Euroasia: Language, Culture and Travel

At Euroasia, we have the privelege of meeting talented New Zealanders who do amazing things in their day jobs. For today’s blog entry, we have Ken Applegate, who has been learning Mandarin with us since early last year to share his views on the Chinese economy, why he’s investing there, and his experience in working with the Chinese.

Ken is the Senior Portfolio Manager for the Fisher Funds International Fund, a specialist New Zealand-based fund manager with assets under management of NZ$1billion spread across more than 30,000 clients.  Thanks Ken for sharing your story with the Euroasia community.

As a global investor we have the ability to invest anywhere in the world and our allocation to Chinese companies has ranged from 20-40% of the fund.  We have a long term structurally bullish view on the Chinese economy.  This is not just our opinion; it is based on fact and history.  China has been a global economic powerhouse more than once in history.  Countries like the US and the UK have dominated the world economy once before and even Rome was ‘great’ once.  Just a little more than 200 years ago China’s economy comprised approximately 1/3 of global GDP and it is on the rise again.  To quote Warren Buffett, a legendary investor, “the 19th century belonged to England, the 20th century belonged to the U.S., and the 21st century belongs to China.  Invest accordingly“.  I firmly believe most people underestimate how important this shift is and the significance of its implications.

China dominated the world economy 200 years ago

I have worked as a global fund manager for more than 15 years with the majority of my experience gained while living in California.  I first visited China in 2000, and I now travel to China 2-3 times per year.   In addition, I speak with Chinese companies and local investors/analysts on a weekly basis and often meet with Chinese companies when I attend investment conferences throughout Asia, especially in Singapore and Hong Kong.  I have described below two examples of investments made in China which highlight some of the many challenges I have encountered and learned from over the years.

I also believe in continued learning and my latest pursuit has been learning Mandarin.  I began taking a weekly class at Euroasia language school in Auckland in early 2010.  I have experienced first-hand the difference between speaking Chinese and thinking Chinese.  While I have spent a good deal of the last 10 years trying to understand the Chinese way of doing business, I decided that learning the language could be another way to bridge the gap between cultures.  Many Chinese attempt to learn English so out of respect why shouldn’t we attempt to learn the most widely spoken language in the world?

China’s future will be driven by urbanisation and the emerging middle class

It is critical to understand that while China is one country there are significant regional differences.  One way to gain a holistic picture is to travel to a variety of locations throughout China.  While Shanghai and Beijing are the financial and political centres, they comprise less than 5% of the Chinese population.  The real future of China, in my opinion, lies in the emerging middle class so I have made an effort to travel to tier 2 and tier 3 cities.  In addition to Guangzhou in the south, I have been as far west as Chongqing and Chengdu and as far north as Changchun.  I like to visit similar locations every few years to see how things are developing.  The reason for my travel is to visit company management at their headquarters.  I have found they are much more open to a dialogue and it forms a lasting impression if a fund manager from New Zealand makes an effort to come and spend a day with them on their home turf.

This is the welcome I received from Cao Zhao Hui, the CEO of Wasion Group, when I visited them at their headquarters outside of Changsha in 2009

The first example is an investment that didn’t work out.  One way we generate our investment ideas is through quantitative screening of financial metrics.  We discovered a company called Dapai, China’s leading branded backpack and luggage company.  I was attracted to the company because of its leadership position in its industry and cheap valuation.  The valuation of the company was low because the company had made some decisions that did not fit the mold of a ‘typical’ high quality publicly traded company.

After significant research on the company and numerous conference calls with company management I believed that this was an investment worth pursuing.  We are strong believers in quality management so I travelled to Quanzhou, Fujian Province, to spend a day with the CEO and Chairman at their facility.  I also conducted research by interviewing customers at shopping malls (including the competition) to gauge the perception of the company and brand.

As mentioned previously the cheap valuation was due to subpar decisions the company had made in regards to how the stock and company was perceived.  I believed these decisions were made in naivety.  During my meeting with the CEO I highlighted how to change their perception which could lead to significant wealth creation.  I offered my assistance and facilitated a conversation with a public relations firm and numerous specialised brokers and made myself available for discussion on any decision-making if required.  They responded positively and we celebrated a fruitful day and good relationship over dinner.

I had continued conference calls with management and while the company did make some positive steps forward they were only baby steps.  Unfortunately the key decisions continued to be poor in spite of my advice.  This was frustrating as there was no logical rationale for the decisions.  The decisions were actually made for reasons other than purely financial reasons, which meant sacrificing their own business in the short term to maintain relationships with distributors.  I understand this is important, but it was still frustrating as management had committed to change.  While I do understand how Chinese think, I am ultimately a westerner, especially when it comes to business, and our way of decision-making does not always prevail.

Touring the Dapai factory with the CEO, Chen “Perry” Yong

The second example involves a more positive outcome.  The company is China Automation Group, a leading company in safety equipment for the petrochemical and rail equipment industries.  It is similar in structure to the first example where my research and relationship was developed over a 6-month period.  The major difference in this example is that I already had relationships with a number of players in the rail equipment industry.  This added depth and meaning to my relationship with this company.

We first invested capital in China Automation Group in mid 2008 and while business for the company continued to be positive, the stock took a dive in 2008.  This was frustrating for the company and for me.  I remember meeting with Xuan Ruiguo, the Chairman of China Automation Group, in Hong Kong in October 2008 when the stock price was HK0.60/share.  To put this into context we bought our first shares at HK$2/share.  The good news is that now the shares are trading at more than Hk$6/share.  We showed our confidence and belief in the company by buying more shares and it was this day that defined our relationship.  I had breakfast with the Chairman in March this year and he recalled my support during that challenging time and said that he always has time for me.

Summary

I have always believed in a long term approach to investing and this is a mindset that is critical when it comes to doing business in China.  The best lessons I have learned have not come from reading books but from my own experiences on the ground.   This will continue to be the focus for me in the future.  We shouldn’t overestimate the ability to change others’ mindsets and this is not a sustainable outcome anyway.    We need to adapt if we are to conduct business in their country, and both parties in a relationship must be satisfied.  This requires a long term approach – it’s not just about trying to make a short term profit.

The best piece of advice I give people who want to try and understand China is to go there.  I tell them to spend some time in one of the big cities and then travel inland to a smaller city.  I have offered numerous times to provide assistance to those interested in an attempt to make the process seem less daunting.  Seeing is believing.  It takes time to develop an understanding and time to create relationships.  Confucius said “A journey of a thousand miles begins with a single step”…and the long term rewards can be unlimited.

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Came across this funny story, not sure how true it is, but it’s funny nevertheless.

The police swear that this story is true, and that it is about a Christchurch judge who was once in session in a court down south, when the case of a German tourist was called.

The tourist could speak no English and no interpreter was available.

Was there anyone in the court who could speak German? the judge asked.

He did a bit of pleading and cajoling in the interests of getting the case heard right then, and eventually a wee chap in the back of the public seating put his hand up.

Yes, he spoke German, he said.

The judge looked relieved and motioned him forward and told him to stand next to the dock.

He would act as the unofficial interpreter to get the case moving.

Could he start by confirming the person’s name please? the judge asked.

The wee chap turned to the dock and loudly demanded: “Vot iss your name?”

Shaking his head, the judge said, “Ah well, I suppose I asked for that,” and sent the “interpreter” back to the public seats.

Credit: Courtnews

p/s: Euroasia offers professional translation and interpreting services, to ensure you don’t end up in these “funny” situations.

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In this TED video, Patricia Kuhl shares astonishing findings about how babies learn one language over another — by listening to the humans around them and “taking statistics” on the sounds they need to know. Clever lab experiments (and brain scans) show how 6-month-old babies use sophisticated reasoning to understand their world.

Why do babies pick up language easily? There is widespread acceptance amongst the language learning community that children pick up languages easily. How they do this is not as well understood.

According to Kuhl, babies are listening intently to us, they are “taking statistics” depending on how adults talk. In this video, she gives some examples of Japanese and American babies learning their native language.

In English, babies use a lot of RA and LA. But the Japanese do not, so the study shows that though both Japanese and American babies respond early on to the same RA and LA sounds, but somehow as the babies grow older the American babies respond better to RA and LA, but the Japanese babies deteriorate ie. what sounds babies are exposed to matter.

Bilingual babies have to keep two sets of “statistics”. Do they get confused?

Kuhl tested sets of American vs Taiwanese babies at 6-8 months vs 10-12 months

The experiment exposed American babies to Mandarin sounds at these time intervals. American babies exposed to a Mandarin speaker over 12 sessions have equivalent respoonses to those living in Taiwan. This is an amazing finding.

Kuhl then tried to replicate this with audio and TV/video.  If the baby is exposed to audio alone or TV/video alone, babies do not absorb the “statistics”. Only human interaction matters. This has enormous implications for parents who spend thousands of dollars buying video/audio packs for babies in French, Spanish, Mandarin etc.

Kuhl closed her lecture with some food for thought.

In investigating the child’s brain, we will discover deep truths about what it means to be human. And in the process we may be able to help keep our own minds open to learning for our entire lives.

Watch the video. Highly recommended for everyone, not just parents with kids.

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This Thursday, 3 February, marks the start of the Year of the Rabbit, according to the Chinese calendar. The Rabbit ( 兔 ) is the fourth animal in the 12-year cycle of the Chinese zodiac. Chinese New Year is the most important of the traditional Chinese holidays. Despite its winter occurrence, in China it is known as “Spring Festival,” the literal translation of the Chinese name 春节 (Pinyin: Chūn Jié), owing to the difference between Western and traditional Chinese methods for computing the seasons.

Apparently those born in the year of the Rabbit are gracious, kind, sensitive, soft-spoken, amiable, elegant, reserved, cautious, artistic, thorough, tender, self-assured, shy, astute, compassionate, lucky and flexible. They can however be moody, detached, superficial, self-indulgent, opportunistic, stubborn.

Do you know anyone born in the year of the Rabbit?

The New Year festival begins on the first day of the first month (Chinese: 正月; pinyin: Zhēng Yuè) in the traditional Chinese calendar and ends with Lantern Festival which is on the 15th day. Chinese New Year’s Eve, a day where Chinese families gather for their annual reunion dinner, is known as Chú Xī (除夕) or “Eve of the Passing Year.”

The Chinese New Year coincides with the Japanese and Korean New Year as well. So if you meet any of your Chinese, Japanese or Korean friends this week, wish them a Happy New Year! [Ed: In 1873, Japan adopted the Gregorian calendar, moving away from the Lunar calendar (but not the usual New Year traditions).]

Or better still, sign up for a course with Euroasia so you can greet them in their language!

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Federer switches seamlessly from English to French, then Swiss-German and Italian. He always finishes with a couple of German answers and can also handle Spanish if necessary.

For this reason the French and Germans have adopted Federer as one of their own, and it is not uncommon for his post-match media commitments to take longer than his games.

Reported in NZ Herald today. Maybe the secret to tennis greatness is… to speak 5 languages.

OK, maybe start with a second language.

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You may be interested in these upcoming NZSO concerts to celebrate the Year of the Rabbit. Two dazzling young Chinese artists will star in the NZSO’s Postcards from Exotic Places concerts celebrating the Chinese New Year in Auckland, Wellington and Christchurch. The NZSO programme of popular classics features Dvorak’s thrilling Symphony No 9, From the New World – one of the most popular symphonies ever written.

Hong Kong-born conductor Perry So will lead the orchestra. Only in his twenties, he is already set to become a classical music megastar.

He will be joined by 24 year-old violinist Tianwa Yang, whose performances in the US have excited both critics and audiences. A former child prodigy, Yang was described as “The Pride of China” when she was only 11 years old.

The concerts feature arias from Jack Body’s Alley opera, sung by Australian counter-tenor Jon Jackson, whose versatile voice has been said to be able to “wallow in the depths like Johnny Cash, growl like Eartha Kitt, purr like Peggy Lee and trill like Maria Callas”.

The NZSO is using the Chinese New Year as an opportunity to focus on China’s growing importance in the classical music world.

Postcards from Exotic Places takes the form of a journey that will transport the audience from East to West, from the old world to the new.

The concert opens with Chinese-American composer Bright Sheng’s Postcards, which draw a series of colourful pictures of a mystical, old-world Chinese landscape.

We move through a newer China with arias from Jack Body’s opera Alley – which is based on the life of the New Zealand-born teacher, social reformer and friend of China, Rewi Alley. From here we continue to the warmth of Spain and the piquant rhythms and melodies of Lalo’s Symphonie Espagnole.

Our musical odyssey comes to a magnificent conclusion in America with Dvorak’s thrilling Symphony No. 9. The Czech composer was inspired by the local music he heard while working in America near the end of the 19^th century.

Postcards from Exotic Places is presented in association with Four Winds Foundation Limited.

*There will be a free pre-concert talk within the venue by composer Jack Body one hour before each concert.

Postcards from Exotic Places

A Chinese New Year concert

SHENG Postcards
I. From the Mountains
II. From the River Valley
III. From the Savage Lands
IV. Wish you were here
LALO Symphonie Espagnole
BODY Alley Arias
DVORAK Symphony No. 9 From the New World

Wellington / Michael Fowler Centre / Sat 29 Jan / 8pm
Book at TICKETEK 0800-842-538

Auckland / Town Hall / Tues 1 Feb / 7pm
Book at THE EDGE  0800-289-842

Christchurch / Town Hall / Thurs 3 Feb / 6.30pm
Book at TICKETEK 0800-842-538

Tickets start from $25. Booking fees apply

Fast Facts

• Tianwa Yang started learning the violin at age four and could very quickly learn her music. She loved reading but her father thought she should focus most on her music practice. When young, she once tricked her father into believing she was practicing by playing her music while reading a book hidden inside the music on her music stand!

• Tianwa Yang set a world record when she became the youngest-ever interpreter of the Paganini 24 Caprices, recording them at the age of 13.

• Jack Body was inspired to write his Alley opera after a visit to China in the 80s, where he recognised that Rewi Alley was an iconic New Zealand adventurer of the same ilk as Sir Edmund Hillary.

• Bright Sheng is the adopted name of the Chinese-born American composer, conductor and pianist Shèng Zōngliàng. The second syllable of Sheng’s given name, Liang, loosely translates as “bright lights”, which is why he took “Bright” as his English first name.

· Bright Sheng’s Postcards was commissioned by a couple in 1997 to celebrate their silver wedding anniversary. They chose Sheng because his music reminded them of a wonderful trip to China they’d had. Says Sheng: “So I thought a selection of musical postcards from various places in China would be appropriate for the occasion. I based each of the four short movements on folk music styles from different regions in China.”

• Chinese New Year in China is as important as Christmas is in the West. It’s about spending time with family and giving gifts, with food being an important feature

• The upcoming Chinese New Year falls on February 3, 2011 and ushers in the Year of the Rabbit

• Red underwear is a popular gift that couples give each other at Chinese New Year, as red is one of the luckiest colors in Chinese tradition. It stands for loyalty, success and happiness

• At New Year it’s traditional to give Hong Bao, particularly to young people. These are red envelopes in which money is placed. The amount is usually in bills (not coins) and an even amount – multiples of eight are considered lucky
• The main focus is on food. Chinese families will prepare their New Year meal for many days. If you’ve been invited to Chinese New Year festivities it’s a nice idea to bring your hosts food and drink. Focus on the colours red and gold for presentation
• Many Chinese homes will place an upside-down character on their doors or windows at New Year. The character is 福, fu, pronounced “foo”. It means fortune or luck has arrived

• Chinese New Year festivities traditionally end with the Lantern Festival or Yuanxiao, which falls on the last or fifteenth day, and provides another reason for families to get together and have fun.

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The Press reports that flyers titled “Immigration or Invasion” has been distributed in Christchurch by a group called New Zealand Right Wing Resistance.

Some thoughts on the arguments presented:

“If current trends continue, whites will soon be a minority in this country”.

That’s a well-known fact. Not just in New Zealand. Around the world white people are having fewer kids. So it’s no surprise that the proportion of whites will continue to dwindle.

I imagine similar conversations happening in Christchurch in the 1800s along the lines of ”If current trends continue, Maori will soon be a minority in this country”.

“Uncivilised immigrants are turning New Zealand into a third world slum. They come to take advantage of our welfare systems, they take our already scarce jobs, they disrespect our culture and have no interest in the wellbeing of our once great nation.”

These “uncivilised immigrants” are the very people propping up the New Zealand economy. Globally, it’s well acknowledged that immigrants give more than they take as a whole. If immigrants uproot their lives in order to move their family to New Zealand, don’t you think perhaps they may want to contribute towards their adopted home, in order for a brighter future for the kids? It’s preposterous to suggest immigrants come to New Zealand to sabotage this country so that their kids have no future here.

Some of us “uncivilised immigrants” take it a step further; creating jobs, paying taxes, paying people who pay taxes, buying from local suppliers etc.

Hon Jonathan Coleman, Minister of Immigration, commenting on the Department of Labour research on the economic impact of immigrants to New Zealand, says: ”Without current levels of inward migration, both our population base and economy would shrink dramatically. By 2021, our population would drop by 9.6 per cent and our GDP would drop by 11.3 percent. There would be a 10.9 percent drop in the available labour force and the export sector would be savaged with volumes dropping by 12.9 percent.

“What this research tells us is that immigration contributes significantly to every New Zealander’s per capita income”.

“They bring crime, spread previously foreign diseases inter-breed with our people, and are increasingly taking over our schools, putting our own children at a disadvantage.”

Anyone who has ever attended a school prize-giving ceremony in any urban New Zealand town will see that there is a disproportionate number of Asian immigrant kids winning prizes. If that is what is meant by “taking over our schools” I’m not sure if that’s a bad thing. After all, the people complaining are supposedly the the very people who champion meritocracy and complain about affirmative action for Maori.  It’s no secret. The reason immigrant kids are “taking over our schools” is simply because they work harder, in spite of English often not being their first language, and in spite of many having come from humble family backgrounds. Encouraging people to succeed in spite of adversity is supposedly a very Kiwi value. So I’ve heard.

“Don’t allow yourself to be misled by this corrupt financially useless, multiculturalist, perverted Government! Stop sitting back on the sideline, DO SOMETHING for your people and your nation! Send them home and close the borders!

Ahh… when all arguments fail…there’s always the standard line: Ching Chong, go home.

I suppose there’s only a very small minority who share the sentiments of this white supremacist group. What’s worrying however is the number of people who have voiced their support for this group in the comments section of The Press article.

At Euroasia, our corporate vision has always been about “connecting people across cultures”. Though we are in the business of providing foreign language courses for Kiwis, in reality we do more than that. We help New Zealanders better understand people from other cultures, and vice-versa. 9 times out of 10, misunderstanding occurs because of a lack of communication between parties, and unchallenged misconceptions about the other party. We are now offering our language courses in Christchurch. Hopefully we can play a small role in bridging the gap between immigrants and locals in Christchurch.

INVASION?

or

INVESTMENT?

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Today I received a package in the mail – with a brand new t-shirt from our email marketing provider, Mailchimp. It’s a Christmas gift that they sent out from their Austin, Texas HQ to clients all over the world. I must be one of a few people in New Zealand who received this package. The guy putting the package together might have wondered to himself where New Zealand was. Maybe off the coast of Alaska.

Pretty cool t-shirt don’t you think? This is quite a smart way to get people talking about Mailchimp. So for a couple of bucks, they’ve managed to get me to blog about this I wonder if we send out free Euroasia t-shirts to clients it will produce the same effect. Well, maybe not with a monkey on the front.

Euroasia has been using Mailchimp since last year to manage our email marketing campaigns. We pay USD30/month (for 2500 subscribers or less). We’re about 100 short of the upper limit, after which we’ll have to pay USD50/month for up to 5000 subscribers. With the high Kiwi dollar, it’s pretty worth it. Especially seeing the features offered are far superior to what we had previously with our open-source email management software.

There are standard things like Analytics integration, subscriber activity reports, social media integration etc. Even not-so-standard things like the ability to add users on the fly using the Mailchimp app on my iPhone, or to view reports on the go.

For those with a smaller subscriber base, Mailchimp offers a free email marketing plan: store up to 1,000 subscribers and send up to 6,000 emails a month. With no expiring trials, hidden charges or sneaky contracts. They won’t even ask for a credit card. All for ZERO dollars. You might be thinking there’s no such thing as a free lunch. Well, Mailchimp employs what’s known as a freemium model. In a September 2010 blog entry, they explain how it all works, and how they’re making a lot more money by offering free plans. They also describe their experience starting the Mailchimp business in the wake of the dot-com bust, and why it makes sense starting up a business in a bad economy (useful reading for all of you still thinking about whether to get started on the business idea you’ve been thinking about).

So what are you waiting for? If you’ve been using an underwhelming product to manage your email newsletters, the New Year is the time to consider Mailchimp.

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