Image courtesy of china.org.cn

Image courtesy of china.org.cn

Finding a place to live in Beijing is one of the most onerous and grating tasks for anyone in the city. It just is not easy. While many media outlets (like ourselves) try to bring transparency and clarity to the capital, it often appears that opacity, obfuscation and information-withholding are founding principles of the People’s Republic. This data-poverty pervades the city (and country) in many ways: from the street-level difficulty in finding addresses (why do so few buildings have numbers?) to the unaccountability of those in power, at any level. Every English teacher at a state institution like middle school or university will have stories of sudden arbitrary demands or turning up to teach and discovering theĀ  building is suddenly a building site and no-one thought to tell them. (And the rule goes all the way to the top, of course. The “black box” at Zhongnanhai, as foreign correspondents occasionally ruefully admit, has never been cracked).

Thus, information about accommodation can be hard to find, which therefore makes making an informed decision about where to stay difficult. While ex-pat websites like theBeijinger, along with local sites like Sina Zufang and Ganji do offer accommodation ads, these are largely monopolised by agents posting ads which generally have little similarity to the properties they claim to be advertising. But while these ads are moderated, short of verifying each and every post, there is little an open site can do. The tactic on the part of the agents is however conscious, indeed deliberate. While they may perform a service in promoting properties that non-English speakers cannot, their strategy is to insert themselves between the owner and renter, making it impossible for the two sides to come together without them. Worse, the information posted is often false. That nice 2-bedroom apartment in Gongti Bei Lu with a (relatively) big kitchen? It’s actually a 1-bedroom flat in Hepingli, but would you still like to see it? That sweet-looking pad with the new sofa, TV and DVD player? It’s a tiny shithole with dead roaches on the kitchen floor. It’s still 4000 a month, but hey, lots of people want to view it, so you should take it now, yes? (This has literally happened to me).

The insertion of an artificial link in a chain of commerce can be infuriating. While property agents might have a purpose – if they act as a middle-man between you and the landlord, helping with contracts and repairs – in China it appears that they merely introduce you to the landlord and provide no other service. For a payment of a month’s rent, that is a preposterous fee for a negligible service. But given that their entire business model is based on preventing either side being able to come together with full information, they are doing “a good job”. (I don’t mean ethically good, of course). You have to go through them. Users of every property website are deluged with misleading adverts, burying the genuine posts from actual individual landlords who have one place to rent. Meanwhile 5i5j and their ilk have numerous agents posting several ads a day, often from several accounts, so that you can never tell what is real and what is commercial. The muddier the water, the better. Disinformation is the name of the game.

What therefore happens is that you call someone upon seeing a promising apartment; it turns out to be an agent, and they take you there. It sucks, so he offers to take you to others. In agreeing, you are reliant on the agent for information on the housing market. You are also forced to view numerous properties in able to be able to make an informed decision. Efficient, this is not. Not in a city of 20 million people. But it effectively makes you dependent on the agent, which is their entire industry game plan. If you were able to glean the information you wanted, their business would not exist.

This parasitic obstructionist business model, to coin a phrase, is a danger in every industry. There’s always some middle-man trying to wedge themselves into some line of business. (Think about trying to buy a ticket to see a doctor at a Chinese hospital!) Take Apple, for instance: they are famous for the vertical integration of their business model, where they “manufacture hardware, develop the software to run on the device, control the delivery of, and make money from the sale of, content through tightly bound distribution channels such as the the Apple shops, iTunes, iStore and iBooks” (Effective Business Models – Apple – #CSI). Everyone wants a piece of them, and they’ve been very successful at preventing it. With design and software done in-house and sales controlled via the closed ecosystem of their various iStores and Apple stores, Apple is a textbook example of preventing these parasitic layers coming between any of the links in their business model.

However, there was a recent attempt on Apple’s integrity that we Beijingers will recall. You probably heard about the mini-riot outside Apple’s Sanlitun store for the release of the iPhone 4S in January 2012. This, contrary to common belief, was not caused by overexcited Apple fanboys. The egg-pelting and aggression were down to disappointed scalpers paid to wait overnight to be first in line in order to prevent regular customers from buying one when they wanted. The aim of course was to subvert the logistical chain of company to consumer, so scalpers could profit from the eagerness to own the latest iPhone after the death of Steve Jobs. The bottleneck of people crushing around the store is an clear instance of process breakdown. It was an obvious attempt by a parasitic obstructionist business model to insert themselves into Apple’s logistical chain. Fortunately Apple on the release of subsequent products have reduced it by a reservation system and photo ID.

Image from AP via the WSJ

In both cases, accommodation and Apple, there is profit to be made by obstructing the free flow of trade. One depends on blocking information and access; the other relies on seizing up the commercial process. It is worth always remembering that free trade is not something that occurs naturally. It is dependent on strong institutions and strong law enforcement. In China we’re still on the way there.

 

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