Here is another great blog from the founder of the business, Fred Belinsky. Fred is based out of San Diego, California, running the US website www.villagehatshop.com.
How important are blue skies? I don’t mean metaphorical blue skies, but literal blue skies. Earlier this month I returned from China. For the first time, I was struck by the general discontentment of my employee there, Chinese born and raised. I’ve known her many years. We first met when this smart and ambitious young woman – let’s call her Cindy – sent unsolicited emails (in the days when people were still reading them) from her homeland to various businesses, offering her services as a conduit to Chinese hat manufacturing. The personal and authentic nature of Cindy’s correspondence prompted a reply (I did in fact have inklings of expanding our inchoate Asian import business so her timing was fortuitous). After exchanging some emails, and becoming “acquainted”, I decided to test the waters by initiating a process with a goal of bringing in a single product from China shepherded by Cindy. Sourcing, sampling, pricing ultimately led to an order and delivery. It went well. Fast forward seven or eight years and Cindy is now in the loop of a high percentage of our inventory. When we first met face-to-face, many years ago, she was everything I expected: bright, well-organized, hard-working, upbeat and appreciative of the opportunities that her country’s burgeoning economy in combination with her skills and ambition afforded her in the modern world.
On this latest visit, Cindy was different. She now does not like living in China. She was glum. She dreads the prospect of living life without blue skies, not only for herself but more so for her three-year old son. She lives in Shenzhen, Guangdong Province in southern China. Until this past year she didn’t know what life was like in a place where one could regularly see a blue sky. Her husband’s company, however, recently transferred him to Spain and for three months she joined him in Madrid, a land where the sky was blue. For her, there is no turning back. She wants out of China.
I met her in the city of Guangzhou (formerly Canton), in the same province as Shenzhen. The sky was gray, smog covered, for the week that I was there and she made a point to call my attention to it. Although this discussion of feeling smothered by the inability to see the sun was all quite personal and literal, I cannot help but consider its broader implications. Is China’s poor record of custodianship of the environment a looming problem? I think so. As its citizenry continues to mature, their willingness to live in a place where smog blots out the sun will be less tolerated. Moreover, finding out that there are blue skies elsewhere when one didn’t even know they existed speaks to a much bigger issue that might be relevant to China’s future. What else don’t the Chinese people know about the world outside their borders? And what will happen when the people learn these things, as they surely will?
As one who follows the current geopolitical climate, I am aware of the pressure being placed on China by much of the world to allow their currency – the renmimbi – to appreciate to the market rate of exchange against other currencies (China pegs this exchange so that their export market will remain vibrant). At the risk of oversimplifying, the argument being made by the USA and others is that China needs to keep its economic engine humming via growth of its domestic market and rely less on exports thereby contributing to a more stable world economy. To that point, I was struck by the emergence of both large USA-style major malls as well as smaller strip-centers being developed in the midst of huge apartment complexes. I visited a large mall in Beijing, dragging Cindy along to a place that she heretofore had not ventured. She could not fathom how businesses were selling merchandise at the ridiculously high prices indicated on the hang tags. Finally, she came to terms with this new shopping phenomenon by understanding that China had a small percentage of its population that could shop at these stores; yet, that small percentage, given China’s 1.2 billion population, is significant enough to support the malls and the Chinese entrepreneurs that are opening Western-style shops.
So from what I see first-hand, China’s economy is adjusting and in fact is transitioning a greater percentage of its GDP to its domestic market. However, there are still millions of its citizens moving from very poor rural areas to factory towns incrementally improving their lot in life (see my 24-slide presentation of a hat factory) so the cheap labor force supporting the manufacturing sector can, as well, likely survive a long time. By controlling its currency and other state-run levers of its economy, China, given its size and various economic classes (ironic for so-called Communists), can transition from an export driven economy to a more mixed economy in a time-line fundamentally of its own choosing.
This observation had me shaking my head as I traveled the country. “How can the USA – or any country for that matter – compete?” To this economic advantage, add Chinese cultural values such as their work ethic and their high regard for education including the learning of others’ languages, and future dominance on the world stage appears inevitable.
Unless, in this uncertain age where change can and does happen with little warning, the dissatisfaction of the person who sat next to me in the taxi, complaining about the dearth of blue skies, tells a more compelling tale about China’s future.