Doing Business in China

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By Mark Streich

One billion customers!

That has been the siren song for countless businesses thinking about selling their products in China. But unlike the mythical Ulysses' order to his men to ignore the song, James McGregor's book, ONE BILLION CUSTOMERS: Lessons from the Front Lines of Doing Business in China (Wall Street Journal Books, $27), attempts to prepare you for what you may encounter when you are enticed by it.

McGregor was The Wall Street Journal's China bureau chief after the 1989 Tiananmen Square massacre, chief executive of Dow Jones' China business operations during the 1990s, and a venture capitalist. These positions gave him access to people and information that few businesses have.

That is perhaps my greatest misgiving about the book. His experiences are not likely to be relevant to the vast majority of readers, as you're unlikely to have the same access in your business dealings. How many of you will be able to draw upon high level contacts in either the U.S. or China government when you're being strong-armed by a ministry official, or have the media's ear when your intellectual property is being stolen?

You immediately get a sense that the book will be more dramatic story-telling than instructional with his "Cast of Characters," which lists various government officials, Chinese and US executives, and historical figures. It provides a thumbnail sketch of the people he will talk with and about throughout the book.

I never found myself referring to the list while reading the book, as the stories are relatively short and don't approach the complexity of a Tom Clancy novel. It would also fail as a reference guide for later use, as I doubt any of the cast would be in my Rolodex. One of his stories recounts how even media mogul Rupert Murdoch had trouble meeting with the appropriate officials.

As McGregor puts it, in 1993, "Mr. Murdoch had earned the enmity of China's top leadership ... [by saying] that advances in communications technology had 'proved an unambiguous threat to totalitarian regimes everywhere.'" And he said this just after buying control of a satellite network that reached all of China. A month later, China banned the private ownership of satellite dishes. It wasn't until four years later that Murdoch was granted an audience with the Chinese President. Murdoch used those years to learn more about China and how to live within the current limits set by the government, or what McGregor calls, "the size of his cage." But while Murdoch may now be in the good graces of China's leadership, satellite dishes remain illegal.

Why tell us about Murdoch's foibles and ultimate redemption? This is where McGregor brings it together. At the end of each chapter, he provides a summary called, The Little Red Book of Business. In these two-page summaries, he boils down the "lessons learned" that you can, and should, refer to when doing business in China.

For the Murdoch example, McGregor suggests, "Avoid the 'slobbering CEO syndrome.' Don't fall for China's brilliant use of its huge size and two-thousand-year tradition of manipulating political pageantry to intimidate foreigners into accepting unwise deals." In other words, the Chinese will use the siren song, "One billion customers!" but you should not allow that to lull you into a bad business deal. While you can be firm, you should still remain mindful not to be insulting, which is actually true in any business negotiation.

Some of the more entertaining and useful entries in his Little Red Book include:

• The Chinese will ask you for anything because you just may be stupid enough to agree to it. Many are.

• The Chinese always need to get concessions from you.

• If you don't trust your CFO like your mother, give your mother the job.

• Don't mistake language ability [e.g., speaking English well] with business or management competence.

• In China, a conflict of interest is viewed as a competitive advantage.

• Understand and use the fact that most Chinese government officials live in fear of being criticized for not upholding China's interests.

• Get your own copy of Lucian Pye's classic text, Chinese Negotiating Style, and read it. It's still very relevant.

One Billion Customers is recent, but not all of the stories and examples are, which leads you to wonder if China still has many of the same issues today. I believe the answer is yes. China is advancing rapidly as a technical and economic powerhouse, but people don't change as rapidly as manufacturing processes. The Chinese are living in a maelstrom of economic and cultural change, as well as a growth spurt greater than the Internet boom. But they have a long history, with many traditions, and so it is unlikely that the Chinese you will interact with today are much different than those McGregor initially faced 15 years ago.

If you are looking for a step-by-step guide to doing business in China, assistance in selecting an outsourcing strategy, or market research on China, this is not the book for you. What it does provide is historical perspective and entertaining anecdotes that are valuable as you decide whether it is the right time for your business to enter China, and to develop a strategy when you do so. One Billion Customers also prepares you for some of the cultural and regulatory issues you will encounter as a foreigner.

Just as Ulysses was prepared for the Sirens' song, allowing him and his men to avoid destroying themselves, you too can and should be prepared when lured by the call, "One billion customers!"

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