Posts Tagged ‘China’
January 10 – Qingdao
Tesco, oddly enough, was the first supermarket I visited when I arrived in China in June 2008. The store inside the Luwan stadium was next to the block of serviced apartments where we stayed in our first month.
It was a dire store. The vegetables looked limp and old, the meat gave off a strange smell, the layout was indecipherable and no one seemed to be buying much. I quickly gave up on Tesco’s China strategy and never went back.
Until last weekend, when I arrived in Qingdao and saw the new Tesco hypermarket and the shopping centre that Tesco has built around it. It seems the supermarket giant has got serious. It invested £500 million (5.4 billion yuan) in China last year and plans to spend even more next year.
The money is going on a series of 23 giant shopping centres, some of which have blocks of apartments and cinemas attached. Tesco is going into the property development game (hohum, sometimes I think this is the only game to play in China). This way, it can have its pick of sites for its stores and lay them out a bit better than that store in Luwan (which is being renovated, apparently).
One Tesco executive tells me that they are opening four more shopping centres in the south in November, December, January and then February. The cinemas, in particular, should do well. “In the US, there is a cinema for every 400 people,” he says. “In China, there is one for every 180,000, so you can see there’s a growth potential”. The rush to open these stores is because WalMart and Carrefour are far ahead of Tesco.
The new Tesco store itself is impressive. It spans two floors and is laid out to focus on the core items that Chinese shoppers look out for: cooking oil, eggs, pork, toilet paper, rice etc. However, it also stocks a mind-boggling array of produce. Tesco says it has 2,000 suppliers for the store, who make 800 direct deliveries each week. The logistics of running that many suppliers is mind-boggling and Tesco is busy building distribution hubs so that it can mastermind its supplies better.
The “marketplace” is much cleaner than in the old Tesco, with fewer iffy smells, but retains all the chaos that Tesco insists makes Chinese shoppers happy. The store refers to the shouting and shoving as “theatre”. And there is one innovation that has come from Korea, apparently. A fine mist is constantly sprayed over the vegetables from overhead, making them look fresh and just out of the fridge. The system appears to have been rigged up, shanzhai-style, from a length of drainpipe painted green and I imagine it won’t be long before it is replicated across stores elsewhere.
The boss, Ken Towle, has a remarkable command of every price and every product he stocks. He discusses the elasticity of demand for eggs, which are sold loose in the store and sometimes decanted into plastic bags for customers who just want the liquid to take away. He says that a tiny fluctuation in the price of eggs can spark mad rushs. A 20 per cent price drop, he adds, would cause a stampede in store (the store is already packed out – the police restricted the entrances but around 60,000 shoppers were expected to pass through).
Meanwhile, the store has also reached out to the local community. Through the neighbourhood committees, Tesco invited locals to do their morning exercises in the forecourt, set up a CD player, handed out warm coats and also hot drinks. This sort of thoughtfulness costs nothing and generates a lot of goodwill.
It is early days, and Tesco clearly doesn’t have the guanxi in Qingdao to fill its shopping centre with the big name shops. Much of the mall looked like it had been filled with mom-and-pop shops that were happy to upgrade to shiny new premises. The only really recognisable Chinese brands on offer were Li Ning and Erke. It will be interesting to see if the bold strategy works though, and with the speed Tesco is expanding, it shouldn’t take long before the results are evident.
Gao Zhikai, or Victor Gao, was Deng Xiaoping’s old interpreter and sat in on some of China’s earliest encounters with the outside world, including the 1986 meeting between Deng and John Phelan, the then chairman of the NY stock exchange, during which Deng decided that China must have its own stock exchange.
Today, he is an executive director of the Beijing Private Equity Association and a director of the China National Association of International Studies, and has held positions with Morgan Stanley, PCCW and CNOOC.
But it was his early knowledge of Beijing’s interactions with the outside world that were most relevant for a piece about how Britain should handle its relationship with China.
In his view, China’s foreign policy history during the post-Mao period can be split into three periods:
1. 1978 to 1989: Deng Xiaoping’s opened up China to the outside world after decades of isolation. During this period, China’s tacit support for US policy helped bring about the end of the Soviet Union and the end of Communism in Europe. Mr Gao said China and the US were trading military and political information, and that the US was in the process of selling China helicopters and fighter-jet guidance technology.
2. 1989 to 2001: After the events in Tiananmen Square, the US turned its back on China. A UN resolution was passed against China and sanctions were imposed. No diplomatic meetings took place from 1989 to 1993, when Bill Clinton finally met Jiang Zemin on the fringes of the Apec conference in Seattle. “This was a sensitive and difficult time for China,” said Mr Gao, pointing out that with the Cold War over, China emerged as the next natural ideological enemy for the US, even though its brand of “communism” was a world away from Soviet marxism.
3. Post 2001: After the September 11 attacks, the US reconciled to China, aware that Beijing was a valuable ally in the war against terror, since (a) China has a Western border with Afghanistan and (b) China is not ideological at all, unlike, say Islamic fundamentalists. In addition, China’s admission to the WTO had helped push the country forward economically and given it an incentive to play a bigger role on the world stage.
Last year, said Mr Gao, was a major year of transition. A year in which China fully turned from introverted to outward-looking. The old policy of remaining a humble and non-speaking partner is finally dead and China expressed its position strongly at every international summit, from the G20 to Copenhagen.
Nevertheless, it is clear that there have to be some structural changes in the CCP bureaucracy before foreign policy is given the role it deserves. For their part, Hu Jintao and Wen Jiabao have travelled abroad to cement business ties, rather than to play the grand game of international diplomacy.
Mr Gao pointed out that the Foreign minister, Yang Jiechi, is not even in the enlarged politburo. “There are two to three dozen officials higher up that him, compared to the US, where the Secretary of State is number two or three”, he said.
The reaction from the Chinese, however, has been to raise the spectre of the Opium War and of colonial extraterritoriality, when British subjects were not subject to Chinese law. Since I arrived in China, nearly two years ago, I reckon I have heard the Opium War raised at least twice a week, either in the media or in conversations with Chinese. This war took place 170 years ago and it is time that people got over it. After all, there are far more recent tragedies that no one mentions.
The fact that the Chinese embassy feels the need to point out Britain’s history of colonial oppression, and to suggest that current policy is influenced by events in the far past, does it no favours at all in terms of building China’s “soft power”. It merely reinforces the idea that China is stridently nationalistic and determined to be unaccountable.
It would win more points by outlining the legal process which convicted Shaikh, and by pointing out that every death sentence in China is now examined by the Supreme Court, a recent reform which has led to a dramatic decrease in executions.