Potentially some tough times ahead for HP in China, at least in the short term. The problem: bad Nvidia graphics cards in some laptops. Sorry, gamers.

I assume that HP has a good relationship with a PR firm used to handling crisis management in China. The photo is from a 2009 Greenpeace protest against HP last year. I wonder if HP has already met with their consultants on this issue?

A couple of isolated tort cases would be unfortunate, but certainly no cause for alarm. However, there seems to be much more going on. The Financial Times has details today:

Chinese lawyers have filed a complaint on behalf of more than 170 consumers against Hewlett-Packard, requesting that the Chinese government order a recall of allegedly faulty notebook computers.

Uh oh. Some good news/bad news for HP here. The good news is that the complaint was not a lawsuit. The bad news is that it was a formal request sent to the General Administration for Quality Supervision, Inspection and Quarantine (AQSIQ), asking the government to open an investigation, institute a recall of the laptops, and order HP to provide compensation.

This is probably a smart move on the part of the lawyers involved. Class action lawsuits are not really a formal process here, although the functional equivalent is possible. However, big lawsuits are frowned upon and not in keeping with a Harmonious Society. On the other hand, mediation led by a government agency can be quite acceptable, as long as you go through the right channels and have enough political support.

What makes this worse than your run-of-the-mill product liability/consumer law type of case is the backdrop of the Toyota dispute (my previous post on Toyota) hanging out there and the sensitivity towards non-reciprocal customer remedies. Ouch, the complaint alleges the same thing with this dispute:

“We have also noticed that HP in the US offered consumers extended warranty periods for even more models and compensated them for transport costs, but in China, it has not made a statement or offered services, and openly discriminated against Chinese consumers,” the complaint said.

Not good at all. How bad it will be for HP depends on a number of factors, including the total number of people involved (so far, rather small), whether there is political support for this action, the reaction of HP, and media interest.

As to the latter, I already noticed one article in Xinhua today (Chinese) about an enterprising young law student from Zhejiang who had laptop problems and went up against HP to get compensation. Poor kid buys a laptop made in Taiwan and, within the two-year warranty period he gets the black screen (黑屏) (of death) after the graphics card overheated. Bummer, no more World of Warcraft.

If the Chinese media is already starting to pen feature articles describing poor unfortunates who have suffered after their HP laptops have given up the ghost, then bad times might be ahead. The next bump in the road is March 15, International Consumer’s Day. Expect AQSIQ to announce some new campaigns at that time to show the higher-ups in the government that they are diligently protecting the interests of the people.

Update: China Daily is on the story too.

Perhaps a poor choice of headlines from the Financial Times on this book publishing story. “China to Loosen Control of Book Publishing,” at least to me, suggests that the State might start allowing in foreign investors.

Bad assumption on my part. Looks like a restructuring for business reasons, the usual pattern whereby a domestic monolith is transformed into a leaner, financially stable entity that can go out and compete internationally as well as dominate at home.

At least I think that’s the idea.

China’s largest publishing house intends to transform itself from a propaganda vehicle into a global player as it spearheads Beijing’s plans to restructure the industry while keeping it under state control.

Nie Zhenning, president of the China Publishing Group, told the Financial Times that he hoped Beijing would regroup the publishing industry into two state-owned conglomerates. After an initial public offering, Mr Nie’s company would then seek to acquire players at the provincial level.

Keeping all this under State control means no meaningful new opportunities for foreign companies. Maybe in the future, if the restructured entities want to do a great deal more business overseas, they will have to make some concessions on the China market. Wouldn’t hold my breath on that in the short term, though.

How ya gonna keep ‘em down on the farm once they seen Karl Hungus.

–The Dude, The Big Lebowski

The New York Times just published a discussion on unemployment among recent college grads, asking a variety of experts what their take on the subject was and what some of the causes might be.

The basic supply-and-demand problem:

In 1999, the government began a push to expand college education — once considered a golden ticket — to produce more professionals to meet the demands of globalization. This year, more than 6.3 million graduates will enter the job market, up from one million in 1999. But the number of high-skilled, high-paying jobs has not kept pace.

Or maybe it’s a chicken-and-the-egg problem. You push education to develop the economy, but the jobs lag certain other measurements of growth.

First up in the debate was Cindy Fan from UCLA, who downplays the huge numbers of grads (still only 8% of population is college educated) and looks for other explanations:

• Geography. Lots of kids from small cities are flocking to Beijing and Shanghai, putting pressure on those job markets. At the same time, there is a “brain drain” in these small towns.

Kind of reminds me of my situation when I graduated from law school. The economy was bad, sure, but the biggest problem for my fellow graduates and I was that we wanted to stay in Boston, a medium-sized city with too many law schools and not enough jobs.

• Sea turtles (海龟 – hai gui). Chinese students with overseas degrees are returning in record numbers and displacing local grads.

Yes, those folks certainly have a leg up on the local competition. Unfortunately, the market is so bad that many of them have come back to low-paying jobs, if any, earning them the sobriquet kelp (海带 – hai dai).

• Training mismatch. Students these days are more likely to be trained for service sector jobs, but China’s economy is still dominated by industrial firms.

Next up is Huang Yasheng from MIT, who focuses on geography as well. Grads do not want to invest time and money in a college education and then go back to their hometown. (The Karl Hungus problem, see above.)

Professor Huang also sees a skills mismatch, stating what everyone knows about recent grads here: they can’t do much. I can’t tell you how many clients I’ve had over the years who would kill for an experienced Chinese manager who had problem solving skills and who could think creatively. You can’t get that in a college grad (or many older workers, for that matter). I thought this comment by Huang was a particularly nice summary:

Although Chinese universities are not without pockets of excellence, they are churning out people with high expectations and low skills.

Daniel Bell, who teaches at Qinghua, was next. No surprise, he starts off with a quote from Confucius! Bell focuses on the current situation as opposed to the causes, which I think he mostly attributes to a supply-and-demand problem from a boost in education spending.

Bell’s advice is for parents and kids to lower expectations and for China to develop a strong vocational training system. I’ve heard that before, and it certainly is needed. However, if Professor Fan’s 8% figure is correct, it seems like on the whole, China does not have a long-term problem in training this many students.

Next up was Albert Park from Oxford, who is optimistic. He says that given the small percentage of people getting college degrees in China and the trajectory of the economy, everything should work out eventually. Given the short-term pain, however, it sounds as though Professor Park is cautioning grads to modify their expectations.

Last, but not least, was Loren Brandt from the University of Toronto. Professor Brandt points to a mismatch of supply and demand and of skills but is optimistic that economic growth will take care of this problem in the long run, provided that teaching and economic development proceeds forward.

To summarize: too many grads, not enough jobs. Teaching needs to be better, economy needs to grow. Sounds like no short-term solutions and no magic bullet. That does not bode well for recent grads, as the advice given seems limited to “be patient and lower your expectations.”

On the other hand, that’s pretty good advice.