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Come in, but stay out.

 

China-Russia relations are a prime example of a love-hate relationship.  The two countries’ trade, tourism, business development, and border protection policies vary from warm and fuzzy to bitter cold.   A city right on the China-Russia border, Hehei, is known for its ritzy lights, cheap electronics and clothing, and booming tourism industry.  Russians often travel to Heihe for pleasure, but few Chinese are able to cross into the Russia for the same — which has in turn caused China to publicize its border control efforts.   

At this section of the Russia- China border, the two are inextricably linked — the oil pipeline, the cross-border trade, and the inter-cultural marriages.   There is, however,  an underlying mistrust between the two — a classic case of Spy v. Spy in a variety of organizations, enterprises, and business ventures.  Issues of electricity supply and pricing, oil distribution, and general control of natural resources force the countries to constantly be skeptical of each other.

I dare say that the Russians need to stay on their guard a bit more, and consider whether they are really ahead in their China-related ventures.  If they can’t ascertain whether they are winning or losing; chances are they are losing.    

“Therefore, just as water retains no constant shape,
    so in warfare there are no constant conditions.” – Sun Tzu, Art of War

 If one wants to track business opportunities with China, I suggest tracking by industry.  Today’s flavor of the day: wind energy. 

Tracking money coming out of China can be as simple as tracking what incentives and new programs the Chinese government is promoting; that is where the money originates from. 

China Energy Conservation Investment Corporation (中国节能投资公司) is a good example of  a governmental vehicle used to direct funding into a top-priority industry — clean energy.  If you watch the deal news, large-ticket joint ventures and equity deals are being financed by Chinese banks and other forms of government funding.  The Chinese have become increasingly sophisticated in making the wind turbine components at low-cost, and with government funding to obtain majority control in wind turbine deals in the U.S., these deals are becoming more and more attractive for all involved.

 

 

 

 

Besides being very amusing when translated, Chinese proverbs are often very insightful to Chinese culture and the Chinese way of thinking.  One of my favorites is:  Three feet of ice is not created with one day’s cold temperature (冰冻三尺非一日之寒).

Obama’s trip to China served as a small contribution to decades of hot and cold U.S. – China relations.  Many expected him to take one trip to China and solve all trade, currency, economic, human rights, and political issues; such way of thinking betrays a misunderstanding of China.  In China, relationships are built slowly and gradually over time.  In such public forum, with topics on the table that are so pertinent to China’s national interests it would be wildly peculiar if China gave the United States any headway in negotiations.  It is typical and should have been expected that nothing (at least from a U.S. perspective) would be accomplished.

Expecting substantial progress in negotiations after only one trip to China is a common pitfall among Americans in the political and business atmosphere.  For example, a New York-based investor relations boutique recently sent a Chinese consultant to China to address business development needs and to sells its company’s services.   It provided the Chinese consultant with a list of companies, or leads, to call and to meet with.  It called  the consultant two or three times a week asking for progress updates, to see if any new accounts had been gained.   When the consultant returned to the U.S. after one month’s time, the U.S. client was stunned to see that no new clients signed onto contracts for its services.   The consultant reported that it had met with several of the leads on the list, had lunch or dinner with them, and even made friends with a few.  To the Chinese consultant, this was progress; the U.S. client saw it as a waste of time and even more so a waste of its resources.  Needless to say, both parties were displeased.   

We didn’t really expect President Obama to spend 2 days in China and solve decades worth of China-related issues, did we?  Some of us did — which leads me to my final Chinese proverb which properly addresses our current state of U.S.- China relations:  When you need a person you should suspect them, and even though you suspect a person, you may still need them  (用人要疑疑人要用).

In efforts to gain a physical presence in China, many U.S. businesses open representative offices on the ground.  This is a relatively low-cost and low-hassle way to gain a physical presence in China for foreign businesses.  However,  a representative office requires a chief representative to run it, and most times U.S. businesses will seek a Chinese national to fill that position. 

Unfortunately, Chinese national chief representatives are often caught between playing by U.S. rules (i.e. acting within the legal bounds imposed by the U.S. headquarters) and Chinese rules.  Despite being illegal, bribes and other forms of coercion are all too common in China, and U.S. businesses need to be sure that their China office conforms to U.S. legal and ethical standards. 

Regardless of the “when in Rome” mindset that a China-based representative office manager may have, the U.S. headquarters will most certainly be judged by U.S. standards.

回不回家?

每一年我想回哈尔滨看冰灯,但是孩子太小了,买四个人飞机票太贵了,工作太忙了。今年我想是不是应该带他们去看爷爷和 奶奶?我也想回去。如果明年一月份回去的话,孩子可以看哈尔滨冰灯。看看吧。。。

1_哈爾濱冰燈050

Each year I think about traveling to my husband’s home in northeastern China and seeing Harbin’s Ice and Snow Festival.   But the kids are young,  it’s a long and expensive trip, and getting time from work may not be feasible.   This year I am thinking that I ought to take the kids to visit their grandparents.  I myself would enjoy the trip.   If we go in January, it will be just in time to see ice castles and snow sculptures.   We’ll see.

Follow the Money

If every five years we note a single trend of what is profitable with respect to business transactions involving China, surely capital markets will be in the running for the next few years.

The amount of money that is being raised for Chinese enterprises doing IPOS in the U.S. and HK, is impressive during a period where others are scraping for funding. 

A with success stories such as Evergrande, when will it end?  And how will it end?  I guess we will have to wait and see.

 

Credit Risk

While in China, I am always amazed at how a country with such enormous financial capacity can lacks fundamental financial regulations.  The most recent example of this is best illustrated by the introduction of credit cards to China. 

1)  Card holders are paying late or just not making payments.  Credit card debt at least 6 months overdue is up 131% from last year. 

2) Banks are not doing their due diligence before extending credit.  Little documentation is required to get a credit card in China; sometimes all that is requested is a business card. 

3)  Lack of education regarding responsible use of credit.   Stories of young Chinese racking up debt in the amount $30,000 USD (210,000 RMB) before the age of 30 is common. 

So now what?  China’s major cities, Beijing, Shanghai, Guangzhou, Shenzhen will be filled with middle age Chinese drowning in debt.  We might as well write-off the  8% growth projection for 2010. 

And since consumer protection in China is essentially non-existent, the parents of those irresponsible credit card holder will continue to experience harassing phone calls and threats to seize property.    Well, I guess each country has the right to learn the hard way.

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