Update on Tralin Paper (a.k.a. Tranlin Paper or Quanlin Paper): Financing Based on Chinese IP Now Creates Jobs in America

I previously reported a remarkable IP-backed financial deal in China, where Tralin Paper (Quanlin Paper in Chinese, though they use www.tralin.com for their website) used their IP portfolio to back a loan for 8 billion RMB, around US$1.3 billion. Now news  from the office of Governor Terry McAuliffe of Virginia reveals what Tralin is doing with that money. See reports at TAPPI.org and MFRTech.com. Tralin Paper, renaming themselves as Tranlin Paper for some reason, has just signed a deal with the State of Virginia, obtaining state support as Tralin/Tranlin/Quanlin invests $2 billion to create a new environmentally friendly paper mill and create over 2,000 US jobs. In a departure from the stereotypical view of Chinese companies stealing American jobs and IP, here is an innovative Chinese company that has created and protected their own IP, used innovative financial tools (and plenty of solid Chinese guanxi) to obtain massive financing based on that IP, and then brought their money and their technology to the US to create many jobs. At least some parts of this story are going to be repeated in many ways in days to come. The old paradigm of China lacking IP or lacking valuable IP is fading.

After the announcement at ChinaPaper.net, the first report on this story to the English-speaking world, as far as I know, was my original March 6, 2014 report at InnovationFatigue.com followed by an update here on the Shake Well blog that gave a translation of the Chinese story. It was picked up by Intellectual Asset Magazine and by World Trademark Review, but is still a generally unrecognized but important story.

Watch for China to surprise many pundits who decry its lack of IP and innovation. Many Western companies are going to be startled at the tsunami of innovation and IP that will come from the Middle Kingdom, which is rushing to become the epicenter of global innovation and IP value creation. China still has a long ways to go in overcoming its problems and strengthening innovation and IP, but the trends here are remarkable and should not be discounted. Meanwhile, we should welcome stories like Tranlin’s, and watch for many more to come. But for some US companies, this will mean even tougher competition that won’t be easily avoided with restrictive, protective tariffs or antidumping legislation.

By |July 8th, 2014|Categories: Business, China, Industry, Innovation, Paper, Patent law|Tags: , , , |Comments Off

Shopping in China: Are the Prices in Department Stores Fixed or Negotiable?

One of the challenges of shopping in China is knowing when the marked prices are firm prices or just an inflated asking price subject to haggling. In grocery stores, the prices are generally the real prices and there is no sense trying to argue anything down. But in many other settings, the marked prices might be negotiable, meaning they could be way too high and you shouldn’t pay that much.

Sometimes a store will have fixed prices on one aisle, and negotiable (inflated) prices on the next. If there are friendly sales people servicing a particular set of products or section of a store, let that be a warning sign. Why does this store have five or six people anxious to help me buy blankets or vitamins, but no one in other sections of the store to help me buy batteries or copy paper? It may be because the people selling blankets or vitamins are on commission. They may not even be employees of the department store, but employees of a manufacturer. They are highly motivated to see you the product for as much as possible. This can happen in malls, department stores, and even grocery

One way to know if the prices are flexible is to simply ask if they can lower the price a little. “Keyi pianyi yidiar?” If they say something like, “Well, since you can speak a little Chinese, I’ll give you the friend discount of 10%,” then you know the price is flexible. If they pull out a calculator and type in the price to display it for you (this allows them to show you a price privately without revealing it to other customers within earshot), that’s a sure sign that the price is flexible, and a sign that what they are asking is way too high.

If they say, “No, I can’t lower the price,” say “OK” and walk away. It’s when you walk away that you see if they are serious or not. If you walk away and they say, “OK, OK, 10% off!” then you know the price can be lowered. If they say nothing, the price probably is firm.

Many electronics, appliances, bedware (blankets, linens, quilts, mattresses, etc.), and relatively high-margin items have prices that can be negotiated when shopping in China.

The next challenge is knowing what the real price is. Sometimes you can only hope to shave off 20% or 30% from the price. Other times the asking price might be 10 times the real price (this is especially true of gifts like pearls or jade items). This is where knowledge is power. Chinese people ask each other what they pay for things all the time in order to learn real prices. Do your homework before you buy. But if you don’t have time, you can try several different shops and start very low, and seeing if they call you back after you walk out. Again, it’s only when you walk that you see if your offered price might actually be acceptable. You may have to walk away several times, raising your asking price each time, until you find a taker and realize that you’re close to the real price.

On the other hand, if you are not in a bind financially, don’t be too tight-fisted in China. Spending a little extra money for what you buy can mean a lot to the merchants. For a small extra amount that is still a fair price, you can bring a lot of cheer, and if you feel that a merchant is kind, helpful, and honest, giving him a “healthy price” can keep him or her happy to serve you and help you in the future. That’s my view, anyway.

By |June 14th, 2014|Categories: Business, China, Consumers, Shopping||Comments Off

Customer Service in China: China Telecom Busts Another Western Myth

I commonly hear Western businessmen stating that China doesn’t get innovation and customer service. I’ve discussed the myth of China’s lack of innovation on the Innovation Fatigue blog. Today I’ll share my experiences with China Telecom that convince me that the West has a few things to learn about the new world of customer service in China.

Some of the worst customer service I’ve ever experienced involved internet and cable TV service – in the United States. When we had technical problems, the hassles we faced when working with Time Warner in particular put real strains on my endurance. It took forever to reach someone, and then getting help to come fix a problem when that was needed was a real pain. Required advanced scheduling with no knowledge of when the people would show up. Coming to China, I expected things to be even worse. What a surprise that has been!

Two days ago I bought a new router for our home, worried that the signal strength of our old Apple Airport router was too low. But the new router, with instructions only in Chinese, wasn’t working right even after I thought I had done everything properly. I called China Telecom after 9 PM, reached an English speaking agent in about 2 minutes, and they said they would send someone out the next morning. I asked if they could make it around 6 PM when I would be back from work. They said OK, 6 PM or later. The next day at 6:05 PM, a friendly tech support man showed up. Big smile, very polite and kind. He understood exactly what I needed, went to the router, looked at the router page on my computer, clicked one area and immediately spotted an error in my set up. Within 2 minutes the problem was fixed. He then tested the connection, gave me his number in case I had any other trouble, smiled again, shook my hand, and was off. Then 5 minutes later, I got a call from China Telecom to ask how things went, if the problem was fixed, and if the service man had a good attitude and had given me his phone number, etc. Wow.

Rapid access to support, rapid scheduling of service, prompt arrival, quick resolution of trouble, and follow up. What a great lesson for American businesses. China Telecom is a large state-owned enterprise that represents mainstream Chinese business in this new era. China gets customer service. Sure, there are plenty of cases of bureaucracy in the way and lazy employees who don’t care, problems that abound in the West as well. But China Telecom’s fantastic customer service should be the gold standard that the West tries to copy and imitate, before it’s too late. Likewise, the burgeoning spirit of innovation and intellectual property support in China is something the West should learn from, though China has much to do in this area still. But don’t discount the competitiveness of China because you think they don’t get customer service or innovation. Time to start relearning what you think you knew about China, and relearning what you know and do about customer service.

By |April 22nd, 2014|Categories: Business, China, Industry, Internet|Tags: |Comments Off

Brave Dragons: About Chinese Basketball, But Maybe Also About Your Job in China

I just finished reading Brave Dragons: A Chinese Basketball Team, an American Coach, and Two Cultures Clashing (New York: Alfred Knopf, 2012) by Jim Yardley, an entertaining Pulitzer Prize winner. While the topic might seem very narrow to some readers, it may be one of the best books on the market to prepare for life and work in China, if that’s of interest to you. Even if you aren’t coming to China, it can help you understand some of the cultural barriers between China and the U.S. in spite of its very specific focus. It’s about one Chinese basketball team and an American coach’s experience in coming from the NBA in the U.S. to a lesser known Chinese city, Taiyuan. But so much of what he experiences and the setbacks and surprises he faces remind me of what many foreigners face when they come here to work or live. Definitely a good read and an entertaining one.

NBA coach Bob Weiss does a remarkable job of adapting to changes that would make many people give up in exasperation. For example, he was hired to be the coach of the Taiyuan team, but that changed when the owner suddenly made a Chinese man the acting coach to ensure that the team would run through constant fruitless drills to work the team to death rather than working on the skills and play development they really needed. He rolled with the punches and didn’t let pride get in the way. It helped that he really loved China and wanted to stay here, as it has helped for many foreigners here in related circumstances.

People coming to China for jobs often find out that the glorious position they were offered wasn’t quite as described, or that the benefits promised were withdrawn without notice, or that the work environment is almost the opposite of what they expected. In some cases, even the very job they accepted isn’t actually there. You need to come here expecting disappointment and setbacks, but determined to find a path through the craziness to make something precious and fulfilling out of your experience. Contracts here don’t carry the same meaning as they do in some parts of the world. There is much more emphasis on flexibility and renegotiating things when they prove to be difficult for one side (i.e., the other side). Important issues that you negotiated during your interviews might be eventually forgotten. Understand that and always ask yourself what you will do if an understanding doesn’t turn out the way you thought it was supposed to. Over-communicate,get anything important in writing or be prepared to abandon it, and be prepared to abandon it in any case.

While management in China can be quite good, in many businesses there are some huge differences in style that will surprise Westerners. The unfortunate management style of Boss Wang, the team owner, is  important to observe, but will probably  never encounter the extremes portrayed in the book. He tended to yell at his players for everything, sometimes an hour or more of yelling at them, constantly demeaning and harassing them for mistakes, and emphasizing excessive work rather than smart preparation. But the sudden last minute changes in plans and strategy that he would call from the top can be something you’ll see more often here than you might have seen before. Sometimes it works, but see for yourself in the book.

I recommend reading this book and contemplating how you might deal with related situations in your own journey in Asia or anywhere with new culture and rapidly changing rules.

For sensitive ears, there is some profanity as some of the players are quoted.

By |April 4th, 2014|Categories: Books, Business, China|Tags: , , |Comments Off

Great Chinglish in a Dramatic Video from a Machinery Company That Teaches Much About Chinese Culture

Great Chinglish in an impressive video from Peixin Machinery Corporation in China

Great Chinglish in an impressive video from Peixin Machinery Corporation in China

“It inherits the wisdom of Minnan Merchants. It assembles numerous elites.” Spoken in perfect English with a dramatic deep voice, these words begin an impressive and instructive video prepared as an advertisement for Peixin Machinery Company and their advanced systems for the paper industry. There is so much that may be puzzling to native English speakers when they watch this video, and so much that teaches unintended lessons about Chinese business culture. I feel that the video and its Chinese equivalent could be a valuable addition to any course studying Chinese and especially business Chinese or business culture in China.

Some of the scenes selected for the video also teach a lot about culture in China. You can see the intense deference to authority in several sections, for example. Quite interesting. But it’s the English that I enjoy most.

“Big waves wash the sand, but we still go ahead bravely with the pulse of the times.” That’s one of many intriguing statements that are important in Chinese speeches and ads, but seem really strange to Western ears. The Chinese version of the video has been translated well, I think, as far as direct translations go, but it’s the whole mindset and nature of the content that needs to be retranslated and reworked for this to be an effective video for native English speakers. For example, starting off with a boastful link to Minnan merchants is just crazy–even Americans who have been living in China for years are not likely to appreciate the old lore of Fujian Province merchants known as the Minnan merchants. One of many moments that makes this fun video a great example of the very large cultural gaps that sometimes look like language gaps between the East and the West.

No offense intended to Peixin. Their video is better than most and has been done much better than most. The equipment also looks pretty good, but I don’t know one way or the other.

By |April 3rd, 2014|Categories: Business, China, Chinglish, Industry, Paper, Products|Tags: |Comments Off

A Sign of China’s Growth in Intellectual Property: Chinese Company Relies on IP to Gain Giant Loan

Notice & update: IAM Magazine, one of my favorite sources for information on intellectual property, just issued a blog post on the use of IP in lending in China: “Chinese companies have secured over $10 billion in patent-backed loans since 2008” by Jeff Wild, March 4, 2014. The news I share below (cross-posted at InnovationFatigue.com) definitely supports their article. Great timing! Further, responding to the news that I first broke to English speakers on the Innovation Fatigue Blog, IAM Magazine has written a blog post about this story (kindly citing my announcement), wherein they observe just how big of a deal this is. I agree, though I also think it’s fair to wonder how much of the transaction actually depended on IP and how much was due to guanxi and other factors. I have not yet evaluated the IP and if I do look at it in more detail, do not plan on sharing my analysis publicly, but may still offer further updates on this story here. IAM’s post includes a translation of the Chinese article behind this story. My independent translation (prepared before I saw the IAM translation) is at the end of this post. If there are significant differences in meaning, I’ll defer to them since my Chinese is still rough.

March 6, 2014: I just learned of breaking news from the Province of Shandong in northern China. A Chinese paper company, Quanlin Paper (also called “Tralin Paper”) has successfully used its portfolio of patents and trademarks to secure a huge loan of 7.9 billion RMB (about $1.3 billion). Potentially significant story for those tracking IP and innovation in China. The story was just reported on March 3, 2014 at China Paper (the story is in Mandarin). This is quite a big deal and may be a record for China in terms of how much value IP brought in seeking a corporate loan. To emphasize the significance of this development, the normally dry China Paper publication begins with a somewhat flowery statement based on an interview with the Chairman, who expresses surprise and delight at how much money they were able to obtain with their IP. Here’s my loose translation, followed by the actual Chinese:

“I never thought that intellectual property could have such a big effect in obtaining this loan. IP was a big part of it,” according to Quanlin Paper Company’s Chairman of the Board, President Li Hongfa, speaking today to a reporter about the 7.9 billion yuan from bank lenders that began this week. He said that this money will help them rapidly expand and seize market opportunities. Money has been tight for business, and this new addition is welcomed just as the mist-covered earth rejoices in the spring rains from the night before.

核心提示:“没想到知识产权能在这次贷款中起这么大作用,占这么大比重!”泉林纸业有限责任公司董事长、总经理李洪法今天对记者说,79亿元的银团贷款本周已开始放款,这笔资金对正在快速扩张、抢抓市场机遇但一直资金紧绷的企业来说,就像雾霾重重的大地喜迎昨夜的春雨。

OK, a bit flowery, but again, this is big news for China and things get flowery when the big news is good. This development shows that IP in China can be valuable (though the portfolio includes some international patents, it is mostly Chinese IP). It also shows that Chinese companies, even in seemingly dull industries like the paper industry, can be innovative and create valuable IP. I haven’t reviewed their IP to assess its value, but I understand they have over 100 Chinese patents in areas such as technology for using straw and other renewable or recycled materials for making paper, with alleged benefits of enhanced environmental friendliness and cost effectiveness. Shandong Province’s IP Office has also created some publicity about Quanlin’s IP estate (see the Chinese article here), though this was before the news of the massive loan secured with the help of IP. Expect more publicity from them shortly.

Further background comes from Baidu’s wiki-like entry on Quanlin Paper.

When nations develop strong IP systems, companies can use their IP to protect their innovations. This also motivates them to take the risk and spend the money need to drive further innovation, and gives investors courage to fund growth and innovation. In this case, it helped give a lending partner (a Chinese financial organization) the courage to loan a giant sum of money to help Tralin grow. Tralin has been pursuing IP not just for tax breaks it seems but also for strategic purposes, and information coming out about this story shows that they have been developing expertise in their staff to develop their IP estate. Sure looks like that has paid off for them.

This is one of many signs that China is becoming serious about IP and innovation, and not just low quality IP, but IP that can provide significant value. For IP to apparently be a crucial part of such a large loan in this challenging economic times is a remarkably positive sign for China, in my opinion.

On the other hand, the loan may be due to politics and guanxi with officials, and the IP is just window dressing. That’s possible. But to even choose IP as the window dressing for publicity and hype is a remarkable thing in it’s own right, and still a sign of China’s rapid transformation in valuing and pursuing intellectual property.

Here is my loose translation of the China Paper article:

泉林纸业知识产权质押融资创国内最高

Quanlin Paper Crafts the Nation’s Largest IP-Backed Financing

泉林公司以110件专利、34件注册商标等质押获得的这笔贷款,2月21日在国家知识产权局完成备案。经省知识产权局核实,这是迄今为止国内融资金额最大的一笔知识产权质押贷款。

On Feb. 21, 2014, Quanlin Paper secured a loan using a pledge of intellectual property. The pledge, recorded with the State Intellectual Property Office (SIPO), includes 110 patents and 34 registered trademarks. The Shandong Province Intellectual Property Office has verified that this is the largest amount ever financed in China using intellectual property.

“这笔资金到位,我们的大项目就能加快推进,市场机遇不等人啊!”李洪法说的大项目,是一个年处理150万吨秸秆的制浆造纸综合利用项目。泉林公司总部位于聊城市高唐县,是一家以浆纸业为核心的大型企业,利用秸秆制造“本色”纸品,变废为宝、环保健康,改写了人们对造纸业的既有印象,也在改变着人们的消费习惯。企业提出这个大项目后,很快得到环保部、国家发改委认可、立项,是全国资源综合利用和循环经济示范工程,也是2013年省重点建设项目。目前,项目基本建设已经全面展开,计划年底前建成,投产后,预计年可实现销售收入81.65亿元,销售税金4.89亿元,利润12.4亿元。

“With this funding obtained, we will be able to accelerate our large projects. Market opportunities wait for nobody!” said Chairman Li Hongfa. The primary project Li refers to is a straw-based pulp manufacturing complex for papermaking that will process 1.5 million tons per year of straw. Quanlin company is headquartered in Liaocheng City, Gaotang County (Shandong Province). Quanlin’s core business among their large-scale enterprises is pulp and paper manufacturing using straw to create “natural color” paper. Quanlin turns waste into treasure and promotes a healthy environment, transforming both the impression that people have (of the industry) and their habits of consumption.

After the enterprise brought this large project forward, it rapidly gained approval from the Environmental Bureau and the National Development and Reform Commission. The project is an important program for the nationwide comprehensive utilization of resources and a model project for China’s recycling economy. It was also considered a provincial key construction project in 2013. Currently, capital construction is fully underway and should be complete by year-end. Once production begins, the expected annual sales revenue will be 8.165 billion RMB, with anticipated sales taxes of 489 million RMB and annual profit of 1.24 billion RMB.

知识产权获资金市场高度认可,对科技型企业无疑是巨大的利好。尽管泉林公司本身的发展就是受益于在知识产权、核心技术上的不断投入——即使在企业资金最困难的时候,这上面也从来没有“短”过,李洪法这次还是被深深地触动了:在这次贷款中,企业拥有的专利评估价值达到了60亿元,对贷款顺利达成起到了关键作用。这意味着,专利等知识产权不仅能垄断市场、为企业创造长期利润;质押融来真金白银,更是能够解决科技型企业成长中最头疼的资金饥渴,释放发展潜力,及时把握市场机遇,让企业“长大”。

For intellectual property to receive this high level of approval from the market is without doubt a giant benefit for technological enterprises in general. Although Quanlin company’s own development has now benefited from their intellectual property, they continue to invest steadily in their core technology—continuing even during the times when investment is most difficult. This is an area where the company has never gone “short.” The result has made a deep impression on Li Hongfa: in the process of obtaining these loans, the appraised value of Quanlin’s patents reached 6 billion RMB and played a key role in successfully obtaining the financing. This means that patents and other IP rights are not just about obtaining a monopoly in the market, but can be used to creating long-term profit for the enterprise. They can be used as collateral for significant financing to resolve one the biggest headaches for high-tech businesses, the hunger for funds to grow, to capture hidden potential, grasp favorable market opportunities, and to let the company “grow up.”

这一融资方式也让银行对科技型企业增添了兴趣。不仅国家开发银行牵头银团,为泉林公司发放了这笔79亿元的贷款,交通银行甚至还与省科技厅签署专门的战略合作文件,并推出了专门的知识产权融资产品。交行山东省分行零售信贷部总经理姜鲁荣说,知识产权看似无形,却体现了企业价值创造和持续经营的能力,银行业务风险没有增加,却有可能抢占一批优质客户,改善银行客户结构,“就像泉林公司这样”。

This financing will stir the interest of banks other technology enterprises. Not only did the China Development Bank and their affiliates issue Quanlin a loan of 7.9 billion RMB, but the Bank of Communications also signed a strategic cooperation document with the Provincial Science and Technology Department, and launched a specialized intellectual property financing product. Jiang Lurong, General Manager of the Retail Credit Department of Shandong Branch Bank, said that while intellectual property seems invisible, it reflects value creation and the ability to continue operations without increasing banking risk, and can help obtain more high-quality customers, improve the system for customers of the bank such as companies like Quanlin.

Kudos, by the way, to Dr. Ian Feng of Goldeast Paper in Zhenjiang, China for alerting me to the story in China Paper.

By |March 7th, 2014|Categories: Business, China, Patent law|Tags: , , , |1 Comment