Photo story

A man was being forced into a mini van

Pushed into the van

Policemen in plain clothes?

The photos show what happened under my flat about one and a half hours ago. Very loud argument broke out from outside. Out of curiosity, I looked through my window and saw a bunch of people including a woman were wrestling with a man. Those people were shouting, 'Get him in the car! Get him in the car'. The man was shouting, 'Let me go, I don't know you! ...' Apparently, they were trying to force this man into their mini van parked in the middle of the road. I thought it might be a kidnapping and grabbed my camera to take some shots. As the 2nd photo shows the man was overpowered and pushed into the mini van. When they were about to leave, a black car suddenly appeared and blocked the mini van. Several guys in plain clothes came out of the car and shouted, 'Don't move! (别动).' Then, the mini van stopped. At that moment, I thought those guys must be policemen. It seemed someone must have called the police earlier before the incident. The man 'kidnapped' stuck his head out of the window of the mini van and screamed to the policemen, 'I don't know them! I don't know them!' At that moment, my camera ran out of battery and I couldn't take more shots. Those 'kidnappers' began to talk to the policemen and behaved obediently. Anyway, the man was rescued and they moved out of my sight a few minutes later.

Phew! My photos will not be used as evidence by the police!

Travel 2.0, Youth 3.0? Any idea?

I have some understanding of what 'Web 2.0' refers to. Even though there is little revolutionary development from so called 'Web 1.0', the term 'Web 2.0' came into existence and has been widely used by many people to refer to the web we are using today. I have no problem with it since everybody has some knowledge about what 'Web 2.0' means. But, it seems some people have become addicted to conjuring up new concepts nowadays. In the last a few days, I came across terms like 'China Travel 2.0' and 'Youth 3.0' on the internet with absolutely no clue what they refer to. These so called 'new concepts' left me bewildered. How can 'travel' be 2.0ed, and 'Youth' 3.0ed? And, how did the age of 'Youth 2.0' circumvent us without being noticed? Weird, weird, very weird!

Anyone knows what 'Youth 3.0' is?

No idea? It doesn't matter. I've come up with a new concept 'Sex 2.0'. I AM SMART! 

Vancl, the fast follower excels

Chen Nian, the founder and CEO of Vancl

Yesterday, I watched a TV program interviewing Chen Nian (陈年), the founder and CEO of Vancl.com. His name isn't unfamiliar. He is also the co-founder of Joyo.com (Amazon China). When Amazon acquired Joyo, he continued to work as an executive VP. However, things went sour when heated argument between him and the newly appointed top American executives began. In the end, he was not happy and left Joyo. Now, here comes Vancl, a leading online shirt retailer and a brand of men's apparel. Actually, Vancl isn't the first to explore the B2C business online. It's PPG who made a buzz first. PPG's advertising campaign almost made PPG a household name in China in 2007 and early 2008. PPG's ads were everywhere on TV and on many newspapers. However, PPG's advertising campaign backfired. It was too EXPENSIVE, which cost PPG the first mover advantage. News came out last year that PPG was in trouble and short of cash. The entrepreneurial Chen Nian was amazed by PPG's business model: selling shirt online, self-owned brand, outsourced logistics & production, and no factories needed. According to himself, he studied PPG for several months before coming up with the idea of Vancl. The business model is not much different, but Chen Nian put his advertising campaign ONLINE. That's why whenever I browse the internet, I see Vancl. Vancl was established in Oct. 2007 and later in mid 2008 received a total of USD 30 million venture capital investment. Vancl sells more than 10,000 shirts per day. According to the TV program, Vancl's sales revenue reached RMB 300 million in 2008, which was a miracle for a newly established company.

Two months ago, I bought a shirt, a pair of trousers and shoes on Vancl. Honestly, I'm very satisfied. It's inexpensive and the quality is very good. I remember Chen Nian boast that Vancl's products, moderately priced, are made of well selected high-quality fabrics, and the quality is not inferior to many big name brands. I am not an apparel expert, but I assume he lives up to what he's promised. What makes Vancl an instant success? Here are some of my thoughts,

• Being a fast follower. PPG, the first mover, found the niche
  market. Vancl followed with improved business model and is more capable of executing the business plan.
• Knowing clearly who the customers are. Vancl targets male professionals aged between 25 to 40. Well, I'm one of those customers who's reluctant to spend time walking around shopping malls to buy clothes for work use.
• Knowing how to reach target customers at a reasonable cost. Vancl's ads have been on a lot of well selected websites (e.g. Tianya.com, 51job.com, yeeyan.com, etc.). I've heard from a friend who has some contact with the marketing officer of Vancl that over 80% of their advertisement is online. There seems to be a profit-sharing agreement with various websites. That's exactly where PPG did wrong. I watched PPG's ads on TV and newspaper. All that I knew was I could dial a telephone number to order PPG's shirts, but I wasn't aware of PPG's website even though it was vaguely mentioned in the ads. Also, it's too expensive to advertise on TV and newspaper.
  

I think the above three points are the keys that led to Vancl's success. Also, there are other reasons behind Vancl's success. For example, Vancl knows customers needs very well and keeps improving their products; and Vancl's other marketing activities (e.g. customer loyalty program, giveaway electronic coupons) help foster a large number of loyal customers; good logistics ...

As I know, the orders made via Vancl.com are still on the rise. But, wait! Where is PPG now? Can Vancl take a breath now? I am afraid not. Masamaso and Bono are coming to get you!

Related reading:
VCs in China: Kleiner’s shirt factory, Sequoia’s farm
Vancl Secures Series C VC Financing

Apricot-picking trip

Apricot trees

Apricot

I got a call from my ex-ex-boss early last week, inviting me to join his family, relatives and former workmates to go on an apricot-picking trip to a village in Haidian District on Saturday. I said, 'Great, I'll be there'. On Friday, a former colleague, also a good friend, invited me to dinner and asked me to stay at his flat so that we could go together in his car early in the morning. It was raining when we hit the road. It took us about 1 hour to get to the village. When we met the other people we headed for the apricot orchard, which is on the hill near the village. We did apricot picking in the rain, which took away some of the fun. However, I noticed that a lot of people/families still managed to come out to do the trip. Anyway, the trip was not so bad. It's great to meet some friends I haven't seen for a while. It's my second fruit-picking trip. I did one many years ago. Fruit-picking is the activity that you go to a fruit orchard, enjoying your time with family/friends while picking fruits. Then, you can bring the fruits home after paying the farmer. Fruit-picking trips are popular in Beijing in Spring and Summer when fruits are ripe. Families/friends drive to the fruit orchards in the countryside. They are welcomed by the farmers who raise fruit trees in orchards, because it helps speed up sales during fruits' short maturity period.

By the way, unlike the other people, I didn't bring back any apricot which is not my favorite fruit. Next time, I'll take an apple or peach-picking trip. :)  

The anniversary

I was frustrated and angry today, because my wireless internet connection did not work almost the whole day, and I was treated with terrible customer service by the vendor who sold me the CDMA wireless card at Buynow Plaza. However, I'm happy to read the post entitled 'Looking Forward to Tomorrow' on China Hearsay before I go to bed. It's nice to read a post like that by a laowai who keeps the sanity, which is in sharp contrast with so many 'commentators'. I left a comment on the above-mentioned post and I do not have the desire to say more about the anniversary.

I'm looking forward to tomorrow, too. 

Representative Office or LLC in China? That is the question.

Several weeks ago, I received an email from one of my blog readers from US. We exchanged some emails chatting about some Chinese pop musicians, and later he expressed his interest in doing business in China. He said that in future his company would register a representative office in China and work on getting Chinese clients, which prompts me to wonder why foreign investors tend to register a rep. office instead of a LLC (limited liability company) to do business in China. So, here comes this post, in which I'll remind interested foreign investor of the regulations that he/she needs to look into before he/she decides to register a business entity in China, also I'll talk about the pros and cons of a rep. office and LLC.

Before you decide to invest in China, you're advised to look through the Catalog for the Guidance of Foreign Invested Enterprises (Revised 2007) (or, 《外商投资产业指导目录(2007 年修订)》in Chinese), which is a catalog of encouraged, restricted and prohibited foreign investments. Basically, it tells you which industry you are allowed or not allowed to invest in, and in what form, WFOE or JV, etc. Unfortunately, I cannot find an officially translated version of the Catalog. Interested foreign investors may use Google to find unofficially translated English versions of the Catalog. Anyway, don't worry. Foreign investors are allowed to invest in most industries in China. Then, let's look at the pros and cons of a rep. office and LLC.

Pros of Rep. office:

• No minimum registered capital requirement.

Cons:

• No allowed to conduct actual business (only for liaison purpose);
• Cannot hire Chinese employees directly; Employees sign employment contracts with a qualified HR company (e.g. Beijing Foreign Enterprise Service Group Co., Ltd. or 'FESCO' in short) and employees are then dispatched to work for the rep. office. The service provided by FESCO is not cheap.
• Must pay taxes even if a rep. office does not have any income. The tax payable is calculated on the basis of a portion of a rep. office's expenses.

Pros of LLC:

• Can conduct actual business in China;
• Can hire Chinese employees directly;
• Pay taxes just like any other Chinese company.

Cons:

• Minimum registered capital requirement: RMB 30,000. (Trust me, nobody would do big business with you if your liability is limited to just RMB 30,000. To make your company look trustworthy, increase the amount!)

Rep. office is only useful for companies that need special permit or license to operate business in certain industries in China, for example, banking or securities. Before these companies can obtain a license to operate their business legally, a rep. office is a reasonable choice to begin with. Foreign universities can also register a rep. office to recruit Chinese students. I would advise most foreign investors to registered a LLC if you're serious about doing business in China.

Of course, there are other business forms you can choose. My objective in this post is to advise foreign investors to go for LLC rather than a rep. office. Don't always assume a rep. office costs you less than a LLC (You pay the registered capital and it's still yours, right?).

You may be interested in having a look at the Company Law of P.R. China (《公司法》). By the way, registering a company in China is not so difficult and you don't have to hire expensive lawyers to help, unless your case is complicated and you feel the need to use lawyers. However, if you don't want to waste time on your trips, you may need to hire a professional agent to run errands for you and get your company registered.

It's Barca time on Dragon Boat Festival holiday

I didn't get up at 2:30 AM this morning as planned to watch the Champions League Final live on TV. I'm a fan of attractive and attacking football. Arsenal and Barca are my favorite football clubs. So when I woke up in the morning, I was a happy man. Barcelona is the WINNER! Ha, ha ... Rookie coach Pep Guardiola outsmarted Sir Alex Ferguson. Barca beat Man. United by 2:0. I'm watching the replay of the match now. Lionel Messi had a fantastic game and he is my pick for the World's Best Player of the year. It's great news to begin with the traditional Chinese Dragon Boat Festival. I'm going to buy and eat Zongzi to celebrate Barca's win and the festival today.

The Dragon Boat Festival is widely celebrated in China. This morning, CCTV had a good coverage of the celebrations in Guangdong, Guizhou, Zhejiang and across the country. The celebration event in my hometown (actually my father's hometown), Jiaxing of Zhejiang province, was on TV for about 2 minutes. Jiaxing is well known for Zongzi with the brand name of Wu Fang Zhai (五芳斋). Various fillings are used for Wu Fang Zhai Zongzi, and they are delicious! According to the TV report this morning, over 150 million Zongzi are produced by Wu Fang Zhai and sold across China every year. I'm going to buy some in the nearby supermarket here in Beijing. Great to eat Zongzi from my hometown on Dragon Boat Festival holiday.

Barca's win is great, Zongzi is delicious and the festival begins!

The 'invisible' entrepreneurs

He is ordinary-looking, plainly dressed, hard-working but not so articulate. He is the bread earner of his family, but he takes big risks by putting all his savings into something called 'business'. He has limited education and no idea of business etiquette, but he IS in the business.

There is a culture of entrepreneurship in some regions of southeast provinces in China. About 4 years ago, I had the chance to have a glimpse of the small business of one of those entrepreneurs. At that time, my father, a retired electrical engineer was invited by someone to work for his startup business in a small city in Zhejiang. The business was to develop a product to be used to adjust the speed of battery-powered bicycle. Being bored at home, my father decided to move to the city and work for him. I was a bit worried and decided to accompany my father to go and have a look at the place where my father was supposed to live and work. The living and working conditions were anything but appealing. The boss (entrepreneur) was not rich and rented an unfurnished 3.5-storey apartment in the countryside, which was used for accommodation and workshop. The guy was married with a son. He employed some migrant workers. His family and all the employees including my father lived and worked in the unfurnished apartment. As the photos show, the floor was rough and uneven; The makeshift staircase looked dangerous; and, there was NO third floor! I had a chat with some migrant workers. They were young (between 17-23 yrs old) and worked 12-13 hours a day seven days a week. Actually, one 'migrant worker' turned out to be the niece of the boss. The boss' mother-in-law also worked as a cook in the apartment. Anyway, my father made the decision to stay and work. I was assured by the boss that he would take good care of my father. Then, I left the next day. My father only worked there for about 3 months. Later, I learned from my father that the business failed but the boss didn't quit and decided to start a new business.

In this story, the guy started with limited fund and utilized all the possible resources available to run his startup business. He was down but not out. He is the one that fits the description in the first paragraph of this post. Actually, there are many entrepreneurs like him working against the odds in the manufacturing industry in China, but they are 'invisible' to many because they are not in the fancy IT or high-tech industry and they are not in big cities. I know that less than 20% (or even a lower percentage) of those small businesses can survive over a period of five years. Win or lose, they are still the heroes in the economy. Nobody knows where the next Li Shufu (李书福, Chairman of Geely Automobile) comes from, right?

China's 'angry youth'

Translation: (The words on the flags:) 'Justice' and 'Conscience'.

Chinese angry youth: 'Want to know what 'angry youth' really means? Just look at the words on my flags!'

'Angry youth' isn't 'angry youth' literally. Please, I hope some people can stop messing around with the phrase.'
- - - - - - - - - -
When I was criticizing western media's so-called 'balanced report' about China at a dinner with a friend the other day. He said, 'You're still an angry youth (fenqing in pinyin, or 愤青)'. Of course, he was not saying in a derogatory way. It was slightly complimentary. I assume he meant I was still challenging things that I thought was unfair.

However, the phrase 'angry youth' is always associated with nationalism in western media. Actually, Chinese angry youth are very diverse in their opinions. Two Chinese angry youth may have different, even opposit opinions about something. Calling those Chinese who stand up against western media 'nationalists' does not tell what 'angry youth' really means in China. In my opinion, 'angry youth' refers to a person who is somewhat rebellious, outspoken and would challenge the perceived unfairness, unjustice and unequality. Also, 'angry youth' is an universal phenomenon. Che Guevara is regarded as the most famous 'angry youth' by many Chinese.

Adrian Geiges from Germany, was also an 'angry youth'. He published a book entitled How The World Revolution Once Accidentally Started In The Black Forest. The Chinese version of the book is entitled 《我的愤青岁月》(literally translated as My Days As An Angry Youth). 'Angry youth' does not necessarily refer to the young, but also the middle-aged and the old. Are 'Chinese angry youth' nationlists? Some are, some are NOT. Therefore, 'nationalist' should NOT be an acronym for 'China's angry youth'.

Communications can be more effective with less use of emails, ppts, etc.

My blogger friend Ramesh talks about the dark side of Power Point here, here and here in his blog 'Business Musings'. Later, he recommends a recipe for a power pointless, but effective presentation here. I find the topic interesting and want to expand the topic a little bit here. Many of us (if not all) unknowingly have done some ineffective and inefficient business communications to some extent.

Two weeks ago, I received a call from a friend who is a general manager of a PR company. He told me that his company were going to pitch to a well known French multinational company for a big project in Beijing. He asked me if I could do him a favor to translate his power point slides and do a presentation on behalf of his company to the top executives of the French company. 'In English?', I asked. 'Yes, they speak English', he confirmed. Great, my French is good enough only for aliens to understand. So, out of curiosity I agreed to do the favor (for free). When I received the PPT slides I was shocked. They put together 108 slides which were expected to be presented in about 20 minutes! And the worse was that they put too many paragraphs of Chinese in the slides. I took me an ENTIRE day to translate! Also, I noticed that it was the 12th version of the presentation. I thought the ppt presentation was not viewer friendly, and said that by no means could I finish the presentation in 20 minutes. Then they reduced the ppt to 91 slides. On a Friday afternoon, I did the presentation in front of the senior French executives and the feedback was good. But you know what? As I previously warned, I did not cover every paragraph of text they put on the slides. Anyway, my friend was very satisfied with my presentation. Later, I learned they spent about 2 weeks drafting and revising the ppt. What annoyed me most was that they put so much unnecessary information on the slides to window-dress and make it look 'more professional', which in my opinion was the opposite of effective communication.

If you can communicate a message face-to-face to a fellow worker in 5 minutes, why do you bother to spend 20 minutes writing an email to him/her even if he/she is sitting 3 meters away from you? Once I was asked by a country manager to send him an email to brief him on a meeting I had with a business partner. I did so in the evening. The next morning, he came into the office holding his blackberry and said to me, 'Hang, I got your email. It's a bit long and I haven't read it. Can you come and brief me in my office?' See? Even a reader may become fed up with emails. As a matter of fact, the message could be effectively communicated on phone or face to face in 5 minutes.

I've mentioned in my previous post that the newly appointed CEO of Eachnet (Ebay China), Wang Leilei (王雷雷) once criticized the staff in Eachnet for their excessive use of emails and ppts, which he thought was less straightforward and a bad habit.

Sometimes, we relies too much on emails and ppts for 'effective' communication. Communications can be simple and effective too!

I've got itchy feet!

I've been a loyal reader of Jonna's blog recently. I really enjoy her writing which is of great fun. Today, her post is about her plan of traveling in Yunnan, which prompts me to bring back the pleasant memory of my trip in Yunnan last September. I did solo traveling and made many friends during the trip. I've got itchy feet again, but I know I cannot take another trip now. That's why I'm sitting here listening to the beautiful song 《彩云之南》(The South of Colorful Clouds, which refers to Yunnan) by singer Xu Qianya (徐千雅). I really like her music about Yunnan and Tibet.

Being an adventurous guy, I 'illegally' went fishing on a fisherman's boat in Dali and solo trekked the Tiger Leaping Gorge. I also traveled to Shangri-La and made many friends with fellow backpackers in Lijiang. These are some photos I took on my trip. Man, I love traveling!

The countryside near the old town of Dali

Buskers & their dogs in Shuhe old town

A singer from Guangzhou in a pub in Shuhe

Jade Dragon Snow Mountain

Trekking Tiger Leaping Gorge
Backpackers at a guest house in Lijiang
Girls I met at a guest house in Lijiang

Thank you very much for buying our Chinese competitors!

VS

VS
Li Guoqing (李国庆), the co-CEO of Dangdang China's largest online retailer of books, CDs and videotapes, said that if Dangdang's biggest competitor Joyo had remained Chinese he would have had a much harder life. Obviously, he is right. Joyo was the No. 1 in the market before. But since Amazon's acquisition, Joyo has been going downwards and lagged far behind Dangdang. Joyo is not alone. Eachnet shares similar experience. Eachnet used to be the No. 1 auction site in China with over 60% market share. However, Eachnet gradually became mediocre after being acquired by Ebay. The new Chinese entrant, Alibaba's Taobao entered the market and quickly surpassed Eachnet. Now Taobao has firmly established itself as the most popular online auction site in China and the gap between the two is growing. Foreign internet companies do not seem to adapt well in China. Need more evidence? Google is trailing behind Baidu while Yahoo is struggling.

Why foreign internet giants fail to win the competition against their Chinese counterparts? This is a question that many have tried to answer. I'm not going to do it here, but I have been keen to hear what those who have been personally engaged in the competition would say. Here are some of them.

The outspoken Li Guoqing ,once on a TV program, ridiculed Ebay by telling a story about Ebay's inefficiency. He says that once Ebay's Chinese team decided to change some Chinese fonts on Eachnet. The Chinese team could not do it right away. They needed to report to the US headquarter of Ebay to obtain an approval before they could actually do the change. The approval did not come soon and one China-based Chinese executive of Eachnet was very angry and threatened to resign. After all the farce, the change of fonts was finally done, which was not quick. I know the story sounds absurd and I am not sure if it is true. But from my personal experience with a foreign company in China, I tend to believe the story. If you have followed the news, Ebay and Tom formed partnership and Tom's former CEO Wang Leilei (王雷雷) became the CEO of Eachnet. When he began to work at Eachnet's Shanghai office, he was not impressed. He once said Eachnet's staff had the bad habit of doing every thing by emails, powerpoint files, etc. They did things in a less straightforward way. He thought they had gone too far, which was less efficient. Anyway, Wang himself failed to lead Eachnet out of oblivion and then quit. Another well known resignation from Yahoo China was Xie Wen (谢文). Xie, the former CEO of Hexun, was invited to lead Yahoo China as CEO by Alibaba's Chairman Jack Ma (马云). But after a meeting in the US with Yahoo CEO Jerry Yang, Xie decided to resign. His resignation was just about 40 days from his appointment. Rumors say Xie had not won the support he needed to change Yahoo China. The reason for his resignation has not been disclosed.

I assume the above does give a glimpse at why foreign internet giants stumble in China. Has any of them improved? I don't see it for the time being. Actually, those foreign internet giants deserve a big 'thank you' from their Chinese competitors for destroying those Chinese companies acquired.