Silk Road International Blog

By now we should all be convinced that anyone doing business in China better be very involved with their suppliers. But the latest news suggests that some people still haven’t learned that lesson yet. Tainted BSA badges aside, the juicier story is now stock in worthless companies.

The stock for the tech firm China Expert Technology is now, it seems completely worthless. The US investors that bought up to a 20% stake in the company and saw the value rise to $7 are now sitting on worthless paper. What happened?

It looks like they just didn’t do the due diligence necessary and/or didn’t have anyone on the ground to confirm that what the company was claiming was real—after the initial dog and pony show, things fell apart. Once the first visit was over the veneer of “US accounting” practices, a home office in Hong Kong and announcements of big provincial level contracts convinced foreign investors that this was a safe bet.

Of course, only insiders know the full story, but you can bet that none of the foreign investors stayed in China confirming orders even though they bought 20%. More specifics are available here.

What’s the take away? You’d better either be on the ground yourself or have someone who you trust be on the ground to represent you. You, as the buyer/distributor in the West will ultimately take the biggest hit in both PR and $$ for a shipment of below standard product. What’s avoiding that hit worth to you?

So whom can you trust? You need to hire a company or employee who is rewarded for accuracy and quality rather than fast turn around and cheap prices. It’s still true—you get what you pay for. Whether its stock, toys, tires, or BSA badges.

What does one trip to China do for you? Nothing. Absolutely nothing. If you are the buyer or an investor don’t forget that a tradeshow is just a show and Shanghai and Shenzhen are showcase cities—designed specifically to impress foreigners and attract FDI. That’s whey they were built and they do a damn good job in fulfilling their purpose. Further, a one-week “fact finding” tour of a facility will get you more dinners and photos than facts. The Chinese have been “entertaining” foreign gests for centuries and they know exactly what they are doing—especially if you’ve got cash to spend.

A 10-day trip to China will do nothing but overwhelm you. So don’t get all excited that China “is totally different than I thought it would be. I can’t believe it!” as we hear so many people say. Keep your wits about you, keep your camera and your wallet in your pocket, ask every question to more than one person and compare answers, come to China more than once and don’t invest anything until your harshest critic has been answered.

Tags: Business by david
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When I read a book I look for three things, entertainment value, new information and applicability to my current situation (whatever that may be).

I first read China Shakes the World maybe 6 months ago, and honestly, I left it on the plane when I was done—it was very entertaining to read but it didn’t do much for me beyond fill my flight time. Basically, I didn’t see myself pulling it off the shelf in the future and citing it or recommending it to others.

But since then it won the Business Book of the Year (Financial Time) and it got some good reviews by people that I respect so I figured that maybe I had given it a bad shake or missed some hidden nuggets of practical information. So I bought it and read it again.

My second reaction isn’t much different from my first.

I loved the stories and the travel log-like experiences. Indeed, the best parts of the book are Mr. Kynge’s writing style and the personal experiences he relates. The personal stories of individual Chinese involved in the worldwide changes are indeed fascinating too. Tales of illegal Chinese textile workers in Italy becoming factory owners in China are great, personalized versions of stories we’ve all heard. Equally interesting are the stories about oil barons, auto magnets, lawyers, politicians and activists. The human side of the “China experience” is a successful pattern for humanizing the numbers—and there are a lot of numbers here—that has been followed by many an author trying to make sense of China for the lay reader.

I like to read books about China by authors who can speak Chinese, Kynge speaks Chinese and that gives him insight into China that writers who do not are not able to grasp. Further, he’s been here a long time—and while that may not mean much in other parts of the world, in China it means that he’s witnessed history. Earth shaking history.

Kynge also collates a mess of stats into the kind of reports that make people’s head’s spin. And judging by the title of the book that was his purpose. The growth in China is astounding, amazing and truly unique in the history of the world.

But with all that praise I’m still left, after I read the book (again), wondering what to do with the stories and the numbers? Most troubling is the fact that the banking and legal data is at least three years old. Which in China Years is more like 10.

China is now shaking the world and will continue to do so, but this book will not. It should be read for all the individual stories, personal insights and Kynge’s extensive experience—it’s a very entertaining read. But it’s not all that new and it won’t help you do business in China.

Tags: Book Reviews by david
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