China Twist

SAN FRANCISCO – China may now be the world’s second largest economy and the engine for economic growth in a world beset by recession, but a growing number of its fast growing upwardly mobile population seems to feel it is an iffy bet for their future. They are voting with their feet.

The growing number of Chinese who call themselves middle class but without the right connections are now dreaming of the attractiveness of migrating to countries like the United States, Canada and Australia. Often enough, even those with the right connections, “princelings” in fact, also find it safer to have a foot inside a major Western country, just in case…

Ed Liu, my old UP MassComm classmate who had taken on a career as a lawyer in San Francisco serving the Chinese community, has seen it all. Ed has an interesting way of classifying these people on the move…

“‘Sea Turtles’ are those Chinese professionals who have gotten themselves ‘wet’ with education in US colleges and universities and training in hands-on employment in US tech or financial services companies or other skilled professions in the US who are lured back to China to apply their skills and experience in Chinese ventures.

“These bicultural professionals have become the ‘engine’ and ‘incubators’ for many creative endeavors inside China. They work both ends of the trans-Asia-Pacific Ocean. They are seasoned in US work culture, business practices, imbued with American corporate skills...but have now reverse-migrated ashore in and back to their homeland ‘to lay their eggs’ to spur China’s growth.

“The downside and unsuccessful side of this ‘reverse migration’ is the ‘Sea Gull’ phenomenon...

“The ‘Sea Gulls’ are ‘drifters’. They are between two shores but can’t quite land in either end of the trans-Asia-Pacific. Many are mid-aged high-tech professionals, often ‘downsized’ or let go by their American employers, tried to go home to China to re-start or re-boot their careers, but can’t land on their two feet there!”

Then there are those of Chinese ancestry, second or third generation American-born, who feel the need to go back to China attracted by a booming economy. Wen-Szu Lin and Joseph Sze are good examples. Born and raised in the US, with MBAs from Wharton and holding well paying jobs, they itched to try something entrepreneurial… in the world’s fastest growing economy… China.

They found out the hard way it wasn’t easy. It isn’t as if they were not warned. Writing a book that chronicles their adventure in China, Wen-Szu Lin recalled that “an investor once warned us that ‘opening a business in China is like experiencing Chinese water torture.’ A ‘China Twist,’ so to speak. A fitting description, given that we were opening a pretzel chain.”

The book, “China Twist”, available in Amazon this week, is a must read for anyone who is thinking of opening a business in China. But it made me wonder why a Chinoy like Carlos Chan who didn’t go into any fancy Ivy League business school end up with over a dozen factories and a successful business manufacturing Oishi snacks in China while two MBAs from Wharton, also with Chinese genes, couldn’t make a go out of establishing something as simple as a franchise operation for Auntie Anne’s pretzels?

Perhaps the difference between these two Chinese-Americans and the Chinoy taipans who were successful in China is cultural sensitivity. The Chinoys are acclimatized to the Chinese ways in a way someone coming from America isn’t. As Wen-Szu relates it in his book, their problems can be summed up by two concepts: “cha bu duo” and “guanxi”.

“One common phrase that represented the general attitude of many local Chinese was the concept of ‘good enough.’ In Chinese, the phrase is ‘cha bu duo’ literally means ‘not much difference,’ although the meaning is closer to ‘good enough’ in English. This term could be applied to all sorts of situations.

“Ask for a latte but get a cappuccino? Well, ‘cha bu duo.’ Ask a printing company to correctly spell your name on a business card, but they still print it wrong anyhow? ‘Cha bu duo.’ Ask for a vegetarian meal but still get bits of ground meat in the dish? ‘Cha bu duo.’ The excuse got tiring very quickly, but in 2008, it was part of common life in China, professionally and personally.

“‘Cha bu duo’ was not an attitude easily acceptable for someone who demanded precision and quality like we did. As one of my friends here elegantly phrased it, ‘cha bu duo’ my ass, I need this to be perfect.’”

Okay now… that sounds familiar to us… Puede na yan! A Filipino Chinese can relate to that in a way that an American Chinese can’t.

Then there is “guanxi.” Here is how Wen-Szu related how they hit the wall with that one. Their experience also sounds familiar in our setting.

“Many government employees were paid at most a few hundred US dollars per month, yet their decisions on licensing and enforcement could save or cost companies millions. This unbalanced equation led to an obvious incentive for firms to give gifts, and create a culture where government employees demanded them.

“China was making an effort to crack down on the graft. Everyone knew that the hunt was on. Did it stop the bribes or gift-giving from  happening? No. The format of how it was done simply changed. Now, most government employees would only take gifts from people they could trust. Finding a relationship channel that led back to a government employee became a key action item for companies. Otherwise, one needed to invest a lot of time in building up the trust of a government employee to get them to accept anything.

“Incredibly, this system powered by relationships, or guanxi, was still faster than any ‘published’ processes. Given our Western upbringing, we had a difficult time believing the significance of relationships in this culture.”

And so they took months trying to get regulatory permits to get their business selling pretzels going. They found the process nerve wracking every inch of the way. They were at the mercy of bureaucrats who didn’t care about their timelines or the amount of investor money at stake. Reading the details of their horrifying experience makes me wonder how China managed to attract as much investor capital as it did over those years.

Indeed, the water torture analogy was appropriate.

“The concept behind Chinese water torture was simple. Immobilize a victim. Drip water on the victim. Repeat. Again. And again. And again.

“Drip. Repeat. Again. And again. And again. That is it. Watch the victim go insane.”

 For instance, “CIQ had discovered a dairy bacteria in our pretzel mix. How were they able to detect dairy bacteria in a pretzel mix that had absolutely no dairy content?”

I enjoyed the portion of the book which described the office scene when Wen-Szu went to see the bureaucrat who ordered his shipment of ingredients quarantined. It’s hilarious… so long as it isn’t happening to you.

“He looked busy, his expression serious as he stared at the screen in front of him, squinting to see what must have been small text. I was thoroughly impressed by his concentration, unexpected for a government employee. After waiting by the door for a few seconds, he shot a quick glance over at me. ‘Please wait for a few minutes as I finish up my work,’ he said in a deep, professional voice.

““No problem,” I tried to say cheerfully and nonchalant, wanting to make a good first impression…  After my quick visual tour of the room, Mr. Zeng was still not finished. He still had the same razor-sharp focus on his computer, but now I noticed that he was not typing with both hands, and instead had one hand navigating the mouse. The mouse crisscrossed the mouse pad in a frenzy. What was he using? Excel model? Proprietary customs software?

“An explosion answered my question. Faint sounds crackled and exploded from his computer. I leaned in and listened carefully.

“Shhuuuu….boom! Boom. Boom. Crack, pop, pop, pop. Boom!!! That was not music. It was the sounds of guns and bombs going off! I realized. Mr. Zeng continued wriggling the mouse, clicking on its buttons while his left hand tapped the space bar and several letter keys with lightning speed. I envied his focus. I could see his screen reflected in the window behind him.

“His computer monitor was full of monsters trying to kill each other. Warcraft! Well, a Chinese version of it. Mr. Zeng was not working tirelessly to clear as many customs forms as possible before the Olympics—he was playing computer games.”

No wonder this Chinese American duo gave up on China. That’s probably also why Intel and other foreign investors have given up on us. It’s torture and somehow, it can’t be worth it.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco