Tim Clissold -- Mr. China: A memoir (an adventurous young man collides with a vast nation on the brink of capitalism)
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There are really 2 books here:  The first is about the author and
his learning experiences with Chinese ways and Chinese business
rules (or the lack of rules).  The second is about the author's
work as a representative of an American investment company
attempting to form joint ventures with Chinese manufacturing
companies in China.

Some books are entertaining; some books are enlightening.  This
book is both.

This book can be viewed as giving a picture of the period that was
the precursor to the current one dominated by the business model in
which Chinese companies under local management produce products on
demand for export to be sold by foreign companies in foreign
(non-Chinese) countries.  The experiences described here follow a
different model, one where a U.S. (or British or European) company
tries to take a part owner and joint management role in a Chinese
company producing products for sale inside China, for example
machine and vehicle parts for Chinese vehicles, beer for consumption
in China, etc.  Different customs and values, different
management styles, lack of cooperation and unwillingness to give
control to a foreign outside company, and, in some cases, blatant
fraud are a few of the problems, challenges, and "learning
experiences" the author encountered and benefited from.

However, China now seems to be in a period where they are having
success with companies inside China, under local ownership, locally
managed, and possibly supported by subsidies, currency manipulation
to maintain a low value to the Chinese renminbi, etc.  Is there an
explanation of how the transition to this period succeeded?  That's
the next story I'd like to read.

A few additional questions:

- Did American/foreign investment and joint management/ownership
  enable the old, rotting, inefficient factories described by
  Clissold to convert to efficient production of consumer goods for
  export to the American market?  Or, were those inefficient
  factories and companies replaced by entirely new companies?

- How did the recent round of Chinese-owned manufacturing succeed?
  Where did they get their expertise and their technology?  Did they
  learn from, then take over from foreign joint ventures?  If so,
  was the cost to the foreign investor of doing the joint venture
  the technology and business practices expertise that was passed
  along to the Chinese company?

- What support from the Chinese government was needed to help these
  companies succeed?  Tax forgiveness in "enterprise zones"?
  Technology transfer from other companies?

Clissold makes clear, through numerous entertaining examples, that
there are serious problems with the use of the joint ownership
business model.  For example:

- Joint ownership makes it difficult to maintain separate accounts
  for the different owners and also makes to difficult to prevent
  unauthorized and fraudulent transfer of funds between those
  accounts, e.g. into the accounts of a Chinese partner.

- It is difficult to prevent the Chinese partner from setting up a
  rival company that successfully competes with the jointly owned
  company through the use of technology and funds from the jointly
  owned company.

- There is a significant cost in attention and time when dealing
  with Chinese partners, Chinese workers and their unions, and
  Chinese government officials whose interests oppose the foreign
  investor and who refuse to cooperate.  The foreign partner cannot
  assume good intentions or cooperation, the foreign partner has
  little leverage apparently in getting that cooperation.

Given the extreme nature of these problems described by Clissold,
it now seems that the joint ownership model he describes could be
viewed as either (1) a failed experiment or (2) as a temporary
technique, a trick actually, used to get businesses in China going
at the expense of the technology and funds from the foreign
(non-Chinese) partners.  That's my outsider's view; it'd be good to
get an expert analysis on this.

You will learn lots about business in China from this book.  And,
you will be shaking your head in disbelief and rolling your eyes in
amazement and amusement at the entertaining stories.  But, you will
end up with plenty of questions, too.  Perhaps that's one of the
real values of this book: it makes you interested enough to want to
learn more.

06/20/2010

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