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Dealing with Asians is no cakewalk
Issue:
Cultural Differences:
| ASIAN
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NORTH
AMERICAN
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- Subtle
- Relationship-oriented, respect
elders
- Vertical and horizontal
integration
- Adaptable and flexible
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- Direct
- Transaction oriented
- Horizontal vision
- Bureaucratic
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DEALMAKING 101
by ANDREA
ENG
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Think you know China?
Eight things foreigners get wrong
SHANGHAI, China
- As a public service, here’s a thoroughly idiosyncratic, non-comprehensive
list of the eight most common misunderstandings about China.
 
1. China is America in the 1950s (or
Japan in the ‘80s, or Mexico in the ‘90s or ...).
Everybody loves a good historic analogy,
but China is too big, too complex and too thoroughly integrated with the rest
of the world. The country’s consumer culture is leapfrogging its own unique
path.
2. China’s public data are unreliable.
There have been tremendous strides recently
in the quality of publicly available data, especially for urban demographics.
Pay attention to the development plans of central and city governments. They
are clear and ambitious, if vague at times. I also recommend a visit to the
Shanghai Museum of Urban Planning to anyone curious about population density,
retail clusters or transportation infrastructure.
3. China’s Internet is like the rest
of the world.
As Google’s recent drama has highlighted,
China’s Internet is unique. Global big guys like eBay,
Amazon, Facebook, Twitter, Skype and, yes, Google are insignificant or
non-existent here.
Want to utilize social networks for your
brand? Spend a day learning QQ and mastering its roster of functions not seen
in the West. I have a soft spot for Douban, which acts as a sort of
user-generated index to the global library of music and film. (QQ is a popular
free instant messaging computer program in Mainland China with more than 300
million users; Douban is a web2.0 startup founded by Bo Yang to help users to
tag, share, rate, review and discover books, movies and music.)
Empowered by Douban, culturally inclined
youth are uncovering everything from punk classics to experimental Dutch
cinema, and sharing them with their friends.
4. China’s consumers are split between
urban and rural.
Technically true. But most global brands
are actually dealing with a limited part of China: the mega-urban and the
merely urban. China’s consumer market is overwhelmingly clustered in
cities—many with populations of one million or more.
Size isn’t everything. The most relevant
factor for marketers should be the city’s access to a cultural center like
Beijing or Chengdu. A mom living in a medium-size city two hours from
Guangzhou is likely to be more sophisticated about brands than her counterpart
living in the massively populated, but under-exposed, provincial capital city
Zhengzhou.
5. China’s regional differences are as
big as Europe’s.
I hear this one from very sophisticated
people, keen to show their respect for the scale and scope of China. Their
hearts are in the right place, but they overstate the case. There are
certainly regional differences, but within a moderate range. All of China
learns the same history, takes the same exams, speaks the same language (at
school at least) and watches the same news programs. Climate is one big
exception, and it does influence food, architecture and even clothing.
6. There are big generation gaps between
each decade.
Generation gaps are huge, and they crop up
more than every decade. This is a logical result of fast economic growth.
Changes in culture and technology result in wildly different formative
environments.
Today’s 25-year-olds grew up watching
glossy boy bands like Taiwan’s F4. Meanwhile, kids a mere five years younger
watched gender-bending Li Yuchun (from “Super Girl”) and other courageous
oddities of the reality TV circuit. Is it any wonder they embrace a weirdness
that baffles their elders?
7. China is rapidly Westernizing.
Without a doubt China is modernizing—just
look at all the KFCs. But can we call it Westernizing if those KFCs sell
congee for breakfast?
While there is a notable increase in
Western brands and lifestyle options, it is matched by a comparable increase
in historic Chinese culture. Witness the renewed interest in pu’er tea
collecting, learning calligraphy and the resurrection of Imperial dishes.
There is a strong argument that China is
becoming more Chinese. There’s one other often-overlooked influence: North
Asia. Japan, the world’s second biggest economy, sits off China’s shore,
and its cultural influence is at least as significant as that of the West.
Sure, 18-year-olds in urban China are wearing American Nike shoes. But
15-year-old kids are reading Japanese manga and listening to Korean pop.
8. Chinese youth are divided into
tribes.
There is a kernel of truth here, and young
people are segmenting themselves at ever-earlier ages. But these tribes look
different from their Western counterparts. In the West, we can use magazine,
music or brand affiliations as shorthand to describe a group. These don’t
quite work in China, what with print media being relatively small and the
music scene so confused by piracy.
Brand preference can be descriptive in big
cities, but in the rest of the country brand differentiation is more blurred.
So what does that leave? Celebrity preference can be useful. Choice of
hobbies, including membership in online clubs, says a lot about a person. But
there is a lot of fluidity and change.
- 2010 February 3 By
P.T. Black, Crain
News Service
P.T. Black is a partner at
Jigsaw International Ltd., a boutique lifestyle research agency in Shanghai
that looks at the direction of change in China, particularly among young
adults. This piece appeared in Advertising Age, a New York-based sister
publication of Tire Business.
China lacks talented managers and
leaders
But there's hope for
the long term as the successful ones rise and replicate
In 2006 alone, China-focused venture
capital and private equity funds raised close to US$20 billion from
investors around the world. This figure does not even include global private
equity and hedge funds such as Blackstone, in which the Chinese government
has taken a stake and which undoubtedly will invest in Chinese companies.
Indeed, US$20 billion is a startling
number for a country where the conventional forms of corporate finance -
public equity, bank debt and bonds - are woefully underdeveloped. The term
'venture capital' barely had an adequate Chinese translation 10 years ago -
'private equity' still does not have one to this day.
This anachronism - one of many in China -
manifests itself in unexpected ways. One of them is the significant shortage
of management talent and leadership relative to capital. Although it is
difficult to get a bunch of venture capitalists to agree on anything, they
all lament that 'in China there are a ton of business opportunities' and
'too much money', yet 'not enough fundable people'.
Along similar lines, according to a
recent survey by Accenture, most multinationals in China count recruiting
and retaining good people as their biggest obstacle to growth. Lack of
management skills, trustworthiness and the ability to scale are often cited.
It is ironic that, in a country of 1.3 billion, the people factor has become
the limiting factor.
To understand this mystery, one needs to
keep in mind that while these days Shanghai is a lot more interesting and
exciting in which to do business than New York City (just ask anyone who has
worked in both), capitalism in China is at best 20 years old and still very
much in its infancy.
Most Chinese people in their forties and
fifties, whose counterparts form the backbone of business management in the
West, had their education interrupted by the Cultural Revolution and
afterwards worked most of their lives in state-owned companies, where they
held 'iron rice bowls' and did as little as they could.
It was not too long ago that I had to beg
an attendant at the Shanghai Number 2 Electronics Store to show me products
safely ensconced in a cabinet behind the counter, or with humble apologies
ask waiters to pause their chatting and bring me a menu.
My sister, who is in her mid-thirties
today, is one of the lucky few who had the opportunity to be trained in
Western management skills after she graduated from college in 1992. In her
case, it was with Hewlett Packard, one of the earliest joint ventures
established by Western companies in China.
While Chinese capitalism has resulted in
many individual contributors and some good managers like my sister, its
short tenure has created very few experienced executives.
Aside from the skills and experience
factors, another issue is the use of standard business practices and ethics.
As aptly described in a plethora of China business books, more often than
not, the signing of a contract is the beginning rather than the end of
negotiation; conflicts of interest and insider trades are opportunities to
take advantage of rather than challenges to manage; and minority investor
interest is quite literally a foreign concept.
Its eventual collapse notwithstanding,
Enron would be considered a paragon of good corporate governance compared to
many of the Chinese companies listed domestically and abroad. Again, this
should hardly be surprising.
Coming from the modern business world, a
Western businessperson tends to forget that things were not always so
orderly. The robber barons got their names for a reason. Imagine the blank
stares - or worse - one would get if he or she started to mouth off about
Sarbanes-Oxley in front of the business pioneers of the Western world.
Yet if one examines the drivers behind
the people factor, it gives one pause in the short term but hope for the
long run. It is clear that many of the management and leadership issues are
a result of China's unique history and environment, and unlikely to have
quick fixes.
A Western investment firm, wild-eyed over
China's admittedly exciting business opportunities but unaware of the people
factor, is in for a rude shock - hopefully before it puts most of its money
to work.
Over the long run, just as has happened
in the West over the past century, institutions, laws and enforcement
mechanisms will be put in place to provide incentives for proper business
practices. They are good for everyone because they promote fair, more
importantly efficient, and ultimately more sustainable, growth - a goal that
the Chinese government has finally firmly set its eye on.
One can also hope that the many Chinese
managers in their twenties and thirties today will grow to become leaders
tomorrow. So far, Western companies and investors have provided most of the
training but, increasingly, the growing tip of the iceberg - successful
Chinese executives and entrepreneurs in China and abroad - have begun to set
examples and invest both their time and financial resources in teaching and
fostering leadership.
One can imagine a future where
inexpensive products will no longer be the only Chinese exports, but Chinese
leaders will become teachers and investors in other parts of the world.
- by Bo Shao SINGAPORE
BUSINESS TIMES 17 August 2007
The writer is the chairman of Novamed
Pharmaceuticals, China, and the Young Global Leader of the World Economic
Forum
MORE
ANECTDOTES:
Dealing With Planning
Ignorance
Liu Thai-Ker started his friendship with
China in the early 1980s when he was tasked to help the Fuzhou government with
the master planning of the city. This was followed by a similar request from
Xiamen. Since then, he has helped to chart 'many, many' master plans
Although a number of the master plans were
not implemented owing to various reasons, ranging from change in political
leadership to a lack of local talent, Mr Liu says that he takes comfort that
some ideas were adopted.
'If I can recognise 15 per cent of the land
use in my plan, I give the city full marks. I wish they can raise it to 70 per
cent, but this is the reality. The issue is that if they get 30 per cent or 15
per cent, isn't that better than zero? Or even minus? If they go on the wrong
track, it'll be worse, isn't it? So this is the way I console myself. But I'm
hopeful that more and more cities in China will respect the integrity of the
master plan.'
He also notes that while there is
heightened awareness about environmental issues, developers and local
authorities are having a tough time balancing green practices with the pursuit
of economic growth. The answer, he says, lies in preparing a thoughtful
long-term plan. But not every city government understands that.
'Also, I think one of the reasons Chinese
cities or even other Asian cities don't develop well is that they are more
architecture-oriented than planning-oriented. If you want to produce a
sensational piece of architecture, very easy. Just pay to get a famous
architect to do it.
'But it's just a building. It will not
change your city. So there are many cities, officials are so seduced by
sensational architecture that they think that's a solution to improve their
cities, which is wrong. Because sensational architecture, individual pieces,
they are like jewellery on a person's dress. The jewellery, no matter how
beautiful it is, if it sits on a sick person's body . . . then the jewellery
sooner or later will lose its shine anyway. They still don't yet quite
understand the relationship between planning and architecture. But this
problem is not unique to China. Even Singapore, we also have a tendency to
think that good architecture can replace good planning, which is totally
false.' - 2010 November 13
SINGAPORE
BUSINESS TIMES
Doing business in China not so easy.
It is now widely
recognised that success in China is predicated upon a cultural understanding
of the way business is done in one of the world's fastest-growing economies.
"Guanxi" or relationships are critical to this. Many are
hoping that the 'seasoned China hands' they have hired will give them this
edge and thus a competitive advantage in sourcing and closing deals.
China saps Maple Town of Canadian style
A new suburb's look was meant to evoke Canada's spirit, but the grind of
local politics crushed most concepts away
FENGJING, CHINA -- It was
touted as the first Canadian town to be built in China. There were breathless
reports that "Canadian Maple Town" would feature a slice of the
Rocky Mountains, a replica of the Northern Lights, eco-friendly Canadian
technology and even a depiction of the RCMP Musical Ride.
Today the dream has crashed into the reality of
Chinese capitalism. A handful of shrunken maples are about all that survives
of the much-vaunted scheme to build a Canadian suburb in the heartland of
China.
Almost every trace of Canada has been wiped out of
the blueprint. Instead the developers are talking vaguely about a "North
American flavour" for the planned suburb of 25,000 residents. Their
models show palm trees where the maples were once envisioned.
"We've had to make some changes,"
acknowledges Zhang Fushun, chairman of the development company at Fengjing,
about 60 kilometres southwest of Shanghai. "The overall concept is for a
North American flavour, but people understand that this includes the United
States too."
The sad fate of Maple Town is a cautionary tale for
Canadian architects who venture into Chinese territory. Early enthusiasm for
Canadian designs can be quickly sabotaged by profit-hungry Chinese developers,
who prefer the familiar habits of cheap construction and faux-foreign design.
Three years after winning a competition to design
the project, Toronto architect Lisa Bate puzzles over photos of the site.
She scarcely recognizes a massive neo-classical
bridge at the suburb's centre. Her team had planned an eco-friendly bridge of
light materials, with room for trees, bicycle lanes and pedestrian paths. Now
it is dominated by heavy Roman columns and ornaments, all built from concrete,
and the developers have decided to call it the Alexander Bridge, though nobody
seems to know why.
"It was supposed to be a suspension bridge,
very elegant, with minimal use of materials," Ms. Bate said. "But
they said it was too expensive. So, once again, they used massive amounts of
concrete. They reinterpreted it into their own vision."
The developer, Mr. Zhang, is unperturbed when a
visitor tells him that the bridge is not very Canadian in appearance.
"That's because Canada doesn't have its own culture -- it's just a
mixture of French and British," he explains airily.
Maple Town was born at the turn of the millennium
when Shanghai decided to build nine satellite towns on its outskirts. Each
would take its theme from a foreign country: Britain, Germany, Italy, Spain,
the Nordic countries -- and Canada.
Six years later, some of the projects are
progressing rapidly. Thames Town is quaint, with cobbled streets, a
fish-and-chips shop, a pub, a church, a village green, a market square
surrounded by Georgian townhouses and even a statue of Winston Churchill.
New German Town is situated near a Volkswagen plant
and a Formula One track, with homes modelled on the German city of Weimar.
Italian Town has canals inspired by Venice.
But little has happened at Maple Town, except a
gradual drift away from the original ideas. Only a few Canadian maple trees
have been planted, because they grow too slowly. Instead the developers are
growing hundreds of maples from Japan and the United States, which grow much
taller in the Chinese climate. Palm trees have been added to the display
models.
As for the replicas of the Rocky Mountains and the
RCMP Musical Ride, the developers are baffled by the question. Those ideas
were dropped so long ago that they cannot even recall them.
"We will use a Chinese approach to interpret
the Canadian style," explains Wang Hui, planning director at the Fengjing
development company.
An early intention to put Canadian cedar and other
materials into the suburb has also been largely abandoned. A sales brochure
talked of including "Inuit paintings and Indian wood sculptures"
along with statues of Emily Carr and the Group of Seven, but the developers
were unable to explain what had become of those ideas. In fact, the entire
Canadian theme has become so murky that it is almost impossible to pin down.
"We might not be importing Canadian building
materials or architectural styles, but we hope it will embody the spirit of
Canada," Mr. Zhang says vaguely.
To make matters worse, Maple Town has fallen far
behind the pace of the others. Its developers have spent $100-million (U.S.)
on roads and infrastructure, but that represents only one-fifth of the planned
budget. None of the housing has been built, except for apartments for the
3,000 residents who will be relocated to make room for the suburb.
"Things have gone sideways," said Ms.
Bate, president of Six Degrees Architecture and Design Inc., based in Toronto.
"We wanted to promote a Canadian sensibility: clean air, clean water,
nature, sustainability. You work your butt off, you work around the clock and
then the vision is not carried out."
Her original plan for Maple Town included a Canadian
state-of-the-art system of catch basins to remove sediments and oil from the
canals. But she soon discovered that her plan had been ignored. "They'd
already put in the same old crappy catch basins that they always use,"
she said.
"As an international firm, we can do the master
plan and the design development, but the working drawings have to be done by
design institutes, which are owned by governments. They go back to
construction practices that they know."
In an earlier China project, Ms. Bate designed a
sustainable building, including wind turbines and recycled water, as an
eco-friendly gateway to a resort area in Jiangxi province. That design, too,
was dumped. "Now it looks like the Palace in Monaco on steroids,"
she said.
Her firm has scrapped a plan to open a branch office
in China. "It's been very frustrating. . . . The central government wants
international competitions, sustainable design and energy efficiency. But
after you win a competition, you get dumped by the local governments.
They hire the same old guys and it ends up with no relation to the original
plan." - THE
GLOBE & MAIL 2007 Jan 10
Accelerating
Asian opportunities for B.C.
Deal-making guide through complexities of Chinese investment world
The
Chinese are coming. They’re going to continue to come, and experts say local
businesses need to know how to cut deals with them if they’re to realize the
huge Asian opportunity the Chinese present.
“The
Canadian business community and also the public, the media, even the
government have to face this reality or new trend that is likely more Chinese
investment coming to Canada,” said Kenny Zhang, a research analyst with the
Asia Pacific Foundation of Canada.
Over
the past several years, China’s juggernaut economy has generated numerous
deals for Canadian companies, many of which are Vancouver-based resource
enterprises.
Joyce Lee, a partner in
McCarthy Tetrault’s business law group, is a go-between for Chinese and
Canadian companies looking to negotiate deals.
Last
year, Lee played a role in six deals between resource companies worth more
than $1.3 billion and has worked with Wuhan Iron & Steel (Group) Corp.,
the Hanlong Group and state-owned China Investment Corp. (CIC).
While
it’s no secret that China’s hunger for natural resources appears
insatiable, Lee said Canadian companies have been slow to realize that.
“The
long and short of it,” Lee said, “is the Canadian companies have been
reluctant to deal with Chinese companies, because they’re not very used to
dealing with Chinese investors.”
She added that there are
two reasons why Canadian companies have been reluctant to catch on.
The first is that prior to
the recession, the commodities market was so strong Canadian companies had
little reason to venture abroad.
The
second reason goes back to 2005 when China Minmetals Corp. made a bid for
Canadian copper and nickel producer Noranda Inc.
The
deal fell through, and Switzerland’s Xstrata plc bought a stake in the
company.
“I
think it’s fair to say they [Chinese investors] were not as prepared as
today,” Lee said, “and they were not very used to dealing with
transactions the so-called ‘western way.’”
Chinese investors
consequently turned their attention to Australia and in Canada focused on
smaller resource deals. But that approach didn’t last long.
In
2007, Chinalco, China’s largest diversified miner, bought Peru Copper Inc.
for US$860 million.
Last year, CIC took a
$1.74 billion stake in Vancouver’s Teck Resources Ltd. (TSX:TCK.A/TCK.B).
Lee said Canadians and
Chinese have figured out how to do business together, and it’s unlikely the
rate of deals will ebb any time soon.
She
said the Chinese are involved in three types of deals with Canadian companies:
- takeovers;
- substantial
investments short of majority shareholder positions; and
joint
ventures in which Chinese companies sign off-take agreements for specific
commodities.
Apart
from the mines, they’re also very interested in seeing how successful North
American mining companies actually conduct mine development and mining
business,” Lee said.
Chinese companies have
ambitions to become world-class players in the mining sector, she said, and
that’s another reason they’re entering the Canadian resource scene.
The trick, she explained,
is for Canadian companies to figure out how deals with Chinese investors
differ from others.
“One
of the keys would be to get the two parties to understand each other.”
On
paper, the deals don’t look much different from any other merger or
acquisition, she said, but certain social and business customs must be met.
Lee
pointed out that meetings and interactions are critical to bridging cultural
gaps.
“From
a deal management perspective, I try to make sure some of the critical issues
get dealt with from Day 1 so there’s no frustration.”
That
means establishing what a deal’s timeline is and who its decision makers
are.
“You
have to understand for big state-owned companies you don’t get to see their
chairman,” said Lee. “It’s a big corporation, and therefore there are
many departments within them, and each department might have a slightly
different objective.”
She
added that every company is different, and figuring out who makes the ultimate
decision on a deal comes with experience.
Canadian
businesses should also be aware that Chinese companies sometimes work from
consensus, so there might not be a single decision maker. But
Lee said the Chinese aren’t only after minerals.
“Technology
would be another area that we’ll see some action,” she said, noting that
Chinese investment adds a huge Asian market for tech companies.
In
that case, B.C. technology firms need to make sure their intellectual property
is well protected if it’s going to be used overseas.
The
Asia Pacific Foundation’s Zhang said the Chinese are also interested in
B.C.-based biotechnology and bio-chemical companies.
“It’s
not only one particular sector that’s benefiting,” said Zhang. “It’s
the whole economy.”
And thanks to immigration,
said Lee, Vancouver has a leg up on the rest of Canada when it comes to
forging deals with Chinese investors.
“They’re
more familiar with Vancouver. Undoubtedly, the key principals of these either
state-owned companies or private companies would have friends and relatives
living in Vancouver.” -
2010
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