A Rational Decision Maker: Stay Away from Next Panic Buying

Vincent Thian/AP

Chinese consumers just recover from the recent nationwide salt panic buying. The panic, which began in China’s coastal provinces and spread quickly throughout the country, was a result of two misunderstandings:

  • The radiation from reactors at Japanese nuclear plants, caused by the devastating earthquake and tsunami would contaminate sea salt supplies in China.
  • The iodine in salt can prevent thyroid cancer, which is a disease associated with radiation exposure.

Misled by the rumors, millions of Chinese consumers flocked to their nearby supermarket, bought as many bags of salt as they could, which made the salt price jump ten times in some cities. China Daily reports a man purchased 6.5 tons of salt during the insane buying period, now finds himself stuck with three truckloads of salt, which can’t be returned, sold or even transported.

straightfromthedoc.com

Chinese consumer is the victim in this rumor-led crisis, of course no one wants it to happen again. So how should we do to prevent it?

Many people blame the Chinese government for not responding quickly and effectively, but I don’t think it is the cause. We all know in a market-oriented economy, the price is determined by the demand and the supply. China is now transforming into a more open market, the price fluctuation is and will always be a common phenomenon. Open your eyes and be realistic. We are not living in a planned economy era any more. We cannot depend on government’s macroeconomic control all the time. We have to hand over the power to the “invisible hand” of the market. Otherwise, Chinese economy cannot be strong enough to enter the entirely free international marketplace.

But we’ve got to prevent it, and there is a way. All we should do is to become a rational decision maker to protect ourselves from next waves of social panic, and that can be achieved within several steps:

  • Be aware of the economic situation and be alert to the unusual signs. So when the crisis approaches, you can anticipate it and have enough time to make your decision.
  • Once you are aware of the unusual signs, you need to realize what are  important in making the decision. In this case:
    • the accuracy of the information: find out whether the rumors are true or not;
    • basic health knowledge: you should know that taking too much salt is bad for your health, a small amount of salt will be enough to maintain your body’s daily activities;
    • general prediction of the uncertain future:  the government will not let the salt price jump too much, since the seasoning is the fundamental ingredient in people’s life. It can go from 1.6 to 2 considering China is in a high inflation period, but if it goes from 1.6 yuan to 16 yuan, it is ridiculous, and you don’t want to be part of it.
    • financial cost: if you buy a small bottle of salt, it usually costs you 1.6 yuan ($0.25), at the highest price it costs you 16 yuan ($2.4), and you can consume it for several months. But if you buy 6.5 tons of salt, it costs you 27,000 yuan ($4,100), and you can NEVER eat it up in your life!
  • After understanding these, you can choose the optimal decision easily. You may still decide to go to buy several bottles to emotionally calm your fears towards the uncertain future, but  I am sure you will not rush into the supermarket to buy tons of salt, and you will not panic if the salt has been out of stock.
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When Wisconsin Ginseng Met A Fake China

 

It was 2004. Butch Weege was in a trade mission to China with a Wisconsin governor. A year ago, Weege was elected as the executive director of international marketing at the Ginseng Board of Wisconsin (GBW), the official organization of Wisconsin ginseng growers. He had been growing ginseng since 1982, the crop that has a high value in oriental medicine, and has a large market in China.

The mission for his trip was to understand the end users of the ginseng market. He went to Shanghai, Nanjing, Guangzhou and Hong Kong and many others cities. In every city he stopped in, he found the trade mark of Ginseng Board of Wisconsin. In the Chinese traditional medicine portion of town, in the shops, in the pharmacies, he found the trade mark everywhere in the cities. The state’s prized Wisconsin ginseng seal was printed on countless ginseng products, but no one was authorized to be using it.

“People were taking our brand, our registered trade mark, and they were putting ginseng from other countries, they were putting on their home grown Chinese ginseng,” Weege said. “It made us realize why our market was falling apart.”

He knew he needed to do something. He needed to do something right now.

******

 

In the early 1980s Wisconsin had 1,400 ginseng growers. Now, it has only about 150. In middle 90s, Canada and China entered in the global market, and the largely increased supply has been making the price of ginseng plummet since then. In 2007 the price that ginseng growers received was lower than the profitable price by $5 per pound on average.

“That is a huge collapse in the industry,” Paul Mitchell, an assistant professor, agricultural and applied economics at UW-Madison.

“It was a hard time for us,” Kirk Baumann, a ginseng grower in Wisconsin. “Many of other farmers gave up the ginseng and began to grow other crops.”

Baumann stayed in the industry while his brothers started to grow corns or wheat. The bad economic situation made him almost gave up as well, especially considering that ginseng is extremely hard to grow.

“Kids are easier to raise than ginseng,” a ginseng grower said in an interview with WSJ. Kristin Johannsen wrote in her book Ginseng Dreams the ideal condition for ginseng: “The climate must be cool and temperate, with plenty of rain, but the water must not stagnate around its roots. …It needs protection from the direct rays of the sun by an unbroken canopy of forest. It needs soil that will keep the roots growing slowly as they force their way down. And most of all, it needs a particular combination of nutrients found only in the decaying leaves of certain hardwood trees that drop their leaves early in the fall, such as maples and poplars.”

But in his mind Baumann believed that the thing would work out one day, and it would come to a good end.

What Kirk didn’t know is that in the other side of the Pacific, a large underground ginseng market was taking advantage of Wisconsin ginseng’s reputation illegally. While ginseng growers in Wausau like him had to pay in 20 cents per pound of ginseng that they sold to Hong Kong, mainland China, Malaysia and Korea buyers, for using the GBW seal, the counterfeit Wisconsin ginseng market in China was using the trademark for free for many years and making great profits.

 

******

 

Liang Xie, had been taking ginseng capsules for 2 years. The stress from his job made the 45-year-old businessman fatigue all the time. A Chinese traditional medicine pharmacist told him that Western ginseng could relief the fatigue and make him full of energy.

Xie accepted the suggestions. He went to the nearest drugstore, and saw many different kinds of Western ginseng products produced by different drug brands. He decided to buy Eagle Stars and Stripes ginseng, the brand he was familiar with, whose advertisement of its Western ginseng played on different television channels all the time. The price of ginseng capsules was pretty high, but it was worth, Xie thought.

In the May of 2006, he went to the drugstore as usual, but the people who sold the Eagle Stars and Stripes ginseng told him that the product was out of stock.

“It is odd, I have been buying this for 2 years and it never sold out before,” he thought.

He asked when the products would be in stock, the people said they didn’t know. Driven by this curiosity as well as the need to consume the product, he finally forced the drugstore workers tell his the real reason why the Eagle brand’s ginseng products were gone: they were confiscated by the market supervisors from Industry and Commerce Ministry, because the Eagle brand as well as other ginseng production brands stole the trademark of Ginseng Board of Wisconsin and counterfeited the American ginseng, which was actually produced in Northeast China.

“They were basically confusing Chinese consumers and during the meantime, our farmers here were being paid for much less for their products,” Weege said. “In 2005 and 2006, we spent a lot of time taking people to court.”

A war without gunsmoke flared up. In 2005, GBW set up a bureau in Shanghai, appointing a sale representative to investigate the counterfeited Wisconsin ginseng products, as well as to promote their authentic ginseng. In 2007, the Ginseng Board of Wisconsin filed and won lawsuits against 30 to 40 Chinese Pharmaceutical companies in Chinese courts. The result of the lawsuit was a fine, for each vendor, of up to 22,429.5 US dollars, and more importantly, forced them to stop selling their products with the Wisconsin Seal.

The lawsuits went on successfully. Pharmaceutical companies paid the fine and stopped immediately, partly because local Chinese governments actively involved in the enforcement of these sanctions and they found no loophole that they could take advantage of anymore.

“I believe we had effectively cleaned up the market place, so we could go in there fresh, and began to re launch our Wisconsin American ginseng in its image, and regain the consumers’ confidence that had been tarnished by the counterfeited ginseng,” Weege said.

 

******

In Baumann’s business card, his Chinese name was printed in the opposite side of his English name. Keqin Bao, which is pronounced similarly to Kirk Baumann, is named by Mabel Zhuang, the Chinese sale representative of GBW, in order to make it easy for Baumann to communication with Chinese buyers.

In 2008, GBW signed a deal with Beijing Tong Ren Tang Health Pharmaceutical Company (TRT Health), a company with a 400-year history, and about 1,000 drugstores in China, to distribute genuine Wisconsin ginseng in the country. The Chinese drugstore giant is now the exclusive Chinese dealer for the Ginseng Board of Wisconsin, the only one that could use the “Wisconsin Seal”, certifying that the ginsengs are 100 percent Wisconsin grown.

The target consumer of TRT’s ginseng products is up class and up-middle class in China. The price of Wisconsin ginseng is too high to working class and major middle class, not everyone has the ability to consume the nutrient product on a daily basis.

But the obstacles for Wisconsin ginseng still exist. Although GBW won the lawsuits, and stopped the unauthorized usage of GBW’s trademark, there are still Chinese ginseng products using the name of “American ginseng”, “Western ginseng”, or printing American maps, the Star Spangled banner of America and the Statue of Liberty on the box to confuse consumers.

“It is hard on that level. We cannot stop them using the American map or flag, even American government has no such right,” Zhuang said. “What we can do is to try whatever we can to build the reputation of our organization in Chinese market and make as many as Chinese consumers know us.”

“They’re gonna to be there to maintain the presents. It’s important for them to know their market,” Mitchell said. “And I really think production control is important. Have a few selected marketers, maybe they should have more than one, I don’t know, but keeping that number small and controlled is important.”

Weege is now learning Chinese. He can already speak a few Chinese words like Nihao (Hello) and Zaijian (goodbye). He knows that winning the lawsuits and signing the exclusive deal are not enough. The potential of the Chinese market is waiting for him to explore.

Where does the American ginseng sold in China come from?

Ginseng, a bitter root looks like a carrot is a crop well known for its medical value in oriental world, especially in China. Chinese traditional medicine has regarded ginseng as one of the most valuable herbs for centuries, and has been using it to enhance the energy of the body and to cure ailments like fatigue and cold. It is also believed that ginseng can slow down the speed of people getting older.

Wisconsin ginseng has higher medical value in the eye of Chinese traditional medicine, than the ones produced in the other part of the world. The ginseng grown in Wisconsin contains on average much higher levels of ginsenoside, the active and valuable ingredient in ginseng, than the ones from Canada and China, the main competitors in the global ginseng market.

Marathon County, which is part of Wausau, located in the central part of Wisconsin has been producing the largest amount of ginseng in the world. The hills with rock, the granite to aid drainage and the topsoil rich in minerals and nutrients give the crop its desired characteristics. Wisconsin produces 95% of the nation’s ginseng by pounds. Marathon County produces about 85% of that.

In 2008, Ginseng Board of Wisconsin signed a deal with Beijing Tong Ren Tang Health Pharmaceutical Company (TRT Health), a company with a 400-year history, and about 1,000 drugstores in China, to distribute genuine Wisconsin ginseng in the country. The Chinese drugstore giant is now the exclusive Chinese dealer for the Ginseng Board of Wisconsin, the only one that could use the “Wisconsin Seal”, certifying that the ginsengs are 100 percent Wisconsin grown.

Let’s start a journey following the ginseng to see where it comes from!

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Check out more pictures of ginseng on Flickr.

Dairy Industry Crisis: What Does A Better China Need?

By linduyichu (from image.baidu.com)

Mrs. Zhu lived with her husband and her 3-year-old son in Beijing. The little toddler hadn’t drunk any made-in-China powdered milk since he was born. All of his powdered milk was from a Netherlands-based company, Friesland-Campina, which was only sold in Hong Kong. During the past three years, his parents travelled all the way to Hong Kong, the city 1224.9 miles away from Beijing every several months, only to buy some bottles of the Netherlands-made milk products, or asked people who went to Hong Kong to purchase for them. Mrs. Zhu complained the high costs of shopping like this, but since she doubted the quality and safety of the milk powder products made in China, (seemly she even didn’t trust the foreign brands sold in mainland) she felt she had to do so.

I read this story from a news website, and then I searched online and found out that purchasing foreign brand milk powder from abroad is now a kind of a phenomenon among Chinese young mothers. It’s not just Mrs. Zhu’s one case.

Since the melamine tainted milk incident first brought the food safety of milk out of the surface, and was widely covered by the both domestic and international mainstream media in 2008, Chinese consumer’s trust on “made-in-China” dairy products, especially the ones for infants, has been vanishing. But Chinese consumer’s grudge against dairy industry is not from the bad memory of two years ago, but also from a similar safety issues occurred recently:  some rumors spread widely online by blog posts and news reports, saying that the milk products for children and infants, produced by two Chinese dairy giants, Yili Group and Synutra International, lead to kids’ premature sexual development, even the growth of breasts. The rumors had a huge negative impact on the two dairy companies, whose stock price immediately plummeted, but then it turned that the rumor was themed by another Chinese dairy company-also the largest one-Mengniu Group through PR agents, to revenge a similar smear planned by Yili and targeted at Mengniu in 2003.

The rumors have been clarified, but the negative impact on Chinese consumers cannot easily go away. Mengniu hoped that the smear could make its competitors crash down, but it didn’t realize that the negative information like this would also frighten the consumers, and bring shame on the whole dairy industry.

From image.baidu.com

But that is not the most important part. What really matters is not about the unethical company, or the ill-regulated market, or the fierce business competition, or the powerful PR manipulation with a wrong purpose. What really matters is how the dairy companies, or I should say the whole food industry in China, treats the consumers: the companies who produces food for the whole society don’t care the people they service. The only thing they care is the money-how to maximize the profits, how to enlarge the market, how to beat the enemies, and how to make people willing to pay for the products. The Chinese consumers-millions of young mothers, millions of innocent infants and millions of individual families-are just their tool to achieve the business goal, that’s why those companies could add toxic ingredient in spite of the life of millions of infants, that’ way those companies could use the rumors concerning millions of children’s growth as a weapon to fight against each other.

What a shame.

I read many reports, editorials and blogs about this smear scandal. Chinese experts and media generally urge that the business competition should be moderate and the industry giants should be trustworthy, while in the Western eyes this is just another case of the unregulated China. But for me, I feel like it is the time for the whole dairy industry to really take care of their consumers, those infants and toddlers who could not healthily grow up without good quality milk products, those mothers who love their kids so much that any illness the kids suffering could break their hearts, and those families which may lose the happiness and peace forever if their kids have any severe damage, rather than to focus less on coming up with another round of PR activities to save its own reputation.

A booming economy is supposed to lead to a better society, a society is surrounded by loves and cares, a society that people trust and respect each other. But our economy has been focusing too much on the rapid growth and has forgotten its mission to build a better society.

Let’s slow down the pace. Let’s retrieve the situation by facing the problems and solving them, rather than covering the mistake. Let’s pick up the oldest moralities that were inherited from our ancestors, to love, to care and to respect. Let’s promise not only a rich China, but also a better China.

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