One Billion Customers - James McGregor [53]
The sad fact is that the Chinese system today is almost incompatible with honesty. Certainly, there are upright and honorable government officials who try to follow the government’s dictates of maintaining selfless socialist ways. The government’s anticorruption campaigns like the one detailed in this chapter are not cynical exercises, but China has a system of checks and no balances. The party wants to root out corruption at the same time that it allows the families of the ruling elite to accumulate assets so they can remain the ruling elite in a country dominated by commerce. The Communist Party also wants to employ laws and the courts to prosecute offenders while keeping the party’s ruling elite above the law unless their behavior or party politics necessitate making an example of them. In short, if you have the right pedigree, building assets quietly is quietly accepted. The result is an unspoken policy of “don’t ask, don’t tell.”
Everywhere one looks in China there are state-enterprise bosses and government officials sporting Armani suits, driving Mercedes or Audi luxury cars, and living in apartment buildings called Park Avenue, Palm Springs, or Beverly Hills. They golf at private clubs that charge $150 a round. Many of them earn little more than $1,000 a month, but nobody asks about their assets and nobody tells. If somebody does, there is institutional impetus to bury the accusations because almost everybody is at least a little bit dirty. China has basically returned to the traditional symbiotic relationship in which merchants are beholden to officials and officials are dependent on merchants. To do business, one needs a constantly changing array of approvals, licenses, and favors from government officials. To accumulate assets for retirement and provide for the future of their family, government officials cultivate businesspeople who can help them.
Lai is like most Chinese peasant entrepreneurs. They aren’t complicated people. They didn’t grow up wondering whether they should be a doctor, fireman, or attorney. They grew up with too little food to eat. Ill-educated, coarse, and hyperactive, they are eternally optimistic. The future will certainly be better than the impoverished past as long as they keep scrambling for the next opportunity. And they know opportunities depend on cultivating the people in power. China has a system of organized dependency. It is your personal relationships that open opportunities and get things done. With many layers of bureaucracy and personal interests to deal with, China is not a place where individuals function alone.
As a result, the whole pattern of business relationships in China is different than in the West. Your network of family and personal relationships are more important than the rules of the road. Your network keeps you secure in the absence of a fair and unbiased legal system. Lai Changxing offers an illuminating view into this system. He took good care of the officials whose help he needed. He invested early and often in developing friendships with fast-rising government officials. Personal relationships were his company’s core asset. And when his network unraveled, he fell far and fast.
Lai’s rise and fall is instructive for anybody doing business in China. Dealing with China’s pervasive corruption is a vexing problem for foreign businesses in China. Corruption can extend from the top of a company right through its workforce and out to officials at almost every level of government. Secretaries take kickbacks from travel agents when buying airplane tickets. Salesmen pay kickbacks to win orders. It isn’t difficult for the average