that comes to mind for the West when thinking about Chinese products and services. The Chinese have historically been really good at inventing new stuff and innovating (gunpowder, movable type, compass, the straddle…the list goes on).  Unfortunately, the upheaval of the last 100 years meant that education has come to a virtual standstill and when it was revived less than 30 years ago, the focus on hard science and engineering (since China has lagged behind the industrialized West), with little room for the creative arts.  In addition, in order to rapidly develop China's economy, money was poured into manufacturing and supply chain processes (which China got really good at).  While this made China the world's factory, it has meant that Chinese companies got really good at copying, instead of innovating.  With time, this might change, but for now, China is a great at replicating technologies, faster iterative "micro-innovations" and having the most complete manufacturing supply chain in the world.

6) Diverse
To the outside world, China seems like a culturally and ethnically homogenous country. In reality, China is  incredibly diverse and it's better viewed as a continent. There are 56 ethnicities officially recognized in Chinese law (as in officially recognizing each culture and language).  The "Han" ethnicities dominate over 90% of the population, with the remaining 140 million people spread across 55 ethnicities. In addition to this, there are huge differences between the North and the South, the East and the West.  The Northern Chinese (an area of China where I was born) are physically bigger.  Their personalities are very open, honest and are known to have a temper. The Southern Chinese in contrast are known as being very shrewd and are physically more petite. Most Chinese provinces have thousands of years of history that have uniquely influenced it to form its own character.  In many ways, China is like Europe, except with a united written language (thank you Emperor Qin), family values (thank you Confucianism) and central government.

7) Multiplication
China has 1.3 billion people.  Any number multiplied by 1.3 billiion looks really impressive. China has the biggest Internet users in the world, the biggest number of cities over a million people, the most number of University graduates, the biggest luxury market. China has overtaken Japan as the 2nd largest economy in the world.  This is the side of China that the world often sees and sometimes fears.

8 ) Division
It's important to remember that the 1.3 billion people works both ways. To a Chinese, the effect of this is not multiplication but division. Everything divided by 1.3 billion becomes dysmally small. 80% of the Chinese internet users are extremely unsophitiscated, most of the luxury good consumers earn less than 2000 USD a year, employment is a huge issue for Chinese graduates today.  

We in the West tend to view China in black or white, right or wrong, left or right, in reality, China is an incredibly complex country with its own rich culture and history, with a different set of values.  The best we can do is to learn more about this nation of 1.4 billion people to work towards a better future for humanity. 

Jack Ma and Alibaba, the legendary story of the first global billion dollar Chinese internet company

Porter Erisman's new film is a must watch for all those interested in China and startups.

Jack Ma is something of a phenomenon here in the Chinese tech industry.  Unlike his other modern counterparts, who are often scorned for copycat and monopolistic corporate behaviour, mention Jack Ma and you're likely get words of admiration and awe from entrepreneurs. 

For those of you who don't know, Jack Ma is the founder of the Alibaba group, one of the three "emperors" of the Chinese web landscape.  The Alibaba group dominates: 

• E-Commerce, Alibaba's Taobao.com takes the lion-share of e-commerce in China.  Taobao was one of the few Chinese web companies to directly compete with their western counterpart, eBay, head-on and won fair and square. Taobao was not a clone of eBay, and eBay lost despite having invested more than US$250 million in the Chinese market. Taobao also recently launched tmall.com which has now become the largest online shopping website in China. 
• Online Payment, Alipay absolutely dominates in the online transactions business in China. 
• Business to Business Platform, Alibaba.com is the most comprehensive list of manufacturers and suppliers in the world.  Making the Alibaba group China's first global web company. 
• They also own a suite of other sites, like Yahoo! China, Aliyun, eTao and AliExpress. 

You can imagine my excitment when I was approached by Porter Erisman, the first Western executive to work at Alibaba from 2000 to 2008, to have a "sneak preview" look at his new film "Crocodile in the Yangtze River" (if you don't get the reference, look at my previous post here).  The film traces Jack Ma from his very early days in the 1990's when he was trying to start China's first online directories page (and failed), to him starting up Alibaba in his own apartment, to listing on the HK Stock Exchange, to bringing eBay to its knees and in the process, becoming one of the most valuable internet companies of our time.  

This film is a most see for all those with an interest in China or startups. 

Here are some of my thoughts after watching the film: 

• Jack Ma is an inspirational leader with a clear MISSION.  It didn't matter that he had no formal business training (in fact he was a English school teacher), he was not interested in becoming uber rich or famous, but he was driven to create something greater than himself.  In the early 1990's, it was about putting China on the Internet.  In the 2000's, it was about proving to the world that China can build an Internet company every bit as innovative as its Western counterparts. 

• Companies that directly copy western models to China mostly fail.  This is because I believe startups at their roots are about solving a problem that exists within society. Every society has very different norms and different problems. eBay entered the Chinese market by purchasing its Chinese clone, Eachnet.  However this model ignored the fact that trust amongst strangers is very low in Chinese society and Chinese users are very price sensitive.  So when Taobao came out with no fees, it destroyed Eachnet's dominance from 90% market share to being booted out of the market completely. Meg Whitman famously said "free is not a business model", guess Meg didn't really see how online advertising and online payments could actually be very profitable spin-off businesses. 

• There needs to be more coverage in the West about firms like Alibaba in China.  Yes there are a lot of clones in China, but there are also innovative companies like Alibaba which is really making a difference in the world.  Here's a great quote from Jack Ma that sums this up: 

The world has given us this platform, this opportunity and we need to use all our wisdom, all our courage, and apply all our efforts to help 10 million enterprises thrive, to create 100 million jobs and to provide a valuable and affordable platform for 1 billion people in the world. 

Here are some of my other favorite Jack Ma quotes from the film: 

• "It doesn't matter if I failed, at least I've passed the concept to others." Jack Ma speaking about his efforts in trying to put together the Chinese online yellow pages.   
• "Americans are strong at hardware and systems, but on information and software, Chinese brains are just as good as theirs. If we are a good team and know what we want to do, one of us can defeat 10 of them. We can beat government agencies and big famous companies because of our innovative spirit.  Yahoo's stock will fall. Ebay's stock will rise. And maybe after Ebay's stock will fall, Alibaba's will rise. The dream of the Internet won't burst."

For my Stanford friends, I will try to liaise with Porter to have a screening on campus after September, just in time when we start classes. :)

Be Like the Crocodile in the Yangtze River

This is my first post about China and it's taken directly from an article I wrote for the  New Zealand China Trade Association.  I would love to hear what your thoughts on this.

Jack Ma, the founder of Alibaba group and the king of e-commerce in China, once famously said “eBay may be a shark in the ocean, but I'm a crocodile in the Yangtze River. If the crocodile fights the shark in the ocean, it will lose, but if we fight in the river, we win.”

For many New Zealand businesses, the Chinese market remains as enigmatic as the Yangtze river, full of promises of riches but also fraught with risk and hidden-traps. In this article, I’ll seek to explain some key characteristics of what makes the Chinese consumer tick and what all this ultimately means to you, as a business owner in New Zealand.

It is well known that Chinese consumer products suffer from notorious quality issues. While this is not an issue isolated to China as a developing nation, it deeply affects how Chinese consumers behave. Case in point, the most recent food scare in China is “beef paint”, a coating put on its cheaper pork counterparts that when cooked, make the meat taste like beef. The coating is toxic and is carcinogenic. Needless to say, the Chinese consumers are paranoid about the quality of consumer products.

Perhaps due to this paranoia, there is an increasingly strong desire for branded products in China. An often publicized fact is that China is the biggest luxury market in the world. What is less known however is that 50% of those customers earnings less than 2,000 USD a year! What explains this paradox? Why are the Chinese consumer not obeying Maslow’s hierarchy of need, buying luxury goods when sometimes their basic needs for food and shelter are not met?

While consumers all over the world appreciate products that allow them to express their own identity, the disparity of wealth and the large population base in China has really amplified the identity issue. For example, recent university graduates in Chinese cities have earned a new nickname: “Ants Tribe” as they cram themselves into closet size rooms. Consumers products that does well often allow the consumers to feel important and unique as consumers attach social status to the items they purchase.

Finally, it’s important to remember many middle-class Chinese consumers today is the first generation of Chinese in modern history that has surplus income. Parents of the older generation often remind their kids born after the 80’s and 90’s what a comfortable life they are leading now and that as a kid growing up, they often did not have enough to eat. This is the first generation of Chinese in many centuries where putting food on the table is not a concern, but we should not forget that China overall is a poor country.

So what does this all mean to you? First, think in division and not multiplication. It’s not about how many times larger China’s market is compared to the local market, it’s about understanding consumers in specific markets to cater to their particular desires and demands. Addition, a brand that instills trust and one that can enhance one’s own identity is paramount to win the minds and hearts of Chinese consumers.

To build your brand in China, you should be smart about how you do your marketing. New Zealand businesses often do not have the marketing budget to get celebrity endorsements, run billboards or television campaigns, however there are extremely cost-effective and innovative marketing channels emerging in recent years. For example, one of the best ways to gain traction and buzz in the Chinese market for consumer goods is through online subscription sampling. The biggest player in this market is called MyLuxBox (www.myluxbox.com), which happens to be co-founded by a Malaysian-Kiwi. They’ve had great success with pushing New Zealand and many international consumer brands into the Greater China region.

The beauty of the MyLuxBox model is that consumers pay to receive samples and then the consumers share their sampling experiences online through MyLuxBox’s social media platforms or their own social media networks. As a result, brands achieve high levels of buzz and awareness and instant word-of-mouth marketing. It’s great for the consumers because they are given an opportunity to learn about and try out luxury products each month, while for the brands, this means an innovative way to acquire new customers and increase sales revenue through product sampling (at minimal costs).

Jack Ma reckons that the best way to win in the Chinese market is to understand the market and act like a native Chinese company. I agree with him. By using innovative models like MyLuxBox to market your consumer based products, you can be the crocodile in the YangTze river and might just see your efforts in the Middle Kingdom reap much reward.

Our First Non-Profit - LawSpot.org.nz

Earlier this year my partner Maya Shino and I co-founded the non-profit website LawSpot (www.lawspot.org.nz).  It has been 2 months into the journey and I'm glad to say that it has been one of the most gratifying startup experiences I've had to date.

In a nutshell, LawSpot is a online legal question and answer website where qualified lawyers answer questions, posted by the general public, about New Zealand law for free. We were inspired to create this site after seeing the great work done by the community law centres around the country and felt that their service would be greatly complemented and enhanced by an online presence.

Here's a few salient points about LawSpot: 

• Strategic partnership: LawSpot has partnered with the Wellington Community Law Centre  to promote access to the law by creating an online branch to cater to unmet legal needs.  
• All Star Team: in addition to Maya and myself, we have Paul Bartrum to head up technology (who is a star developer at Trade Me), Lizzie Chan to head up partnership (who is a finalist in the Young New Zealander of the Year 2012 and is clerking at the Supreme Court of New Zealand) and James Whitaker to head up marketing (who is Trade Me's marketing manager).  
• Everyone Wins: users get answers to the legal questions they wouldn’t know where to find.  The information is accessible online, anytime, for free.  At the same time, the lawyer volunteers will be protected from legal liability in the same way as they are when they sign up to give advice at a community law centre. 
• Patron: We are incredibly honoured to have Hon Margaret Wilson DCNZM as LawSpot’s patron. Margaret is a former Attorney-General and Speaker of the House, and is a strong advocate for social justice and increasing New Zealanders’ access to the law.

The LawSpot team combines the years of practical experience from the Community Law Centre with technology-savvy and technically capable entrepreneurs.  I really believe this is the way of the future for social enterprises, i.e. applying the no-nonsense execution abilities of the commercial world in the non-profit context, to ensure projects are setup and ran as efficiently and effectively as possible.

We're a few weeks away from a soft launch of the pilot and we are incredibly excited about the potential of LawSpot to increase  accessibility to the law for all New Zealanders.  You can express your interest by leaving your email at www.lawspot.org.nz and we'll make sure that you'll be the first to know when we launch!

Why I chose to go to Stanford Graduate School of Business

(I'm the guy on the right, on my left is my lovely girlfriend Maya Shino)

This is a question I get asked a lot, so I thought I would quickly list out a few reasons as to why I ultimately decided to attend the Stanford GSB.  Note my views were formed from visiting Stanford GSB's admit weekend (so it would be inherently rose-tinted), and talking to over 40 alums from the various top b-schools as part of myapplication process. 

Anyway, here goes: 

• Nice: like all top business schools, the GSB attracts people of amazing talents (amongst my classmates are NASA space scientists, high street fashion entrepreneurs, military officers and senior movie executives to name just a few). One thing that stood out to me, however, was that the Stanford GSB people were exceedingly NICE.  The general consensus at the school is that business should not be a zero sum game and that b-school education is about increasing the size of the pie rather than your own slice of it.  Which leads nicely onto my next point…
• Collaboration: due to the belief that everyone can get a better outcome by working with, and not against, each other, amazing things happen at the school (like this).  The school also actively encourage this by allowing the enforcement of the Grade Non-Disclosure Policy and taking courses from other faculties is EXPECTED.  
• Change: people who go to Stanford GSB generally have an innate desire to change the world.  Unlike most people who want to change the world however, these people have insane talents, incredible drive and ruthless execution to ensure their dreams come to fruition.  Failure is seen as a natural part of the process, the important thing is to think BIG, start SMALL, fail QUICKLY and scale FAST! 
• Ecosystem: I don't know the ecosystem of other entrepreneurial centers like Boston so can't comment on how it compares, but the entrepreneurial ecosystem that Stanford has built up over the last 70 years is nothing short of breathtaking. They have so much institutional knowledge, industry connections and infrastructure, that everything I thought were "obstacles" melt away as merely excuses to not do something.  How can you not do something when you have initiatives like this and this. 
• Inspiration: yes the program has amazing teaching staff (Schmidt, Condi, Grove, Joe to name just a few); yes the student body is amazing; yes Silicon Valley is an amazing place to be to be inspired.  All those things make Stanford GSB awesome, but the most important thing that struck me was that almost every one of my classmates were intimidated by what everyone else has achieved, in a good way, which means everyone is incredibly humble and eager to learn from each other. There is an infectious idealism at the school and Stanford students and alumni inspire and support one another to reach their OWN dreams. 

Want to continue the conversation on this topic? Feel free to comment here or ping me @bowenpan.

Hello world - from downunder!

Hi, I'm from New Zealand (see picture above).  Since this is the first time that I've written a blog of any kind, here's a brief introduction of who I am and why I've created this blog. 

• I'm a Chinese New Zealander, or a Chiwi (Chinese + Kiwi) as I like to call myself sometime.  My family moved to New Zealand when I was a young boy and I grew up in Auckland (New Zealand's largest city, about 1.5 million people) and have also lived and worked in Wellington (our capital city) for several years. 
• I am passionate about technology and start-ups.  I get goosebumps when I read things like this and this. 
• I want to change the world by eliminating wasted potential in ideas, people and nations.  I want to create world-changing technology companies to help me towards this ideal. 
• I will be embarking on an MBA from Stanford Graduate School of Business (or the "GSB" as we affectionately call it) in September 2012 and I can't wait to start an adventure of a lifetime.  Before then, I will work at a tech start-up based in Shanghai (see here if you are interested).  I have a background in technology start-ups, product management and strategy consulting.  If you are interested in my background, take a look at this.  
• Besides all this, I have a keen interest in building mutual understanding between Asia and the West, and have been involved in a number of global conferences representing New Zealand, such as this and this. 

In the coming months and years, I hope to write about some of my thoughts, hopes, dreams, achievements and failures on this blog.  Thanks for reading and I look forward to sharing my journey with all of you.