One Billion Customers - James McGregor [13]
Hong Kong today is the only Chinese city whose best days are behind it, but it is still the best place in the world to live as a millionaire. Taxes are low, housing and recreation are first class, lots of cops ensure social order, there is good flight access to the entire world, household help is cheap, and sophisticated financial managers are a local specialty. But Hong Kong is no longer a suitable place to headquarter a China business. Mainland Chinese today are generally better educated and have better English language skills than their counterparts in Hong Kong. Indeed, the Hong Kong government and elite seem intent on proving true the Chinese proverb, Fu Bu Guo San Dai, which means, “Wealth can’t last more than three generations.”
The Nation Family
Patten was put in his awkward position not only by his democracy proposal but by the burden of history. China was very emotional and nationalistic about recovering Hong Kong—and Macao from Portugal two years later. Regaining control of those two regions would finally erase the deep humiliation that began in the mid-1800s when Western powers forced the country to open for trade and business by carving out foreign enclaves called treaty ports.
Patten’s other transgression was to put himself between the Chinese government and the Chinese people. To the Chinese government, even the descendants of Chinese who emigrated to America, Europe, Hong Kong, Singapore, or elsewhere centuries ago still have responsibilities to the motherland. The overseas Chinese are not considered insiders, nor are they necessarily trusted, but they are deemed to be part of the tribe. In Chinese, the word “nation” is guojia, two characters that mean “nation” and “family.”
Overseas Chinese have been key to the startup side of China’s economic and business development. Hong Kong and Taiwan factory owners and managers have brought in the manufacturing expertise and modern management that has provided the base for China to become the world’s workshop over the past two decades. Hong Kong property developers built the first five-star hotels and modern housing necessary to attract foreign business, and in doing so provided local developers with a model they quickly followed and have improved upon. Overseas Chinese managers at the foreign multinationals have also often been instrumental in building huge and profitable operations in China while mentoring and training new generations of local Chinese managers. That’s the good side.
Overseas Chinese have also been largely responsible for reviving a China business culture that is at least as corrupt as that of the 1930s, which helped bring the Communist Party to power in the first place. Many of the first Hong Kong businessmen who came into China with their own companies, or as foreign multinational bosses, had no instincts for China because they grew up under a British colonial government. Many of them made blatant bribery their primary business tool. In the mid-1990s, I met a Hong Kong fishing rod manufacturer in Shandong province whose business model embodied this. He would go into a small town and give bribes to local officials to allow him to set up a fishing rod factory under the government’s umbrella. He would take them overseas a couple of times a year for shopping excursions and tourism junkets disguised as board meetings.
“I teach them how to enjoy and spend money,” he said. “But after about three years, they want to interfere in the business and take the profits for themselves.” That’s when he would pick up and move his operations to another town.
The Taiwanese often have been just as corrupt, albeit more subtle because they have better instincts for China as the result of growing up under a corrupt authoritarian Chinese government themselves. The most hopeless group has been the Singaporeans, who grew up in a nanny state and have the equivalent of a learning disability when it comes to China. Many of them