Silk Road International Blog

I apologize for not posting for a while.  I was completing a year-long goal of losing 50lbs and running a triathlon, the Laguna Phuket Triathlon, this last week.  I have never been so proud of 618th place in my life!

I’ve also been incredible busy–I’m writing this from Vietnam. 5 countries in the last week and the contrast in national “personalities” is just striking–I’m literally overlooking a huge street party in HCM city right now.  Vietnam just won the Asian Games football gold.  Thailand was a vacation (whether we wanted it or not) and China is 24/7 business–we were gone for only a week and came back to a new building that had previously just been cement, with a totally new glass face.  Taiwan seems more and more depressing each time I go and Hong Kong is still amazing.   And as we’re heading back to the US for Christmas (country #6 in 10 days), this will be the last post of the year too–other than the annual year-end review of the most popular posts.

Thanks for reading and commenting.  Merry Christmas and Happy New Year.

At the last Global Sources show in Hong Kong I was asked after my presentation: “So is there anything else that you think we (people new to business in China) should know?”  I answered, “Yea, tons!  Do you have a year?”

Here’s the longer answer to that question.  These are my suggestions based on the books that I’ve read over the last few years.  These are all books that I liked and found to be of value, or at least to be of interest.  I tried to focus the list and limit the qtty to what I expected is a manageable amount of reading for someone who is busy moving to another country.

Of course, this list is in no way exhaustive.  Feel free to add to it.

I’ve divided the suggestions into different categories based loosely on the situation of the coming reader.  The first link is to SRI’s book review (if I wrote one), and the second is to Amazon–you’re welcome.  My favorites are numbered (1-10).

First, Business Professionals—meaning people that are going to be working in China in a more or less completely Chinese environment full time.

(4) Inside Chinese Business, by Ming-Jer Chen

(3) Chinese Business Etiquette, by Scott D. Seligman

(7) The China Price, by Alexandra Harney

The Chinese, by Jasper Becker

Managing the Dragon, by Jack Perkowski and (8) Mr. China, by Tim Clissold

Business Leadership in China, by Frank T. Gallo

(5) The Coming Collapse of China, by Gordon G. Chang

(Yes, there are a ton of other books that could go here–feel free to add to the list below–but these are the ones that I thought were the best.)

Sub category: Importers—people trying to build their own brands and markets within China.

All of the Business books above, plus:

Luxury China, by Michel Chevalier and Pierre Xiao Lu

(6) Elite China, by Pierre Xiao Lu

Where East Eats West, by Sam Goodman

Sub category: Buyers—these are people that are here irregularly, but still have significant in-China experience.

All of the Business books above, plus:

Poorly Made in China, by Paul Midler

Factory Girls, by Leslie T. Chang

All the Tea in China, by Jeremy Haft

One Billion Customers, by James McGregor

Second, non-business types. Maybe spouses of professionals and/or English teachers or students (non-business focus).

(9) River Town, by Peter Hessler

Oracle Bones, by Peter Hessler

The Rape of Nanking, by Iris Chang

Will the Boat Sink the Water, by Chen Guidi and Wu Chuntao

Wild Swans, Jung Chang

Life and Death in Shanghai, by Nien Cheng

Soul Mountain, by Gao Xingjian

Chinese Lessons, by John Pomfret

China Hands, by James R. Lilley and Jeffery Lilley

Lonely Planet China, here’s the web site too.

Sub category: Politics and/or higher education

(10) China: Fragile Superpower, by Susan L. Shirk

The Tiananmen Papers, by Liang Zhang, Andrew J. Nathan, Perry Link, and Orville Schell

(1)Gifts Favors and Banquets (anthropology), by Mayfair Mei-Hui Yang

(2) Capitalism with Chinese Characteristics, by Yasheng Huang

The Great Wall, China Against the World, by Julia Lovell

What does China Think?, by Mark Leonard

The Search for Modern China (history), by Jonathan D. Spence

Chinese Religiosities (anthropology), by Mayfair Mei-Hui Yang

Tags: Book Reviews, Business, China, Culture, Politics, Thailand by David Dayton
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First, I have completely loved reading Yasheng Huang’s “Capitalism with Chinese Characteristics.”  This is easily the best book that I have ever read on the development (or regression?) of capitalism in China.   Just wonderful in it’s explanations of detailed economic events in the context of the very politicized Chinese economy of the ‘80’s, 90’s and today.

Be warned: this is not a book for the faint of heart.  Huang is a professor of political economy and international management at the Sloan School of Management at MIT.  The book reads more like a thesis than a Sunday-morning coffee-house or beach-reading book.

In brief, this is the scientific analysis of the question on everyone’s lips, “Just how capitalist is China anyway?”  The short (rather surprising) answer?  Less now than 20 years ago.

The long and very detailed answer is that there have been major policy shifts in the last twenty years that have had significant impacts on the Chinese economy.  In combination, these changes have effectively eliminated the rural entrepreneur and increased the role of government in the urban economy exponentially.

Further, the undervalued proximity of neighboring Hong Kong (one of if not the most free-market places on the planet) has had an absolutely immeasurable affect on the Chinese economy.  Far from the typical commentary that “Hong Kong would be dead with out the business that China runs through it” Huang details the reality that EVERY SINGLE “Chinese” business success story would not have happened at all without the city state’s legal and business systems being so close and available to mainland Chinese entrepreneurs (hence the inability of any other country to successfully copy China’s economic ‘miracle).

Other points of significance included the facts that since the policy shift in the 90’s: individual household income is down, education levels are down, access to health-care is down, size of government is significantly larger, poverty is up, government corrupt!on is up.

He also tackles the western media perpetuated myth that if the numbers (GDP) are big (8% or higher) than that equals good policies and policy decisions.  He takes on the talking heads (mostly westerners) that have lauded China for success by pointing out specifically that they have not only misunderstood but totally misreported China’s current economic situation.

If China is your business then you need to read this.

Second, like Dan Harris at China Law Blog, I also received a signed copy of Sam Goodman’s book: Where East Eats West. Goodman’s book is more of a handbook or a how-to manual for China, than a book about China.  It’s one of those handy refer-to-often type of reference manuals that you keep in your glove box or within arm’s reach on your desk.

There is a ‘chapter’ on just about every conceivable problem or question (same same) that you’ll ever come across while working in China.  Sam not only has the China chops to dish out these answers but he’s brutally honest and direct when sharing them—something I find very refreshing in this tip-toe-around-the-real-issues PC world that we now live in.

This book is great because you can pick it up and open to any page and read for 5 minutes or 30 minutes and not worry about following a story line—there isn’t one—it’s just vignette after vignette of real on-the-ground business experience in China.  You’ll swing back and forth between “I have so been there” and laughing out loud at things that sound impossible (only to find out for yourself later that they’re all true).

Like your toothbrush and the Imodium, this is a must-have for anyone traveling to China.

Finally, a book that is less about China today and more about where historical Chinese attitudes of superiority may (rightfully?) come from.  When Asia was the World, by Stewart Gordon, is a fun and captivating recounting of personally stories of how far reaching Asian trade, politics and philosophy were before the West was even tying their proverbial shoes.  It’s a fantastic travelogue through the Asia of 1000 years ago.

Monks, traders, diplomats, doctors and others all make their appearance in this very readable and detailed account of life in Asia (Mediterranean to China) from 500 to 1500 CE.  The individual stories are captivating and together in the context of a vibrant, educated global economy they paint a picture of “the past” that, at least for me, was more “modern” than I had previously understood.

Of the three, this is the Sunday-morning coffee-house book or airplane book.  Very enjoyable.

Next time you’re in the Hong Kong Airport, pick up all three!

Tags: Book Reviews, China by David Dayton
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Like a couple other of my favorite books on China, River Town and Mr. China specifically, I’m admitting to you now that the reason that I like this book so much is that this is my life in print. This is what I’ve done for the past 7 years in China—solved other people’s problems, dealt with very “cleaver” Chinese factories and played go-between with suppliers and buyers who are not just from different countries but actually from completely different planets.

Poorly Made in China tells the stories behind the products. Unlike Made in China, it’s not an agenda-driven call to political action, but rather a travelogue of successes, missteps, misunderstandings, adventures in manufacturing and scores of “I can’t believe what just happened” moments.

If you think that “oh, China’s not so bad anymore” then you need to read this book. It’s a Mr. China for this decade—a direct look into the experiences of a China Hand deeply involved in manufacturing in Southern China right now. Despite the gleaming steel and glass buildings of Shenzhen and Guangzhou, Paul clearly shows that China is not a first world country. It’s the uglier under-side of China where all the manufacturing and (double) dealing really happens; and that’s were Paul Midler writes from.

Many books about China are written for the MNC class of China buyers—big companies that have entire purchasing departments. Very few are for or about the rest of us—those entrepreneurs that come to China and work with or for smaller companies (that may or may not sell into the big box MNC’s eventually). This is the boots-on-the-ground advice and perspective that everyone that is coming to China should read at least once.

Here’s the review from the Economist.

The book is a quick read if only because it’s so captivating and entertaining. But there are lessons that I’ve underlined and will come back for in the future. Here are a couple of my favorites:

• Chapters 8-11. If you’re going to read this book like a Chinese (sit on the bookstore floor on Sunday afternoon for a couple of hours) then these are the chapters that you just can’t ignore.
• “China’s saving culture was so strong that it was at times detrimental to business interests.”
• “Typically, the importer negotiated prices in advance of any order. Then, throughout the production process, (the supplier) would look to find savings where it could. If the supplier managed to cut a corner and it worked out, it pocketed the savings. If it did not work out, the supplier then tried to use the fiasco as a chance to raise the prices in some way.”
• “Importers were not inclined to pursue legal action when problems arose in a ongoing manufacturing relationship. An importer was not going to place an entire business on hold just to settle the matter of a few containers. Manufacturing problems tended to be small relative to the size of the overall business, and factory owner actually took this into account when they considered whether or not to manipulate quality levels.”
• “The importer should have been rewarded for uncovering quality problems, but it was almost never the case. Factories did not see an attention to quality as something that would improve the business prospects, but merely as a barrier to increase profitability. Working to achieve higher levels of quality did not make me a friend of the factory, but a pariah.”
• Speaking of faulty product discussions with a supplier, Midler says: “While we were both looking at the same problem, she was simply choosing not to see it. More than that, it seemed, she was hoping that I would share her view. Most her disappointment, it seemed, was reserved for me, because I would not entertain her own versions of reality.”
• “Creating the outward appearance of the thing was often just enough to get the order initiated. Once funds were transferred to China, the manufacturer could then work on the part about getting the product right.”
• “By now, it was clear to me that such inspections were pointless anyway. Whatever could go wrong with a manufacturing process was going to be seen on a walk-through. If there was something that would raise a serious alarm…the factory owner could easily make sure that it was hidden for a few short hours while the inspectors were in the plant.”
• “Factories manipulated quality on a large number of variables, taking small nibbles out of each’ if they were caught in one area, they still had the advantage of others. It seemed at first a little unusual to me. By running so many schemes at once, (the supplier) seemed to be increasing his chances of getting caught doing something dishonest. In an environment where everyone is expected to do the right thing, the smallest indiscretion is a sign of moral failing, but China was a low-trust environment. Local players operated on the presumption that everyone was engaging in some level of game playing, that others would expect a level of misappropriate activity. By spreading the shenanigans around, an operator could make related wrongdoing appear less damaging. No auditor could ever be do diligent as to catch every maneuver, which mean that profit lost on one shortcut could still leave other sources of margin.”
• “Factory owners were aggressive more than anything else, and perhaps even a little bit cruel. This one factory owner had encouraged his prospective customer to board a plane in the United States and fly all the way to China. Once the investment in time and money had been made, the factory took advantage.”
• “Why didn’t Chinese manufacturers take the (customer is king) approach with their own customers, and why were they eternally focused on short-term gambits? Chinese business leaders were continually preaching how they valued relationships, and yet it was more often foreigners who understood what it really meant.”  My take: Why don’t Chinese think about “long-term” relationships? They do, but foreign clients are rightly not whom they think they will have these “long-term” relationships with. They don’t know you from Adam, they don’t know if you’ll place one order let alone the volume and the re-orders that most buyers talk about. And there are so many clients beating down the doors in China that suppliers really don’t need to care.
• “Reverse Frequent Flyer” programs—the more you work with a factory the more punitive the relationship becomes.
• Mark Elvin’s “Advantage of Backwardness” says that “farmers were so good at finding small ways to increase efficiency through tinkering and that success with short fixes dulled the impetus to build machines that could replace human labor.  What is surprising is how little has changed, even as the country has moved from agriculture to a focus in export manufacturing. Factory owners were just as focused on life at the margin. While they worried less about natural disasters, they behaved as though they were struggling to just get through the season.  What had kept the nation from creating its own industrial revolution was more than likely this enduring cultural trait—an endemic myopia—and knowing that they suffered from it was what led common fold to welcome the larger and more direct role that government played in their lives.”
• “China itself was involved in a similar contradictory pattern; while the nation wanted to become a major global player, there was still too much to be gained by insisting that they were just barely getting by. They wanted to be feared and respected, but at the same time they saw the advantage in being pitied.” Thank you. I’ve been saying this for years—China is schizophrenic.

Tags: Book Reviews, Business, China, Culture by David Dayton
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This is a great story book with a moral at the end, to boot!   Managing the Dragon is a this-is-how-I-did-it style book with little hidden lessons found in hundreds of small tales and personal experiences.  It’s a timely read and a useful tool for anyone coming to China.  And there is a very good blog by the same name that updates Jack’s current status too!

No one is going to be able to do what Jack did, but that doesn’t hurt the value of the book.  A “smaller” more employee perspective is in another book, Mr. China, by Tim Clissold (my review here).  The two books really should be read together.  Tim worked for Jack and many of the stories in each book are told from a different perspective in the other book.  Tim can speak Chinese but isn’t a businessman.  Jack is the opposite.  Both apparently like to drink. A lot.

The only thing that I really I didn’t like was the attitude that what Jack was doing was unique.  In terms of $, yea, there probably aren’t many other people that will ever do this.  But as he starts out, there are thousands of people with the same experiences.  The attitude that “I’m the first one here” and “No on has ever done this before” got a little old.  He’s not unique, he’s not first, and hundreds of thousands of others, overseas Chinese for hundreds of years, have done similar things but with less exposure.  But since he doesn’t speak Chinese Jack just didn’t bother to hire someone to look them up.  Not to mention all the foreigners that were here before Jack (many of whom he hired!).  The story is really great, but Jack’s a bit more than willing to throw people under the bus that he realized (after the fact) were not his best hiring decisions.

General perceptions of Jack and his experience:

*Jack knows business, but not China (at the start), and he has enough money to fail and keep going until he gets it right.  I’m not sure if the point of this is that business is business everywhere or that if you have deep enough pockets and a good head you will eventually get it right.

*You can crack any market with the right connects (and enough money).  Jack had connections that no one (without that much money) else will every have access to.

*You too can probably figure out the right things to do if you take two well-funded years off to research first.  Most people can’t duplicate what he did.  But you can still learn from the experience.

*Managing in China is going to be more difficult than anyone every imagines.

Other more practical lessons:
•    You can never really do anything in China unless you have control of the management.
•    China changes constantly and quickly
•    China (markets) is fragmented because of size (among other reasons).
•    Chinese markets and foreign buyers in China want better quality, butter prices and better service than they can usually find local.
•    Everything is hard, but nothing is impossible.
•    Chinese factories were (and many still are): “sprawling, state-owned… dirty, not well lit… with too much work in process inventory… highly vertical [and] did everything, but nothing very well.”
•    “If China is important, get your best people there.  Whether they have China experience or speak the language is beside the point.”
•    “I believe that specific industry, product, or technical knowledge should be weighted more heavily than China experience.”
•    First domestic MBA in ’91.  This means that no local educated MBA has more than 15 years experience.  For individuals, this isn’t such a big deal.  But for entire industries (and entire countries!) the effects are staggering.
•    Management is the biggest challenge in China.
•    Chinese managers know China better than foreigners probably ever will!
•    Taking the time to build quality managers is always worth it.
•    Nothing is what it seems.
•    Trust and experience are the keys to by-in/success.

Jack is a good writer, has great experience, teaches great lessons and the book is easy to read and apply.

Tags: Book Reviews, Business, China, Culture by David Dayton
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I would recommend Frank Gallo’s book, Business Leadership in China, to any new-to China manger working for an MNC—that’s who it’s written for and that’s who will probably get the most out of it.

I liked the fact that there were a lot of personal examples that show that Gallo has indeed lived the advice he’s sharing.  This to me is the most valuable portion of the book.  Frank has been here for 8 years and writes from experience—both good and bad.  That’s important.  He’s not just sharing success stories, but his mistakes and misunderstandings too.  It’s easy to point out everything that was successful.  It’s much more difficult and more valuable to others to identify where mistakes where made and the follow up remedies.

I liked the fact that that there was an attempt to compare the two cultures—this, I think is sorely missing in the literature on international business.    There are more than enough books describing Chinese culture to foreigners but very few making side-by-side comparisons.   This should be the highlight of this book—any time you can have someone point out to you  “we do it like this and they do this” and then identify some personally experienced middle ground you know you have some tools you can use.  There is some of this, but it’s limited in it’s application because of how it’s presented and at whom it’s directed.

I like that for whom it’s targeted, it’s a quick read.  I understand that this was written to be digested in (very very very) small parts and would therefore be valuable to someone that is (very very very) busy and has absolutely no time whatsoever to commit to learning anything about a new culture that will impact business results.  Making culture accessible in 5-minute chunks was obviously a goal.

And kudos too because the book is just what he claims it is: a starting point for further research into constructing a business model that blends both foreign and Chinese leadership techniques.  To this end, the bibliography is a great resource.  When you read this you know there is more to learn and that Gallo would be a great expat to sit down and have a discussion with.  Personally, I love getting into a book and finding new ideas or ideas that I don’t agree with and having a source citation so I can look it up!  So, thanks for the new additions to my factory-travel reading list!

Now, for the things I didn’t like as much.  And please understand, the structure of the book is what I have issues with far more than the content.

(I guess) It’s a very MBA style look at how culture affects the corporate environment.  Meaning it’s a very very simplified version of Chinese culture that is explained in the context of how it does or does not fit into various foreign business models and theories.  You both had to know the theories and be in a place (large MNC) where you can use them for much of the analysis to be useful.

And while it does compare cultures, it’s actually very PC look at only one and a half cultures, not really two.  What I mean is that Gallo is very deferential to China and Chinese culture and not nearly as nice to foreign cultures.  For example, even in the chapter on honesty, he won’t say that any practices in China are dishonest.  Not one, not once.  He’s not alone in this unwillingness to be (ironically) honest.  I’m not sure why people are afraid to call warts warts after they get to China.  In this case I assume that he didn’t want to offend any of the Chinese reviewers/interviewees, which was probably a good idea considering how valuable the interviews are to the book.  But throughout the book he is more than willing to use terms like “rash,” “haphazard,” “over confident,” “cocky,” “aggressive” (as a pejorative term) and “impatient” to describe foreign business leaders.  Maybe self-deprecation is a Chinese virtue he’s trying to indirectly teach foreigners who read the book.

What’s surprising is that this book came out of a class that was teaching foreign business practices to Chinese MBA students but the final product is much more about how foreigners need to adapt to Chinese culture than it was about a 50/50 blending of two ideas.  This is a VERY common approach in many books, usually justified by “China has a 5000 year history” or “China is a huge market” and “you’re just not going to change it.”  And with each of these points I agree.  But these answers don’t justify a lack of analysis of Chinese processes or an unwillingness to look at the need for Chinese to adopt international standards in many businesses.  For example, when it comes to accounting, no one says, “Hey!  Let’s do it the Chinese way!”  So why can’t we discuss both sides of the cultural coin on other issues as well?  If we are to honestly blend the two why is there not equal give and take on both cultural sides?  Is it because we’re in China and we’ve been cowed into thinking that we’re privileged just to be here?  Why is it so popular to bash foreign cultures and worship China?   Has social relativism infected MBA schools too?

Now I’m all for cultural adaptation—I’ve spent years reading hundreds of books about China and SEA, studying Chinese and Thai—but even though I was educated as an anthropologist I do not believe that just because “it’s how things are done here” that that automatically makes it right and so the outsider must change.  If that’s the case why not just condense the book down to one page of “When in Rome,” sell togas (chopsticks in this case) and save the executives the time they would otherwise take reading the executive summaries?!  I’m just asking for some balance, that’s all.

Side note on comparing two cultures. I hate the term “westerner.”  Who the hell is that?  Can you honestly say that an Italian manager will have the same style as one from California?  A German the same as a Mexican?  A retired Israeli soldier the same as a Canadian trader?  A 50-year-old MBA in a MNC and a 30-year-old small business owner?  Clumping “westerners” all together is just as bad as grouping Asians all together.  How can you compare cultures when one of the two cultures your comparing isn’t even an identifiable culture!?  Just because there was a class in Junior High School called “Western Civilization” doesn’t mean that “Western” is a culture.

Now that I’ve said all that I have to be honest myself.  This book is good—not nearly as bad as the organizational issues I have with it make it sound.  The content is better than the structure.  I just found the structure and vocabulary of the book getting in the way of me appreciating the context.  (Apologies to those who read my blog regularly and know how many typo’s per posting I usually have!  No, a degree in Anthro didn’t teach me how to write well.)

Actually I found quite a few useful examples and ideas, mostly from Gallo relating his personal experiences.  And I really like the fact that he will get some Chinese culture into the hands of people that he thinks may not have otherwise looked at it at all.  That’s a huge plus for this book regardless of anything else it does or doesn’t do.

I also loved that he has Chinese managers with foreign degrees talking about Chinese culture specifically to a foreign audience.  That, I think is more of what is really needed.  I would really like to see an appendix with extended transcripts of the interviews.  Those interviews by themselves would be another book that I’d buy (and read).

I would recommend this book to a foreigner that is new to China and will be working in a large multicultural and MBA environment.  I think that for whom it is written and how it is presented it would connect and be a great introduction (hopefully not a conclusion) to a further study of Chinese business culture.

Finally, for me, this book is also a somewhat humorous look at business executives too.  Open Question to those of you with MBA’s: Do MBA’s really need to have a 1-page executive summary after a 1-page introduction and only 3-6 pages of text?  Is this what MBA school is like?  Is everything broken down into bite-sized pieces for quick digestion with little analysis or context?  Are all MBA’s really so much busier than the rest of us that they can’t read a real book?!  In this book, for example, there only 35 pages of full text (out of 225)!  There are huge headers, big quote boxes, bullet point lists and large font on almost every page!  I’m left with the impression that going to business school must give you ADD as well as an MBA.

Tags: Book Reviews, Business, China, Culture by David Dayton
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