China Apprentice

“If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of everyone, and the receiver cannot dispossess himself of it.” - Thomas Jefferson

Photo by Fatty Tuna

China is often admired for its vibrant variety of cuisine, a long and enchanting history, delicate ceramic, silk, and other cultural arts, not to mention, a vibrant street market of cheap copied DVDs, pirated software, and fake designer clothing. The dichotomy of rich cultural heritage based in Confucian and Daoist doctrine paired with an almost flagrant neglect for characteristically “western” values for intellectual property rights (IPR) can surprise the unassuming visitor. The fakes, the poor product quality, and an apparent disregard for IPR make foreign governments and businesses unsure of China’s innovation potential. Understanding the past, present, and future of China IPR is key to successful business in China.

Foreign media consistently overwhelms the international community with impressive statistics of China’s growth. That growth is enthusiastically fueled by continual investment from the world’s multinational corporations in the new “socialist economy with Chinese characteristics.” Depending on the source, China’s GDP growth hovers at just a fraction under 10% year-on-year – a record for a country’s development by almost any standard. The so-called “gradualist-reform” inspired by Deng Xiaoping’s famous Southern Tour in 1992 and subsequent opening of the economy that led to China’s eventual inclusion in the World Trade Organization in 2001 has attracted a frenzy of foreign direct investment and an overall global rush to enter the China market. Annual factory growth, though slowing in recent months, holds steady at around 17% while export growth hovers around 20-30% . It wasn’t long before the world recognized China would become the “factory of the world”. The technical competitive advantages of companies opening facilities in China rolled in on waves of technology and intellectual property transfer. Literally millions of China’s poorest citizens were trained to operate all manner of machinery in order to manufacture anything the world ordered.

The more Gucci pocketbooks and James Bond movies China’s workers manufactured, the more local people realized they might like one or two themselves. After all, a fake Rolex from one of the original Rolex factories really didn’t seem so different from the real thing sold for thousands times the price in downtown London. Fakes and counterfeit products are good export moneymakers too. In fact piracy and counterfeiting has been consistently on the rise since China took the title from Taiwan, Russia, and Southeast Asia. The Geneva Chamber of Commerce claims that 7% of all global trade is counterfeit goods. Estimates put foreign firm’s losses at $20 billion annually with two out of five companies losing more than 20 percent of their local revenue sometimes reaching as much as $150 million annually. And this isn’t just fake CDs and DVDs. Half the motorcycles sold in the China market are imitations of Japanese Yamaha and Honda. 97% of 1300 synthetic medicines produced in China are copies. High-technology items, such as microprocessors, are knocked off as well, modified to accommodate pirated components in video game consoles or computers thereby creating a value-chain based on piracy. There’s often no way to reliably tell if a product is real or not. Of course, most people probably wouldn’t be surprised to know that the “US-based Business Software Alliance claims that 96 percent of China’s software is illegally copied.” A CD of software on the street sells for less than a dollar and legitimate stores are virtually nonexistent. The processes for mitigating the mass IPR problems are weak at best. It can take five to six years in China to successfully remove a bad-faith trademark that violates IPR. Counterfeit products take up valuable Chinese domestic market share and are also aggressively exported overseas creating a real problem for both Chinese and foreign companies trying to leverage corporate intellectual property in China. (more…)

An analysis of the space tourism industry using Porter’s Five-Forces Model
A relatively new industry called Space Tourism is proving that motivated private investors paired with creative and talented engineers may now be able to accomplish what only governments were previously capable of. In 1961, supported by massive government funding, research, testing and operations, the USSR successfully launched the first human, 27 year-old Yuri Gagarin, into space on the Vostok-1 spacecraft. The world watched as this previously earth-bound human ventured into a truly heavenly place where no man had gone before. This journey caught the adventurous spirit of billions back on the planet. Now almost 50 years later, people are yearning for their own space experience. Private corporations are making this possible through what they hope will eventually be a profitable industry in Space Tourism.

Stephen Hawking, the famous physicist known for his work in space-time theory, has warned that,

Life on Earth is at the ever-increasing risk of being wiped out by a disaster such as sudden global warming, nuclear war, a genetically engineered virus or other dangers … I think the human race has no future if it doesn’t go into space.

Several entrepreneurs with seemingly bottomless pockets and unwavering determination seem to have heeded Dr. Hawking’s cautioning, and are now working with fervor to make a bit of money off what promises to be an eventual mass migration into the cosmos.

Wealthy multi-billionaires are financing what is now turning out to be a new commercial space race. First governments were in on the act. In 2001, the Russian Federal Space Agency sent the first private citizen space tourist, Dennis Tito, up for a ride in the Soyuz craft with a stop at the International Space Station all for the modest price of $20 million. Then in 2004, backed by Microsoft’s co-founder, Paul Allen, and led by aerospace guru, Burt Rutan, Scaled Composites launched and landed the first private privately-funded manned space flight subsequently winning the $10 million Ansari X Prize.

That was just the beginning. Since the inaugural Scaled Composites SpaceShipOne flight, the company has been acquired by Northrop Grumman and is now in cooperation with eccentric British millionaire Richard Branson and his company Virgin Galactic. Virgin has reportedly attracted up to 200 clients who are each paying $200,000 for a short weightless ride in SpaceShipTwo, Mr. Rutan’s new 6-seat spacecraft. The Washington Post reports that “Virgin Group expects to invest a total of $240 million by 2013” in the company’s bet on space tourism.

Space tourism market still suborbital

Allen, Branson, and Rutan are by far the most visible in the still very “virgin” space tourism industry. There are a handful of other wealthy entrepreneurs that are all vying for their piece of the potential market. Among them, Amazon.com founder, Jeff Bezos, with Blue Origin, Jim Benson’s Space Company, as well as other companies like Space Adventures, Space Island Group, and Bigelow Aerospace. Traditional government-funded efforts still haven’t folded their cards yet either. Boeing and Lockheed recently signed a monopolistic “United Launch Alliance” to supposedly cut costs in the rocket booster industry. NASA created Commercial Orbital Transportation Services (COTS) agreements with several companies to spur private sector R&D. The Russian Federal Space Agency is still sending tourists into space like the first privately-funded Iranian-born Ms. Anousheh Ansari. Also, the European aerospace agency, EADS Astrium, “unveiled plans this summer to develop its own four-seat space plane, with tickets to sell for around $150,000.”

What investors and potential market entrants are now predicting is a rapid market “explosion” in space tourism. Although skeptics say these companies “will merely provide rich people with a good view of the atmosphere that their carbon-hungry trip has just helped to destroy - the ultimate 4×4 experience”, others are betting on a larger, more mainstream tourism market.

In the years 1908 to 1912 the world went from a grand total of just ten airplane pilots to hundreds of airplane types and thousands of pilots in 39 countries. It is hoped that the X-Prize [is providing] a similar jumpstart to the space travel industry.

The difference is that instead of leaving the development of this new industry to slow, risk-averse government organizations, risk-taking private investors are providing the much-needed venture capital and corporate vision. The cumulative investment of $1 trillion that has been made by governments in space technology development has yet to earn a commercial return. NASA currently spends $100 million or more per space launch and many of those don’t even carry humans. Perhaps the forward-looking business strategic environment that focuses on cutting costs and turning profits is what could bring a sense of purpose to the often criticized over-budget NASA.

What’s different today is we have more millionaires and billionaires than ever before, and we have the analytical tools, computational tools, where a single individual can finance it, and a team of 20 can design and build a spaceship that used to take a major first-world nation to support.

Taikotourists

The market worldwide is certainly growing. As people see the prices come down from the millions to the hundreds of thousands to the tens of thousands, the demand will continue to outpace the supply. According to research by Patrick Collins presented at the 1997 IEEE Aerospace conference, “some 80% of young people up to the age of 40 would like to [travel to space], and even some 30% of people in their 60s and 70s say they would like to … a majority of those in favor say they would pay 3 months’ salary; about 1/4 say that they would pay 6 months’ salary, and some 10% say that they would pay 1 year’s salary or more.” Those statistics reflect a welcome climate for potential investors. The European Tourism Research Center says that “perhaps most exciting speculations about future travel involve the idea of space travel becoming commercially available to the public.” Futron, a market research firm, predicts that “as many as 14,000 space tourists will be heading into space each year by 2021, generating annual revenue of more than $700 million” says the International Herald Tribune. Demand is expected to grow to more than 1 million passengers/year if the cost can be reduced to around $20,000 per person.

And if there’s a significant market, we can be assured that the world’s most populous nation will be interested in the business. Merrill Lynch reports there are over 300,000 millionaires in China. In fact, Hong Kong businessman, Jiang Feng is reported to be paying $100,000 to take a suborbital flight. Just recently, an undisclosed entrepreneur in Zhejiang province became the first mainland Chinese to sign up for a seat onboard Mr. Branson’s ship. Chinese technology and companies may also even be players in the space tourism market before long. According to Wired News magazine, “Space Adventures will consider the Chinese Shenzhou vehicle once it has proven its reliability.” Realizing the potential for domestic interest in space flight, NASA administrator, Michael Griffin, predicts “China will be back on the Moon before [the U.S.]” (more…)

Ok, so this has been circulating around the internet for many years. If you’ve never seen it and you’ve been to China, then enjoy. Or just read it again for nostalgia. It makes me smile every time. Can you think of more???

1. You’re at an expensive western restaurant and don’t even notice the guy at the next table yelling into his cell phone
2. You enjoy karaoke
3. You walk backwards in the park listening to a transistor radio
4. The China Daily is your source for hard hitting, fast breaking, investigative journalism
5. You smoke in crowded elevators.
6. All white people look the same to you
7. You like the smell of the bus.
8. You find state-employed retail staff helpful, knowledgeable and friendly
9. You no longer need tissues to blow your nose
10. You find western toilets uncomfortable (more…)

It’s almost guaranteed anyone who’s ever lived in Guangzhou will only spend one summer there. We learned the hard way our first summer. In short, it’s hot. Fortunately, we arrived in July and missed a good portion of the heat. But the GZ summer humidity still got to us and we learned that a summer in China is better spent out of Guangzhou.

Now Guangzhou expat veterans, my wife and I managed to escape this summer. We spent the better part of our summer break first visiting my sister and her new husband for their wedding in the USA. Then we took a trip to Eastern Europe. We started in Germany, Austria, Slovenia, and Croatia. I’ve already touched on our experiences/impressions there. We finished off the second-half of the trip heading south from Hungary to Romania, Bulgaria, and Turkey. Friends (and employer) asked us, how does Eastern Europe have anything to do with China? Although I secretly echoed their suspicions, I answered what country these days doesn’t have something to do with China?!

Since I wasn’t quite as punctual as I’d liked in blogging these impressions immediately during or following the travels, my memory has been reduced to a series of notes. Although I’d like to write about this in a more fluid prose style, I think I’ll keep it in bullets. So sorry to the reader if you enjoy trolling through my rants. On the other hand, this way is probably better for the random person who Googles in here actually looking for some specific information. Anyway here is a:

Comparison of Former Communist Eastern Europe with Currently Communist China

First of all, if it could be financially possible, I think travel to Eastern Europe should be a required field trip for all Chinese high government officials. If they’re going to make this current communism/capitalism mélange work, they ought have a long hard look at what communism did for their European comrades. ABD saw parallels between China and E. Europe throughout our trip. I’m sure we only scratched the surface but it’s fascinating to almost be able to see the future through a past communist/socialist regime. However, in a lot of ways, old E. Europe is NOT China and the two could vastly politically diverge in the near future.

History – It all started with the Sumerians. (more…)