When I arrived in China last week, I headed directly from the Hong Kong to Ningbo to visit some factories with U. I was fresh off a crazy few weeks of work deadlines and my housemates’ wedding, so I hadn’t been paying much attention to my plans for the first days in China. So, I didn’t read up on Ningbo or the Zhejiang province before left. It’s taken me a week or so to digest my visit, and I’ve started to do a little reading now. But, first, I wanted to share my initial impressions.
We arrived in Ningbo by plane and immediately hopped on a bus to Cixi where we met up with the crew from Focus Designs. The factories they work with to produce their self-balancing unicycle are all around the area, and on Saturday, we went to their main assembly manufacturer in Yuyao.
This was my third trip to China this year, and my second factory visit. Both times, I was surprised by the small scale of the operations. (The first visit I made was to a factory where they assemble a well-known basic robotics kit.) These “factories” are household operations. The Yuyao factory is located inside the owner’s home, along a long chaotic stretch of road lined by restaurants, factories, and houses. We were located about two blocks up a side street; along the same street were a small electronics factory (it seemed), a fireworks factory (frequent day-time testing of the product made it feel like a festival was underway), and a beautiful golden rice field.
In addition to their product, the factory made (at least) two other products: one that licenses some Focus Designs technology — and hair straighteners. The hair straighteners are made, more or less, from scratch. The owners have a machine for making injection molded plastic parts, and they make both the plastic handles and the electrical plugs on site. They purchase the heating elements, cable, and metal prongs for the plug, and assemble the device on site. It’s their backstop product — when there are no other products to work on, they make hair straighteners. I saw box after box of simple, black and red straighteners, unbranded.
The production line is of a type with other assembly lines that I saw: a long stretch of wooden tables with a metal frame dividing the workspace into stations on both sides. Each station has a laminated card with instructions for the step performed in that spot, and products rotate along the line — up one side and down the other — coming together piece by piece with parts made by other suppliers, purchased nearby, or molded and machined on site.
The device is assembled and tested by hand. The manufacturer designed and built several unique contraptions for holding the somewhat-awkwardly-shaped device in place for testing at various stages — e.g., a simple metal frames, sized for the unicycle’s height with rollers at the base that allow the motor to be tested. The assembly line is probably staffed by no more than 15 people, and the owner and his wife were both present and hands-on in the whole process. We were there on a Saturday, so I didn’t get to see the line operating at full pace, but I got the idea.
The place was nice — a small office, a couple of rooms for manufacturing, a simple line. The owner drove a high-end foreign car, and the house itself was clean and spacious; quite American and suburban in its styling, in many respects. I saw billboards all around the area advertising American-design developments. The factory team worked closely with the Focus Designs team to develop new product testing processes to speed up production time. I set up shop on the couch in the office and worked on the Wi-Fi network. At lunch, we all went to a nearby restaurant for epic amounts of food (and slightly too much beer for an afternoon of wading through jet-lag).
That evening, U and I continued on from Cixi by bus to Yiwu. Our bus was loud and slow — unless it was careening far too quickly along a suddenly clear stretch of highway — and jammed with people. Hundreds or thousands of small manufacturers and assemblers and parts suppliers lined every road that I saw along the way. The region was booming with business, and it felt completely Wild West, with so many small shops and businesses, many doing the same things in parallel.
In Yuyao, we’d experienced the advantage of this ecosystem, though; if you wanted to prototype a new product or try a new way of making something, it was easy to get the parts you needed, either by buying it off the shelf at the specialized shop down the road or by stopping in at the machine shop up the road and having it custom made. Everything was available within spitting distance of your own shop.
This sort of ecosystem advantage gets talked about in Silicon Valley, with respect to the density of entrepreneurs, advisers, investors, and potential customers; this was that density times 100, if not times 1000 — just in a different area of expertise. I imagine that Detroit and the U.S. Rust Belt, more generally, must have offered a taste of this experience in its heyday.
Anyway, some brief Internet research on our way to Cixi suggested that the city had a large Middle Eastern district, so we looked for hotels nearby and grabbed some delicious dinner (including the best baba ghanoush I’ve ever eaten!). Yiwu is a big city – bigger than San Francisco — and the “Exotic Street” (according to the street sign) district where all the Middle Eastern restaurants were located was bustling. Many of the patrons seemed to be visiting from Africa and Arab countries on business trips — with the amount of manufacturing in the region, it made sense that this city would be full of traders.
We took a bus from Yiwu to Yongkang the next day, where we had made appointments — purely out of curiosity — to visit a couple of other factories. U had done some research and discovered that the Yongkang region is known as the “hardware capital” and that factories there also manufacture an enormous number of electric vehicles — not cars, but other devices: electric scooters, motorcycles, golf carts, ATVs, go-karts, you name it. According to Wikipedia, the region produces 150,000 scooters every day (not just electric).
Our Yongkang trip began with lunch; our first hosts took us to grab a quick bite at an efficient place with terrible food. But the restaurant looked out on the river that runs through Yongkang — parking spots lined the streets, and a riverwalk with flowering trees and a nice path ran alongside the water. Our host told us that, when he was a kid, it wasn’t as beautiful, but that the water was clean enough to swim in, and that he spent his childhood playing in the water. Today, there are a lot more factories and cars and things on the road, and the river is too polluted to swim in. (I would have liked to know more about that, but we had a significant language barrier that made it difficult to go deeper.)
Then, on to the factory, which makes motorized skateboards. While this was a much bigger facility than the Yuyao factory, the basic arrangement was the same. A storeroom of parts, some made on-site and others purchased from other suppliers; a few long production lines, where individuals moved a product down the line after completing their step of the process. Hand tools, instruction sets, and a final testing stage.
The factory here was more ‘official’ feeling — more inventory, more products, a showroom for meeting with potential buyers/clients (us), and more staff — but on the whole, a smaller operation than I would have expected. I grew up in the Midwest in the ’80s, and my mother worked in the Bell manufacturing facility in Rantoul, Ill., where I saw much higher-volume production with much higher degrees of mechanization, including computerized machines for embroidery and sewing. I was a small child, so my impressions of this place are few and dated, but I know for sure that the scale of the Bell facility was much larger than what I saw here.
The final stop on our factory tours was an even larger facility — a factory that makes scooters, golf carts, go-karts, ATVs, and … trampolines.
I asked the woman who was showing us around — she works in exports, but her English nominated her as our guide for the day — why they had started making trampolines, since they seemed so different from the rest of the company’s products. She told me that they were looking for a new product they could make that had higher demand; apparently, global trampoline sales are booming. Who knew? The other reason was simply that one of their customers had asked if they could make them. On the surface, the products seem terribly different, but after visiting the site it makes more sense: trampolines, like the other items we saw, are mostly made of bent, powder-coated metal and springs.
A minimum of 150 employees operate a plant that shapes metal parts on-site, then preps them with rust removal and powder coating, before assembling them with other components into the above variety of products. They have recently opened a second, larger factory across town where they had shifted much of their production. Workers live in on-site dormitories, and since we visited on a Sunday, the plant wasn’t in operational mode. A handful of workers were tinkering with a few go-karts on the production line, but the place was pretty quiet.
We left after the brief tour, and headed back to Yiwu and caught our flight back here to Guangzhou. More bus rides and airport waiting rooms reinforced what we’d seen the rest of the weekend: endless amounts of manufacturing in tiny shops along all roads throughout the region, huge numbers of Africans traveling through the region on business, and filth everywhere. From the bus I saw a couple of smoke plumes that could have been buildings on fire, or could have been manufacturing related; it wasn’t clear from the road. Traffic was a madhouse, and expensive foreign cars jammed the roads alongside the usual bewildering array of buses, scooters, motorcycles, taxis, bicycles, tricycles, mini-trucks and pedestrians.
Arriving in Guangzhou, with its nearly 13 million inhabitants, was a sigh of relief. Urban and crowded and a little chaotic, certainly, but it feels like a global city here; not like a crazy frontier town on the verge of a bar brawl. I have to say, I’m a huge fan of Guangzhou, and I really enjoyed my week in rural Yunnan back in January. What I saw in Zhejiang wasn’t appealing. Since arriving, I’ve been trying to read a little bit more about what I saw in Zhejiang. It was so different from my experiences in Guangzhou and Yunnan. And, apparently, it really is different.
The Zhejiang Model
The so-called “Zhejiang Model” is something that’s been the subject of Western media and Chinese success stories over the last 5 years. In short, the Zheijiang model of development has relied heavily on private investment and small businesses to drive enormous growth in the manufacturing sector. That was very much in keeping with what we’d seen: dense networks of small businesses and lots of entrepreneurship.
The narrative about the region’s success has been right in line with Western narratives — particularly in the business press — about entrepreneurship, small businesses, and bootstrapping as the way you climb the economic ladder, so I’m not terribly surprised to find so much press about it. Take this piece, from the Financial Times, in 2006:
During his recent trip to China, Hank Paulson, the US Treasury secretary, made his first stop in Hangzhou, capital of Zhejiang province. This carefully choreographed trip was thought to signal where Mr Paulson thinks the country’s future lies. This is a long overdue approach. Unlike his predecessors, who liked to tour the skyscrapers in Shanghai, Mr Paulson understands the China miracle – that its impressive development came from the same dynamics that create growth and wealth elsewhere, namely bottom-up entrepreneurship and a market-based financial environment. It is time to get the China story right and understanding the rise of Zhejiang is the way to do it.
BusinessWeek got in on the Zhejiang lovefest a few years later with a contributor piece called “Zhejiang Province: A Free-Market Success Story” in 2008:
The Zhejiang model is characterized by a heavy reliance on private initiatives, a noninterventionist government style in the management of firms, and a supportive credit policy stance toward private companies. Probably the most famous product of the Zhejiang model is Wenzhou, a city in southern Zhejiang province that today accounts for a disproportionate share of rich entrepreneurs, asset owners, and China’s manufacturing prowess.
Although Wenzhou and Zhejiang represent the triumph of laissez-faire, broad-based, entrepreneurial capitalism, many outside analysts fail to appreciate why China should adopt free-market economics rather than retaining state-owned monopolies and state interventionism.
Unfortunately, the Zhejiang Model appears to have shown its dark side recently.
Like the Yongkang manufacturer told us, pollution has become a major issue. Ningbo and other cities in the region have (like, this very weekend, but also before) been the site of large-scale environmental protests. Rapid growth of manufacturing hasn’t been limited to small business; it’s been large and small businesses, including chemical and chemical-intensive manufacturing. Various campaigns have raised concerns about the impact of these industries on environmental and human health, pointing to fish kills and increased cancer rates.
The economy appears to be tracking a bit too closely to Western models these days, too. The region is now experiencing a serious credit crisis, complete with large-scale bailouts by the government. Many observers seem to suggest that the current problems are largely driven by a private sector that outpaced the ability of the Chinese banking sector to meet its demands; but it seems to me like the problems weren’t so different from what we saw in the U.S. economy: a proliferation of bad loans that required continuous strong economic growth to hide their problems. I’d love to hear comments from others who have a better understanding of these issues.
Also, I’ll be curious to see if how the region’s situation is dealt with in the U.S. press going forward, now that the free-market darling isn’t quite so darling.