Shanghai Tour Report

Shanghai. It’s huge. 16 million+ people. That’s two times New York. As large as the Netherlands. Bigger than Switzerland and Austria combined. And that’s just the official estimate.

The defining realization of the tour was scale. The size of the country, the city, the urban landscape, buildings, factories.... they’re big, bigger than most of us have ever encountered. It required a perceptual shift of an order of magnitude. Example: every day, Shanghai gets three new skyscrapers. 1000 per year.

Our hotel was right in the center, and when we left to visit a university, incubator, or company, we drove, watching the highrise buildings glide by. In other cities – here I’m thinking of New York – you drive for awhile, but not long after leaving the center, the buildings scale down. Not in Shanghai. You drive for kilometers and kilometers, in any direction, and you’re still looking at highrise buildings. They just go on and on, with new ones under construction everywhere. When the Shanghainese refer to old buildings, they mean pre-1990.

The tour – called an ICT Tour – had a lot of Swiss participants, since it was organized by the Silicon Valley Association in Geneva (http://www.siliconvalley.ch/), but it included an Austrian and a French guy, both living in Switzerland, an American (guess who) and Canadian living in the Netherlands, and a couple of Dutch people living in one place or the other. It was a convivial group, loosely focused on IT and new technologies.

The SVA has existed for fourteen years, and is expert at tour organization. One of the practices is everybody had to have a ‘buddy’ to reduce logistics. Brenda and I kept an eye out for each other. You don’t want to get lost in Shanghai. There was a full schedule of visits planned, plus some private time sprinkled throughout the week.

One history note about the SVA: Henri, the director, told me that he went to Silicon Valley on a couple research trips in the 1970’s. One time he joined a meeting of the Home Brew Computer Club. Two guys showed up and started setting up a computer. Those two guys were Steve Wozniak and Steve Jobs, and the computer was the Apple I. Those trips provided the inspiration for the Silicon Valley Association. In 2005, in China, Henri was packing an Apple laptop.

Arrival

We arrived on a saturday morning, very jet lagged after an 11 hour flight and 36 hour day. Customs was efficient, and most of us pulled cash out of ATM machines at the airport. The train into the city woke us up, shooting along at 431 kilometers an hour. That’s 267 MPH, the fastest train in the world. It’s a maglev, whooshing us from airport to near the city center in 7½ minutes.

The train station was super clean, super modern, situated in Pudong, the bristling new business district that didn’t exist ten years ago. We went to checkin at the hotel, a luxurious skyscraper looking down on the Huanpu river and the Bund, Shanghai’s historical waterfront. My room looked out the other side, over a neighborhood that hasn’t yet been razed to make room for new development. It looked like old Shanghai, with twisty streets and ancient pre-war buildings.

Acclimating

Later we piled into the bus. The bus had a driver, and he gets an award. Driving in Shanghai is an adventure. Traffic rules are a little different from what we’re used to, namely, there aren’t many rules. At an intersection, nobody has the right of way. The one who goes first is the one with the most chutzpah. That was usually our bus. One day when Patrick and I were sitting in front to enjoy the scenery, as we were entering a big crossroads we saw another bus coming. Its driver hit the gas. But our bus was a meter or two further, and our driver didn’t flinch. The other one slammed on the brakes, and we sailed on through. Jesus.

In Europe, the pedestrian is number one, then come bicycles, then vehicles with engines. In China it’s reversed. Our bus would turn into a teeming throng of people and bicycles. They would stop. Respectively, bicycles routinely cut off pedestrians. That’s the way it is. I never saw a flicker of irritation. Funny thing is, the system works; it’s just another urban mindset. The city flows.

We went for lunch with Yong and his family. Yong is Henri’s ‘assistant’. I don’t think that’s the right title; ‘mover and shaker’ is more like it. Yong played the role of guide, translator, negotiator, advisor, ambassador and a few more. The food was Shanghai Chinese, delicious, and markedly different from the dishes most of us know from western restaurants. More basic and healthy, light on the sauces.

In the afternoon we went to Webster University at SISU (Shanghai International Studies University), and visited a class about investment and venture capital. The room held 40 or so MBA students, most of whom have monday-to-friday jobs, but spend their saturday at Webster to further their career. The teacher, Steve Fieldman, is American, and from his accent obviously a former New Yorker. We heard about how VC’s operate in China, setting up WOFE’s (Wholly Owned Foreign Enterprises) and such.

Back at the hotel in the evening, despite the jet lag fog, some of us gathered in the bar. We were simultaneously tired and excited. The Hotel Panorama Century Court Shanghai, Panorama Hotel for short, has a bar on the 31st floor, and the view is breathtaking. You look down on the People’s Heroes Monument, the arc of the river, and Pudong on the other side. We drank and watched the water traffic flow in both directions. Later I thought it was too early to go to bed, so I left the hotel and went for a walk, strolling along the Bund. There is a definite magic to this city.

Sunday shopping

The next morning, up early from the time switch, I went to the fitness room to do my Tai Chi. Wolfgang and Liesbeth showed up too. It became a running joke throughout the week, inquiring whether our group was properly represented that morning. We didn’t do bad (mostly thanks to Jean-Claude).

Shanghai is a shopper’s paradise. There’s no sunday, and there’s no evening either. On the door of one of Shanghai’s big department stores, I checked the opening hours: 9:30-22:00. Every day.

After breakfast we went to a local market. What a circus! It was big (Shanghai big) and full of, well, mostly crap, like any market, although in this case it was Chinese crap, which made it fascinating. If you want to get an insight into local culture, go shopping.

Recently the authorities have forbidden display of counterfeit goods. So if you want a knockoff Louis Vuitton or Dior bag, you won’t find it unless you look interested. Then a fake wall at the back of the shop slides open, and you enter a back room filled to the ceiling with goods. The prices are amazingly cheap. But it’s bad form to accept the quoted price, you have to negotiate. If you do it well, the price goes down to 20% or less of the asking price. That’s beyond cheap.

The negotiations make the experience fun. Since English is useless, it’s one of the only ways to really interact with people. Besides a few rote phrases, the real communication happens with body language and voice tone. Numbers are typed into a calculator, replete with shocked reactions and really, the best, last offer. If you play the game, things get heated. They get angry, you pretend to be exasperated and walk away, they grab your arm and pull you back, you stick to your price, they grudgingly make another final offer, you give up and really leave, and then they shout “Ok, ok!” at your receding back. Hans and Doris learned it first, with a little help from Yong, and they scored.

Everybody scored later at the XiangYang Lu Clothing Market. An enormous compound, full of tiny alleys packed with overflowing booths, selling every upscale brand you’ve ever heard of. I was searching for white dress shirts for my suits. I found some crisp Armani’s, and started a protracted haggling session. At one point the girl got really angry and she gave up. Until I walked away. At that point I realized we had an audience of people from nearby booths, so it must have been a good game. Final price for a designer shirt? Five euro’s. Probably I paid too much.

The clothes market gets a lot of tourists. I noticed some curious banners hanging here and there. With big white letters on a red background, in both Chinese and English, they read:
Respect intellectual property.
Maintain the market order.
Maintain management order.
Purify market environment.

Back at the hotel, I unpacked and studied the Armani dress shirts. Beautifully made, I can’t tell if they’re counterfeit or not.

Visiting

Monday began with a visit to the ChaoBo musical instruments company. It’s owned by Yong’s family. The company makes traditional and modern instruments, including such brands as Axl, Johnson, Palatino, and Lucida. They also do OEM (Original Equipment Manufacturing). Ever heard of electric guitars from Fender? They’re made here.

We were welcomed in a spacious conference room, then took a tour of the production facilities. We watched guitars being produced. The guitar bodies are cut out by a computer-driven router machine. The blanks then went to a team of twenty or so girls for sanding and smoothing. And so on down the line, until at the end there were complete and gleaming electric guitars in a rack, ready for testing. Two guys with amps played every guitar before it went on to packaging.

Following that we went to the piano factory. Again, a fully staffed Henry Ford style assembly line with perfect pianos rolling out the end. A whole floor was devoted to tuning. It was impressive.

As we walked through the premises, we noticed dormitories on some of the upper floors. Most of the workers stay here for a temporary period, say two years. Housing in Shanghai is expensive, so the company provides its own facilities.

Yong’s father, the owner of the company, guided our tour. At one point he examined a guitar and spoke to a girl doing finishing. I watched and thought about the roles. The boss is chief of a 36 million dollar company with corporate headquarters in California and a worldwide distribution network. The girl comes from deep in the rural countryside of China, from a farming village that may not even have a television. What a gulf of difference. Extend your scale by an order of magnitude.

Interestingly, I sensed very little hierarchy in the interaction. No rigid formality or submissive gestures. It was a normal conversation.

We did notice one unusual thing in the office building. Directly across from the main entrance was a room marked “Party Office”. That’s not a place to hold a party. It’s the office of a senior staff member who’s responsible for party members.

We had lunch at the factory cafeteria, choosing from a nice selection of good, nutritious Shanghai food.

Flextronics

In the afternoon we switched industries and visited Flextronics, a global company with 2005 revenues of $15.9 billion. The “Electronics Manufacturing Services” company does outsourcing for technology giants like Siemens, HP, Casio, Sony-Ericsson, Xerox, etc. The 1.9 million square foot campus is one of three in Shanghai, with other facilities in 32 countries on five continents.

I heard from Henri that our delegation wasn’t exactly welcome. Maybe they were concerned about trade secrets and espionage. We were given a tour, but camera’s weren’t permitted in the production areas, and we were escorted by a small group including a man from the party. He didn’t seem to speak any English, but was present just the same. The girl leading the tour carried two mobile phones which rang incessantly. Made it seem like her conversation was being monitored.

We had a look at a fabrication facility, a cavernous space as large as several football fields. It was an enormous ‘clean room’, a dust-free environment, and we couldn’t enter, just view the air curtained entrance. Everybody working there is dressed in a medical coverall, hair cap, and special sock/sandals. Before entering they had to pass through a turnstile that tested whether they were grounded or not. One guy forgot to change his shoes, and the buzzer sounded. On the way out, every person went through an airport metal detector and was manually scanned by a guard.

Inside, teams of young girls, looking like clones in their color coded costumes, lined up like squads of toy soldiers and received a briefing from another coverall clad girl. One group seemed to be waiting for their leader. They stood there, three deep, for at least the 15 minutes that we were present, and were still patiently waiting when we left. That was four and a half hours of company time.

Wiserun Information Systems

Tuesday we visited a company in Changning Science and Technology Park that, of all the organizations we saw, is most similar to my own company. It’s only about ten times the size.

Shanghai Wiserun Information System Co. specializes in software research and development, technology consulting, and IT outsourcing, with a focus on business information system design, development, and integration.

The CEO received us. Named James Ding, he’s a tall, intense, and thoughtful type with a wry sense of humor. He studied in the States, and communicates well, giving us a presentation about Wiserun. They started out doing a content management system in collaboration with a US company, and have now built a range of systems, such as an e-commerce platform for the Shanghai Institute of Foreign Trade. The company has an ISO9001 certification. He talked about the costs of doing business, how it was really difficult to find good sales people (isn’t it), and mentioned there are around 1000 IT companies in Shanghai, mostly of medium size, say 30-100 employees.

Before going to China I did some research about doing business there, reading about etiquette and how to behave properly. One of subjects was what not to talk about. Don’t ask questions about the Communist party, or Taiwan, the EU arms embargo, human rights, etc. James talked about all of them. People appreciated that. Such openness made everybody relax. He told us to look around at how much had changed, in politics, the economy, in people’s way of life. “Seeing is believing”, he kept saying, and that continued when he took us out to lunch. I suppose that’s the reason we came to China, to see it with our own eyes.

Multimedia Park and Incubators

Later that day we visited a whole range of companies, some of them located within a government sponsored incubator. I won’t go into detail about every company and the incubator officials, but at GreatWall Infonet Software a girl gave us a tour through the development area where we could see the programmers at work. At the end of the tour she pulled out a prepared statement about how they develop their software and read it to us. It mentioned that they use the UML (Unified Modelling Language) methodology. That sparked my interest, so I asked a couple questions, about whether they use UML to collaborate with their clients, and whether they’re satisfied with it.

The poor girl. This alarmed look crossed her face, she shrank back against a wall and said, “UML? What’s UML?”, then switched into Chinese to confer with her coworkers. One of them pointed out that UML was in the statement she just read. She peered at the paper, then yelled “Wu!”. The chief developer hurried over, looking a little sheepish, and answered my questions. Christoph chimed in with a few other remarks, and during that conversation we heard the words “open source” for the first time in the entire tour. It was in reference to using the Eclipse development environment.

Intel

Wednesday began with a visit to Intel, which has three major operations in Shanghai. The one we visited, in the Waigaoqiao Free Trade Zone, is an investment of $500 million. After an introductory presentation we got to see two product demonstrations. Intel is not just doing ‘fab’ in China, but is actively doing R&D and creating products. In my research I read an article where some expert was saying the Chinese could only fabricate, not innovate. Wrong, dude. It’s happening, and they’re good at it.

The first project was a special pen called ePen/EduPad. Connected to a small and sophisticated sensing device, the pen turns any surface into a computer input. By anything I mean a piece of paper, a book, or the monitor itself. You can write (western or Chinese characters) or draw directly and it will be instantly digitized. The resolution is high, and the pen software can interact with prescanned printed content. The sensor uses a combination of ultrasound and infrared. Nice potential (as long as they Bluetooth the sensor/computer link, right now it’s tethered with a cable).

Intel’s Christea Project

The second demo was a system administration product for large networks that allows remote and automatic updating of hard discs and operating systems. The initial target market is Internet cafes, although you could easily extrapolate to, say, a university network. There are over a million Internet cafes in China, which have a real problem with machine maintenance. Code named the Christea project, the combination of server, software, and Intel motherboards looks like a dream come true to a harried sysadmin.

For the demo we saw an isolated network with a couple ‘new’, empty computers being plugged in for the first time. Without requiring any human intervention, they were up and running with complete systems and unique addresses within minutes. Christea is Windows-based, and the product also allows partial updates and data preservation and backup. The server needs to be a Windows machine, but if required, it could install Linux disc images.

The girl who presented was confident, quick, and friendly. The demo triggered a lot of interest from the university IT guys, and they peppered her with questions, but she could ‘talk the talk’. With a sparkling style she deftly fielded each inquiry, beaming with anticipation when the next one came up. At the end of the session I thought, “Yup, I’d offer her a job” and I made sure I got her business card.

Swiss presence

Wednesday afternoon we visited a Swiss company, Kuk, that’s moving it’s manufacturing to Shanghai, with help from a Swiss government funded business center (http://www.swisscenters.org/). A presentation at the Swiss Center by Nicolas was highly informative. In a study about doing business in China, the top three success factors were: HR selection and Human Resource Management, Product (quality/price/services), and Knowledge of the local environs. Guanxi (networking) was number five. Language was way down at #14. Nicolas told us Shanghai is not traditional, and – if you’re planning on doing business there – there’s no point in researching traditional Chinese culture.

The evening included a speech and dinner with Dr. Hans Roth, the Swiss consul in Shanghai. Unfortunately his speech was in German, so I missed a lot of the details. In short, he painted a dreary picture of doing business in China. There are all sorts of difficulties that compound each other. Completely different world views, for example.

One of the fundamental points was that Chinese people tend to view life as a movie, whereas westerners see it as a series of pictures, missing the motion that connects them. This might be stretching the point, but the traffic rules could serve as an example. In Europe, an intersection is analysed and subdivided into discrete entities of lanes, directions, and signals. Depending on where you’re going you wait until your window appears. In China, you only wait if the current context demands it, otherwise you go with the flow.

SAP

Thursday we visited SAP, both the headquarters in the center and an enormous development campus in Pudong. It reminded me of the SGI campus in Silicon Valley, with lots of modern buildings filled with green in between. They obviously have big plans.

I can only wonder what business strategy and pricing the company is pursuing. SAP is super expensive in Europe. Deciding for SAP means a huge investment and committing to an army of consultants who are needed, well, forever. I can’t imagine local companies going for it, unless the pricing is 2% of what companies in Europe pay. Although the woman who gave us the tour at the headquarters, the CFO for China, said they will be focusing more and more on SME’s (Small Medium Enterprises).

It seems SAP – and all the big players – are taking an extreme longterm view, establishing themselves in China, but not expecting any sizable profit until the market matures.... someday.

Tiger Hill Gardens

Thursday afternoon we took a break from business and did something touristy, travelling to the old city of SuZhou and wandering through the famous Tiger Hill Gardens. SuZhou is 2500 years old.

The gardens are stupendous, so incredibly beautiful you feel like you’re walking through a Chinese scroll painting, not reality. On an information board at the entrance, a long list of sights was noted, including something like “18 enchanted views”, “9 vistas of national treasure”, and the list went on and on.

After dinner we walked through the shopping district (open till 10 of course). Didn’t find anything special, so Robert and I sat down in a small square and were joined by Theo. We had some time to kill before heading for the bus, so we watched the evening scene. Theo noticed something telling. Not far away somebody was sitting with his feet up, and a man from the Communist party walked over and told him to put his feet on the ground. He did so without comment. The party man was old, dressed in black ‘peasant’ style clothes and sandals, but he had a red armband on his sleeve as identification. I wondered whether the party man did that because we, the white ghosts, were sitting there.

Lenovo

In May IBM sold its entire Personal Computing Division to a Chinese company, turning Lenovo into a leader in the global PC market with annual revenues of $13 billion. We visited one of the Shanghai locations. After a presentation we were invited into the expansive production facility. We donned clean room gear: lab coats, shoe coverings, and a hat, thankfully not a shower cap type, but a baseball hat.

The plant was several city blocks in size, and we wandered through the laptop assembly area. I was surprised at how many people were employed, and at how boring the work was. Some of the tasks could have been done by a robot. But when you compare the price of a robot to a local salary for a couple years, the robot comes out far more expensive. Pascal and Kurt and I talked about it, and all had the same conclusion: “I’m glad I’m not working here”. Count your blessings. On the way out two cool girls in uniform body scanned us with a metal detector.

Farewell

For friday evening a Farewell Party was planned, and Henri had invited some of the personalities we met during the tour. Thursday morning I sent Sandy, the girl at Intel, an invitation by email. A couple hours later an SMS showed up in my cellphone; she would join us! Late friday afternoon another SMS arrived; she had meeting overrun. She was leading the meeting, so she couldn’t just exit. The group went on ahead to the party restaurant, and after a flurry of SMS’s and calls, Sandy pulled up at the hotel in a taxi, and I jumped in. We arrived and enjoyed a sumptuous dinner, laughing at a Shanghai trivia game and clapping for the gift presentations (e.g. an Apple iPod for Yong, yes!).

Nightcap

At the end of the evening Sandy and I bade our farewells to the group and went for a stroll along the Bund. She suggested we go to Shanghai’s latest hotspot, a newly renovated trading house called ‘Eighteen on the Bund’. We arrived on the top floor and found a line to get in. But we must have been fashionably early, because moments later the elevators opened and Shanghai’s cool crowd poured in, packing the vestibule. We looked at each other, shook our heads in unison and threaded our way to an elevator, leaving the crush behind.

Further along the waterfront, at Three on the Bund, we went up to the rooftop terrace and gazed at the spectacular view. We watched Shanghai’s night lighting shut off at the stroke of the hour. Then we chose a table, ordered a bottle of Pellegrino, and settled in. Sandy was born and raised here. To her, everything I’ve described above is normal. She told me she works 11-12 hours a day, and said it wouldn’t be possible to get everything done working just 8 hours. The product team for Christea has hardware and network specialists, ten programmers and ten quality control people. She’s in the promotion group – the title on her card is Technical Marketing Engineer – and will go on the road this month, training her people to take the product on a nationwide tour. Intel is busy in China.

I described Infrae’s products: the content management system, browser-based editor, and content repository. She couldn’t believe we do it with just seven people. I explained, “We do agile programming”. She gave me a dubious look. “Hmmph”.

Later we both started to yawn. Heavy week. We went downstairs where a line of taxis was waiting outside. The doorman put her in a cab, and as it took off, we waved. Then I strolled along the Bund.

* Names of people in the group shot, from left to right: Kit Blake, Theodor Klossner, Wu Guorong, Hans Däpp, unknown, Doris Däpp, Jean-Claude Berney, Robert Jogg, Henri Slettenhaar, Brenda Fischer-Campbell, Liesbeth Steenhuisen, the Chairman of Witcat, Wolfgang Korosec, Yong Liu, Christoph Glaus, Kurt Städler, Patrick Lehner, unknown, unknown, girl from GreatWall Infonet Software.

Photographers

Theodor Klossner
Engineering Management Selection E.M.S. AG
Rütistrasse 66, Postfach, CH-8030 Zürich, Switzerland, +41 1 266 13 13

Wolfgang Korosec
ETH Zürich
Informatikdienste, Weinbergstrasse 109, CH-8092 Zürich, Switzerland, +41 1 632 5838

Kurt Städler
University of St. Gallen
Informatikbereich, Dufourstrasse 50, CH-9000 St. Gallen, Switzerland, +41 71 224 3039

Author

Kit Blake
Infrae
Hoevestraat 10, NL-3033GC Rotterdam, The Netherlands, +31 10 243 7051

This document was produced with the Silva content management system and the Kupu Editor.