China: Diaspora Waves, Bamboo Network Economic Interdependence & 996 MNC Culture with Jianggan Li - E425

· Podcast Episodes English,China,VC and Angels,Southeast Asia


"I've read quite a bit of history about the province of Fujian where about 40% of the Southeast Asian Chinese originally came from. Historically, because that region is full of mountains and access, people go from land to land and across the sea. People have been navigating through the sea for more than 1000 years. And almost every dynasty, at some point in time, tried to restrict trade, but the challenge is that it's a vast coastline with lots of bays and mountains, making it very difficult to police, so people found ways to trade and it just carried on for so many years." - Jianggan Li

"Jack Ma of Alibaba certainly popularized the term 996, which means working from 9am to 9pm, six days a week. It was prized because you work hard, you get rewarded, and the company grows faster than your competitor, but if everyone starts to do the same and there's no growth in the top-line market, it becomes what people call 'involution nature.’ Then the rewards became more scarce and had to be distributed to more people. So now, 996 is almost a taboo in China. People don't really talk about it, but you will see that it's many of the companies are still practicing top-down control, and long working hours, but in tech, you already see lots of companies that try to steer away from that."​​ - Jianggan Li

“China is becoming more open. So now, if you look at the global trade order for the last 20 years, China is probably one of the biggest beneficiaries. It developed its industry. It allowed them to sell lots of things across the world, and it has an interest in defending the current trade order despite the fact that it didn't set up this order. The order is actually set up by the West.” - Jianggan Li, Founder & CEO of Momentum Works

Jianggan Li, Founder & CEO of Momentum Works, and Jeremy Au talked about three main themes:

1. China Diaspora Waves: Jeremy and Jianggan discussed the long-standing historical connections between China and Southeast Asia, dating back to the era of Admiral Zheng He's voyages during the Ming Dynasty. They touched on the various dialect groups Cantonese, Hokkien, Hakka, Hainanese & Peranakan and event drivers across trade, piracy, civil war, invasions and re-opening.

2. Bamboo Network Economic Interdependence: Jianggan highlighted how Southeast Asian companies benefited from China's manufacturing boom in the 1980s. They also touched on China's tax reforms in the 1990s, which spurred local governments to develop real estate and industrial parks, ultimately boosting China's manufacturing leadership. They cited billionaire Robert Kuok's Kerry Group, intertwining the stories of Fuzhou, Malaysia, Singapore and Hongkong.

3. 996 MNC Culture: Jeremy and Jianggan covered the intense work schedule advocated by Jack Ma of Alibaba, which involves working from 9am to 9pm, six days a week. This is driven by the intense competition and high productivity expectations within Chinese companies. They also discussed the differences in labor regulations and productivity across various countries where Chinese companies have set up operations, such as Vietnam, Cambodia, Turkey, and Mexico, and highlighted the motivation of migrant workers compared to local hires.

Jeremy and Jianggan also talked about the below-the-radar influence on South American food culture, challenges for Chinese tech companies hiring in international markets and the resumption of Chinese emigration.

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(01:43) Jeremy Au:

Hey, Jianggan. It's good to see you.

(01:45) Jianggan Li:

Hey, hi, morning.

(01:46) Jeremy Au:

This is the start of a regular feature where we're going to be chatting about China and Southeast Asia on a regular basis. So really excited to have you on the show because, you're really quite an expert obviously with your work, your experience on, all sides of this wonderful region. And also, I think a great author as well. I'm just singing your praises now, but could you share a little bit by yourself as well?

(02:06) Jianggan Li:

Sure. Hi. Oh gosh, I shared most about myself. Born in China, came to Singapore when I was 16, worked in mobile internet since 2013, dealt with old countries in Southeast Asia, and had a brief stint in India, the Middle East, and Latin America. And during the pandemic, wrote a book together with a professor from INSEAD to talk about how difficult it is for Chinese tech companies outside China.

(02:26) Jeremy Au:

Yeah. Could you share the title of the book and we'll hyperlink to it?

(02:29) Jianggan Li:

The title is called "Seeing the Unseen: Behind Chinese Tech Giants Global Venturing". Seeing the Unseen was the, was the name put up by the publisher because they said they wanted something attractive, but the real essence is we used lots of case studies from people like Alibaba, Tencent, Baidu, Huawei, and OPPO. I mean, all the tech companies from China who have been trying to sort of expand outside China over the last like decade or so, and there are lots of stories, lots of lessons, lots of case studies along the way.

(02:55) Jeremy Au:

Yeah. Amazing. I think what we want to do is for this first one is talk about the general relationship between China and Southeast Asia. So for me, I think the question I have is, it feels like China and Southeast Asia weren't really a big topic, I would say in the news, say, six years ago. And now it seems to be like something that's always in the news and so forth, it's like the flow of people, the flow of capital, flow of companies as well. So what do you think is going on at a macro level?

(03:22) Jianggan Li:

I think at the macro level, I mean, first is, I had this long lunch with this famous historian in China about two weeks ago in Beijing, and he was trying to, for 10 years, he was trying to understand what exactly caused China to become China today. And this theory, which was very interesting for him that he has discovered over the years, that there was, there was this tax reform in China in the 1990s, which made almost all the taxes go to the central government, and the local governments were deprived of tax. And instead, the central government gave them a leeway saying that, hey, you can build your own land. You can sell land, you can collect all the fees related to land. So that caused lots of local governments to start developing real estate. I think today you see all the property bubble, et cetera.

I think the roots came from there, but they also developed a lot of industrial parks, and his theory is that local governments developed too many industrial parks, which were empty. And when China joined the WTO in early two thousands and all outsourcing requests from Western companies came, and that allowed, that empty land with lots of people who were enterprising, but who didn't have the proper jobs. Very quickly unleashed lots of manufacturing potential. And how is that relevant to Southeast Asia? And if you look at the geographical proximity between China and Southeast Asia, and the existence of a large Chinese diaspora in Southeast Asia, which meant that I think in the early boom of manufacturing in China, lots of Southeast Asian companies actually went to benefit.

I mean, Robert Kuok's Kerry is well known in China and the, the cooking oil they have is a household name, but not many people know that it's from Malaysia. I think Indonesians went to build pepper mills and stuff. So you see this business connection has been there since the 1980s, 1990s, but over the years, this exchange, a lot of Chinese side to see Southeast Asia as a close market that they can tap into. Obviously, as time progresses, China becomes more saturated and people are looking for outside markets to either sell their and produce or expand their business models.

And for many of them, Southeast Asia, is just something natural, right? I mean, I'm not sure whether it's the right analogy, but if you look at the US, naturally they're looking to South Latin America to see, okay, what are the opportunities to move your manufacturing, to expand your market access, et cetera. So I think it's just all natural.

(05:19) Jeremy Au:

Yeah. I think I love what you said about history as well, because I also love history. And there's also a long history of Chinese relationship with Southeast Asia, right? I mean, go back to hundreds of years. Admiral Zheng He, sailed his treasure ships right down south into China to India and almost the Middle East there. So a lot of long history over hundreds of years. And obviously, I, myself am a person of father heritage. My great-grandparents left China in that wave of time and turmoil in China. And there are actually multiple waves of Chinese migrants ethnically to Southeast Asia, right?

So I think it's no surprise that you said that there's a diaspora element as well. And that's created what people call the "bamboo network", which is like a diaspora of trading ethnic Chinese with mainland China, but also with East Asia and Southeast Asia. So it’s a very interesting history dynamic for sure. So I feel maybe one thing in my head was that, inspired by what you just said was that it's less about the fact that there's the usage of Chinese wave capital, and there was a time period when Southeast Asia was very focused on the US since the colonial times, I guess. So the Western powers and obviously with America after World War II, but now that China's reopened, it's like returning to the normal, I guess, of a lot of trade that people flow with China.

(06:29) Jianggan Li:

Yeah. I think it's just also China becoming more open, right? So now, if you look at the global trade order for the last 20 years, China is probably one of the, probably the biggest beneficiary. It allowed it to develop its industry. It allowed it to sell lots of things across the world. And obviously has very interest in defending the current trade order, despite the fact that it didn't set up this order. The order is actually set up by the West.

(06:50) Jeremy Au:

Yeah. Yeah. I think it's really interesting that you mentioned that, because the order in Southeast Asia, I was actually reading the history of Southeast Asia. And it's quite interesting because every couple of dynasties, there'd be a lot of engagement from the dynasty if it's Southeast Asia. And then suddenly, for example, Admiral Juncker, he's like coming by every couple of years to Southeast Asia. So everybody's expecting him. And then suddenly all his expeditions stop because the dynasty becomes inward-facing.

(07:12) Jianggan Li:

Yeah, the funny thing is that I've read quite a bit of history about the province of Fujian, where I think I think about 40% or half of the Southeast Asian Chinese originally came from. And historically, because that region is full of mountains and access, I mean, it's pretty much like Greece in a way, right? People do not really have much easy access inland. And then people actually go from towns to towns and plateaus, sorry, land to land across the sea. So people have been navigating through the sea for more than 1,000 years.

And historically, you look at, I mean, almost every dynasty at some point of time, there was a push to say that, okay, there's a problem with the piracy, there's the problem of conspiracy with the Japanese warlords, etc, etc. So at every point of time, some governments try to restrict trade, but the challenge is that it's a vast coastline with lots of bays and and mountains and stuff it's very difficult to police. So historically, people found ways to trade and it just carried on for so many years, but obviously, whatever’s happening in the center of power in Nanjing, in Beijing, and in Xi'an, would still impact the intensity of the trade and also how trade is formalized, right? I mean, if the government allows it, they usually set up ports, set up customs, et cetera, collect fees, collect taxes, but if it's restricted, you have other parties, you have people setting up trading posts in Taiwan, for example.

And sometimes, the Ryukyu Islands, Okinawa benefit from that. So the dynamics have been shifting, like of the millennia, but yeah, so it's not that, okay, people found this new love for trade since the 1980s. I mean, yeah, it has been in that region for like hundreds, if not thousands of years.

(08:36) Jeremy Au:

Yeah, it's funny that you mentioned that as well, because if you ask my dad, he'll probably say it's Cantonese and my mom would say she's Hokkien. Obviously, Fujian province, right? There's that dialect or geographic line that's there. But yeah, it's interesting to see that because both of these are like the southern provinces of China, which actually the closest to Southeast Asia as well. So I think there's this interesting spectrum of trade.

(08:58) Jianggan Li:

Yeah. And the thing about about Guangdong where the Cantonese came from, at some point of time before I think for many years before the Opium War forced China to open more trading ports, I think all the trade had to go through Guangdong, go through Guangzhou or Canton. So that enriched the region, the Pearl River Delta greatly, but that also caused lots of pain for people from other coastal provinces, because they have to physically transport the goods over land to Canton and over the mountains and stuff to trade. So that was not very efficient, but, there were lots of interesting consequences that allowed guilds to form in Guangzhou. And that actually impacted how trade was carried out and how trade was financed and how competition was regulated. But that also created the fact that Cantonese became the lingua franca, right? I mean, in sort of the southern China trade ecosystem, people from Chiu Chow or Teochew-speaking areas. I mean, everybody in the past, if you're engaged in some of the business, you speak Cantonese because you have to trade via Canton. So lots of interesting dynamics and I do think it was to a large extent for you to understand exactly why things are happening today. It's always interesting to go back to history because a lot of things are not sudden.

(10:00) Jeremy Au:

I love what you said, because, if you go to America, for example, almost all the immigrants who are in America, speak Cantonese, so there are multiple ways of immigration.

(10:10) Jianggan Li:

And there are some unintended consequences. I've read this, like this takes a full account of the history of drug trafficking in the Americas, and apparently in the 1880s to 1920s or something like that, the Cantonese actually ran the largest drug trafficking network in Mexico because lots of them sort of went to California to work, and some of them fused through to Mexico at that time, so basically the thesis is that if you want to buy drugs, go to the town, find that then, or that is operated by somebody with the ponytail or something,

(10:38) Jeremy Au:

Oh yeah. The Manchu style Qing dynasty.

(10:40) Jianggan Li:

Imperial Chinese haircut. Yeah. Dimensionally. And they operated that network. So it's way before Pablo Escobar.

(10:46) Jeremy Au:

Yeah, Wow. Yeah. It's interesting because we're also talking about a ways of immigration history, right? I think there's also other folks who are all around the world. I think there's, I think the Hainanese are here as well. A good chunk of them as well. It's the Southernmost Island on the coast, so obviously, Singapore talks about Hainanese chicken rice and Hainanese curry, for example, in the food styles.

(11:05) Jianggan Li:

(11:06) Jeremy Au:

That's true. I forgot about that. You reminded me, it just came out. Apparently, it's quite popular in China now. This is cause all the Hainan folks are like, wow. One of our, I don't know, great-grandchildren became the prime minister in Singapore, right? floated on the boat south. Yeah, it's crazy.

It's interesting because while I was reading in Singapore history was that the Hainanese were one of the later folks to move south into Southeast Asia. So they found that a lot of the roles were not as good as, for example, the Cantonese, cause the Cantonese had come primarily based on trading. They'd been around for longer. So the Hainanese had to do a lot of the cooking. The chef drops a lot of the blue collar jobs that have already been filled by either the Hokkien, Fujian folks or the Cantonese folks. That's why in Singapore you have Hainanese chicken rice, and Hainanese curry.

It's all because of that influence. And then as a result, I think the Hainanese, supposedly for a time they were like worse off economically, right? Cause they were trying to work from more blue-collar jobs. But like I said, now the Hainanese are, integrated well into Singapore and now you have Lawrence Wong, right? The new prime minister of Singapore.

(12:02) Jianggan Li:

And we'll talk about how it needs to have to undertake the jobs. I mean, sort of culinary art or in cooking, in running restaurants and stuff. In a way, is it similar to how Italians found footing in the US and why Italian food became so popular because there's just so many Italian immigrants who just opted to be in the restaurant trade.

(12:19) Jeremy Au:

Yeah. And after that, the Chinese came afterwards and then they were only allowed to work running laundry marts and restaurants, in America as well. They also had to that's why, you have so many Chinese restaurants everywhere, right? Of course, it's all Southern Chinese, and also low cost because it's not Imperial Chinese, Northern style or Sichuan style, it's all Southern Chinese base.

(12:36) Jianggan Li:

Yeah. And I'm not sure if you go to Europe regularly, or if you look at almost all the Chinese restaurants in West Europe. They're best operated by people from this particular city called Wenzhou in Zhejiang, right? You go to Italy, you go to Spain, you go to France, you see all this like Chinese takeaway restaurants. And they are almost exactly the same. They serve, the name is different, but the decor is almost exactly the same. I mean, the food they serve is exactly the same. And you need to be Chinese to go there and completely ignore the menu and ask the chef saying, Hey what vegetables do you have in your kitchen? Can you stir-fry some dishes for me instead of selling me this fake Vietnamese spring roll?

(13:08) Jeremy Au:

That's right. Now I went on a a car ride from south of Italy to north of Italy, right? So from Naples all the way to Milan. And I felt like as I drove north, I saw more Asian people, Chinese people, and then the Japanese restaurants were being run by the Chinese as well as the Chinese restaurants. But I think when I hit Milan and so forth, I actually was surprised by how many Chinese people there were because of the trade links between the luxury industry and Wuhan, right? So I was just really surprised by that.

(13:32) Jianggan Li:

And over the last 20 to 30 years, and many of these people from when to initially they went there to trade, and they would trade cheap Wenzhou ware. Wenzhou ware was used to be quite famous for its shoes and stuff. But over the last 20 years, you see lots of them has started buying up traditional Italian workshops and with the brand name, with the story. And they turned that into a more sophisticated, a more modern sort of operation. And then of course, it's legitimately made in Italy. And because many of these guys, the second generation, their third generation, they take Italian passports, et cetera. So now you see lots of the medium, smaller brands from Italy, they're actually run by people from Manchuria and it's actually quite common. Yeah.

(14:07) Jeremy Au:

Yeah. And that's a surprise because I was talking to the tour guide and her day job was a teacher, and she was just saying that she's teaching a lot of the second generation of third generation kids, and she was explaining that, like you said they had brought their families, the kids, and then the owners obviously also bring in more labor from China to work in Italy because like you said, the rules are like, you want to have a brand that's made in Italy, but it could be made in Italy by Chinese labor with Chinese materials from China as well. And so there's this huge corridor that's actually happening where obviously there's local assimilation integration where they speak Italian. I saw them dress very stylishly, more better than me and my Uniqlo.

And then it was interesting to see, but also I think it helped me understand for, during the pandemic the first place, the pandemic happened was in Wuhan, and then the second place it popped up was in Italy. I was always so confused at the start of the pandemic. I was like, it's so far apart, right? That's the weirdest connection. And then you're like, oh, it's because of that. Like you said, the leather work materials trade between both countries between those two cities actually cause that dynamic.

(15:03) Jianggan Li:

Yeah. And and I'm not sure if you are familiar with, since we talk about data trade a few years ago, I spent a week in a great, maybe not forgotten city of Kolkata in India. And and I'm not sure if I'm aware that in Kolkata there used to be this it's a fairly big Hakka Chinese population, and who basically run all the tanneries in a city in a leather trade. So now if you go to a Kolkata, that town has largely moved on, many people have migrated to different parts of India or to the West. But you still see tons of Chinese restaurants. And we go to some Northern Indian restaurants. they usually serve what was called Indian Chinese, right?

Of course, there's the momo, which the dumplings, which which I think I think got got into India via Tibet. But there's also this Hakka fried noodles, which is actually fairly popular across the Indian Chinese restaurants.

(15:44) Jeremy Au:

The Hakka made it there.

(15:45) Jianggan Li:

Oh, yeah, they have mapo tofu, but but instead of tofu, they put paneer. So it's Mapo Paneer.

(15:49) Jeremy Au:

Oh, I've never had that, but I'm also massively lactose intolerant, so I'm probably not allowed to have it, but that's not delicious. No, I think it's interesting, yeah, because there's a whole cuisine style. I can't remember the exact name. I think we'll have to look it up here, but yeah, I think it's a known cuisine style in India. And I was backpacking there and also saw that as well. Also, I think in Mexico as well, they also have the old school Chinese, the stir fry style in Central America as well from the Chinese immigration wave. So I think it really shows up in the Chinese food everywhere. It gets localized.

(16:16) Jianggan Li:

Yeah, it does. Many years ago when I was still working for Rocket Internet, there was once we had a few colleagues coming to visit from Peru, from Lima, and basically stayed in Singapore for a few days, so I took them around to try different food, right? I remember vividly that we went to a dim sum restaurant, And they said they seem not surprised at all because they said, Oh, we have dim sum in Lima, but we, but I was thinking, okay, maybe it's just they like Chinese food or whatever. And, but then they said that there's actually a fairly large Cantonese population in Peru. And I remember at the table, at the dim sum restaurant in Singapore, there's somebody who just suddenly said, told me that, Hey, pass me the chao, like the soy sauce. I said, okay, you know this word and they said yeah, this is how we call it in Peru, right? I mean the soy sauce and actually going to a restaurant. They call it chifa, which is like a eat rice in Chinese.

(17:02) Jeremy Au:

Yeah. Exactly. So that's what happened. I was backpacking in Peru as well. I was very surprised that this diaspora existed, which kind of makes sense. I think hundreds of years ago, there was also like the California gold rush as a big immigration for opportunities in America as the railroads obviously were built a lot of the Chinese labor until the Chinese Exclusion Act that was done bypassed by the anti-immigrant Congress at a time later on.

So I think the border should slam shut at a certain point of time, but during that window, there was a lot of opportunity. And then of course, on the other side of the table, I think China was in turmoil, right? So we had the fall of the Qing dynasty. and after that, there was like the civil war and the Japanese invasion. So I think this, and then obviously, there was the low economic growth. For many years after that, so it's a stabilization dynamic era. I think a lot of people just left, wherever they went, and now we're kind of starting to reconnect with each other because of the internet.

(17:50) Jianggan Li:

Yeah. And that dynamic's interesting because people who arrived, or who left different points of time, of course, psychologically they feel different. So I have I have a few uncles and aunties in my family who, back in late eighties or early nineties China, I mean, everybody wanted to go to the West. And the route is that, okay, you study really well in university. You go for the English tuition and then you find a, I find a grad school to go to in the west. So I have part of my family in Boston and pass the family in Calgary, in Canada. But it's kind of interesting that many of them initially, they found it really hard to adapt and it took them like, how many years to find their footing.

But some of them are saying that, hey we left at the wrong time 1990s. And you completely missed the miracle in China between the late 90s to the best of the last few years. And I don't know, it's like strange mixed feelings, right? I mean, I went to my aunt's house in Boston. It's like a very nice house in the suburbs, and obviously everyone drives, and you have very nice scenery. You can go for a walk. There's a wood right next to the house, but they were saying that they look at Their former classmates back in university who stayed in Beijing and at least for the last, I don't know, 20, 25 years, every time they go to Beijing, their friends always had like interesting stuff to tell them.

But for them staying in the suburbs of Boston, everything has been relatively stable for 20 years. Of course, it feels a little bit different. You feel like, okay, maybe I missed something, but since the last two years, they feel a little bit better because I think the sentiment in China has sort of weakened a bit. So people have this kind of unease about the future. A bit of a feeling that everything is saturated. I don't know where the growth is. I feel I'm fit. I feel unsecured, and COVID left a big psychological impact on people. So yeah. And maybe many people are telling them, saying that, Hey, maybe it was the right decision after all for you to have left China.

(19:31) Jeremy Au:

It's the old Chinese practice, right? You send one kid overseas. You keep one kid here, right? You got to spread your bets on your kids. So yeah, it happens all the time, right? I think I was also reading this article about how somebody sent one kid to serve for the common town and they sent another kid to serve for the communist, he's got, spread your bets a little bit here, diversification, right? Because things can go up, things can go down.

(19:51) Jianggan Li:

Yeah. You never know.

(19:52) Jeremy Au:

Yeah. I think what's interesting, like you said, is, that there are different eras, and I think different waves and they all have some similarities, but all getting to know each other. So I think the oldest wave in Southeast Asia, I think that now they're called like the Peranakan, right? So I think that's probably like they assimilated, integrated, they intermarried with the primarily the Malay and indigenous populations. So they have a blend, of both Chinese and Malay customs, obviously, and they got relatively rich as a class because you said, they were trading a lot with the trading Chinese. And then of course, later on when the colonial empire came, a lot of them were used to be promoted to manage commerce and so forth, to so I think as a colonial administrator slash third party, right? So that was an interesting first wave.

And then I said, I think the second wave, I said, is around those are I guess from today's perspective, the great grandparents and grandparents. So that's like a trading Chinese, but also those who left early. And then like I said, the now is the newest wave, which is maybe like this current generation seems to be one set of flow as well.

(20:47) Jianggan Li:

And I think I think there are also new dynamics. I mean, obviously, we talked about, previously all these businesses which are expanding to Southeast Asia. And of course, with these businesses that some people came to, one of the stories that people often talk about is the whole gang that funded J&T Express in Indonesia. It started with the open distributor in one province, Eastern China was sent to Indonesia saying, Hey, here's your market to develop is a vast market. Nobody knows how to do, how to sell a phone. So smartphones there. Go and figure it out. And so they took a few years to figure out.

What I find amazing is that they brought lots of people from China with them there and that they really found a way to work with the local team really well. And to date they still run a large ecosystem. And in addition to GNT Express, they have incubated many other companies, right? I mean, Tomorrow Coffee, Y. O. U., the brand for cosmetics and that they are distributing for this property store in China called Tenala, which copied exactly Mixue. And they're distributing that. They are, I mean, basically, they're doing multiple, multiple JVs with multiple Chinese companies because now they have to figure out how to do business locally and how to work with local executives and how to manage the local workforce and how to basically respect the local culture.

This is something that I think many newcomers don't know how to do it because, many businesses in China, they're relatively young. I mean, so the communists wiped out almost everything in the mid-20th century. So all the businesses that you see coming out of China, they were basically started in like 1980s, 1990s, some of them like 2010s. So all these businesses are relatively new. And for the entire history that I have been in existence, it was a search in economic growth in China. So now they have to deal with a different reality, meaning that the Chinese market is saturated. They have to deal with entering different markets and they have to deal with the complexities of navigating through different markets, which I think many of the American and Japanese MNCs took decades to learn back in the 70s, 80s, and 90s but these guys because of the speed they are used to China, they probably do not have the patience to, they probably do not know how to slow down. So that caused lots of friction and as you can see often in the news.

(22:42) Jeremy Au:

Yeah, I was at a dinner party last night and they were, they were just chatting about how they work for I guess sub-Singaporean, I would say subsidiary or subdivision, southeast Asia division of a Chinese company. And I shared with the other person was like, Oh, how's it like for the 996 work culture?

(22:57) Jianggan Li:

Oh, 996. I'm not sure where they originally came from, Jack Ma or somebody else, but Alibaba certainly popularized this term by working from 9am to 9pm six days a week. So basically, basically 12 hours times six is 72 hours a week, which is almost twice the normal working hours in a day. Most advanced countries, right? So at some point in time, it was priced because you work hard, you get rewarded. And of course, the company grows faster than your competitors, but if everyone starts to do the same and there's no growth in the topline market and it becomes what people call "involution nature".

Yeah. Absolutely. And then the rewards became more scarce and had to be distributed to more people. So now 996 is almost a, it's almost a taboo in China. People don't really talk about it, but when you go to companies, you will see that it's many of the companies that are still practicing, top, top-down control long working hours, et cetera, et cetera. But in tech, you already see lots of companies, which are, which try to steer away from that. But it is not easy because if your competitors are aggressive, it's very hard for you to afford to say that. I give people work-life balance, etc. Sure, because lots of the work still needs to be done by humans, right? I mean if you look at e-commerce, lots of the work from logistics. You have to have humans to do it and it comes operations. You have people to do campaigns, edit images, set prices talk to people for customer service, etc. So you still need lots of people so you still need lots of people and the hours matter.

I think that's probably the reason why the e-commerce platforms in China have been investing so much in AI. They are trying to find an edge without working the human labor too hard. But of course, the other side of the coin when you look at it is whether are they looking to replace all these humans, which renders a lot, which potentially render lots of people jobless. So this is always this argument and the dynamics and intention there. But yeah, back to a dinner party.

(24:34) Jeremy Au:

Yeah, that's why everybody in Southeast Asia still ask about 996, because it's not yet taboo. Everybody's like asking about a work culture. I think it's interesting what you said about the work culture, because fundamentally it's about the competition for labor, if there's a lot of when labor is short, then obviously labor gets more negotiating power to get more leverage.

They can negotiate for better working hours. I always read this fun Economist article that basically says that Europeans earn about 20 to 30% less than Americans on a per capita basis, and per person basis, but individually, they also work 20 to 30% fewer hours than Americans. It's actually a fair amount of productivity.

(25:08) Jianggan Li:

Okay. This means that they're compensated fairly because of this hours trade-off.

(25:13) Jeremy Au:

Yeah. exactly. So I think The Economist was basically saying that the productivity factor is roughly similar across the West between Europe and America. I don't know if they should do something on that's working almost twice as hard as definitely twice as hard as it does hours as the Europeans. I wonder whether it shows up as two times more productivity.

(25:29) Jianggan Li:

It was interesting. I've been speaking with a lot of a lot of factory owners in the Pearl River Delta who are engaged in cross-border trades, trade, and software suppliers of companies like Xinyi, et cetera. So over the last few years, many of them have been exploring like setting up factories outside China.

I mean, some of them went to Vietnam, some of them went to Cambodia. And the more enterprising ones went to Turkey and Mexico. I have heard from multiple people that when you measure about the absolute productivity, like per hour, how much can you actually generate per hour for the labor in all these countries? And most of them are telling us that it's remarkably consistent, right? I mean, somebody who was operating a textile factory in Guangzhou and a separate subsector in Turkey, and he said, Turkish workers produce us as much as the Chinese workers and they went to set up something in Mexico.

They realized that actually some Mexicans are actually slightly faster than the Chinese workers et cetera. So basically there isn't much material difference, but, but there's always this notion that for many of the Chinese bosses that, okay, it's hard. I mean, people from other places are lazier compared to the Chinese, but once we start manage the business, you will know that, okay, this is a fallacy, right? So people who are willing to make up hard work and especially people who are migrants. So the people who went to Mexico to open up factories many of them actually have their factories close to the US border and the employees that they employ are coming from different parts of Mexico, sometimes from other countries, not in America.

And they realized that people who are willing to. Pack up and move to another place for a better life, and they're probably willing to work hard. And this is something different when they realized in parts of Southeast Asia, where you largely hire from the nearby townships. So he said, the level of drive from people who actually work out of their hometowns.

It's very different from the level of travel for people who migrate. And I think this is something they see internally in China as well. I mean, when they set up a factory when they hire people from nearby villages, versus when they hire people who move across different provinces to work, the motivation is different but if somebody has the right motivation and their productivity, it's probably very similar across different places, but one thing they mentioned to me is that in many countries, because of the regulations, and of course, I'm in down to each individual level power basis to the productivity is the same, but because of regulations, they could not organize labor the way they do in China.

How does it work? I mean, in China, if you have a factory, if you have a search in orders, whether coming from e-commerce platforms or coming from trading partners you typically go to the labor market saying, Hey, I need 500 workers next day, and I'm willing to pay a little bit extra. In many countries, it's simply not allowed. In many countries, you have to enter proper contracts before somebody can work for you in many countries, and the minimum employment period is one month. If you employ someone full time, et cetera, et cetera. And a tax treatment is different.

So I think in China, there's depth in the supply chain, there's lots of flexibility in how labor could be arranged, even though the government has fairly pro-labor sort of legislation, but when it gets implemented in different cities, you have the local governments helping businesses to actually make some flexibilities.

(28:14) Jeremy Au:

Yeah, awesome. We covered a lot. We learned a lot about, obviously the history between China and Southeast Asia engagement. I think about the different ways of immigration in terms of history and time, but also in terms of the various provinces, of China. And also we got to talk a little bit about the latest wave of immigration in terms of the companies and their work culture. And in terms of productivity on that note, thank you so much, and see you next time.