The Grey Market for Foreign Products in China

Foreign baby formula 
is worth its weight 
in gold in China!

Daigou's are overseas Chinese who either work, travel, or study in a foreign country and sell items purchased abroad for resale in China.  They take advantage of price differences between the products sold in China and the same products sold in the rest of the world.  Recently, daigou's have received a great deal of attention in the press.  News outlets continually chronical high-profile shortages of baby formula in Australia, Hong Kong, and elsewhere caused by Chinese middlemen buying the product in bulk for resale in China.  Several factors contribute for the demand for foreign products in China.  First, Chinese consumers do not trust domestic brands because of a series of deadly safety scares.  Second, Chinese consumers often prefer foreign brands because of their status and higher quality.  

Designer bags are very
popular

Chinese consumers who purchase foreign products in China must pay high and clandestine taxes.  These taxes dramatically increase the prices of popular consumer products in China.  In many cases, the government levies these high taxes on foreign brands made in China.  Milk powder, luxury bags, vitamin supplements, and electronics are popular items sold by daigou’s.  In November of 2017, the Chinese government cut the average import tax from 17.3% to 7.7%.  However, the incredibly opaque method of how, when, and at what rate the government levies import taxes makes this claim suspect.   

Chinese consumers circumvent the high taxes by buying products through daigou's.  They buy products while abroad and ship the products back to China for sale at a markup.  Despite the costs and time involved in this practice, it is still cheaper for Chinese consumers to buy products through daigou's than from retail outlets in China.  The fact that many of the products purchased abroad and sold by daigou's in China have "made in China" stamped on the back of them makes this practice incredibly surreal.  For example, something is:

1.  Made at a factory in China

2.  Shipped to a port    

3.  Loaded on a ship and shipped across the Pacific Ocean

4.  Unloaded at a port in America

5.  Loaded onto a truck and shipped across the country

6.  Unloaded and put on display in a store

7.  Purchased by a daigou (after they receive an order from a consumer back in China)

8.  Purchased, packaged, and shipped by the daigou

9.  Sent to a sorting facility

10.  Shipped to a port 

11.  Loaded onto a ship 

12.  Sent across the Pacific Ocean

13.  Unloaded at a port in China

14.  Shipped by truck to a sorting facility

15.  Delivered by a delivery service to the Chinese consumer in China

And the item still costs less than if the Chinese consumer bought it off the shelf at their local store!

Items like this a 
listed on
WeChat accounts

Daigou's use the Chinese social media platform WeChat to list products available for purchase in stores.  Daigou’s take pictures of the items and upload them as a “WeChat Moment,” which is similar to a Facebook “Status Update.”  Go to a Costco or Wal-Mart in any major city, and you will likely find Chinese people taking pictures of products with their phone.  They work as daigou’s.  People in the daigou's social circle can view the products and place orders by forwarding a message to the diagou using the app.  Often, purchasers pay for the items through Alipay or some other form of virtual wallet (think Apple Pay but Alibaba branded).  

Some daigou's have the ability to carry the items they've sold through customs.  You'll see hundreds of daigou's at the Shenzhen and Hong Kong border.  Follow the link to see a YouTube video about the border.  Whenever I arrive at Beijing Capital Airport, I rarely see anyone go through the line to declare items at customs.  Even individual travelers with five or six suitcases go through the "nothing to declare" line without a problem.  It's painfully obvious that these people are daigou's returning to China with items purchased abroad.  

This watch likely
comes with at least
a 50% markup in
China

So why don't customs officials stop them and make them pay taxes on the suitcases full of items they've purchased for resale?  There's a lot of speculation about why the Chinese government turns a blind eye to daigou's.  I think it's because it allows overseas Chinese to generate wealth without having them interact with us "natives."  Feel free to speculate in the comments below....

https://www.youtube.com/watch?v=YQm5FZMforg

http://www.scmp.com/news/china/policies-politics/article/2121377/china-cuts-import-tariffs-range-consumer-goods

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11979837

Xi's All That

The Chinese Communist Party just wrapped its 19th Party Congress.  Twice each decade, China's rubber stamp parliament meets to sing its own praises.  Unsurprisingly, cadres read out of new hymnals provided by Xi Jinping.  It should surprise no one that Xi further consolidated his power at this event.  Here are a few interesting and/or important takeaways from the event.       

XI IS ON TOP
A new politburo standing committee (PSG) was named.  However, it didn't include a clear successor for Xi Jinping.  I've seen many click-bait articles speculating that this is the first important signal that Xi Jinping plans to hold the reigns of power past his expected retirement date.  Without a doubt, this was the biggest news from the event.  The regime famously fears government instability caused by top officials suddenly passing away (a la the Soviet Union in the early to mid-eighties).  Xi staying in power past 2022 would show a major shift in the party's priorities.             

House of Cards...China
Style 

WANG IS OUT
Many expected that China's anti-corruption tsar, Wang Qishan, might break with tradition and stay on the PSG despite reaching the customary retirement age.  This didn't happen.  Seen as a fiercely strong ally of Xi, Wang had the added benefit of not having children.  Too bad Wang's favorite TV show, House of Cards, probably won't release a new season anytime soon.

LONG SPEECHES AND CONSTITUTIONAL CHANGES
Xi gave a  3 hour and 24 minute speech.  The communist party wrote Xi Jinping thought into the Chinese Communist Party's Constitution.  Past leaders have had their political philosophies enshrined in the party's constitution.  However, unlike Deng, Hu, and Jiang, Xi's political philosophy had his name attached during his lifetime.      

It's the fine print that'll get ya...

JIANG STEALS THE SHOW
Xi Jinping might have given the keynote speech, but China's former leader Jiang Zemin stole the show.  Images of Jiang yawning during Xi's public speaking marathon lit Chinese social media on fire.  Like a student on the last day of school, Jiang incessantly checked his watch.  The 91 year-old used his now iconic magnifying glass to great effect during Xi's speech.  Expect this make and model of magnifying glass to rocket up the sales charts this Singles Day (11/11).  I have already purchased mine on Taobao.     

Trainspotting 2: Beijing Railway Station

Beijing Railway Station is an underrated architectural gem.  Situated just inside the city's second ring road, Beijing Railway Station stands out from the city's other railway stations because of its Soviet and Chinese influences.  It's hard to miss this majestic building, but few tourists get the chance to see it.  The station building resembles a hypothetical child of the Forbidden City and Grand Central Station.  Built to commemorate 10 years of communist rule in China, the station has welcomed countless visitors to the city during its nearly 60 years.          

Crowds congregate in front of the station 
Photo from China Daily 

                            

In a nation known for gigantic structures, this station still manages to impress.  It has the grand size of Union Station in Chicago, but with way more people.  The sea of humans in the square directly in front of the station never dissipates.  It doesn't even have a discernible ebb and flow.  Despite the sea of people coming in and out of the station everyday, the station doesn't feel nearly as cramp as some of Asia's other famous train stations.  Unlike other large stations in Asia, Beijing Railway Station doesn't have short ceilings or a utilitarian vibe.  Instead, the communists built a station that ironically evokes grandeur and distinctiveness.       

The station lit up at night 
Photo from Beijing-Travels

Like Amsterdam Central Station, Beijing Railway Station features twin clock towers.  The clock towers are certainly my favorite part of the building.  Another distinctively Chinese thing about the station is its relatively isolated position.  Large public buildings in China are often set-apart from nearby buildings to emphasize their size and importance.  Exiting the station and going to the KFC across the street takes a five minute hike.  You must walk across the enormous public square directly in front of the station and then travel up and down an elevated walkway over a busy city street.  This is one hell of a hike for one of the world's most densely populated cities.  

An original clock face
in China's Railway Museum 

The station's platforms 

Some large stations in Asia literally have shopping malls or skyscrapers built on top of them.  To the untrained eye, these stations simply look like other nondescript buildings in their respective cities.  Efficiency and convenience were the driving motivators behind their design.  In contrast, the designers of Beijing Railway Station didn't take these factors into account when building this monument to communist rule.  Beijing Railway station wants you to know it's a train station, it wants you to know its important, and it wants you to know its here to stay.      

Quotations from Chairman Lee

A photo of Lee Kuan Yew

Lee Kuan Yew served as the first Prime Minister of Singapore.  He held the post for decades and guided the city-state through its rocky beginnings to becoming an "Asian Tiger."  Throughout his life, Lee Kuan Yew succeeded in taking Singapore from a weak former colony to an economic powerhouse.  He often courted controversy for his authoritarian disposition and his tendency to be "politically incorrect."  Several of his more famous and interesting statements have been collected in the book Lee Kuan Yew: The Grand Master's Insights on China, the United States, and the World.  

The book collects Lee Kuan Yew's statements  on topics ranging from the rise of China to Islamic extremism.  Lee's most interesting statements have to do with culture and the role it plays in the success of society.  He makes numerous statements applauding the United States's entrepreneurial culture and China's emphasis on saving.  For me, his realistic emphasis on culture and the role it plays in economic success and political stability run counter to the conventions of Western politicians.  The ethnically Chinese leader of a former British colony didn't have to worry about the international community branding him racist or imperialistic (though some still did).    

Lee didn't shy away from the fact that certain cultural attributes contribute to a nation's success.  Lee reshaped his nation after it gained independence by changing it to compete on a global scale.  His administration emphasized education and sacrifice.  It took only a few decades under Lee's guidance to raise the tiny, island nation of Singapore "from the third-world to the first-world."  It's certainly easy to find wisdom in Lee's speeches.  I wholeheartedly agree with Lee's critiques of welfare-democracies and socialism.   

Lee is famous for mentoring many Chinese leaders and still openly criticizing the Chinese Communist Party.  It doesn't take a genius to see the affect of Lee on Chinese government policies.  From his emphasis on societal order and the paramount importance of economic development, Lee's thinking certainly impacted generations of Chinese leaders.  I hope my nation of the United States never losses the "frontier spirit" that Lee admired in us.  We must take care of ourselves and each other.  We simply cannot depend on any government, state or federal, to effectively fulfill our needs as a society.  As Kennedy said, "Ask not what your country can do for you, but what you can do for your country." Lee did shy away of asking this of his countrymen like most 21st century politicians.               

Studio Ghibli: Animation Powerhouse

The film's box art

I've heard Studio Ghibli called the Disney of Asia.  While I agree with the high praise, I don't really think that this is a like-for-like comparison.  Diseny makes films for children and the "children in all of us."  Studio Ghibli makes films for general audiences that just happen to be animated.  During the studio's genesis in the 1980's, Studio Ghibli blazed a trail later followed by Pixar, focusing on inventive, original stories.  Gone are the "royals" who have their every wish granted.  These animated films focus on normal people thrust into extraordinary situations.  Studio Ghibli made movies that appealed to children, but had enough ideas and themes for adults.  This formula kept families coming back for more, and made Studio Ghibli critical, though not commercial, darlings in America.

And you thought your
commute was crazy

Last week I watched the classic Spirited Away.  Warning: I wouldn't recommend this film for children under ten years old.  It contains many scary images including the protagonist's parents transforming into pigs and a faceless demon who eats a few of the film's supporting characters.  Not exactly Disney material; unless you count the Black Cauldron.  Yes, Disney killed Bambi's mother and traumatized a generation of children, but death is a natural part of life.  A faceless demon that gobbles up anthropomorphic spa workers will likely cause many nightmares and sleepless nights for anyone under the age of seven.  Also, the film's serious tone contrasts with most American produced animated films that rely on humor to advance the story.  I don't remember laughing once during Spirited Away.  It's the only animated film I've seen that surpasses the vast majority of live-action adventure flicks.  This film tells a story with a tone more like a live-action film than a goofball cartoon.  

The cover lets you know
this won't be a happy film

Earlier this week I watched the Studio Ghibli classic Grave of the Fireflies.  Set in the final days of World War II, the story chronicles a brother and sister's struggle to survive after their mother dies in a firebombing.  The DVD contained an interview with Roger Ebert about the film.  In it, Ebert noted the that using animation, rather than real actor's, increased the emotional impact of the film.  Instead of the audience focusing on a young actress playing a starving child in the film, the animation allowed audiences to focus on the experiences of the characters and ideas of the story.  An interesting idea that might explain why movies like Toy Story 3 pack so much emotional punch.  I would not recommend this film for kids unless you are looking to scar your children for life.  In the opening 15 minutes, you see the children's mother burned, dying, and covered in bandages like a mummy.  The DVD case might say ages 3 and up, but there is no way I am showing this film to my kids.

Children in terrifying situations 

Grave of the Fireflies will tear your heart out.  It's amazing how Studio Ghibli puts so much emotion into its animation cells.  Not only would I call this one of the greatest animated films ever, it's also one of the greatest war films.  The film focuses on an aspect of the war sadly, largely forgotten.  The film shows us what war did to families and the pain it inflicted on the civilian population.  Despite a number of films focusing on German civilians garnering commercial and critical acclaim in America, films focusing on the Japanese remain conspicuously absent.  This only makes Grave of the Fireflies more culturally and historically significant.  I plan on watching more of Studio Ghibli's movies over the next few weeks.  Anyone who enjoys animated films should certainly checkout their catalog.  Most of the films aren't well known in the United States, so tell your friends.




.   

The Xi Jinping Era: Cheng Li's New Reference Book for Chinese Politics

Pay no attention to the man behind the curtain!

Anyone interested in China has probably gotten their hands on this book.  A good deal of fanfare accompanied its release, and several of my favorite podcasts featured recommendations of the book.  So, does it live up to the hype?  Yes.  However, unless you're a serious China watcher, I wouldn't pick this one up.

This book is dense.  Like really dense.  It took me a long time to get through it.  In hindsight, I should have read all of the book's conclusion sections first, and then just read the chapters that interested me.  Much of the book's content consists of information about the composition of committees and governing bodies in the PRC.  Other than the noteworthy individuals, most of the names went in one ear and out the other.  However, the extensive profiling of politicians will make it possible to refer back to this book.  I expect to use this book when the next party congress happens.  This is the best reference book for Chinese politics.  The names of politicians, committees, and departments are indexed, making it easy to find information.  

The book's author

Cheng Li insists his approach to studying Chinese is quantitative because he uses numbers and charts.  Like many "social scientists," he cloaks his work in the cloth of science, even though nothing about it is scientific.  Adding charts and a large about of statistics, while useful, does not make something scientific.  

In the decades to come, prior generations will likely view this book as a great snapshot of foreign understanding of the inner workings of Chinese politics.  Xi Jinping's consolidation of power has revolutionized Chinese politics, and I must give great credit to Cheng Li for trying to make sense of post-collective leadership in China.  I must give him even greater credit for not shying away from the fact that Xi's revolution poses great dangers to the established orders both inside and outside China.   

Chungking Express: A Unique Cinematic Masterpiece

One of the film's posters

The seminal film Chungking Express paints a wonderful, cinematic portrait of isolation in densely populated Hong Kong.  The urban jungle metaphor has an added layer because Chungking is the Cantonese word for Chongqing (a city in west central China) that also means jungle.  To be up front, I have been searching for a copy of this film for years.  I finally secured a copy from the New Orleans Public Library.  The film is split into two halves, each chronicling the recent break-up of a Hong Kong police officer’s relationship.  Don’t get confused, the two officers in the film aren’t the same person.  Luckily they don’t look alike, and their stories have almost no overlap.  Certainly an unusual structure, but for this film it works.   

The facade of the actual
Chungking Mansions

The film takes its name from the legendary Hong Kong slum Chungking Mansions, smack-dab in the middle of Kowloon’s Golden Mile.  The images of the building’s tightly packed corridors and improvised factories inside of cramped, converted apartments juxtaposes amazingly with the loneliness felt by the main characters.  It’s amazing how well the film conveys this feeling, and I can’t really express all the ways that it does it.  The director uses a lot of longshots, quickly turning the camera to capture the characters’ movements as they dart around small rooms filled with boxes, beds, and tables.  You just have to see it for yourself.  It gave me a claustrophobic feeling.    

The film’s amazing music distinguishes it from other “artsy” films of the 90’s.  The soundtrack features both instrumental and pop tunes to great effect.  One warning; get ready to hear the song California Dreaming more than you ever thought possible.  But the payoff from the song and story just make its repetitive use even better.  For the first time in years, I am considering buying a film’s soundtrack.  I was blown away by the music. 

Two of the film's protagonists

While my wife was not a big fan of the film, she enjoyed seeing the film’s stars at the beginning of their careers.  Many of the actors and actresses went on to have very successful careers in the Hong Kong, Taiwan, and Chinese film industries.  One of the actresses even does a song on the soundtrack, lending credence to the stereotype of Hong Kong cinema producing multitalented stars.  

  

I find it extremely difficult to articulate why I loved this film so much.  With film being such a visual media, it’s impossible to describe the tone and visual style of the film.  And that’s why the film is so amazing.  I can’t really describe in words why it’s so special.  The makers of this film produced something that only the magic of cinema can achieve. 

      

Stock Google image of 
Chungking Mansions' ground 
floor

Unlike other film’s set in the world’s most dynamic city-state, Chungking Express is a view of the city looking down on the lives of its people, instead of from street level looking up. 

Note: I previously wrote a blog about the actual Chungking Mansions from which this film takes its name.  Here’s a link

http://chofficespace.blogspot.com/2014/03/the-mansions.html