What happens when the miracle is over?

Not sure yet, but it looks like it will be very very bad.  And it’s coming sooner than many want to believe.

From the article:

We now know that [rehypothecated assets] has been happening in China with the most critical component of its economic growth miracle: steel. We will soon discover that all other assets: stocks, bonds, commodities (including gold and silver) and finally cash (think deposits) have been comparably rehypothecated and criminally commingled. The end result will be the most epic bank run in world history, which incidentally is precisely what the central banks are attempting desperately to delay as much as possible by generating excess inflation to “inflate” away the debt, leading to rematching of finite assets and virtually infinite liabilities. Alas, in a world in which credit-money liabilities are in the quadrillions, and in which the real assets are in the tens of trillions, only hyperinflation can seal the deal.

Or, in other words, lose-lose.

Sssshhhhh…. Don’t tell anyone

From the NYT:

“China’s food-safety problems highlight both the collapse of the country’s business ethics and the failure of government regulators to keep pace with the expanding market economy. Yet an excessive focus on poor government oversight often means that the much graver problem of disintegrating civic morality is neglected.”

Add to that the fact that the economy is likely at 1% and not the 7% that is being claimed and you can see why FDI is down to 2009 levels and why unrest is more common than ever before.

The culmination of these multiple events suggests that changes, and not in a positive-way, are coming to China’s immediate future.

I’m still a firm believer that China’s economy will eventually be the largest in the world, it ought to with 1.5 billion people (and the Chinese will win more Golds/medals total than all others, etc. etc.).  But I’m much more worried that the “Chinese style” of doing business will become the most commonly exported feature of both China’s soft and real power.  The combination of “disintegrating civic morality” and wealth (an no place to invest domestically) invites the spread of Chinese business, influence, practice and corruption to other parts of world and other industries.

Now don’t claim that I’m saying China is the source of amoral business practices.  And don’t think for a second that I’m naive enough to believe that there is corruption already (at China levels?) in other parts of the planet as well.  But most, if not all of those other places, are limited in the influence their corruption can have outside of their respective locals–either due to significantly smaller amounts of money, people, resources or whatever.  China has none of those restrictions at this time and a growing sense of both entitlement (we should be the worlds super power like we were before) and nationalism.

S.N.O.R your way to China – Guide before you go. Guest Blog Post

Snoring is a type of action we do when we are not aware of it (hopefully….), it happens when we are unconscious.

I want to help fellow entrepreneurs here to get out of this unconsciousness and have a S.N.O.R plan. A VERY conscious 4 step plan to be ready to move to China.

Step 1: S for skills

Skills would be the 1st thing to develop and some would claim it would take the longest time developing it. What are the skills needed or at least recommended for a person who is moving to China.

Cultural Change – Get ready for a cultural change in the way you live and the way people around you will be. It will be annoying, tough and frustrating sometimes.

On the other hand it will be interesting, full of liveliness and challenging. Don’t be one of these people going back on the next flight possible. Get accustomed to what’s happening.

I recall that on the 1st day of work in a Chinese company I needed to call my wife because we just moved to our new apartment the previous day and there was a lot to do.

After making the phone call, I was told that no personal calls during work hours are allowed, only on lunch break or after work. This is something that western companies are more tolerant about and in China is a NO in many companies.

This is one example out of endless Challenging, peculiar and misunderstandings happening all the time!

My point is that you have to KNOW that you should suffer a cultural change. Have that in mind.

Language – Tons and tons of posts/newspapers/websites are written about Chinese language. It’s takes a couple of years to master it, which you probably don’t have, but you should be prepared with some basics.

I’ll write a separate review on some of the options out there, but here are a few main ones, you should have a look, at least to start with:

Chinesepod – One of the most known websites out there today which gives podcasts on various subjects in different levels. It’s thousands of podcasts that are ready for listening, you are talking about here.

Melnyk – Melnyk is also a popular website.  Melnyk gives a long series of lessons you can listen to. The first few dozen lessons are free and get you to a basic level to start with.

Study more Chinese – a website that cover news and findings of other readers about the Chinese language. It’s a good resource to find more materials.

Chinese hacks – Cool website that brings all tips & tricks to learn the language. Try it out to find more tools to enhance your Chinese learning experience.

Step 2: N for Networking

Networking is an art, it’s like a big game of connect the dots, and once you’ve connected then you get a nice picture of the environment that will be your play field. Generate meetings for networking. Go to conferences in your country/area got to do with China, in either industry you are at. It can be Tech, or sourcing or HR. Anything you can think of. The most important thing is getting those contacts and build your map in China.

You’ll learn a lot and feel more confident when arriving. These will also be the people that might help you to set in and perhaps your future business partners.

Linkedin groups

A different kind of networking I recommend on is using LinkedIn. Before I decided to move to China I started networking in groups about China and got connected with people that have “China” on their profile. Some of them are good friends of mine right now. After finding them, I got in touch with them and asked them about the right way to arrive & help finding a job, Etc.

To start with I recommend the following groups. There are many many more, but these are the ones I know and active at. There are valuable discussions there and more important people like you who have the same interest: China.

Recommended Linkedin groups

  1. China Expats and Returnees jobs
  2. Business in China
  3. China Business
  4. China networking group

Step 3: O for Online

Wow, this step is exploding with info! When mentioning “Online” I actually talking about blogs, you just have to pick the right place for you and things that interest you the most.

Blogs on China are endless (No, Really!) and you cannot cover them all. There are excellent blogs about technology in China (Click here for a Twitter list with the major tech blogs in China and Asia) , Business & law, Language, local info & Daily life, sourcing, negotiation and more, more &….more.

This list of links is not to be treated as ultimate or the best one, it meant to give you a taste and a place to start explore from.

Before I arrived I swallowed those blogs, I wanted to know everything that was going on. Almost every blog has a valuable blog role list, with which you can develop your interest even more.

There is even a website the collects all these blogs into one place, China blog network. CBN, lists are organized by topic so it’s easy to find what you need.

In addition, with some of the bloggers I also made some networking. This helped reaching more contacts and information I needed. I encourage you to follow 5-10 blogs that you find interesting for you. Try following those bloggers on Twitter as well. Send me a message if you cannot find the right blog for you on the subject of your interest. I’d be glad to help.

Step 4: R for Reading

Books would open up China for you like you’ve never felt before. When moving and living in China, you see the culture all around you and wonder where things were originated from and which person people are talking about.

I personally skipped this step before coming and I’m soooo sorry about it. It’s not something irreversible, but I’m feeling I’m missing a lot.

So as blogs, there are endless books about China. My wife on the contrary never stopped reading. She was reading more than a dozen books about China most of them of its modern history. So, I ask her a lot about current affairs and things I don’t understand and I emphasize that you should do it yourself.

Here is a list of HER recommendations.

  1. Wild Swans: Three Daughters of ChinaJung Chang
  2. Mao: The Unknown Story – Jung Chang &  Jon Halliday
  3. The New Emperors: Mao and Deng – A Dual Biography – Harrison Salisbury
  4. When Huai Flowers Bloom: Stories of the Cultural Revolution – Shu Jiang Lu
  5. The Chinese cultural revolution as history – Studies of the Walter H. Shorenstein Asia-Pacific Research Center
  6. A History of Pain: Trauma in Modern Chinese Literature and Film - Michael Berry
  7. Wild Grass – Ian Johnson
  8. Oracle Bones: A Journey Through Time in China – Peter Hessler
  9. i.      The Corpse Walker: Real Life Stories: China From the Bottom Up – Liao Yiwu

Click here for reading more about this list of China Books.

As my wife’s’ list is mostly related to modern history, please also check David’s additional list for business books related to China here.

After taking all these steps, I believe you’ll be more prepared and learn what’s going on in the middle kingdom.

Now, Go and S.N.O.R!

________________

Shlomo Freund has just launched Start Up Noodle. It’s a blog with practical information for entrepreneurs coming to Asia and China. It contains information, guides on Chinese social media, best tech blogs, where should you work while moving to China, and more. Check it out

 

Guanxi and Contracts–A Chinese explaination from the US.

Some fantastic opportunities to learn about China are more and more available in the US.  While in the US this month I attended a couple of sessions of the UVU Doing Business with China seminar in Utah.

First, Andrew Hupert presented a great keynote address on Guanxi.  All that needs to be said/known about this can be read in his great ebook: Guanxi for the Busy American.  You can buy it at Smashwords.  Some highlights include:

1. Relationships come before any contract (Guanxi as Due Diligence).

2. Relationships come after all contracts and work are completed (Guanxi Best Practices).

3. Get these relationships right or have never ending frustrations (Guanxi Myths and Realities).

Second, in a follow up on this, in a break out session on working with Chinese in the US, the Chinese speaker said two things that I found very interesting.

1. There is a “misunderstanding” that Chinese don’t follow contracts.  She said, this isn’t true, they just understand things differently.

2. To support this position her example was this: Chinese buyer signs a contract with the US supplier.  Exchange rate changes dramatically and now the funds that were guaranteed just days prior are not longer available.  Chinese client comes back and says that the contract must either be re-negotiated or cancelled.  Chinese buyer is outraged that the supplier was not willing to change the order (that was already in place and financial commitments made on the supplier side).  So the buyer disappeared and blocked payment.

This example was supposed to show how both important Guanxi is and that Chinese do keep contracts but just understand them differently.  Everyone in the room exchanged awkward glances and I don’t think that anyone of us made the same connection that the Chinese speaker had.

It reminded me of something that my graduate professor said to me.  In a moment of truth while talking about gift-giving in Thai business, she turned to me, dropped the academic façade and said something along the lines of, “It’s all just bribes, isn’t it?  We can call it whatever bullshit we want.  But it’s really just bribery.”

In the same vein, Chinese can call it whatever they want, but if you sign a contract and make both financial and legal commitments and contractually obligate your counterpart to do the same and then want to change because it’s not convenient for you any more that’s called: “not following a contract.”

Now sure, things change, money moves, opportunities disappear.  That’s what due diligence is for.  That’s the point of a contract—to confirm that each part has both what they claim to have and are willing to follow though regardless of the extenuating changes.  Can true partners be flexible?  Yes, to a degree.  Can people with Guanxi make changes?  Absolutely—but often after money is spent, you can’t just “call in a favor” from a buddy and expect a relationship (which the American partner doesn’t value nearly as much as the Chinese counterpart does) to cover those costs.

Third, with both the political and economic clouds Chinese with money (i.e. those with influence/education) are leaving in greater numbers.  This can’t be seen as a good sign for the future of China.

“Would you make the same decisions in a foreign language as you would in your native tongue?”

“Would you make the same decisions in a foreign language as you would in your native tongue?” asked psychologists led by Boaz Keysar of the University of Chicago in an April 18 Psychological Science study.

“It may be intuitive that people would make the same choices regardless of the language they are using, or that the difficulty of using a foreign language would make decisions less systematic. We discovered, however, that the opposite is true: Using a foreign language reduces decision-making biases,” wrote Keysar’s team.

Originally from Wired Magazine, I’m wondering how does this impact doing business in China?  My two cents (in English):

First, it means that given the same sets of circumstances you likely will NOT make the same decisions in a different language environment.  That’s HUGE for CSL speakers that are both learning Chinese (almost all of us foreigners) and working in China.

Second, it means that understanding and decision making in ESL is also different for your English speaking Chinese staff.

Third, there are limits to fluency and translation on the effectiveness of thinking through something in a second language.  How many of us have, years after learning a second or third language had an epiphany about a word/concept that we use all the time when we hear it used in a new context?  I know that this happens to me regularly in Thai and Chinese.  I’ve “learned” and used a word for years, decades even, and then one day someone uses it differently and it hits me, “Oh, yea, it can mean that too.”

Further, it likely means that when you’re not thinking in your second language you’re making decisions “normally” as are your Chinese counter parts (although each person’s “normal” is different).

The research in the article point out that the second language literally gave people more pause and more deliberation, thus possibly allowing for better decision making.

From the article:

“The researchers believe a second language provides a useful cognitive distance from automatic processes, promoting analytical thought and reducing unthinking, emotional reaction.

“Given that more and more people use a foreign language on a daily basis, our discovery could have far-reaching implications,” they wrote, suggesting that people who speak a second language might use it when considering financial decisions. “Over a long time horizon, this might very well be beneficial.”

One other aspect I was considering is both the level of risk-adverseness in each culture/language and also what is valued (time, money, decorum, relationships, immediate success, long-term goals, etc.).   I know that because of second/third language abilities I “reverse engineer” decisions and Chinglish or Thinglish sentences all the time.  I’ve been doing it for decades now, it’s second nature.  (I’m surprised at times when non-Chinese speakers don’t “get” what’s going on sometimes, but then realize it’s an acquired skill.)  I’ve also come to realize that my counterparts are deconstructing what I’m saying as well–and over the years we’ve learned to hire for this skill/ability.  This, I think, is very valuable in negotiations and problem solving, especially in High Context cultures like Chinese.

I can see that thinking about things in a second language can have dramatic effects on decision making, both good and bad.  Delays/thinking things through can be positive, but there certainly are limits to the value of analyzing a situation in a second language (while still based in your first language culture/values).

After 20 years in China/Taiwan and Thailand I believe that the majority of foreigners that “love” China don’t (yet) speak the language.  And oddly, those that have the most difficult time with the business/govt culture are those that have dedicated the years necessary to learning the language.  The acquisition of a second language may allow for more deliberation on decisions, but those decisions not made in a vacuum and there are so many other factors that contribute to the final outcome in addition to just language understanding.

What do you think?