Is this really news? It’s not new!
There is a fine between news that caters to the LCD and just a waste of paper. The headlines on this morning’s Drudge Report cross that line.
Seriously, how is this news? Is this really cause for “shock and dismay,” Senator Brownback? Has no one heard of the Great Firewall of China? Did anyone really believe that individual rights and freedoms were going to trump security and control in 2008 China? Even money, the true Chinese language, is losing out to the twin aces of national security and continued government control. Lest anyone be duped into thinking that One World One Dream really is the goal let me set the record straight: The 0lympics are for DOMESTIC consumption—meaning they need to play well on national Chinese TV. No protests, no disruptions, no problems. They won’t be “green” or improve rights to make the West happy or even make money. At this point they just need to be less embarrassing than the torch run.
UPDATE—even as I write this more news comes out about backroom deals to keep Chinese security despite the public promises made.
What’s even less news worthy is that Zhang Zhiyi (beautiful, yes; political consultant, no) can’t believe that people are critical of Beijing’s 0lympic tactics. Two very plausible reasons for her reaction. First she’s smart. She knows that more than one actor/actress/athlete has had their career cut short by knocking the political standards of the mainland. Second, she doesn’t think that there is really much wrong with what’s happening in China. There are very few Chinese (few is relative, of course) that complain about side effects of the economic growth that China still enjoys. Even fewer that are sympathetic to the “ungrateful T!betans” or believe that the Internet is really censored.
So if it’s not news, why give them more space here? Because they illustrate a couple of key points that are just as true in politics as in business. First, what is written on paper and what actually happens in real life can be very different. Second, China will out-wait you until you have no choice but to take what is offered. Third, you can buy anything you need in China but even after paying for the moon, sometimes politics will even top your money. Fourth, unless you are buying every month, year in and year out, you are less important to your supplier than you think you are.
First, paper vs. reality.
As if the IOC’s public agreement and now public backroom deals were not enough to convince you that this is how business is often done, I’ll give you two examples of cases we’ve seen in projects we’ve been asked to help resolve.
First, foreign company makes contract and PO with Chinese supplier. Quality is not up to specified standard and foreign company indicates problems and requests round two of samples. Round two are still not up to snuff and the foreign company questions the ability of the supplier to do it themselves and offers to come to the factory and help with the sample production to teach the factory how to do what is wanted. Factory not only says no thanks, but also tells the foreign company “your standards are too high. You can take the samples and production as they are or cancel the order.” By the way, if the order is cancelled the foreign company won’t get the money paid for molds or the 30% deposit back. Court is certainly an option—but at what cost. Since this project was under $50,000 it wasn’t worth it go to court. So the foreign company was stuck with the choice: do we accept lower quality or lose $20K and just move on? They moved on.
Second, foreign company sends a small ($20K) PO to a Chinese supplier and pays a deposit. The PO calls for specific standards and the factory agrees to the PO standards (signs and stamps the PO). From the very beginning standards are not met. PO standards are discussed with the factory and they really seem to have no interest at all in the paperwork or the standards. Either the samples are good enough or they are not and if they are not then tough luck!
When amounts are too small to go to court over or timing is too tight to delay any longer foreign companies are forced to accept lower standard or pull out of the deal. We are asked to step into deals like this at least a couple of times a month.
Second, the Iron Ass
I’m not sure where the term came from, but it’s true. Chinese can out-wait you—so develop an Iron Ass, or deal with the consequences of quick (relative) decisions. China will wait you out until you have no other choice but to take the product offered or lose money. This is classic negotiations strategy that is used all the time in China.
Chinese factories know that most businessmen are here on 30/60 day visas and can’t wait more than a week to sign deals because they have to get projects and molds started before they are scheduled to fly home. This is a huge advantage for the Chinese suppliers. If the end customer is Wal-Mart, for example, the delivery day that must be meet can be missed only by hours—not days and certainly not weeks. Christmas season, another example, in the US means that product has to ship before September or it’s too late. The Chinese know this and will use it, as any smart negotiator would. If it’s the choice between, say colors not being exactly correct, and you losing your place in the Wal-Mart distribution queues, which one will you opt for? That’s right. And they know it.
The Olympics are similar. What is anyone going to do about censorship now? What could anyone really do about right violations 6 months to a year ago? Nothing outside of moving the games to somewhere else, which we all know wasn’t going to happen. So public hand wringing and/or support until undeniable evidence is proffered is all that can be done. Similarly, you can whine and complain until you’re blue in the face, but if you are not here to do anything about the problem yourself, or if you are here but are reliant on a single factory or individual to perform (with no consequences if he does not) a task that he or his superiors don’t want or don’t care about, you’re in trouble.
Third, Money or Political Connections?
So what’s more important money or connections? I’d suggest following the law. Yea, you may get delays. It may cost you more than “other people are paying” and it may be a nightmare to negotiate exactly what “the law” actually is, but you’ll always be safe when things hit the fan. And they will.
A couple of examples. Buying shipping documents in China has been pretty much matter of fact until this last year. These meant that shipping could be done cheaply, but not legally, if you knew who to talk with. The problems came when China Customs started enforcing the existing laws after the toy scandals of last year. Now the same products cost more to export/ship because you have to do it the “right” way. We know of one supplier that had an entire warehouse (multiple paid orders) of electric bikes that could not be shipped due to new enforcement of existing regulations. So politics triumphed money—and almost always will.
But the political wind changes in China are relatively rare (really) and are usually well announced. The problems come when provinces and cities are left to interpret the commands from Beijing. This results in, for example, Guangdong province requiring a special type of photo for residence permits but other provinces accepting regular passport style shots.
Individual connections can be really helpful but can leave you stranded too. You should certainly know who the people that affect your shipments are. And great networks of associates and friends can never hurt. But don’t rely on your network connections to do for you the work that you should be doing through regular administrative channels, just like everyone else.
Fourth, Who is This About? It’s About ME.
That’s right it’s all about me. And in China that “me” is not you. The Olympics are for domestic consumption—what’s most important is how the government looks to it’s own people not necessarily how the world sees China. For proof, look at the recent visa situation (e.g. suspension of all business visas till September) and the resultant loss of business (money) as foreign companies move out of China to SEA to guarantee that they can ship in time for Christmas.
This is often the case with Chinese factories too. Even if you are the largest client of any give factory, your current status as top dog is temporary and your supplier knows this. Product life-cycles are short, often no more than 1year, and that means that while you may be throwing cash around now, it will most likely be gone next year.
I have to admit, that as a “middleman” working with Western buyers and Asian Suppliers, I’m often shocked at the self-important attitude that a $50K project gives Westerners. I’ve heard more times than I can count “Fine! If they don’t want my money, I’ll go somewhere else.” They do want your money, but not the attitude that accompanies it.
You have the right to demand everything you contracted for. No argument there. But you must also understand that you are not the only client (and usually not the biggest). In the West that may not matter, but here it does. Regular clients, big projects and projects from the owner’s “friends” will take precedence. A couple of examples.
We were working with a supplier on a project that was more than $200K. In the middle of the project production just stopped. People were pulled from packaging even though we were an “A” level client (one of the 10 biggest for that factory for the previous year). But we were nothing compared to a half million-dollar book deal from Euro Disney. We had to fight and argue and beg (and swear a lot) just to get a minimal amount of work done. Ultimately we had the factory move the project to a sub supplier of theirs.
Example number two. We were working with a factory just this last May when they informed us that our re-orders would be postponed until July or later because their factory had been selected to do some 0lympic projects. The orders were NOT as big as ours but that didn’t matter. This was a contract from the government and it was national pride at stake.
Again, this isn’t new and it’s certainly not news. But it does need to be shared, in context, so that people know what to expect. And what is that? Expect to get good quality product from China. Expect to get good prices too. Expect to have to spend more time (and probably money up front) to get it and expect to have to be involved in much more of the process than you may be used to.