EP 96 - Steve Simonson- The 1 Hour China (2017 Edition) Book Review
The One Hour China Book (2017 Edition) Book Review
On this episode, Steve introduces the Awesomers Book of the Week, The One Hour China Book (2017 edition) written by Von Jeffrey Towson and Jonathan Woetzel. This book contains interesting facts and inspiring stories about China and some hard working Chinese individuals. Here are some valuable lessons Awesomers can learn:
The key drivers of business in China.
Why China still remains the only surviving competitor amongst other emerging third world countries.
Understanding certain patterns of business in China.
So, listen to today’s episode and learn amazing insights about trends that shaped modern Chinese society and economy towards becoming a global force.
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You're listening to the Awesomers podcast. Everybody, Steve Simonson, and I've come back to you again with another episode of the Awesomers.com podcast series. And this is episode number 96. As it turns out, that's the 96. I'm looking at my screen. If you're listening out there, you can't see me looking, but you'll have to take my word for it.
So the tradition is very clear by this point. For anybody who's an avid listener, just go to Awesomers.com/96 and you'll find today's show notes and relevant details, maybe even a link to the book that I'm reviewing this week. So this is a book of the week review. And as I've said before, I'll probably say it again, we don't always get to a book every single week, every seven days a, although I do try to read books, uh, pretty much every week. We just don't have time to put together and produce an episode for you. And in this case, I haven't even done any kind of formal visual presentation, uh, because this book is again, a very easy read. It's called the One Hour China Book and this is the 2017 edition. But I call people's attention to what's happening with the global economy and the, you know, they call it a trade war, but I think it's more of a trade skirmish or a trade kerfuffle.
You guys can look that up. Those are ranking a ranking wise, far less serious than a trade war. A trade kerfuffle is when, you know, China wants something and the US wants something and they both just throw fits about it. Now it's having a real impact, right? There are many important as I know and very sophisticated, very large importers are having 10 percent tariffs, 20 percent tariffs, even 25 percent tariffs happening starting in January. And others with antidumping duties of 40, 50, 60, 70 percent one anti dumping a regimen I know about is 400 percent. So, um, again, the book one hour trying to book it gives some of the Meta reasons why China is the way it is. Now. I like to reflect just for a moment that I'm, uh, I'm pretty easy going when it comes to different societies and different rules like when in Rome do, as the Romans do, right?
So one in Beijing, do as Beijingins do, I'm not sure what Beijingins, if that's a real word or not, but the point is every country can have their own rules. Every country can try to negotiate for their own best interest. That's life. That's the way it should be. At this moment, the United State's position is that they're being unfairly treated and they're trying to reconcile those differences of opinion and they've just done that with the Nafta partners, Canada and Mexico, and they are doing it with European partners as well. And let's not forget that trade is essential for the world to go around. Everybody knows that. And you can't take the world's biggest economy. That's the biggest consumer of everything. Uh, and so maybe not everything, but most things were maybe chopsticks. China's gonna beat the United States in total number of chopsticks used or things like that, but of the biggest, highest value consumables and consumer type of items and even industrial type things, the US is still the place to be, so if you're not trading there, you're missing out on opportunity.
Now this far, it's been a tit for tat battle on the tariff. The US says, we're going to pass this group of terrorists. China matches it a us as we're doing another batch. China matches it. Well. They're the point now China doesn't buy enough to match the tariffs and again, these tariffs heard on both sides. There are people not buying soybeans and not buying certain things from the United States that they may otherwise have purchased. Apples are red cherries or things like that that the US has really good at exporting and China's trying desperately to replace some of those things just to punish the United States. Now the United States, I'm also enforcing some pain. There's plenty of people who are now saying, hey, should I be looking at other places? And I can tell you personally that I've started to look at India for some alternatives because if we could source of very high quality items from India, Malaysia, Vietnam, and Cambodia, wherever, another viable resources and that same high quality item could be received and become systemic and, and high quality and so on.
Well, we may have a 25 percent advantage compared to our competition as of January first 2019. That's significant. So I'm not the only one who's doing this. Um, and, and by the way, for larger industrial stuff, we've started moving that, um, or I would say high volume stuff. We've started moving to other countries proactively, well over a year ago knowing that this sort of thing was coming. So I talked a lot about tariffs, but I want to reinforce why I'm talking about the One Hour China Book. And this is going to be relatively short because a book, this book in particular should only take you one hour to read. It's a fairly thin book, but it goes through six Mega factors that make China what it is today, and it kind of helps explain some of the growth in the history. So one of the first mega trends that the book calls out is what they call urbanization, right?
And this happened also during the industrial revolution in the United States, in the Western world. People move to cities and industrialized those cities and urbanization and the housing built around those industrial cities started to create a whole new economy of its own. And that urbanization was the foundation of our, some of the Chinese growth has come from the next thing they go into the book is the manufacturing scale. China committed early and often to massive manufacturing capabilities. They did a lot of subsidies for the manufacturers. So manufacturers, for example, we'll get export credits, uh, and that, that mostly went away over the past 10 years. But those are likely to start coming back at to help offset tariffs and help lead Chinese factories win the business. Now, the WTO and the US and the plenty guys will, will kind of fight that. But I suspect the government, even if it's a in the shadows, will start saying, hey, we want to keep you in business.
So if you're losing a customer, we're going to give you a 10 percent export rebates to offset that 10 percent tariff or at least offset part of it. So don't be surprised by that. So the manufacturing scale is unprecedented when it comes to China. And, uh, that's, that's the main reason why China is still remains a viable competitor versus some of these other emerging third world countries like Vietnam or India or wherever. They don't have the infrastructure. They don't have the, the, uh, organized corruption that China has. And I say that a delicately, but let's not kid ourselves the way things work in China and all third world countries. By the way, this is not exclusive to the China is somebody getting paid to make something happen. And it doesn't happen in every case. And I think China has done a lot to try to iron out the wrinkles of graphs that are happening.
But they have a very organized system about it. They know which guys getting paid by this. You know, who's paying the governor, who's paying the minister, who's paying this guy, who's paying that guy, who's paying the guy to get the containers? It's all sorted out. Everybody knows who's getting paid and it's just part of the deal. And I remember sitting at a dinner, uh, some years ago and the governor of a particular province was coming in and I asked the guys at the table, I'm like, ah, it is a nice guy, toasted everybody and you know, showed to the foreign visitors. Um, but I noticed he's doing that to all the rooms. Uh, you know, what is the governor make you know, what, what's the salary? They're like, well, you know, he's probably making around 36,000 a US American dollars per year. But as, as manufacturers, that would be embarrassing if we let him, you know, trying to live on that paltry sum.
So you know, all the, all the manufacturers, all the businesses in this area, we make sure that the red envelopes are filled up and we make sure that, you know, he comes down okay. And they imply that you know, that that particular type of position would warrant a couple million dollars worth of collections from the local businesses and folks that are in the area. So my point is it happens there, even if they're trying to stamp it out, it's still more organized and more predictable than it is another countries, including India or Mexico or any of these other places. And I can tell you some horror stories about trying to get stuff imported into Mexico or the Philippines and being shaken down by customs officers in naked and aggressive and absolutely illegal ways, but there's nothing we could do about it. We'll talk more more about that. Maybe another episode. So, manufacturing scale is another big part of the equation. Wire from urbanization to manufacturing scale. Uh, they get into it. I'm going to talk about the, the other four but we're going to take a quick break right after this. I'm going to get right back to it.
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Okay, we're back again everybody and I'm talking about the One Hour China Book. This is going to be a simple read for you and this is especially important if you want to understand the six kind of mega trends that are impacting China. I've already covered two of those trends. One is urbanization and one is manufacturing scale, uh, but the other trends to keep an eye on are the rising Chinese consumer. So what does this mean? Obviously there's a lot of Chinese consumers, but the point is their income is rising and what this means to you is they become competitors to export a products. So I'll give you an example. Some years ago we were trying to hold this a factory to, you know, hey, we need this rigid quality, we need this, a low price and that's kind of the US formula.
We need low price because we have the great volume and we want high quality because we want no problems and the way Chinese manufacturers think as they, they're like, we want, you know, no problems. We want to give no warranties, no assistance when it comes to warranties, uh, you know, I call it a tail-light warranty. When you can't see the tail lights, you can forget it and they also want to get more money. And at one point the factory kind of looked at us as, as we were kind of negotiating. They're like, you know what a will pass, we don't need the business. And we're like, yeah, fair enough. We can go find other manufacturers. We were surprised, but why are you passing? And they're like our us or our. Yeah, our US export business is not the most profitable part of our business anymore.
It's selling to the domestic Chinese market. So they were able to sell and get money faster, more of the money. Right? So they still have a higher margin and a higher price and they get no warranties. And so that's a hard thing to compete with if you're trying to get them to export at low price, even if it's high volume, they're like, yeah, I can get paid more faster and have no problems by selling to Chinese consumers. So the rise of Chinese consumerism is a very, very important part of this mega trend that the call down in the book. Uh, the other thing is what they call out his money and lots of it, right? China has lots and lots of money because of all their, their import export surplus is particularly the United States. They have billions and billions of billions of dollars of excess kind of money that was produced from outside the country and brought in.
This means their market expands. The capital expansion that happens gives them access to tons of money. Now, no doubt there's things happening off the balance sheet, you know, I, I wouldn't doubt in the next couple of years if somebody says, Hey, China's got, you know, billions maybe trillions, uh, off the books and as a bunch of debt and is really not managed as well as it appears. But today it appears that they've managed it pretty well and they've sunk a bunch of it and infrastructure and to continue to maintain that scale. Remember that part of the vision of the current Chinese regime is to be made in China everywhere, on everything. And I want to be clear about that everywhere the United States is big, but the rest of the world is bigger and they're perfectly willing and have shown ample incentive or motivation to go anywhere in the world and make China the number one trading partner.
So they're very, very good at it. So money is the fourth of the mega trends. The other thing is the brain power behemoth as it's called in the book. China is producing students at a very, very high education level and, and pretty high motivation level as well at an unprecedented pace. They have absolutely extraordinary brain power and it's being deployed all across China insignificant ways. This is no longer a as it was, you know, 20, 30, 40 years ago. And the agricultural place that had no real agricultural production that had no, we had the United States, we've had agriculture for so many years, but we've had tractors and we've had, you know, big industrial production on these farms so they could produce massive amounts in China even today, but less so today, there's a lot of just farmers walking around with a water buffalo plowing fields and spraying the, you know, whatever they're spraying on there, uh, all by themselves as, as solo farmers.
That does not happen really in the United States anymore. So the shift from urbanization has also shifted to the brain power behemoth as it's called in the book. And I think that's an important point to remember that you know, within this book they talk about these six mega trends and your opportunity to understand these trends I think will give you better insights in how China operates. And it doesn't really matter how this current a tariff kerfuffle goes. If, if this trade or I suppose as a trade kerfuffle technically, if this continues to drag out for a long time, you're still gonna want to know about China. If it goes away in the short time, you definitely want to know about China to make sure that you're in the best position that you could be. So we're going to take another quick break then I'm gonna, wrap it up and tell you the final, a mega trend that you need to look out for in China. And this is a big one. We'll be right back after this.
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We're back again everybody. Steve Simonson, talking about the book, the One Hour China Book and it literally should only take you about an hour to read. It's a very fast read, but it talks about six important mega trends and if you trade with China, if you want to know about China or you just want to understand the political landscape between China and the rest of the world. This is a book that you should read. I've already covered five of these mega trends to cover them quickly. Urbanization, a manufacturing scale, rising Chinese consumers, money and lots of it. And then the brain power behemoth. That's point number five. All of these things are undoubtedly driving the core economic expansion in China and has a lot to do with China. China's position when it comes to expanding the military, expanding their reach across the globe with the, um, the belt in, what's it called?
The belt and road initiative. Essentially, you know, China's putting in transportation systems like they can now carry trains all the way to Germany within like five, six days from China instead of running big shipping containers that costs more and polluted and take longer and they just put it on a train and go. And this expansion of the belt and road system, I think they call it a will happen all over the United States and they're even looking at, you know, how can they do a rail, you know, some way, you know, over, you know, through Russia, through Alaska, you know, with tunnels or otherwise it's, they're really trying to break all barriers to make goods move. And I think that's good for the world, not just China by the way. So the last mega trend that I promised, number six is the Chinese Internet. Now this may be a simplification of the concept, right?
Everybody goes, yeah, well the Internet that it's huge. Whatever big, you know, not a shocking revelation, but I think what people don't really understand is the extent that the internet is used in China. We chat is ubiquitous on every device over there and people go, Oh, who cares, somebody is chatting in China, but we chat does way more than that. It, it manages the, you know, the DDs, it, you can actually, um, coordinate on we chat and reserve a table and have the food. When you arrive you just scan a barcode on the table, the food shows up, you don't talk to anybody, you don't pay for anything because it's all done through we chat and you disappear. It can do so many things. It's, it's like a mega app in itself. It does, you know, about 20 of the main functions that we use other apps to do.
So we chat ubiquitous and is really driving a lot of what's happening. And there are other sites. I'm Tao Bao and T-Mall and so forth that are driving consumerism. People are buying stuff on the Chinese internet like crazy. Um, and because I have more people in China, they have more mobile purchases. They have more total purchases. Although today the gross merchandise value is still below the US. They will pass us in the next couple of years. So all of these things kind of worked together. The urbanization, now they deliver anything to your house, and I do mean anything you want to. You can order a fridge and have it delivered cash on delivery in China through the Internet. They're the rising Chinese consumers. They have more discretionary income that's driving it. Obviously the, the local manufacturing scale helps. Now I will say that China being a face culture, they still like to have exports in from other countries, but no doubt they still are happy to have a Chinese made goods for the most part.
And there's a certain amount of nationalism and pride, especially during this trade turmoil. Uh, then of course there's the brain power. They're bringing talent a right to their own shores that are keeping it in house. And then finally the Internet is what puts that whole thing together. It's like the glue that sticks it together. Um, I really do think this book is a quick read. It's an important read and you know, you'll see some of the people on the, the, um, the back that are offering some of the, the endorsements or whatever, but you know, a Dick Gephardt was with the US House of Representatives, says a quick of fascinating book to give readers who know little or nothing about doing a business, China, everything they need to know and what everything they need to know or remember about how to succeed in business in China. One hour will with this book will make you an expert on business in China.
Now, sounds like a typical politician, uh, uh, going right for the hyperbole, I don't know that this is everything you need to know and I don't know, this will make you an expert, but it will make you a lot smarter and more armed to do business in China. And it only takes an hour. So I've, I've run out longer as I tend to do than I anticipated, but I hope you check it out. Again, this has been episode number 96 of the Awesomers.com podcast series, and a, Gosh, we sure hope you get out there and leave us a review and better yet subscribe and get some of your friends to subscribe. Uh, when we're climbing on the charts that makes us have a nice little warm, happy feeling. So get that done for us to, if you will, and, uh, we'll see you guys next time.
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Well, we've done it again, everybody. We have another episode of the podcast ready for the world. Thank you for joining us and we hope that you've enjoyed our program today. Now's a good time to take a moment to subscribe, like, and share this podcast. Heck, you could even leave a review if you wanted. Awesomers around, you will appreciate your help. It's only with your participation and sharing that we'll be able to achieve our goals. Our success is literally in your hands. Thank you again for joining us. We are at your service. Find out more about me, Steve Simonson, our guests, team, and all the other Awesomers involved at Awesomers.com. Thank you again.