Thursday, 19 June 2014

Review: Mr. China

A memoir on the perils of doing business in China
When I was almost finished reading Paul Midler's Poorly Made in China, the friend who lent me the book suggested I also read Mr. China by Tim Clissold.

I had actually bought the book several years ago on one of my trips to Hong Kong when I was living in Beijing. I read through about half of it and then gave up because the business jargon went over my head and I lost track of the characters in the book.

But my friend encouraged me to try it again and so I picked it up again. With the Poorly Made in China background, it was easier to understand the complexity of what was going on in Mr. China because of Clissold's writing that was both engaging and intellectually witty.

Mr. China is about Clissold's own experience of living in China, learning the language and then teaming up with a flamboyant Wall Street banker named Pat and an ex-Red Guard named Ai Jian.

The trio saw the potential goldmine in opportunities in the early 1990s. There were factories all over the country that had the possibility of becoming big, if only they had a cash infusion.

And so Clissold, Pat and Ai Jian raised over $400 million, bought up a number of factories all over China, signed contracts, put seemly capable managers in place, and then expected the money crank out too fast for them to count.

But they soon discovered that China didn't follow by the West's rules. Abiding by the contract? There was no such thing -- the Chinese would always find some way of worming out of it.

Clissold talked about similar factory production problems as Midler did, illustrating this in the Chinese beer factory they invested in. The bottles either had flat beer, or not enough, or labels were plastered on upside down.

Tom Clissold's witty writing makes for a fascinating read
And then there were strong allegiances people had to their own which made it difficult for Clissold to sack incompetent people or get rid of excess workers.

Meanwhile factory managers or owners who had 49 percent of the shares in the business were always scheming, taking the funds deposited into their bank accounts and building newer factories instead of plowing the money into the existing ones to improve efficiency or quality.

Trying to kick these people out of the business took up most of Clissold's time, energy and sanity. It was a race against time to secure the factory and equipment, bank accounts and authority over the place. The fights ran from the verbal to physical, to standoffs that lasted for hours and was really a test to see who blinked first.

Although Clissold was well versed in Putonghua and had lived in China for many years, he was still not prepared in how to play the game.

In the end only a few factories made money, while the trio lost millions of dollars everyday and needless to say it was difficult to explain to investors in New York where their money went.

As he writes: "At that stage I was more worried about making sure the electricity wasn't cut off and the accounting records weren't thrown into the furnaces in a factory where our most sophisticated HR strategy was to invite everyone to an enormous fireworks party".

It's a fascinating read and hard to fathom that all this did happen 20 years ago.

There's a postscript to this story -- a few weeks ago I met a lawyer who works for Morgan Stanley who told me that he worked with Clissold at Goldman Sachs after his book had come out.

This lawyer said the author was a very clever man, having studied physics before business and Chinese. He's still in China, and even put his children through the tough elite schools, learning by rote method and completely fluent in Mandarin.

Mr. China documents the crazy times of the 1990s, but two decades on, things haven't changed much when doing business with the Chinese. There's still the problem of quality control, counterfeits, intellectual property stolen, managers refusing to yield and companies having a bloated work force.

So if you're still interested in doing business in China, it is imperative that you read this book. You have been warned!




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