My slant on the Chinese IT Bubble

I was just completing the first year of college when the dot com bubble burst.  I remember one of my lecturers coming into the class, tears brimming in his eyes as he related to us how all of his shares in Ericsson had lost most of their value. Quite a substantial amount of money at the time.

So in 2000, the bursting of the information technology bubble had marked economic implications for Sweden. Ericsson, the world's largest producer of mobile telecommunications equipment, shed thousands of jobs, as did the many of the world's once fast-expanding Internet consulting firms and dot-com startups.  Ericsson's shares nosedived from $20 to $0.98.  My lecturers warning about how quick things can change really rang loud and clear.

With America's economy now in crisis mode, everyone is now looking towards the next cash cow, which astonishingly to quite a lot of peoples surprise is now China.  Well, its not astonishing now but 10 years ago it was unknown for IT and B2B solutions.  I moved over to China in 2005 working for a large Chinese software company and although I was confident about taking quite a step into the unknown I was very excited about the industries future.  The industry was bouncing back.  At the time India was regarded as the main outsourcing capital of the world with many jobs from America being outsourced there for a long period.  Having entered the Chinese software market just when things were beginning to get interesting I am now starting to get extremely apprehensive about where things are now heading in the Middle Kingdom. 

So to date Microsoft, Intel, Oracle, GE, Google and Yahoo have committed their futures to the Chinese market.  Intel Corp, the world's largest chipmaker, won China's approval to build its first semiconductor manufacturing factory in a small place called Dalian (Awesome place, I recommend JD's nightclub for the uninitiated).  With many new graduates coming on-stream from second and third tier Chinese cities institutes of technology these companies are guaranteed a large talented workforce for years to come.  China is incredibly hot right now and everyone wants to get in on the act.  It doesn't hurt that the Chinese Yuan is unbelievably good value for money with a very cheap and affordable workforce with an extremely low corporation tax rate.

With these well established companies now gaining a foothold in the country there are now an enormous amount of startup Chinese IT companies in China being incorporated.  Many of these business are getting very high valuations even though they are not even making a profit yet.  Venture capitalists have been pumping large amounts of money into small Chinese startups that are by and large clones of existing applications for the past 3-4 years.  Many of these startups have been formed by 20 something talented Asian developers with little management experience and it certainly reflects in todays industry.  When youtube initially surfaced in the west, there were hundreds of clones created by Chinese developers.  Today it has whittled down to about 3 Chinese companies, the most popular of which, toudou, has not made had a single profitable quarter. Leasing thousands of servers around the country is not a cheap enterprise, especially when most Chinese couch potatoes like nothing more than watching their favorite version of Mandarin dubbed Heroes.  Seriously, Hayden Panettiere sounds very cute when speaking in Mandarin. /me does a french whistle.

Although much of the investment has been on individual websites, however there are many other areas where China are beginning to take over as world leaders, most notably on telecommunications devices, chip design, biomedical devices and many more.  There are many more places for the venture capitalists to invest in however all valuations are sky high right now.  People have reason to be worried, with the credit crunch in the US investors have perhaps over extended into the Chinese market.  If the Chinese economy even shows the slightest sign of slowing down then the entire world will feel shock waves and scream in Unison. 

Many of the changes that have overcome China in the past few years are astonishing.  Billions of dollars has been invested in the smaller cities of China with education being a priority for the people.  Software parks have been cropping up all over with the Oracle being the latest to open up shop in Shenyang, Liaoning.  Indian companies were seeking relationships with any outsourcing company who would have been interested in forming a partnership.  With prices in India beginning to rise much of the outsourcing is being transferred, Chinese accents are slowly replacing the Bangalore Kannada slang.

So where does the future rest?  The cost of living in the main cities of China is starting to increase exponentially.  Rent is rising as are salaries, it is only time before the Chinese government re-values the Chinese Yuan which will mean that it will cost even more to do business with China, however as China will have most of the expertise, local infrastructure, desire to succeed and innovate it will be absoloutely impossible to not do business with China in some form or other.  The world has too much vested in China to see the entire IT industry there implode.  China may be in a bubble but it is not just the IT sector that is floating within its confines.  The Chinese government actively promotes its citizens to invest in Chinese companies and so patriotism and national pride is certainly alive and kicking especially when investing in the likes of Baidu (Also the name of my favorite BBQ joint in Dalian, I wonder who would object to the name). 

So to leave on a lighter note I embedded a video below that has caused some controvesy over the past few weeks around the tubes.  Anyhow, its worth a look if your interested in the bubble that is the American IT industry.  Enjoy.  By the way, with this post I am officially declaring that my writers block has vanished.  Clarity has entered my life and I have officially become enlightened.  I should get drunk more often. 

Me, China and naivety

This post is about something I wrote on the request of an old English teacher in my secondary school whilst working in China.  It was part of a project by some transition year students who were asking past pupils of the school for real world experiences of their life to date living in a foreign country. 

I wrote it when I was 24 years old and 6 months into my Chinese story.  Bear with me, I sound terribly niave and exactly the type of optimistic young traveller that I cringe at when I see now.  I loved my China experience and I hope to someday return to the Middle Kingdom ready to accept new views and experiences.  I'll soon be heading off to Australia, hopefully my optimism remains with me throughout my stay there.

Q1 Did your way of life change much when you went to China?  

Imagine moving to a new country, away from friends and family, with the bare basic command of the language; you may then imagine how much my life has changed.  The language is the largest barrier to surmount when you move out here.  The small, everyday things that you take for granted in Ireland have to be planned and studied before taking action.  Think about going to a barber shop without knowing how to communicate how you want your hair styled or stepping into a taxi without being able to tell the driver where exactly you wish to go.   

Ordering food from a restaurant is yet another experience, as Dalian is not renowned for having foreign tourists everything is written in Chinese so you do not know what you are ordering at first.  I remember my very first breakfast which consisted of luke-warm water, celery and tofu (what I really craved was a breakfast roll).  Tofu, regardless of what your vegetarian colleagues insist, is not a delectable meal first thing in the morning. As for my own experience I believe it was my diet which changed the most.  Living in China on a western wage allows you to go out to different restaurants every night.  It actually costs less to eat out every night than to cook yourself.  Food poisoning is not uncommon in China, kitchen standards are low in some places and you know which places to avoid after a while.  The lack of people eating in these places is a good sign to stay away.  However I found that in general my diet had improved immeasurably through the constant consumption of sticky white rice and seafood.   

Q2 As you love to travel and learn about new cultures do you find that the Chinese culture contrasts a lot with others?  

Where do I start with this question?  Chinas recorded history stretches back over 5000 years.  There is no place in the world similar to China; every culture in the world is different from the other.  What I found with China was that it is embracing the west.  I would dare anyone to walk down the main streets in Shanghai and not draw similarities between Tokyo, New  York and London.  High rises and skyscrapers are all the rage; however this comes at a cost.  McDonalds, Starbucks and KFC are now on every corner and western ideas are being implemented constantly throughout the country.  Through the great leap forward much of Chinas heritage was destroyed.  Many of the things that we take for granted in Ireland (Literature, art, architecture, history, etc.) was destroyed during this period and is still being destroyed today to make room for industrial pursuits.  Did you realize that in a few years America will be purchasing nuclear reactors from China?  This all comes at a high price, through building the world's largest dam; China has effectively destroyed millions of livelihoods and eradicated thousands of species of animals.  This all leads to one important point: China's culture is being taken away from the Chinese people.  

As is commonly known, China is a communist country.  This means that there is an unbelievable amount of propaganda on the television.  The people of China believe what their beloved government tells them and this is the main point which separates China from the rest of the world.  Through media restrictions many Chinese people are ignorant to the outside world.  I'm sure that the deal the Peoples Republic of China made with Google is well known you now so try to imagine researching a topic as well documented as democracy and not having it appear on your computer screen.  Other sensitive topics such as Tibet, human rights and Falun Gong are not openly discussed in China.  Discussing these topics inside China or even the Internet as a Chinese blogger (MSN Spaces) found out can lead to lead to difficulties for the parties involved.

I know that I've spoken about much of the bad side of China however I'll take some time to discuss the up-sides of living there.  There is no-where I know in the world where you can encounter such a variety of friendly people.  Throughout all that this people has come through in the past 50 years it is a testament to them that they are still surviving, at the forefront of technology and part of the world's most powerful economy.  Such a diverse people that are very family orientated, things such as old-folks homes are almost unknown in this country.  All holidays revolve around 3 things, family, food, fireworks.

One thing that is prevalent throughout every single culture is a passion for alcohol.  Although it is commonly thought that Chinese people do not often drink they have a potent spirit known as baijiu which they toast with during festivals and holidays.  Baijiu is just as potent as poitin and very legal.    They also have perfected the art of fermenting beers, a trick they picked up from the Germans.

Q3 Do you find that the houses and apartments in China are different from other houses and apartments that you have lived in? 

Accommodation as you would have in Ireland is non-existent in China.  Due to population restrictions in China much of the accommodation centers on the small two bedroom apartments.  This would have a small kitchen and a very small dining area.  This area would consist of the TV hooked up to a karaoke system which is a national pastime of the Chinese people.  A large apartment is not needed as the one-child rule per family comes into effect within the large cities.  By the way, Dalian in China is considered a small city within China as it only has 5 million people living there.  Depending on what region of China you live in your heating may be supplied by the Chinese government.  This usually comes into operation in late November and is turned off in mid February.  Up in Dalian you really need it during the winter as it can drop down to -15 degrees Celsius during the winter and reach up to 30 degrees in the summer.  It's not really the snow and frost that is the worst however it is the Siberian wind which cuts like a knife that is the worst part of living up in northern china.   This is the reason that many Chinese men and women wear long-johns here, a habit I have resisted to date.  

You would find that within many communities there are small parks where people can exercise.  It is not un-common to see old-age pensioners taking advantage of this opportunity throughout the morning time to get in a workout either by practicing their Tai-chi or by doing calisthenics'.  

Q4 Do many Chinese people understand English?  

English in China is taught from a very early age and although much of their grammar is perfect it is unfortunate that their accents are not.  This cannot be said for all Chinese however as there is a huge illiteracy rate in China as many cannot even read mandarin.  However, within my department in DHC, it is required that everyone speak English at all times.  This can be quite a lengthy process to try and get a programmer to explain something technical in English so I have applied myself to learn Chinese.   

Q5 As you say you come from a business background do you think this has been an advantage to you working in a big company like Dalian Computer Technology? 

As with any business in the world there is a hierarchical system, from the receptionist to the CEO.  Once people find their place within this system they should have absolutely no problem working within any Chinese company.  I'm a firm believer that hard work will lead to success and believe me that should you come to China you would have no problem finding work to do.  The average worker in my company clocks in 60-70 hours a week working.  The average wage for these people would be around 4000 kuai (400 euros).  People wonder why China has grown so fast, they put it down to the booming economy, the cheap wages.  Personally I feel that it's the hard work of the average worker. Many of them take pride in their work and as well as their companies profits are improving at a very substantial rate per year.  What you must remember however within a Chinese company is that you should never publicly shame either your boss or your company.  That is the hardest lesson to learn when working here I believe.  The Chinese people view the notion of a company much the same as a family, you would never shame your family so you should also never shame your company.  Simply criticizing your boss in a meeting could be perilous to your future advancement within the company however this could also be said for working within an Irish company.  

I believe that through my experience through dealing with many different types of people allows me to excel within this field.  In essence business is not all that different no matter where you work; you are subject to two things, the almighty dollar and the satisfaction of the shareholder.  

Q6 As you have knowledge of a number of European languages do you think that Chinese is a hard language to learn?  

Chinese is completely different from any language I have ever learned.  Although I have only been learning the language since last August I have made progress within that time, even if I was here for 10 years I would not be fluent, however I would certainly not embaress myself.  Chinese is a tonal language which means that one word could have over four different meanings depending on how it is pronounced.  Languages such as French are more concentrated on learning tenses of a verb, although your tone or accent is important you can still be understood speaking French whilst speaking in a Dublin, Kerry or Offaly accent.  Chinese is completely different as tenses do not play a part however the pitch of your voice does.  Still I believe that learning a language is beneficial to the career of anyone within any business.  It also helps while traveling the countryside on holiday, the Chinese are much more accepting of you should you be able to converse with them in their native tongue and the same can be said of the Irish. 

Q7 As you are working with computer systems and documentation do you find this a demanding job? 

I work with computer systems every day, mainly through designing and programming.  At the moment I am working with General Electric (GE).  GE are the 5th largest company in the world and they supply most of Americas energy needs, from nuclear power to wind turbines.  It is a very demanding job which leads to a very hectic work schedule as well as a lot of travel opportunities.  Right now I am based in Atlanta, Georgia however I shall be returning to Dalian later this month. 

Computer programming is something that I have been interested in since a very early age and something with which I take great satisfaction from every day.  This is one of the professions where there is constantly new and emerging technology which has to be embraced and learned, the programming profession also allows me to tackle complex real-life problems and come up with new and innovative ways to deal with these problems.  Although I create a lot of software solutions for the company I work for I also give back to the Software community by being involved, through creation and participation, of Open Source projects throughout the internet which are free for all to use.  

Q8 Are there many Irish people where you are and are there any opportunity to play Gaelic football or hurling?  

At the moment there are 13 Irish people in Dalian.  Six of those are teaching English as a foreign language, two of those are working with my companies biggest rival in Dalian (Hi-soft) and one of those is a colleague of mine working in DHC.  There are also a number of Irish business men that have set up some very successful Irish bars in Dalian which are doing fantastic business.  

When I first came out to Dalian I brought a few hurley sticks with me with the intention of setting up a hurling team out here.  However I soon learned that despite my best intentions and hectic work schedule that there is no hurling league to play in here, however each year there is a tournament held for Gaelic football in China.  This is known as the Asian Gaelic Games and just goes to prove that the Irish culture has extended its reach throughout the globe.  I hope to be involved in this years Gaelic games which will be taking place in Shanghai this coming September.  Teams from all over Asia come to participate, from far reaching places as Taiwan, Dubai, Japan, Singapore, Beijing and hopefully this year Dalian.  

Q9 Do they have publicised sports leagues in China?  

There are many sports leagues in operation in China.  China has a huge fascination with Basketball and Soccer.  They follow both the NBA as well as the premiership intensely.  All of the information regarding these leagues is readily available on the Internet.  As China shall be hosting the 2008 Olympic Games in Beijing the country has gone Olympic crazy.  The stadiums have already been completed well ahead of schedule in stark contrast to the Greek effort; there is a national hunt for translators throughout the country to aid in the Olympic effort.  There is already a wide marketing campaign to get the Chinese interested in many of the sports that shall be on display in the games.  China has always had a very strong Olympic team and I believe that this games shall prove to be no exception.   

Fin.

A penguin,a panda & an animated paperclip go into a bar

Fortune magazine has an interesting article stressing the Chinese market's importance to Microsoft's long term strategy, and touching on Linux's involvement in the Chinese market.  

In the early days of Microsoft rampant piracy helped establish it as the de facto standard in PCs despite good alternatives. History may be unfolding again here, with the exception that having the Chinese government as an ally has huge additional benefits. Or perhaps Gates has met his match with the Chinese government.  

In another boost for Microsoft, the government last year required local PC manufacturers to load legal software on their computers. Lenovo, the market leader, had been shipping as few as 10% of its PCs that way, and even US PC makers in China were selling many machines "naked." Another mandate requires gradual legalization of the millions of computers in state-owned enterprises. In all, Gates says, the number of new machines shipped with legal software nationwide has risen from about 20% to more than 40% in the past 18 months.

I bought a new Presario laptop in Dalian last year, the initial machine was void of an operating system.  The nice clerk unwrapped the new machine and straight away brought out a nice new shiny CD of Microsofts XP OS.  Needless to say I never let the young fellah put the CD into the drive.  This is one user in China which China has not conquered. Should I have gotten the computer at a cheaper price without the OS installed?  Anyhow I left him with the words Debian Linux ringing in his ear.  

So has Microsoft truly conquered China?  I don't believe so.  Firstly should we define victory by having every single machine running a version of Windows?  Is it based on sales in which case Linux doesnt stand a chance.  Maybe defined by the number of home or business users?  By the way, even pirated software sellers do not stock linux in their cardboard boxes, why sell something which be obtained completely free.  Mission criticle systems in any business will continue to run on some nix based system, if they don't then their IT manager should be fired!  

The article I am referring to makes notes to how the current regime in China is very close to Mr Gates, who is actually treated like a rock-star in Beijing.  Hell, Hu Jintao even had dinner in Mr Gates humble abode, Microsoft must be great.  I should remind people that Microsoft made no secret of their dealings with the US government regarding encryption and purpose built-in back doors to their software.  Outrage from the Chinese people ensued which led to a brief boycott of the system for a time.  As a result of all of this subterfuge Microsoft has allowed China to have a look at the fundamental source code for its Windows operating system and to substitute certain portions with their own software - something Microsoft had never allowed in the past. Now when China uses Windows in President Hu's office, or for that matter in its missile systems, it can install its own cryptography.  China was very keen "to control our own destiny", while the People's Liberation Army Daily noted that "without information security, there is no national security in politics, economics, and military affairs."

Efforts such as this probably play a large part in Fortunes perception that Microsoft has conquered China.  When asked about why the people of the Middle Kingdom liked Linux Gates appeared upset and replied:

"What the heck are you talking about? I think what you're talking about is that you're assuming that the American does a reliable job in reporting on China. I doubt you read the government's press release... what the press in [the US] wrote and what the facts are is 100 per cent different."

Of course it is well known that the Chinese governments press releases are always 100% correct and valid.  Anyhow, I digress.  On another note I find it hard to imagine that no-one seems to be paying attention to Red-Flag Linux.  During the latest launch for Red-Flag  Linux the Ministry said it would give its full support to the development of Red Flag Linux, as well as all the other Linux systems.

Red Flag Linux has gained around a quarter of the server market since it was launched at the end of last year and the Chinese government also reported that software sales in the first half of this year grew to 9.1 billion yuan ($1.1 billion), with the domestic proportion being 30 per cent.  There is additional support in that Jiang Mianheng, the son of Chinese president Jiang Zemin, plays a prominent role in the management of Red Flag.  It's been a while since anything worthwhile was released by this company.  The last release was in 2005, with 5.0.  Time for some Chinese to get patriotic and do their duty to update this Microsoft killing Chinese beheamoth.

So in conclusion, Microsoft has a "a great market share in China but not a lot of revenue". Microsoft software is just too damm expensive for the market. Personally I think 5RMB for a DVD of Microsofts complete software catalog is just simply way too much.  China's operating system heart is still up for grabs, Canonical, Red-hat, Solaris and many more different nix enterprise providers have set up shop in China.  I don't think this press release will cause them to lose much sleep. 

For Microsoft, there is a dangerous possible downside to this: the Chinese government still may decide to avoid any anti-piracy enforcement problems by declaring Linux to be the official operating system for the government in the future. If the world's biggest potential market went Linux, it is easy to envisage a consequent domino effect that would not just strengthen Linux in the rest of Asia, but have a profound effect in the western world as well.  For a company that has spent billions investing in the Chinese market perhaps they should be the ones experiencing the sleepless nights.

Disclaimer: I live, breath and dream Linux when not dreaming of beautiful girls...(I think it's impossible to breath and live beautiful girls, one can but try though).

What's changing in Beijing?

Quite a few things have changed in Beijing lately.  Gone are the foreigners, so many of the ex-pats who lived there have left over the past number of months due to new regulations with visas.  No longer can one person claim to be a tourist for 6 consecutive years within the Middle Kingdom, you know who you are.  Visa's are now incredibly difficult to come by, no longer can you call someone up, hand over your passport and a wad of cash, wait a day or so, get the visa back and then repeat year after year.  I never engaged in such activities...

DHL recently issued a memo on many other changes, which I picked up via the China Law Blog.  I found the following quite interesting:

• 20 enterprises around Beijing notorious for heavy pollution are requested for a 30 percent reduction in emissions.
• Enterprises which can not meet emission standards are requested to shut down temporarily.
• Work at all construction sites around Beijing, including cement and concrete mixing will have to stop on or before July 20.

I can see a huge amount of work being shifted inland temporarily as a result of this.  I'm going to be very interested if many of these regulations will be still in place when the Paralympics commence from 6th - 17th September 2008.  By the way, for those not in the know, the above picture is one of the FUWA's. Trust me, come the Olympics in two months we shall be brainwashed by the little fellahs...

China goes green, well, attempts it

"Just outside Shanghai, there is an island about the size of Manhattan. China is going to build its first ever 'green city', complete with no gasoline/diesel powered vehicles, 100% renewable energy, green roofs, and recycling everything. The city is called Dongtan and it should house about 5,000 people by the end of 2010, with estimates of 500,000 by 2050. The goal is to build a liveable city that is energy efficient, non-polluting, and protects the wildlife in the area." 

It should be known, 5000 people is considered a village in China, 5 million is considered a third tier city.  It's impact will be the equivilant to a drop in the ocean of pollution that is emenating from that side of the world.  These types of projects should not be confined just to China, but to the consumers of the products that China is pumping out tonnes of pollution in order to make.  People keep complaining about China's pollution, in reality the blame should be attributed to the people who want goods at a low cheap price and who are willing to damage the environment to achieve them.

I do applaud their efforts, I just wish that they could make more of an effort on a larger scale to make this project meaningful.  People always tell me that China is a great country, their breath is taken away when they discuss the various projects underway in China.  Perhaps they should be setting a high bar for the rest of the world to follow for once instead of just playing it safe and doing what is expected.

It's just a difference of opinion...

As so often happens in the world of software, someone aquires a version of Dreamweaver and instantly think that the website that they have spend hours working on is now the bees knees.  Everyone has gotten this feeling at one time or other, I certainly have (blinking lights and ms clip art was all the rage back in the 90's).

A guy I knew during my my time in Dalian, China, got back in contact today proclaiming that he now has an outsourcing team asembled working as soldiers of fortune. Their mission, to crack open the mythical giant of the US & EU software industry and reap the rewards.  Anyhow, we get to chatting about the venture of his and his plans for world-wide domination, he then shows me his website.

My eyes are still bleeding, it looks terrible, it is terrible, small children would run away from this colourful behemoth, grown adults would roll into the fetal position and cry out for their mother.  Let's just say it was bad.  So anyhow I proceed to give him the benefit of the doubt, I remember saying that blue backgrounds full of ships and bright yellow links have no place in an outsourcing website, that the 90's want their webpage back, that messages to their customers should never contain the phrase "Just do it ,man!!!" and above all that practice of harvesting links pointing to the 90% of the worlds spam resources is just one very bad idea.  

To top it all off, during my browsing of this site (I was wearing protective glasses at the time), I was infected with a number of nasty trojans and viruses.  My friend has become a spam king.  He was wondering why he had no US & EU clients, so I gave it to him straight.  Every company, usually gets to give their first impression via their website, getting infected with anything is always a negative in their view.  These days so many mediums of information are are all inspected before a deal is done to ensure that the opposite party is legit.  My first google search for my friends page yielded results of Viagra, Erectile Disfunction and JS_DLOADER.JS, it's a very weird combination.  

One thing I always noticed was a huge divide between website design in the western world and design in China.  It's not a bad thing, it's a matter of culture.  I always equated it with walking down the main streets of the respective cities, in the middle kingdom you are faced with glaring neon lights proclaiming KTV bars, electronics and noodles, Ireland, thankfully, is a bit more quaint in that regard.  So when I see websites in China with all the bells and whistles I don't particularly pay much notice but do spend a lot of time trying to see past the junk for the nuggets of gold that are off to some side.  In the western world, things are much more minimalistic, each page focuses on a specific are, one which automatically draws the attention to the users point of view.  At the end of the day, it is chalk and cheese, I would have great difficulty designing any Chinese site and vice versa.  

I do hope that he takes some of the advice I gave him, but I doubt he will.  I'm a minimalist type of guy, I like clean lines, some curves and good content.  Flash, FLEX, Silverlight, well those are things I am not into, sure they have their uses, can look very eye-catching but mostly they are just used for evil purposes.  I know what I like and can definitely tell you what I hate.  Bells and whistles = FAIL.  Spam url's = EPIC FAIL....