Advice on Doing Business in China (with Pictures!)

Shel Israel departs the United States in two weeks for his virgin trip to the People’s Republic of China, in conjunction with The China Business Network.

He’s conducted much research, including an interview yesterday with Kaiser Kuo, the Ogilvy China Group Director for Digital Strategy.

He will meet with scores of technologists, scientists, and executives. The highlight of his trip, Shel tells me, is when he presents a lecture to 800 Chinese bloggers at CNBloggerCon in the megalopolis of Guangzhou (located about two hours west of Hong Kong).

Guangzhou traffic (though not rush hour!)

I told Shel that I would help him out in preparations as best I could due to my graduate school enrollment in an elective class in May 2006 which brought me to the Land of Mao. In my last article, I included information about the Ministry of Commerce, the subject of a lecture I gave to my classmates before we, too, departed American soil.

As a follow-up to that article, I want to share with you my advice on doing business in China. I write from personal experience, having met with C-level business executives in Beijing and Shanghai who represented domestic, joint venture, and multinational corporations, including Boston Consulting Group Shanghai, Schlumberger, GF Securities, and the Shanghai Stock Exchange.

Of course, no trip to China’s major mainland cities is complete without visits to the Kingdom of Heaven and the then-future site of the Olympic Games, climbing the Great Wall of China, and walking through the Forbidden City. I also caught some Chinese opera, ate REAL Chinese food, and bartered with local merchants when products lacked state-controlled prices.

Here I am, at the Great Wall of China

When I returned from the three-week trip, I reviewed copious notes in my travel journal and recollected memories through my photos, and answered the following subjective questions comparing the United States to China as the final element to my earning an “A” grade in the class.

Note: Aside from minor editing, I haven’t changed this 2-year-old paper. I also didn’t fact-check for updated figures, though a story in yesterday’s Korea Times implies not much has changed.

I added English-language hyperlinks where appropriate.

All of the pictures are copyright Ari Herzog.

Reflect on our travels and your prior preparation. In what ways did you find doing business in China to be similar to and different from your expectations. Explain.

Aside from cursory research on company websites and/or online searches, I conducted little advance preparation for each of the companies we visited. However, from the co-requisite “Doing Business in China” class, I did learn much about China and its market-style economy from lectures by both Professor Nelson and assorted business leaders.

While I had learned the Chinese government controlled its enterprises (to the extent businesses could not operate void of government mandate or interference), I was unprepared for the extent of this control. At several companies we visited, we asked questions about operations and import-export scenarios, and their answers either were limited in response or they could not answer.

Yet, one would assume the government operating behind-the-scenes would force the same answer from different companies, but this was not so. For instance, at several company visits, either I or someone else would ask whether there was a foreseeable future in renewable energy, particularly in solar or wind power.

At Beijing Enterprises Holdings, the answer was they were in favor of such sources but it would be many years away and would require much investigation. The answer was similar at GF Securities, hearing that commodities (including renewable energy) was a strong and stable market. Schulumberger, though, said the Chinese energy future was in oil and gas, not sun and wind.

Computers sit unused during ceremony on Shanghai Stock Exchange floor

Compare and contrast your experiences in Beijing, Shanghai, and Shixiang Village.

In Beijing, the government is everywhere: I always saw the red flag and the state seal. And guards; there are guards everywhere, both official police guards and rent-a-cop guards keeping order at a store, bustling sidewalk, or pedestrian mall.

There’s also a lot of traffic; in the middle of a weekday afternoon, it took about an hour to drive 10 miles. I’d thought the ring roads solved the gridlock, but with millions of residents, not to mention business leaders and tourists, everyone piled onto the ring roads and the city streets. The traffic was full of cars, buses, taxis, bikes, and people.

I saw a lot of construction. Cement trucks traversed the city streets at all hours of day and night; I counted hundreds in days. I was constantly told this was due to the Olympics and cement was needed.

Hawkers were everywhere: historic sites, tourist destinations, city sidewalks.

Smog, too, from the pollution and nearby Gobi, was everywhere. It wasn’t until it rained that we saw blue sky.

Rice is locally grown in China’s North, and it’s eaten at the end of meals.

Erecting the Birds Nest for the 2008 Beijing Olympic Games

In Shanghai, some two hours by air away from Beijing, there is much less government. This is noticeable with less display of flags and seals. There are still guards everywhere, though this is partially to employ the millions of residents.

Taxis are everywhere; far more than in Beijing. I noticed less bikes, though, and far less cement trucks. Despite the lack of cement trucks, Shanghai is a city of cement with little green space. We walked through a few parks, but there is no “Central Park” of Shanghai. There is a lot of building construction, more than in Beijing.

Corn is grown in China’s South, yet we ate little corn but did eat rice, though the rice was at the beginning or middle of the meal, usually with soup, and never served at the meal’s end.

Shanghai Infrastructure - Wires on a Pole

Shixiang Village (in Dingxing County, Hebei Province) grows its own vegetables and fruits, and has much green space.

A village of about 1,000 citizens, it’s existed for thousands of years and life has pretty much remained the same. The infrastructure is primal; there is running water and electricity, but no sewage. We saw a public toilet that was not much more than an open-air port-a-potty.

The dead are buried in communal hills of dirt.

The roads are composed of dirt or clay, and when it rains, they are unpassable.

Few people drive cars. Many ride bikes, or walk.The oxymoron of the village is when we had a huge bus and an elder’s Audi parked on the dirt roads.

The village is far from the cities so many children never saw white people until we arrived. I taught one how to do a “high five” and showed him his picture on my digital camera after I photographed him.

The children never saw a digital camera.

Maoism is strong here. I saw Communist Party signs and a “punishment board” for people who commit acts.

Our meal was simple: rice, vegetables, and dumplings. Loads of dumplings, whether chicken, pork, veal, or lamb.

Shixiang Village children pose

Do you think that Chinese business people have a responsibility to teach foreigners about the numerous protocols for conducting business in China? Why or why not.

No, for the simple reason that Chinese business leaders have no more responsibility than any other country has to teach foreigners about their business protocols. While it’s true protocols should be disseminated, it is not the role of the local business community to send that message. Rather, the message and rules should be part of standard outreach by each government.

For instance, the U.S. Department of State has a division that works with import-export groups and publishes documents on how to conduct business overseas, whether China or elsewhere. This should be the same role of the Chinese Ministry of Commerce, not the commercial entities in China.

Wangfujing Street in Beijing

How does China view itself with regards to the rest of Asia?

This is best answered with an anecdote. In Beijing, Nick asked one of the “UIBE buddies” about China-India relations. He was told, as he later conveyed to me, that China hates India. The next day, I noticed not two blocks from the University of International Business and Economics campus was the China-India Friendship Hospital. I pointed this out to Nick and he smiled. Who knows what our Chinese peer really meant, but if China hated India, why the hospital’s name?

Shanghai views itself similar to Tokyo, more than other Asian cities. A major reason is the Tokyo Stock Market and the westernization that Tokyo, like Shanghai and other Chinese cities, has taken on.

More products are “made in China” than elsewhere in Asia, stemming predominantly from the vast resources of U.S. and British companies which have set up operations or joint ventures in China.

There is a need, though, for China (and other Asian nations) to appreciate its currency. At the financial companies we visited, there was a constant plea that the yuan appreciate. Toward the end of our Shanghai visit, the local papers indicated the yuan, compared to the U.S. Dollar, appreciated under 8 for the first time in history. Maybe times are changing.

Brilliance West Shopping Mall in Shanghai

What are your 3 most significant learnings from this experience?

First, I did not expect so many company executives to not be fluent in English. It was amazing how many times Larry or someone in-house acted as a translator, even when the official knew partial English.

I had assumed that executives of Chinese firms and joint venture firms would need to speak English to conduct business more effectively and efficiently. When I posed this question to an analyst at GF Securities, I was told, “The facts are the same. We feel things in a different way.”

Second, I observed that companies either didn’t like sharing information or assumed we knew what they were talking about.

For instance, during the meeting with Bailian Group, they spoke highly of the Brilliance West Shopping Mall, the country’s first open-air market, which was designed by Jeder Design Corp.

I looked at some classmates at this point and we all shrugged, never having heard of the firm, despite the Bailian woman saying it was a popular U.S. company.

(Postscript [from 2006]: I recently googled both the shopping center and the design firm, and got zero hits.)

At the same meeting, I asked them whether their stores operated as franchises and was told, via Larry’s translation, that it was “complex to describe.” How complex could it be to describe?

Third, there was a noticeable difference of perspective between the MBA students and the GMBA students.

Granted, there were some days in Shanghai when the GMBA students did their own thing because they had to study for some paper or exam, but there were other times when they either walked around somewhere by themselves and/or tried to invoke chaos and confusion among everyone else.

For instance, on our last night in Shanghai, some of the GMBA students wanted to eat at a Thai restaurant which they’d heard good reviews of from last year’s China group. But Larry had made a reservation at a restaurant (not knowing we all ate there the first day in Shanghai, which he wasn’t at). It took about 30 minutes of back-and-forth arguments before everyone succumbed to eat together at the restaurant. It frustrated me!

How has this experience altered your view of yourself?

I had wanted to visit China, along with other seemingly-remote places in the world, for years. But due to finances or time commitments, I could never get myself to China.

When I saw a notice last fall that Suffolk was offering a course that could feasibly take me to China, and that my financial aid would cover the cost of airfare, I leaped for joy! I knew I’d be the odd man out, as a MPA student among a sea of MBA kids, but this wouldn’t (and didn’t) prevent me from participating in whatever was necessary to enrich myself in all that China had to offer.

I suppose visiting China—and meeting a wealth of people in China—has altered myself in the sense that everything, well nearly everything, is MADE IN CHINA!

The fact I can now say I’ve been there is amazing.

I’ve been back for some two weeks, and I still run into people at the workplace or in classes who didn’t know I was in China.

When I tell them, I can see their eyes bounce, and they repeatedly ask me, “How was it?”

Uhh… “It was amazing!” I tell them, trying to capture my three weeks of journal entries, pictures, and memories into a single essence of words.

Shel, can you take me with you? Thoughts on the above? Please share with me and my readers your reactions when you visit.

And to my other readers, how does this commentary and associative photos make you feel? Do you like the general tone of my writing? This piece is very long, yes, but did it flow smoothly for you? Anything you feel like sharing with each other?

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