One of the more interesting parts of the discussion was the question of whether Mainland Chinese MBA students (of which there were a good many in the room) would – and should – go back to China once they get their US degrees to be Internet entrepreneurs.

Eddie Chen – a class of ’04 Anderson graduate – did just that – kind of. He originally went back to China as an employee of AIG (he repeatedly said “it was fine when I was there!”) and then after awhile he said he couldn’t resist the temptation of the Internet any longer and started ICE with a few other partners.

When I said that running an Internet company in China is becoming increasingly difficult with all the self-policing going on, and that there are other, lower-profile, but highly profitable tech sectors to get into in China in addition to the Internet, Eddie said (paraphrasing), “well, I don’t have the skills to run a biotech company or anything, and the Internet is something I could do.”  Of course, this is true for many Internet entrepreneurs around the world, not just in China. But Eddie started his company a few years ago, and as a gaming company, and I assume that it hasn’t been that difficult to stay out of the last six plus months of increasingly pain-in-the-ass self-censorship going on for more communications-focused web services. So the question I’ve been asking myself is: if I’m from Mainland China and just got my MBA from Anderson, would I jump on a plane at LAX right back to China to run an Internet startup?

Before I answer that, I think I’ll paraphrase what Bobby Chao said about how they invest in Internet startups in China (I’m paraphrasing so much because I was on the panel and didn’t have time to take notes). Bobby said, “We don’t care about censorship or any of that stuff. We focus on whether it is something completely new and on the commitment of the founders.” I regret not asking Bobby whether or not the last year or so has changed the first part of this investment strategy, but from his attitude, I doubt it. Regardless of the short-term impact, I suspect that as a long-term strategy this is completely correct (and hard to argue with a guy that put $13 million into Baidu that turned into $2 billion on the day search engine had its IPO).

We also had a bit of a discussion about whether Internet innovation was happening in China vis-a-vis Silicon Valley, and I have to agree with Eddie when he said, “there is business-model innovation” going on in China but that Silicon Valley still far outstrips anywhere in China in technological innovation. This of course led to a discussion about whether/how  foreign Internet companies should enter and compete in China. Christine Lu, who is organizing rethink Shanghai in May, said from the audience, “you can’t out Chinese the Chinese” and this was generally agreed upon, especially when a multinational tries to just impose their will onto the China market, which almost never works. However, as I said on the panel, I think that there are plenty of Internet back-end technologies that can have success in China – it’s the web services and sites that can be easily cloned that have little chance of being successful in China.

So would I go back and set up shop in Zhongguancun or wherever and start throwing up a website? Well, yes and no. I’d go back, but personally I wouldn’t put up a website-based service, I’d focus on Android and possibly iPhone development (though Android probably has the better chance right now). Looking out into the crowd and watching the hands go up when we asked whether they’d go back, and regardless of the present challenges of running an Internet company in China, just as it is everywhere else (and quite possibly even more so) the Internet in China is still a huge opportunity for any entrepreneur, especially one that is a native speaker with a UCLA MBA. So to all those students there on Friday, thank you for listening for 90 minutes, and good luck not matter which side of the Pacific you end up on!

Today’s announcement comes a few months after Google’s China chief Kai Fu Lee left the company (I’m venturing a guess that he knew all of this was coming and asked to not be put in the middle of it, and as he obviously wants a future in China, who can blame him). Since then, Google China has been without a clear captain, and rumors recently surfaced that employees had started looking for jobs elsewhere (and today’s announcement would seem to substantiate at least the idea that Google China employees have been prepared for the end). So personnel-wise, things have been in the works for a while now.

Google spent most of their announcement talking about hackers trying to get at human rights activist’s Gmail accounts and emails. There really isn’t anything I want to say about that other than hackers attack companies constantly and sometimes there are breaches and sometimes the hackers are (big surprise) working for foreign governments.

If Google decides to pick up and leave China (and although not out of the realm of possibility of them returning, doing so within say 3 years is probably next to impossible), the reason that they would leave is that they simply are putting too much into their efforts in the market, while denting their image worldwide (by censoring results) and are not getting back enough to justify it all. That’s the reason, plain and simple. And the real losers in this will be Chinese Internet users, who will lose a (not perfect) resource offered by a company that truly believes in the freedom and power of information. Don’t believe me? Google it… sorry, I mean Baidu it.

(Note: Upon re-reading and further reflection, I’ve edited this post since I first wrote it.)

Over the last few weeks, some people have been saying that 2000-2009 was China’s decade, including Fareed Zakaria. China’s acendency was also named the most read news story of the decade. Having spent the majority of this decade in China, all of this got me thinking – was this China’s decade?

From a personal standpoint, this was certainly China’s decade for me. I lived, got married and found a career in China this decade. I traveled to over 20 provinces, SARs and autonomous regions. I celebrated the new millennium with a few million other people in Shanghai, worked from home in Beijing during SARS, spent a week going to the Olympics, and even had a major role in a never-made-it-to-TV-because-the-plot-was-too-controversial-prime-time-soap-opera. Above all though, this was China’s decade for me because of the amazing friends that I made – all of which were helping to make China even more spectacular for me and others.

But that’s me. Other people (Chinese and expats) that have spent most or all of the last decade in China may or may not have the same feelings, or not. But I know that’s not what everyone wants to know – people want to know on a worldwide scale if this was China’s decade.

So how do we go about deciding this? I think that first of all, the real question should be when we say “China” what are we talking about? Its influence on world affairs? Its government? Its people? Its economy? Its environment? Its military? Its culture? I think we can pretty much rule out that China’s environment got better over the last 10 years (and that China is certainly not alone in this claim). As far as its military goes, they were not involved in any major conflicts, so I think that question is moot. So that leaves its influence on world affairs, government, people, economy and culture.

China certainly has become a more influential player in world politics over the last decade. From having the clout to get the Olympics in 2001 to the Six-Party Talks, to Africa’s best buddy, to a stabilizing voice in the economic crisis to the recent climate summit, China’s voice is increasingly heard above the din of most other nations. I wouldn’t say that its unprecedented, but certainly this was a major positive for a nation that spent so long on the world politics sidelines.

As far as China’s government goes over the last decade, what I will say is that they tried – tried to hold onto old ways while trying to cope and adjust to a new world order and population that they had nourished to change (and of course that pesky Internet didn’t help). Progress here has not been as swift as other parts of “China”, but there has been progress.

China’s people and culture. Wow, how do I even begin to access that? People have more money and property, more freedom, more access to information and more opportunity. They mainly went out and got this themselves. Not everything or everyone in China is pure and honest – big surprise there. Make no mistake, however, the Chinese people are making their country into their image, and if the answer I come to below is “yes”, half of it will be because of the Chinese people’s drive to make it happen. Which brings us to the final consideration: the economy.

There has never been anything like China’s economy over the last decade. It fired on all cylinders, didn’t miss a beat, hit all the marks – whatever superlative you can come up with for consistent spectacular performance, that’ll probably fit when trying to explain China’s economy over the last ten years. It reached into nearly all parts of Chinese life (for good and bad) and, yes, the Chinese people are better off because of the economy than they were in 1999.

So this was China’s decade, right? Well, if we are talking about economies and a people as a whole striving towards something, then I would say China wins the gold medal, in a sense. I say in a sense because I think that this decade was just the tip of the iceberg of what China will become, somewhat along the lines of what the United States did at the turn of the last century. Of course, I’m not the first person to point this out. But I think that China’s world reach hasn’t made itself felt everywhere yet (other than “Made in China”), unlike what I would consider to be the true namesake of this decade – the Internet. More than even China, the now ubiquitous Internet has changed our world (including China) in ways that cannot be undone. After all, my grandmother is on Facebook.

First of all, lets face it, Obama is cool. Most likely the coolest president ever. He’s a rock-star, etc., etc. China’s citizenry is just as susceptible to coolness as every other citizenry in the world, and if for no other reason than his coolness and his personality, Obama will be very well received. Ok, enough scientific analysis.

Secondly, most world leaders (Japan is often a notable exception) are usually very well received in China, and the higher profile the country, generally the bigger the reception and discussion. I lived in three different cities in China, including in Beijing for five years, and I can certainly say that when a major country’s leader arrives – never mind the US president – the city is slightly transformed, and the coverage in the press and the talk in the street really in my experience dwarfs anything that happens in the US (that said, I’ve never lived in DC, maybe there are similarities). People genuinely want to hear what the leader says, and discussion is usually very positive towards how that country and China are going to improve relations. Of course, US-China relations are somewhat unique, but the same respect and spirit of cooperation is usually present when a US president visits.

Speaking of US presidents, as I mentioned in Part 1, probably the only nail that GW Bush Jr. will be able to hang his hat on in foreign relations for posterity is his administration’s work with China. In this one country, Obama actually has to live UP to the well-liked Bush’s reputation, instead of trying to piece together the shattered remnants as he’s had to do with other nations. That said, Bush’s stewardship of the US economy has really put China (and the world) in a bind, so even in China, Obama will have to sweep up a few shards.

I’m going to conclude this short post with the defining word on Obama: hope. Of all the things that could possibly endear Obama to the Chinese people, their shared hope for the future is probably it. China’s citizens are some of the most hopeful in the world. They see a bright future, and Obama’s defining attribute is his ability to inspire hope, so they should get along quite fine.

US Economy

image from Reuters

The US economy may technically be out of recession, but with a 10% unemployment number hovering around him (with one economist today saying it will reach 13%), Obama is going to have a hard time convincing China that we’re on the mend and that their enormous investment in our future (bonds) is on good ground. On the flip side, I think that the Obama administration needs to push China to understand that China’s “we’ll just sell everything to America and everything will be fine” strategy may be a thing of the past (at least in the short term) and that they need to continue to stimulate China’s domestic economy (which is a win for both sides).

North Korea

Obama is going to have to set a tone while in China that he trusts that China will continue to spearhead a solution to the craziness going on across the river from Jinan. Supporting the six party talks was probably the only thing that Bush Jr. did passably well in foreign relations, and Obama needs to continue to allow China and the other Asia states to influence North Korea into some kind of progress. It’s really the only way it’s ever going to work.

Tariffs

The continuing tariff spats on industries such as steel pipes and the auto industry, really annoys the business communities on each side of the Pacific. I doubt that this trip will help to ease any existing tariffs or significantly stem the tide of more to come, but hey, you never know, Obama is a charmer.

Currency

The Wall Street Journal has confirmed that Obama will bring up the RMB (or I should say, try to get it down) while in China, which isn’t really surprising. However, both the EU and Japan are also calling for China to reassess their currency, especially if the global crisis lengthens a bit into next year, so China’s brass may be forced to give some time to the issue if it falls out of a primarily US led demand.

Climate change

With a cloud of grey death hanging over much of northern China this week, I think that it’s fair to say that climate change and the environment will be a discussion point during the trip. However, as key as China is to keeping the world green (or the other way around depending on your point of view), with climate talks already scheduled for later on in the year, the Chinese leadership will most likely defer to those talks and – baring perhaps some green purchasing agreements, i.e. wind turbines or the such – I wouldn’t expect much to happen on this front during Obama’s three days there, though I do expect that he’ll put it prominently in his speeches.

Beyond these issues, the “war on terror”, China’s expanding role/investment in Africa (China really wants us to just butt out of that, so I doubt it will go far) and tainted food products will also be discussed, but actually I think I’ll save that last one for Part 2, as that is an issue that really affects Mainland China even more than the world at large. Looking forward to your comments and most likely I will expand on this post over the next week.

To fight back, China Mobile is going to release a Lenovo built, Andriod powered 3G iPhone challenger called Miro (here’s Lenovo’s kind of silly and really slow to load promotional site for Miro) – the OS is called OPhone – and if it does well, it could not only be a boon for China Mobile and Lenovo, but also a strong endoresment of Andriod, especially in the world’s largest mobile phone market (heck, China Mobile alone has more subscribers than there are people in North America). That said, the impact that the iPhone is going make is going to be hard for China Mobile to cushion, and I expect China Unicom to see significant gains over the next year.

If this sticks (which it may not – there is certainly a long history of these kinds of decisions being overturned and/or not enforced), then it is really a blow to both foreign entrepreneurs in China and foreign companies looking to enter and expand into China’s lucrative online gaming market. The gaming market has been a consistent target of foreign entrepreneurs, one main reason being the well established system of virtual currency spearheaded by QQ, as well as China’s hundreds of millions of mobile users.

Obviously, we are seeing some extreme protectionism going on here, but I think that in GAPP’s collective mind there is something else going on as well – better control of the content of games, which many higher-ups in China (as they once did/still do in the US) feel are corrupting young minds – this really is a major focus of the government. That said, this seems to be an extreme measure in either case.

My guess is that this is a short-term restriction that the GAPP is enacting in order to reconfigure the industry so that when/if it lifts the foreign investment ban, there will be a quite a number of hoops to jump through. There is also the ongoing strife of China’s ministries, and often these proclamations come out of jostling for supremacy between the ministries to try to determine who controls industries. Of course, I would imagine that companies such as Activision and others are going to bring this to the WTO, but again, my guess is that the sector will open up again (in a new form) before it really comes to a head. China’s online gaming industry is simply too lucrative to keep the rest of the world out for too long.

The debate over whether to end the Golden Weeks has gone on for some time within China, and to be fair, it is a complicated issue. Here are the three main reasons usually given in support of the holidays.

First of all, there is an argument that without some kind of forced holidays, Chinese companies simply wouldn’t give their employees vacation time. I personally don’t think that this is the case, especially now that Chinese workers have grown accustomed to having at least 21 days of “vacation” (I’ll explain why it’s not really a vacation shortly) annually.

Secondly, there is the issue of the strain on the transportation system, mainly the railroads, but also air and bus routes. The Golden Weeks put an enormous strain on the system when they occur, but on the other hand the argument goes, if Chinese workers could choose when they went on vacation, most would go in the summer, and the system may then be strained during the peak tourist season and for a longer period of time. I can’t imagine that the strain during the summer, however, would approach anything that the Golden Weeks bring.

Third – and probably the reason that the Golden Weeks are still in place – is that they boost the economy. Real estate, cars, retail, tourism, eating out – if it involves consumer spending, these weeks have historically been very strong for sales and a way to get consumers’ money out of the banks and into the market. Basically, the Golden Weeks are like rolling all of the big US shopping days together, and the almight yuan rules the day, so this is the largest obstacle to getting these weeks trashed.

Here are main reasons why this Golden Week needs to be the last.

First of all, these “vacations” are really nothing of the sort. Workers are mandated to work either the weekend before or the weekend after (or both) in order to make up the days during the Golden Weeks that are non-national holidays or actual weekends. It’s national workshifting, and, especially as these Golden Weeks constitute the only “vacation” time that most Chinese workers receive, they are pretty much getting screwed. Even 5 days annually that they can take when they wish, would be a better deal.

Secondly, China’s cultural sites are being destroyed by the millions of people that visit popular destinations during these intense weeks. Curators have no choice but to just stay back and assess the damage and try to pick up all the trash at the end of the week. Although this problem is not exclusive to the Golden Weeks (or to China for that matter), packing in all of these people all at the same time, 3 times a year, is certainly speeding up the rate at which these sites are disappearing.

Another issue that I always thought was a bit underplayed, specifically regards the October holidays, and that is that they provide a major interruption of the school schedule only about one month into the school year. I doubt that this is a good thing.

Finally, and perhaps this in the end is the core problem with the Golden Weeks, is that they are – like too much in China – directed from on high in a way that directly interferes with both personal and corporate life. By pushing everyone to take the same weeks off, the government is taking away the choice of workers and companies to take time off when it is convenient for them, which is what vacations should be all about. People in China will still most likely take a week or more off for Chinese New Year, but that is a very deep rooted cultural holiday, not some made up workshifting holiday. By eliminating the May and October weeks of craziness, however, China will be that much more golden.

One thing that was interesting Twitter-wise was that no one knew what the hashtag was for the parade, so it will be hard for anyone to go back and search for tweets based on a single hashtag (you may wish to try #cpc60 #nationalday #prc60) Below are a selection of tweets from the grand parade starting from right before the start of the speeches by China’s leader, Hu Jintao:

CCTV just showed a bunch of the floats on Changan right inside of Jianguomen, guess they won’t get stuck in 2nd Ring traffic

bring on the tanks! what’s the hashtag? how about #爱国？

too bad that they didn’t put a webcam on the roof of the limo so we could get another angle of “tongzhimen hao!”

and there go at least the first batch of faux women soldiers in pink skirts

ok, so I’m a Chinese solider right now thinking “Where the f#$% have they been keeping the soliders in skirts?!”

sun roof = check. teleprompter…. yeah, wait unitl year 70 for that

do you think we’ll all be able to get commemorative parade uniforms and/or action figures?

Pilots: “phew… glad they grounded all those kites on the square, we’d have never made it through there if not”

the foreigner float broke crashed my browser (watching on CCTV.com) that’s how bad it was