One Billion Customers - James McGregor [64]
What This Means for You
While this is a dark tale, and China still has many, many dark corners, this episode occurred in the 1985–95 “smash-and-grab” decade when people like Lai’s nemesis Zhu Niuniu got themselves into the middle of government deals and made piles of money. Many of these ill-educated but powerful slugs and thugs of the system are now retired, enjoying their luxury cars, countryside villas, multiple mistresses, and focusing on lowering their golf handicaps.
With the spectacular rise of private Chinese companies, often funded by venture capital or stock market listings, the business environment is more transparent and marginally more law-abiding. But China still doesn’t pay civil servants enough to expect honesty, and the government workforce is so vast that to hike salaries to keep up with the private sector could bankrupt the government. Young people today, both in government and the private sector, are also aware that they are at the tail end of the Chinese gold rush, so many are eager to feast on the “emperor’s grain” while they have the chance.
How does this environment affect your company in China, and how do you deal with it without going broke or going to jail? As a foreign company in China you are in the same boat as Chinese companies: you depend on approvals and favors from officials in order to conduct business, and you sell and distribute your product into a system that is lubricated by graft. The practices I have seen employed by foreign companies in China can be categorized as good, bad, or ugly.
Let’s start with the good. Do not succumb to the notion that all Chinese people are corrupt and the system requires corrupt behavior. There are many companies that insist on strict ethical standards and develop higher-level methods and relationships to survive in China. Large multinationals can operate above the muck because their deals are often very large, very visible, and they are interacting with senior government and party officials. They often win business in China as they would anywhere else in the world by selling top-quality products that China needs and bringing in state-of-the-art manufacturing capabilities and know-how. While operating in China, these companies try to focus on helping their Chinese partners, suppliers, and customers become more sophisticated and international.
In the 1980s and 1990s, it became widespread practice, considered ethical and acceptable, to arrange overseas tours for Chinese business and government counterparts, mixing facility tours, business seminars, and training courses with generous opportunities for tourism and relaxation. Many officials and state-enterprise managers don’t have the money or the permission to travel overseas for learning or tourism on their own, so this formula is still effective today. In the late 1980s and early 1990s, AT&T essentially trained the hierarchy of China’s telecom bureaucracy and engendered lots of goodwill along the way. It is important to have company officials accompany these delegations, from start to finish, because the true personal friendships developed on these trips are invaluable.
Many of your Chinese business counterparts these days are well funded and well traveled, so free trips and business tours have little allure. But these individuals are focused on building internationally competitive companies. Exchange programs in which Chinese business partners work temporarily in a series of headquarters departments or home-country manufacturing operations are very effective. Equally useful are high-level training opportunities. Perhaps the best example of this is General Electric, which invites senior executives from Chinese partners, suppliers, and customers to attend ten-day management courses with simultaneous Chinese translation at GE’s highly regarded executive training facility in upstate