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Illegal Baby part 2: I fought the law and the law won

will — Sun, 05 Oct 2008 08:01:00 GMT

Regular readers will recall that Imagethief became a father earlier this year. Having a child requires new parents to undertake many unfamiliar responsibilities. These include the obvious, such as the care and feeding of an infant, and some things that you really just don't think much about in advance. Among those are the bureaucratic hoops that the parents of new children have to go through, especially in China.

There were some things that I anticipated. In my mind I had a pretty clear idea of the set of bureaucratic steps we'd need to go through for Imagethief Jr., a.k.a. "Z". 1) Apply for passports (Z is a dual citizen so there are two passports). 2) Apply for a visa. 3) Apply for a certificate of temporary residency. Simple. Easy. Logical.

And missing one critical step. I didn't know that I'd have to actually register Z's birth separately with the Chaoyang District police. After all, it wasn't like I'd bought a weapon or imported an exotic car. It's a baby, fer chrissake. The only things he's a threat to are diapers, teething rusks and the thoroughly detonated sleeping habits of his parents.

I discovered the police registration requirement for newborns by accident when we went to apply for Z's visa. Mrs. Imagethief and I had waited a while to do this because we hadn't applied for the passports right away. We were, as you might expect, a bit overwhelmed by the presence of a newborn and didn't have any immediate plans to travel. When we finally got Z's US passport, which was the one under which we intended to apply for his Chinese visa, he was about two-and-a-half months old.

My company helpfully pulled together a letter and assorted business registration documents for me. We had Z's Chinese birth certificate and shiny, new American RFID passport. For linguistic help I drafted my assistant from work to accompany us. Mrs. Imagethief, a Singaporean, speaks pretty competent Chinese --far better than Imagethief himself-- but for bureaucratic situations a local can be useful.

In fact we'd had some rumblings of possible trouble already. That same week a friend of ours had attempted to get a visa for her new baby, who was almost exactly the same age as Z. Informed by the Beijing Entry and Exit Authority that she had missed the critical registration step and could expect to pay a fine of several thousand RMB she had stormed out of the building in a rage. I, cocky in my various successes wrestling with the Chinese bureaucracy, was optimistic that no such misfortune would befall us.

Pride, as is widely known, goeth before the fall. My pride had goeth-ed and my fall was not far behind.

At the Entry and Exit Authority we waited in the snaking queue for the better part of an hour before arriving at the counter. Around us swirled the usual motley collection of immigrants dealing with their visas: West African families; necktie wearing businesspeople with Chinese handlers; visa agents with fistfuls of other people's passports and so on. Other than the tax authority, which I am pleased to have avoided having to visit in China, there is no clearer glimpse into the soul of a government than the waiting room of its immigration bureaucracy. You rapidly get a picture of whose life is made easy, whose is made difficult, and the average level of desperation inflicted on the gathered applicants, supplicants and itinerants.

At the counter the uniformed young lady fiddling through our paperwork was quick to spot a problem.

"How long have you had his passport?"

"We just got it. It took a while to arrive." This was kinda true. It took a while to arrive because we took a while to apply for it. Zach's Singaporean passport had taken nearly three months from application to delivery, but the US passport had only taken a week.

"Do you have a receipt that says when you picked up the passport?"

"Uh, no." This was true. The US government does not give you a dated receipt when you pick up the passport. Just the passport itself. I pointed out that that passport had an issue date in it that was within the prior two weeks.

"No, I need a receipt. Can you get a receipt?"

I weighed the likelihood of getting the US State Department to write me a letter saying exactly when they had given me the passport in anything less than a matter of weeks, decided the yardage was too far and elected to punt.

"I don't think so."

She promptly ran my punt back for the touchdown. "We can't issue a visa now. Your baby is not properly registered with the police. You'll have to register him and pay a fine."

"How much is the fine?"

"Five thousand renminbi."

I didn't see the relationship between the passport issue date and the missing police registration, but there it was. At this point I decided to unleash my masterful china-hand negotiating skills.

"Isn't there anything else I can do?"

"No. Take him to the Chaoyang District police post on Ritan Donglu. Next!"

Damn. She knew how to negotiate. I had no choice but to make way for the extended West African family crowding up to my counter.

Early the next day we were off to the Chaoyang District police post. I had expected a massive, bustling metropolitan police station out of American television fantasy. Cops banging out reports on IBM Selectrics; perps being hustled past; a crowd of prostitutes flirting with grizzled sergeants while waiting to be booked. This was exactly wrong. It was more like something out of rural Indonesia. There was a quiet front courtyard with a couple of idle police cars. Inside there was exactly one desk with one bored looking officer sitting at it. We were the only other people in sight, although there was one officer in another room that the guy at the desk shouted occasional questions at. Sultry May air had penetrated the lobby, completing the languid, tropical feel. On the wall behind us, watched by nobody in particular, an Olympic countdown clock ticked away the months, weeks, days, minutes and seconds (no picoseconds?) until 8/8/08.

I'd rather expected a stern police haranguing, but to the officer on duty this was clearly just a trivial bit of paperwork in a long, uneventful and somewhat sweaty day. He asked me to tell him what happened, which I did with as much honesty and clarity as a PR man can muster. He took copious notes and, when I was done, explained the bottom line to me.

"As a foreigner are legally required to report the birth of your baby to the police within thirty days. Your baby is seventy-seven days old. That means he has been illegal for forty-seven days."

Good heavens, I thought. I have an illegal baby! I never thought this was the kind of thing that would happen to me, a good Silicon Valley boy who's sole scrap with the police was being ordered off of Santa Cruz' Seabright Beach after official closing time.

The next part, explained the officer, was important:

"Did you break the law intentionally or were you ignorant of it?"

So there it was. Are you a criminal or an idiot? Even I could see which way this one would cut, so I cast my lot with idiot.

"I had no idea."

He grunted and finished the paperwork, which turned out to be my confession that I had accidentally but most definitely transgressed against the laws of the People's Republic, was contrite, and agreed to accept such punishment as the authorities had decided to mete out, which in this case was five large. This was read back to me to make sure I understood my idiocy in complete detail, which I did. Anxious to transform my illegal baby into a legal baby, I signed. It was my first confession to anyone other than my parents. I did feel a new lightness washing over me as I unburdened myself of my sins, but it may have just been the lightness caused by the extraction of RMB 5,000 from my wallet.

Or the psychological impact of imagining RMB 5,000 being removed from my wallet, since I didn't actually pay at the the police station. Instead, I was told to present myself again at the Entry and Exit Authority the next day. A representative from the police would meet us there and we could pay the fine and complete the registration of our illegal baby.

It seemed a little odd that the police would send somebody round to meet us and deal with this, but this is China and I've learned not to be surprised by bureaucratic eccentricities, such as the fact that the residency records of my neighborhood are apparently maintained on paper in a library's worth of binders arranged by estate and danwei. Or the fact that although I live in the bustling, commercial heart of Beijing's ever-extending central business district, our local paichusuo is on the other side of the Fourth Ring Road in a remote,down-at-the-heels neighborhood called Balizhuang that is being rapidly flattened to make way for god only knows what. It's these sorts of things that remind me that the area I'm now living in was farmland and industrial estates just a decade ago.

Of course the police didn't send someone to meet us. We discovered this as we waited like idiots (fittingly, since I'd already officially confessed to being one) on the foreigner floor of the Entry and Exit Administration, scrutinizing every cop who came in to see if it was one of the two we had seen at the Chaoyang District police station. Following a half hour of gathering flies, some investigation revealed that there was a police desk on the floor that apparently existed for the sole purpose of paying fines. It was doing thumping business.

We presented our confession and various chopped documents officially certifying our idiocy and tipped RMB 5,000 into the government coffers (possibly used to help pay for last week's space launch), at which point we were once again duly authorized to stand in line and submit our visa application for Z. A week later we got his passport back with visa in place. We went straight off to the to register him for his certificate of temporary residency, and I'm pleased to say he's been fully legal ever since.

Thinking back on this episode, it's clear in retrospect that the attendants at the hospital where Z was born told me as we were checking out to register him with the police within thirty days. I had confused this fairly rigid, visa-oriented requirement with the certificate of temporary residency registration that foreigners need to complete with 24 hours when they arrive in China or move to a new address. Despite sounding very urgent, I'd always found the enforcement of temporary residency registration to be pretty squishy. I'd often been late --once in Shanghai by a staggering six months-- and never got more than a lecture for my sins, if even that. But the baby requirement is different, and in the period leading up to the Olympics nothing about the enforcement of China's immigration laws was squishy.

Honestly, it's a lot of bureaucracy for new fathers, who aren't the most competent of creatures at the best of times. Z was born in a hospital where little English is spoken, so combined with the linguistic gulf it was a recipe for trouble. Maybe they should have simply tacked the fine onto my bill at the hospital and saved everyone the trouble.

It also would have been nice if my company's HR department had thought to warn me of the baby registration requirement, but apparently not too many of our foreign staff have had babies in Beijing and it's simply not on the checklist. So if you're a foreigner living in China and expecting a baby, remember you have thirty days to do the paperwork. True, the Olympics are over and things might be getting a bit squishy again, but RMB 5,000 pays for a lot of diapers, so why tempt fate?

And though I offer a few weak excuses, in the end there is really nothing to blame but my own idiocy. I have a stamped confession to prove it.

Previously:

Illegal baby part 1: The strange case of the sluggish passport

Illegal baby part 1a: The Singapore government sends a fruit basket

Analyzing Skype's statement about the China keyword scandal

will — Sat, 04 Oct 2008 09:31:00 GMT

Predictably for Skype, the mainstream coverage of the TOM.com keyword trapping scandal has grown, with associated reputation damage for the former naive idealists at Skype and their parent, E-Bay. (Browse examples at ZDNet, Reuters, The Register, GigaOM, Financial Times, the BBC, AFP, and god knows where else.) Among the mainstream coverage so far, the Associated Press story is interesting because it makes the pertinent point that the Chinese government may not be alone in listening in on Skype communications, and reminds people of some of the doubts that have circulated about the widely-used international version of the Skype client:

"For a couple of years, maybe more, people have had the suspicion ... that Skype pretends to be secure but actually isn't," said Bruce Schneier, the chief security technology officer of BT Group PLC, the British telecom carrier.
"The Chinese eavesdropping on Skype text messages only adds to the PR problems, the image problems, that Skype has among those who care about security," Schneier added.

Imagethief's suggestion: Assume the worst of your out-of-the-box Internet technologies. And if you really want to use the Internet for secure communication, look into e-mail+PGP.

So how is Skype's response shaping up? Via the always useful China Journal, Skype has published a statement attributed to company president Josh Silverman. Here is is in full, with some annotation by me:

You may have seen some reports in the media about a security and privacy breach in the software provided by our Chinese partner, TOM Online. I'm writing to let you know where we stand, and what we're doing to resolve the problem.
Some brief background: In China, TOM is the majority local partner in our joint venture that brings Skype functionality to Chinese citizens. [Imagethief: Majority local partner = "We don't directly manage this thing!" This buys some distance from what has happened, but is a reminder that they've surrendered control of their brand in China to an entity with little incentive to being transparent with them. This was Yahoo's error.] The software is distributed in China by TOM and TOM, just like any other communications company in China, has established procedures to meet local laws and regulations. These regulations include the requirement to monitor and block instant messages containing certain words deemed "offensive" by the Chinese authorities.
It is common knowledge that censorship does exist in China and that the Chinese government has been monitoring communications in and out of the country for many years. This, in fact, is true for all forms of communication such as emails, fixed and mobile phone calls, and instant messaging between people within China and between China and other countries. TOM, like every other communications service provider operating in China, has an obligation to be compliant if they are to be able to operate in China at all. [Imagethief: Very open of Skype to admit this with such frankness. The reason to do so is to make sure you, the reader, know that Chinese users should know what to expect. But it raises the question of complicity, and whether it was right for Skype to make their technology available to a partner who would have to submit to such a regime. The "compliance with local laws" angle, even wielded by extension through a local partner, has proved thin insulation for other global Internet companies with their butts in the Chinese censorship fire.]
In April 2006, Skype publicly disclosed that TOM operated a text filter that blocked certain words in chat messages, and it also said that if the message is found unsuitable for displaying, it is simply discarded and not displayed or transmitted anywhere. It was our understanding that it was not TOM's protocol to upload and store chat messages with certain keywords, and we are now inquiring with TOM to find out why the protocol changed. [Imagethief: Top of the head guess as to why "the protocol changed": Because TOM changed it, either to satisfy a request from the authorities or to keep themselves covered in case the authorities came knocking. If you concede that "censorship does exist in China and that the Chinese government has been monitoring communications in and out of the country for many years", why should your Chinese partner or the Chinese version of your product be exempt? There seems to be a disconnect here between acknowledging that the Chinese government snoops and being surprised to find a Chinese partner enabling such snooping.]
We also learned yesterday about the existence of a security breach that made it possible for people to gain access to those stored messages on TOM's servers. We were very concerned to learn about both issues and after we urgently addressed this situation with TOM, they fixed the security breach. In addition, we are currently addressing the wider issue of the uploading and storage of certain messages with TOM. [Imagethief: I bet the security breach was fixed quickly. I also bet Skype isn't the only one "urgently addressing this situation" with TOM.]
It's important to remind everybody that the issues highlighted in yesterday's Information Warfare Monitor / ONI Asia report refer only to communications in which one or more parties are using TOM software to conduct instant messaging. It does not affect communications where all parties are using standard Skype software. Skype-to-Skype communications are, and always have been, completely secure and private. [Imagethief: Translation = You're safe, but Chinese users are out of luck. If you attempt to go to www.skype.com from inside China without a VPN, you're automatically redirected to the tom.skype.com site, so getting the international client takes some legwork. Thus it's insecure, censored crippleware for Chinese users. No wonder Chinese bloggers are annoyed. As for Skype-to-Skype communication being completely secure and private, the categorical statement probably makes good immediate PR sense, but seems like the kind of thing that could come back to haunt.]
I passionately believe in Skype's mission to enable the world's conversations. Allowing the world to communicate for free empowers and links people and communities everywhere. Our challenge is to bring this valuable service to people all over, including China, while being transparent to our users and staying within the boundaries of the local laws. We are committed to meet this challenge. [Imagethief: The question is whether the requirements to be transparent to users and stay within the boundaries of local laws are compatible in China, especially when working through a local partner. Transparency doesn't seem to have made the cut in the current situation.]

One word leaps into my head as I go back and reread this statement: Naivete, especially with regard to the obligations and priorities of a mainland Chinese partner. The Skype-TOM deal and associated controversy date from mid-2006, well after the US congress started looking into the behavior of US Internet firms in China (although before Yahoo got roasted over the Shi Tao affair). The alternative to naivete is calculation that the risk of an outing like this was worth taking in order to pursue opportunities in China.

I'm a big fan of Skype and I use it all the time, especially for my odd-hours conference calls with the US or Europe, when I don't want to go into the office or shell out China Telecom IDD rates (I don't even have IDD on my home phone). I use the international version. I assume it is secure in the same way I assume my WiFi is secure: Enough to deflect casual interest but not enough to deflect a truly interested party with resources, such as, say, Uncle Sam. I also assume nobody is that interested in me.

On balance I'm glad that Skype is offered to Chinese people even via TOM, just as I'm glad that Google, Microsoft and Yahoo all offer their products here. The China-specific platform may owe as much to the need for different payment mecanisms and China Telecom's defense of its IDD franchise as it does to censorship and monitoring. Still, it would be nice if Chinese users had easy access to the more secure international client, which comes in a simplified Chinese version.

Silverman is probably right that the average Chinese user will assume any product they download from a Chinese company will cater to the requirements of the Chinese authorities. Skype's situation is not the same as Yahoo's, and the full extent to which the service is compromised is not clear. But it's probably safest to assume the worst, and Skype looks badly wrong-footed by a fairly predictable outcome. Still, I give Skype and Silverman credit for explaining their position, even under duress. According to the FT, TOM declined to comment on Citizen Lab's report. What a surprise.

Update:

Skype has also posted a very brief Q&A, also attributed to Silverman, on their blog. Little different from the statement avove, but includes the following clarification:

What have you learned from TOM about the uploading and storing of certain chats, and what are you doing about it?
What we have discovered in our conversations with TOM is that they in fact were required to do this by the Chinese government.
***
What Skype can and will do is to ensure that it is clear and transparent to Skype users that their chat messages into and out of China may be monitored and stored. We are looking into a number of ways to make this more clear to our users.

So TOM didn't think to mention a likely government monitoring requirement during the negotiations? Why am I not surprised? These are the kinds of things that American and European Internet companies need to think about while deals are in progress.

The transparency pledge is good, but the challenge will be getting a statement somewhere that mainland Chinese users are likely to see during the download and installation process. This will require TOM's cooperation, and possibly the authorities' agreement. I'll be interested to see how that works out.

Lessons from Citizen Lab's China-Skype revelations

will — Thu, 02 Oct 2008 10:44:00 GMT

If you don't know the story, you can read up on the New York Times or the Wall Street Journal (and again in the Journal here, with more focus on the backlash for Skype). In a nutshell, the story is that the University of Toronto's Citizen Lab, which focuses on Internet, free-speech and censorship issues, released evidence that TOM-Skype, the joint venture between E-Bay and Tom.com that runs the China version of the Skype service, is monitoring its users conversations for the kind of keywords that one usually associates with China's net nanny.

It was interesting to watch Skype's response to this situation evolve over 24 hours. Yesterday was the focus on the "security issue" (which it most certainly was). From the New York Times article:

Jennifer Caukin, an eBay spokeswoman, said, “The security and privacy of our users is very important to Skype.” But the company spoke to the accessibility of the messages, not their monitoring. “The security breach does not affect Skype’s core technology or functionality,” she said. “It exists within an administrative layer on Tom Online servers. We have expressed our concern to Tom Online about the security issue and they have informed us that a fix to the problem will be completed within 24 hours.” EBay had no comment on the monitoring.

However, by today the repositioning had begun, with the emphasis shifting from security to privacy. From the second Journal article:

Jennifer Caukin, a spokeswoman for Skype, said practices related to a text filter that blocked certain words in chat messages had been changed "without our knowledge or consent and we are extremely concerned. We deeply apologize for the breach of privacy on TOM's servers in China and we are urgently addressing this situation with TOM."

Jennifer's hat seems to have changed overnight. If I was the kind of person who wore a tinfoil hat (and I might be) I might think they were trying to keep the focus off the E-bay parent brand. But it might just be a result of the channel the journalist went through.

The Journal's "China Journal" blog tracks the interesting evolution of Skype's written statement in response to this situation. Skype says that text filtering has always been part of the package and that no one should be surprised at Chinese government monitoring, but then shifts rapidly into outrage mode when theoretical possibility that the government might be monitoring communications starts looking like it's actually happening:

The idea that the Chinese [government] might be monitoring communications in and out of the country shouldn’t surprise anyone, and in fact, it happens regularly with most forms of communication such as emails, traditional phone calls, and chats between people within China and between people communicating to people in China from other countries.
[But later]
In 2006, Skype publicly disclosed that Tom operated a text filter that blocked certain words on chat messages but that it did not compromise Tom customers’ privacy. Last night, we learned that this practice was changed without our knowledge or consent and we are extremely concerned. We deeply apologize for the breach of privacy on Tom’s servers in China and we are urgently addressing this situation with Tom.

To which Imagethief can reply to Skype/E-bay with a wry smile, "The idea that the Chinese [government] might be monitoring communications in and out of the country shouldn’t surprise anyone." It especially shouldn't surprise American Internet firms, all of which no doubt paid close attention to the bombing that Yahoo took when it's Chinese partner was revealed to be providing user information to the Chinese police. I say with the deepest of apologies to Claude Rains that I am shocked (shocked!) to hear that surveillance is going on in this establishment.

From a PR point of view, here are the problems for American (and, in fairness to Skype although it's now owned by E-Bay, European) Internet firms operating via joint ventures or partners in China:

It's your brand at stake, regardless of whether you're a minority shareholder, you simply licensed the core technology, or you simply had no idea what was going on. This was true for Yahoo, who surrendered all control of what happened with their brand in China when they sold their China operations to Alibaba.com. It's true for Skype's JV with Tom.com in China. A visit to the home page of the Skype-Tom home page reveals tons of Skype branding, while TOM appears only in text links at the top and bottom of the page.

Your Chinese JV partner doesn't care what your stakeholders back home think. This is especially true if you've surrendered control of the technology or hold only a minority stake. It's concerns first and foremost will be 1) the Chinese authorities, 2) profitability or potential thereof and 3) winning Chinese customers. The concerns of your overseas stakeholders will be somewhere way down the list of priorities.

The Chinese government will be involved somehow. They will set censorship guidelines, listen in, demand personal information on users who cross the line or all of the above. Now refer back to the first point in the previous paragraph.

For the reasons above, Imagethief thinks it makes sense for you, the foreign Internet firm, to own and operate your own business in China rather than surrender your brand or technology or both to a joint venture partner. It's not that you'll be able to escape the problems above, it's that you'll have much better visibility into what's going on and control over what's happenening, and you'll be much less likely to be caught by surprise as Skype apparently was. Google, for instance, has taken this route and has so far avoided the worst outcomes despite submitting its Chinese search engine to local censorship requirements.

The problem with flying solo is that foreign Internet firms who do so in China tend to bomb. This is something that E-Bay knows a lot about, having been chased out of China by Jack Ma's Taobao.com. (MySpace is latest arriviste to be suffering.) So I suppose it all comes down to priorities and the specific risks you want to absorb.

We'll see if Skype and E-Bay absorb serious fallout over this. Honestly, my gut feel is probably not. Tom Lantos, who carried the torch for this issue in congress died earlier this year, and congress is anyway too busy not rescuing America from impending financial collapse to focus much about this kind of thing at the moment. As for the public, if you're worried about making your car payment, the travails of a bunch of innocent nerds in faraway Cathay probably doesn't grab as much attention as it once did.

An extensive list of Imagethief's prior comments on this topic is here. See also Rebecca MacKinnon's characteristically fiery post on the situation. For more information check out the blog of Nart Villeneuve, who authored the study.

Who goes there?

Tough times for the country, good times for Jewish comedy

will — Thu, 02 Oct 2008 07:50:00 GMT

Although Imagethief is not particularly religious, he is by descent a card carrying member of The Chosen People. He was therefore highly amused by the two following videos:

Jon Stewart, in one of his all-time great rants, on congress breaking for Rosh Hashana this week, at the height of the economic crisis (note -- readers in China will need a VPN for Hulu video):

And Sarah Silverman urging young Jews to head to Florida to get their grandparents to vote for Obama in "The Great Schlep". Yes, it sounds like a cliche, but Imagethief's grandparents retired to Florida from Philadelphia so, really, they're on to something:

Jon Stewart H/T Silicon Alley Insider. Sarah Silverman H/T my mom.

Anti-PR from a poorly-pitched blogger

will — Wed, 24 Sep 2008 09:26:00 GMT

Most PR people will tell you that pitching bloggers is a bit different than pitching mainstream journalists (although now that many mainstream journalists have blogs the line is blurring). If you pitch a mainstream journalist badly, say by misjudging his interests or poorly researching his beat and articles, he'll ignore you, or perhaps hang up on you. A blogger will often mock you publicly, publish your pitch e-mail and shame you or your agency by name. Thus this entertaining post from the recently very hard working Andrew Leonard, who writes the superb "How the World Works" blog for Salon.com. He flames a PR agency that badly misjudged his point of view on the current US financial crisis, and pitched an interview on corporate tax breaks to him. Leonard published the heart of the pitch and then writes:

[PR firm Dezenhall Associates] then offered to arrange a chance for me to speak with representatives of the Tax Foundation so that they could explain why lowering the corporate income tax rate is the right thing to do now. Alas, life is too short.
That's right, first let's authorize the spending of up to $700 billion to bring solvency to Wall Street, and then we lower the corporate income tax rate. It's hard for me to imagine a more stupid, insulting and flat-out enraging public relations campaign at this particular moment in time than this travesty from Dezenhall Associates.

Life is too short to take your interview. Ouch. Advice to PR people: Find ways to avoid "enraging" your media targets. And if you're pitching against the grain, by which I mean working against a journalist or blogger's established point of view, take the time to come up with some that is really creative and at least demonstrates that you are aware of the ideological hurdle.

Or, on the other hand, just take the easy route and stick to Fox News.

A really unfortunate choice of words

will — Tue, 23 Sep 2008 09:08:00 GMT

I don't normally go for the straight Chinglish stuff, but this one is worth sharing. Via Language Log:

Full explanation at Language Log. A better translation of this might be, "The world's biggest sporting celebration is about to burst forth!" But even so, the copy writing is, shall we say, unfortunate.

Hat tip: Bishop Joey

Full Battle Rattle screening in San Francisco on October 17

will — Tue, 23 Sep 2008 05:31:00 GMT

A note to San Francisco-based readers: The San Francisco Film Society is hosting a screening of my brother's documentary "Full Battle Rattle" on October 17. Details on the venue and a link to ticketing are on the San Francisco Film Society Website. The description of the film:

Deep in the Mojave Desert lies the Fort Irwin National Training Center, where soldiers about to go to the Middle East receive a unique type of preparation. In the space of 1,000 square miles are 13 simulated Iraqi villages and about 1,600 “role players,” soldiers and civilians acting out a variety of real-world situations in loosely scripted yet malleable scenarios. "Full Battle Rattle" focuses on one of these villages called Medina Wasl and the group of paid actors and soldiers who bring it to life. Among them is a diverse group of Iraqi Americans, including one who is undergoing deportation hearings, who all hope to prevent needless deaths of Iraqi citizens and American soldiers through their participation. Hearing them and the soldiers discuss their increasing involvement and investment with their characters illustrates the effectiveness of the process. Directors Jesse Moss and Tony Gerber, who embedded themselves in Fort Irwin for a full training rotation in order to make the film, show the many layers and ironies of the simulation—the places where what is real and what is fake become incredibly blurred—and hint at the pivotal role they hope it will play in ameliorating tensions overseas. With precision, finesse and humor, they illuminate this fascinating and surprising war game taking place within our borders.

And the trailer:

What of China's relaxed environment for foreign reporters?

will — Sun, 21 Sep 2008 02:44:00 GMT

Tim Johnson, Beijing bureau chief for the McLatchy newspaper group (and a standout among the local blogging journalists), has posted about the imminent expiration of the relaxed rules for foreign correspondents that were implemented for the Olympic period. This has been a matter of concern for the Foreign Correspondents Club of China (FCCC), which has publicly called for the new rules to be made permanent (spottily observed though they were). Tim notes that the signs are not good. Tim reports that the question came up at a recent instalment of the regular Ministry of Foreign Affairs briefings for uppity foreign hacks:

[At the briefing] spokeswoman Jiang Yu offered no hint whatsoever that the relaxed rules would continue in their present form.

She was asked, “Any chance these measures may be extended?”

Her answer, according to a transcript on the Foreign Ministry website, was: “I understand your interest in this issue. The Regulation expires on Oct. 17. I would like to stress that China will carry on the opening-up spirit, welcome foreign journalists as always, and protect their legitimate rights and interests in China according to law, including their right to report. We also hope you will abide by Chinese laws and regulations and cover China in an objective and fair manner.”

Exactly the kind of unpromising non-answer that the local bureaucracy excells at. The cynical PR man in me can't help but be impressed by the utterly noncommittal nature of her reply. The avid reader of China news in me less thrilled.

Personally Imagethief feels that the Olympic honeymoon is now over. The downside is that I expect the reporting rules to be allowed to lapse and the air to once again silt up with grunge. The upside is that all the things that were tightened for the Olympics --visas, various petty registration requirements, limits on where you can and can't hike/film/run/walk/drip ice cream-- will relax and it will once again be possible to negotiate around all these issues. The bureaucracy giveth, the bureaucracy taketh away.

The waste no time around these parts, by the way. The banners are coming down, and yesterday on Gongti Beilu crews were already taking down the "Beijing 2008" roadsigns. Back to business as usual, whatever that means for you.

At last, embedded video in Imagethief

will — Sun, 21 Sep 2008 02:29:00 GMT

As a video hobbyist it has always rankled me a bit that my blog engine didn't allow me to embed streaming videos into posts. Finally, after tireless Googling and some nerve-wracking edits to the blog engine and script configuration files that problem appears to be resolved. This will spare me the laborious practice of snapping and uploading linked screen caps and forcing readers to other sites to actually view stuff. Videos should be visible in compatible RSS readers as well.

To celebrate, here is the most recent of my idiotic "travels with Imagethief" videos, "Imagethief and the Top-Secret Dam of Panjiakou", previously posted using the olde fashioned method.

Yes, now I can embarrass myself more thoroughly than ever. What joy for my family.

New original stuff coming soon with any luck (depending on your point of view), as well as interesting crap from around the Internet.

Google, Baidu, and the great China MP3 search swamp

will — Thu, 18 Sep 2008 05:02:00 GMT

The Financial Times today has an interesting article (subscription) on the few markets where global search megalith Google is not the market share leader. These include Russia, the Czech Republic, Japan, Korea, and as anyone reading this blog probably knows, China. Here Baidu is king, with about 60% of searches. Google CEO Eric Schmidt had the following to say about Baidu's dominance in China:

Eric Schmidt, Google chief executive, said in an interview with the FT last month: “Because Baidu had such a head start largely because of the various bizarre laws that China has with respect to foreign media. It will take a while, but we will eventually do well there.
“All of us should tell the Chinese that their local markets need to be open to foreign investment, they need not favour their local competitors.”

Imagethief notes that the quote, which comes from an earlier interview, is nearly a month old and has not caused any noticeable fallout here. Still, when the CEO of a global corporation with a prominent presence in China refers to Chinese law as "bizarre", their local PR people's teeth probably start vibrating. I know mine would. While there isn't any fallout now, that's the kind of comment that gets stored up for later when you have a problem or need a favor from the government.

Of course the Chinese government does favor local competitors, the regulatory environment often makes life difficult for foreign companies (especially media companies), and Schmidt is probably capable of taking a calculated risk in referring to these things. But Imagethief isn't sure that regulatory issues and an unfavorable competitive environment explain everything about Google's second-place status in China. After all, the search engine runs, is available nationwide, works fast and is reportedly popular among urban professionals.

But when Google first launched in China, local users cited Baidu as returning more relevant results. And as powerful as the lure of international brands can be in China, the pride in local champions is often more powerful still.

Where, however, did Baidu's relevance come from? Baidu's MP3 search, for which Google has no analog, drives oodles of traffic, its legality notwithstanding. Perhaps Baidu maintains its relevance by being willing to stoop to levels that Google will not. There must be a reason why Google is strong with audiences for whom the search for music tracks is clearly not the first priority. If this is the case, Googles problems might not be rooted in the regulations themselves, but in very selective enforcement that favors a flagship local company.

For more on this possibility, I strongly suggest you read David Wolf's new post on the ethics of Baidu, which looks at some of the implications for all foreign companies doing business in China, and the very interesting story on Baidu's business practices from The Register that inspired it. From The Reg:

Music searches using Baidu return results that are heavily skewed in favour of unlicensed music, while they rarely return search results for licensed music sites. Meanwhile, the unlicensed MP3s appear to systematically move around a complex network of domains in response to infringement notices.
Chinese web surfers may be forgiven for missing the news. Baidu fails to link to news stories critical of the company, including some of the findings below; these have been covered only by a handful of publications within China. It's a chilling reminder of the ability of a web search engine to control and shape public discourse.

Both Wolf's post and the Register article are well worth your time. Makes one think about the claims being thrown around concerning Baidu's possible screening of negative search results for Sanlu.

Truth from facts, anyone?

Previously:

Sanlu Melamine milk powder issue becomes a national crisis (yesterday)
Baidu more a media company every day (Jan, 2007, for CNET Asia)
Google aground in China, MySpace sailing for trouble (Sept, 2006, for CNET Asia)
Further struggles of foreign Internet companies in China (August, 2006)
Google drops Baidu stake (June, 2006)
Guge a gufe? (April, 2006)
Google's Brin on operating in China (March, 2006)

Sanlu melamine milk powder crisis becomes a national issue

will — Wed, 17 Sep 2008 05:05:00 GMT

Like on the top-forty radio show Imagethief used to listen to as a thirteen-year old, the hits keep coming in the Sanlu milk powder crisis. Over the past thirty-six hours the situation has evolved from a company-specific Sanlu crisis to a nationwide dairy-industry crisis reminiscent of the glory days of last summer's product quality crisis.

Here is the latest: Products from 175 dairy companies have been tested (中). Twenty-two of them tested positive. Sanlu is still the champ in terms of micrograms per kilo of product, but some other famous (and not-so-famous) brands are now implicated, including Mengniu and Yili. I bet Yang Liwei didn't know about this when he decided to endorse Mengniu. But astronauts should be able to digest melamine, which anyway seems like kind of a futuristic substance. Imagethief used to have melamine coasters. No joke. Very "Jetsons".

Also not a joke is that over 6000 children are now reported to have been affected and three are dead. The Internet is seething. Collars at the State Food and Drug Administration haven't felt this tight since Zheng Xiaoyu was frogmarched away and shot for corruption just over a year ago.

So here are the PR implications:

Winner: Sanlu (sort of)
For Sanlu this is actually good news. All of a sudden what looked like their problem is a nationwide problem in which they are just one of many companies caught in the riptide. In PR we teach an interview technique called broadening. When confronted by an interviewer with a problem or challenge that cannot be refuted you respond by "broadening" the issue to include the rest of the industry, your rivals or whomever. It works like this:

Maria Bartiromo: Your stock price is down by 50% this month? Does your company suck?

You: Well, Maria, market conditions are tough and many companies in our industry have had similar declines but we are key message, key message, key message, yadda yadda yadda.

Sanlu doesn't need to broaden the issue. It has broadened itself. This doesn't make Sanlu's problem go away. They're still the worst affected, the most apparently negligent and most closely associated with the issue. In the past day or so, the chicken of accountability (a really big chicken in this case) has come home to roost and heads have justly started rolling. But misery loves company, especially in PR, and now the spotlight of attention has spread out a bit. It buys Sanlu some small breathing space at the trade-off of kindling a hotter but more diffuse groundswell of national anger.

Losers: Everyone else
While this broadening might be good news for Sanlu, it's bad news for everyone else. Consumers have no idea which domestic manufacturers they can trust. Even ice cream bars (sob!) look suspect. Foreign manufacturers such as Nestle may benefit for a while, assuming resentment doesn't turn on them later, which is possible. Also, Fonterra is now recalling its own Anmum branded milk in China. On top of its involvement in Sanlu, this may be wearing the foreign gloss a touch thin.

The Chinese dairy industry looks like a hopeless swamp incapable of quality control. Production and upstream wholesaling are completely fragmented and obviously subject to only the most featherlight of regulatory scrutiny or inspection regimes. The job of applying quality control nominally lies with the brands that sit between green fields and cow dung and supermarkets aisles and consumers, but they appear to have dropped the ball completely. Honestly: Twenty-two companies and 66 products? You'd sooner trust the Three Stooges with your dairy factory than this bunch of clowns.

The SFDA looks about as wired as it did in July, 2007. AQSIQ, which is separate from SFDA, is also scrambling. Regulatory involvement seems conspicuously after-the-fact in this situation. Sanlu was exempted from inspection because it was recognized to be such a fabulously well-run company. Lesson: No one should be exempted from inspection. More inspections for everyone, in fact, seems like part of the prescription for this situation.

And China in general reminds everyone else in the world of why they are just a touch suspicious of Chinese food products. There are apparently some export products involved in the current situation, although they are apparently exported primarily to the kind of no-hope client-states (think Myanmar) that are unlikely to make too many waves lest they have to start paving their own roads. But the rest of the world is watching.

As, incidentally, are the (ahem) China-based expatriate parents of small children. I am happier than ever that Imagethief Jr. is breast-fed. Mrs. Imagethief may be made of stern stuff, but it's almost certainly not melamine.

Now what?
Aside from the fact that Imagethief will sadly never look at an Yili ice cream bar the same way again, what happens now?

Unfortunately, the whole situation has got much trickier. For individual companies PR issues can be managed because it is relatively easy to speak with a single voice. Situations that involve entire industries are trickier, because getting a bunch of competing companies to speak with a single voice about anything is like herding giant cats with tens of thousands of employees each. Cats that often want to blame each other. Try doing PR for an industry association someday and you'll get a taste of this.

The cat-wrangling hat now passes to the Chinese government, which has just inherited the stage from Sanlu. The Chinese government needs to explain why there is a pervasive problem in the dairy industry and what it is doing to solve the situation. (It would be nice to talk about a plan for structural changes in the industry.) It needs to make sure that the dairy brands themselves are singing the same song with one voice arranged to church-choir perfection. It also needs to keep on letting consumers know which products are safe and which aren't and ensure that people have enough real and timely information that gossip and suspicion don't become the main drivers of the public response. It needs to vigorously punish offenders who have been sloppy and do its best to convince people that the companies, regulators and local governments are all entwined in one sloppy, corrupt ball. I know that executions will look tempting, but executions alone probably won't solve the problem of restoring consumer confidence, so let's think more creatively than that.

Importantly, if there are more melamine skeletons in the closet it is best that they come out soon rather than creep out over the coming weeks and months. The situation has already deteriorated. The sooner it moves into recovery phase the better. More bad news dribbling out over weeks and months will delay the start of the recovery and stoke the fires of suspicion and anger. This is one reason why it's important to make sure people have enough real information to forestall the worst of the gossip and conspiracy theorizing. For that reason, AQSIQ's public round of testing was a good thing, even if the news was bad.

But the whole process will be difficult. In yesterday's post I mentioned all the entrenched and institutional problems that retard the development of public communication in China. Many of them also serve to slow the development of effective commercial enforcement. In a sense the larger challenge for China is not just to prove that it can clean up the dairy industry, but to prove that its commercial environment can evolve into something other than a cozy swamp where insiders get rich and outsiders get kidney stones.

But that's been the challenge for a long time now.

Suppressing the news is not a PR solution
Hop on over to ChinaSmack and read the new post "Kidney Stone Gate: Baidu denies censoring search results", which cites a 21st Century Business Herald report on Baidu's possible involvement in suppressing negative search results for Sanlu:

Soon after the Sanlu poisonous milk powder news came out, a copy of letter from the Teller public relations firm to the Sanlu Group began spreading on the internet. In the letter, Teller advised Sanlu to pay Baidu 3 million RMB to have Baidu manage search results containing negative news about Sanlu (supposedly not all news could be censored but most results coming from smaller websites could be deleted). When Baidu heard the rumors, they quickly denied working with Sanlu. A representative from Teller also said the letter was fake.

Sanlu Group logo: Sanlu is suspected of paying Baidu 3 million RMB to censor negative search results.On September 13th, “21st Century Economic Report” reported that Baidu admitted receiving a “Sanlu Public Relations Crisis Proposal” letter from a public relations firm, but Baidu could not confirm that it was the Teller firm.

There's more in the post, including a partial translation of the 21st Century Business Herald article. Some evidence is presented in the story to support the allegation that Baidu was complicit, although Baidu denies it. The jury is still out.

However, the basic PR rule is this: Supressing bad news is almost never a viable PR solution. Bad news tends to leak. It tends to percolate through the pores. It tends to squirt around to wherever your grip is weakest, like the air inside a balloon animal. This is particularly true in the era of the Internet, regardless of what Baidu (or even the government) does.

Only an irresponsible PR agency proposes suppressing bad news as the core of a PR strategy. That's not rebuilding or defending a reputation. That's admitting you can't help. But suppressing news is an old tradition here, handed down from the highest levels. It will be a long time before that kind of recommendation stops coming.

Baidu's statement (中), also partially translated, includes the following:

Baidu’s most important value is to seek truth from facts. (百度价值观中最重要的一条就是实事求是)

One would hope so. But I recall that somebody else in Chinese history used to talk emptily about seeking truth from facts.

Previously:

Melamine in Sanlu milk powder? Now that's a crisis! (Sept 17)

China's food crisis PR strategy: Blame everyone else (June, 2007)

Shanghaiist: The Sanlu milk scandal widens (including video of Sanlu VP Zhang Zhenling's apology)

Today's Oriental Morning Post cover, from Danwei.

Melamine in Sanlu milk powder? Now that's a crisis!

will — Mon, 15 Sep 2008 10:56:00 GMT

If you want to get people mad --I mean fired-up, torch-and-pitchfork enraged-- screw with their pets or their babies. That's what we've learned over the past year thanks to the unfortunate tendency of the plastic melamine to pop up in the strangest places, most recently in infant formula from Sanlu, a mighty Chinese dairy firm.

You would think that after last year's long-running product quality fiasco people would have learned. Those of you who have brushed the last of the Olympic rings from your eyes will recall that the product quality crisis began with American pet food tainted with melamine thanks to contaminated ingredients from China. It then rippled into lead-tainted toys (repeatedly), antibiotic-laden fish and various other hysterias that collectively managed to knock Dream for Darfur (remember them?) off the front pages. Man, what a summer that was, especially for PR nerds. I get all misty just thinking back on it.

But there will be time for nostalgia later. I want to spend a moment on the word "crisis", which I used in both the headline and the paragraph above. Like the phrase "mission critical", beloved of jargon-head business types, "crisis" is a word that is often misused to describe any situation where a company is wrestling with a spot of PR trouble. Chinese nationalist youth are insulting our company on the Internet! We've got a crisis! No you don't. You have an "issue."

What's the difference? An easy if somewhat oversimplified way to think of this is chronic and debilitating vs. acute and life threatening. Being morbidly obese with high blood-pressure and diabetes is an issue. But your doctor can prescribe a program that will over time mitigate it. Going into cardiac arrest is a crisis in which the options are immediate treatment or death. In corporate terms this means a situation so bad it threatens the reputation of the company in a way that could rapidly and substantially damage business or shareholder value. Crisis is life-and-limb, billions-of-dollars or fate-of-the-company territory. Cyanide in Tylenol, the Exxon Valdez, Singapore Airlines flight 006; those are crises. Lehman Brothers is was having a crisis (it is now over in the same way that the cardiac-arrest crisis will be over if you don't get immediate treatment).

Apply the "life-and-limb" test and I think we can agree that Sanlu is having a crisis. Fonterra, their foreign part-owner to the tune of a significant 43%, is having an issue, although the weather could turn worse on that. More on that below.

Here is the story so far: On September 11th, almost a week ago, initial reports emerged that an unusual outbreak of kidney stones in about sixty infants had been linked to tainted milk power. Naturally the first assumption was counterfeit product, as happened in the tragic Anhui milk powder episode of 2004 and in countless food scandals in China. Since then, the story has spread, blob like, in a fashion that reeks heavily of a coverup unravelling. There are now over 1000 affected babies and two fatalities. Genuine Sanlu product has been revealed to be culprit. There'll be no palming it off on counterfeiters. A recall of over 8000 tons of product is under way. Sanlu apologized in a news conference yesterday. Heads are now rolling, but only at a suitably low and distant level in the great chain of scamming and incompetence.

Deliciously (unless you're a formula-fed baby), Sanlu and provincial authorities from Hebei, where Sanlu is based, allegedly knew about the problem possibly as far back as early this year, and at the very least in early August, well before the Olympics. We know this because Fonterra are now telling anyone who will listen that they told Sanlu and the Hebei authorities that there was a problem but got no action until they got the New Zealand government to tell the Chinese central government. So everyone involved knew the formula was dodgy except for parents merrily feeding it to their babies. The irony of this situation is that foreign involvement is often seen as an indicator of quality thanks to the well documented quality problems in the market.

The New York Times has this quote from Gao Qiang, Vice-Minister of Health, which is solid gold by the leadenly unquotable standards of Chinese officials:

“This is a severe food safety accident.”

Gosh. You think?

Now the conspiracy theories are boiling to the surface like worms after summer rain (we've had a lot of rain in Beijing recently, so this image is fresh in my head):

Some think leading Chinese search engine Baidu may have had an agreement with Sanlu to filter negative search results. I don't really buy this one, but as a student of the Internet I find the supposition interesting. It says a lot about how people feel about the power of search engines as gateways for information. If it was true it would be really interesting. Note to search engines: The time to come clean about how you will and won't help advertisers is now.

Others wonder if the story was suppressed because of the Olympics, and invoke the Central Propaganda Bureau's alleged 21-point reporting guidance for the Olympic period. I find this one pretty credible, and it stokes my belief that in addition to bringing out some of what is best about China, the games also brought out some of what is worst. The post linked to above, from China Digital Times, also has a translation of apparent Propaganda Bureau guidance on how to report the current situation, suggestion that the cogs of harmonization are already grinding through comment on this situation, although they've not yet clamped down on it completely.

And then there are claims that Sanlu not only knew about the issue, but has been paying off afflicted consumers to buy their silence. This one is also pretty credible, and goes along with established Chinese practice of privately arranged compensation for the families of people injured in industrial accidents and such, often in return for an agreement not to make waves. Coal mines are past masters of this tactic.

Uncoverup
The PR rules for situations involving the endangerment of human life are simple: The company's priority is to take all steps possible to mitigate danger, and communication should be centered around ensuring that the public is completely and rapidly informed in a way that minimizes the risk of injury or death. If you concede that the contaminated product is fait accompli and that some damage control will be necessary, then such an approach, funnily enough, often pays the best dividends in terms of repairing a damaged reputation. This is because it demonstrates clearly that the company prioritizes customers and human welfare over a grimy buck. In troubled times this a critical message to send, and it helps to remind customers of why they placed their trust in the company in the first place. See the Tylenol-cyanide crisis for the textbook example.

On this count, everybody involved in the current situation fails. They've prevaricated their way into disrepute. There were some shockingly basic steps ignored along the way. As of Sunday, for instance, when the formula recall was in full swing, there was nothing on Sanlu's website to suggest anything odd was going on. No announcement. No recall information. No advisory to customers. Not hotline. No news since August 14th. Zilch. As of yesterday and into today their website has been unreachable.

This is not a surprise. It is perhaps unfair to judge Sanlu by my imperialist western standards of public communication, given that the company is the product of an environment in which the relevant authorities have not always led by example. Sweeping scandal under the rug is a favorite institutional pastime here. Read up on SARS if you need a refresher on this, or the Songhua river benzene crisis, or the Xifeng county journalist scandal, and so on. But SARS was blown wide open, and if this was a cover-up it is now blown wide open too.

While acting vigorously in the interests of the public helps to repair reputational damage from a tainted or defective product and rebuild trust, covering it up compounds the problem. Remember when you broke the dining room window and then lied to your mom and said it was the dog? And she didn't mind the window so much but was gravely disappointed about the lie? And you didn't even have a dog? You learned an important lesson then (I hope). This is the same thing, only bigger and with the public instead of your mother. And no imaginary dog.

A blown cover-up demonstrates convincingly to the public that you don't give a crap about them, and you were willing to let them (and their precious babies) twist in the wind to save your own hide. Now you have two problems instead of one: Your product is poisonous and your company is run by untrustworthy bastards as far as the public is concerned. The natural conclusion is that you now have at least twice as much work to do to repair your reputation, although Imagethief thinks that the repair work actually goes up as the square of the number of self-inflicted wounds, if not the cube (modern media being three-dimensional).

In addition to simply being ethical there is another reason why coming clean is a good approach: It shortens the time-frame for bad news. Scandals often don't bust all at once, but drag out over days or sometimes weeks as bad news bubbles to surface in bits and pieces. This can feel a like a very long time when you're on the pointy end of bad press and public scorn, and can leave a very deep impression on the public. As noted above, the CEO of Sanlu has apologized, but once the story has gone this far it looks like an apology under duress, which simply doesn't have the power of pre-emptive contrition. (Lawyers take note: I am not suggesting pre-emptively admitting liability.)

While it's hard by definition to know how many cover-ups succeed, Imagethief expects that most are busted, especially when there is a large public impact. The old mob aphorism holds that two people can keep a secret if one of them is dead. If a lot of people know about your crisis, better for you that you resist the coverup temptation. Own-up and be seen to get cracking on solving the problem and helping the victims. Or hope that your crisis is so thermonuclear that it wipes out all witnesses and all evidence.

But exhorting transparency is almost certainly pissing into the wind. The problem here isn't just one of the occasional irresponsible company. And it's not a problem that one or two or a dozen PR agencies or mad PR bloggers are going to solve. It's a problem of endemic business and regulatory culture. There are several factors at work. First, the Chinese government doesn't have a history of encouraging transparency. Second, the relationship between media and business is often too cozy for the good of anyone but media and business (this is especially true at the local level, which is why the government's restrictions on all but national news organizations reporting outside of their home areas are so damaging). Third, the government still maintains explicit control over the media and to a degree the Internet, which means that stifling coverage by fiat consistently presents itself as a path of least resistance. Fourth, the government still maintains tight links with major businesses. Sanlu's majority owner as near as I can determine is the Hebei provincial government, who's PR philosophy is probably pretty old-school.

The Kiwi's aren't off the hook either
But what, then of Fonterra? They're not a Chinese company. They come from a different media, PR and regulatory tradition. How has their performance been? From the Financial Times:

The Sanlu board, which has three Fonterra directors, was told of contamination on August 2 when a trade recall began, said Andrew Ferrier, Fonterra's chief executive,yesterday. A public recall did not start until nearly six weeks later.

"[Fonterra] have been trying for weeks to get an official recall and the local authorities in China would not do it," Helen Clark, New Zealand's prime minister, said on television yesterday. "At a local level . . . I think the first inclination was to try and put a towel over it and deal with it without an official recall."

***

Sanlu could not be reached for comment yesterday, but Mr Ferrier defended Fonterra's role, saying "as a minority shareholder [the company] had to continue to push Sanlu. Sanlu had to work with their own government to follow the procedures that they were given."

Not so good, I'd say.

Here's the million-RMB question: Did Fonterra have a responsibility to go public in China based on what they knew? To someone not directly involved (such as me) it looks an awful lot like Fonterra sat on its hands despite knowing that customers were at risk, possibly to protect its business and relationships in China. Minority shareholder they may be, but 43% is a big minority and they have three board seats. Their reputation is hostage to the behavior of their partners and right now they look complicit in a sketchy situation.

I am sure it was hard decision considering the prickliness of Chinese authorities and regulators and the likely fallout of ratting on their Chinese partners (see Danone vs. Wahaha for an example of what can happen when sino-foreign business relationships disintegrate). But I wonder how their noisy stakeholders back home in New Zealand, who won't care so much about the idiosyncrasies of the China market, will react. Some nasty questions present themselves: How bad would the problem have to be before Fonterra blew the whistle? Do they prioritize their China business over the safety of customers? Is China an appropriate market for them to be in under the circumstances? At times like this you're happy to be a privately held cooperative.

Fonterra has no official statement on the situation that I can find as yet, although I've seen references to press releases. Private or not, I think, like Lucy, they have some splainin' to do.

Lessons from the great milk-powder fiasco of '08
It has been heartening to see both the Chinese press and the Internet go to town on Sanlu, especially since they're not my client. While I don't envy them their PR miseries, the willingness of the Chinese press to take on big Chinese companies that do wrong by their customers (as opposed to just foreign ones) is an important development for civil society. While the coverage will follow the Central Propaganda Department guidelines referred to above, the whack of big, negative headlines may still have a salutory effect on other companies. That's as it should be. People trust brands. The tradeoff is that brands are accountable, and the media is an important part of the mechanism for making them so.

It's also interesting to see that even Chinese companies can have quality problems with their suppliers. At the height of the product quality crisis much was written about the importance for foreign companies of vetting and monitoring suppliers rigorously and continuously. It is reassuring in some small way to see that it's not just foreign dupes who have trouble managing these problems. Local dupes can have them too. It is, on the other hand, a reminder of how much room for development there is in the Chinese commercial environment.

Finally, as bad as this situation is, it shows that there is an opportunity. Chinese companies do understand the value of a powerful brand and a good reputation. That's a good first step, but more is needed. Many clearly also learn the value of communicating transparently and aggressively in crisis situations in order to defend the brand and reputation. Nobody wants a crisis, but the lessons learned this way can help prepare the best managed and most progressive of China's big consumer goods companies to succeed internationally, where the old cozy approach won't work as well.

An ancient and time-worn chestnut of China journalism is that the word for "crisis"--危机, or weiji--contains the characters for "danger" and "opportunity", which is sorta-true-but-not-really. As a piece of popular wisdom, it has the unfortunate consequence of trivializing the concept of a crisis. Sure, "crisis" in the classic sense means an inflection point from which multiple outcomes, including perhaps opportunity, may arise. But in the colloquial PR sense it means a grave situation with unpleasant and possibly catastrophic consequences. Thus, Imagethief has always felt that it would be much more accurate if the Chinese word for crisis combined the characters for "shit" and "fan". I'm sure that right about now executives from both Sanlu and Fonterra would agree.

Still, I'm an optimist by nature, and I do like to look for the upside. Let's hope some lessons are learned.

See also:

From EastSouthWestNorth, this translation of a darkly funny post from a Chinese netizen lamenting the situation and the latest on the two fall-guys for the crisis.
From Global Voices, more reaction from around the Chinese net. (And more here.)
Rick Martin's Little Red Blog on the Scandal-Deny-Apologize pattern.
Shanghaiist, with a video of angry parents trying to return milk powder.
But surely there can't be melamine in the mooncakes, can there? That's just wrong.
A very interesting story from Peter Ford of the Christian Science Monitor on the systemic problems in China that have made situations like this so depressingly regular. H/T China Law Blog:

Some observers see a silver lining in the scandal. "One positive result is that people will become more aware of food safety," says Ren Fazheng, a professor at China Agriculture University in Beijing. "Government and society will pay more attention to this issue ... and more inspection agencies will use more methods, so the level of inspection will improve."
Yet public opinion, even outrage, has limited impact, as evidenced by the stunted efforts by angry parents who lost children in the Sichuan earthquake in May to demand government accountability. While officials are still investigating why so many schools in the quake area collapsed, protests have been curtailed and media coverage on the issue banned.
Still, with Sanlu closed by government decree and its future in doubt, two men charged with crimes that can carry the death penalty, and a government investigation widening, "this serves as an extremely strong cautionary tale for the whole industry," says Professor Yang.
"Lawsuits have not worked well in China, but the costs are escalating" for companies that cheat, he argues. "Producers realize now how precious their brand name is."

Perhaps. But as long as some companies feel their brands can be protected through means other than sound ethics and transparency I'd suggest channelling the Gipper: Trust but verify.

Disclosures:

Imagethief once worked for Fonterra's PR firm in Singapore. Fonterra was not my client.

The founder of Imagethief's current employer advised Tylenol during their 1982 crisis. Imagethief was 15 at the time, and was too busy watching "Get Smart" reruns and not doing his homework to be involved.

We're very, very sorry we were caught.

Image from Danwei.

Coke and Huiyuan: Let the PR slanging begin

will — Thu, 11 Sep 2008 10:36:00 GMT

Have a read of this post from the Wall Street Journal's China Journal blog on some of the communciation issues Coke is having around its attempted takeover of the Huiyuan juice company in China:

More damaging may be the allegations that Coke is trying to silence critics of the deal in China, which were published in this Chinese language article from the Beijing Morning Post. The origin of those allegations appears to lie in some ill-advised statements made by lawyer Qian Weiqing in an Internet discussion last week, in which he offered a pessimistic opinion about Coke’s chances of winning public and regulatory approval for the Huiyuan purchase. Qian is a senior partner at the Dacheng Law Firm, which counts Coke as a client, and within a few days all references to Qian and his statements were subsequently removed from the Web site where they had appeared. Coke has been blamed for pressuring Qian and his firm to retract the statements– a charge that the company strongly denies.

It's a reminder that western companies trying to acquire well-known Chinese brands are almost always behind the PR eight-ball and should therefore prepare in advance for the backlash and make sure that all potential spokespeople are briefed and anyone not authorized to speak stays silent.

Of course, it's hardly a one-way problem. Chinese companies attempting to acquire especially American companies face similar problems, as anyone who followed the attempted Haier-Maytag deal or Lenovo's tricky path to aquiring IBM's PC business will recall, so we westerners shouldn't feel particularly aggrieved.

Now, from around the Chinese Internet, some of the caricatures and cartoons making the rounds (inspired by one particularly fine example on the WSJ blog). You may detect a certain theme:

From Yangcheng Evening News via Sina Finance.

From "Hello Taiwan's" reprint of a Xinhua article.

From China Economics Web (and as spotted on the WSJ blog).

From XKB.com via SinaFinance.

From West China City Daily.

From a Xinhua article on QQ finance.

From China Industrial and Commercial Times via Linkshop.

Note that some of these images may not originate in the stories they are linked to here. Just pointing out where I (or rather, Baidu) found them.

Updated to add:

It's worth mentioning that this situation is haunted by the ghost of Danone's troubled relationship with another Chinese beverage company, Wahaha. Danone is a significant minority shareholder in Huiyuan and agreed to sell its stake to Coca-Cola.

Update 2:

See also Silicon Hutong's post on this (Typepad - blocked in China). A choice for the Chinese government in terms of the future of M&A in China.

Jingjing and Chacha live?

will — Wed, 10 Sep 2008 10:25:00 GMT

These two have been patrolling my housing complex for the past week. I haven't seen them make any collars yet, but I've been surfing much less sm*t than usual, just in case:

Note: Don't know who Jingjing and Chacha are? Click here. Or, to see them in action, here.

China's iPhone Girl: Brilliant Apple PR or lucky accident?

will — Sat, 06 Sep 2008 06:37:00 GMT

If you follow either Apple, the Chinese tech scene or Chinese Internet buzz, you've probably heard of "iPhone girl". A British man reportedly discovered several photos of this young lady, apparently a quality-assurance inspector at contract manufacturer Foxconn, on his newly purchased iPhone 3G. Reportedly the girl's photos were taken by her friend, who's job was to test the iPhone's built-in camera, but the photos were not deleted before the phone shipped.

iPhone girl caused a sensation both internationally and in China, conveniently right as negotiations between Apple and China Mobile to officially bring the iPhone to China apparently gathered momentum. (Unofficially, China is already awash in grey-market iPhones, unofficial accessory of the year among Starbucks-prowling urban Chinese professionals.)

China loves a good Internet sensation. The resulting wash of publicity for Apple has apparently made some people wonder if the whole incident was an orchestrated PR campaign. Roland Soong of EastSouthWestNorth has translated an interesting story from yWeekend (中), a weekly supplement published by Beijing Youth Daily, that investigates whether iPhone girl is genuine or the creation of a PR team. The whole thing is worth a read. Of particular interest to me is the conclusion, in which two "Internet promoters" speculate on the possibility that the whole thing is a campaign:

So what do the Internet promoters feel about this affair?

Interestingly, the two relatively famous Internet promoters held different views when interviewed by yWeekend.

Internet promoter Chen Mo had promoted famous Internet celebrities such as Little Celestial Girl and February Girl. Upon receiving the telephone call from the yWeekend reporter, he did not even require an explanation of the purpose. He snickered and said: "You are going to ask about the iPhoneGirl, right?"

"When it first started, it may have been real." Chen Mo speculated. There have been occasional reports that users found photos in their new mobile phones. But this is the first time that there were photos of the pretty worker who made the machine. It is not impossible for this to occur in the natural course of events. The post made by the Englishman did not contain any obvious flaws. So in the absence of evidence, let us assume that it is real.

"But once the affair gets propagated back to China, the manufacturer definitely took the opportunity to carry out a successful hype." Chen Mo told the reporter: "You can go to check the major websites and forums to see what type of people are stirring things up."

"Based upon my observations, it is mainly the Internet promoters who are writing about this. I don't have to name names. We are all in the same circle. This affair became so hot in just a few days. It is hard to believe that there wasn't anyone pushing it in the background."

The other Internet promoter is Li Er, who created incidents such as "exchanging a safety pin for a villa." He told the reporter directly that he already knows that the whole caper was planned from start to finish.

"This is clearly a case of Internet promotion. You can tell just from the process. I know who handled this 'case.' It is a team of people. But I cannot tell you who they are, because I am acquainted with them."

Li Er analyized: "This 'most beautiful Chinese worker' is like that 'most beautiful cleaning girl' that we did before. The concept is completely identical. You bring up a clean and pure image of a pleasant-looking beautifu lfemale worker. The only difference is that this affair was triggered by having a foreigner post photos to an overseas website. But this is precisely where it is brilliant."

"The planners of this affair thoroughly understand the Chinese mind -- a lot of Chinese people think that anything that happens overseas must be real. On this point, they were very successful." Li Er said that almost all of the popular "most beautiful girls" on the Internet were promoted by Internet promoters from behind the scene.

These so-called "most beautiful girls" are part of the "girl series." From Tianxian MM to the girl who swapped a safety pin for a villa," they were all variations of the same "girl series." The rapidity by which iPhoneGirl became red-hot popular on the Internet showed that the planning and execution of this campaign was perfect and effective.

"Why do I say that this was a perfect promotion? Because it successful used the girl to showcase the product and the manufacturer. The whole process looked very natural and unaffected.:

But Li Er said that the affair was not traceless.

For example, there was the news that Foxconn fired the girl. Li Er thought that this was another stage in the promotional campaign. The purpose was to create another twist in the story to continue to draw attention. But it was a bit too obvious. Actually, the girl had nothing to do with the actual taking of the photos. It was her co-worker who did it and that should have been the person to be fired. Bringing the fate of the girl into the process was done to secure the continual attention of the netizens.

Then Foxconn came out to dispel that rumor and assured everybody that the girl will not be fired. Foxconn said that this was just a "beautiful mistake." That kind of statement gives clue to the promotional effort.

"Before I even knew who the Internet promoters were, I had sensed that the whole matter was not so simple." Li Er said that ordinary people have no way of knowing the truth with such Internet promotional campaigns unless something goes wrong. The operators may disclose the truth some day, but certainly not while iPhoneGirl is hot.

So what do I think? Two observations:

First, viral campaigns are fiendishly tricky. P*rn aside, it's difficult to predict what will fire up the Internet. Despite the best efforts of PR people and digital marketers, most Internet sensations are accidental. Where they work in companies' favor, they are often lucky accidents, for instance where a particularly creative television commercial or promotional video picks up an Internet audience. There are certainly successful and creative online marketing campaigns, but few of them are truly viral in the sense of relying primarily on the enthusiasm of netizens for their propagation. Most incorporate a substantial traditional marketing component.

For that reason, most Internet stars in China have not been created by corporations, but instead come to public attention first and then been appropriated as spokespeople and endorsers. The classic example of this is the Backdorm Boys, who were funny dweebs first and celebrity pitchmen second. There are others as well, such as Tian Xian Mei Mei, Little Fatty and so on. Sam Flemming, of CIC, is the man to follow if you want to know more about this.

Second, simplicity is essential, and any campaign that could be exposed as fake risks a severe backlash. Commercial viral successes are usually --though not always-- transparently linked to their parent brands simply because people don't like to feel duped. No one wants the viral communication about their company to be a hate campaign.

On the simplicity test the case for iPhone girl as an engineered campaign looks weak. The scenario: Apple has a freelance English accomplice, Mark Mitchell, claim on MacRumors in August to have discovered the photos in his phone in the hope that this will cause a wave of publicity and discussion in China in order to...what? Increase Apple's negotiating leverage with China Mobile? Get people salivating for an iPhone that's already a grey-market hit?

Maybe. But it's a touch Rube Goldberg for me. It also requires complicity and secrecy from many parties, including the guy who posted on MacRumors (who has since given interviews), Foxconn, the QA girl/model and whoever was involved in planning and executing the campaign. In PR, as anywhere else, two people can keep a secret if one of them is dead. If anyone blew the whistle, Apple would have anti-PR in China. Apple may be evil marketing geniuses, but crazy-suicidal they aren't. If the QA girl thinks she has human-flesh search engine problems now, wait until the Chinese Internet community think she's a pawn in an attempt to dupe them. Plus, it's hard to imagine Foxconn agreeing to a plan that makes them look sloppy.

Occam's razor suggests that these were in fact test photos that accidentally leaked and were discovered by an iPhone fan in the UK. Apple creatively exploiting the situation for PR is totally believable, although perhaps redundant.

Sure, it's possible this was an engineered campaign. If so, hats off to Apple. But Imagethief would also suggest they start covering their asses in asbestos.

Sept 7th Update: Why couldn't it be a Foxconn campaign?

Reader WGJ posted an interesting thought in the comments below. One or two friends had raised it with me offline as well, so I thought it was worth addressing in the body (the wording is similar, but not identical, to the wording in my comment response, also below.

I don't understand why you assume if it's a campaign, it has to from Apple. To me, Foxconn is the much more likely puppet master.

Certainly it's nice for Foxconn to have one of their workers shown happy and enjoying her job, which goes against the stereotype of the Chinese manufacturing drone. But the public isn't Foxconn's audience, except in the rare occasions when Foxconn has to defend itself against charges of poor worker treatment, as happened with iPod manufacturing a couple of years ago. I am not aware of any such situation brewing now.

Foxconn's customers --and thus its main PR audience other than investors-- are Big IT companies, such as Apple, HP and so on, who sell to the public and who generally like their contract manufacturers to stay as invisible as possible. In serving those customers, Foxconn lives and dies by its ability to maintain quality, consistency and product secrecy. Anything that makes the company look sloppy, as this does, seems unlikely to be part of a campaign they would orchestrate.

In fact, I rather expect they had some explaining to do, both to Apple and their other customers. This doesn't look like a Foxconn PR campaign. I just don't see what they gain. It looks more like something that might might make Foxconn's PR people sweat.

Are you for real?