Blog InAsia

Will the Chinese economy be a bright spot in the global economy?

Watching articles and blogs around the world leaves one to wonder if the emerging giant will be a port in the storm or just another ship lost at sea with all the other ships. I’m no economist but the economic data doesn’t look favorable to me.

Economic Data-

There is a data packed article that talks through several indicators at AsiaInt.com stating that “The slow down hits China” . It walks through the PMI data for China’s manufacturing sector which has fallen below 50% and continued to drop in October indicating a “contraction of activity”. More troubling is the fact that the article then goes on to indicate that the slow down in the manufacturing sector, indicating slowed exports, is coupled with slowing domestic demand as the Chinese Consumer Confidence Index (CCI) is dropping as well, according to the National Bureau of Statistics. The article continues with news from the Canton Fair, Hong Kong SAR, Shanghai, China Petroleum and Chemical Industry Association (CPCIA), Ministry of Finance (on SEOs) and Bao Steel. All describing a marked slow down in there respective areas and ends with these words of encouragement:

“During the week, China Chengxin International Credit Rating Co. (a joint venture in which Moody’s Corporation is a partner) said that it expects that China’s economic growth this year will slow to 9.4% for 2008 as a whole. The latest developments suggest that even this forecast may be over-optimistic.”

It’s been a tough week folks but don’t worry just when it seems all is lost the government comes out with a stimulus package that sent the world markets to fluttering.

Stimulus Package

When the Chinese government goes, apparently they go big or so it would seem if you base your judgement on the size of the stimulus package that Beijing announce earlier this week. According to an article by the Associate Press, Investors Cheer China Stimulus Package, the $586 Billion will be spent on infrastructure projects, and lending for rural areas and small companies among other things. From what I have read in other articles a portion of the money will come from the central government but a larger part will come out of the banks and state owned companies that are flush with cash after the last decade of growth. The money is there. They just need to spend it on the the right things.

So will China be the growth engine that continues right on through the turmoil? It’s really hard to say from my perspective. I think the best chance of any place on the planet would be China ,however, I’ll leave the predictions to the analysts and economists. In the mean time, as it was before the economic meltdown, my advice to companies world wide is to invest in capturing China’s domestic market. It’s still growing and that is better then shrinking…even if it is growing slower than last month.

Broken Phone
It was a Friday night trip to hotpot that ended with my phone display not functioning. Not wanted to be out of touch, I suggested to my wife that we needed to get another phone on Saturday.
The Deal
She reminded me that we had received a call from our China Mobile Global VIP Customer Service Manager telling us about a special deal for Global VIP customers. The deal was that if you put a deposit down on select phone models and commit to a predetermined minimum amount you would spend over the next two years, you get your deposit back (i.e. get the phone for free). I am a fairly heavy user, or at least have been on and off so that deal was easily under what I would spend in two years of normal usage. Sounds like a good deal, right? We set out to get the new phone.
The Problems
We looked at the available models for the special offer with the help of a customer service person at the store, picked a model and after spending 30 minutes looking were told, “We don’t have the key for that display. It’s the weekend and that person is out.”
After my wife placed a phone call to the manager, magically the keys appeared and the display was unlocked. When we inquired as to if someone had delivered the keys or if they were there the entire time, the service person said, it wasn’t clear who had the keys before but they were in fact there. Chalk that one up to the usual lack of follow through exhibited by customer service personal in a large government backed monopoly. It’s the level of service I have grown to expect so, I let it go despite the wasted time and effort wrangling them to do their jobs.
After 45 minutes in the shop, I can finally see the box that my new phone is occupying. It’s right there on the counter and all I need to do is pay the deposit, and sign the agreement. Simple enough, right? Not really. When the service person asks for my phone number she looks at the account and says, you have participated in a promotion and are not eligible for this one because of the one you already have.
So, I ask, “OK. What promotion is that?”
The long response was basically, there was a deal that if you put 200 RMB on your account; China Mobile would give you 200 RMB free. Still failing to see the problem, I was at a loss as to:
1. Why would the China Mobile Global VIP Service Manger call to promote an offer it I wasn’t eligible?
2. Why, even if I had participated in the buy 200 get 200 free promotions, China Mobile would refuse to take my 3500 RMB deposit on a new phone and a guarantee of 10,000 RMB in business on the account over the next two years?
What followed was the longest completely irrational conversation that I have had in China. For the next hour we talked with store managers, Global VIP Customer Service Mangers and anyone else that would listen, while we sat in disbelief that for 200 RMB a business would pass on 10,000 RMB.
I offered to cancel the previous deal and forgo my 200 RMB worth of free service. That was not possible. I asked for a loner phone until they could sort out the problem. Again, not possible. They did offer that if I gave them 10,000 RMB I could have the phone but then again handing someone 10,000 versus committing to a service agreement for 10,000 over two years is a bit different. The only other solution offered was to get a new phone number, thereby creating two accounts that I would be responsible for. Committing to additional exposure to poor service somehow sounded a bit sadistic to me.
In the end
I realized that short of going to China Unicom and giving up my phone number that I have held for nearly 7 years there was no option because China Mobile is a government monopoly. So, I spent the afternoon playing their game of monopoly only to realize that there was zero incentive for them to offer customer service because in the end they are the only game in town.