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As the dazzling displays of fireworks, interpretive performances and welling nationalist pride of the 2008 Beijing Olympics fade from international memory, another pro-China, six-month event (the largest and most expensive of it’s kind) has just begun this weekend in Shanghai, China (上海 Shàng hǎi). The Shanghai World Expo or 中国2010年上海世界博览会 (Zhōngguó Èrlíngyīlíng Nián Shànghǎi Shìjìe Bólǎnhuì) is a chance for Shanghai to steal a little thunder from it’s neighbors-to-the-North, celebrating the the most modern(现代 xiàn dài) and cosmopolitan city of China, as it’s involvement in global trade, finance and culture mark it as one of the 21st century’s “new great world cities”. For 上海 it is a long overdue honor, but better late than never.

Much like in the prelude to the Beijing Olympics, the government has been allocated billions in renovation/construction funds along with an area larger than 5 square kilometers to hold expo events. They’ll be needing all that floor space considering that an estimated 75-100 million people are expected to attend the event over the six month time-period, including hundreds of dignitaries, politicians, businessmen and moguls of industry. It’s now Shanghai’s turn to shine.

The ceremony opened with with yet another massive display of fireworks, including LED screens and lazer lights over the Shanghai river (not to mention, indoor performances including the Jackie Chan variety hour). YouTube Preview Image and YouTube Preview Image

But the real pomp and circumstance associated with World Expos comes with the building and unveiling of pavilions (亭子 tíng zi), most of which represent an individual nation or a regional entity. If you are a fan of unique architecture, graphic design and/or interactive displays, then I urge you to start looking for plane tickets now. View Slideshow here.

Most notable of the pavilions are the five “urban-themed” Shanghai comprised of Urban Dwelling, Urban Footprint, Urban Planet, Urban Beings and Urban dreams. The goal of these pavilions is two-fold: first, it shows the conscious effort China is taking to combat climate change, and secondly, it’s trying to convince foreign politicians, businessmen and dignitaries to open up shop in China.

After all, much of this event is all about proving that Shanghai can compete with New York, London, and Hong Kong for investment and market share. Sure Beijing may be the political center of China, but Shanghai is a cultural and economic powerhouse, touting a glitzy and fluorescent skyline that attracts foreigners like moths to flame. Further, more people speak English in Shanghai than Beijing, especially among young business elites, yuppies and college students, which adds to it’s appeal as an “international city” with half a million 老外 expats. There are more western amenities, restaurants and stores in Shanghai, along with a nightlife that would give NYC a run for it’s money.

As a result, Shanghai and Beijing citizens have often been at odds of one another, calling the other “fake” or too westernized (if your a Beijinger), or too “boring” (if you’re a Shanghai resident). It’s like the back and forth between New Yorkers and LA residents, except no one knows where to find a good bagel and people are pushy everywhere in China.

So Shanghai, this is your official introduction to the rest of the world (although you’ve been a large and unofficial member for quite some time). Sure Beijing had it’s chance, but that was two years ago. No point in living in the past. Never again will you be seen as Beijing’s successful, but under-appreciated brother to the south. Bask in it, because as Beijing will tell you, the sunlight fades when the closing ceremony ends…or wait, was that just because of the pollution restrictions?

When you’re riding public transport in China, you may go some time without seeing people using 现金 (xian4jin1 – cash), opting instead for their 智能卡 (zhi4neng2ka3 – smart card), maybe just (shua1 – swipe) their 钱包 (qian2bao1 – wallets) without even taking the card out.
Where can you get these cards?  In cities that use these cards (so far I’ve seen them in Beijing, Shenzhen, Guangzhou, Hong Kong, and Macau- I’m saving Shanghai for when I go to visit the World Expo), you generally look for a booth at a subway station that says 售卡 (shou4ka3 – cards for sale).  You can sometimes also purchase these cards outside stations, but be careful that you don’t accidentally buy a 充值卡 (chong1zhi2ka3 – charge card) for your cellphone.

The cards go by different names depending on where you are.  Beijing uses 一卡通 (yi1ka3tong1 – all-in-one card), while Guangzhou uses 羊城通 (yang2cheng2tong1 – Guangzhou connect), Hong Kong still uses 八达通 (ba1da2tong1 – Octopus card [lit. 8 directions connect]).  Although cards cannot be used interchangeably, the Hong Kong Octopus card may allow RMB deposits in the future.  The best part about these cards is not that they can sometimes offer a 折扣 (zhe2kou4 – discount) compared to the cash fare, but that they can also be used in 便利店 (bian4li4dian4 – convenience stores), 超市 (chao1shi4), and other places as well- including McDonalds!
Smart cards- front view

Smart Cards: rear view

Yesterday I went with some friends to Macau, one of China’s 特别行政区te4bie2xing2zheng4qu1 (special administrative regions).  There, we saw some of the 痕迹 hen2ji4 (traces) of Macau as a 殖民地 zhi2min2di4 (colony).  Macau has become a supreme tourist attraction in East Asia, attracting more tourists last year than even Hong Kong!  This may have to do with the fact that gambling is 合法 he2fa3 (legal).  百家乐 Bai2jia1le4 (Baccarat) is the most popular game played in Macau, far ahead of other table games in the main rooms as well as making up a near-monopoly of the higher-value gaming rooms.  Although casinos have their own 商场 shang1chang3 (malls), the clear majority of tourists are Mainland Chinese residents traveling on a 通行证 tong1xing2zheng4 (travel pass) for Hong Kong and Macau, which allows them to stay in the SAR for 7 days at a time.

Macau quietly slipped ahead of Las Vegas in 2007 for gaming revenue, before the Venetian and MGM Grand had opened.  Today, there are almost no large gaming groups (except for Harrah’s, which owns Caesar’s Palace in Las Vegas) who do not have a presence in Macau.  According to Macau Business magazine, Macau is not threatened by the 圣淘沙 sheng4tao3sha1 (Sentosa) resort in 新加坡 xin1jia1po1 (Singapore), which had a soft opening for its casino this past March.

The next big question about Macau as developments proliferate is the fate of the 法律制度 fa3lv4zhi4du4 (legal system) of Hengqin island, a part of zhu1hai3 (Zhuhai) which could become the next target for Macanese property developments.  I 不愧为说 bu2kui4wei2shuo1 (am not at a loss to say) that billions of dollars swing in the balance of the decision to regard Hengqin island as part of the Mainland versus part of Macau.

Readers- have you been to Macau or any of China’s other unique jurisdictions?

The US remains the largest 生产 (sheng1chan3 – manufacturing) nation, but few if any people I have asked have been able to answer correctly which country it is.

Several days ago, I spoke with a trader who deals in appliances and power tools sourcing some components from the Mainland.  I was particularly curious about one component of his trade:电池 (dian4chi3 – batteries).  I wanted to know which companies supplied them, which were good, and which could be better.

According to him, the company 比亚迪 (bi3ya4di4- BYD, a company in which Warren Buffett and many retail investors have invested) is not a great supplier, and they should be a cost leader.  He added that their batteries do not make use of the best technology.

Surprised to hear this, I asked a confidant who works in finance and holds a stock position in BYD.  He remarked that BYD’s manufacturing could be made cheaper through further development of optimized practice (including things such as assembly lines).  However, BYD continues to rely on manual labor for the assembly of many parts, holding that an overhaul of its manufacturing process would result in fewer jobs overall as well as significant resource investment in the 短期 (duan3qi1 – short term).  Despite the fact that 1000 taxis powered by BYD technology are set to be piloted in Shenzhen next month, BYD’s small battery division does not have the same successes. Even top companies are faced with the battle of margins.

If you want to see the toll that margins can take, take a look at China’s textile industry.  The competition is 日益激烈 (ri4yi4ji1lie4 – increasing in intensity every day).  Indeed, while speaking to a factory producing jeans for export to large retailers in the US, I encountered her frustration at  turning a meager profit after paying out for materials, housing employees in dorms, and other assorted business expenses. She added that European and US standards make it nearly impossible for her to use certain cost-cutting measures such as changing dyes or using a different type of cloth.  As more companies spring up in saturated industries, the existing profit margins will only diminish further.

Readers, what have you experienced regarding Chinese manufacturing?  Are any of you planning to contact Chinese companies for sourcing?

It was this time last year that I was en route to give a talk at a university in Wuhan.  During the drive from the airport, I began to chat with the driver.  Our focus soon shifted to trade between the US and China.  As we built rapport, he asked very frankly, “是不是美国公司就把这些垃圾食品卖给我们中国人吃?” (Are American companies just selling junk food for us Chinese people [to eat]?)  It seemed like a far-fetched notion at the time that American companies would dump low-grade products on the Chinese market.  If they did that, then they would have no competitive advantage over locally produced low-quality goods, to say nothing of locally-produced high-quality goods.

Having lived across the street from Beijing’s famed 秀水街 (xiu4shui3jie1 – silk market) as well as Shenzhen’s noted 罗湖商业城 (luo2hu2shang1ye4cheng2 Luo Hu Shopping City), I have seen no shortage of fakes, knock-offs, and imitations that were “not quite quite.”  My only possible explanation for the local government’s 睁一只眼闭一只眼 (zheng1yi4zhi1yan3 bi4yi1zhi1yan3 – one eye open, one eye closed) or staggered approach to combating fake goods is that having people employed selling fake goods is generally better for social harmony than having restive unemployed citizens.

The original appeal of 次品 (ci4pin3 – factory seconds) is that goods can be had at low-cost, not unlike the factory rejects often on sale at outlet malls or bargain bins like you might find in the States.  This concept extends beyond mere clothing, however.  Printers with iffy paper feeds, bookcases missing screws for shelves, and other consumer goods are all part of the 次品 market in China.

Knowing the importance that people attach to foreign brands and understanding of quality that exists among Chinese consumers, imagine my surprise to read the March 16 China Daily article describing how several world-famous 名牌 ( ming2pai2 – top brands) imported into China had failed routine quality inspections.

The girlfriend of an associate of mine works for one of the top foreign luxury brands in China, running a store in one of China’s second-tier cities.  She has observed how sales girls with employee discounts will skip one meal per day for months in order to scrounge up the money to purchase a bag from this company.  The revelation that the goods may not be up to par with the originals sold in Europe or the Americas quickly unravels the allure of getting such a product.

Readers, what have you experienced?

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