Tuesday, August 31, 2010

A New Partner

In one my last blog posts I mentioned the difficulty in finding a suitable partner for this region. After all, the system worked like this: as a farmer, you would basically take your crops to the market or to a local processor. The price you earned would be equivalent to whatever the market price was for your crop. The bulk of the profits would go to the processor or marketer, while the farmer saw only a fraction of it.

Hence the need for agricultural cooperatives, which would allow farmers to band together, thus giving them greater freedom in negotiating prices with their sources, cutting their costs by making bulk purchases, and allowing them to give a coherent, consistent message in their marketing efforts.

Of course, Chairman Mao tried this a few decades ago. After all, the way he came to power was taking land from the wealthy and promising it to the peasants in the countryside. The catch with agricultural co-ops, however, is that they are run most effectively when they are kept private. The government really shouldn’t be too involved in the operation of these co-ops, after all, there is that bit of conflict of interest. Naturally, the government would not be good at advocating on behalf of farmers in the face of corporations (who pay the most taxes), and besides, the private sector tends to do things much more efficiently than the public sector.

Herein lies the contradiction. The Chinese government tends to oppose any private effort by citizens (i.e. unions, co-ops) that would create a collective power outside of the government’s reaches. But the core of a successful cooperative is an independent nature, so how does the government adjust for this?

Currently, it doesn’t. The government essentially tells farmers what to grow, regardless of what may be most useful for the farmer and his land. The government will pay the farmer for his output, and perhaps tack on a slight subsidy. The underlying result is that quality is so-so (after all, the government officials themselves are often evaluated based on output, versus quality), crops are rushed, and the land isn’t put to its most effective use. At the end of the day, the farmers still don’t make enough to live in the land (unless they own lots of it and can hire other farmers to work it), so they send their best and brightest to the cities to find work.

The Story of Mr. Chen

I was introduced to Mr. and Mrs. Chen by Xiaojian, my project manager at the University of Michigan. Mr. and Mrs. are both from Guiyang and own Fenglin Trade Co., based in Fenglin County, Guizhou. Both Mr. and Mrs. Chen are descended from a long-line of high-ranking government officials. They are savvy and well-to-do, having made their fortune already in real estate. Though Mr. Chen could’ve easily settled into an easy retirement, he opted instead to take a sizeable chunk of his fortune to follow his passion- helping farmers to improve their lifestyles by growing quality organic tea.

Despite not having a background in farming or agriculture, with the help of various local experts and books, Mr. Chen learned the trade along the way. Using his own money, Mr. Chen purchased enough land to cover 5 villages and 2 town-ships. He is very thorough and unique in his approach. Since he is able to control costs and production, he ensures that no corners are cut. As such, his tea has passed all local organic certifications, while his local competitors have not. As a result of his high-quality production methods, as well as fair wages paid to the farmers, the cost of his tea is also high.

He owns his own factory and plant, employing approximately 700+ farmers (not full time) and a staff of at least 20-30 employees. His company is well-versed in the growing and processing of tea, and he has numerous local government connections to assist him. Profits are shared with the farmers, and he estimates that their average salaries have increased by approximately 50%, which allows them to remain with their families in the rural countryside. His greatest challenge currently lies in the marketing, promotion, and sale of tea.

We believe that his tea has great potential in the U.S. organic market. I will blog more about this at a future entry.

Below are a videos taken with from Mr. Chen:

(Note: translations available at a later date)

(Note: translations available at a later date)

Sunday, August 1, 2010

A Friend in Town

This past week, a friend of a friend made a trip out to Guizhou. Abby, a current Fulbright scholar studying renewable energy at Tsinghua University, wanted to conduct some research in rural China. As such, with the help of Stone, we undertook to see whether we could jump onto a student trip that was heading to San Yuan (3 元), one of the poorer villages in the region.

Sounds simple right?

Not really. As it turns out, doing investigative work is quite difficult in China, and as a foreigner, there are many different hoops one must jump through before the government will grant you permission to do much of anything. Long story short, we were barely allowed to go on the trip, and this wasn’t without some severe restrictions placed upon us. With a bit of cunning, however, we were able to get around the most severe restrictions- I’ll blog more about this in a subsequent entry.

Anyways- I have to admit- I really wasn’t expecting much coming into the trip. After having already spent a decent amount of time in the countryside, I really wasn't sure what more to expect. In the end, however, the experience was positively delightful.

The area was gorgeous, the college students were down-to-earth and welcoming, and the kids… oh.. the kids. Let's just say- before this trip, I thought I was light years away from wanting to have my own- but now, it may no longer be such a stretch...

(Abby with two of the college students)

Since we weren’t allowed to do investigations, Abby and I taught English to the youth.

(Note that its mostly girls in class- the boys just go off and do their own thing)

Probably the highlight of our trip- our intrepid student leader, Xiao Ping, was constantly bugging us to come up with a performance. We were under the assumption that in accordance with local customs, we would be doing some small song-and-dance in front of some villagers and perhaps a gov't official or two. We brainstormed a few ideas- perhaps a skit on American historical events, or maybe a simple Bollywood dance. Eventually, Xiaoping let us know that the local government officials were requesting that we sing in Chinese. This is when I started to figure that this wouldn't be some ordinary fireside gathering. Being the music prodigy that she is, Xiao Ping then embarked to teach us a Chinese folk song called "茉莉花" or “Jasmine Flower.”

(Getting my makeup on with some of the dudes)


(With some of the local girls who performed)

As it turns out, it really wasn’t some small-village performance. In fact, it was a pretty big deal - the County's first-ever county-wide cultural exhibition festival. Many of the local government officials were in attendance and despite the rain, nearly 1,000 people turned up to watch the show. To make things even more interesting, we were even interviewed by the provincial television station. Click the link below and scroll to around the 2/3rd mark...

Rob and Abby On Guizhou TV!

(Afterwards, with Xiao Ping)

On balance, this was definitely one of the most memorable experiences of my trip thus far. The culture in the region is so rich, and the people exceedingly warm. I definitely hope to come back to the region at some point. I also learned a lot about what it means to build Guangxi ("relations") at the local government level. Stay tuned for a deeper analysis on this topic.

Saturday, July 17, 2010

So Now What?

Last week, I left for a trip to Guizhou’s countryside. The purpose: to find a compelling story in the region that would entice consumers of organic products in the United States to a buy Guizhou- produced organic tea. The results of the trip are as follows:

a) Guizhou’s countryside is gorgeous (see pictures)
b) The farmers and tea companies are poorly organized
c) The farmers were a bit better off than I expected- while not rich by any means, not entirely destitute either
d) The indigenous minority cultures were not really involved in the tea-growing process (a hopeful CSR angle)
e) The tea is of good quality, with special health attributes (natural Zinc and Selenium), but has little name recognition, even in China
f) The tea companies in the region are more concerned with building market share in China than exporting to the rest of the world.

The conclusion was that there wasn’t a clear cut-and-dry CSR story that I could use to build a brand around. In other words, for Guizhou organic tea to be competitive, it needed to stand mostly on its own merits.

As such, I can’t say I blame the locals for wanting to stay domestic. After all, when considering that the initial investment costs for exporting to a foreign market, from obtaining international certifications to finding a domestic partner, are prohibitively expensive, it makes it highly unlikely that a loosely-organized and resource- poor band of farmers and tea companies could hope to make a dent in the rapidly developing US market.

Nonetheless, I can’t help but feel that the region is missing out on a great opportunity, which would also allow them to also avoid intense domestic competition from the more established Chinese brands from Yunnan, Zhejiang, Guangdong, etc. During my research phase, I found that the market for US tea (dollar-wise) is surprisingly(!) not significantly smaller than that of the China market. While the China market is growing faster than the US market, the US market is still in heavy development mode, with more and more consumers slowly shifting toward healthy products, and knowledge of the health benefits of tea quickly developing.

Therefore, my revised goal is to help the farmers, tea companies, and government to collaborate and form co-operatives in order to achieve a more cohesive market approach. While co-operatives have the advantage of saving on input costs through group purchases, I believe their biggest advantage lies in their ability to devise a unified marketing image and message which it can promote to the masses. The branding of Guizhou tea as a uniquely different, high-quality, great-tasting drink laden with special health attributes will be the key differentiator in whether or not they can export to other markets.

We will see how effective these efforts will be. After all, getting organizations to work together with minimal government interference is difficult in a country whose governing body, for the last 5,000 years or so of history, can loosely be described as ‘hierarchical’ and ‘bureaucratic.’

God help me.

Wednesday, July 7, 2010

Update from the Countryside

After 10 hours of crazy driving in Guiyang, I'm currently in Fenggang County, visiting various agricultural farms in the region. I must say, it's pretty awesome being here. The air is clean and beautiful, and its very scenic. I must say though, the farmers here are fairly well off compared to other counties (which I have yet to see, btw). There is a lot of eco-tourism that takes place here, so combined with the various tea farms are very decent lodging that would definitely garner a place in a China Lonely Planet.

Anyways- our days are usually packed pretty full (lots of conversation, eating, meetings, etc.) I'll add pictures and movies later.

In the meantime- below is a video of what its like to watch the World Cup at the school I'm staying at. Since most students don't have TV's in their rooms, a bunch crowd into the cafeteria to watch the games. I find it interesting how students clap to show their support for good plays, even though they're not rooting for any particular team. The excitement in the air is generally very palpable, unfortunately this game (Arg v Ger) was a blowout, so it wasn't particularly exciting:

Wednesday, June 30, 2010

On China's Nationalism

In my conversations with Stone I sometimes find that he can come off as rather demeaning. Not that he is a physically imposing person (in fact, he's quite the opposite), but he's eloquent and has a very harsh tone sometimes that appears a bit condescending.

"You don't know Chinese history, you need to understand Chinese culture." etc.

I don't understand Chinese history or culture? I am Chinese! But am I? Being born and raised in California, I didn't watch CCTV growing up or study Confucius, rather, I grew up on the X-Files and reading Time Magazine/ Economist. But as I grew older, I began to study and appreciate Chinese language, history, and culture. Also, my parents and grandparents raised me with a healthy dose of Chinese culture just by being who they were (immigrants from Taiwan). Surely I know something about China, right?

Over meals we debate Chinese history, politics for hours at a time. I like to interject Stone's purely-Chinese viewpoints with contrasts derived from my perspective of American history. With 5,000 years of history, Stone indeed has a deep well of information to draw from. When the smoke cleared, however, we came to the consensus that Chinese people indeed do have a right to be proud of their history and culture, but the problem with current society lies with those in charge of the country. Are they willing to make the sacrifices necessary to empower the rest of the country, to share their power so that others may also thrive? Or will they continue to hold on their power, make promises of changing things, and then do not a whole lot about it (or even the opposite)? This is the fundamental question.

Given my beliefs, I often tell Stone that the biggest difference between China and the US is America's historical belief in God. Americans historically have tended to believe in (and hence follow, or worship) God, while Chinese people have gotten away from this belief in 上帝 (the ancient Chinese term for God), especially in recent years.

If we are to believe that:

1) God is all-powerful and the creator of all things
2) He loves us and cares for us
3) He sees and knows all things
4) He especially guides and blesses those who choose to love him

then I don't see how my postulate couldn't possibly be true. If you are an unbeliever reading this blurb, then of course this entry probably doesn't make a lot of sense to you. But as a believer, my thoughts are that if indeed God is all-powerful and willing and able to bless others, then its pretty clear a society where the majority adhere to these beliefs will be more 'blessed' or 'civilized' than a country where the majority do not. And these results manifest over time, in many different ways: from prosperity, to innovation, to our ability to help other countries, to culture, to the ways we treat each other.

And that is the fundamental difference between the U.S. and China. At least for now, anyways. Who knows where we'll be in 50 years...

Wednesday, June 23, 2010

Finally in the Heartland

I touched down in Guiyang, the capital of Guizhou, two days ago.

The "Iowa of China"

Someone told me that out of China's 32 provinces, Guizhou is the 6th poorest. As such, I came prepared- while in Beijing I purchased a box of tasty beef jerky in case there wouldn't be enough meat to go around.

How wrong I was- the streets (at least in this college area of Guiyang) are very lively, with lots of students, meat, and even alcohol. The most noticeable differences between here and Beijing is that it is very green, hilly, and unfettered here. The ambience keeps the weather cool and pleasant, not too hot.

(I can't wait until retirement)

I was greeted by Professor Ye at the airport, who teaches econometrics and enterprise management at the University of Guizhou School of Management.

I will be working primarily under him on this project, but as he is busy teaching courses and has several other graduate students working under him, he has assigned two of his to help me in the meantime.

Their names are Stone (he doesn’t have an English name, and his last name literally means 'shi' or 'rock') and Sophie. Sophie’s family lives about an hour outside of Guiyang, while Stone’s family lives further away.

(Mai on the left, Sophie in the middle, and Stone on the right)

Just to be clear, my project here will be to help Guizhou’s organic tea farmers to market and brand their tea for export to the world’s primary organic markets, focused especially in the US and Europe. In addition to assistance from China's universities, I am hoping to leverage support from the local governments here. I am staying on-campus at Guizhou University.

Prior to coming to Guiyang, I did a decent amount of research, including speaking with students who had previous experience working on organic farms or in advertising with large organic retailers such as Whole Foods. I also visited a number of tea cafes in Ann Arbor and San Francisco to see what it takes to get product stocked on their shelves, as well as data on the type of customers that frequent their businesses and purchase organic consumables.

Yesterday, Stone and Sophie took me to a village outside of Guiyang, about 30 minutes away. The village is a popular tourist destination for locals. I’ve attached some videos (with translation) for your entertainment and edification.

Stone introducing the village we visited, Qing Yen

Sights and sounds of the village market

Eating pig feet with an excitable Sophie

In the meantime, I'm working on putting together a business plan of sorts to hopefully get their tea to market. It is difficult because this region isn't known for tea-growing, but rather for Bai Jiu, aka Mou Tai, aka expensive, Chinese hard liquor.

Hopefully these videos will help. A big challenge will come when I finally get to go out to the 'real countryside' to see how these farmers really live.

Update from Beijing (Originally published on 6/16/10)

My WDI internship officially began on June 1, 2010. Prior to that, I was in Bandung, Indonesia, working on a sustainable agriculture project involving dried mango exports with four other Ross MBA students. It was a fantastic experience and I’m hoping the lessons learned about the difficulties of running a social enterprise will carry forward onto my other projects.

My internship is divided into two parts. The first component was a 2 week-project with the Asia Foundation (my previous employer), where I helped the Beijing office to create a project to train green energy entrepreneurs on how to start a clean tech business. Involved in the creation of the project was the determination of which industries we would train the entrepreneurs in, how the trainings would be structured, how the project would be funded, and who the strategic partners might include.

Very useful to beginning this project was the fact that there’s a number of other Ross MBA’s who are currently working in Beijing, many of whom are involved in green energy projects. I set up various dinners and meetings with my contacts to see who was working on what and who could be involved. One of the most important contacts was with one of my associates at JUCCCE (Joint US China Collaboration on Clean Energy), who happens to be the program manager of the Mayoral Training program, which has trained hundreds of mayors in China on clean technologies. I was able to get an extra ticket to this conference for my contact at the Asia Foundation (cost ~ $500).

Classmates and fellow energy compatriots

It was decided by the office that the money for the project should come from private funding. Based on my research, I came to the conclusion that there are four key greentech areas which the trainings should be focused:

Green Building, Green Industry (i.e. waste -> energy), Biofuels, and Clean Water.

The main reasons for selecting these industries include:

1) The Chinese government has yet to make significant inroads in these areas, so the market is less mature
2) The Chinese government has ambitious goals to increase energy efficiency stemming from these projects
3) The doors are more open in these industries for private companies than, say solar or wind power, where Chinese companies already dominate the market
4) Innovation in these industries would significantly help to improve the environmental situation in China

Separately, I also identified a listing of 80 companies who would potentially be interested in sponsoring such a training program.

The Asia Foundation Beijing office was very receptive in collaborating on this project, and I’m hoping that future collaborations are also possible.

My next blogs will hopefully be more frequent as I am leaving Beijing for the rural countryside on Sunday to begin my main project working with organic tea farmers. More pictures, and hopefully videos, to come. Attached is a random picture of some guys I played basketball with at Beijing University.

And hanging with my cousin Mars