Working with China, Tim Stratford's Ideas/Experience (and some of my own thoughts too)

At the request of the Office of the President, I work with a local university in Utah as they implement a new Chinese program.  As part of that, I had the opportunity to listen to and then chat with Tim Stratford for a few minutes this week as he spoke at the UVU China Initiative luncheon.  His topic was: Building Trust in US-China Economic Relations.While he spoke at a very high level and in generalities, there were a couple of specific themes that apply to individuals doing business in China.1. “Trust is the most elusive thing in US Chinese relations.” Part of me was pleased when he said this.  I thought, “See, it’s not just me.”  But then I realized that this is a systemic problem and is not going to get better any time soon.In answering a question about people doing business there, he furthered the point by noting that “trust is lacking at ALL levels” of the US China economic relationship.  And that people doing business in China need to be very cautious.Part of the problem is completely differing agendas.  While we (US/China) can agree on many high level ideals, getting to “yes” is another ball game completely.  And it’s not just that the US doesn’t trust China.  The mistrust goes both ways.My thought here was this, it’s been my experience that a lack of trust comes from two different places.  First, history of being scammed or taken advantage of.  Second, from being untrustworthy; people naturally assume that others do business just like they do, until they are shown otherwise.  Both China and the US are learning that business is NOT done the same way in each country.  While both are out to make money, how they get to “profit” in very different ways.2. “It’s often hard to distinguish between a lack of capacity vs lack of commitment.” In almost every business venture I’ve ever been involved with in China, not a truer statement could be said.  Add in the golden sample and you often can’t know that there will be problems until is much much later into the production process.  So often an “ability” problem is actually an attitude issue (or vis versa).  Sometimes you’ll never know.Some of the best ways to determine which type of problem you’re dealing with is to eliminate one of the variables and see what the result is.  If you can isolate a specific technical problem, and then throw more money/time/options at that one piece to see what can be accomplished.  Admittedly, this can be an expensive/time consuming rout to take.  But if you’re demanding results and not getting anything other than empty promises, you may have to help you supplier realize a way out (and get yourself some satisfaction).  Never throw “incentives” at a problem unless you can control both the proposed solutions and the results.Another option, if you’re an engineer is to get into the production processes yourself. Check the tooling on your own, follow one item from raw material to fulfillment and see where the issues are--then isolate the problem steps in production and make the necessary changes.  Of course, this requires that you’re actually in China.3. The other party’s leverage is perceived to be limited by both sides, (but the US/foreign side is usually wrong). Even if your qtty’s are “big” for you, they are probably not that big for the factory.  Even if you’re paying cash (30/70) the factory can probably cover their butts by selling your product to others if you don’t pay for it.  If you are not more than 30% of your factory’s orders/capacity then you do NOT have the leverage to dictate to them changes or even enforce contractual demands.4. China is willing to do anything that it can be convinced is in it’s own best interests. Ditto every other country, and of course ditto just about every factory I’ve ever worked with.  IP, you may say, is in their best interests to protect, right?  Nope, not yet.  They can make more money than they will lose (be forced to pay) by selling your designs.  And, furthermore, they know that even if you take them to court, you’ll have a hard time enforcing anything.  But wait, isn’t in their best interest to treat their customers well, so they’ll come back?  No, not really.  They don’t know you from Adam.  They don’t believe all your talk of “potential” and they probably have no idea who you are or what your market is.  So no, they don’t know how much money they are leaving on the table by going after as much as they can get on one order.5. China is willing to opt out of the world’s current rules and make their own (they have both the ego and increasingly the power to do so too).Ever thought to yourself, “China just works on a different model than the rest of the world.  Well, you’re right.  They do.  One of the characteristics that Tim pointed out was the guiding principle of Deng Xiaoping to not show your cards too early.  This is, in hie view either a show of modesty or more cynically a way to hid things.  I think that it’s both.  Chinese are for the most part honestly very modest.  But that doesn’t mean that they are in deed hiding things from you.  And in manufacturing or in negotiations, ignorance isn’t just expensive, it will kill you.  Test, QC, monitor, be there or you do not know what’s really going on.On a related note, from Julian Assange (yes, the WikiLeaks founder):

“The "technological enemy" of WikiLeaks is not the US - but China, according to Assange."China is the worst offender," when it comes to censorship, says the controversial whistleblower. "China has aggressive and sophisticated interception technology that places itself between every reader inside China and every information source outside China. We've been fighting a running battle to make sure we can get information through, and there are now all sorts of ways Chinese readers can get on to our site."

6. Develop a whole new way of communicating with the Chinese. This was the most practical of all his presentation.  He noted that from the beginning of his time in BEijing working with US/Chinese trade commission he was very specific in his method of communications with his Chinese counterparts.He said that when they had a potentially difficult discussion, after outlining the situation he would then give them potential options for resolution and discussion.  Of course the Chinese were neither very happy about either the difficult situation or limited number of options, but the information was invaluable.  Then, with each option he detailed the consequences for each of the these options and the potential reactions from the US. This was almost too much--predetermined reactions and limited options.  But after a history of being correct in the options and reactions, the Chinese knew what to expect and could plan accordingly--and that was the key to a successful relationship.So how do you duplicate that?  You follow the same plan.  Maybe you’ll have to allow for more input into the scope of the options that are available for problem resolution, but the forecasting (which Chinese factories, in my experience do not do well) will be very much appreciated, even if the results are not pleasing.Finally, here are some questions that I had, that I didn’t get answered.  Maybe you know the answers.  How do you discuss competence issues with a power that distrusts (US/China) and a power that is extremely face conscious/insecure (China/US)?I was particularly interested in the fact that he said in working with the WTO they were able to compartmentalize issues and contain the fall out on both sides.  I have found this, in China, to be very difficult.  Compartmentalizing in a holistic society is next to impossible.  How can you really compartmentalize econ issues not make them political?  Or in the case of production, how can you compartmentalize quality/production mistakes and not make them personal/financial?One point that I’ve used effectively many many times is the 3rd party scapegoat.  He mentioned that both the US and China use the WTO as the whipping boy for media spin often.  This is a GREAT way to save yourself forma fight and give you factory a way out--offer up someone else to take the fall.  Very effective.  I wanted to know more about how this worked at the country level--I guess just the same as it does at the production line level.Lastly, “Are you a Friend of China?”  I hate this question almost as much as I hate the question “Do you have free time?”  Because of the baggage and the implications and expectations of these questions, there is really no good answer.  If you answer, “Yes, I am a Friend of China” you are then expected to act the part.  Meaning, you are supposed to do what’s best for China (or the Chinese you are dealing with at the moment) usually at the detriment of your home country or your current personal business interests.  Tim answered this in two parts, “Yes, I am a friend of China, but I am also a representative of the US government and I’m required to look for for their interests first.”  What do you say?