One Billion Customers - James McGregor [50]
If your industry requires joint ventures for access to China, proceed cautiously. Expect that you and your partner won’t see eye to eye. Foreigners use joint ventures to learn how to do business in China and to access the China market. The Chinese will use the joint venture to learn the business. If you take those motivations as inevitable, then you can structure the business for peaceful coexistence. Get a clear majority ownership and management control, especially in personnel and finance. If you must settle on fifty-fifty or a minority stake, prepare for an adventure that will consume enormous amounts of management time and make your attorneys rich. There are some useful tricks. It is common for foreign companies to hold back crucial parts or technology from a joint venture in China. The company headquarters then acts as a third-party supplier to the joint venture and overcharges for the item. In this way, headquarters can book decent profits from its money-losing China operation. That is a nice Band-Aid, but hardly a business plan.
Companies that do joint ventures in which the government allows only a minority interest, such as Morgan Stanley, must have a larger agenda. If a joint venture is the only way a company can break into the China market, it may be worth doing as long as you realize it will be a learning experience. More often than not, these ventures blow up. Some companies sit back and wait for policy changes that will give them full control of their China joint venture. They enjoy watching those who got to China first digging themselves out of the hole.
Austin Koenen’s success at CICC was short-lived but significant. In a perfect world, the manager of your China operations would speak and read Chinese, understand Chinese culture and history, enjoy strong support at headquarters, be steeped in the corporate culture and ethical standards, and have significant industry and management expertise. Such people are rare. The good news is that it is even more important for your China manager to be a true leader, a true expert, and a tough-minded mentor. Chinese people are eager to learn, and they learn very fast. They want to be led, but they will only follow and respect leaders who have the skills and intelligence to deserve it. Show Chinese employees that they have a path to top management. Build systems that put your Chinese and expatriate executives on equal footing. Too often, the Chinese side assigns its best and brightest to the joint venture while the foreign partner picks people based on their willingness to live in China, which often brings inexperienced foreign managers or deadwood pushed out of headquarters. Send in your most creative and driven entrepreneurs, not your risk-adverse corporate bureaucrats.
The real lesson to be drawn from Austin Koenen is that genuine sincerity goes a long way in China. One of his former Morgan Stanley colleagues put it this way: “Austin’s approach was that the way to succeed in China is to submerge your ego, be secure in yourself and your position, be prepared to be a coach rather than a boss. The successful people in China are the ones who can attract, train, and retain senior Chinese employees. These people will walk through a wall for you if you help them. But if you fuck them, they will fuck you three times.”
That colorful quote is the perfect lead-in to discuss Fang Fenglei’s tenure at CICC. The distrust between the China Construction Bank contingent and the Morgan Stanley people in CICC started right at the top and trickled down through the entire organization. Once somebody became CEO of the joint venture, they were distrusted by both sides. The Chinese considered them a Morgan Stanley spy and Morgan Stanley’s Hong Kong office considered them a competitor. It was easy for the Chinese to drive the CEO