xmedialab

Preludes to XML 2008 - Wellington

There must be something about living on the edge of the world that motivates New Zealanders to push the boundaries when it comes to digital creativity.

Surrounded by water, the flora and fauna of the country diverged into a natural ecology unlike anywhere else in the world; the unique human culture arose in a similar fashion. New Zealand has long been the beneficiary of sequential waves of migration. They came first in long canoes from the Pacific then in tall ships from Europe. Now the face of the country is changing again from the benefits of recent Asian immigration. Each of these waves has contributed something special to the societal blend.

In the mid 19th century, settlers had to wait months for provisions to arrive from Europe and were often driven to fashion their own tools and implements in order to get their work done. Necessity has endowed New Zealanders with a hardy sense of self-sufficiency and a willingness to “muck in” and get the job done. This is as true on the sportsfield as it is in the creative industries. Indeed, research suggests that New Zealand is one of the most entrepreneurial nations on the planet; and especially so for the indigenous peoples.

It is these characteristics that have attracted the attention of the Hollywood entertainment industry in recent years. Wellington is home base for Lord of the Rings director Peter Jackson and most of that movie was shot in various locations around New Zealand. Jackson also has a stake in Weta Workshop, the Oscar award winning special effects house, and Park Road Post (Board Member Michael Stephens is attending both the XML Suzhou and Wellington Labs).

Apart from LOTR, Weta has been involved in providing high spec digital graphics effects for King Kong, X-Men, and forthcoming Avatar movies. Spinoff company, Massive Software provided the CGI magic for these movies and many others and now sells its services across the industry. Another digital innovator is Sidhe Interactive, responsible for developing some of the hottest games to be found on both Xbox and Playstation. Consequently, moves are now afoot to establish a Centre of Excellence in Wellington for screen and digital technologies. This entity will be responsible for bootstrapping cross-sector investment, mentorship and collaboration.

Wellington has also become home to another growing tribe of digerati. Australasia’s busiest e-commerce site TradeMe is headquartered in the Capital city. The company was itself traded in 2006, with media conglomerate Fairfax controversially paying $700 million for the trading website. However, the business and technologocial expertise built up through developing TradeMe has now percolated outwards, helping to grow a new generation of local technology start-ups, especially in the hosted software space. So it is very much within an encouraging local context of digital and cross media creativity that we frame the Wellington X|Media|Lab event. We are very proud to have TradeMe founder, Sam Morgan, as a Mentor in the Wellington Lab.

Wellington itself is a compact city of only 150,000 residents wedged between Cook Strait to the south and jutting hills to the East and West. Hutt City and Porirua are near neighbours only a few minutes drive to the north. The extraordinarily beautiful natural harbour is a centrepiece for the entire region. The administrative capital of New Zealand, Wellington has also emerged as a focus point for arts, music and cafe culture. Mindful that the city must compete with other Asia Pacific centres for people, ideas and capital, the city has repositioned itself as a “must see” destination full of museums, restaurants and cultural events.
Further afield, there are also other enclaves of digital innovation coupled with startling natural scenery.

Auckland is the home of Nextspace, a 3D graphics thinktank and mentoring venture supported by the government and highly successful Right Hemisphere. Down south in Christchurch is HitLabNZ which researches and commercialises human/computer interface technology such as virtual reality and simulation. Further south again, in Dunedin, is the home of Animation Research, provider of graphics depictions for the Americas Cup events. The city also has a cluster of exciting new technology companies within its Upstart technology incubator.

So why hasn’t New Zealand become the Finland of the South Pacific? In many respects the two nations began with a similar economic base and comparable population. But whereas Finland diverged away from agricultural commodities and tourism, these remain the backbone of New Zealand’s income and, unlike in Finland, there is not a market of 400 million at New Zealand’s back door. Achieving scale and attracting capital have always been challenging for even the most promising and hard-working of New Zealand technology firms. Therein lays both a challenge and an opportunity for investors, mentors and global connectors.

Interestingly, we already have more than 70 projects nominated – and plenty of those are red-hot quality commercial propositions. With this level of creativity, originality, and innovation, plus the usual amazing line-up of International Mentors, XML Wellington is going to be one of the very best yet.

[Many thanks to Paul Spence, the director of GeniusNet, a Wellington based technology management consultancy, who kindly wrote most of this post. e: paul@genius.net.nz]

Preludes to XML 2008 – Suzhou

When I was discussing doing a Lab on animation in China with Sun Li Jun, the Dean of Animation at the Beijing Film Academy, he told me that best place to do such a Lab would not be Beijing, but rather Suzhou.

I had never heard of Suzhou then, but now I know much better why Professor Sun wisely pointed me in that direction.

Preludes to XML 2008 - Dubai and Doha

In an otherwise scintillating exposition of the emerging geo-political balance, Parag Khanna, senior research fellow at the New America Foundation, manages to leave out of his calculations almost entirely one giant powerhouse of development: the Middle East or, more exactly, the states that make up the Gulf Co-operation Council.

The GCC comprises six states – Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Bahrain, and Qatar. But they have untold energy resources and with energy prices at historic highs (and they ain’t going back down in our lifetime’s Buddy!), they are accumulating wealth of staggering proportions at ever-increasing speeds.

China’s levels of Foreign Direct Investment (FDI), now greater even than those going into the USA, and their levels of foreign reserves, plus the extraordinary levels of resources-based income gushing into the GCC and their neighbours, are having a profound but until now subterranean effect – something like the oil itself.

Make no mistake – a fundamental, irreversible change is happening … in fact, it’s happened already, and news of this shift is only now becoming almost daily news fare in the West. And these effects will become ever more magnified and permanent as these players become more confident in re-investing this income into Western securities and assets through their Sovereign Wealth Fund (SWF) vehicles.

And as well as this, the levels and scale of infrastructure development and industry diversification are startling – here is a summary of just a few of the gigantic projects underway, taken from the excellent “Business Intelligence Middle East” newsletter – highly recommended!

With all this in mind, and navigating by one of X|Media|Lab’s longest standing tenets (that “New Media = New Geographies”), we have been exploring and cultivating friendships in the region, and we place a very high priority on establishing a Middle East node in the XML international network.

When we say “Middle East”, we are referring to three relatively distinct regions: the Gulf States (including Saudi Arabia); the Levant (Syria, Lebanon, Jordan, and Palestine); and North Africa (Egypt, Libya, Morocco). Our progress so far has been concentrated on the Gulf States – and so far we have visited Dubai in the UAE, Doha in Qatar, and Muscat in Oman.

We’ll take a look at three emblematic initiatives from which we can learn something about the GCC: Dubai Media City; Al Jazeera; and the Burj Dubai; before looking at a few snapshots of economic life in the GCC.

Dubai Media City

The first thing to know about Dubai is the startling fact that income from “oil and energy resources” constitute less that 10% of Dubai’s GDP. Dubai is miles ahead of everyone else in the GCC in successfully diversifying its industries and revenues.

Dubai Media City (DMC) exemplifies a lot about this new Dubai. DMC is in the middle of a vibrant cluster that also includes Dubai Studio City, Dubai Internet City, Dubai Internet University, and Dubai Knowledge Village.

Companies that set up in this officially designated “free zone” pay no corporate tax; no income tax; have 100% company ownership; have no foreign exchange controls, trade barriers or quotas; and have no restrictions on capital repatriation. You can set up a business in the DMC Free Zone in 20 minutes. That’s pretty hard to beat.

These advantages are designed to promote media (and digital media) as part of the many economic diversification initiatives.

One striking factor of the GCC demographic is its relative youth. Roughly 50% of the population throughout the entire Middle East are under 24. Currently, broadband penetration is somewhere between 7-10% depending on the country. As the extensive world-class infrastructure gets rolled out now, this will mean an explosion of demand for media content and services from a vast young population who are born digital.

The best summary of the growth opportunities in media is the recently published report by the Dubai Press Club and pricewaterhousecoopers “Arab Media Outlook 2007-2011". The report can be downloaded here.

The staff at DMC are also emblematic of what is happening in Dubai – totally switch-on, results-oriented, multi-cultural, and multi-talented.

We are intensely excited to be in the throes of announcing X|Media|Lab Dubai for December 2008.

Al-Jazeera

What drew me to arrange the visit was having the opportunity in Dubai to take the time to sit and actually watch and experience the Al-Jazeera English channel. I was stunned! The quality of the reporting and journalism, the cutting edge use of viewer content and embedded mobile uploads, the use of user-generated documentaries, and the sheer freedom of speech was an awakening. It is so far ahead of the BBC and CNN on every level that, while I was watching it, I started emailing people from all over the world asking if they had ever seen Al-Jazeera. Their stories were all the same as mine – yes, of course we knew everything about Al-Jazeera; yes, of course we were media experts in touch with the latest trends and best practices … but, ah, no … actually none of us had ever watched it! It was mind-opening.

All I can say is that you must experience for yourself.

[Pic: In the central newsroom at the Al-Jazeera English Channel in Doha]

Before visiting the Al-Jazeera headquarters, I read Hugh Miles excellent history of the network. The three things that stood out in this book for me were: 1) how successful they have been building a global brand, which is also one of the most trusted media brands in the world, in a decade; 2) how brave they have been in face of acts of murder and sabotage; and 3) when you see it all retrospectively telescoped into a few chapters, how demonstrably immoral, illegal, and wholly without justification the Iraq war is. Unless, of course, the very basis of the GCC wealth we are covering here – energy resources and wealth – are the real “justifications”. Read it for yourself.

[Pic: with Safdar Mustafa, Head of Mobile, and Mohamed Nanabhay, Head of New Media, at Al-Jazeera]

If you don't have time to read the whole book, here's an excellent short paper that Miles wrote for "Foreign Policy" that summarises a few very important points.

By the way, the civil servants in the UK who leaked the minutes of the meeting between Blair and Bush where they discussed bombing Al-Jazeera headquarters, were sentenced to six months and three months in jail for leaking the minute.

Burj Dubai

In many ways, the story of the Burj Dubai encapsulates a good deal of the story of the GCC states, and Dubai in particular.

When it is completed the Burj Dubai at around 2,300 feet will be the tallest structure in the world of any type ever built. It already stands at 160 stories high and its exact final dimensions are strictly secret.

This is because the Burj is already subject to competition not from one but from three other buildings – and all of them are in the Gulf States: the Murjan Tower in Bahrain (200 floors); the Madinat Al-Hareer (“City of Silk”) complex in Kuwait; and, wait for it, the proposed 4,000 ft. Al Burj at the Dubai Marina just a few miles away from the Burj Dubai.

[Pic: The Burj Dubai in December 2007 - towering over a forest of skyscrapers]

The entire tenancy of the Burj Dubai has long ago completely sold out. The 700 private apartments on 60 floors were sold within 8 hours of going on market. The first 37 stories contain an Armani hotel (the entire building is furnished with Armani designs) and the corporate suites and floors are already full.

There have been many labour disputes in building the Burj Dubai, and this reflects a wider reality in the GCC. The populations of these states are comparatively sparse, by any standards. For example, native Bahraini’s may constitute less than 10% of the total population of Bahrain. The other states vary in the ratios but in all of them, it is immigrant labour, constituting an absolute majority of the population, who do this work, and effectively build the nation under the management of the indigenous people.

The nationals of Kuwait, Oman, and each of the seven Emirates are all in a minority. By far, the overwhelming employment of Gulf nationals is in the civil service, where economic, social, and cultural policy is developed and managed. In some Gulf city-states, 99% of the national labour force is in the public sector).

Citizenship and citizen rights are tightly controlled, and each day’s newspapers have extensive coverage of the latest benefits accruing to citizens in healthcare, education, housing assistance, marriage funds, child subsidies, land endowments, cheap loans, and other general welfare. It’s easy to forget that just a generation ago, the main sources of income for these thinly populated littoral tribal emirates were fishing, pearling, and other low-intensity maritime industries.

What is strikingly impressive is how intelligently and far-thinking the investments of the new-found wealth are being made within the framework of a very definite idea of commonwealth.

On a positive note, the UAE has recently allowed the foreign workers to organise themselves in Trade Unions.

Snapshots of Economic Life in the Gulf

The best intelligent introductions to all we have been exploring here, besides the honour and pleasure of meeting with the inspiring people at DMC and Al-Jazeera, are definitely two excellent books: “Globalization and The Gulf” and "Dubai and Co.".

The former book analyses the interplay of the ultramodern development of the Gulf States and the Gulf Co-operation Council (GCC) with the obviously entrenched tribal value systems that continue to organise and prioritise economic and social developments.

It’s important to understand that only a generation ago these were relatively poor regions, lightly populated (the UAE was all of 150,000 persons at independence in 1971), and foreigners were few and far between.

The principal organization of the common polity was built around kinship systems of local tribes and ruling families with intricate marriage practices that intertwined entire communities, bound by Islamic principles in which the profit motive is not the highest priority.

The presiding networks of ruling families are understood as caretakers at the top of a posited single, interrelated kinship web, and are considered the distributive dispensers of a wealth which is owned in common.

The Gulf cities’ pulsating multiculturalism is therefore embedded within a background of strong indigenous governance and control in which the everyday dealings with the culturally and religiously ‘other’ run parallel to a somewhat invisible (to outsiders) inner traditional logic of kinship and nativity.

The challenges of globalization to such a distinct and unique heritage are obvious. Free market capitalism seeks to order the world in utterly different ways, and the tensions are always in play. The centrality of local communitarian kinship networks is different from the priority of enforcing freedom and security for the movement of capital.

Their resources wealth has meant that the Gulf States have never been beholden to the tactics and priorities of the IMF and the World bank for their development. Nowadays, the states are increasingly investing their capital internally, and in sister states, rather than in Western stock markets and the associated financial gambling that passes for economic activity. This is leading to further intensification of competing priorities. Indeed, the USA has repeatedly refused to deal with the GCC as a trading bloc.

As the Gulf States move into the final decades of oil extraction and oil-generated wealth, they are firmly focussed on education, financial services, media and information industries, trade, and tourism.

It’s all exciting, complicated, overwhelming, and exuberant – all wrapped up in great material resources, and an infinitely civilized culture. Welcome to XML Middle East!

Preludes to XML 2008 - Seoul

The Importance of Friends.

Spending some time in Korea is made much easier if you have a few wonderful friends to smooth the path for you.

So we were blessed that we already had a great friend to make some amazing connections for us, Ms. Soh Yeong Roh, the Founder of the internationally famous Nabi Art Center, [pictured] who attended the Singapore Lab last August.

So a few great friends, a lot of reading and research, and plain old “meeting as many people as possible” introduced us to Seoul. Plus my old fashioned favorite: get out and walk around.

Right up front, even on the train from the spectacular Incheon airport into the heart of Seoul, the ubiquitous digital networking was immediately obvious. The entire carriage was digitally connected to something, somehow. Some people were even commubicating via face-to-face speech. Radical!

Korea’s eminence in digital media hardly needs restating: world leadership in broadband internet connectivity, and internet speeds; in online communities; in massively multiplayer online gaming; in 3G mobile content and services; and in digital TV. All are World No. 1 – in Korea.

I am on the International Jury for the Interactive Emmy Awards. In last year’s judging, for the Best Interactive Channel, the Korean entry was so comprehensively far ahead of any other offering, it was an awakening.

A good summary book is definitely “Digital Korea” by Tomi Ahonen and Jim O’Reilly, who observe: “the virtuous circle of devices, users, high-speed networks, and new services … cause both a “push” and a “pull” effect, dramatically accelerating the usage, and [therefore] improving service development”.

Korean people (and especially the under-twenty-fives) are exemplifying the digital future: constantly connected, continually multi-tasking, instantly time slicing, co-creating and sharing their own content, with low- or no-cost transactions - and totally mobile.

Most young people in Seoul have never used email. And never will.

Korean students receive 2 hours compulsory instruction per school month on mobile phone ethics and etiquette (e.g., compulsory first question when making any call: “Are you available to speak now?”).

Korea is cool! Korean music, TV soaps, films, games, and virtual worlds fill North and South Asia. When I was back in Singapore last year, literally thousands of young boys and girls thronged the airport arrival lounge to go hysterical and faint over a Korean pop singer who flew into town for a single sold-out gig.

But it’s not just the content, it’s the platforms and applications that excel.

Korea’s Cyworld is the largest “virtual world”, full stop (US site here). Cyworld combines social networking, blogging, music distribution, Web 2.0, video sharing, instant messaging, and a host of other services.

Cyworld has more active users than Second Life has had total avatar registrations. The complacent, and complicit, Western media continually delude us about the relative levels of innovation. Western companies however are not so blinded: Google, Yahoo, Microsoft, and many others, have set up major R&D centers in Seoul to test themselves in the world’s most demanding digital media market.

But how come?

The Importance of Government and Infrastructure.

Why is Google only the third-rated search engine in Korea? How has Seoul become the world’s preeminent test-bed for digital media applications? Why, in Korea, has digital media spread into intelligent homes, mobile phone payment systems, rapid mass transport systems, eco-cities, and robotics?

Firstly, government leadership, and something resembling a national innovation strategy. Over many years the national government has designed and implemented a “co-operate in order to compete” policy, taking responsibility for rolling out world’s best infrastructure, and using the education system as the basis for building a national broadband network.

The Innovation Policy consists of creating a virtuous circle of infrastructure, test beds, R&D investment, joint ventures, and regulation that guarantees open access for competing on services.

Additionally, the government insisted on the principle of hypothecation – In South Korea, all revenues from telecoms spectrum licenses were strategically reinvested into IT and telecoms infrastructure development.

All of this is depressing enough for those of us who have experienced a “lost decade” of government and bureaucratic obstruction and obfuscation merely to serve existing vested interests, and ultimately, to do nothing.

How come time- and space-wasting bureaucrats aren’t tossed out along with the governments they abet? If you live by the sword of complicity, then you should die by it too.

As I mentioned, easily the best introduction to all this progress and farsightedness is “Digital Korea” by Tomi Ahonen and Jim O’Reilly. And anything by the digital media consultancy +8* who specialize in mobile and internet business consulting in Korea, Japan, and China. (The Founder and CEO of +8*, Benjamin Joffe, will be speaking at our “Digital Media ‘08” Conference Day on March 7th in Sydney).

There are a few other specific factors contribute to South Korea’s success. Firstly, geography, it’s comparatively small and roll-out is far easier and less expensive that vast countries like Australia; amazingly, almost half the population of South Korea live in Seoul (though once you’re sitting in the traffic, this is perfectly believable). Secondly, language – Ahonen points out that multinationals like testing new products in Korea: the infrastructure is world-class, the consumers highly selective and very knowledgeable, and lastly, if the product fails, well, the rest of the world will never know! Thirdly, the Chaebol structures of government and business that make an integrated approach to business and R&D somewhat easier to co-ordinate than elsewhere.

Indeed, to me, the microscopic dimensions of digital technologies together with the giant scale of the Chaebol’s represent the two ends of life in Seoul. In almost any district, it’s easy to find and get lost down the infinite alleyways of beautiful restaurants, boutique fashion shops, geomancers, and art houses laced like capillaries in between the vast highways and mind-numbing conurbations.

The Importance of Culture.

Korean culture of course is the hottest in Asia. Korean music, film, TV soaps, internet innovations, and mobile apps etc are widely consumed, and much copied.

If I can hazard a guess: it’s like the rigidity and hierarchies of social structures and interactions are somehow balanced by an astonishing freedom of creative expression in the arts.

I mention balance – Korea, of course, has the Yin and Yang symbol emblazoned on their national flag!

Formally, (and generalizing beyond my qualifications), Korean people like to quickly calibrate age, gender, family, hometown, into understood hierarchies that regulate the flow of conversation. This is not unusual. In fact, when you experience it elsewhere, it should serve as a reminder as to how effectively the same kind of calculus is at work in our own dealings and relationships.

What is striking is that this rather strict Confucian ordering of the world from the perspective of the father, the male, the family, and the home outwards, is met with a kind of absolute freedom in the arts, including in digital arts and innovation.

In music, dance, fine art, architecture and elsewhere, the highest admiration is reserved for the absence of order, the unstructured, the non-programmed, the unexpected, and the aleatory.

In music, dance and theatre, the traditional frameworks are designed to create a free space where extemporaneity can occur. For example, in Sinawi, a traditional form of Korean folk music, there are no written scores; the music is fully improvised ensemble playing based around the instrumentation, only the tempo is set. The idea in Sinawi music is to arrive at moments of beautiful spontaneous harmony, while each musician is playing individually. This love of a “free jazz” format would have delighted John Coltrane!

In these arts, the performer’s own interpretation is more highly valued that imitating a master’s style.

In dance, superb technique is not valued highly. The effective expression of inner emotion is the highest value. The traditional dance is even called heoteun chum, “loose dance”, in which there are no restrictions or rules.

In the fine arts, spontaneity, eccentricity, blemish, asymmetry, randomness, and “intentional intentionless-ness” are what constitute a Korean aesthetic. Straight lines are to be avoided.

I strongly recommend Choi Joon-sik’s brilliant and beautiful introduction to all these themes in his book “Understanding Koreans and their Culture” (although, as a dutiful Derridean, I always pluralize … i.e., “Koreans and their Cultures”).

Indeed Professor Choi’s closing chapter is on the remarkable history of appropriation and localization of religious practice – the ever-present but underlying Shamanism, the best-practice Confucianism (admired for it’s ritual purity even by the Chinese), Buddhism, and the amazing post-war contagion of legions of Protestant sects (which curiously combine a revivalist shamanism with DIY, big business, churches - complete with US-style tele-evangelist profits … and scandals).

Our many thanks to the amazing people who smoothed out path and patiently explained the why’s and wherefore’s, and made the trip such a pleasure: Young Joon Hyung, the Founder of Cyworld; the Director of International Relations for Ohmynews, Jean Min; Soh Yeong Roh, Founder and Director of the Nabi Arts Centre; Dr. Song Yee Yoon , VP of SK Telecom (voted one of the world’s Top 50 Business Women by the Wall Street Journal); Professor Kim Jin-seo, Director of the Korea Content Management Institute; Professor Kimn Ha-Jine, Director of the Digital Media Association of Korea; many others; and of course, our guide, translator, and friend, Sarah Kim.

Here's a couple of Korean tech blogs well worth subscribing to:

Web 2.0 Asia
Koreacrunch

And you should definitely sign-up as a Member of the Seoul Digital Forum.

Next Stop: Dubai, Oman, and Doha

Preludes to XML 2008 - Beijing

2008 is going to be a magical year for X|Media|Lab. To give you some idea of how it has taken shape, here’s a review of the last couple of months ...

Beijing

In November we ran our first event in China. We were an official part of the International Creative and Cultural Industries Expo (ICCIE) in Beijing. Our four days consisted of a 1-day conference held at the Great Hall of the People, one of the world’s most iconic venues; a free day where our delegates could attend any of the ICCIE Seminars; and a 1-day “Virtual Worlds” Summit and business-matchingheld in partnership with our great friends at the Cyber Recreation District (CRD) in West Beijing. On the last day, we piled all the XML Delegates into a bus for our “Social Networking” day and had an amazing time visiting the Forbidden City, the Great Wall (at Badaling), and finishing at the Red Capital Club, hidden in an ancient hutong, where Chairman Mao, Lin Bao, and Zhou En Lai used to hang out.

Apart from the honour of providing the International delgates for the official launch of CRD’s “Dotman” Virtual World’s project, the 4 days gave us a great chance to test all the logistical parameters for running major XML events in China in 2008. We came away both exhilarated by the experience, and full of enthusiasm for what we can stage with our partners there.

The Cyber Recreation District people were very happy with the outcomes too. Shortly afterwards, the CRD’s partron, the Beijing Municipal Government, appointed XML to a two-year term as an official “Foreign Expert Advisor” on digital media industry development.

Anyone interested in the scope of the CRD “Dotman” project should check an article by Victor Keegan from the Guardian who interviewed the CRD Chief Research Scientist, Dr. Robert Lai, who attended the one-day Lab we did in London in October. It’s definitely ground-breaking, and potentially huge. We are happy to help co-ordinate any introductions from the XML Network to our friends at CRD.

[Photo: BH outside the Great Hall of the People with Second Life's most famous resident, Anshe Chung, who attended the XML events in Beijing]

Most of the International Delegates who attended the 4-day XML were in China for the first time. They were amazed! Amazed at the sophistication, the deeply civilized and welcoming reception they received, the giant luxury malls, the ubiquitous developments going up everywhere (and they didn’t get to see any of the second-tier cities where these developments are taking place at a stupendous scale and pace), and the commitment to digital media as one of the strategic industries to transition China away from the smoke-stacks of the past.

It’s worth noting a few points about why now, and what is contributing to this emergent China. The most salient features are these:

An enormous population; a huge economy; rapid growth; untold foreign reserves deriving from a globally dominant manufacturing sector; levels of Foreign Direct Investment (FDI) that are greater than the rest of the world’s developing markets put together; and, pivotally, the gradual opening of economic sectors to private or individual initiative to compete with the State Owned Enterprises (SOE’s).

The somewhat opaque inter-relationships between the strategic directives of the national government, the SOE’s, the Asset Management Companies (AMC’s), which stand ready to take the non-performing loans off the balance sheets of the banks, and the networks of the national banks themselves (often lending on a political rather than commercial basis), all together make any understanding of the true circumstances of China’s economic standing uncertain and incomplete.

I would reckon, however, that the Chinese financial system is very far indeed from the recent extraordinary events in the UK, where for the first time in the West since the Great Depression, there has been a run on a major bank, and the UK government has made the hapless tax-payers lenders-of-last-resort, providing this “private enterprise” with unguaranteed loans of a staggering 23 Billion GBP! Perhaps it’s time for the western economists who constantly question China’s financial systems to shut up for a while, and first put their own houses in order.

R&D - the Key

The International Delegates at the Beijing XML event had the honour of participating in the launch of the CRD’s “Dotman” Virtual World. But the Cyber Recreation District is far more than even this singularly massive project. In Chinese, the CRD actually translates as the “China Virtual Economic Zone”. It’s a “virtual” version of the “Special Economic Zones” that laid the groundwork for China’s domination in the global manufacturing industries.

That’s extraordinary enough - but CRD is far more than that. It’s a massive training and education facility, featuring eight seperate training academies, an IP protection centre, a business incubator, and an important R&D centre.

The development of a national R&D innovation network is one of the foremost priorities of the national government. CRD in Beijing is just one of these centres, which can be found everywhere in China with extensive government support, full local autonomy, and major partnerships with multinational technology companies.

[Photo: The X|Media|Lab Business Matching participants at CRD]

In Suzhou, Changsha, Dongsha, Hongzhou, Chongqing (a city of over 30 million people), and many places elsewhere, industrial parks and R&D centers are springing up out of the ground creating the 21^st Century China even as you read this. In Shanghai alone, there are over 70 (large and small) such centres competing for talent, investment, and R&D partners. The Suzhou Industrial Park (SIP), only 90 minutes drive north of Shanghai, takes up more square kilometers than the entirity of Singapore.

In the digital media industries alone, Nokia, Microsoft, Cisco, Lucent, Oracle, Seimens, IBM, Nortel, Agilent, Hewlett-Packard and many others have established major joint-venture R&D centres in these locations. The Microsoft R&D centre in Beijing alone currently employs over 3,000 full-time researchers. This will increase to a 10,000 headcount in less than three years - i.e., Microsoft, in its Bejing R&D head office alone, is acquiring 10 new R&D employees every single day.

Obviously, this will have long-term implications - not just because of the osmosis effect for the development of China innovation, as R&D employees shift between the multinationals and local start-up’s; but also as the weight of the R&D investment shifts from North America to North Asia, there will be an inevitable relative decline of R&D employment opportunities for graduates in the US. If you want to know where to look: China produces over 800,000 engineering graduates every year; the USA, less than 80,000.

Brands

I wasn’t surprised that the theme of the ICCIE Conference Day at the Great Hall of the People focussed on the issue of “Brands”. This is a critical issue for China. The paradigm example is this: the manufacturer in China gets paid 1 dollar for a shirt that is made in Shenzhen or somewhere similar. The shirt is made under contract for a brand-name such as H&M or Zara, who then sells the same shirt for 20 dollars on the High Street in Europe or North America. That is to say, 95% of the total income value resides with the owner of the brand-name, and not the owner of the manufacturing process.

As much as this defies logic, it is the world in which we live. (Note to self: dig out all those old Jean Baudrillard books on “symbolic value” and re-read them!). There is a definite understanding emerging in China that the while the ownership of the manufacturing processes has guaranteed it untold wealth relative to its previous status (at one stage in the early nineties, the market valuation of Microsoft exceeded the value of the foreign reserves of China), this amounts to little when compared to the relative profitability of the ownership of the brand.

I think we can expect to see many more experiments in both the creation and various forms of the ownership of brands emerging from China from hereon. This would include examples such as taking over foreign brands (Lenovo laptops, ie., IBM Thinkpads), creating home grown brands for the domestic market (e.g., Hipihi taking the place of Second Life), and taking equity stakes in Western assets through Sovereign Wealth Funds (SWF’s) and related vehicles - an eventuality made easier by the extraordinary self-immolations taking place in the fatally corrupted Western banking systems.

Of course, things will not be so easy nor so simple. In this “free trade” world, some markets are more-or-less free, and others not so more-or-less free. It’s sometimes puzzling as to which is which?

And of course, if eventually all the “free trade” rhetoric proves strained and hypocritical, and all the financial apparatus to support it backfires and fails, there’s always the last refuge of an absurd appeal to innate superiority.

[Photo: Bryan Ogden, New York; Suresh Seetharaman, Co-Founder Virgin Comics and Virgin Animation; David Ding, Singapore Entreprenuers; and Megan Elliott, XML at the Forbidden City]

Conclusion

The first XML event in China was a great joy to participate in. We all learnt so much, made such good friends, and had such an amazing time. Delegates came from Singapore, Australia, New Zealand, Japan, USA, UK, India, and Sweden.

Lastly, on China, here's some blogs and links we regard very highly:

Read Write Web

Ogilvy China Digital Watch

Plus Eight Star

Next Entry: Seoul