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Some Final China Thoughts

After a whirlwind first trip to China where I spent most of my time in Qingdao covering International SinoCES, and what turned out to be a lengthy visit to the mammoth and futuristic airport in Beijing, I finally arrived back home.

Many industry executives reading this have been to China numerous times, so I am far from an expert, but permit this rookie to give you a few of my observations of what I experienced last week.

During one of the meetings that I attended with the Consumer Electronics Association’s (CEA) delegation to the show, it was mentioned that China has 260 cities that are more than 1 million in population. Try to get your head around that number. We were told that those “second-tier” cities, like Qingdao, which has a population of about 7.5 million, are where much of this country’s middle class lives and where there is an opportunity to sell more upscale brands.

I felt fortunate that I was able to visit China on the eve of its great world “coming out” party, the 2008 Summer Olympics. Beijing and Qingdao are two of China’s Olympic cities, and you could see banners for the event all over the place. There was great pride in holding the games, from the Chinese politicians and regular citizens we met, along with blanket coverage of anything Olympic-related in the media.

In this case, this first trip to China reminded me of my first trip to Japan in 1993. I traveled and covered the precursor of the CEATEC Japan. On that trip I had one day off, Sports Day, which is a national holiday and commemorates the opening of the 1964 Summer Olympics in Japan. It was awarded the Games almost 20 years after the end of World War II and during a time when Japan’s economic engine really started humming.

The same can be said of China getting this year’s Olympics. It has been 30 years since Deng Xiaoping, head of the Chinese Communist Party, began the movement to open Chinese society and its economy. That effort has made China an economic colossus on the world scene, and not without its problems such as the protests at Tiananmen Square.

The Olympics, no matter where they are staged, Summer or Winter, never go off without problems. The Chinese are on a high security alert. For example buses going into the Shangri-La Hotel in Qingdao were inspected and airport-type security greeted guests too. But everyone, from hotel and convention workers to local and national officials, went out of their way to be hospitable.

Still this reporter got the gut feeling that China really doesn’t know what it’s in for next month, and if the Games get negative reviews from the worldwide media, one wonders what it will do to the nation’s collective psyche.

Whatever happens, there is bound to be an Olympic hangover here. The Chinese have been planning for the Summer Olympics for four years at least, if not more. TWICE China’s editorial staff told me that HDTV and A/V sales are booming prior to the Olympics, but many expect sales to dip after the event. I guess China may have to content themselves with construction projects all over the country that will continue right through the Olympics. Take a look at this New York Times story about how China architecture has changed due to the Olympics.

In terms of consumer electronics, all the presentations we heard said there continued to be double-digit growth in CE sales in China. If there were apprehension on the part of any Chinese officials we met, it was on the ongoing subprime loan problems that began in the United States that may affect their economy — from slower growth to reduced manufacturing production for CE and a variety of other products.

China has not really experienced a significant world economic downturn since it opened up its economy, so it will be interesting to see how it responds if it makes an impact on its economy.

While China is and continues to be the manufacturing hub of the worldwide CE business, with higher energy, commodity and labor costs the industry may be forced to look at other lower-cost areas to manufacture or (perish the thought!) manufacture in or closer to the countries where they are selling their products.

Finally, my thanks go to the CEA and the China Electronic Chamber of Commerce for inviting to visit International SinoCES and China during a key moment in that country’s history, and to the many Chinese citizens and fellow foreign travelers I met last week who made my trip enjoyable and educational.