Gregor King

Doing Business in China

Doing Business in China: Body Language, Lost in Translation

We are often led to believe that the non-verbal forms of our communication are so culturally bound that they are indelible and always remain with you even after living a lengthy time in a second culture.

This is far from the truth. The culturally bound, non-verbal habits of your native culture can often be over-ridden in spite of the inborn natural predilection of cultural blueprinting.

Most often, North American and European companies wishing to expand in China will send over their local ‘new market expert’ to initiate contact with local authorities and business leaders. Equipped with the socially proper forms of introduction; the acceptable patterns for exchanging business cards; the appropriate level of gift giving along with best wishes and the encouraging advice of “Go get’um cowboy!, the poorly prepared candidate doesn’t realize the formidable task before him or her.

Rarely, the company will leap for joy, when they realize that they have a native born Mainland Chinese employee on staff and he or her is given the task of opening up the new territory in the expectation that sending back the expatriate to do the job gives the home company a great advantage.

Certainly, the ability to speak the host country’s language is a distinct and valuable advantage. But it is not the key to success by a long shot.

For example, I was recently in a series of meetings where just this sort of unhappy scenario occurred. The company was marketing a software bundle to a Beijing Company, for the burgeoning Chinese real estate market. Two of the Canadian company’s employees were native born Chinese who had immigrated to Canada over 8 and 12 years ago, respectively. There was a key Beijing resident point man who had all the connections required to introduce the Canadian company to the Beijing authorities. It should have been a reasonably easy project since all of the necessary components for successful communication were in place.

But something wasn’t going well.

The first meetings went as expected. The point man was graciously received by the hosts and the meetings started with acceptably low level representatives. Apologies were given for the absence of higher representatives. The reasons for their absence were acceptable since these introductory meetings were necessary in any event.

After two such meetings there was a stall to meet the higher decision makers. Continuing excuses and apologies were forthcoming and time went on. These circumstances can be expected and are often used as a negotiating tactic when dealing with foreigners who the Chinese regard as too eager to make deals. The strategy is meant to frustrate the foreigners and to agitate their natural impatience so as to extort concessions during final negotiations. The two native Chinese employees were aware of this tactic but were not influenced by the circumstances. Like their Canadian colleagues, having lived in the foreign influence for 8 to 12 years, in spite of their cultural blueprint, they were becoming more and more impatient.

Another meeting was finally arranged with more low level and intermediate level Beijing representatives but still the absence of the decision makers of whom apologies were again offered.

During the meeting I had the opportunity to observe everyone’s body language. Here it was helpful to understand which gestures were universal and which were culturally bound. The universal gestures, such as facial tics and eye contact should have been apparent to everyone, including the two Chinese Canadians. But they were ignored, having been overtaken by the new cultural standards they had been living under for a decade.

Finally, quite uncharacteristically, one of the Chinese Canadians shouted out his uncontained frustration and anger at the slow progress. The point man, a native Chinese, who should have been able to read the body language of his own countrymen, also shouted uncharacteristically, threatening to pull all of his financial support out of the project.

Such behavior is regarded as the most unacceptable behavior in any meeting or company in China. It causes the ‘lost face’ of both parties since one is shamed and the other is embarrassed for them. After some calming and soothing efforts by the hosts it was agreed to close the meetings for now and resume later when the decision maker could finally attend the meetings. This seemed to placate all those who had registered their vociferous complaints.

What went wrong? Why didn’t the Canadian company ever get anywhere with what was clearly a great product and one which everyone agreed could be put to good use and make a profit for everyone?

First of all the Chinese Canadians had forgotten the explicit non-verbal signs of their native cultural. They ignored the fact that the hosts, although showing outward respect for the point man were not going further than the intermediate stage which should have indicated that there was something superficial about the relationship between the point man and the hosts. He in fact had exaggerated the positive aspects of the relationship which as it happens did not run as deep as needed in these circumstances. This fact was apparent at different times. For example, the point man’s seating position in the meetings was relegated to a diminishing placement in the various meetings. If this had been noticed by the Chinese Canadians, it was misinterpreted as a sign that the hosts wanted to speak more candidly with the Canadian guests. As time went on, the hosts began to discount the comments of the point man which is very uncharacteristic This would never have happened if the point man held a prestigious place in his relationship with the Chinese hosts.

I later learned from a candid conversation with a nephew of the high ranking decision maker that the government had done business with the point man in the past but the relationship had deteriorated since. The offer of initial meetings was based on the appearance of respect in efforts to avoid unpleasantness. But the invitation was construed as a green light for the project. Also, when the two incidents of shouting occurred it should have been abundantly clear to the two Chinese Canadians that something was terribly wrong. If the relationship was solid this would never have occurred. Yet, the whole Canadian party held out for more than another month at great expense to the company, in the false hope of another meeting.

I have since witnessed several other similar meetings with English, German, American and South African companies to whom I have offered advice.

I cautioned each company, prepare your employees and representatives with knowledge that they can use when coming to do business in China. Arming them with superficial knowledge of greeting courtesies and gift giving rules just isn’t enough if you want to be successful. Teach them communication skills and especially appropriate non-verbal awareness and behavior.

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Negotiating with the Chinese

Negotiating with the Chinese: Enter the Dragon

It seems obvious, that faced with the prospect of upcoming negotiations with a Chinese company, the foreign company, would undertake some form of specialized preparation and understanding of at least the rudimentary cultural differences of their negotiating counterpart.

So not surprisingly, that is precisely what happens.

Fully equipped, the assuming foreign negotiating party, made up of the most experienced members of their negotiating teams, excitedly boards the business class area of their preferred airline, each with his or her laptop determined to make full use of the flight time to go over last minute concerns. Each has his “What-to-do” list, itemizing the most essential of symbolic cultural acknowledgements: the dark suit; business cards; an abridged English to Chinese dictionary; gifts of high expense and little thought and, of course, the absence of the most senior member of the company. He or she has been scheduled to arrive later, once the groundwork has been accomplished.

Such a recipe for failure has never been clearer. Making preparations should not be limited to packing your bags. Following are some important misconceptions:

1. Guanxi: Pick up any article on the subject and the most prominent comment you find, will be on the concept of “guanxi”. We may be led to believe that this habit of “guanxi” is a charming vestige of bygone days which still lingers as necessary behavior in modern day China. This belief would not be accurate. When we read that “guanxi” is about building relationships and friendships, westerners often conclude that once the relationship has formed and blossomed into a friendship, negotiations and following business events will go smoothly. This is a very misleading interpretation of the facts.

“Guanxi” is less a relationship of friendship than it is an exchange platform for benefits. If the westerner can continue to provide benefits which his or her Chinese partner requires, then continuing “guanxi:” is assured. One benefit deserves reciprocity in perpetuity. And this works vice versa: if your Chinese partner can no longer provide the westerner benefits then there is no reason to continue the relationship....find another partner. Here is a concrete example of the principle conveyed in the familiar phrase: “Business is Business!”

A cautionary note: don’t ever confuse building “guanxi” with buying favors. If you find your company in the position where an official (especially a government official) has indicated that a monetary contribution will get the wheels rolling, you are in for a sad surprise. Not only is the company faced with contributing to corruption, (which is another chapter) but there will be absolutely no guarantee that you will receive benefits for your contribution. If someone else comes along with a more generous contribution you move to second or third place and are soon forgotten.

2. Preparations: If you are planning a move into China, then make adequate preparations. Begin to look for an employee who is of recent (at least 8 years of residency) immigrant and speaks fluent Mandarin and who has enough western cultural experience. Hire him or her and begin to train the new employee in the complete workings of your company so that they understand the rudiments of the technical and commercial requirements. A year of training is a minimum requirement. This act will result in your most effective investment in China. And it is money well spent...worth the price of a 100 banquets with your Chinese hosts. Beware, the Chinese will have their own interpreter, probably with overseas experience and trained in detecting mendacities and deceit in verbal tones and body language.

Also be prepared to have your most senior executive (if not the CEO or President) attend the first few meetings. This is a necessary display of the level of intent of the western company and a good sign of respect. After that, the executive may give the excuse for his or her absence in future negotiation sessions by feigning having to work on financial preparations for the venture. So often, companies make the mistake of sending over experienced but relatively low-level executives to start the negotiations in the misplaced strategy of having the boss come when the negotiations get down to the “nitty-gritty.”

3. Collectivism and Individualism: The literature on the subject of negotiating with the Chinese abounds with need to recognize, that most Asian countries are culturally collective compared to many western countries, which are familiarly regarded as individualistic. In better explanations these two opposing outlooks will be characterized as “low-context” and “high-context” cultures. But still the comparison is not hard and fast.

The notion of collective behavior in the Asian culture, specifically in China, as the familiar literature suggests, is rooted in “Confucianism” where decisions are made collectively from the basic family unit to government bodies. But don’t mistake this for decisions made for the ‘common good’. Senior members of the Chinese negotiating team, individually, will be looking to see how the final agreement will personally benefit them. This notion of the ‘common good’ was certainly more a part of the Chinese culture prior to 1949, but since the Great Leap Famine....it is a very ‘every man for himself’ society. 

4. No never means no: Finally, if there is one thing you should keep in mind at all times when negotiating with the Chinese is that “NO”, never means “NO”: it simply means, “not at this time, under these conditions”. And the “NO” will not be expressed verbally; the Chinese are a polite people and avoid confrontational language. The negative aspect of the negotiating proceedings will be displayed as slow progress; missed meetings, postponements; misunderstandings; clarifications and so on, until the westerner retreats with a broken spirit and sense of frustration and failure. 

Learn to recognize these signs and change tactics or reconsider your options before proceeding.

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Fragile Mandarins in a Flat World

 Fragile Mandarins in a Flat World

 

Enough has been said about the many faults, both in style and substance of Thomas L. Friedman’s “The World is Flat.” But it is important, form this China’s perspective, the topic of this essay, wherein Friedman be taken to account for his shallow treatment of the drill down effect of price reductions, which is largely, quantitative and finite with regard to the concept of globalization. China here is an important singular market, different from others in many respects.

To illustrate: This Christmas, my son bought me some underwear. He bought seven pairs; yes, one for each day of the week. Of the seven, all current models and stock, two were made in India; three were made in China; and two were made in Thailand. What does this tell us? It clearly illustrates that the co-operation; the globalization that Friedman speaks of is largely dependent on price...which must reach a finite point. At some price point, no manufacturer will be able to go lower. That is why there is no loyalty in these three markets for the brand. But what then is left to manipulate in the market? Service? Future concessions? Packaging? Shipping? Brand loyalty (you may find brand loyalty in the consumer but not in the intermediary.)

Friedman also overlooks the psychology of the typical Chinese intermediary as well as the typical consumer in China. It is an ongoing trend that we attribute to globalization processes, that China and to some extent, outside of the service industry India and Thailand have been bent on providing low price to its customers. But how will it end?

China

The fragile mandarins in a flat world: here is where Friedman really displays his lack of research skills. The young, upwardly mobile, recently arrived or latter day millionaires are not interested in what Friedman calls ‘levelling’ or ‘flattening’ processes. (I will use Friedman’s terms here even though their inadequacy is so poignantly laid out by Matt Taibbi, New York Press, 2007.)

They do not want or need a level playing field in their own country. Certainly, such an environment is desirable in the rest of the world where they would be treated as equal opportunists, but in China they recognize the competitive elements provided by an ‘un-even’ playing field. They want the status quo, where they are treated as the favoured ones; not democracy.

  Cursed, as the privileged only child, these mandarins are ill equipped for competitive advantage.  They have been brought up to expect to instantly receive, any need or want they may have. Yet in this special social favoured class we have three sub-classes; one not envisioned by Freidman.  Most children (97%) are from ‘one-child families’. Some families, both poor and rich, have more than one child, but they pay a price. The three sub-classes are:  privileged, under-privileged and mediocre (we won’t name them middle class, because technically they are not.  What we would normally call middle class, i.e. those who can live comfortably as a result of their livelihood are in China’s case, the privileged.)

Here, the mediocre, are a very big and vast problem, representing 53.6% of the population (Annual income below 24,000 RMB, $3,285.00) (Li Peilin, head of the Finance Institute at CASS, 2007-6). Only 3% of the population regarded themselves in the privileged class and the remainder of people regarded themselves in the under-privileged class, 43.4%, a half a billion people). Oddly, the privileged class regarded themselves as moving downward in the last three years.

We may refer to this 53.6 percent as the mediocre class. Those occupations which receive diminishing rewards due to their redundancy and what may be referred to as their fungible status. And this class is a direct result of the higher education system which is ill-equipped to supply learning material or scholastic standards required to cultivate individual excellence. The concept of ‘individual excellence’ is not the same as we in the west might intuit. In China, individual excellence can only be measured by school marks, not as to quality of intelligence, which is to say, meaningless.

The needs and wants of this mediocre class, (I am reminded by a line in the movie, Amadeus, where Salieri, F. Murray Abraham, states, “It is a sin to reward the mediocre.”) cannot be regarded as similar to our natural and collective understanding of the word. Here ‘mediocre’ must include the notions of hopelessness, vulnerability and fragility. This sub-class, the mediocre, does not have the option to compete; they are incapable; the privileged class has no desire to compete and the under-privileged class has no opportunity to compete either in a flat world or any other shaped world. In fact they all prefer a round world, where they understand the forging factors of ‘them’ versus ‘us’ (or me, in this case.)

How will these Chinese sub-classes fare in a ‘flat world’? Friedman devotes his definition of ‘flat world commerce’ to goods by in large. Services, which are the rising product category in China’s new economy, will account for 70% of the GDP by 2020, which will match the international standard of developed countries. It is those in the mediocre class who will fulfill the task of providing these services and any task that can be relegated to the past by digitalization, automation or outsourcing will be lost, causing the populations of the mediocre to drop to the under-privileged classes which will swell and as noted above, face unclaimed opportunities.

The privileged class, remember, is ill-equipped to compete on individual scales as the technocrats of India are; where individuality is praised and recognized and subsequently rewarded.

At this time, China can only compete on price, and is therefore ill-prepared for a flat world end scenario. Friedman will find, that the world can only be so ‘flat’ and in the end, individual countries prefer to live in a round world where advantages are clear and only reluctantly join flat forces in attempts to survive the times. And, inexorably, times change.

 

 

 

Bashing Matt Taibbi

Bashing Matt Taibbi

By Gregor King

I know it is not popular to “Matt Bash”, especially since Mr. Taibbi is high on the ‘cool list’ as viewed from his recent television interview on The Colbert Report. Recently an article describing Barack Obama’s position relative to the Democratic pick appeared on Tiabbi’s blog The Smirking Chimp, “Obama on the Rise”.

Some things deserve comment as quickly as possible and cannot be ignored when they are read by so many, affected by so few and understood by fewer still.

Matt Tiabbi’s comments on the state of Barack Obama’s popularity and readiness for the presidency are greatly inaccurate.

There are many things which as Tiabbi points out which may transpire in sport that storey the success or failure possibilities resulting in the future of a champion. However, is this the way we pick winners in politics: by judging them on their talents, luck, and charisma or by their merits, experience and integrity?

The world of politics and sports are not parallel universes. And, even more distasteful is Tiabbi’s comparison of Obama to ‘Kennedy, Regan or ‘even’ Clinton”. Kennedy owned a political persona and had many years in public service (but Kennedy and Obama are approximately the same age approaching the Presidency); Kennedy had a lifelong preparation stage for the job; Regan occupied an ideal in the mind of movie going voters and had been the Governor of the largest state in the nation (they both exhibit this rock-star magnetism with ready smiles and home-body easiness; and Clinton had losses, negotiating sessions and law making experiences together with Gubernatorial experience before him before ever reaching where Obama finds himself today in the American collective psyche, (remember Clinton ran in 1992 a “a candidate for change and also as “the man from Hope”). After all, we not vote in an MVP but a BPP, “Best Possible President.” Regrettably, Barack Obama still has a one page resume.

To his credit, Tiabbi notes the inappropriate and infantile approvals that we can collect from the adoring public, such as “change is goood” [sic]; and “There's just something about him," rather vaguely; "Yeah, but it's good vague."

Granted, Obama is popular. But he is riding on what the American people are hopeful of; are idealizing as a likely candidate. After all, he speaks well; he looks good; bye in large he is regarded as having integrity and offers a pragmatic approach to problems. He’s shown that he can win, in Iowa; but not always as in New Hampshire...and second is not second, it’s behind Clinton, McCain and Romney and now Romney has beaten McCain in Michigan.

When tough decisions have to be made on Iran, China, Wall Street, housing and others, can we trust Obama to have the experience to make the right decision? Granted, all Presidents have their handlers, but Obama is a man who likes the front line and yet he hasn’t been tested. I’m inclined to think that whatever the advice he receives he will make his own decision and that folks, is what scares me. He appears to be a fine man, but in my opinion, he needs more time before he’s ready for this job.

I like Obama too. But my prediction is that he will fade soon. His inexperience and decision making abilities will be more and more in question and in the end, the public will choose Hilary Clinton as their Democratic candidate.

And I think Matt Tiabbi’s cool too!

 

Corruption: A look at China Now

Corruption: A look at China Now

1. Introduction:

No doubt you question why I should single out China. And you’d be right to ask. Corruption is not a new phenomenon; nor is it exclusive to certain countries. Any reader may not look any further than his own country to witness the practice in varying forms, degree and range. And if I may be permitted to make a suggestion, to those of you living in western ‘developed’ countries, start by looking at the ‘lobbying’ industry. The Corruption Perceptions Index (CPI) defines ‘corruption’ as "the abuse of entrusted power for private gain". China ranks 77^th out of 158 countries: from another perspective North America ranks fourteenth, so those of us defending our personal position may not be so defensible as we might suppose.  

Over the last generation, corruption in China has drawn as much attention as the economic reforms and progress with which it is linked. And more recently, the results of corruption in the form of quality controls has summoned even more regard from the media. But the corruption of today has many roots stretching from long ago in traditional history to today’s plain and simple greed. The status of high moral values and discreet social behaviour once practiced by most prior to 1919 has been now usurped by the high status of wealth and power.  And these dichotomies between traditions and state-society relationships have been practiced now for a very long time…time enough to become established as the status quo. Corruption is a great concern within itself but more troubling are the underlying tensions that seems to be its cause. The state has been unable to addresses these underlying problems successfully and its ability to support rapid, drastic change is undermined by social resentment. Chief among these problems is insecurity and its ever accompanying brother, greed. Most in China understand that the state will not look after them so that they must look after themselves and high return on investment rates and low risk factors promote the intangible temptation to take what you may want.

Today, China’s economic success and national credibility is threatened by this corruption as was most recently evidenced by the regrettable Tiananmen Square incident. But this is nothing to the thousands of protests carried on each day of smaller varieties but nevertheless troubling to the regime’s stability. While these reactions are concern enough, we are worried that corruption, unless checked in some fundamental way, will run out of control and worsen.

2. Reasons and Causes

There are some (Kwong et al, p 175) that while acknowledging that corruption has been part of China for 5,000 years and is unlikely to disappear entirely. The causes of the corruption of today in its rampant forms, dates from after the cultural revolution if not the time of liberation of 1949. It is suggested that after the cultural revolution higher principles representing the morality of the country, changed status and were replaced with the status of power and wealth, which in turn was made possible by corruption.

On the streets, it is said, that, “The only way to get rich in China is in the dark.” And I recently read that anything can be accomplished in China except abolishing smoking in the capital. In fact even that is possible if the kickbacks from the tobacco industry and tax collectors were not so lucrative. In fact, it is true, if the right authorities want something accomplished…anything is possible. Look at the two countries of China and Vietnam who attacked SARS in a head-on basis. This could not have been accomplished in any democratic or so called developed nation; we would have had armed protests. And this tendency towards corruption follows the food chain all the way down to  private entrepreneurs and as I have observed, even to widows and school teachers.

A recent antidote tells of a school teacher who had no connections with a prominent university but who wanted to achieve the status and stability of being a university professor, was told that the appointment would cost 100,000 RMB under the table (about 2 years salary for a professor). But the opportunities as a professor are much more lucrative than those of a lowly middle school teacher, so that the return on investment would be justifiable as 1:1, where the payout equalled 1 of year work rather than four years.

3. Risk

Lax enforcement

 

The apparently harsh penalties by the Chinese law enforcement agencies, in the form of lengthy jail terms and even execution often impress the casual outside observer. The most recent case involved the highest official in the Chinese drug department who had embezzled or received in bribes, over $1 million for overlooking poorly tested drugs, to passing, out and out fake drugs.

 

But appearances are deceiving. Despite the few high profile cases, studies show that Beijing punishes only a small number and percentage of offenders in corruption cases. For example, nearly 80 percent of the 130,000–190,000 CCP members disciplined and punished by the CCP annually since 1982 got at most a warning. Only 20 percent were expelled from the party. Less than 6 percent were criminally prosecuted. In recent years, half of those convicted of corruption received suspended sentences and did not serve any jail time. Therefore, the odds of an average corrupt official going to jail are at most 3 out of 100, making corruption a high-return, low-risk activity.

  The same 2006 study (Pei, 2007) of 3,067 corruption cases found that only half of the people accused of engaging in corruption were related to land claims and infrastructure cases. This trend can be seen in the number of local land officials who have either quit or been fired from their positions. Half of these have been sentenced and some executed. Corruption is also rampant in the activities of land transfer. Typically land is acquired through coercive means and resold at inflated prices to those offering the highest bribes. A 2005 survey by the Ministry of Land Resources found that of sixteen cities half of the transactions were illegal. They had found that between 1999 and 2005, over one million cases were transferred illegally.

China’s financial sector is similarly fraught with corruption. Kickbacks for loan approval, massive theft by insiders, misuse of funds, and large-scale fraud are routine in Chinese banks, brokerage houses, insurance companies, and rural credit cooperatives.

People involved in this type of fraud at the highest levels of government. Other areas involved are transportation, communication and Insurance industries.

 

4. Types of Corruption

Corruption takes on many forms. Many people think the Communist Party wants to end the corruption, Mr. Pei says, citing public executions and long prison sentences. The appearances, though, are deceiving. In the 1980s, Mr. Pei says, few corrupt officials stole more than one million yuan ($135,000). Now, even lowest-level officials routinely steal "tens of millions of yuans." All in all, Mr. Pei, Pie, 2007) says, corrupt government officials steal 3 per cent of the country's $13-trillion (U.S.) economy ($1.9 Billion). These crimes, he says, "represent a large transfer of wealth from the poorer to the richer, to a tiny group of elites." In fact 35% of the corruption occurs within SOEs which are owned by the PLA. The PLA also owns 70% of the companies on the China stock exchange.

Various Types of Corruption:

Judicial system: judges are paid off and innocents are punished

Police: extortion and illegal activities carried out by the police themselves

Licenses, Infrastructure and Public Utilities: companies pay a 3%-5% levies on projects they undertake.

Land Administration: misappropriation of lands, illegal transfer of land use rights.

Tax Administration: bribes to secure tax exemption; generally the farther away from Beijing, the higher the corruption through taxes

Customs Administration: the waving of import taxes. Now less likely after WTO

Public Procurement and Contracting: this is the type of bribery that extends form the very top to the bottom since there are no General Contractors who take full responsibility for the project and since there is no “pride of ownership” or anyone who takes over the building after it is finished. It is just sold to someone else who is looking no further than a profit.

Environment, Natural Resources and Extractive Industry: watch out for local officials overlooking environmental laws in spite of the potential damage.

Labour Market: the Hukou (or social registration system) restrains people not from migrating to other cities but from receiving the same benefits as permanent residents of the city. Also the fake document factories that will print up any fake document for whatever purpose. These can be printed in any language. They advertise by chalking their cell numbers on the sidewalks.

Banking: it is not uncommon to pay bribes to receive loans; banking is a SOE and therefore its corruption is directly connected to the CCP and PLA.

Nepotism: Of China’s new billionaires, about 2,900, 90% are the children of senior cadres. At the start of reforms, in 1979, Deng Xiaoping said: “Let some people get rich first.” It is now clear who he had in mind…in Qingdao, Shandong, his granddaughter owns a luxury 5 star hotel on the beach claiming to be worth 63 million dollars.

5. What to do About It?

Now that we know that we will encounter corruption when we do business in China, what do we do about it? For rest assured that you will come face to face with it. Well, there are only two roads to take: the high and the low.

We may have heard of the famous story of Texaco refusing to pay bribes so adamantly in Africa that many of its Jeeps and convoys go past borders unmolested. But ask yourself: how many companies are clamouring to get into African countries (except Chinese companies)? For the same reason that Chinese restaurants don’t improve their services…if you are not happy with the service…then move on. Someone else will walk in the door within a few minutes to take your place. At the moment, from the Chinese perspective, services don’t have to be improved…business is great!

Taking the high road in China while trying to carry on doing business, is futile. You just won’t get anywhere, but your competitors who have chosen the low road are flourishing. But by dealing with it, you can make choices. The only thing you must worry about is that you’re paying the right person.

I can’t tell you how many horror stories I’ve heard about the nice North American company who spent two years taking the wrong people to lunches and dinners. This comes from either poor experience or by trusting someone (which comes from poor experience. And herein can lie the proverbial endless cycle: how do I get experience without getting hurt…how can I avoid getting hurt without having had experience? You have to take the risk and learn fast, which leads us to another topic, who do we send to China to break the ice.

6. Management 

You are a bright, aggressive, experienced executive. You have proven your abilities on the home front by successfully opening many new outlets for your company and now you are finally getting your just rewards.

The head office has just informed you that you will be spear-heading the “China Initiative” and will be expected to open the new overseas Asian operation by the following year.

Moreover, your spouse and kids are encouraged to join you; (the Chinese, the head office has learned, respect family unity). It is such a complete surprise and future challenge that you just cannot gather it all in; and as you have just finished informing your wonderfully supportive spouse you both sit down speechless and dumbfounded at the prospect, staring at each other with mouths open. Your children are gleeful, and return their attention to the television, vaguely envisioning a kind of China wherein exists an older picturesque version of Disneyland.

“Don’t worry”, the head office informs you, “We will give you lots of training and cultural sensitivity workshops to prepare you.” More often than not, management perceives this initiative in terms of months, or one to two years. Any venture into China should be considered long term: five years minimum to work well. Of course, in some circumstances, with a joint venture partner where supply of goods is the only consideration, trade can take place relatively soon.

So often, though this is a simplified scenario, companies eager to break into the China market, send such promising, enthusiastic young, aggressive executives into the gaping maw of the huge market of China without adequately preparing either the employees or their families. It is a very costly mistake and one that can ruin the reputation and bottom line of an otherwise successful firm.

Within the next two months of preparation before departure, you have learned through the misguided efforts of your company HR department the polite way to greet the Chinese, the gift giving protocol; the business card exchange, the topic taboos and the ever important “Ni hao” (Hello) and “Xie xie” (Thank you).

Your accommodation has been approved and your official company ‘Interpreter’ will greet you at the airport. Bon Voyage! See you in Beijing.

The Chinese businessman views his Western counterpart with a curiosity that you might give an innocent or neglected child. They are kind, courteous, and exceedingly accomplished hosts, but they are very well versed in the most refined of intellectual manoeuvrings learned over a history of thousands of years. The North American penchant for the aggressive, “let’s do it” attitude, so valued in our own culture, is looked upon as hasty, emotional and ill advised behaviour. The Chinese have been learning for the past 28 years since 1979, how to deal with Westerners and now, Westerners had better learn how to deal with the Chinese businessman; and learn fast.

Language is the basis of all culture and Chinese is not a difficult language to learn to speak but if you are an executive expatriate in China you must learn the language. Of course you will have to rely on an interpreter at first, but the sooner you can speak the language the better. In any event, it makes good sense for any company looking to deal with the Chinese in the future to be training their staff on the rudiments of the language and have at least one person fluent in the language. A Chinese interpreter, though generally helpful, in difficult negotiations, cannot always either understand the nuances of the negotiation or cannot convey your precise point. And, if the interpreter himself or herself is a Mainlander, he or she will always formulate the North American message in a Chinese way, and in the process, distort your intentions. Once this is done, the Westerner may perceive progress but be quite disappointed later on as the negotiations proceed but eventually fail.

Of course you will not become fluent in the language immediately; that will take at least five years. But someone from your firm should be with you who is fluent enough to grasp and convey important points from your company’s perspective. Similarly, and more importantly, the Westerner should pay very close attention to non-verbal language, and watch the Chinese delegation as closely as the delegation will be watching you.

So often, I hear of expatriates that arrive with the best of intentions and greatest degree of integrity, leave for home, defeated in spirit and undertaking. Sometimes, the executive is making progress but the company has neglected to prepare the spouse and children for the cultural shock of China and they become unhappy and feel alienated. The poorly prepared executive is placed in the position of having to save his job or his marriage or both. And when the executive, who although not entirely successful, has made many inroads and friendships since his or her arrival, must now abandon those inroads, in which everything gained, however small, is lost.

The company either regroups and plans to send another executive out, perhaps better prepared, or abandons doing business with the Chinese on their turf.

This scenario is a real shame, since all of business is accomplished in China through relationships. Not simply the “guanxi” that is certainly required, but the friendship that goes along with the reciprocal nature of “guanxi”: the trust. This takes time, of which the Chinese are always prepared to give. Often, time, is used as a tool to force agreements which are disadvantageous to the Westerner because pressed for time, he or she doesn’t want to return home empty handed.

Such similar stories abound in corporate North American companies. I know of more than one Canadian company and many American companies who have sent their point men ahead to reconnoitre the area, as it were, and who have wasted hundreds of thousands of dollars in living and travel expenses over a year, only to learn that they had been taking the wrong people to lunch.

Asked later, by head office, the expatriates invariably exclaim that they felt that everything was going well. “The Chinese seemed to like our product or service; they introduced us to many factories and logistic chains but we never got to the stage of signing a contract.”

Welcome to China!

7. Conclusion

 China's corruption is linked both to its traditional heritage of the CCP and to its new market-mixed economy. It is currently a severe problem and one which can be envisioned as ruinous in the future. The economic system is undergoing profound change, creating enormous opportunities both legitimate and illegal. The decline of communist and pre-communist values has given way to greed and cynicism, hampering reforms through the legal system. Top down elitists plunder assets, while the new mixed class of entrepreneurial and bureaucratic elites enrich themselves and challenge the old system. These trends are producing unrest and mistrust throughout China wherein lessons are learned from observations.

 

There are reasons for serious concern. First, corruption in its most serious forms requires money, access to money, or special expertise, and thus is most likely to benefit the well-connected and newly rich (the New Mandarins). As such, it widens the income inequities among people and regions, with the majority remaining poor and feeling abused by the increasingly corrupt system. If, as it is likely, such income disparities will continue to grow, and the resulting mass discontent could threaten the stability of the social order and the legitimacy of government and the CCP. And second, corruption is seen by some intellectuals as leading China toward a kind of "anarchy...a paradise for those who have money and power." In short, corruption is making it more difficult to govern China from Beijing, and in the absence of clear alternatives to Party-state dominance this is a serious matter. This is a curious state as it mimics the traditional role of Emperor, as citizens often did not know from dynasty to dynasty who their ruler was because of poor communications.

 

Corruption may trigger a dynamic process moving China further toward rational and institutional government--or it could disrupt social progress and wipe out the remarkable economic accomplishments of the last decade. All depends upon whether the government has the capacity and the will to confront the political aspects of the corruption crisis. As noted above, much of the public is outraged about some forms of corruption, but lacks legitimate channels through which to express those grievances politically (and since 1989, is confronted with obvious evidence of the dangers of trying to do so). Other forms of corruption are more widely tolerated, but this both reflects and intensifies the current crisis of values. The result is that while corruption is one of the most serious threats to China's future, it will be very difficult to address the problem in effective and legitimate ways.

Given the tenacity of China's regime, and the resilience of its people, it is risky to predict any single outcome of this dilemma. It is clear to us, however, that the current situation, in which extensive corruption coexists with rapid growth and only limited political response, cannot continue indefinitely. Economic reforms have reached a crossroads, but where China will go next is a question for its citizens. They will take us there, but rest assured, we will all be affected.

 

Sources

Julia Kwong. Armonk (New York): M. E. Sharpe. (Studies on Contemporary China.) 1997. xv, 175 pp.

Pei, Minxin, Carnegie Endowment for International Peace, Corruption Threatens China’s Future, Policy Brief 55,  October 2007

They Came by Night

Yesterday was one of those warm Vancouver Sunday early evenings when we can proudly declare, without fear of argument, the environmental superiority of our city. While walking with friends down in Gastown, at Water St. and Carrall, we came across a mounted policewoman, which, no doubt had been dispatched as a hospitable public relations gesture. Not the RCMP variety but a Vancouver constable riding a huge and formidably beautiful beast decorated and spirited and although being ridden, seemed to have an awareness of its own importance, independence and duty. It edged and snorted its way forward in a kind of sideways motion lifting its forelegs knee high and placing them back down hard in a display of controlled power. The policewoman was visibly pleased with her mount’s exhibition.

Involuntarily, I recoiled, startled. My guests were surprised that I seemed afraid of such a marvelous and unlikely appearance of the mounted officer. And I unashamedly explained myself.

����������� About this time, over 35 years ago, I began, actually on August 7, 1971, we had a riot in these very streets during which four mounted Vancouver policemen discredited and shamed themselves, and the city in the view of many. “The Gastown Police Riots”, as they were referred to in the papers afterwards. I continued explaining that I was a naïve art school student, roaming the peripheries of the assembly of about 2,000 provocative “heads”, and entirely innocent tourists and ordinary Vancouver citizens.

����������� My guests, peered around; from left to right as if looking for some remnants of rioting, were surprised and intrigued by the basics of my story so asked me to expand the narrative. By asking me to expand the memory I took it to mean embellish and so took the opportunity of being able to offer a living history of our city. I continued the story with as much adventure and commentary as I could recall.

����������� It was a time when the police believed that smoking dope made your hair grow longer. Everyone nodded in agreement. I was a junior art school student at the time at the Vancouver School of Art and so was imminently eligible as a possible detainee, having had the obligatory long hair. I later added a moustache and beard, supposed to indicate a complete metamorphosis from� citizen to civil foe. �Almost everyone with long hair was a police target for harassment, illegal search and seizures; and the application of a rather loosely worded ‘vagrancy’ law which entitled the police immeasurable latitude in questioning and detaining anyone that they showed an interest in. But this attitude existed all across North America and what happened in the states, often became the case in local Vancouver. The crux of all the conflagration and attitude was focused on the legalization of marijuana: an innocent theme of the moment characterized by bright and explorative school age kids wanting something called ‘freedom’. It was part of the times when such social assessments were more for display than political discussion.

����������� An article printed by the Georgia Straight a prominent underground newspaper of the day advised: “…not to promote any kind of antagonism or violence, and asked those who attended the rally to give the police no justifications for arrest.” It encouraged restraint and withdrawal against any attempts by police to "manufacture a police riot." The attitude that night was just that, a quiet, orderly assembly of those for and against liberalization laws. That is until the four horsemen advanced on the crowd about 10:00 pm. Determined to transform a modest assembly into a fully developed riot.

����������� Even from a distance you could sense the powerful chests of the horses charging into the crowd. Their mouths wee open as if gasping for air and ready to physically attack. Long-haired hippies were not the only target. Innocent bystanders and tourists were caught up in this shameful historical display of force and violence. In "almost a satanic arrogance" the horsemen waded into the crowds. Horses galloped unsure of their footing down the slippery sidewalks of the refurbished streets. Pedestrians were pinned to walls and doorways and then lashed indiscriminately with heavy batons. The damage was immediate and horrific. Police control was maintained within minutes, the strategy of fear and flight having taken its toll. Mr. Sweeny, alderman at the time was quoted as saying, "They are using them [sic] like you'd use a stick to beat a dog."

����������� Afterwards was cleanup and arresting time. Anyone acting contrary to what police perceived to be uncooperative were seized and undignifyingly thrown into the back of a paddy wagon, often with the assistance of a perfunctory probe from an eagerly wielded baton. Fevers and fear ran high.

����������� We passed by a restaurant where they were distributing “The Georgia Straight”. I �explained that the paper which was the bible of so many in the late sixties and early seventies and which was proudly referred to as Vancouver’s free underground press at the time, is now albeit an all-entertainment, mostly music-focused publication. Oddly, the paper has the same publisher, Mr. Dan McLeod which is a testimonial to the obvious: that both people and times change.

����������� My guests looked around them perhaps trying to re-enact the story in their minds. We were at the exact position of the riots that took place almost 37 years ago. I laughed after reading their expressions. I agreed that it was hard to believe. The Vancouver constable moved her mount nimbly across the cobblestones and sidewalks. She was less than 30 years old so I resisted the temptation to ask her if she knew of the history of the Gastown Police Riots. I think it would have embarrassed my guests if I had asked, and may have perplexed the policewoman so I denied myself the opportunity.

Anyway, as we have established, people change and that goes for the police of today. I think it unlikely that you would be able to witness such a display of force in this day and age on such a non-violent question. The kind of insurrection in 1994 which we refer to as the Stanley Cup Riots, are a different kind of confrontation fuelled by hooliganism and alcohol.�

My guests wanted to return to Gastown the next day and take in some restaurants, all of which as I explained, were new to the area. There were new trendy sites Irish Pubs selling nothing but salt and the pepper, which are fashionable for awhile and then die off discreditably, like sudden, summer thunderstorms. I agreed to accompany them starting in the early afternoon and luckily we were again favored by one of those days. ���