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By Root 5430 0

for foreign governments and companies set themselves out as having special wisdom about China and were paid well for their expertise. But as many of those foreign governments and companies were to discover, Hong Kong Chinese for most of the first two decades of China’s opening were often clueless about, and culturally incompatible in, most of China. Hong Kong managers did well in neighboring Guangdong province because they share the Cantonese language and distinctive Cantonese cultural behaviors, which come across as crude, loud, and arrogant to many Chinese. And despite setting themselves up as experts, Hong Kong Chinese generally had few instincts for China because they grew up under a British colonial system.

As Wadsworth negotiated with Wang, Morgan Stanley’s Hong Kong–based staffers grew increasingly worried about their very comfortable and highly lucrative jobs. They launched a frenzied whispering campaign to undercut him and the deal. Their bosses back in New York regularly were told how risky the deal was and how it would jeopardize the company’s business in China. Why risk missing our numbers, they were told—and, not coincidentally, our huge bonuses—by getting in bed with a Chinese bank? Everybody knows how corrupt and unscrupulous they are. The whispering campaign wasn’t enough to stop the deal. Ultimately the senior partners, pressed hard by Mack, gave Wadsworth the go-ahead. But Morgan Stanley’s Hong Kong office wouldn’t be part of the CICC venture.

Rules and Reality

Setting up China International Capital Corporation took much longer than Wadsworth had ever anticipated. But when it finally won the approval of China’s government and opened its doors for business on June 25, 1995, it still seemed to Wadsworth that China was the next big thing and that Morgan Stanley had one-upped all its competitors. Cash-hungry state businesses were continually pressing the Chinese government for more capital. More than three hundred companies were listed on China’s two approved stock markets, in Shenzhen and Shanghai. After tentative first steps in the early 1990s to make shares of government-owned companies available to foreign investors through listings on the Hong Kong market, the government was stepping up the pace of approvals for companies to issue shares to foreigners. Morgan Stanley’s competitors in Hong Kong were throwing around million-dollar salaries to hire “princelings,” the sons and daughters of China’s Communist party aristocracy, in the hopes that they could win some of the underwritings. But they didn’t have what Wadsworth had: a partnership with one of China’s major banks.

The first inkling that the laboriously drawn contract between China Construction Bank and Morgan Stanley wouldn’t be rigidly enforced came early on as the joint venture hired staff. Wadsworth wanted the best talent he could find, a mix of experienced Morgan Stanley bankers and younger Western-educated Mainland Chinese who sported degrees from Harvard and Wharton, who spoke perfect English, and who had an understanding of Western finance and polished personal manners. But Morgan Stanley bankers making millions of dollars in New York weren’t about to leave for a risky undertaking in a developing country run by Communists. Only eight Morgan Stanley employees joined the CICC staff. Edwin Lim, whom Wadsworth had named as the venture’s first CEO, had much more success assembling a group of impressive mainlanders who were World Bank veterans.

But even as Wadsworth was vetting potential hires, he began noticing new Chinese faces turning up in CICC’s offices. He knew he hadn’t been introduced to them, hadn’t seen their résumés, and in fact didn’t even know their names or what they were doing there. They just appeared and began working. Tang Shisheng, the director of human resources who approved all new hires, was brought over from Construction Bank by Wang Qishan without consulting Morgan Stanley. Edwin Lim himself had taken Wadsworth over to the China World Hotel to meet the man that Wang Qishan had tapped as the top Chinese deal maker, Fang