Read very very carefully

Sometimes the details that really kill you are not in the printed text but in the white spaces–what’s not said.  Here are four examples of how careful reading gives a completely different story than what was originally reported.

1. Retail sales are NOT good in China. Unless, of course, you count food, services, gas and auto loans sales—which China does count and much of the rest of the world does NOT.

***Quick Monday Morning update.  The iPhone isn’t selling well (subscription required). Really?  No kidding?  Well let’s think about this for about 2 seconds.  1. It’s relatively old (I bought mine in China more than a year ago). Chinese are just as up-to-date as the West in terms of brands/fashion, maybe more so so why buy now?  2. It’s expensive and retail sales are not good in China (no money for new toys here either).  3. Bonuses are paid in Feb–people will (maybe) have extra cash in 4+ months, not in October.

If you want to know if this will be successful in China, wait for the next post CNY software or hardware update and then look at the numbers again.

2. The Chinese market is HUGE. Unless, of course, none of the people that you’re marketing to spend any money.

“Statistics show that there are more than 300 million basketball fans in China, surpassing the entire U.S. population…”

“Despite its promise, the income earned from the China market is estimated to be less than $50 million, far less than the $3.5 billion earned domestically in the United States.”

Haven’t seen many of those “China will lead the world out of recession” articles in the last 6 months.  Hmmm….

3. High context vs low context. I was reminded of this last week in a heated negotiation over some details that were included in a Chinese contract (translate originally from English).  The sticking point wasn’t what was said but about who was responsible for understanding the meaning of specific professional terms in the contract.

Chinese is a high context language–meaning you need to understand what’s going on culturally and “behind the curtain” to get the full picture.  If that wasn’t hard enough in a language as, well, as foreign as Chinese is to most Western European language-speakers the burden of learning and (correctly) applying all this context is up to the LISTENER not the speaker.  In English, a low context language (specific words that don’t need as much context), it is the responsibility of the SPEAKER to make sure that his message is clear and appropriate to the audience.  Not so in China.

This is specifically why contracts in English are the final word (literally) and in China they are just a starting point for further negotiations.  There is no way that a Chinese document can detail all the spec’s of any given items within a significantly larger context being understood in different ways by both parties.  Add to this the fact that Chinese does not add new characters to it’s language nearly as fast (hundreds a year, mostly unofficially) as English does (officially hundreds of thousands each year) and you understand why detailed contracts are as foreign to Chinese business as Chinese characters are to most Americans.

In our case the factory claimed they didn’t understand our use of the wording–we said they shouldn’t have signed a contract they didn’t understand.  They didn’t disagree but they didn’t admit any fault either.  Fortunately for us, there were two sections in dispute and the other one was significantly more expensive for the factory–so we were able to make a trade and get the problems fixed for basically what we had originally agreed to.  Like I’ve said numerous times before, sometimes the best solution is being happy to pay more for what you originally contracted for.

4. Know where you’re going before you start the trip. This is an older (Sept) piece that I never posted, but the question came up a couple times in the Global Sources show last week so I’ve resurrected it (don’t kill me, it’s helpful if not exactly topical).

I’ve written before about concept of China’s interstate commerce laws making the country more like a loose confederate of countries rather than a united country.  Here’s is a new take from the WSJ.

This is important for foreigners coming to understand before they get here for two reasons.  First, if you’re into general manufacturing or sourcing or in need of multiple products than your location will be different than if you’re doing finance or logistics or investment.  If you’re setting up an office, you need to know where you want to be in relation to your suppliers or distributors.  If you’re planning on marketing within China you must know where your market and DC’s are before you’ll know where you want to be.

Second, if you are doing research into living conditions of Chinese cities I’m convinced that maybe the single worst thing you can do is read about those cities online.  Foreigner posts and government sponsored info will typically give you only the highlights and lowlights–not what you’ll have to deal with on a daily basis.  You really need to see these places for yourself.  I suggest that you stay for a week and “try it on, if you can.  Oh yea, and your spouse better be included in that discussion or you’ll be looking at a divorce lawyer faster than you can say “Chongqing, what a dump!” (This was the lead line for the Lonely Planet’s chapter on Chongqing when I first moved there in 1995.)

I got two or three emails a month from people asking me where they should locate and my response is always the same: “Where are your main suppliers/partners/DC’s?  That’s where you should locate.”  One guy from London was doing significant business with a supplier in Chongqing and wanting to know what I thought about him relocating to Beijing, Shanghai or Chengdu as he didn’t think that Chonqing was a good place for his family.

Now having lived in Chongqing before I agree that Chongqing may indeed not be good for you or for your family.  But it’s not like Beijing or Shanghai or Chengdu are any cleaner or safer.  And being in a city that is not convenient for your business interests means that you’re going to be on the road a lot—which isn’t good for the family either.  My personal experience is that being gone on business all the time is worse for the family than a couple years of pollution and inconvenience.

My basic recommendation, no matter if you’re coming here for a month or a year or a decade, is to do some research before you get here but actually visit the potential cities to determine where the best place for you should be.  When I moved to China the second time I went to Guangzhou, Shuzhou, Shanghai, Ningbo, Hong Kong, Bangkok and Shenzhen to visit suppliers and to check out possible relocation options.  We determined that, based on the location of a majority of our factories, transportation options, living conditions and costs, that Shenzhen was the best bet for us (for our company) and then made things work for the family.  7 years later this is still true–we do 70% of our business in Guangdong province, about 20% in other provinces and 10% in Southeast Asia.

2 Responses to “Read very very carefully”

  1. Another excellent post, as usual. I think that most western people have difficulty in grasping the reality of the Chinese people’s capacity to save. They therefore have difficulty grasping the fact that there is not a domestic economy in China such as there is in the west.

  2. I have only just discovered this blog as someone who is a Supply Chain Management Professional and has a personal interest in China.

    To add a post-script to Marcus’ post above and to add some context to your statement: “The Chinese market is HUGE. Unless, of course, none of the people that you’re marketing to spend any money.”, the [Chinese] population is c1.2-1.4b, and the GDP per head is $2,430 (source: The Economist Pocket World in Figures 2010 Edition).

    I’ve heard time and time again (although no source to quote) that the average wage is c2,000 yuan per month. Roughly £200 p/m.

    Moving on to the vexed question of where to live, it’s almost a no-brainer as it will all in likelihood be one of the Big Four: Beijing, Shanghai, Guangzhou or Shenzhen. That said, I’d absolutely agree that if one hasn’t experienced China before, then it’s an a no-brainer that one has to visit to determine if one can live their or not i.e. one’s family.

    My personal experience? I loathe Shenzhen. It has two redeeming features: (1) job opportunities, (2) next to Hong Kong. Sadly, I’ve resigned myself that I may need to live / work in Shenzhen for SCM opportunities – as well as confirming your opinion that researching cities on-line leads to “lowlights” by foreigners 😉

    Ideally, I’d like to find opportunities in Kunming where I’ve lived / studied. Realistically, one of the Big Four. At least it won’t be Taiyuan 😉