Climate China

Todd Stern ( quoted by Bloomberg):

“I don’t think that there’s any question that China and the other major economies have to be in the game,” Stern said today on a conference call with reporters. “They’re doing a lot already, but they’re going to need to do more actions and commit to them and be able to quantify them.”

There seems to be little argument that China needs to play a role in controlling the emission of greenhouse gases going forward.  The public pronouncements of China’s leadership would certainly indicate that they take the issue of climate change seriously, and only a cave-dweller would not know that China has taken a number of actions that have (or, will have, if all goes well) the effect of reducing the growth of its carbon emissions off business as usual scenarios.  If you are a troglodyte, the Center for American Progress has prepared a handy primer on Climate Progress in China  that you should read.

The US, of course, has awoken from its slumber and significant climate change legislation (ACES) is working its way through the House.  The legislation could be stronger, particularly in terms of 2020 reduction targets, but, in Speaker Pelosi’s words, it represents a “sea change” in the US position on climate change.

Does the final passage of ACES require commitments from China ?  No .  The US has accepted the responsibility to lead on the climate change front and it should continue to lead on this issue.  ACES has enough provisions to protect US business from competition from foreign companies that may be operating in a less carbon constrained environment. 

It should be noted that not everyone shares this view and, especially in the Senate, there may be factions that assert that ACES (or whatever bill the Senate is considering) should not come into force unless there are significant commitments by China.  I think that these arguments will primarily be made by those who would oppose any carbon reduction legislation, and thus are simply smokescreens designed to kill the bill.  For those genuinely concerned about this issue, additional sticks can be added to the bill which can be brought down on countries which fail to undertake their fair share of responsibility on the carbon front.

The US needs to pass and implement ACES (or something stronger) regardless of what China does.  This will help get its domestic house in order, and many of the provisions of the bill make sense even if the only issues were energy independence, conventional pollutant reduction, and economic stimulus. 

No actions the US can feasibly take alone, however, even if the 2020 reduction levels were 5 times greater than ACES currently provides, will be sufficient to avoid catastrophic climate change if the other significant emitters are not on board with their own commitments.  This brings us to the next question.

Does US agreement to a deal at Copenhagen require commitments from China ?  Here I think the answer is yes .  The US has now committed to leadership on the climate change front.  The effective employment of that leadership requires crafting a deal that works for the planet.  A deal without commitments from China won’t work (for reasons I will address in a later post, but are really self-evident).  Refusal to participate in a deal in which China does not meaningfully participate gives the US the freedom to continue to ratchet up the pressure (and yes, as a last resort, I think carbon import tariffs are an option) to obtain acceptable commitments from China. I wouldn’t rule out the possibility that increased cooperation and collaboration between the US and China, as contemplated by several pending initiaitves, may be able to ultimately convince China agree to meaningful and verifiable commitments.  If this carrot works, use it; if it fails brandish the stick.    

Should the US repeal ACES if China doesn’t sign up at Copenhagen?  Of course not.  As I mentioned earlier, ACES is a sound piece of legislation even if climate change were not an issue.  Moreover, it provides mechanisms to cushion US businesses from “unfair” advantages competitors operating in less stringent carbon environments may have, and provides sticks to prod other countries who do not commit to meaningful carbon emission reduction efforts. 

If there were no deal at Copenhagen, but the US continues with ACES and China continues with its currently announced efforts (and presumably it will since most of the actions touted by China were designed to achieve other goals and only incidentally reduce the growth of carbon emissions), there will not be any significant harm in the short term.  Long-term, however, China needs to commit to more efforts and the success of its efforts needs to be “measurable, reportable, and verifiable.”  If these aren’t part of a Copenhagen package, I don’t see what is to be gained from a carbon reduction prespective from US participation.  

Thus, I think Todd Stern’s approach is right on track, and he should have the leeway to walk away from the table if acceptable commitments from China (what these need to be and why they are important will be the subject of a subsequent post) are not forthcoming.

Some reporters are likening this position to the one advanced by the Bush administration.  That is complete nonsense.  Bush had nothing similar to ACES and no (domestically or internationally) enforceable commitments to reduce carbon emissions.  That position will be dramatically reversed with the passage of ACES.  A US commitment to live within the strictures of ACES with or without a deal at Copenhagen constitutes a complete 180 in terms of US policy.  It use to be we won’t act if you don’t act (a “suicide pact”); now it’s we are acting, come join us.

Congressman Ed Markey, who co-sponsored the draft bill and chairs the Select Committee on Energy Independence and Global Warming said he was "encouraged because of movement that was being made in a significant way in China on energy intensity, energy efficiency, fuel economy standards."

Dalian China

Aston Future English School, Dalian, China is recruiting teachers for a September 2009 start.

Future English School was first established in 1996, with one school in Dalian. It now has 7 branches around Dalian and its outskirts, with 40 Foreign teachers and more than 5000 students. Potential teachers will have the opportunity to teach both children and adults on a regular basis.

Expat China

Oral English teacher are needed in China

Firstly, thanks for your close attention and support!
The Native English Speaker Recruit Project (China District) is run by the International Education Volunteer Organization (China). It is authorized by the Chinese Education System to recruit foreign English teachers.
Our Aim:
Providing high quality oral English teachers for schools (especially for primary and secondary schools) to improve Chinese students� English communication level.

Our Requirements:
You are enthusiastic and well behaved, and you can speak English clearly and fluently, furthermore, you should be able to control a 60-student class.

Teaching Place:
Your teaching place can be choose by yourself, from remote villages to bustling urban centres, including Hebei, Inner Mongolia, Henan, Shandong, Shanxi, Gansu, Ningxia, Jilin, Heilongjiang, Xinjiang, Yunnan, Guizhou, etc.

Your Benefits:
Three months� contract, renewable if you wish, or you can choose to teach in another area of China. It is an easy, enjoyable and rewarding work, meanwhile, it is also a good opportunity for you to travel in and explore China.

Contact Us:
Tel: +86 10 67527894
Fax: +86 10 67576849
Mobile: +8613693677612
MSN: Janehan0402@live.cn
SKYPE: janehan0402
Contact Person: Janehan

Last year I wrote a post about foreign entrepreneurs in Shanghai that included a Big Question with a link:  Who gets rich in China? The page attracted a ridiculous amount of search engine hits considering its dumb content, which proves that it was indeed a hot question. Time passed and I never got around to writing more, but my intention was just to echo the phrase I so often hear from disgruntled expats:

“Who gets rich in China? The Chinese!”

I am afraid I don’t have a better answer now than I had then, but recently I’ve been talking business with some entrepreneurial friends, and one problem has come up so many times that I think it is worth a post. And I hope this is useful for foreign start-ups in China to avoid making a bad decision from day zero and ending up, a few years down the line, mumbling the bitter phrase. The problem I refer to is the market dilemma, otherwise called the expat trap.

The Expat Trap

The idea is simple. In China there are two completely different markets: the massive Chinese market and the tiny market (but strong in per capita spending power) of the foreigners stationed here. If you plan to sell something in China, you need to choose one, and usually there is only one good choice. Of course, most large companies are after the Chinese markets, and the question expats/locals never arises. But for small entrepreneurs planning to start a venture in China, it is an essential decision, and all too often they take the easy road.

The expats are rich, they are accessible, they speak the same language and they have lots of time to spend reading your website or speaking about your product. Who wants to dive into the complicated world of the Chinese, where competition is cut-throat and many consumers have the wrong tastes? For many first-time China entrepreneurs, expat is the obvious choice, and so they move on with their idea. And sometimes they make a good job of it and they build up a nice little company that becomes popular in the expat community. And then, they are in the trap.

Now, I don’t pretend to have a solution for everyone, and surely not all business ideas area applicable to the Chinese market. But the point is many startups don’t give enough consideration to the market question. Even businesses that were intrinsically meant for foreigners can find ways to appeal the Chinese public. Look, for example, at the popular Chinese teaching company ChinesePod, which is now looking to turn around its business with the new website: EnglishPod. Unfortunately, this change is often impossible for a company unless it has been looking at the Chinese consumer from the beginning.

The barriers are enormous to switch markets: the product positioning, the culture of the company, the pricing strategy, all things you can’t change without upsetting your existing customers. Language is also a big problem, especially in the case of internet companies with active content, which find translating a whole website into Chinese is an impossible task.  Finally, the company has not been learning about the Chinese all this time, and chances are somebody else has instead. By the time a successful start-up figures out it should be looking into the Chinese markets, there are already a bunch of Chinese copycats that have taken its place.

In most of the cases, starting a company focused on expats is just a bad decision. Some might argue: there are enough expats in China to run a successful business, and there is nothing wrong in staying small. Right, they might be the kind of pretzel-selling Marge Simpson who is contented with little, but normally this argument just hides frustration. If you came all the way to China to start a business it is because you had big ideas in mind, and the only big thing here that you don’t have in Europe is the Chinese market.

Put it this way: you have moved across continents to have access to a market of 500,000* people at most, roughly the population of Luxembourg, and probably with a lower average income. Besides, these Luxembourgers are weird clients. They keep moving out all the time and a large part of them is replaced every year, which has a strong impact in their loyalty. Worse still, although their numbers are growing, the trends in expatriation policies indicate that their average income will be going down , as massive expat packages disappear from the scene and more locals are able to do the jobs expats used to do.

And the answer to the Question

Of course, the expat trap is only applicable to companies selling in China. Some business models are doing just the opposite, selling China to the World. Often they sell information, and their markets are far away, which makes them resistant to Chinese traps. Another possible exception might include businesses that manage to franchise their model to other expat cities around the World, or even run it back home. This is possible in theory, especially for internet companies, but I don’t know many start-ups around who have succeeded.

On the other hand, I know many companies in China that have seen the expat market work as a sweet bait, and then found themselves caught in a dead end. I was going to give some examples here, but I don’t like to hurt the image of companies that I know and admire in other ways. Instead, I can give a couple of examples of foreign entrepreneurs, like the ones behind Tudou, Neocha or DaD, who worked with Chinese partners and got their markets right from the outset.

So, in conclusion, if you are an entrepreneur and you plan to sell in China, beware of the dangers of the expat trap. And for the curious who scrolled down this way, this is and has always been the correct answer to the question above:

Who gets rich in China? Those who find their way to the Chinese market.

NOTES

* I am, of course, only considering Western expats. The large Korean and Japanese communities tend to have their own companies here, and are usually not a good customer base for Western companies. Other communities, like Russian workers, are also difficult for Westerners. Remind me to do a post about the number of foreigners in China.