Business and personal relations in China with Robert Fisch – SupChina
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Robert Fisch, the CEO of Incorp China, discusses key principles and practical advice for Western companies wanting to do business in China.
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Below is a complete transcript of the China Corner Office Podcast with Robert Fisch:
Chris: Hi, everyone. Thanks so much for joining us today on China Corner Office, a podcast powered by SupChina, the New York-based news and information platform that helps the West read China between the lines. I’m Chris Marquis, a professor at the University of Cambridge Judge Business School. Today’s episode features a discussion with Robert Fisch who is CEO of Incorp China, a boutique consulting firm that helps Western companies navigate the complexities of doing business in China. Robert has over 40 years of experience working in and with Chinese companies and organizations.
One of the things that I really enjoyed in talking with Robert is his storytelling ability and how he is able to draw on his diverse experiences in China to illustrate some key principles that other businesses can learn from. Take guanxi (关系 guānxì) for instance, a term that is thrown around in pretty sloppy and one could even say somewhat ignorant ways when talking about China.
Part of the issue though, is it’s just hard to understand the deep cultural nuances of what guanxi means without actually having spent significant time in China. But Robert’s stories from early post-opening days, when he hosted the Hangzhou Mayor in Boston, to more recent experiences negotiating with bank managers in Shenzhen to open an account, provide evocative examples of the importance of personal relations and the human touch to business in China.
Along the way in the episode, Robert also provides some very practical advice on many things. From setting up a wholly foreign owned entity or WFOE, and how businesses also shifted in the COVID era. I hope you enjoy Robert’s stories and learn from them. I know I sure did. Thanks so much and enjoy the show.
Robert, welcome to China Corner Office.
Robert: Thank you, Chris. I’m honored to be here today. I’m very happy to be able to share some of my life experiences of over 40 years in China with the rest of the world. I’ve spent all of my adult life actually being a bridge between the two countries and I’m happy to share.
Chris: Great. Really looking forward to learning about some of your experiences over those 40 years you spent time on the ground living in China. You have a business that helps Western companies enter China, deal with a variety of the unique situations of localities all over China. I’d just like to start with the question of… Let’s say a company comes to you and is interested in entering China. What’s the few key steps to do for a business to start working in China?
Robert: Well, we deal with companies anywhere from two million to 500 million. Normally, the key things that we want to understand is that they have a business plan in place. What is their reason for approaching the Chinese market? What do they hope to achieve there? So that we can tailor-make the best package for them with the right entity, the right market strategy, and how to proceed and be more successful. Our greatest joy is bringing a company into China, getting them up and running, and then sticking with them through the entire process to make them be successful.
As like any other relationship in the world, the U.S.-China relationship ebbs and flows and has multiple changes in what the rules and regulations are in China. Being able to respond quickly and accurately about what’s happening at different jurisdictions helps us to guide them through. We’ve got multiple clients that have started with one staff. And then, we’ve had the joy of building them up to 50 staff.
We feel that we’re really making a contribution on both sides of the world. That it’s a mutually beneficial relationship. It also comes down to very critically important cross-cultural relations.
Chris: A couple of things that you said there that I really want to dig in a little bit. You mentioned jurisdiction. Really interested in the formal processes of, for instance, registering an organization in China.
And then, also you mentioned the importance of cross-cultural understanding and relationships. Maybe we’ll hold on that for a second. But that’s a real important topic we need to discuss. But first, logistically, to register and operate a business. What all needs to be done?
Robert: Well, there are two sides to the process. First of all, one of the biggest frustrations for a Western firm is that China is more relationship based rather than transactional based. Also, the local jurisdictions wield enormous power as to how they interpret things.
The laws are passed in Beijing by the central government, what we would call the zhongyang zhengfu (中央政府 zhōngyāng zhèngfǔ), the central government. From then, it’s translated and passed down. For example, in the case of Guangdong, that would go to Guangzhou, which would be the, sheng zhengfu (省政府 shěng zhèngfǔ)…
Chris: The provincial government.
Robert: The provincial government. And then, when it goes from Guangzhou, then down to Shenzhen. That would be the municipal government. And then, even within Shenzhen … It could be a bit mind-boggling how the laws are interpreted in the Futian district as opposed to the Lo Wu district or the Nanshan district. The different districts are very different. The only way that you can know that, which again goes back to that concept of it being a relationship based culture. You have to go in-person and meet with the people.
Chris: You mentioned many different levels, even just in that little, simple example. At least five or six different places from provinces, cities, districts, whatever.
How about the relationships that you develop yourself there? You have to go there, but is it important to have local contacts in all these different places? If you want to do something in … I don’t know. Harbin versus Shenzhen.
Robert: Absolutely. How they select where they want to operate is critical. Sometimes you’ll ask an American company, “Where do you want to operate and why?” They’ll say, “Well, we met somebody at a trade fair and they said they have really good relations.” And they’ll choose some very remote area that doesn’t really stand the test of why you want to be operating there.
It’s important to want to know why you want to be operating. One of the things that’s interesting in China, that most people might not know is that … When you choose a jurisdiction to operate, we have clients that operate China-wide. You can register in one city and still have staff in other cities, so that can be very helpful.
Chris: I’d love to hear a little bit of some of the stories that you might have. You mentioned going to places. I’m just laughing sort of recalling the many times I’ve had to actually go to various administrative or security bureaus. I lived in Shanghai for a while. You have to go register at the security bureau. Or you have to go do some various administrative thing. It’s always… I can’t think of the right metaphor, but it’s out of some crazy movie it seems.
Robert: We joke and say, “If you want to get a headache in China, you have to go to the Ministry of Headaches first and get it chopped in triplicate.” It’s like a Monty Python skit.
Chris: That’s a good one.
Robert: But it is critical to have those relationships. For example, just before the pandemic, we were helping one of our Western clients from the West Coast to get set up. They were really under stress to get the bank account open, so they wouldn’t lose their business in China.
Now, normally around the world, especially with all of the concerns about money laundering and anti-money laundering and KYC (know your customer) and CDD (customer due diligence)… It can take two or three months to get a bank account up and running. Because they’re not familiar with who you are.
They need to dig into your background and make all of that clear before you proceed. What we did in this case is that … I was dealing with Bank of China. I found out where the boss was and I basically walked in.
Chris: And this is a city? Like Shanghai, Shenzhen, or a small … Is it a city office that you’re walking into?
Robert: Well, this one happened to be in Shenzhen.
Robert: I went in. I found what they call the hang zhang (行长 hángzhǎng) or the boss of the bank. The bank president. Walked in and opened my mouth to speak Chinese. Because there’s a concept in China of jiedai (接待 jiēdài) and keqi (客气 kèqì). Welcoming a guest and being polite.
Again, it’s about a relationship first. You don’t just sit down and, “Wham. Bam. Thank you, ma’am. This is what we need and you need to help me.” We sat and we drank tea for … I don’t know. A good hour and a half, while we were sitting, getting to know one another. About your family, about your history, about your background and where you grew up. Of course, being a frustrated performer, I was able to throw in some communist slogans that I learned from my early days in China. Throw in a little bit of Tang poetry, which always helps. Having a deep understanding of the culture creates an instant bond. You get instant respect and they’re much more willing to help.
We went through this process. And as opposed to a Western setting, where if you’re in a meeting room in Wall Street, you get to the point, “Time is money. It’s $1,000 dollars a minute.” If you try to use that approach in China, all bets are off. We sat together. Got to know one another. The department heads randomly wandered in and out of the meeting. Rather than exchanging name cards, they all scanned my WeChat QR code. So I now have a WeChat group of Bank of China from the different department heads.
Chris: That’s a valuable resource.
Robert: What ended up happening was that the bank manager … Very interesting. I had talked about how you have to know the local rules and regulations. He had been transferred from Harbin. Throughout these meetings, at the very end, he decided to admit that, “I’m just transferred here. We’re going to have to rely heavily on my local colleagues, because I don’t really know what the rules and regulations are here in Shenzhen.”
You can imagine that if a well-educated, sophisticated career banker from one city in China transfers to another and doesn’t know what all the local rules and regulations are … How much less so would the outside world be able to know? Being able to set that up, we then finished our very elaborate tea ceremony, where they have the special tongs to pick up the tea leaves and put it into a special teapot. Pour it into what they call the smelling cup, and then into the drinking cup.
And then, getting to know one another as the department heads came in. In and out and in and out. They all sat down and shared tea with me and told me about their backgrounds and where they were from and about their children and about their histories. It didn’t hurt that I was able to throw in some local dialects when speaking with the different people. A little bit of Cantonese. A little bit of Chaozhou-ese We then ended up inviting some of the bank officials to have lunch together with us. Together with the customer. Rather than it taking several months to do the set up for the bank account, we were able to do it in just a week.
This concept of building the trust, getting the relationships going, is so critical to getting things done in China. There’s actually an etiquette that they talk about. They talk about the guanxi, which is building up the relationships. That means that you meet with the people. You respect them. You take time to get to know them. In stark contrast… Just to compare and contrast. I was called into Boston, to Federal Street, to one of the companies. They had the penthouse. Top floor. Well-established. They wanted some advice about how to get things done in China.
They brought me into their meeting room and we sat down. They looked at their watch and I could tell this was not going to work too well. Because they wanted guidance about how to perform well in China. I said to them … There were three senior executives. All women. It was a women-run business. I said, “Ladies, I would like to break with normal U.S. business protocol. You’ve called me to advise you about China. I’d like to invite you downstairs to the coffee shop. The Paul Revere Coffee Shop, with very fancy cakes and coffee and so on. We can get to know one another first. Because this is how it would work in China.” One of them said, “Well, I have a Harvard Law degree, but I had a minor in Cultural Relations. I guess I’m okay with it.” I said, “Thank you very much.” We went down to the coffee shop and they looked for a little bonbon. I said, “We got to do better, ladies.” I got a half a dozen of the nice cakes.
We sat together and I went around the table and I asked them about their backgrounds. One of them was part Native American and part Irish. She was telling me about her history, how her family arrived, and what struggles they encountered and so on. We went around the table. The thing that was clearly very, very different is that the other executives who had been working together for many years … None of them knew any of the history of their colleagues. You can see the stark cultural difference, so critical.
Chris: That’s nice. Did they end up entering China and succeeding there?
Robert: They did. I’ve had several experiences where I’ve had Western businesses coming in, needing to negotiate things. And I’ve had to educate some of the CEOs about how to approach the problems. We clearly understand that the solution is that you want to increase shareholder value, increase return on investment. We get it. That’s all good and fine, but you need to use a different approach. We’ve seen multiple clients over the years come in and believe that whatever model they’re using on the shelf in New York is exactly going to be the same in China. We’ve seen some pretty bad failures that way.
Where the Chinese are very, very polite. And if they’re not used to that very immediate direct approach … They’ll be polite to the Western client and they won’t say no. But they’ll simply send them on a wild goose chase, until they end up going home with their tail between their legs wondering what happened.
Chris: They think, “Everyone’s so nice to us,” but nothing ever actually ends up getting closed … That’s interesting.
Robert: Well, we had a very interesting case. We were doing some work for … In the old days, it was still called Amoco, before BP had acquired them. They were building the single largest factory, single largest investment ever in Zhuhai. They had an entire vessel of pipes happily steaming its way to Zhuhai without any import permits. I mentioned to them, “That could be a problem.”
Typically, if you’re sending a whole shipment in and there’s no import licenses or permits, they would seize the vessel. You’d have demurrage charges, you’d have penalties, you’d have black marks against your name and so on. I figured that wasn’t going to be a good way for either side to get started with this very high profile project. The CEO said, “Robert, we need your help. We’ll support you. See what you can do.” I went to Zhuhai and I went to meet with the district commander. The District Commander of Customs. Imagine trying to book an appointment with somebody like that would be very difficult.
I went to the building and I asked “Where’s the boss?” They told me what floor he was on. I then proceeded to walk right into his office. Past everybody. I did it looking like I really belonged there. And it happened so quickly that nobody could stop me.
When I got in and opened up my mouth to speak Mandarin with the guy, he was so impressed and so pleased. He sat down. Again, we did the tea ceremony. We went through with what the Chinese would refer to as creating some human touch. I would say that is one of the biggest challenges for Western companies in China is not wanting to take the time and the effort to build some relationship. Again, I get it. Because America is a transactional culture. You can be successful just having a transaction. But that doesn’t work very well in China.
Chris: Well, thank you for those examples. I think people here maybe that haven’t been to China … These ideas of guanxi and relationships being important. These little stories you’ve shared bring that point home in really helpful ways for our listeners.
Another question I have for you on setting up a business. You mentioned the bank account. You hear about these WFOEs, wholly foreign owned entities. Can you say a little bit about what is involved in actually setting up one of those?
Robert: Sure. Sure. There’s actually two separate processes going on. The first process is the documentation handling in the home country. The documents all need to be both notarized, which can be done by a notary public or a lawyer, and they need to be authenticated by the Chinese embassy or consulate in the consular district where that business is located. That has to be done correctly.
Our group in China would hold their hand and guide them through and walk them through how that’s done. And then, the other processes will begin after that is done. We would then receive the documents. And then, there’s an entire whole other set of documents that have to be done in China. If you were to be setting up a business in Florida, where I am right now, you would go onto sunbiz.org. You’d get out your credit card, and in 15 minutes, you’d have an entity.
In China, there are 45 statutory declarations. Imagine, if you will, you go into one of the ministries. It’s hard for people to picture this if they haven’t been in a ministry. You go into a ministry and there is entire … Imagine, in a U.S. library, an entire wall filled with pigeon holes that have documents in them. They’re in triplicate in different colors. So if you want to start that process off for your U.S. customer, not only do you go into the ministry, you need to know which documents you need to choose from which pigeon hole. It would be very mind-boggling.
Our team would then guide the people through getting all of that documentation taken care of. Show you the articles of association, the shareholder agreement, and so on. And it’s very important that the documentation that is processed in America is accurately filled in. That there hasn’t been any changes in the Board of Directors and that things match up. Because what happens is that if it doesn’t match up, and you’ve done all of this work, the Chinese Ministry will reject it. What we do to avoid that happening is we would have the clients, prior to sending us over all of the documents, just scan the copies over. We actually… It sounds crazy.
We actually go wait in line and show the documents to the staff at the counter and let them check everything. Make sure they’re comfortable with it before we go through the process of notarizing and authenticating everything. That’s important.
Another part of the process that can be easily confused is that there’s always a concern about what we would refer to as registered capital. Now, China is one of the only places in the world that I’ve dealt with that has two different kinds of bank accounts. Including something called registered capital. Now, years ago, that meant that you had to lock up money in a bank account in China in order to have a business there. That’s not the case anymore. The concept of registered capital is simply an amount that goes on your business license, but it does mean that you have to send that money into China in order to function.
But we normally recommend that clients put in enough money to operate for several years. And the operating capital… If somebody wants to start a business without putting any capital at all, typically the Chinese ministries won’t take them seriously. If you’re not going to put in any money, why should we accept your business license? In terms of that process in China… I’m going to give an example of how relationships and understanding how to get things done is important.
I had a client that was into robotics in New Jersey. He desperately needed to get the entity up and running. They were doing some large consulting projects in China for Tata, the largest Indian consulting company in the world. So I actually flew into New Jersey. Gave the client some coaching as to how to prepare the documents that would make sense, would be easy, and we could proceed quickly. I got on an airplane the next day.
Robert: I flew into Shenzhen in time to go directly into the ministry. While my staff had their stack of documents to review with the people at the counter, I actually went into the office of the manager on duty. We sat and again, we went through the ritual. We drank tea together. We shared stories. I think it was quite helpful that I spoke with him not only in Putonghua, in Mandarin, but also in Chaozhou-hua, which is another dialect of Canton province.
You become like a part of the family. He then immediately approved. While my staff were queuing at the desk there, he came out and he said, “Please help our VIP guest as soon as you can.” Rather than it taking two or three months to finish everything and get it all approved. We actually did that whole process by the end of the day. I had the business license in hand.
Chris: That’s great. That’s well worth it to your clients. I’m curious. Just barging in some ways into some bosses office. How much of that … Do you think because you’re a foreigner speaking good Chinese? They must be shocked in some ways.
Robert: Absolutely. Absolutely. I think that if I didn’t have the cultural awareness and the experience and speak the different dialects … There’s no way I could do that. To the point where, when I’ve been troubleshooting problems before, we had clients that needed to get approved for different taxpayer statuses. If my own staff went with me, and I went into their offices to get help? The normal reaction of the Chinese officials would be to immediately question my Chinese staff, “Who is this guy? What do you want? What’s happening here?”
I have to tell my staff. Some of them are lawyers, accountants, very experienced people. Very sophisticated. “But guys, you can’t go in with me. It won’t work.” They have to sit outside and wait while I go in to make things happen.
Chris: No. It’s probably a lot more fun that way too. It sounds like it’s very interesting to actually be able to have these conversations with these administrators.
Robert: And I’ve tried to help in both directions. I had a time when a delegation from the Mayor of Hangzhou, which was the first place that I lived, the Mayor of Hangzhou was coming to Boston. At that time, it was during the period of Mayor Flynn. China was then considered a poor, communist country. No need to bother with them. The mayor didn’t even want to meet with the people.
Chris: Wow. Sure they regret that now.
Robert: One of the senators spent 10 minutes time. And then, when it came time for lunch. Rather than what the Chinese would do … Put out a big banquet and give you face and show respect and give you the best that they have … They ended up inviting this group to the staff canteen. The staff cafeteria of the government center in Boston.
The mayor was very circumspect. He didn’t know how to push that cup into the ice. For the ice of the Coca-Cola. Because they’re used to drinking tea. What he said to me is, “I guess they really haven’t warmed up to us yet.” Now, being very embarrassed because of understanding the cultural implications of totally not showing respect and not giving face … I got a van and I brought the delegation back to my house in the suburbs of Boston. My wife was from Hong Kong, and made a big banquet. We had nice wine. We sang Chinese pop tunes around the piano in my living room and really just had a wonderful evening sharing ideas. When I returned back to Hangzhou, the mayor himself actually came to my little Chinese barracks apartment. Picked me up in his own car. Normally, they would send a driver in those early days. In what they call, “A red flag car,” a hongqi (红旗 hóngqí).
That was the old communist famous car that you would see in old movies about Mao and others, and they would have the curtains in the car. But he came himself, and he brought me back to his apartment to drink tea, which was a very strong sign of respect. Because in those days, it was still a little bit dangerous to get too close to the foreigners. And then, he invited me to his neighbor’s home to also drink tea. And then, they brought me to the state guest house, for a 15-course banquet where the foods are delicately carved. The watermelon looks like a Swan. The cucumber looks like a peacock and so on. They absolutely give you everything that they have to show respect.
Chris: Wow. That’s another really interesting story. Very early too. I’d love to actually just go back in time a bit and understand. You mentioned you were there when it would’ve been sensitive for the mayor to be seen with a foreigner. How did you first get involved in China and start working on these deals?
Robert: Well, my first exposure to foreign travel and foreign languages is I was blessed. I grew up in the suburbs of Boston, in Newton. My high school gave me a scholarship to go to Bogota, Colombia to learn Spanish. It was my first time out of suburbia and I just fell in love. I was bitten by the bug.
And then, I went on to learn Italian in my high school from a drop-dead gorgeous Italian teacher. I used to sit in the front row and just gawk. And then, went to university thinking that I was going to pursue a career in Latin America, but China had just started opening up. I had a course in Great Books of the Far East and just fell in love with the whole culture. Decided I would begin learning Chinese. I used to walk around the campus with flashcards. Hundreds of characters.
Chris: Early 80s or so, is it?
Robert: Yes. It was the late 70s, early 80s. I would hang around with all of the Chinese students. I was the only American in the Chinese Students Union and I was learning Tai Chi. I just really fell in love with the whole thing. I was very clear on my goal that I wanted to go to China.
It was a little early in those days. There were very few foreigners in China. I graduated school, went to work in Boston. I couldn’t get a job quite yet in China. I was still looking. So I got a job in Chinatown, in Boston, teaching English to Southeast Asian refugees. Including many ethnic Chinese.
And it was a good cultural learning experience as well, because I went into class and these were families who had seen their relatives wiped out. Cambodia, Laos, the Killing Fields, Vietnam and so on. They still had a desire to learn, which was quite inspiring. In the middle of class, they would get up and erase the blackboard and pour me tea.
And I would feel embarrassed. I didn’t really know what was going on. I wasn’t quite so aware. I hadn’t lived in China yet. I said, “Mellow out boys. I can take care of it.” They were just trying to do the respect routine, right? At the same time, I started hosting some Chinese delegations for the Route 128 high-technology strip there. I convinced them if you want to do business with China, because China began sending scientists to America, you needed to have somebody who understood the culture.
So I became the bridge over there. Finally, my first place in China was Hangzhou. That was in 1984. At that time, China was such a poor country that you needed ration coupons for your food. They called that liang piao and you piao. The “Liang” meaning for the grain and “You” for the oil. For the cooking oil. There were very few cars in China. Mostly bicycles. I had my Phoenix brand bike.
Robert: It was, your work unit. They would issue your supplies. In this case, I got issued my Phoenix brand bike. On my first day…
Chris: What was your danwei (单位 dān wèi)?
Robert: “Danwei,” means your work unit. In those days …
Chris: Yes, I know danwei. What was your specific work unit?
Robert: That was Zhejiang Medical College. I was working for a group called Project Hope. Somewhat similar to the Peace Corps. After World War II, they had a great ship, “Hope,” that would go around the world. People would come on the ship for medical care and the Chinese government invited them to have land-based programs in China. I was their liaison and my job was to interact with all of the different Chinese government departments.
So I had my bike, and on my first day, I went out to a local noodle shop. That was called the xiaoshibu (小食部 xiǎoshíbù), a “small eating department.” You’d queue up with your ration coupons and with your foreign exchange certificates. Because in those days, the foreigners had their own set of currency. Get your steamer of xiaolongbao (小笼包 xiǎolóngbāo), your steamer of noodles. Small dumplings. You’d get your bowl of wonton soup. They’d count them out with a slotted spoon and put a little … What do they call it? The closed clip. To put your number on it, so you could pick it up.
When I came back out, much to my horror, my bicycle was missing. It was a big deal getting a bike. Not everybody had a bike. There was an old woman with her red band on. Said to me, “What’s the matter, little boy?”
And I said, “My bike.” She said, “Hold on a minute.” She went running around the corner and came back with a policeman. The policeman said to me, “Here’s your bike, but learn your lesson, foreign friend. Do not park your bike in a no parking zone.” I had parked my bike in a no bike parking zone.
Chris: Okay. That was the reason why the space was there, I guess.
Robert: Absolutely. When I would ride my bike, I would cause traffic accidents. Because you’d see people looking at me. And then, as they stared at me, it would be the domino effect. Whoa. There goes another 10 bikes. At that time, there was really a concept of human touch. Politeness. Helping one another.
They had a phrase called song renjia (送人家 song rénjiā) which means to see somebody off. It was so important and ingrained in the culture to see somebody off there was actually a phrase for it. They would joke. Because if you invited somebody and they lived 10 kilometers away and didn’t have a bike… You would bike to their place, put them on the back of your bike and bike back.
They would say, “Well, if you’re going to send me off and the etiquette is I have to see you off …” That would be called song bu wan (送不完 sòng bù wán) That means we won’t be done sending each other off.
Chris: An endless song-ing!
Robert: Certainly, there was some concern in the early days about mixing too much with foreigners. They had actually built us a barracks that we lived in. Being very friendly and open-minded, I used to invite all kinds of different people together. There’d be artists, there’d be singers. There’d be dancers. There’d be floor sweepers. Whoever wanted to come and join in. That made the locals a little bit nervous, so they decided that they were going to enclose our compound with a brick wall. They told us that was going to be for our own security.
I then had to have a meeting with the President of the University and explain that, while we were happy that they were concerned about our security and we really respected that, the Western culture wasn’t quite so used to being closed in.
We really wanted to make our contribution to the four modernizations, and the five-year plan. Wouldn’t it be a pity if we couldn’t make our contribution, because our American friends didn’t feel comfortable being somehow closed off?
It wasn’t a very direct, “No. Yes.” It was how to look at it culturally and use Chinese culture. Finally, they came up with a Chinese solution, where they built a half-wall with the glass sticking up and they posted a guard out front. But that was enough. It kept everybody happy and we were able to proceed.
Chris: Compromise. That’s good.
Robert: The idea of hosting a foreigner was so deep in the culture that I got invited several times to the village. Literally, people would meet you on the street and they would take you home and feed you.
I had one time when I stopped by a street corner and I was speaking Chinese with one person. A whole crowd gathered around me. I was a little bit tongue in cheek. I had to say, “Ladies and gentlemen, the zoo is now open. Please buy a ticket. Be careful. Because the foreigners might bite.” This interesting time. But they invited me home. And then, what I came to learn was because China was a pretty poor country … They would give you not only the shirt they had on their back, but their shirt that they didn’t have. They would borrow a month’s salary to buy a chicken, so they could show respect to the foreign guest.
I was embarrassed by that. It was a little bit painful to see people contorting themselves for me. I made sure that when I went back to the village to visit, that I didn’t let them know that I was coming. So that wouldn’t happen. A very different dynamic. One of the joys of working in China even now is that, while we have technology absolutely exploding … The hub of high tech in China is Shenzhen. You have companies like Tencent. Other high tech companies, Foxconn, and so on.
Even though they have WeChat, and you can control your whole life on WeChat, even the street vendor that you buy an apple from doesn’t want renminbi. They’ll scan you. Even the guy who you get on the back of his bike to weave through the traffic, to get to the ferry terminal. He doesn’t want renminbi.
They’ll scan you, but there’s still a concept of getting to know one another first. When some of my largest tech clients were approaching the China market, I had to again explain to them, “It’s wonderful that you’re good at Java and coding and all things IoT and so on. That’s great. But if you can’t make a relationship with the people first, that’s all going to be meaningless.”
You have to build that relationship first. And then, those things can come into play. One of our fastest growing clients now is a company called Jungle Scout that’s actually assisting the local Chinese on how to sell better on Amazon. What an interesting world we live in, right? That you see the saber-rattling here and there, but the Chinese are as hungry to get digitally into America and vice versa. That’s a new stage in the relationship that I see has got huge potential. During the pandemic, they hired 50 new staff in China. Again, we were there to help guide them through the setup. I actually went in-person with their chief to the bank. To use my relationships to get things up and running. Go in and drink tea and so on. Try to guide them in the approach to building that relationship. I’m happy that this concept of respecting other cultures, and in my personal case, respecting the fact that I know so much about China is still useful.
Chris: No. It’s been more useful now than ever, I think. It’s really …
Robert: I sometimes get concerned with the saber-rattling, if I won’t be quite as welcome as I used to be. But I think it should be okay. I was put to the test when I had a client having some trouble in China during the pandemic. I actually had never done that before. I had to try to do the remote guanxi.
I had gone into the bank to meet the bank chief when we were setting up. Wonderful woman. Her one son was in San Francisco. Another one was in Tokyo. Well-heeled travelers who know their stuff. But we sat and just had a great time getting to know one another and we were able to set things up quickly. Now, when there was some trouble with some due diligence going on and the Western client wasn’t so clear about what it was all about … They were worried about intellectual property. And I can’t share this. And I can’t share that. Not knowing there was some tension coming up.
That if we couldn’t provide all the proper information, that they were going to freeze the bank account. I was able to, from my old friend, from four or five years ago … She still remembered our encounter where we sat and drank tea together. She then said, “I’ve been promoted to a senior level. I’m no more in that branch. I’m more national.” But she then introduced me to her colleague from WeChat. I had to text in my Chinese first with the WeChat and get her phone number. Then, I could call and we could talk. She said she wasn’t the daily case worker. She was the branch manager. She put me to the case worker who said, “Okay. I’m in charge, but you need to speak to the woman behind the counter.” So I was up all night in America, doing the guanxi from my old friends, until I finally got through to the lady behind the counter and I was able to get things cleared up.
Chris: Good. That was actually where I was going. The example about the client who’s helping Chinese work with Amazon suggests that in some ways … In the pandemic, there’s areas of business that actually probably are thriving. All the personal relationships you’re mentioning. It sounds like it would be harder to do that if you can’t be there in-person. But it sounds like there’s some cases you’re able to actually do it over the phone, even though time difference makes it hard.
Have you seen other things change in the pandemic as far as your relationship building?
Robert: Well, I have actually pulled it off before. I did a factory visit virtually, which is tough. We had clients that were manufacturing. What I was able to do was to get the client, the factory owner on the other side, to take his phone with WeChat video call and walk the factory floor as I asked him questions.
We try to be creative, but I think that there are several areas that really are expanding. One of them that I’ve seen quite busy has been the concept of internet licensing. They call that an ICP License. In order to engage digitally in the Chinese marketplace, you need to do everything as if you’re competing with a local Chinese digital marketing situation. That would include … First of all, you need to have your own entity. We’ve seen over and over again. People try to piggyback on somebody else’s license. A local company will say, “It’s okay. Piggyback with me.” We had one client that was in the elder care field. They were setting up nursing homes in China. They followed this idea that, “Our partner will help us do this and that.” What ended up happening before too long is that Chinese company, because they had piggybacked to get the internet license, the American company didn’t own the intellectual property. And that company started marketing using their name.
There’s nothing they could do, because they didn’t have their own entity set up. We’ve had other clients try to do it on the side and underneath and up above and down. It just doesn’t work. You have to have a Chinese URL. A Chinese website, a Chinese server, a Chinese host. You hear stories about, “I’ll do it from Australia. I’ll do it from Hong Kong.” Here and there. It just doesn’t work. Because you’re competing with other very sophisticated Chinese companies that are marketing digitally in China as well. Google is not welcome in China.
Even if you had a masterpiece website in London or in New York, it’s not going to work. It won’t show up. They won’t find you. You have to have a unique Chinese user experience. Making believe that you are sitting in front of a computer screen as somebody in Shanghai or Beijing would be. What do they do when they sign on to look for something? It’s not the same as what an American might do. What things would appeal to the Chinese taste? How do you want to interact? We have actually, during the pandemic, helped Western businesses set up their entity and create a local Chinese website, so they could begin marketing digitally to the Chinese consumers.
We’ve also had situations where big pharma in America needs to have the ability through their contractors to upload and download clinical trials for patients to share with Chinese scientists. The ability to upload and download data requires that you need to have a business license. You need to be approved by the Ministry of Information and Technology in China. All of those things are areas for quite a lot of potential growth, I feel. It is encouraging even in the midst of the pandemic. As Martin Luther King used to say, “If you can’t run, walk. And if you can’t walk, crawl. But keep moving.”
We’ve had situations in different countries. Depending on where they’re at with COVID, where they’re at with shutdowns, where they’re at from working from home. Things are still moving. I give a lot of credit to my team to be very persistent.
I had calls with my team in Shenzhen a few weeks ago, when they were in lockdown. They were stuck at home with the kids running around and so on. Rather than the parents yelling at the kids to be quiet, I welcomed the kids to the talk and I sang Chinese songs with them. That was fun. “Keep it human,” is so important. I know you had mentioned before, “What are some of the biggest mistakes that I see Western companies making?” I never would be arrogant enough to tell somebody, in their own home country, how they should act or how they should behave. But when you’re going to another country and you want to be successful, you have to understand the dos and the don’ts and the etiquette and so on. The biggest challenges that we face are people not wanting to take the time to build a human relationship. It normally comes back to bite them in the ass later on.
Chris: These examples you’ve given are really great illustrations of that. Are there any other … Like a company comes to you, “One is, take the time. Build relationships.” Any other final recommendations you’d have as the last word here, Robert?
Robert: Normally, what I try to tell customers is that it’s best if they have a business model in their home country that’s already functional. Because I’ve seen companies say, “I want to do a startup in China,” but they don’t even have the business plan working in America. That normally doesn’t do too well. The second thing is, when you’re looking to go into China, why are you going there? To have a clear vision. Very, very important is to understand that China is a long-term prospect. You don’t go in and then overnight you’re a huge success. It takes time and there’s learning.
There’s learning on the ground in China and learning about your consumers in China. Learning about how to deal with your staff in China, which is a different dynamic than here. All of those things are very important. We approach our customers as if their business was my own business.
My passion has been helping Westerners succeed in China. One of the biggest frustrations is when the people aren’t willing to adapt or adjust. And then, you see them fail and you could call that it was coming.
Chris: Right. Super. Well, really very helpful thoughts and advice. I really enjoyed our discussion. Not only does it have good ideas, but then also illustrated with some really nice, human stories.
Thank you so much, Robert, for joining us on China Corner Office.
Robert: Okay. That’s my pleasure.
Former U.S. Ambassador to China
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