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Note: Contributing Editor David Feng will be posting a more detailed follow up post on the 1st Beijing TweetMeet, coming soon to CN Reviews.

Anyone who pooh-poohs the social impact on Twitter should be put on notice by the two Twitter Firsts that happened last night.

Twitter History: First Marriage Proposal

Mashable just broke some news that we may have witnessed the first wedding proposal over Twitter from @maxkiesler (website) to @emilychang (eHub).

His proposal: To @emilychang - After fifteen years of blissful happiness I would like to ask for your hand in marriage? 03:13 AM March 20, 2008 from web

Her response: @maxkiesler - yes, i do! 03:14 AM March 20, 2008 from web in reply to maxkiesler

Congratulations to both @emilychang and @maxkiesler!

Another Twitter First: Beijing TweetMeet

I discovered this Twitter first through another Twitter first: The 1st Beijing TweetMeet, held Friday 3/21/2008! My friend and fellow CN Reviews blogger @DavidFeng posted the link to Mashable and that’s how I discovered this, even though Mashable is on my Google Reader.

The more complete TweetStream is below, but here is @DavidFeng’s take:

This is the first-ever Tweetup in Beijing. Ladies and gents, you are witnessing Twit-stery (Twitter history). ….

For those of you who have never been at a Tweetup, the whole thing feels surreal. People are literally GLUED to their laptops, tweeting!…

We are twittering like mad. We are actually thinking if the server is about to go down chez Twitter ‘cos of the Beijing TweetMeet!…

Question: How did Twitter generate such emotional attachment from its users, so that people would meet up to Tweet together and that other people would get engaged over Twitter?

Just one month ago, I didn’t “get” Twitter. Now I see it in MMORPG terms.

Just 1 month ago, I “didn’t get” twitter and thought of it solely as microblogging. But the fact that a small group of Twitter fanatics met at the Beijing Bookworm (Building 4, Sanlitun South Road near Gongti North Road in Chaoyang District of Beijing) this Fri evening to Tweet to each other highlights how Twitter can be much more than a blogging platform. It can become a nexus of personal relationships and social exchange that makes it similar to Social Networks like Facebook or MMORPGs like World of Warcraft.

To non bloggers and non Twitterers (Tweeters? Twits?), microblogging and blogging can seem like information exchange and a process of social discovery of information. But in fact, it is not just that…it is space and place for social exchange. Microblogging far underestimates the power of Twitter. In fact, Twitter is a specialized form of Massively Multiplayer Online Role Playing Game (MMORPG) but one in which the “role” is tightly bound to your real identity (in most cases).

Amy Jo Kim of Shufflebrain has a brilliant exposition of game dynamics. As an expert in game design, she identifies 5 factors that make games addictive. Here’s how I think it applies to Twitter:

• Collecting - # of followers, # of “friends” that you follow
• Points - # of updates or tweets
• Feedback - people follow you back! And you get an email with an exclamation point! It’s flattering when @JasonCalacanis is following me on Twitter! (before I followed him)
• Implicit Exchanges - Implicit exchange represents the positive feedback you receive as you “follow” more people and see more of who they are through their tweets. You implicitly exchange with your followers when you tweet and share what’s going on with you.
• Explicit Exchanges - Direct messages are explicit exchanges. But @twitteruser messages directed to someone else but visible to everyone’s followers, is also an explicit exchange recognized by the entire community. You are on stage, in the commons, sharing your life with everyone in the village commons.
• Character Customization - Yes you can reskin your Twitter profile page. But more importantly, you can customize your character and your persona by modifying the composition and mix of your Tweets.
• Interface Customization - Web? IM? Gtalk? Twitbin? Tweetbar? Twitterfox? Twirl? Twitterific? Directory here at the Twitter Fan Wiki. Enuf said.

If you are not already familiar with her work, you must go flip through her Game Developer Conference 2007 slides available at her website. Her blog is here.

And now back to the Tweet-by-tweet coverage of the Beijing TweetMeet

I don’t know all the people at the Beijing TweetMeet. But from the TweetStream of @DavidFeng, this is what I captured (in reverse chronological order):

• @sioksiok OK, OK… You will see me with TWO laptops next time! about 1 hour ago from web in reply to sioksiok
• OK, that was my MacBook. Now tweeting on my iPod touch… about 1 hour ago from web
• OK guys, my MacBook’s battery dies in 5 minutes. No sweat - that’s why I’ve the iPod touch!… about 1 hour ago from web
• @davidavdavid The Beijing Bookworm, we are 8 strong live… about 2 hours ago from web in reply to davidavdavid
• @webleon You want my iPod touch to tweet with? Sheetake, I should have brought my PowerBook G4 17-inch along!… about 2 hours ago from web in reply to webleon
• I think I can easily hit that magical 2,500 mark in terms of updates this weekend. Unless an Act of God happens in the Twitter world… about 2 hours ago from web
• @BlogAndGrow QQ = China’s biggest IM service. This thing is MASSIVE. about 2 hours ago from twitterrific in reply to BlogAndGrow
• @BlogAndGlow I think so! about 2 hours ago from twitterrific
  OK guys I am floating this proposal around - a KTV fest for all Beijing Twitterers. Tweet back if you’re in for this! about 2 hours ago from web
• @BlogAndGlow Welcome to read Chinglish. about 2 hours ago from twitterrific
• @elliottng OK, how many Web 2.0 services are you on?… about 2 hours ago from twitterrific in reply to elliottng Icon_star_empty
  This is scary: QQ + Twitter + CN = http://www.taotao.com/ about 2 hours ago from web
• Tweeting AND eating… a David Feng tradition… now shared with all fellow Twitter-ers… about 2 hours ago from web
  Late dinner - Spaghetti for me… ricey-kind of stuff chez
• @sioksiok… about 2 hours ago from web Icon_star_empty
  OK ???: ??????… http://fanfou.com/DavidFeng about 2 hours ago from web
• @isaac @thecarol ????! about 2 hours ago from web in reply to isaac
• @sioksiok ?, There are no secrets in the Twitter world… about 2 hours ago from web in reply to sioksiok
• @kaiserkuo One of your fans (and Twitter-ers) greets you. Musically… (hint hint) about 2 hours ago from web in reply to kaiserkuo
• @thecarol NOW we are ready for you! TweetMeet ?? featuring… about 2 hours ago from web in reply to thecarol
• @elliottng Zhichunli ;-P about 2 hours ago from web in reply to elliottng
• @WebLeOn about 2 hours ago from twitterrific in reply to webleon
• @elliottng THIS is the hair that I’m — well, after for better or worse… about 2 hours ago from twitterrific in reply to elliottng
  I just got a haircut, so if you’re seeing me look a bit funny, that’s… the hair. about 2 hours ago from twitterrific
• @thecarol @webleon No sweat! ???! (We all make mistakes…) about 2 hours ago from twitterrific in reply to thecarol
• @WebLeOn @thecarol They probably mean @DavidFeng about 2 hours ago from twitterrific in reply to webleon
• @WebLeOn @carol They probably mean @DavidFeng about 2 hours ago from twitterrific in reply to webleon
• @isaac Greetings from us from Beijing. You in Shanghai right now? about 2 hours ago from twitterrific in reply to isaac
• OK folks, first pics from the Beijing TweetMeet reality: http://www.flickr.com/photo… about 3 hours ago from twitterrific
• Salve* @chengfen (* Latin greetings) about 3 hours ago from twitterrific
• This is the first-ever Tweetup in Beijing. Ladies and gents, you are witnessing Twit-stery (Twitter history). about 3 hours ago from twitterrific
• I think everyone’s Twitter list at the meetup just went that bit more stratospheric. The ISS is next in terms of altitude. about 3 hours ago from twitterrific
• Allegra* @zhengle (* Rhaeto-Rumansh greeting) about 3 hours ago from twitterrific
• Cute baby pics at the Tweetup! about 3 hours ago from web
  With horror, fellow Twitter-ers at the Tweetup discover that yours truly speaks 10 languages. Gasp! about 3 hours ago from twitterrific
• We are talking about Swiss nationality at the TweetMeet since I’m a Swiss national with Chinese ethnicity… about 3 hours ago from web
• We are twittering like mad. We are actually thinking if the server is about to go down chez Twitter ‘cos of the Beijing TweetMeet!… about 3 hours ago from web
• Bonsoir* @webleon (* French greetings) about 3 hours ago from twitterrific
• Buonasera* @nickcheng (* Italian greetings) about 3 hours ago from twitterrific
• For those of you who have never been at a Tweetup, the whole thing feels surreal. People are literally GLUED to their laptops, tweeting! about 3 hours ago from twitterrific
• Link for tonight: AllTop: http://twitter.alltop.com/ about 3 hours ago from twitterrific
• (Guess who is the 1/2 Mac / PC user…) about 3 hours ago from web
• 4.5 PC people, 2.5 Mac people. This is an INSULT for the Mac citizenry, having a BeiMac meet just tomorrow! LOL about 3 hours ago from twitterrific
• (Bad keyboard!) about 3 hours ago from twitterrific
  Grüezi* @PhilipJohnson8 (* Swiss-German greetings) about 3 hours ago from twitterrific
• Grüezi* @PhiipJohnson8 (* Swiss-German greetings) about 3 hours ago from twitterrific
• @sioksiok and @davidfeng hosting the first Beijing Tweetup… enjoy about 3 hours ago from twitterrific in reply to sioksiok
• OK Ladies and Gents! Live Tweetcast! Live Tweetcast! Beijing Tweetup! Live Tweetcast! about 3 hours ago from twitterrific
  3 more people with the fellow Twitter-ers in Beijing. about 3 hours ago from twitterrific
• Venue: The Bookworm, Nansanlitun Road. See: http://www.beijingbookworm…. about 3 hours ago from twitterrific
• People are getting married via Twitter! http://tinyurl.com/36tcys about 3 hours ago from twitterrific
• Bilingual tweetup, English and Chinese about 3 hours ago from twitterrific
• Grüezi* @JoMangee (* Swiss-German greeting) about 3 hours ago from twitterrific
• I am seated at the long table at the front entrance. about 4 hours ago from twitterrific
• Am at Bookworm… @sioksiok and others? about 4 hours ago from twitterrific
• Heading to the Bookworm. God pray for no traffic jams! about 4 hours ago from twitterrific
• Äh… Twitter meetup… silly me… about 4 hours ago from web
  Facebook meetup in about 35 minutes. Will be on the road soon for the big meet-up. about 4 hours ago

If you read carefully, @DavidFeng is threatening to combine his two addictions: Twitter and KTV! I will have to come out to Beijing for that combination. I will have to break out my Wang Qing Shui (忘情水) rendition for that event.

So Twitter, the MMORPG, has kept me from my day job at Kango of helping people plan family vacations to San Diego, Santa Barbara family hotels, and other such places. OK, David Feng will follow up with a full report once he recovers from a long night of Tweeting and networking with other Twitterers.

UPDATE 4/11:  Also see my most recent post on RMB Appreciation on 4/11 when the RMB crossed the 7:1 exchange rate level.  Also related as a 3/30 post with more links on the RMB appreciation including Brad Setzer’s point that it hasn’t appreciated vs. the Euro.

I have been generally concerned about the decline of the dollar and specifically concerned about RMB appreciation. But the weekend collapse and the unprecendented Fed bailout of Bear Stearns prompted me to research it further.

The problem: dollar decline driven by US budget and trade deficits

John Mason at Seeking Alpha wrote a good analysis on dollar decline that explained that market participants expect there to be higher inflation in the US than in other countries. He explains that the US has acted as a “large country” with a reserve currency, not subject to market forces that would punish the country for running large Federal deficits and a loose monetary policy to prop up growth. When “small countries” do this, market participants sell off their currency. Well, it seems that the US is now subject to the same rules.

Meanwhile, Michael Pettis at Seeking Alpha reasoned that the fall of the dollar would put pressure on RMB revaluation:

To make matters worse, the fall of the dollar ($1.5580 to the euro, $2.0310 to the pound, and Y 99.77 to the dollar) is putting unbearable pressure on countries who peg their exchange rate to the dollar. Not only does this reduce the value of their currencies in international trade (and so put increasing upward pressure on their trade surpluses), but because the Fed is dropping interest rates and pumping liquidity into the system it can only increase hot money inflows into countries like China. Referring to Chinese Commerce Minister Chen Deming, the China Daily today said:

Chen’s ministry, which oversees foreign trade and domestic consumption, said that during the first two months, investments from the European Union countries rose a whopping 109 percent, while investments from the United States increased 44 percent. Wild expectations abroad that the yuan will continue to rise in value against major world currencies has led to money coming to China.

“When you bring US dollars to invest in China, you need to change it into the yuan. Naturally you would like your funds to enter China at an earlier date. Because, if you are late, the same amount of dollars will turn out to be less yuan bills,” Chen told reporters.

Chart: 5 year change in RMB to USD exchange rate

source: Yahoo! Finance

Well, Chen’s comment describes the situation that I’ve faced as we’ve been projecting our 2008 RMB denominated expenses for my company. We’ve elected to advance our payment to vendors so they can convert USD to RMB immediately so we can lock in the current exchange rate. But obviously, this solution is not great for most China vendor relationships! (Why? hint: trust issues)

After researching this, I started to feel that dollar decline was a potential risk to our own personal investments.

1. Limited Solution: establish RMB bank account and convert USD

A limited solution is to set up an RMB bank account in China, wire in USD, and convert and hold RMB in that bank account. With Min’s help I set up an account at China Merchants Bank, which several other friends had recommended. This is only a limited solution because there is a USD $50,000 limit to incoming USD per person per year, as I understand it.

2. Potential solution: hedging USD through exchange traded notes (ETNs) tied to foreign currency

Note: this blog post does not constitute investment advice nor a recommendation/endorsement as to any specific legal, tax, investment or other matter. Do not blame me if you invest and lose your shirt.

This week, March 17, Morgan Stanley and Van Eck Global announced the launch of a new Chinese RMB/USD Exchange Traded Note (ETN) and a new Indian Rupee/USD ETN (BusinessWire, discussion at SeekingAlpha). Detailed information is at their MarketVectorsETNs website.

ETNs tied to foreign currency has been in the market for a while. CurrencyShares from Rydex Investments has FXA (Australian Dollar), FXB (British Pounds), FXC (Canadian Dollar), FXE (Euro), FXY (Japanese Yen), FXM (Mexican Peso) FXS (Swedish Krona), and FXF (Swiss Franc). But this is the first time I’ve seen a Chinese RMB/USD ETN.

There is a FAQ on the official MarketVectors website but here are a few that help frame what this is:

What is an ETN?

An ETN is an Exchange Traded Note, senior, unsecured debt issued by a bank or other financial institution. In this case, they are issued by Morgan Stanley. There is credit risk associated with purchasing these notes.

How does the value of the note relate to RMB?

Notes do not pay interest. Instead, the issuer promises to redeem the notes based on the performance of the S&P Chinese RMB Total Return Index (ticker:SPCBCNY), which tries to stay as close as possible to the Chinese RMB Spot Market. More about S&P’s indices here and here .

What are the risks?

• ETN is debt, and as such is subject to the solvency of the issuer, in this case Morgan Stanley.
• The IRS requires investors to calculate gains or losses on ETNs each tax year, and pay tax on the “notional interest” even though the ETN does not pay out any gains until you sell the note. So this is bad for cash flow (and your net return).
• The net return is also reduced by the fees related to the instrument. There are lots of examples on their Website.
• Many other risks. Read the risk factors in the prospectus.

So is it a good investment? Not sure. But I’ll be considering this and other options while trying to hedge out my USD risk either via going long on RMB or other foreign currencies. Anyone else out there worried about the dollar? or worried about RMB appreciation? Is the ETN a good option for hedging?

UPDATE 03/23/2008

Related analysis on RMB appreciation:

Michael Pettis, professor at Peking University’s Guanghua School of management, blogged about More, or Less, RMB appreciation. He argues that the Chinese government needs to allow the RMB to appreciate to fight inflation. But as it appreciates, more hot money will enter the country:

If Chinese inflation is a monetary problem, which I think it is, I it seems clear to me that the only way to reduce inflationary pressures is to reduce monetary growth, and that means of course reducing the net capital and current account inflows into China. A more rapid rise of the RMB is not only unlikely to reduce those inflows (at least until the RMB is much more expensive than it is now), but on the contrary it will actually increase net inflows by encouraging hot money faster than it reduces the trade surplus (and anyway so far the trade surplus hasn’t declined).

My conclusion is that either a slow, gradual appreciation of the RMB happens or a one-time large-magnitude RMB revaluation happens. Either way, it makes RMB a good investment for the individual investor.

Some other posts by Pettis include:

How do you turn this thing off?

5% revaluation of the RMB? Are you crazy?

More attention on the RMB

Section 988 Tax Issues related to ETNs

I’m still investigating the US Federal tax issues related to these ETNs. The default position of the IRS is that all gains and losses must be treated as Ordinary Income/Loss each tax year, unless a Section 988(A)(1)(b) election is taken, in which case some portion of the gains and losses can be treated as capital gains/losses. But I called MarketVectors and they couldn’t explain this provision even at a high level. The customer service rep asked me who I was with, concluded that I was a small-time individual investor (which I am), and then said “I’ll get back to you” with a tone of disregard. I’m now researching this with my accountant.

Everbank WorldCurrency Access Deposit

Via another SeekingAlpha review I discovered EverBank WorldCurrency Access Deposit Account. It provides for up to $100k in FDIC insured deposits at FDIC insured bank. No interest is provided for. However, this may be better than the drag of management fees with the ETN, and the tax questions highlighted above. I’ll be calling them to learn more about this product.

One downside to the EverBank product is the RMB account doesn’t provide any interest rate. To compare, current time deposit interest rates in China Merchants Bank are as follows: 3 months - 3.33% interest rate; 6 months - 3.78%; 1 year - 4.1%. Still, for the amount beyond the $50k convertible,the EverBank product may still be a reasonable option to hedge against dollar depreciation.

HSBC Renminbi Bank Services

HSBC also provides a variety of RMB related banking services. According to the footnotes on that page, “Renminbi Switching Service shares the same transaction limit of RMB20,000 per person per day with the Renminbi exchange services through HSBC accounts.” This doesn’t appear to provide a better option for large scale RMB exchange either.

ETRADE Global Trading

I’m also looking at the ETRADE Global Trading product that provides for trading into 6 currencies: Japanese Yen, Canadian Dollar, Swiss Franc, Euro, Hong Kong Dollar, British Pound.

UPDATE 03/24/2008

Found out more about the EverBank World Currency Deposit Access Account:

• Basic account is a deposit account backed by $100,000 of FDIC bank insurance.
• Value of principal is based on the spot market for RMB non-deliverable forward contracts.
• Transaction cost: they take a “spread on wholesale spot rate of 75 bps going in and out” according to the EverBank sales rep.
• Account has a $10,000 minimum to establish, and funds can be moved between currencies. Other currencies supported include: Austrailian dollar, British pound, Canadian dollar, Czech koruna, Danish krone, Euro, Hong Kong dollar, Japanese yen, Mexican peso, New Zealand dollar, Norweigian krone, Singapore dollar, South African rand, Swedish krona, Swiss franc.
• For Chinese RMB, the account is non-interest bearing, vs. the 1 year time deposit rate of 4.1% at China Merchants Bank at this time.
  No 1099 will be issued because it is not an interest bearing account. Any gains or losses must be reported as capital gains or losses.

From my perspective, the advantages vs. the ETN are as follows:

• ETN gains are treated as ordinary income unless a special Section 988 election is taken (which I don’t understand what that is right now). According to EverBank, Deposit gains are treated as capital gains. Need to confirm this with an accountant. But if this is the case, then the long term capital gains (LTCG) rate would be 5% for taxpayers in the 10% and 15% tax brackets and 15% for taxpayers in the 25%, 28%, 33%, and 35% tax brackets (source: about.com).
• EverBank takes a 75 bps spread when the currency is bought, and again when the currency is sold. The ETN charges 40 bps asset management fee. So it looks like the ETN is better for a shorter term hold.
• But with these 2 factors, it looks like with a 3 year hold, EverBank is better than the MarketVectors ETN by a slight amount.

Some more links:

• Brookings Institution report dated July 2007 discussing the tradeoffs between currency appreciation and inflation. Written by Geng Xiao, Director, of Brookings-Tsinghua Center.
• China Daily article stating that USD will stay the anchor of China’s foreign reserves and was at around 70% at the time of the article, dated November 2007.
• China Daily article dated 3/24/08 stating that central bank advisor Fan Gang “opposes the use of another one-off revaluation of the Chinese currency, or yuan, according to the Shanghai Securities News. Widespread expectations that the yuan would register further sharp gains against the dollar have been encouraging inflows of speculative money into the country.”

Please mind the gap between China and the West…

• The West: The mic is more “for everyone”. Everyone has a chance to speak.
• China: The mic is for those “with the credentials”. Expertise and professionalism preferred.

We’re not talking about the egalitarian mics you get at KTV parties, where just about everyone has the right to pollute the ears of just about everyone else in the booth. No, we’re talking about something a bit more pro than just mimicking Stefanie Sun or Jay Chow; we’re talking about things such as public speaking or hosting big events.

Beyond than just grabbing the “voice roll” (which is what the Chinese word for the mic, 话筒 (huatong) breaks down into), we’re also talking about participation when it comes to anything speech-related.

The West: Everyone Can Speak

In the Western World, just about everyone can speak. There’s less on the “exclusivity” of the speaker and more on interaction.

When I went to Macworld in 2006, I was “immediately” a speaker at both a Mac user group event and at the conference itself (in the form of the user group lounge). This kind of told me: “credentials” or “experience” is not necessarily as “big” as it is on this side of the planet (as in China). As long as you’ve quality content, it’ll be fine.

In the West, you’re more likely to be discovered as a previously undiscovered talent. If you can pull it off with good Keynote slides (yours truly has a natural allergy to Microsoft PowerPoint — for revolutionary, ahem, Macintosh reasons), and if you’re engaging to your audience, you’ll be called time and time again. The mic’s yours if you can perform in the West. Additionally, when you perform in the West, you allow the audience in — there’s quite a bit of interaction.

As is the case anywhere else, though, experience in speaking in front of the masses will help you out in the West. But even if you’re missing that, there’s sure to be a mic there for you. I mean, I got started at age 10 when I was visiting London and when I started brainwashing people at the Speakers Corner at Hyde Park about my “astronomy discoveries”. I had amassed quite an audience in about 5 minutes — a dozen or so people.

Mom says I was born to perform.

China: Credentials or Experience Preferred

In the Sinosphere, not just “anyone” can grab the mic and yak on for hours on end. You must be a “noted personality” or have the experience to make it.

Probably because China is less individual-based and more a collective community (this was the case as early as back when Confucius was around, so it’s not really a case of pre-1949 or post-1949), people have got to be known in circles. The way I see it, you are discovered first within your own circle, then you spread to other circles, and you work yourself around in ripples.

Regarding the interaction: to describe the audience as “deaf-mute” would blow the whole thing out of proportions. I’m not saying that there aren’t the odd speech sleeper (sans the snoring!), but the Chinese are much more used to the guy (or gal; let’s not forget the ladies holding up half the sky!) hogging up the mic for your average 90-minute lesson in university. I once — in essence — suffered through a whole semester of zero-interaction lessons when the teacher was fixed in one position and one position only for the whole 90 minutes: it looked something like this:

• Eyes: fixed on the monitor
• Hands: fixed on the mouse (with scroll wheel no less)
• Lips: fixed on the microphone

She’d maintain this posture even when I was sneaking a secret peek into my Lonely Planet guidebook to Hong Kong. Just about zero questions were asked throughout the whole lesson. I kid you not…

If the speaker in China has experience or has like a wardrobe of titles, accomplishments and “stuff like that”, all of that is likely to end up on the promo flyers given to the masses en masse before the speech. Wearing many hats certainly helps in this part of the World.

Speaking in China is probably not all that much about being entertaining or jazzy. It’s more the case of an info session (or if done badly, an info deluge or info dump). Of course, if you’re entertaining, you’ll stand out probably even more than in the West.

People will come to like you when you do that.

The China Game has some interesting news to share:

Alibaba shares have fallen to below their IPO price. It took a few months, but, as we suggested, it was inevitable. This IPO was the largest of its kind, and it was promoted heavily by the media. At the very height of the hype - when everyone was asking how Jack Ma did it - we asked whether the company was really worth US$7.8bn. Never mind the run up that followed the stock issue; the price put on the initial offering was itself too rich.

Given the recent rash of negative publicity and subsequent sentiment towards China, this news will no doubt embolden some (particularly in the States) to remark “ah hah!” Unfortunately, there is a high probability and at least some correlation between this and the current market woes facing the world financial markets, not least of which is sub-prime hell America. Therefore, any nationalistic rejoicing should be tempered with such in mind.

That said, the criticisms lodged against Alibaba from many circles are certainly legitimate. For entrepreneurs and small-business owners looking to source from China, Alibaba’s promises cost-savings that can’t be found at home…or getting your ass fleeced so bare you come out of it with razor burn.

Having previously used Alibaba to do some price research, I was consistently amused with how often suppliers tried to pull fast ones on me quoting absurdly high prices only to immediately “correct” their quotes the moment I call them on it. The same products by many manufacturers even often had different prices, depending on whether you were reading the Chinese site or the English site.

No doubt, buyers sourcing through Alibaba, or from China in general, owe it to themselves to do their own due diligence. While many Chinese businesses or individuals will still try to take advantage of someone at every opportunity, not doing your research only rewards such unethical behavior. What amount of due diligence is required often depends on what you’re trying to source and how much money is involved. Good deals and good suppliers can certainly be found on Alibaba but, in many cases, the cost savings will come from the time you save comparing prices over the internet and not from the cost of airfare to China.

Oh, and Jack Ma looks like an alien Doogie Howser. There, I had to say it.

Three bits of subway news updates for the faithful readership… this, of course, CN Reviews’s faithful readership. The scary thing is that yours truly doesn’t appear on the outside to be a journalist — he’s no press credentials and has one of those “civilian” (as opposed to “pro”) cameras.

But even the slightest move of the Beijing Subway system can’t escape eyes of David Feng… A trip to Shaoyaoju station on Line 13 reveals that the folks behind the Subway system are making the best just a bit better (although from a personal viewpoint, better albeit slower)…

• Installing: New AFC Systems

There is a rumor going around that David Feng will get a new MacBook Air and an iPhone by the time Line 10 opens in June 2008. There is also a rumor going around that the new Subway gates will get thinner, making the once-productive David Feng bag (with a 17-inch PowerBook G4 and a MacBook) a perfect candidate for The Computer Bag Combo That Will Always Be Stuck In The Subway Access Gates. Today, I got to see the new, thinner and less productive AFC access gates being installed.

At first sight, it seems like those AFC access gates on Line 13 will be just a bit wider than their devilishly thin Line 5 counterparts. Even so, they’ll be a lot thinner than the current “wide access” gates, which are merely POS machines without any physical access barriers. (There is a “human” access barrier nearby (I know this sounds “bad”) in the form of the ticket checker — he or she will stop just about anyone from entering the subway system without paying for a ticket.)

AFC access gates aren’t new to Beijing — if you were there on the very last day of 2003, you saw Line 13 start using them. An all-AFC subway network, though, is new to the capital. The Underground Powers That Be have apparently let David Feng be more productive: a March 2008 intro was rolled back to May 2008, which has since then been unproductively (or in the eyes of yours truly, productively) rolled back to June 2008.

• Testing: New Automated Ticketing Systems

Meanwhile, to make the subway stations even less humane (ah — I long for the days of buying your ticket from the ticket lady, and getting the lady next to the steps to rip your ticket into shreds as you enter the subway system), The Underground Powers That Be are thinking of installing all-automatic ticketing system, which — by the way — will support English (although we’re not sure if Chinglish will be used as a stepping stone, language-wise).

Presently, the auto ticketing systems seem less than spectacular — displays on the top of the machine plus tacky moving pics of the Temple of Heaven. Come June 2008, however, these machines should be ready for the masses.

• Building: The New Subway Line 10 Link

As I headed outside Exit B, I was a tad disappointed that the subway station didn’t have a connection handy with the soon-to-be-reality Subway Line 10. Then I saw this:

If my eyes and brains aren’t tricking me, this will probably be the new link to Line 10. They’ll probably add a covered extension so that people won’t get to change trains in freezing snow or merciless rainstorms.

Nearby the existing Shaoyaoju Line 13 station (in what can only be best-described as “flesh pink” in color) are four glass cubes, which are supposed to be Line 10 stations. Some even have the station signage done; this, though, is less than perfect, with white-on-yellow text.

Even so, I left the station feeling — well, if I may, feeling the change. This Shaoyaoju station, ever so close to my former university (UIBE, or the University of International Business and Economics), is no longer going to be an isolated station in the middle of nowhere.

Things are changing.

And the funniest thing is — I’m no longer going to school — chez UIBE.

Via Twitter and YouTube, I’ve been following Christine Lu, founder of China Business Network, on her first week back in Shanghai. Her vlog is a great resource for people and companies who are considering entering the China market. Subscribe to her feed now .

Here’s a quick guide to the interviews and what I thought were the most interesting points. I only embedded a few videos…just follow the links to Christine’s blog!

Erica Kerner, Director of Beijing 2008 Olympic Games for Adidas

• Christine’s posts here, here, and here.
• Background: 15+ years in Greater China, 10 years in Shanghai. “Shanghai is my home.”
• There are interesting challenges for consumer marketers reaching the domestic China markets. Huge intergenerational differences exist between the grandparents who went through the Cultural Revolution; parents who are getting their “first everything” - first car, first apartment; and kids who have everything as soon as they are born.

Jeff Hu, CEO of HealthOne.cn

• Christine’s post here
• Relationships are important in business worldwide. But in China, there is a “duality” between those you hold in your “inner circle” and those outside. Those in your “inner circle” will do anything for each other, but if you are not in that “inner circle” then you are “s*** on a stick”
• This duality made sense in a resource poor, people abundant country like China. You can’t spread your resources too thin.
• Advice for people considering China market entry. Do NOT try to “make a big splash”, but take a step by step, cautious approach.
• If your prospective Chinese partner thinks they have the upper hand, expect long, protracted negotiations.

Todd Anthony Tyler, Fashion Photographer

• Christine’s posts here, here, here and here.
• In the creative field, you can add value as a foreigner because you bring an “outside influence” and a perspective on trying to create something special, not just focusing on making money.
• Foreign creatives may come from an upbringing infused with a cultural milieu that brings a different eye to creative challenges.

Jay Zhou, graphic designer

• Christine’s posts here, here, here, and here . Also you can watch Jay get a tattoo here!
• She believes many Westerners still have a perception of China as in the “old times”, all the men with long hair, (like in Kung Fu times?!).
• Opportunity for foreigners is to bring creativity and a fresh perspective. The education system in China is very “traditional.”
• Advice to foreigners: learn the language, learn the food, and treat Chinese as equals.

Shaun Rein, founder and CEO of China Market Research Group (CMR)

• Christine’s posts here, here, here, here, and here.
• US perceptions are shaped by US mainstream media, like the Wall Street Journal or New York Times. You have to take into account the “ulterior motives” of US media (what are these, Shaun?) to take into account their editorial bias.
• China is entering a new phase. In 1997, it was mostly a producer, export-led economy. Today, 2008, domestic consumption is fueling growth. This has led to the need for CMR’s market research services.
• Significant change in Chinese attitude. In 1997, there was a feeling of pessimism: “we are behind, and we need to catch up to the West.” Today, 2008, there is a much more optimistic feeling. “Every expects their paycheck to go up, for there to be more.”
• Role of foreigners: (1) Provide broader perspective. Shaun does not agree with the point that “everything is different in China” so international experience can be applied. (2) Represent corporate culture. He used the example of Goldman Sachs. In order to use your corporate culture as an advantage, you need to bring that into the local market through people familiar with the home office.
• Shaun also talks about the need for empowered local management with home office credibility so that can move quickly to respond to the market and not be second-guessed.

Tracy Deng, VP of Marketing, Tudou

• First Christine shows a little bit of the Tudou office, which looks a bit like the Facebook offices in Palo Alto. Then she lets Tracy introduce herself. Tracy then shares her opinion on the differences between foreign and homegrown Chinese startups. She goes on to talk about where foreigners can be most useful in China.
• This is by far the most interesting interview to me, for some reason.
• Tudou is now the #1 video sharing site (aka “the YouTube of China) with 53% user share, 60 MM unique visitors/month, and 10 MM unique visitors/day.
• Leadership was due to first mover advantage. They started out with students but now have user demographics similar to the internet at large in China: 46% female, geographic and income mix similar to overall China internet, strength in 20-30 year olds.
• Customer acquisition purely through word of mouth.
• Differences between Foreign-run (MNC) and homegrown China startups. Even though staff is comparable in quality and background:
• Difference 1 - Mindset - startups have a survival mindset, and feel like they have to grow or die. MNC employees work as employees but startup employees take ownership.
• Difference 2 - Strategic Importance - Multinationals consider China “part of their globalized strategy” and part of the future, so “lets give it a try.”
• Difference 3 - Decision making and independence - Multinationals may put their local teams on a short leash and not allow them to make decisions independently.
• How foreigners can be successful - bring a new perspective, seek new opportunities, and be creative. Areas where foreigners have been most successful (in her mind) is fashion, design, and art.

Siok Siok Tan, Award Winning Filmmaker

• Christine’s posts are here, here, and here.
• Background: from Singapore, lived in China for 5-6 years
• She is working on a project called Boomtown Beijing
• She believes that Western POV is shaped by a very narrow range of information about China, with little showing modern China or “people having fun”…mostly covering people in China under “extreme conditions.”
• Role of foreigner in China is to “represent a system of knowledge” based on language, culture, and upbringing. This is hard to replicate. So it is true that “more people in China speak English” but that doesn’t mean foreigners can’t play a role.
• The job of foreigners is to “transmit this knowledge” and “institutional memory” to the local partners and employees that they work with.

Most people with some China experience may find that they already agree with most of the perspectives in these interviews. But I think most foreigners looking at the China market must learn to listen and appreciate the complexity of Chinese society and business culture today before coming to a “snap” judgment on how they think things really are. In my opinion, nothing in China is as simple as it might appear at first glance!

Time out — yes. Just not time out from blogging… A weekend is not a “complete weekend” without a quick David Feng post.

China in 2008 is very much a different place than the one in 1978. In the late 70s, if you had a phone, you were considered “too special”. If you had a telly set, I’d guess the neighbors would come around for that. Locals didn’t have Fanta to sip at will; they made do with the local variant, The Arctic (which still has one of the cutest logos around — the way I see it).

The China of 2008 is different — in fact, too different. Young ladies don on the latest casual wear, making yours truly look like an outcast from the era of the planned economy (or someone who’s been to too many business meetings). People IM via QQ, text until their fingers go numb, and watch Korean movies on TV. We’re undergoing screen addiction — and nobody seems able to stop that.

So this is why sometimes, we need to drop the whole thing — and head out into that great big Nature that’s always there for us.

I’ve heard too much — about people being addicted to screens. Screens of all kinds. Stories about young ladies stuck in bed, watching TV or movies off the Web, are about as frequent as those mileage markers on those highways. Too many of my friends are on QQ or MSN / Windows Live Messenger. And mobile phones are all the rage.

The screen bug has hit those born in the mid-to-late 1980s especially hard. Some kids in university (now — note that this no longer includes yours truly) can do without water, but if someone cuts their Internet connection, it’s like hell on earth. They can’t do without that big Internet.

People need to be pulled away from those noxious screens. They need to head out into the open. It’s good that I’m seeing more and more boys and girls (holding hands or otherwise) out on their streets. They need to do something we all need to do — inhale, exhale. And while Beijing’s air quality isn’t the best in the World, it’s still better than that in the average dorm.

Let this post be some kind of wake-up call for those of you still stuck in the dorm — get out and discover that great big World out there!

A combination pool hall and bar lounge with dark and sleek decor, Racks is an impressive space. The mechanical bull by the DJ booth and bar is definitely a nice touch, but getting to the hidden-in-the-wall restroom brought back nervous People 7 flashbacks. As it is, Racks is located across the bridge from the G-Plus nightclub at the south end of Shanghai’s XinTianDi, where the old CK Why Not nightclub use to occupy.

Yeah, “why not name our club CK?” That’s a real forehead slapper.

Like Volar, Racks has a sister venue in Hong Kong and also promotes a certain members-only exclusivity. But if Volar Shanghai’s experience is of any indication, that’s a policy with its obituary already written.

The China Business Network and The Shanghai Business club hosted a “Joint Happy Hour” at Racks this past Wednesday, and Elliott suggested that I attend after twittering a pseudo-invitation out of the event organizer, Christine Lu. After an afternoon of plotting world China domination with the Regional Director of admanGo, Herman Yueh, I managed to convince him to come along. After all, we’re looking for a few good men and these sort of international-minded/expat professional mixers just might be a good place to do some network recruiting, especially after one gets fed up with local talent (more on this in a future interview piece).

We arrived fashionably late. Greeted by the vast and empty black expanses of Rack’s, we almost walked right back out the door. To be sure, a splatter of people for the event were lounging in the corner, but the relative emptiness (and vastness) wasn’t particularly inspiring.

I’m glad I forced us to stay.

We ended up spending about a couple of hours there, and while we didn’t meet an army of people, I did get to network with a handful of great individuals across different fields (FMB, international trade, publishing, expat services, logistics, chemicals, contract manufacturing, architecture headhunting, etc.). With that came ample discovery and discussion of various potential business opportunities, both for admanGo and my own travel start-up, adex360. As far as I was concerned, that made for a productive evening.

I never did end up meeting Christine Lu, which I felt would’ve been common courtesy due to her and Elliott’s twittering relationship. I recall recognizing her (from her Facebook picture) early at the event but later she was nowhere to be found, ostensibly busy interviewing for her video profiles. Too bad, quite a few of us were curious to meet her.

One last thing, and I hate feeling compelled to ask this but, did anyone at the event catch those two (questionably) stunning ladies? Someone tell me those two dolls were, uh, professional models (yeah) and not, uh, the stereotypical gold-digging Chinese huntresses that prowl Shanghai wherever relatively affluent foreigners with the scent of money can be found (of which XinTianDi is not unknown for).

Note:  Proceed at your own risk.  This post contains an easy five step process, with lyrics included, for a non-fluent Mandarin speaker to belt out a song with local friends at a KTV lounge.  CN Reviews disclaims all responsibility for your potential loss of hearing, pride, face, or business relationships.

When I visited Beijing in January, the manager of the Beijing team scheduled a team-building event at Cashbox Partyworld. My problem was threefold: My Chinese wasn’t good enough to follow the lyrics, my singing wasn’t good enough to follow the tune, and I didn’t know any Chinese songs. When I shared these impediments with the Beijing manager, she suggested that I sing Liang Zhi Lao Hu (两只老虎） which seems like at best would have been embarrassing and at worse some kind of devastating loss of face. In the interest of global employee retention, I was determined to make a good showing on behalf of our US team!

Chinese people may not realize that most Americans have absolutely no idea what a KTV experience might look like. I’ve posted photos of Cashbox Partyworld at the end of this post because frankly I found it mindblowingly different than what I expected.

Step 1: Pick a Song

I asked my fellow CN Reviews blogger Min Guo to bail me out. She selected Wàng Qíng Shuǐ (忘 情 水) aka “Water of Forgetfulness.” Her rationale was that Andy Lau’s singing was not that great, hence great for someone of limited vocal range, and that his Mandarin was also not that great, hence perfect for me!

Step 2: Find the MP3 and the lyrics online

Min helped me find the MP3 and the lyrics online, and I dutifully uploaded the song to my iTunes and listened to the delightful strains of Wang Qing Shui.

Step 3: Convert the Hanzi into Pinyin

With only 3 days to go before the big event, I chose not to use the Chinese lyrics as a Chinese character learning opportunity. So I downloaded the trial version of NJStar which I had used before in the past, and slammed all the Hanzi into Pinyin. I have attached the Pinyin translation below to save you this step.

Step 4: Practice!

In the privacy of my Beijing hotel room, I listened to the song on iTunes and sang along using the Pinyin.

Step 5: Get ready to sing, and volunteer early so someone else doesn’t “steal” your song by singing it before you do.

When I discovered that Wang Qing Shui was already on the playlist, I felt a creeping sense of panic. I decided to soldier on and sing the song!

Photos of KTV in Beijing at Cashbox Partyworld, 2008

OK, so what in the world is KTV anyway? Here’s my journey into KTV Wonderland…

Buffet Spread at Cashbox Partyworld

Hallway to our private KTV room

Door to our private room

Happy singers inside

Our Party in Progress

My Beijing debut. I will never forget my first taste of the Clear Water of Forgetfulness.

Appendix: Wang Qing Shui (忘 情 水) in Pinyin by Andy Lau

The song follows an A-A-B-Chorus-Chorus format and repeats twice in its entirety. Then it ends with a repeated Chorus. Quite a simple song form actually. With this appendix, you should be able to follow the song with complete accuracy.

A 1
céng jīng nián shǎo ài zhuī mèng yī xīn zhī xiǎng
曾 经 年 少 爱 追 梦 一 心 只 想

wǎng qián fēi
往 前 飞

xíng biàn qiān shān hé wàn shuǐ yī lù zǒu lái bù
行 遍 千 山 和 万 水 一 路 走 来 不

néng huí
能 回
A 2
mò rán huí shǒu qíng yǐ yuǎn shēn bù yóu yǐ zài
蓦 然 回 首 情 已 远 身 不 由 已 在

tiān biān
天 边

cái míng bái ài hèn qíng chóu zuì shāng zuì tòng
才 明 白 爱 恨 情 仇 最 伤 最 痛

shì hòu huǐ
是 后 悔
B
rú guǒ nǐ bù céng xīn suì nǐ bù huì dǒng de
如 果 你 不 曾 心 碎 你 不 会 懂 得

wǒ shāng bēi
我 伤 悲

dāng wǒ yǎn zhōng yǒu lèi bié wèn wǒ shì wéi shéi
当 我 眼 中 有 泪 别 问 我 是 为 谁

jiù ràng wǒ wàng le zhè yī qiē
就 让 我 忘 了 这 一 切
CHORUS 1
a gěi wǒ yī bēi wàng qíng shuǐ huàn wǒ yī yè
啊 给 我 一 杯 忘 情 水 换 我 一 夜

bù liú lèi
不 流 泪

suǒ yǒu zhēn xīn zhēn yì rèn tā yǔ dǎ fēng chuī
所 有 真 心 真 意 任 它 雨 打 风 吹

fù chū de ài shōu bù huí
付 出 的 爱 收 不 回
CHORUS 2
gěi wǒ yī bēi wàng qíng shuǐ huàn wǒ yī shēng bù
给 我 一 杯 忘 情 水 换 我 一 生 不

shāng bēi
伤 悲

jiù suàn wǒ huì hē zuì jiù suàn wǒ huì xīn suì
就 算 我 会 喝 醉 就 算 我 会 心 碎

bù huì kàn jiàn wǒ liú lèi
不 会 看 见 我 流 泪

INSTRUMENTAL INTERLUDE

REPEAT ENTIRE SONG

REPEAT CHORUS 1,2

REPEAT 2ND PART OF CHORUS 2

Sorry for the late post — just got in as Wednesday wounded up my time (as in timezone). There was one big thing I noticed today when we (as in the thesis team) had a reunion; out of all the folks in the team, I was the only freelancer. And I was the only one doing what I wanted to do — and getting paid for this.

See, that’s the thing. For too many Chinese folks out there (especially for those “born local, grown local”), the first thing that they want to do — is to remain “alive”. They need to earn the money. They’ll have to accept the fact that they have to go through what is considered in the West as cruel and unusual punishment to get the money. As a result, many a modern resumé (by that I mean the resumé of the average guy/lady in their 20s) can easily span pages upon pages — they give up on their present job and look for new ones faster than you shift gears in your average auto.

The Chinese, by the way, have reason to do this: they’re more “reality-based” and are less likely to spend time what I call the “ideological ivory tower”. Folks like me pursue what we want to do (regardless of the econ results; it’s a miracle that I’m paid at all to do what I do, in the eyes of the average local), but folks in the Chinese world pursue what makes their ends meet.

There’s a saying that in the mainland job world, women are used as men, and men are used as livestock. That’s probably too grotesque and graphical, but it’s — well, how can I say this — true. Keeping people in the office over weekends, forcing them into millions of meetings, and making the receptionist stay until late (because the boss is there) — these are the things that many a Westerner probably won’t really come to accept, but many a local do. They “have” to, to some extents; this is how they get paid.

Freelancing is probably not viewed with a negative predetermination; the reason why freelancing hasn’t taken off in China lie mainly in two possible reasons. First and foremost, you have to make ends meet, and you need the money to live to the end of the month. Second, the “traditional bits” in the average Chinese, plus the relative “newness” of freelancing, has meant that few people get to try this new job — or collection of jobs — or few people even have a chance to freelance.

Yours truly, by the way, doesn’t think he’s a freelancer. He thinks he’s a multi-gig guy working from 8 AM in the morning to 11 PM in the evening. Now the only thing that prevents him from being a full-time 8-to-11-er are those Spanish lessons in the morning…

But seriously, can learning a new language be considered as a detriment to productivity?