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 21st 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
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