Demographic trends will undermine China’s main competitive advantage:

No country is aging faster than the People’s Republic, which is on track to become the first nation in the world to get old before it gets rich. Because of the Communist Party’s notorious one-child-per-family policy, the average number of children born to a Chinese woman has dropped from 5.8 in the 1970s to 1.8 today — below the rate of 2.1 that would keep the population stable. Meanwhile, life expectancy has shot up, from just 35 in 1949 to more than 73 today. Economists worry that as the working-age population shrinks, labor costs will rise, significantly eroding one of China’s key competitive advantages.

China’s economy is going to be big by the virtue of size of its population, but living standards are low:

One important nuance we keep forgetting is the sheer size of China’s population: about 1.3 billion, more than four times that of the United States. China should have a big economy. But on a per capita basis, the country isn’t a dragon; it’s a medium-size lizard, sitting in 109th place on the International Monetary Fund’s World Economic Outlook Database, squarely between Swaziland and Morocco.

Environmental issues are out of hand:

By 2030, the nation will face a water shortage equal to the amount it consumes today; factories in the northwest have already been forced out of business because there just isn’t any water. Even Chinese government economists estimate that environmental troubles shave 10 percent off the country’s gross domestic product each year.

The environment is not innovation-friendly:

The place remains an authoritarian state run by a party that limits the free flow of information, stifles ingenuity and doesn’t understand how to self-correct. Blockbusters don’t grow out of the barrel of a gun. Neither do superpowers in the age of globalization.

These rather serious challenges should give everyone a pause before extrapolating China’s past growth to the infinite future.

One line summary (I’m in a hurry:): Chinese market is great, but there are few real entrepreneurs. And there is no effective legal protection for investors, so you have to count on the culture not to get screwed by Chinese entrepreneurs. But unfortunately the culture makes it ok to screw foreign investors.

BenQ’s mobile phone business – the former Siemens division BenQ took over less than a year ago for ?250m – is facing imminent collapse.

A spokesman for BenQ Mobile GmbH says the company will file for bankruptcy in the next few days as BenQ’s board has decided to discontinue funding the German unit.

Did BenQ make a false step in the right direction, or the direction itself was wrong?

To John Hagel, the final outcome gives more support to the theory that the companies are facing the great unbundling to join one of the three groups:

I have anticipated that all companies over time will unbundle into three much more focused business types ? infrastructure management businesses, product innovation and commercialization businesses and customer relationship businesses.

When I think of it, I would expect a successful Chinese outsourcer to dream about going upstream and having its own R&D and brand and all this stuff, and as a result higher value added, read: fat margins. This seems intuitive and expected by everyone but maybe wrong:

Despite enormous success in pioneering innovative business models and business practices, many entrepreneurial Chinese companies still have a sense of inferiority and want to look like larger Western companies with their own manufacturing, R&D and sales and marketing operations. The irony is that, just as many Western companies are unbundling (in part offshoring and outsourcing to more focused Chinese companies), many Chinese executives are tempted to build more tightly bundled operations that mimic the model many Western companies are abandoning.

I’m interested in the future of Chinese companies. Even though I’m skeptical about unbundling predictions, Hagel’s hypothesis provides a useful tool for exploring the topic.

Above is one of my favorite pictures, of two Kunming kids in the university area. Below some others that I like.

In front of the temple in Hong Kong with Shirley.

Beverage peddler on the Moon Hill in Guanxi.

River in Yangshuo.

Bird in the Kunming temple.

Kids in Kunming.

Sari, enlightment in the Bamboo Temple.

Kunming temple.

Trekking the Tiger’s leaping gorge.

Eating snails in Lijiang.

Xi’an, terra cotta army facing a tourist army.

View on Tiananmen square in Beijing, the last stop before flying home.

See more in the gallery.

There were many interesting things to be observed, the ones that come to mind when you ponder why blogging is taking so much of your time. Like how long does it take to write a post for other bloggers, how much they edit and rewrite, how fast they publish.

So it’s not just me after all. It does take long.

The blog was Spices, Silk & Tea, writing about Tiger’s Leaping Gorge (everyone was on the same route in China). It’s in French.

Spoiler warning: be sure to read the initial story first.

I walk home in the evening on the same day, passing again the road near Tiananmen square. When I stop at the lights I meet two Chinese girls who speak English. Funny that they introduce themselves with the English names like “Jessica”, which they think is “cool”. What you were doing all day? Maybe you want to go the old town south of the square? Well I’ve been to this tea ceremony… Oh really? Where was it? We want to go too! But it was expensive, you know – doesn’t matter, they want to go. And they hurry in the direction of the shopping street.

Strange, I think, the city seems to be obsessed with tea ceremonies. And the girls said they were from Tsindao. Capital of beer. Ping and the other also were from Tsindao. But it’s evening and all this thoughts run in the background, while I focus mostly on getting finally to rest.

On Sunday I wait at the airport. I still have some yuans left and decide to spend them on Internet instead of finding exchange office. I open the mail and find message from Ping:

Hello Bartlomiej

Do you remember me?This is Ping.We met at a park of beijing.And we went the tea house together.

I must say sorry to you.Because i cheated you. I knew the tea house.Taking you to have tea is my job.

I know you must be very ungry when you hear it.You can hate me.It is my fault.I need money.I think that money for you is not much.If oneday i go out of China.I would like to return your money if we meet one day.

(…)

Some more personal petition follows, then: she wants to make friends nevertheless.

After the Internet I was planning to buy a book for a long flight, but the email somehow made up for any fiction I could find. “Blade within blade within blade!” For a moment I had the feeling as if I lived in Ludlum’s world, populated with secret agents and saturated with deception. I recalled the details of the event, which suddenly all seemed to fit well together. There was this dumb feeling.

All the information was in place, but the invisible assumption that the people cannot lie on this personal level, assumption which works in Poland but not in China, made it impossible to see through the plot.

I just couldn’t figure if the email is an exception or still inside the scheme. (Your opinion is always welcome below)

Then again, Ping was right that money was not much for the lesson learned. This was tea ceremony and couple dozen bucks maybe. Well maybe more if you add that art students were probably were also scam (but not really, I knew what I paid for, even if I overpaid for the particular object and they lied the whole story). But imagine you are to do business in China for millions. What number of nasty tactics you may be about to face?

I wondered if anyone else had similar experience, and it was easy to check that I was hardly alone, e.g. here or here or here (similar to the level of detail!).

Amusing that this scam looks like the most valuable and real-world experience of China so far.

In the morning I had no money so I changed the first 100$. I wanted to go to the Forbidden city. I was actually going there when I reminded myself that I’m still a bit sick and I needed more coca cola to cleanse the stomach. But in this annoying town you cannot buy coca cola or even water anywhere near the Mao’s corpse storage.

While I was walking looking for a drink and more and more pissed with the city, I met two very nice Chinese girls. Only one, Ping, spoke usable English, though. She said that they were going to the tea ceremony so I joined.

The tea ceremony was ok and I learned couple of new things, even though there seems to be a discrepancy of opinions as to what tea exactly should be made using a clay tea pot. Here they use it only for green tea. In Yunnan they told me that the pot is good for anything but green tea, which should be prepared in porcelain cup instead.

After the ceremony I bought the tea pot. 300Y together with a porcelain one, after some bargaining. The girls bought some tea without asking for the price.

In the end we get the bill – 2000Y! Tea ceremony was no exactly for free, it seems. And the tea costed 1000Y.

Suprisingly, the girls are little moved by spending 1000Y on the tea. Ping buys from me another 100$ note just to show off with her friends (she’s never seen dollars before). We found bookstore incidentally and I buy lots of textbooks and CDs for learning Chinese. Fortunately, the store accepts credit cards. Then suddenly it gets late and I miss Forbidden City, again.

But I come back to the square in the evening to walk around and make some pictures. Near the big gate with Mao on top of it I am approached by two girls who are art students and have their exhibition next doors. I go with them, after declaring that I’m not going to buy anything.

Inside I buy the lacquer painting of old Chinese master. The master wants 1000Y in the beginning, but it ends on 600.

My new piece of art is very big and I don’t know how I will smuggle it to the plane on Sunday.

Update: read unexpected follow-up to this story.

The three bananas were the only things I ate in like two days, so at least the problem is isolated, to put it this way.

I chill out in the hostel and drink my puer tea. I bought quite a couple of different teas and puer I like particularly. I hear that it’s good for this and that so maybe it’s also good for stomach, or at least I hope it doesn’t kill me now.

After the plane from Kunming, which I appreciated a lot, I thought my opinion of the local logistics will take a hit after this 12h journey. But I was positively disappointed.

People were not smoking nor spitting on the floor. There was no problem with luggage, even though initially I took a seat in the upper deck while my place was in the lower one, so I was the last one to have a seat.

But yes the seats make sleeping almost impossible, even if Chinese manage somehow. But I survived and it was the last long distance trip I will have in China this time.

When I was entering this obscure Chinese restaurant the staff displayed signs of shock to see the foreigner in their premises. But I walked decisevely because it was already 6pm and I hadn’t eaten since previous day and had been walking in this Xi’an museum for a whole day. So I just entered and sat at the table despite the look on their faces.

The menu was only in Chinese. I did not understand much so I asked them for a chicken with rice, the two being some of the few things I can convey easily in Chinese, maybe with some sketching on napkin involved. But the staff was appaled even more by this choice and started to discourage me from it, again in Chinese. Then one of the customers also joined this weird conversation, criticized the chicked too and suggested something else, which I accepted.

Soon on my table appeared a scary number of dishes, a boiling pot with some kind of soup and a frozen pack of strips of meat, like one of the frozen things from the supermarket. I had no idea what to do with all of it but at that moment there were five restaurant people standing around my table plus this helpful guest and they all started to show me how to mix the things in one pot, then put frozen meat to the soup but not let it slip into the soup, then from the soup to the mixed stuff, then from there to the rice and then finally eat it.

In the end you drink also the soup.

When I was already quite confident with my dish, it turned out that they did not cancel the chicken thing and it, too, landed on my table. And they were right, it was no eatable. Not because it was spicy, but because the chicken was in form of pieces – but pieces cut through bones and everything and then roasted. Disgusting altogether. Try to eat the thing with chopsticks. I gave up after two tries.

I finished the dish, more or less – they probably thought that I wasted most of it – and asked for the bill. The chicked appeared to have been considered a cultural misunderstanding and was not billed. I paid 20 yuan and had a goodbye exchange with everyone inside before leaving.