Sunday, May 31, 2009

Communism in China - A single party system

[Cross-posted from our WFU MBA China '09 blog]

While not everyone on the trip remembers the Cold War (Russia), or the falling of the Berlin Wall (Germany), or the beginning of the Cultural Revolution (China), you could definitely sense that everyone on the trip had a curiosity, or concern, about how the Communist Party might effect our trip. Having worked for Cisco for many years, I had heard all the accusations about how our products were used to censor the Internet for Chinese citizens.

So the question remained, how much would the Communist government effect our trip? How much would we be allowed to see? How much does it effect the ability to do business in China and with Chinese business partners.

By no means should this post be taken as a definite answer or viewpoint. We were only there for two weeks, and had limited visibility into any aspect of companies or the Chinese people. But we saw bits and pieces, and that is what I'll share today.

In Beijing, we met with the former Chief Economist of The CITIC Group. CITIC is a mulit-national conglomerate that serves as an investment arm of the Chinese government. With that connection, the views from CITIC and the Chnese Government are obviously fairly well aligned. The views from CITIC recognized some of the huge challenges facing China:
  1. An increasingly growing wealth gap between the richest and poorest people.
  2. Environmental problems (air & water) as a result of all the growth over the past 10-15 years.
  3. The challenge of finding enough natural resources to support their growth, as well as the search for alternative mechanisms (solar, wind) to substitute for those natural resources.
  4. The dependencies on exports to drive their economy (especially the US), and the need to drive consumerism within their country.
These challenges all have a long-term time horizon, and all of them have a direct impact on the overall quality of life for almost all Chinese citizens. They impact the government's primary goal of a harmonious society, and they impact the long-term viability of the country.

At other State Owned Entities, such as Bright Dairy or Xi'an Aircraft Corporation, we saw how the government had identified certain industries or economic areas as critical to the long-term success of the country and was providing them with favorable benefits (ie. limited or no corporate taxes) to help drive growth and employment of Chinese people. While these benefits may or may not have been extended to other competitors in these industries, they did highlight the levels that the govenment will go to create a type of "floor" under parts of the economy to avoid speculation or wild swings that could create broader social problems.

Extending this concept of a "floor" to the financial portion of the Chinese economy, we visited the Shanghai Stock Exchange. The most prominent exchange in mainland China, it employs very rules that attempt to ensure more order in their markets:
  1. No short selling of stocks.
  2. All stocks must be held for at least 1 full day prior to being resold (N+1 rule). This essentially eliminates day-trading.
  3. The variation in any one day can not exceed a +/- 10% band from the original price.
While some of these rules could be viewed as restrictive to efficient markets, especially from a US perspective, they could also be viewed as trying to force some amount of patience or "take a step back" into their markets to prevent extremes reactions to rumors, fear or greed. Whether or not this is a good thing for the SS Exchange or the overall Chinese marketplace will have to be determined long-term, but it does highlight another aspect of trying to maintain a level of harmonious society in various aspects of Chinese business.

As the trip progressed, I asked several of these questions to Professor Mike Lord, who has been leading this trip for 10 years and has extensive business accumine in the region. His response was that it probably makes more practical sense to view China as a single party capitalist country, instead of a Communist state that endorses capitalism. You still have to be aware of the guidelines needed to do business in China surrounding ownership, relationships and competition, but that their inclusion into the WTO had sparked a tremendous understanding that global economic powers can not control markets and that competition and innovation will ultimately determine their success or failure. This made a lot of sense. From an outsiders perspective, it was very hard to see China as being anything but a hyper-competitive capitalistic market. Just the pace of re-engineering of products and creation of companies to sell those would suggest that the government can only extend so much influence.

Don't get me wrong, I'm not trying to suggest that the government is not a prevalent part of daily life in China. I witnessed this first hand. YouTube is blocked. I heard people listening in on my phone calls. I saw soldiers outside of many buildings. I heard citizens tell us stories about their knowledge of Fallon Gong, and their fears of discussing the events of June 1989 in Tienanmen Square. But none of these things seemed to impede the flow of business (except maybe portions of Google's business).

So the conclusions I drew were primary about my mindset about this blend of Communism and Capitalism. For now, it seems to exist in a fairly harmonious state. Could this change in the future? Possibly. Those major challenges I listed above could get more difficult, or the citizens might become less tolerant. But there appear to be (at least surface level) signs that they are being addressed.

My advice to Americans looking at interacting with China is to view their economy as being similar to the US, except with the competition level turned up a few notches. Learn what you can about ownership and relationships with Chinese companies and the government, but don't let the fear of a single party system paralyze your ability to actively engage in the world's largest marketplace. Like anything else, keep expanding your knowledge of the region and it's culture.

Saturday, May 30, 2009

Healthcare in China

[Cross-posted from our WFU MBA China '09 blog]

After meeting with United Family Healthcare, we had the opportunity to speak with several Beijing residents about healthcare in China. Several interesting aspects emerged, which highlighted major differences from the United States.

  1. You don't make appointments with a family doctor or at a local clinic. If you have an issue, you take the day off work and go to the hospital. There you stand in line and wait for a doctor to examine and treat you. The doctors don't make much from a basic visit (fixed fee), but instead make the majority of the money on prescriptions. So most Chinese people are often over-prescribed with each visit, to the point that they feel the doctor has failed them if they don't walk out with a list of prescriptions.
  2. Traditional Chinese Medicine (TCM) is primarily focused on reactive medicine rather that the preventative medicine of the west.
  3. The majority of people in China do not have health insurance. This has resulted in people saving massive amounts of money (50-80% savings rates) out of fear of major medical bills. This is recognized as a major cultural issue by the Chinese government, so effects are underway to consider ways to create a social "safety net" system.
  4. The level of doctor skills in China is excellent, both because many of them have been educated in the US, but also because science is so heavily emphasized in the schools from an early age.
  5. The average lifespan is 71 (Male) and 74 (Female). While the air and water quality have serious challenges, the fact that their diet is low in fat and they frequently exercise (walking, bike riding, kung-fu, tai-chi, etc.) contributes to this longevity.

Just as in the US, China has a growing ederly population and will face similar long-term healthcare issues. Without social security of Medicare / Medicaid type programs, many elderly will potentially move in with their children. While this was traditionally accepted, as more of China becomes westernized and the young families are more focused on careers (with only a single child), this is beginning to cause some culture changes and difficulties across the generations.

Long term the population will face the risks associated with growing pollution problems and water shortages. Combine this with the growing western influence to their diets and China has some potentially large challenges to address over the next 10-20 years of their evolution.

Friday, May 29, 2009

Killing the Trolls of your Past

Another good find from Seth Godin. I noticed this at the end of the first semester as classmates told us about their background in our LOB class. So much of their decision-making today was guided by one of those "trolls" from their past. As I mentioned in my China Hangover post yesterday, I've been overwhelmed this week by how much of this I hear around the office. "We can't do that because....", it's almost always based on some failed attempt sometime in the past. Nobody seems to remember that today isn't yesterday and the world is not the same.

One of the most powerful sessions we had in China was a meeting with WFU MBA alum GeFei Li, who has bridged his knowledge of both Chinese and American business and culture into an incredibly successful set of companies. He talked about how many business people approach China with preconceptions or as the enemy, most of whom fail. Approaching business in China requires a new open-mindedness and a willingness to look at this as a win-win partnership. Letting the trolls dictate your goals or agenda is a recipe for disaster. It's not easy to let the pains from old wounds impact your judgment, but it's critical to look forward and find a way to view the world from today's viewpoint, with a vision towards the future. The trolls are in the past, and the past can't be changed.

Thursday, May 28, 2009

The China Hangover

About an hour into long international flights, the flight attendants begin to move down the aisles serving drinks. If you're interested in getting some sleep, it's often helpful to have an adult beverage, and soon enough you're nodding off. But occasionally the cart comes by too often, or the turbulence prevents you from sleeping and upon arrival your head feels like the plane just landed on it. Flight hangovers are no fun.

For some of us, we're in the middle of a slightly longer hangover. In this case, we'll call it a "China Hangover" and it has less to do with a headache and more to do with a comparison. The comparison between the freedom and pace that we experienced over the past two weeks in China, and the pace that our world moves here in the United States. Having never experienced this before after international travel, I'm not sure how long it will last. My sleep is constantly interrupted by thoughts of China. I sit at work frustrated by the unnecessary barriers we put up to get things done. My thoughts during my morning and evening commute are filled with concepts for new businesses that either involved China, or adopt their strategies and attitudes towards business.

China is an amazing place. The past two weeks were incredibly eye-opening. This is a hangover that I'm not sure that I want to end anytime soon, because it's forcing me to look at the world in a completely different way. What I do with this new viewpoint will be the most interesting activity I undertake in 2009 (and possibly 2010). Getting back there is now high on my priority list, and probably needs to become an annual event (in some manner) to build my knowledge and contacts.

The Dynamics of the China Trip (Part I)

Thinking back on the overall trip, there were certain dynamics that stand out as being really important. The first is the order in which we visited the cities, and the second is the breadth of the students on the trip.

I'll start with the ordering of the cities. Coming over from the US, I'm sure we all had pre-conceived perceptions of what we'd experience in this new land. Living conditions, food, the response from the local people, how well we'd adapt to the culture, the role of the gov't, etc.. Beijing exposed us to the crossroads that Chinese culture is experiencing, with the mix of incredible growth and modernization (high-rise, buildings, roads, factories) and the 100s or 1000s of years of culture that still exists in the City Walls, City Moats and neighborhood hutongs and villages. But Beijing is also the center of the Chinese government, and to a certain extent it felt like a giant maze. Trying to get anywhere was cumbersome, there was never a direct path. It constantly felt like we needed to move in concentric circles to eventually reach a destination. And then once we were there, the business meetings often felt like a painful slog of formalities and interpreters. Combined with the newly inhailed pollution, Beijing initially felt like a shiny toy (on the outside), but a visit to a grandparents house on the inside. But then an interesting thing happened, we got outside the shiny parts and were allowed to explore. We sought out the older parts of the city. We sought out the local people and native culture. And we found places like Black Sesame Kitchen and and other places that embraced their past and were combining it with the new.

As we left Beijing and travelled to Xi'an, I sensed that there was some skepticism about the remainder of our trip. There was also a sense that the size and scope of China was so overwhelming that we might be too small to experience enough. Xi'an provided a nice change of pace. While it was a city of 8.3M people (the size of NYC), it didn't feel as dense. It felt more like Chicago. A big city, but further west and away from the crowds of Beijing. Xi'an showed us a new pace of growth. Xi'an is a city steeped in 3000 years of history, the origin of the legendary Silk Road, but here is was trying to become the new gateway to China's west. While Beijing had grown up, Xi'an was adding a new city area the size of Winston-Salem or Raleigh in 10-12 locations. Cranes were everywhere you looked. But Xi'an still had it's history. The Terra Cotta Warriors. The Big Wild Goose Pagoda. The Drum and Bell Towers within the ancient city wall. It had retained it's past, and was trying to build a new set of history. Overall the pace seemed to ebb and flow slightly better than Beijing, but that would all change as we got move on to Shanghai.

Traveling south to Shanghai, it almost felt like we entered a completely different China. Shanghai was new and huge and sprawling. Shanghai was not about history or tourism, it was all about being a center of business and an international metropolitan area. With 35M people, spanning an area the size of Delaware, Shanghai is massive in scope. Shanghai was our first experience of a China that had adopted many westernized ways. Transportation was a free-for-all, but it was fast paced. The business meetings moved to a different level, as the scope of the companies increased and we got insight from exPats on their experiences doing in Asia. The views of the skyline and the water were stunning, especially at night as the Asian obsession with neon was in full effect. The diversity of Shanghai was evident, as many of our group expressed a regret that we didn't have an extra to experience more of this incredible city.

Our final journey took us off the mainland and over to Hong Kong. A British territory in 1997, this felt the most like home. Hong Kong is like NYC with a British (and Cantonese) accent, set along the water and amongst the mountains. Language was no longer a barrier. The business meetings we again face-paced and engaging with exPats or Hong Kong locals.

About halfway through the second week, somewhere between Shanghai and Hong Kong, it started to dawn on us that the trip Mike Lord had created was the perfect blend of experiences for us to truly experience China. It started out slow and formal, highlighting the differences of doing business on the mainline. It showed the importance of local relationships (ours was with Kathy Guan of CITIC Travel), and the customs of interacting with State Owned Entities (SOE). We experienced the challenges of navigating in a country with a massive population and a communist government that needed to manage the growth in a controlled manner. As the trip progressed, we stated to see more freedoms and change, and we continued to see how capitalism and communism were intertwined. By the end of the first week, many of our preconceptions had been proven wrong, and we began to truly understand the incredible energy that was here. If we had experienced the cities in the opposite order, it would have been like driving a Ferrari at 150mph and then suddenly hitting the brakes to go down a one-land road. It would have created frustration. By putting the itinerary in this order, we were forced to experience eastern China first, to get outside our comfort zone and to learn to adapt. Only later woud we partake in the China that had an aspect of comfort for us, and we were all better for it. We had adjusted to the culture, the expectations and the nuances.

The Dynamics of the China Trip (Part II)

[Part I]

The other critical aspect of the trip was the breadth of viewpoints from the group. Composed of 35 students from 5 different MBA programs (in Winston-Salem and Charlotte), the group had very interesting dynamics.
  • The spread in age between the youngest and oldest was 25 years.
  • The mix of men and women was probably 60/40.
  • The mix of groups was fairly evenly divided amongst the five programs, so there was a level of familiarity but also a desire to meet the other members.
  • The backgrounds were diverse - Bankers, Accountants, Architects and Engineers. Consumer Products, High-Tech and Higher Education. Small Business Owners, Non-Profit Adminstrators and Real-Estate Developers.
  • Parents, Husbands & Wives, Expecting Couples and Students heading off to Internships.
With all these viewpoints, there was never a lack of questions, opinions, disbeliefs and curiosity. The older exec students hasseled the younger full-time students about their lack of experience, and then expressed sentiments of jealousy or remorse at how easily they could move their lives to China (if desired) in a heartbeat, without the responsibilities of families or children. The entrepreneurs were constantly taking notes, looking for an angle or an opportunity to engage in these incredible markets. And the professors repeatedly provided a mix of learning, experience and wonderment as they took in new experiences for themselves.

35 people. 35 experiences. All being shared in real-time, all being processed with confusion and wonderment. The diversity of the people was the other critical element to making this such an incredible journey. Those 35 people now have a new bond together, and a foundation for a lifetime of possibilities. What we all do with those experience will each be different, but I expect that we'll all look at life (here in the US or elsewhere) in a new light because of this trip.

Wednesday, May 27, 2009

Putting Green Computing & Virtualization into Perspective

[Cross-posted from my work blog]

Beijing_1 Having just returned from two weeks of business meetings across China, I came back with a completely new perspective on how the work that we're doing around Virtualization and Green Computing can directly effect emerging economies and the environment.

The picture to the right is from a beautiful, sunny morning in Beijing. What!?!? You can barely see the tops of the buildings and where are the blue skies?
With 15-20M people, 4M cars and 1000s of coal burning factories surrounding the city, Beijing has a well-known pollution problem. This same problem exists in at least 15 other major cities all over mainland China and Hong Kong. With a GDP that has grown over 10% y-o-y for the past decade (even 6.5% this past year), growth comes with a price. To walk around Beijing or Shanghai for several hours can give you red eyes and a feeling that you have smoked two packs of cigarettes.

One of the companies I met with was Beijing Tsinghua Solar Systems, one of the top Chinese manufacturers of solar tube and panel technology. With over 10M customers using their technology for basic functions like heating hot water in commercial and residential buildings, the country is able to offload about 50-65 coal-burning factories per year.

Those solar panels save the need to heat water for a few minutes a day. Imagine what the consolidation from virtualization technologies, and the efficiency from green data center technologies could do to put a dent in those coal-burning factories!! Data centers run hot 24x7x365, generating infinitely more demand for power than people looking to take a shower or wash their clothes. Now combine that with the ever growing increases in mobile computing (cell phones) from the next wave of Chinese farmers moving to the cities and you've got a pollution problem that moves from annoying to potentially deadly. To put this into even more perspective, there are between 100-150M people in China that earn less than $1 per day!! If you don't believe those people, and the Chinese government, are extremely motivated to move them out of extreme poverty, then I don't know what to say. These new workers will continue to drive more need for power in data centers, which puts a greater focus on those of us in technology to find more and better ways to deliver that power, computing and storage capacity in a much more environmentally friendly way.

It's good to be back home near family, but my perspective on the need to create more efficient data centers and building systems is now completely changed. The economies of the US and China are so intertwined that this is a global need. It's good to know that we're in a position to make a difference.

Tuesday, May 26, 2009

Pictures and Videos from China

We're still in the process of consolidating the (literally) 1000s of pictures and videos from across the group, but here's a small sampling from across the cities we visited.

Pictures
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http://www.facebook.com/album.php?aid=112243&id=577445773
http://www.facebook.com/album.php?aid=110073&id=577445773
http://www.facebook.com/album.php?aid=112199&id=577445773
http://www.facebook.com/album.php?aid=112034&id=577445773
http://www.facebook.com/album.php?aid=111608&id=577445773
http://www.facebook.com/album.php?aid=109344&id=577445773
http://www.facebook.com/album.php?aid=108892&id=577445773

Videos
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http://www.facebook.com/profile.php?id=577445773&ref=profile#/profile.php?id=577445773&v=app_2392950137&viewas=577445773
http://www.youtube.com/watch?v=txmqgQUt3ok
http://www.youtube.com/watch?v=JnGRRYnvCUg
http://www.youtube.com/watch?v=CMENMmvG604
http://www.youtube.com/watch?v=SXtYaDTPqtA
http://www.youtube.com/watch?v=g9i8x9Yn2HQ
http://www.youtube.com/watch?v=Om9UmGAWW4k
http://www.youtube.com/watch?v=ZWXZioeHnbs
http://www.youtube.com/watch?v=QwEksR5mQIE
http://www.youtube.com/watch?v=AC26UnnT1Js

Back from China

Now that I'm back from an incredible two week journey through the Middle Kingdom, it's time to start getting some of my learnings down in electronic format. I'll be working through a bunch of posts over the next couple of weeks, but I wanted to make a list of topics that will be coming in future posts. This was a list I made on the plane and during company visits the last couple of weeks:

  • Making Sense of the Tremendous Growth in China (growth of cities; gov't growth rate requirements; dependence on US consumption vs. Chinese consumption for growth)
  • The Gov't created "stability" floor for industries
  • The Chinese approach to control vs. chaos (media, reaction to events, etc.)
  • Looking at the world from Eastern vs. Western viewpoints
  • Who defines company strategies (especially in SOE-JV's), the company or the gov't?
  • SOE vs. Private vs. JV companies - Pros and Cons of each
  • Opportunities for Americans in China
  • The need for Americans to better understand China
  • If China succeeds (but uses all non-China natural resources), can the rest of the world survive?
  • The big China challenges (population, land, environment, internal consumption, social security)
  • Cultural Requirements to doing business in China
  • Are you studying China, the way China studies the US?
  • The 1.3B person underdog with the huge bankroll

Monday, May 11, 2009

Keeping up with our China Trip

I don't have time to keep cross-posting while here in China, so I'll just repost the link to the WFU MBA China09 Blog.

Thursday, May 7, 2009

How David beats Goliath

Every once in a while, usually late at night when I'm a little punchy, I come across an article like this from Malcom Gladwell which seems to connect a lot of dots that we studied throughout the semester. I sent this one to my classmates because not only did I think it was great to see OpsMgmt, ITMgmt, and StratMktg concepts all woven together, but because I believe the alternatve mindsets that are discussed are important to consider as we prepare to visit China, Japan and South America over the next 2 weeks. Much of what we'll experience on these trips will require people to recognize that other cultures see the challenges of the world differently, and that these alternative approaches may be their competition or partner. Having the flexibility to understand these differences, and either embrace or reject this alternative thinking, may make the difference between success and failure in the future.

Wednesday, May 6, 2009

China Trip - Putting Big Numbers in Perspective

(cross-posted from WFU MBA China Blog)

In March, both the US and China unveiled massive economic stimulus packages in an attempt to kick-start the downturn that both countries were facing as part of the econalypse. For the US, the package was ~$900B and for China it was ~$800B. Both huge numbers, but it's always important to put huge numbers in perspective. For the US, that 3-4% of GDP, whereas it's 15% of Chinese GDP. While we tend to think of China as a massive country (land, population) and a growing economic super-power, it's GDP is still only 1/3 that of the US. Many business leaders and media outlets have stated that the mid-to-late 21st century will be the timeframe that China overtakes the US as the dominant world economic power. That may or may not happen, but trends are definitely moving in that direction. How the government stimulus of both countries plays out will take a few years to understand and analyze, and the impact will be felt for decades.

One of the areas that I'm most interested in seeing and understanding on this trip is the size and scale of China. From last Summer's Olympics in Beijing, especially the opening ceremonies, we got a first hand look at what the Chinese people could accomplish with a singular focus. How that translates into business and what new opportunities this creates will be an area I'm watching very closely during this trip.

When you're "1 in a million" in the US, you're pretty unique and special. When you're "1 in a million" in China, there are at least 1300 others just like you.

Monday, May 4, 2009

China Trip - Areas of Interest

(cross-posted from WFU MBA China Blog)

As Gregg mentioned in his previous post, we're hoping this blog will be more than just a running dairy, and more of a stream of conversations. So to add on Gregg's areas of interest, here's my Top 5 areas to better explore and understand:

  1. Given that the Chinese have huge populations of people that work for pennies a day, how are they using technology to elevate their standards of living across the population?
  2. As a communist nation with capitalistic ambitions, how does that balance work across various industries and stages of business (start-up vs. established companies)?
  3. What engagement models have been successful by non-Chinese companies that are trying to engage the vast Chinese resources (labor, knowledge, etc.)?
  4. What are the technology trends that are being adopted by Chinese youth, and how are these effecting their lifestyles?
  5. What lessons can Americans learn from the Chinese that can be taken back to our companies and applied to our workforces? It can't just be about cheap (relative) labor.
With 30 people visiting from WFU MBA programs, I'm sure we'll get at least that many viewpoints on areas of interest. Hopefully we can share many of them with you over the next couple weeks.

China Trip - Using a Netbook for Blogging

(cross-posted from WFU MBA China Blog)

A few weeks ago, during our ITMgmt course, we debated a case study on the rollout of the Eee PC from Asus and whether or not it was properly handled as a disruptive technology. Since then, several classmates have purchased various forms of netbooks for the international trip. Inexpensive, lightweight, basic functionality...potentially the perfect platform for an international traveler with basic computing needs and no desire to lose/break their work/school laptop.

I'll be blogging from China with a Eee PC 90 Linux-version (see right), so I'll provide some feedback about it's usefulness.

Friday, May 1, 2009

China Trip - Itinerary

[cross posted from WFU MBA China Blog 2009]

Many people have asked me what we'll be doing while in Chna. Below is our itinerary. Beijing, Shanghai, Xian and Hong Kong over 13 days. As you can see, it contains a great amount of variety. 24 company visits in 11 days. A great mix of Government, Education, Manufacturing, Real Estate, Automotive, Financial Services, Electronics and Shipping.

Sat May 9: Depart U.S.

Sun May 10: Arrive Beijing; orientation

Mon May 11: Great Wall; Summer Palace; city touring
Tue May 12: CITIC, The Hay Group, U.S. State Department/U.S. Commerce Department, Chindex/United Family Hospitals (a.m.); Beijing High School #1
Wed May 13: Beijing Tsinghua Solar (a.m.); Shunyi Real Estate Development, Yanjing Beer
Thu May 14: Tiananmen, Forbidden City; Fly to Xian
Fri May 15: Xian Aircraft, Municipal Government (a.m.), Huasheng Agribusiness
Sat May 16: Emperor Tombs, WG Pagoda; Fly to Shanghai
Sun May 17: Optional touring/free day; Cynergy Global & RF Micro Devices
Mon May 18: Shanghai Stock Exchange, Ford (a.m.); Bright Dairy
Tue May 19: Fudan U.; Lowes Sourcing; Fly to Hong Kon
Wed May 20: Dubai Ports World International (a.m.); Prudential, Wells Fargo/Wachovia
Thu May 21: Texas Pacific Group (a.m.); Hong Kong Monetary Authority, Hong Kong Exchanges
Fri May 22:
VF Global (a.m.); optional touring/HK Disney/free time
Sat May 23: Return Hong Kong/Newark

WFU MBA - China Trip - Blog

I'll try and remember to cross-post here, but as part of our trip to China next week the school has asked me to be one of the bloggers for their official site. Everyone is very excited about the trip and the upcoming experiences, but right now it's slightly tempered by the spreading of the Swine Flu (H1N1) to Hong Kong. Hopefully things stay under control for the next couple weeks.