08.09.07
How to profit in China
Being half a year into my new job now, I have been able to do something about at least the most blatant corruption practices in the company I took over. There is more, I know it’s there. I just need to look in the right places, and in some cases more closely. One step at the time. And I have to move careful too. After all I have a family here, and the spitefulness and vengefulness of the people here, once they only feel they have been ‘wronged’, is unsurpassed. Mrs. Mariner’s family members have been spending most of their life pursuing family feuds, and senseless arguing about events that happened decades ago.
I looked in my archives, and this post from EastSouthWestNorth is as valuable and true now, as it was then. Only it is not limited to corrupt Hong Kong managers in Guangdong anymore. The overall situation everywhere in China now is worse than in the examples below. The greed and willingness to cheat and steal of the people here, has absolutely no limits. All face, and no shame.
Corrupt practice by Hong Kong people in mainland China: A Must-Read for small- and medium-sized entrepreneurs setting up factories in mainland China.
The author is a Hong Kong department manager assigned to work in mainland China and is a second-line manager in the electronics production industry for more than 10 years. During this time, the author has seen or heard about many repugnant behavior by managers from Hong Kong in mainland China and wishes to share those experiences. The electronics production industry, especially the smaller factories, do not have adequate internal controls and the owners seldom visit their factories.
Based upon the author’s experience, the best way to swipe a lot of money is to install one’s own trusted lieutenants. Ideally, the personnel manager should be one’s wife. The engineering department, the production department and the warehouse should be manned by one’s own people. In order to hide the secret dealings, it will be necessary to pay people off. Most people in these situations only want to swipe as much as money as possible within a couple of years, without worrying about being fired anytime. What they can make with the illegal and improper moves is ten times, or even a hundred times, more than their regular pay. The following 15 points serve to remind the Hong Kong entrepreneurs who set up small- and medium-sized factories in mainland China that they have to be wary about the ugly Hong Kong managers.
I know a Hong Kong manager named Chen. Two years ago, he was still living in a public housing estate. Today, he has bought houses in Hong Kong and China; he has BMW’s in Hong Kong and China; he has a mistress. His salary is HK$450,000 per annum, but his under-the-table income is HK$7 million per annum.
1. Wages
(a) Invisible wages
At peak season, the factory employs 4,000 people; during the off season, the factory employs 1,000. But there can be many invisible workers. For example, only 1,000 people show up to work, but the accounts (including the worker cards and personnel records) shows 1,500 people. All it takes is forging 500 worker cards. This is easiest with a company that pays with cash. As long as the personnel department and the electronic production department go along, it is easy to forge the worker cards and punch them in and out with a card puncher at a hidden location.
(b) Workers who resigned or leave before the probation period
Their worker cards are collected and then entered in full at the end of the month with the full pay going to oneself.
(c) Deposit
When new employees enter the factory, they have to put down a 30 yuan deposit. For various reasons, many people do not get the deposits back when they leave. This may add up to tens of thousands of yuan at the end of the year. These numbers do not appear in the accounting books, and one can therefore pocket the money at the end of the year.
(d) Fines
Fines when employees make mistakes can amount to tens of thousands of yuan at the end of the year. These number do not appear in the accounting books, and one can therefore pocket the money at the end of the year.
(e) Dismissals
When workers are dismissed for serious problems (such as theft), their wages are often withheld. One can forge their signatures and keep their wages.
(f) Hiring
When it is necessary to hire many people to expand production, one looks for an employment agency. For each new hire, 300 yuan is paid to the agency but one can receive a kickback of 100 yuan per head for more than 10,000 yuan per month.
(g) Uniforms
One speaks to the manufacturer’s sales person and get a 5 yuan kickback for each uniform. If there are 20,000 persons at a factory, and each person orders two, this amounts to 20,000 yuan.
2. Equipment purchase
There are many methods of mischief. In one method, one finds a friend to set up a shell company called A. When the factory wishes to purchase 20 communications machine, one asks companies A, B and C for quotes. Actually, companies A, B and C are all fakes. The contract is then awarded to company A. So company A goes to Guangzhou to buy the equipment and then sells it to the factory at twice the price. At delivery time, there are more tricks such as receiving 10 machines while signing for 20; at inventory time at year’s end, one can buy some second-hand used equipment in place. One can easily make 100,000 to 200,000 yuan. Good equipment can be reported as broken, irreparable or even stolen, and then sold to used equipment dealers. There are many more such tricks.
3. Outsourcing
One looks for other factories to outsource the work while asking for kickbacks. For example, one cent per item paid in cash. The small amounts accumulate over time as long as the boss does not find out. One applies pressure on the Quality Control and Supplier Quality Engineer departments to ignore the quality of these outsourced products.
4. Raw materials
(a) One gets the Production Material Control person to check on the computer to see if there is anything in excess in inventory and sell it immediately. I had once seen that the BOM list was incorrect and there was more than one million triodes in excess. Of course, that was sold off. The production department asks for the more expensive materials than needed and also use them frugally. Also, the computer is rigged to reflect a figure that is more than the actual amount used. This will yield 30,000 to 40,000 yuan per month.
(b) Using inferior material: for example, the client specifies that the aluminum lines must use Alpha metal, but one can use inferior local aluminum at half the cost with a faked invoice from the supplier and cooperation from the Incoming Quality Control (IQC) person. When the client conducts an audit, one switches back to Alpha metal just in time. This will yield 30,000 to 40,000 yuan per month.
5. Decoration
One must find one’s own company to do the work, so that there is room for negotiation. Ideally, the work should be exaggerated and the price inflated, so that it is neither cheap nor good.
6. Large equipment
On one occasion, a large piece of equipment was sent from Hong Kong to mainland China. During the unloading, it was damaged. So a friend was brought in to fix the equipment and the insurance company paid for the maintenance. This is a minor issue, but several days later, the machine came back as a piece of used equipment that is only half new. This was good enough to make more than 100,000 yuan.
7. Cafeteria
One must find one’s own people to manage the place. The food does not have to be too good; it is enough that no worker dies from starvation. From buying rice and salt to selling the leftovers, there are chances for kickbacks everywhere. A factory of 1,000 people can yield 70,000 to 80,000 yuan per month.
8. Residence
One rents from a friend or else one buys one’s own apartment and then leases it back to the company at a high price.
9. Maintenance
(a) Car maintenance. One sets up an arrangement with an outside auto repair shop owner and sends all the factory sedans, trucks and forklifts there every month for maintenance. There is obviously a kickback that is no less than 10,000 yuan per month.
(b) Equipment maintenance. Exaggerate the cost of maintenance, increase the number of maintenance visits and inflate the total amount as much as possible.
(c) Accessories. I know that there was an AI(auto-insertion)/SMT (surface mount) accessory company that offers a monthly kickback of 10% to Hong Kong managers. At the time, the factory needed AI/SMT equipment accessories worth more than 200,000 yuan per month.
10. Fuel sources.
(a) Diesel oil (for the electric generator): go out with the diesel oil supplier for dinner and see if there is any room for discussion.
(b) One then gets an agreement on padding the delivery quantity in return for a kickback. When the diesel oil is delivered, the quantity is padded up. At some factories, it is necessary to get the cooperation of the incoming material inspector to fudge the forms. This will yield 20,000 to 30,000 yuan per month.
(c) Another trick is to have the diesel truck deliver the correct quantity during the day. But in the middle of the night, a diesel truck comes to the factory to pump the diesel oil back out from the fuel storage tank.
(d) Automobile fuel: One sets up an arrangement with an outside petrol station, so that all the sedans, trucks and forklifts must go to that station to re-fuel. The kickback may be worth at least 10,000 to 20,000 yuan per month.
(e) Electricity and water are supplied to the food and convenience stores in front of the factory. Obviously, the big boss has no idea that the stores have to pay for these services.
11. Waste materials
(a) One assigns one’s trusted aide to deal with the garbage recycler, so that 100 pounds is written in as 50 pounds and so on. One can make more than 10,000 yuan per month.
(b) One can sell off perfectly good materials as waste. Certain items are re-usable, but the savings would benefit only the big boss. But if sold off, it will benefit oneself.
12. Car rental
One finds a friend or else one buys one’s own car and then leases it back to the company. The price is obviously set very high.
13. Fixed assets
Each time that the factory moves or re-decorates, there is the opportunity to sell off a lot of old and even new assets.
14. Side business
One can run one’s own business. For example, one can get projects from other factories to run during the night when the boss is sleeping. One uses the boss’s equipment and electricity, and the workers are paid for outside work. At my factory, the Hong Kong factory manager receives printed circuit boards from outside to do surface mounts between 0:00 and 5:00am. By 6:00am, everything is cleared away and all materials and products are trucked away. This went on for two years without the big boss knowing, earning several million yuan for the manager. The worst thing that he was using the boss’s solder paste, which is quite expensive material.
15. Be one’s own boss
One sets up one’s own factory outside to supply simple things (such as screws, iron sheets, A4 paper) to this factory. One makes up the invoice and does one’s own incoming quality control. Obviously, the quality is dubious and the prices are inflated.
07.23.07
A change comes over Hong Kong (2)
An interesting comment on my previous Hong Kong post I found on ‘A Modern Lei Feng’. An interesting blog by the way.
Well, this isn’t so much “showing love,” but if you want to read a very interesting article, read the post (and the link to the article). This is straight out of a John le Carre meets Red Corner Richard Gere spy story and my guess is that much (if not all) of it is ficticious/all in the writer’s head. While its nice to flatter yourself, this isn’t the late 80s/early 90s and the PSB has far larger problems to deal with.
The quoted story by Loretta Tofani illustrates that now, with Hong Kong being ruled by its new colonial masters, it IS like what we experienced in China from the 80’s till the day of today, when it comes to harassment by the regime. And the PSB together with the Armed Police (the Chinese equivalent of the Nazi Waffen SS) has a very important task in covering up the truth, and making the life of journalists as difficult as possible. It’s Nazi Germany in the 1930’s all over again. Then there were people, just like now, who even when the Germans marched into Poland still believed in their good intentions. East Turkestan, Mongolia, Tibet, Vietnam, how many more invasions do we need before the rose coloured spectacles come off? Will somebody push the red button please!
07.17.07
A change comes over Hong Kong
Loretta Tofani is a former Inquirer reporter writing a series of articles on factory workers in China with a grant from the Pulitzer Center on Crisis Reporting. The articles will be published in The Inquirer. From her is the following article from July 1st.
The clerk at the small Comfort Hotel in Hong Kong seemed like a nice guy. I decided to trust him. After all, this was Hong Kong, the democracy. So I told him something I would never say to a hotel clerk in other parts of China: “I’m a journalist.”
What happened afterward has led me to see Hong Kong in a new way: as part of China’s police state, where nearly everyone - whether in an official position or not - can be expected to participate in the Big Brother system of spying and repression.
This may seem surprising for Hong Kong. Ever since Britain returned Hong Kong to Chinese rule on this day 10 years ago, China’s government has appeared to respect Hong Kong’s status as a “special administrative region.” The region has its own laws permitting freedom of the press, assembly and religion - freedoms not enjoyed in the rest of China. Yet Hong Kong since 1997 has been populated with Beijing-loyal citizens from China. “Apparatchiks,” Hong Kong Legislative Council member Martin Lee has called them. They help steer Hong Kong.
I was in China in March, April and May, doing some freelance reporting on factory conditions. I did initial reporting from Hong Kong. One organization gave me a booklet in Chinese. I do not read Chinese. I speak Mandarin, but not well. At the hotel, I asked the clerk, Peter, to translate a page. He obliged. We discussed my stories.
Then I left for mainland China.
When I returned to Hong Kong two months later, I checked into the same hotel. I used the hotel computer, clicking on a map of China.
“Are you finished with your report?” Peter asked.
I said I wasn’t, then disappeared into my room.
Minutes later, I heard Peter speaking on the telephone.
“. . . Map of China,” I heard him say. “She’s not finished yet; she’ll be back. No, she’s not afraid.”
I tried not to jump to conclusions. I thought back to when I was based in China in the 1990s for The Inquirer. My physician husband would say, “Bring out the Haldol,” a drug for psychotic patients, every time I noticed an odd “coincidence”: hotel workmen putting up drapes in my room at odd hours; repairmen “fixing” my not-broken refrigerator and air conditioner; the taxi “dispatcher” asking the driver for my occupation and nationality.
But this was Hong Kong, the democracy, in 2007. That evening, a new clerk informed me that the air conditioner in my room needed fixing. Would I allow a repairman in that evening, around 8:30?
“No,” I replied. “The air conditioner isn’t broken.”
The next day, Peter was back briefly. He asked if the repairman could visit my room that night.
I felt sure a listening device would be part of the “repair.”
“Sure,” I said.
One hour later, I checked out. The hotel’s front door shut behind me. I started making my way to the street. Suddenly the hotel door swung open and a clerk appeared. Her question seemed inappropriate:
“Are you going to America? Or China?”
I didn’t answer.
I checked into another hotel, Nathan House. Three days later, the maid asked for the phone in my room. I unplugged it and handed it to her. I didn’t think more of it until two nights later.
A man’s loud voice, angry, sarcastic, woke me from my sleep around midnight. He was in the hotel common area.
“Was her boss here?” he asked in Mandarin.
“No,” the hotel manager replied. “Her friend.”
“That wasn’t her friend,” he sneered. “That was an interpreter! An interpreter!”
He was right. A college student, Yuki, using my cell phone, was helping me contact factory owners for comment for my stories. It’s easier for a native speaker to get sensitive information over the telephone.
The man continued the tirade, his voice getting louder and louder, exchanging remarks with a woman whose voice I recognized: the hotel maid. They discussed my personal life - I had come to China without my children - and my phone calls the previous day.
Someone turned on a Chinese music CD at full volume - even though it was by then 12:40 a.m.
“Let her come out!” he taunted.
“Yes, let her come out!” cheered the hotel maid.
I went back to sleep. In the morning I waited for Yuki. I told her about the night’s events. “Don’t worry,” she said. “This is Hong Kong, not China. Anyone bothers you, just call 999. The police will come right away.”
I gave her a number to call: another factory. Yuki asked to speak to the manager.
There was a long pause. Yuki was told the man was at lunch.
“But it’s only 10:30,” Yuki said.
The conversation ended. The hotel maid’s mocking laughter rang through the hotel.
“Something is wrong,” Yuki said.
Yuki tried another number, another factory. The result was the same. The hotel maid’s laughter rang out again.
We stopped. The morning’s failure was not an accident, I felt sure.
As we left the hotel, a man wearing a suit strode into the hotel common area. He was looking carefully at a black object in his hands, larger and bulkier than a calculator.
Was it a machine to read and intercept the phone numbers Yuki had called? So perhaps he could call them and issue warnings?
I believe it was. Journalists are under government control in China. Some have their work disrupted, deliberately.
What does this mean for Hong Kong? The city needs a free flow of information for its capitalist system - a system China strongly supports, both for Hong Kong and itself. But my recent experience suggests that China’s agents will whittle away at freedoms. They will use covert, guerrilla tactics of intimidation and disruption against those they see as threats. In Hong Kong, the appearance of freedoms - for religion, press and assembly - will remain. But the core will be rotten.
07.06.07
How is this one for a pick up line?
From the South China Morning Post:
Ghost ploy used as sex lure, court told
A noodle shop delivery worker lured a teenager to bed by claiming he could exorcise the evil spirit he claimed was possessing her, a court was told yesterday. Appearing before District Court judge Richard Day, Tse Wun, 48, denied attempting to procure another person for an unlawful sexual act by false pretences.
The alleged victim, 19, testified that she knew Tse from the shop where he worked. She bumped into him on the night of May 31 and he had told her she looked unwell, as if possessed by an evil spirit.
The woman said she felt scared as she believed what Tse said because she had seen a ghost when she was small. She later had dinner with Tse.
She told the court she had another meal with him the following night when he gave her an envelope containing a cheque book that he said could help to ‘avert’ her misfortune.
On June 2 they had dinner together for a third time and Tse told her it would be dangerous for her to return home because ’something was going to happen’. She agreed to spend the night with him at a guesthouse, where he said that he could protect her, the court heard.
Arriving at a guesthouse in Yau Ma Tei, Tse allegedly told the woman he could read some words on her forehead in the dark. Afterwards, the court was told, he suddenly looked to the left side of her and yelled: ‘Don’t cause any trouble. I won’t let you go. Although I can’t have her, you are not to cause any trouble.’
The woman said she was so scared when Tse yelled at the ‘evil spirit’ that she leaned to him and was told to embrace him. Tse is then alleged to have told her the only way she could be protected was to have sex with him.
The woman told the court she reluctantly agreed as she believed it was the only way to expel the evil spirit. Tse is then said to have asked her to stretch her arms and lie in the shape of a cross. The court heard he undressed and molested her and attempted to have sexual intercourse with her, unsuccessfully.
The woman told the court she had worked in a karaoke bar and had provided sexual services for money but had not done so on this occasion.
She later told her boyfriend about the incident and was urged to report it to the police. The hearing continues.
06.02.07
Lamma Island
Every now and then I am traveling to Hong Kong. I have to see my eye doctor regularly, I still do all my banking there, and it’s a great place to shop. Besides I have some good friends there, and it’s always good to be away from mainland China for a few days.
One of my friends is living on Lamma island, one of Hong Kong’s outlying islands. He offered me to stay in his house for the weekend. Lamma, also known as ‘Pok Liu Chau’, is the third largest island in Hong Kong. The population is about 10,000. A lot of people live here, and work on Hong Kong island, as the cost of housing is considerably lower on Lamma.
There are ferry services from the Outlying Islands Ferry Pier No. 4 in Central on Hong Kong Island to Yung Shue Wan and Sok Kwu Wan. The ferry takes about 30 minutes. There are also ferries to and from Aberdeen on Hong Kong Island.
My friend lives in Yung Shue Wan in a beautiful house with a roof terrace overlooking the bay on one side, and the hills on the other. There are two very good seafood restaurants in Yung Shue Wan. My favourite is Man Fung Seafood Restaurant. The ‘lobster in cheese sauce’ they are serving, is the best I ever had.
Next to the restaurant is the Island Bar with it’s friendly manager Kumar. A great place to have a good time and meet the locals.
On Lamma you don’t have the feeling you are in Hong Kong. It reminds me more of some places in the Caribbean, or on the North shore of some of the Hawaiian islands.
Lamma also has a few nice beaches, and is great for hiking and fishing. I am already looking forward to my next stay, hopefully soon.
