Wheeling and dealing

The most disappointing aspect of James McGregor's book is its title, One Billion Customers, exploiting a tired theme that dates back to Lord McCartney's first British trade mission in 1793. To be fair, McGregor makes it a tribute to Carl Crow's 1937 book, 400 Million Customers, which he refers to in his forward as a "rich trove of anecdotes and insights about the Chinese people and doing business in China, much of which still holds true today."

But having dutifully reported my quibble, this work by a veteran Wall Street Journal correspondent and former chief of Dow Jones in China is a must read for anyone contemplating setting a commercial foot here. McGregor's obvious love for the country does not blind him to what so of-ten appears as a snake pit of double-dealing, bad faith and widely accepted corruption.

Tempering the negative anecdotes provided in a dozen case studies is the assurance that China's business environment is better than it was. At the end of each chapter is a section called "What this Means for You," which draws lessons from the case studies, although most relate to corporate giants and may well be beyond the operational scope of new players. His handy "Little Red Book of Business" bullet-point maxims are also useful and should be absorbed before any meeting with the Chinese on the other side of the negotiating table.

McGregor starts with Richard Nixon's 1972 kick-off visit, which heralded a disastrous McDonnell-Douglas aircraft deal, all the way to last year's more hopeful, but still risky Lenovo-IBM tie-up. McGregor traces a gradual advance from less to more equitable transactions. But we are still not out of the swamps.

Few Chinese officials believe in communist ideology, says McGregor, but it remains a vital element of political correctness and will be upheld vehemently in public even by those who ridicule it in private. But his repeated advice is to include in all sales pitches the line that the deal is "Good For China."

Chinese negotiating style, he says, is siege craft aimed to wear down the other side. Never fall for being called a "friend of China," and reply that good business makes good friends. Chinese negotiators can also be insulting, he says, but insults must never be returned. The Chinese have been indoctrinated from childhood to listen to interminable tirades and speeches. What you can do is return fire politely, and have a long "loop" of blather in response, never forgetting to repeat those tough questions they failed to answer last time and the time before that – and how your idea is good for China. It's called the "iron ass" strategy.

Much of what McGregor presents is second-hand, taken from interviews he did as a Wall Street Journal reporter, but he also has personal experience as a negotiator as chief of China operations for Dow Jones. He tells of his hard-fought victory against Xinhua, the official news agency. When Xinhua announced that Dow Jones Wires and Reuters had to allow Beijing to set prices of their services and have material submitted for censorship, McGregor decided to fight. At first, Xinhua assured him that it was really attacking Reuters, which had the greater market share, a ploy to play one foreigner against the other. But the Reuters chief and McGregor together organized an effective counterattack – with a little help from their friends.

As McGregor admits: "We were able to enlist … President Bill Clinton, Treasury Secretary Robert Rubin and Federal Reserve Chairman Alan Greenspan. You may not be able to recruit such heavyweights, but [use] your congressman and various business associations and trade groups … My advice is that you write letter after letter. China is ruled by the pen, not by the sword. Blanket the bureaucracy and leadership circles with polite and professional letters that poke holes in your adversary's action by asking questions and raising issues that will bolster your point. When Chinese bureaucracies get these letters, they feel compelled to respond."

McGregor has put together a handy and highly amusing book from his wide range of experiences in China both as a journalist and as a businessman. It will serve old and new China hands alike, and will provide much comfort and guidance to those trying to secure some of those one billion customers.

One Billion Customers: Lessons from the Front Lines of Doing Business in China, by James McGregor, published by Nicholas Breadley Publishing, 312 pages, Available on amazon.com at US$17.82.

Excerpt: on working with Chinese associates
Top down management under a benevolent dictator has been the encoded social order in China for thousands of years and is by far the prevalent business management model in the country. Ancient China was ruled by the Confucian notion of the Five Relationships–ruler to minister, father to son, husband to wife, older brother to younger brother, and friend to friend-that were based on the principle that the superior and the inferior in each relationship had both rights and obligations of benevolence, obedience and proper behavior. Even today, the Chinese respond to charismatic and visionary leaders who can tell them what to do to be successful and who will take care of them. In many cases, the boss is even a substitute for the law, handling any problem that arises, including disputes between employees and family problems. So far that approach has been reasonably successful. But once a company's reach extends beyond the Chinese borders, or needs creative talent in areas like research and development, the Chinese model falls short. Without professional management systems, few companies can survive beyond the life span of their all-powerful founders.