Wharton Cafe Chat in Shanghai

I am just back from Wharton's coffee chat in Shanghai, held by 4 first year Wharton's MBA students. It's a good chance to see what are the MBA like and how they think about their career development. Here are some conclusions I can make after the chat with the nice gals and guys from this top MBA school.

- 2 of them have finance background. One was GE's management trainee working in controlling; one was in the operation function of a state-owned mutual fund. The background of the other two, unfortunately, I have no idea.

- Mostly I've heard the information from Richard and Xinghua Zhou, 2 students sitting left to me. While the other one girl from Hawaii, a half ABC, seemed more american style and not so talkative. The last girl from Wharton was sitting so faraway that I didn't hear much from her. They are all very young in fact. I am getting too old to be an MBA!

- The questions we have asked include essay writing, career, school life, and recommendations. The only interesting answer to me is that Wharton, even other business schools, normally will postpone the deadline, including the application deadline and the toll deadline.

- The candidates having applied these years all have strong background. One from PWC, one from Eccenture, one finance analyst from a chemical manufacturer, just to name a few. Most of them have 4 years W/E.

- Talking with people is great, to learn the other's thought, the other's consideration.

Chinese Building Materials' Opportunity in Russian Market

Russia is our neighbor, but I really know little about this country, except for the super power in the cold war and now the emerging super energy power cross Europe and Asia. In my eyes, it should be difficult to do business in this country. The country had bad credit record. Many reported ethnic violence and some big terrorist attack in the last years. But these difficulties have created and are creating fortune opportunity for bravers and risk takers. And I think just like other BRIC countries, Russia is doing better and better for business.

I met one guy from Wenzhou who does trading business in Russia. He earned quite a lot several years ago, selling Wenzhou shoes in the country. He told me several of his ventures in Russia. I think many people imagine Russia a dangerous land. But I don't think so. The worst experience he told me are only the bribery and violence of the police. Anyway, he was still alive after he got much money from the country. And in St. Peterburg and Moscow, real estate market is really hot. The average price for apartment is already 3000-4000USD/sqm, the central area even higher, reaching 8000USD/sqm. In the last two years, the construction area for residential and commercial buildings has already past the summary of last 10 to 20 years! Russians are investing in their own land for a better life! They definitely need a stable and safe society, for life and for business. So I think even there is potential risk, the things are just changing to be better off.

Let's look into the building materials market. The booming of the real estate and the rise of living standard lead to more invest in building materials, both new and old housing. Shortage of some products even occur in some places. The Chinese goods with low price are really very competitive. Trading building materials is good chance. But we must keep close eyes on some trends:
- Russian customs. To many smuggle nowaday. The Russian government will make efforts and the market price of import goods will increase with a better customs.
- Restriction on foreign investment in retailing.
- Restriction on worker immigration.
- Credit risk

The Value of Assistant

Today, I looked for some executive assistant positions for a friend in Shanghai. The result looks interesting since from the requirement to the salary the jobs vary a lot. While some employers look for candidates with a college degree, paying less than 3000 rmb per month, the other look for people with 5 years or more experience or even with a MBA from oversea school, willing to pay more than 12000 rmb per month.

Just as in every market, the requirement for an assistant depends on the employer's expectation and affordability. In my opinion, American and European companies, esp. starting ups in China are more willing to invest on a highly eligible assistant position, and normally want to coach the person into a general management position. On the contrary, small foreign investor from HK or Taiwan tend to squeeze the budget and normally a candidate with college degree can meet be the fit.

So look out if you meet someone with an assistant title. In some case, an assistant is more expensive than an associate in the job market. And when you are looking for a job to ease your economic pressure, don't even overlook such positions just because of their name, assistant. Sometimes, there are really good deals after the 'Ace'.

SoundTex Was Beated By Some Local Nonwovens?

In our business center in Shanghai, people have long been complaining about the weak sound insulation between rooms. I even doubt that there is no sound insulation materials behind the walls and ceilings.

Last weekend, finally, the landlord decided to replace the sound insulation materials and I got the chance to see what's the secret behind the walls.

To my surprise, they took out from the ceiling many small dark grey fabrics with the logo SoundTex. I was told that they were going to replace SoundTex with some voluminous nonwovens, which look less decent and are probably from some Chinese local supplier.

I examined the removed SoundTex a little bit. They are thin like paper, coated. I am not sure the composition of it, but I just wonder whether this thin material can act as a sound barrier. On the contrary, the nonwovens the workers use are more like the EcoZero product from Politex, my company.

Today, when I sit in the office, I do find that I have more privacy. The neighbor's talk cannot easily be heard any more. Possibly, SoundTex was defeated by the voluminous nonwovens.

China National Waterproofing Association's Visit to Johns Manville and Vedag

Part I Johns Manville

From the end of July this year, the Chinese National Waterproofing Association (CNWA) has paid a 12-day visit to Johns Manville (Bobingen) and Vedag (Bamberg and Freising) in Germany.

The visit was invited by both JM and Vedag. The association has visited JM's research center for polyester nonwovens in Bobingen. According to JM, the market share of staple polyester shrinks at 10% each year. The turnover of spunbond polyester carrier for roofing is 600 million square meter, the staple polyester is 200 million, glass mat 500 million and glass cloth(玻璃布？) 120 million. The research center argued that spunbond polyester carrier has a better performance than the staple. Under the same density, the former one has some advantages eg. better strength, better elongation, stability and evenness. Even though staple can increase the density for 20% to compete with the spunbond in terms of strength, the staple one cannot reach an evenness like that of the spunbond. And the thinner spunbond can
make it easier to be impegnated and carry a thicker coating asphalt, which increase the durability of the roofing membrane.

Of course, one should take a grain of salt for these statements. Nevertheless, JM is marketing the spunbond product, especially those produced in Shanghai to the association and Chinese customers.

In Europe, JM said, the glass felt is mainly used for oxidized roofing and protective layer. 99% of SBS and APP membrane have polyester felt inside. Double layer waterproofing system is widely accepted in Europe, with a oxidized membrane as the basic layer and polyester roofing as a surface layer.

Laminated products made from fiberglass and polyester are more and more popular for high-end products. JM produces 180g laminated from glass grid and nonwovens, and 280g laminated from glass mat and polyester felt. The market for these laminated products for high-end roofing is 5 million square meter in Europe. However, this once widely used laminated felt is being dropped because of the shinkage problem.

JM also cited that an aluminium laminated product in the market.

Since the price of asphalt keep hiking, PVC, TPO, and EPDM membranes are eating up the market because of the relatively low unit price.

Besides, Manville also specified a aluminium laminated nonwovens in the market.

Part II Vedag

Vedag is an important roofing producer. Probably initiating the green roof, the company invited the CNWA to its headquarters in Bamberg. With production bases in Germany, Poland and Slovakia, Vedag has a annual turnover for roofing of 55 million square meters, selling worldwide. Among them, 24% are oxidized membrane, 34% SBS, 40% self-adhesive and APP, and 2% glass shingles.

Vedag thoroughly introduced the testing method of prEN13948, the root penetration test, to the Chinese delegation. Also, accompanied by Vedag, the delegation visited several projects of green roof.

Part III - BDA

The last stop of the delegation is BDA in Netherlands, which introduces the roofing market in Europe. According to them, 60% membrane in Germany is SBS, 90% membrane in Italy is APP, 80% membrane in France is SBS and in Netherlands, 70% are SBS and APP, the rest are single ply.

The underslating with breathability is required for asphalt roofing and slope roof.

Talking About Waterproofing in China With A Senior Civil Engineer

by Eric Chen

During the national holidays, I stayed home and met one senior engineer who has worked in the field of construction in Guangzhou for more than 20 years. Some information from him is helpful for a few glimspes of waterproofing industry in China, especially in Guangdong.

Is the Chinese waterproofing industry growing? Yes. But not healthily. With the hot investment in real estate and other infrastrutural projects, the demand for waterproofing materials from roofing membrane to geotextile is undoubtfully rising. But only in term of quantity but not revenue.

Why? For example, the price of roofing membrane in China has long been kept in a low level, coupled with the ever lower quality. In the market, you can easily find SBS membrane with a price of less than 20RMB (EUR 2) per square meter. Fierce competition makes them priced to sell. Manufacturers use cheap polyester felt, organic felt or glass felt as substrates to produce the products which probably cannot meet the national standard requirement. On the contrary, the ones meeting the standard are sold at price of more than 30 RMB per square meter. These qualified products are facing difficulty in the market because of the price. The waterproofing industry becomes totally price-oriented because the customers, i.e. the contractors, do not buy the expensive and qualified products but cheap and uneligible ones.

One may wonder whether the national standard works or not? The answer is only partly yes. Contractors use roofing membrane, but in most case they do not use qualified one. As the engineer told me, the civil engineers in fact will prefer a reinforced concrete layer working as a real waterproofing layer to a problematice membrane waterproofing layer. In practice, the membrane can hardly prevent leakage, he said. The buliding depends the concrete layer to resist water penetration. And the roof with concrete would prevent water penetration well even if there were not any roofing membrane on the top of it. They use roofing membrane only because the designer has identified the usage according to the national standard. In many projects people use the cheapest roofing membrane from the market and lay them on top of the real waterproofing concreate layer. His narration coincides the roofing manufactures' claim that they are difficult in operating products that meet the national standard.

With the increasing raw materials prices, especially those of alsphalt and polyester, the roofing membrane producers are facing tightening profit margin. And since most of the membrane producers in China are small and medium size companies, they are weak in negotiation power with the buy-side and in the mean time have to face fierce competition with the sell-side.

Statistics of 1H06 reveals that contrary to most sectors in building materials industry, waterproofing industry suffered from plunge in profit.

Nevertheless, the above described phenomenon does not necessarily mean that the waterproofing industry in China is dying. Forgetting about the standard and keeping the price as low as possible, one can sell. Who can accompany this? Those who illegitametly escape tax and use unqualified cheap substrates such as organic felt or cheap polyester felts. Most of the market players fall in this group. The rest are waterproofing materials for large and important national projects such as olympic projects. They should meet the standard and use qualified roofing felt. But the market amount is limited.

One may conclude that the lack of execution of regulations and codes lead to the wide spread of low quality products. Corruption is one reason, but engineering requirement is another important reason. If the contractors and the final customers, the residents do not urge the use of qualified and relatively higher price roofing membrane, the situation that unqualified products dominate the market will last.

China Building Materials Industry - From 2000 to 2005 Summary Report

Edited by Eric Chen

All the results in the articles are based on, and calculated from, data obtained in China Buidling Materials Newspaper.

Highlights:
Steady growth
From 2000 to 2005, average annual growth rate in building materials industry in China was 16.7%. During this period, the annual sales of cement increased steadily with an average rate of 12.6%, compared to 14.7% in the increase of sales for plate glass.

Regional imbalance
In the buidling materials industry, the average annual growth rates during 2000 and 2005 in the east, middle and west part of the country were 18.9%, 11.3% and 14.9% respectively. The coastal area still has a faster growth rate. However, the fixed-asset investments in middle and west part of China increased 51.3% and 49% respectively, compared to 36.6% in the coastal part.

Alterations in different sectors
Although those of cement, float glass and tiles are still prominent sectors in the building materials industry in China, new sectors such as those of cement products, engineering glass, fiberglass, construction ceramics, construction marble and waterproofing have expanded their shares in the industry.

Forms of enterprises
Until 2005, private enterprises had shared 34.3 percent of the total industry's sales increase, while state-owned or collective-owned corporation had shared 22.2 percent.

Fixed-asset investment
The fixed-asset investment in this industry was hot, with an annual growth rate of 48.3 percent. During the 5-year period, the total investment was 347.9 billion RMB, large part of which had been used for imported technology and facilities. For example, in 2005, output of new dry-process cement took 39.7 percent of the output of nationwide cement; output of float glass got 81.1 percent of all the flat glass production; output of direct-melt fiberglass took 57.5 percent of all the fiberglass production.

Rapidly-Growing Export
Export of building materials from China grew fast, maintaining the annual growth rate of 27.7%. In 2005, the number of destination countries was 213, compared to 180 in 2000. The trade amount with 22 countries, compared to 5 in 2000, exceeded 100 million US$.

Growing production efficiency
In 2005, among the building materials enterprises, producing 10.000 RMB goods consumed 6.67 tons standard coal equivalent energy, compared to 10.03 tons in 2000.
(to be continued)

An Unexpected Trap - About an Waterproofing Exhibition in Nanjing, China

by Eric Chen, sep. 19, 2006

Noticed that a waterproofing exhibition called Nanjing Waterproofing Exhibtion 2006 will be held in these days in Nanjing, I contacted an organizer for more detail information. The location of this organzer, which is in Wuxi instead of in Nanjing, looks a little bit weird. But anyway, a person of the company sent me a fax with a layout of the stands of all the exhibitors in this waterproofing exhibition.

Taking no doubt on this fax and the layout on it, I took the high speed train from Shanghai to Nanjing, spent more than two hours on the way, and arrived at the city quite on time. Without any difficulty, I hailed a taxi and got to the Nanjing Exhibition Center, in which the waterproofing exhibition should locate.

But actullay, all is a trap to me. The organizer cheated me with forged information. To my surprise, in the exhibition hall, I found no one of the companies listed on the fax the organizer provided. So I went up to the service desk and checked what hell the problem was. Frustrating again, the staffs of the exhibition center were absolutely not professional and accountable. Mading up my mind to kick the whole things out, I finally found the person who was willing to explain the operation of this exhibition to me. The chief organizer, Nanjing Exhibition Center, outsourced and subcontracted the marketing and sales to three exhibition services companies, one of them Wuxi. Some of these companies split the whole exhibition into several exhibitions for specialized industries, such as building materials industry, digital media industry, and machinery industry, making each of them sound like a whole and independent trade show with some important companies or organizations on the list.

Clearly, this kind of subcontracting undermines the reputation and liability of Nanjing Expo Center and even the city Nanjing. Visitors, some of which could be potential exhibitors in the future will definetely lose interest. The lack of control taken by the head organizer to its service providers does halm the whole business in the future.

Ironically, the person who tried to round up his explanation and story obviously know the problem and could address it to prevent such kind of loss. Unfortunetely, he didn't.

This is an vivid example about how the economy misses the chances to improve the productivity. At least, the Wuxi company benefits from this deal, whereas majority of the economy and society lose.

Admittedly, this exhibition is still something. You can still see visitors surrounding the products they have interest in and asking details and prices. However, without the qualified manage team, the trade show will quite certainly remain a local one and lose in the competition with those in Shanghai. Maybe you can see government touting its investment parks and incentives in front of their international counterpart, but without an efficient and prosperous local economy, most of the people will continue to be kept working and gain little.

Waterproofing Situation in Yunnan Province - China Waterproofing Highlights

Waterproofing Situation in Yunnan Province
Aug. 2006, Kunming
(compiled and composed by Eric J. Chen)

The Waterproofing Association of Yunnan (south-west province of China) carried out a general study, from January 2005 to July 2005, on the status of waterproofing in construction in the province. The survey covered seven major cities of Yunnan. The subjects of the investigation are the waterproofing projects finished from 2000 to 2004. Two main parts of the investigation lie in the quality of project and the materials used. Waterproofing quality of roofing system, basement, bathroom and kitchen, and external wall are main concerns during the investigation. In the first time, such a general and relatively entire look-into of the waterproofing projects in Yunnan was conducted.

Waterproofing quality of roofing system is improving in the province. Among the total 435 projects, the leakage rate, when calculated in area, is 0.85%, and is 15.4% when calculated in number of projects. The leakage rate of Kunming, the capital city, is still high with a rate of 14.7%, the report said. On the roofs, calculated in area, over 61% of the projects used roofing membrane, compared to 32% of those used coating and 7% powders or other materials.

In the aspect of basement waterproofing quality, some 35 projects were studied in the surveying, with a leakage rate of 22.9%. Among these projects, calculated in area, some 62% used roofing membrane, some 38% used coating materials, and the rest took no waterproofing measure.

Among bathroom and kitchen waterproofing projects, the leakage rate is 2.1%. Some 26% of the projects used roofing membrane and some 74% used coating materials. Concerning the tight space in bathroom and kitchen, the use of coating materials, most acrylic acid or polymer modified cementitious waterproofing coating, is more popular.

External wall waterproofing has not been introduced in most among those surveyed in the study. Most of the construction used ceramic tiles or other wall-covering bricks, leading to a considerable leakage situation in this rainy region. Among the few projects having waterproofing, coating materials were used, some imported.

The major part roofing membranes projects used is SBS roofing membrane and PVC roofing membrane

The report said that the quality of the waterproofing had been increased in the last 15 years. The leakage rate decreased from over 50% to about 15% or even 1% after remediation.

As a common phenomenon, lack of regulation effort of the market and the fierce competition among manufacturers lead to low price of the waterproofing materials, whereas the raw materials price keeps growing ranged from asphalt to resin. The market full of counterfeit goods and the contractors without sufficient skilled waterproofing workers are the other two pullbacks of the industry.

Firestone Holds Semilar in Beijing for its Roofing System - China Waterproofing Highlights

Firestone Holds Semilar in Beijing for its Roofing System
2006.8, Beijing
(compiled and translated by Eric J. Chen)

Philip Moors, Firestone's manager from its Asia contraction products division, held a semilar in Beijing in August, introducing Firestone's EPDM roofing system and padding system. Firestone's TPO roofing application, case stud in China and globe, waterproofing system and Firestone's technical service were also parts of the seminar. Obviously, this is part of the Firestone's marketing effort in China.