When East Meets West in the Market Place

With the aplomb of a Wall Street Journal reporter (which he was) and the hard-nosed realism of a corporate executive (which he still is), James McGregor relates the colorful and enlightening storypast and presentof foreign business in China.

Beginning with Lord Macartney’s failed mission to China in 1793, McGregor traces the development of commercial relations through the lopsided opium trade and resulting wars in the mid 1800s, the cozy (and corrupt) relationship between business and the KMT rule in the early 1900s, China’s retreat from the world scene under Mao, and its emergence and eventual entry into the World Trade Organization. Subsequent chapters consist of case studies of contemporary efforts by various foreign companies or individuals to do business in China, including the failed attempt by Morgan Stanley to create China’s first joint-venture investment bank, the race between McDonnell Douglas and Boeing to secure a foothold in China’s nascent aircraft market, Xinhua’s drive to corner the market on financial news in China, and the political intrigue behind the emergence of competition among China’s domestic mobile phone carriers.

Each chapter begins with an overview of the players and their goals, then goes into a detailed account of how the deals actually played out, concluding with a “What This Means for You” section that distills down the relevant lessons for business in China today. In the process McGregor skillfully deals with the political realities, both domestic and international, and cultural nuances that often blindside well-meaning foreigners attempting to navigate the maze of relationships that constitute the Chinese business environment.

Most helpful is the “Little Red Book of Business” that concludes each chaptertwo pages of pithy sayings that encapsulate the insights revealed in the case study. These nuggets alone make the book a worthwhile investment. Some examples of McGregor’s wit and wisdom:

You can’t do too much due diligence on prospective partners. Understanding your partner’s political and family connections is essential. Forget “face,” get the facts.

China’s modernization is aiming at “rule by law” not “rule of law,” so relationships and personal power reign supreme.

Guanxi, the oft-cited Chinese word for relationships or connections, is overrated, temporary, nontransferable, and resides in the hands of the individual who has it. Never, ever put your business in the position where you are dependent on one individual for access to government officials.

Avert crises by spending the money necessary for a comprehensive and proactive government relations program in China. You might even help shape your industry’s regulatory environment.

Frame your arguments to show how your business is good for China, not what is wrong with the Chinese government. You can’t make the system look bad.

Politics no longer drive everything in China. To understand where China is headed, focus on analyzing the country’s business and commerce more than deciphering People’s Daily headlines.

If your boss wants to do a quick deal in China, lose his or her visa.

The most talented businesspeople in China are great human observers who can analyze the people elements of a business situation.

When Chinese see something that works, you don’t have to talk them into expanding it. You need to get out of the way or get run over.

* It is often best to start your business at a provincial level where officials are more entrepreneurial and often resent control by Beijing. They can be very loyal and protect you.

McGregor winds up his book with a look at the Beijing University International MBA (BiMBA) program, a cooperative venture between China’s premier university and a consortium of Catholic business schools in the United States. Here he delves beneath the strategies and protocols of business in China to examine the cultural, social and psychological factors impacting the development of China’s future business leaders. These ingrained patterns of behavior, according to McGregor, are what are currently holding the Chinese back from competing on a global scale.

Chief among these is the “curse of the three monks,” taken from the Chinese parable where one monk fetches water with two buckets suspended on a shoulder pole, two monks fetch less water by carrying a bucket between them, and three monks come back empty-handed because they could not agree who should carry the water and who should supervise the work. Although China on the surface appears to be a collective society, an intense streak of individualism runs through the culture, breeding competition, undermining trust, and rendering cooperation extremely difficult. Add to the mix a tradition of hierarchical leadership, the scars of the Cultural Revolution and other political campaigns, and an educational system that still stresses rote learning and imitation, and one begins to understand the underlying weaknesses that could undermine China’s current economic miracle. For McGregor, it is the creative combination of Western and Chinese business practices (explored through programs like BiMBA and achieved through “layering” Western and Chinese leadership in the corporate management team) that will ultimately enable the next generation of business and political leaders to overcome these obstacles and move ahead.

While written for and about business leaders dealing with China, McGregor’s book has application to foreigners who are trying to work in other sectors of Chinese society as well, including leaders of faith-based organizations. They too encounter resistant government officials who use “fatigue, food, and drink” as negotiating tools, and they are likewise susceptible to the “slobbering CEO syndrome,” whereby political pageantry is used to awe foreigners into accepting unfavorable terms for operating in China. Eager to do something in China, these leaders can be too quick to believe that they need China more than China needs them, and thus ready to do almost anything rather than leave China empty-handed. Like many foreign businessmen, they can come to China with too much goodwill, too much trust, and too little patience, hoping to accomplish something significant in China without taking the requisite time to understand the culture and build relationships.

Finally, McGregor’s advice that foreign business leaders frame their China strategy as a road map is good advice to leaders in other types of organizations in China as well. Such a road map helps to get individuals within an organization (especially one that is fairly large or diversified) on the same page when it comes to China and ensures a consistent response when the organization encounters the inevitable roadblocks that working in China entails. It also provides one’s counterparts in China a picture of what benefits lay ahead provided they are committed to a long-term partnership.

The suggestion in the cover notes that One Billion Customers is destined to become the bible for business people in China may be a bit overstated. McGregor’s purpose is not to immerse the reader in the details of the legal or financial arrangements necessary to doing business in China or to provide a dance-by-number guide to the cultural customs one will encounter. McGregor sheds more than enough light on these areas to inform the teachable leader about how much he or she has to learn, and there is a myriad of other business books and volumes on differences between Westerners and Chinese to fill in the details. However, his real talent is as a consummate storyteller with a gift for drawing valuable lessons out of the real-life experiences of his characters, resulting in a very readable book that is both rich in practical insights and extremely entertaining.