Hangzhou and Yiwu

A couple weeks ago, 50 students took a class trip to Hangzhou and Yiwu in nearby Zhejiang province. A coastal province that borders Shanghai to the south, Zhejiang is one of China's top three richest provinces, with Jiangsu (borders Shanghai to the north) and Guangdong (borders Hong Kong as one of China's most southern provinces). If you look at a map of China, you'll see that these provinces are all on the eastern seaboard, along with much of the nation's wealth.

First, we visited Wahaha, a beverage company prominent in rural China with its soda, green tea, coffee, and other beverages. It can't compete with Coke and Pepsi in urban China, but it uses its rural distribution network and childish appeal (Wahaha, really?) to maintain sales.

Unfortunately, I forgot my camera in my bag the first day so I don't have pictures of Wahaha. They took us to the corporate PR center, and it was interesting to note how many pictures featured Communist Party officials who had visited the factory. Though China has been privatizing many SOEs (state-owned enterprises, think GM or AIG in the US), the government's influence and prestige remains large. Many factories in China provide everything workers need, including cafeteria and housing facilities. Wahaha's cafeteria provided us a feast of a meal, but we weren't able to see its housing facilities.

Next, we visited Alibaba, a privately-owned, innovative e-commerce company. If you've never heard of it, take 5 minutes to read the Wikipedia entry, this company is amazing. Its Taobao.com is like eBay, its Alipay is like Paypal, and its Alibaba.com is a B2B (business-to-business) version of eBay, especially for Western companies who want to source from Chinese companies. Founded in 1999, Alibaba sold a 40% stake of itself in 2005 to Yahoo, which saw the company's growth potential early on. As China's middle class starts coming online for e-commerce services (think about when Americans started trusting eBay, Paypal, online banking, etc. and add maybe 5 years), Alibaba is poised to capture this growing market.

A Google picture of the Alibaba campus since I forgot my camera. What's your normal conception of Chinese companies? Manufacturing factories with inhumane conditions? It may be true for many companies, but exceptions exist and Alibaba is a huge one. I've never visited the Google campus, but in my mind, I could've been in Mountain View, CA, not Hangzhou, Zhejiang. As you can tell, I'm highly biased towards Alibaba, I'd buy stocks on the NYSE if I could.

The next day, we visited Zhejiang University, probably the fifth best Chinese university, the best one outside Beijing and Shanghai. I talked to one of the students for over an hour, and his biochemical engineering studies seemed more advanced than many US undergraduates. If he was living in the US, his commitment would probably land him a six-figure research job with a pharmaceutical company. However, as more companies shift even their R&D centers (not just their manufacturing plants!) to China, elite students certainly exist to staff them. He may not speak English well or have strapping American-like confidence, but he can certainly do the job.

We went hiking that afternoon among some crop fields just outside Hangzhou. When we had to ford a river, even Professor Foudy rolled up his pants without hesitation. For such a commercial and innovative center, Hangzhou has incredibly pretty scenery nearby. We saw several couples in wedding attire taking pictures against the natural and wildlife background.

West Lake in Hangzhou. We took a tranquil, late-day boat ride across this lake, which is featured on the back of the 1 yuan note. Several legends, whose details I no longer remember, surround this lake. Anyway, if you come to Hangzhou, don't miss the West Lake in the flurry of Pizza Huts, Western hotels, and Lamborghini dealers (I wasn't kidding about the province's wealth, especially in Hangzhou)

The back of the 1 yuan note. By the time I reached the posts that you see on the note, night had fallen and I didn't get any good pictures so I had to settle for the earlier picture above.

We traveled to Yiwu the next day, a more manufacuring-based town in Zhejiang and a world away from Hangzhou. We visited a Christmas tree manufacturing company. They sell their trees to larger distributors who place them in stores like Walmart, Target, etc. in the US and Europe. Christian Christmas trees made in Communist, non-religious China? Everything's possible. I wanted to ask the workers if they knew the significance of Christmas in Western countries, but my Chinese isn't advanced enough to hold that conversation.

This machine produces the branches of the tree. It contorts and binds the paper of the three rolls on the ground into branches. You can see the extended strips of paper before they enter the machine. Each machine cost USD $10,000, the company had three such machines. Adding workforce, supplies, and production space, you could probably start a small-scale company in China for only USD $100,000, especially if you located it away from the eastern seaboard.

Remember the normal conception of Chinese companies? These workers were adding special decorations to the branches of the tree and binding them together to form larger chunks of the trees. We didn't see any dangerous or inhumane conditions (obviously companies wouldn't let 50 NYU students come if they had such conditions), but the operation was fairly primitive. After seeing the production methods on the factory floor, it's surprising the trees in the first picture look as good as they do. I don't want to overload this post with pictures, but if you're interested in factory conditions, I can send you more.

The Yiwu wholesale market, commemorated as the world's "largest small commodity wholesale market" in 2005 by the UN, the World Bank, and Morgan Stanley (according to Wikipedia). It was enormous, with rows upon rows of storefronts selling all kinds of consumer electronic, retail, and sports goods. Many foreign buyers from the Middle East, Africa, and the West were browsing the storefronts, placing orders in the tens of thousands of units that would be sent to the affiliated factory in China and eventually filled with goods that would be shipped to the foreign company. You can tell the market's diversity by the Chinese, Korean, and Arabic scripts in the picture above. Many store owners spoke English for Western buyers, but they only sold in bulk so we couldn't buy anything.

One example of the market's diversity. Each store had a specialized niche, ranging from bar signs to knock-off iPads to phones to inflatable swimming pools. Judging by the number of stores, it's incredible to imagine the number of factories producing these goods and able to fill orders in the tens of thousands of units.

A relatively small percentage of goods at the wholesale market were knock-off, but this packaging is a good example. I understand knock-off clothing brands that can be mistaken for the actual designer, but I'm not sure who you're trying to fool here. Is the company trying to fool the consumer? Is the consumer trying to fool his peers and to look prosperous? Maybe no one's being fooled, the consumer just wants the ridiculously low price and feels slightly better/amused with knock-off branding.

I highly enjoyed Hangzhou and Yiwu, the experiences were very different from my normal travels. If you're in China for over a month, please take the time to visit (although you'll need some corporate contacts for the factory visits). It gave me a much clearer and nuanced view of Chinese factories, from the stereotypical "workshop of the world" Christmas tree factory to the in-between Wahaha beverage factory expanding in rural China to the truly innovative Alibaba facilities. China's factories and students are on the move, and we have just as much work to do to stay ahead of them in the West.