One Billion Customers - James McGregor [51]
After leaving CICC, Fang held a few investment banking positions before creating his own investment bank and establishing a new securities firm to do a joint-venture deal with his old friends at Goldman Sachs. Goldman, which loaned $100 million to Fang to start his business, is said to have an option to buy his stake in the firm if rules change to allow foreign ownership. The arrangement is aimed at giving Goldman effective control of Goldman Sachs China without violating China’s securities laws.
Fang has come a long way since Jack Wadsworth thought he looked like someone’s driver. He wears designer labels and does much of his work on the golf course. He speaks highly of Jack Wadsworth and many other Morgan Stanley executives.
“Morgan Stanley never did understand me,” Fang told me. “This was a learning experience for them. They didn’t expect the Chinese to learn so fast. They expected it to take ten years for CICC to grow up.”
The Little Red Book of Business
Avoid joint ventures with government entities unless you have no choice. Then understand that this partnership is about China obtaining your technology, know-how, and capital while maintaining Chinese control.
In a government joint venture, your partner’s political power can easily trump even a significant majority equity share.
If China requires that you joint venture, get a majority stake, control the board, and install your own CEO, CFO, and HR director.
If you don’t trust your CFO like your mother, give your mother the job.
The position of HR chief in China is much more powerful than in the West because those who are hired often feel personally indebted.
Don’t suffer from double vision. Make sure that your vision for the joint company is compatible with your Chinese partner’s vision.
Expect that the relationship with your Chinese government partner will, at best, amount to “peaceful coexistence.”
Never trust a Chinese feasibility study. It will be aimed at attracting your interest, not defining the real opportunity. Do your own study.
You can’t do too much due diligence on prospective partners. Understanding your partner’s political and family connections is essential. Forget “face,” get the facts.
Start with harmony at home. Headquarters politics kill as many joint ventures as do disagreements with the Chinese partner.
Contract details matter less than the personal relationships developed in negotiations. The person who will run the business should negotiate the contract.
Stress respect and equality with your Chinese partners and employees. Insults and slights are never forgotten, and retribution is a certainty.
Place both your expatriate and Chinese executives on an equal footing.
Fairness, honesty, and strong personal relationships will overcome inevitable differences.
Chinese employees are looking for leaders. Choose capable and strong-minded mentors, not dictators or risk-averse bureaucrats, to run your China business.
Eliminate revolving doors in the executive suite. Choose expatriate managers who have a deep interest in China, and keep them in place for an extended period.
Roll up your sleeves. There are no passive investments in China. Expect that revenue and profits will not justify the high-level management time required for the first several years.
Don’t hire the party secretary’s kid. Those political connections can also be turned against you and spoil your corporate culture. If you need such help, consulting contracts with time limits are best.
Don’t mistake language ability with business or management competence. The savviest and smartest Chinese managers often don’t speak