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Superficial impressions of business in China

I’m walking down a residential street in Tianjin. Food vendors hustle their wares for dirt cheap prices. A whole Peking duck for $3.80 USD? Sign me up for that! As I bring my spoils back to my girlfriend’s apartment, I can’t help but feel like I’m caught back in time while the rest of the country is moving in fast forward. 

I’m on my computer looking at valuations of companies in the healthcare/pharmaceutical space. $500M here, $300M there. Whatever your conceptions of speed or size are in the Valley, I assure you, they have nothing on China. The game being played in China is big and aggressive. And Clay Christensen’s “Innovator’s Dilemma”? Nowhere to be found. Alibaba does everything from B2B sales to B2C pharmaceuticals. Big companies just aren’t slow here. What about the startups? Even more fast and furious. 

As a foreigner, China is a daunting place. Almost every perception of what you think you know about doing business basically doesn’t really apply here. In the Valley, the prevailing ethos is “find product-market fit, that’s the only thing that matters”. In China, product-market fit is far from the only thing that matters. Want to hire a doctor to offer healthcare services? Minimum $3M investment. Also the law may have changed a few months ago. Your business might not be legal in a few more. 

A mentor of mine once said “China has done in 30 years what the West has done in 200”. And he’s right. The laws haven’t caught up with China’s breakneck economic speed. That means that laws relating to everything from IP to regulatory issues relating to food are being figured out, and fast. The laws have huge impact on how China looks and feels. Last year, in Shanghai, while eating an egg pancake, my street vendor picked up their cart and ran away from the police. This year, I couldn’t find a single street vendor. 

Chinese product/service design is vastly different from how we view products in the US. In the US, we tend to favour dead-focused application specific businesses. In China, everything is a platform and every feature needs to be crammed in. In the West, WhatsApp is a texting app for friends. In China, WeChat is a home screen, mobile payments platform, and the gold standard for how business is done.

Everybody seems to be incredibly entrepreneurial. Got a medical problem? You could wait in line for a doctor, or I could sell you my place in line. Yes, this is an actual "business" that exists in China. It doesn’t just apply to the 20 somethings, either. Lines to clubs at 2 AM can be seen accompanied by mothers selling roses so the guys can impress their dates. Whether you’re young or you’re old, people here are doing what it takes to survive and thrive. 

There is a downside to this level of hustle, however. The ethical bar here isn’t quite as high. Scams are the norm and there seems to be a lack of consumer confidence in Chinese brands. Western brands are, therefore, perceived as high quality and trustable. I feel as though it’s saying something when you believe that Western brands are trustworthy.

In the West, we’re 100% fine with transactional relationships. In China, not so much. The sales cycles here are several times what they are in the US. Wining and dining is an integral part of the sales process. It seems as though you must be friends before you can do any level of business. Being friends means you trust each other. Trust is precious in China. 

Silicon Valley is very well respected here. When you say Silicon Valley, people listen. For whatever reason, meetings here are much easier to get than back in the actual Silicon Valley. People are more humble, more willing to lend an ear, and more willing to help. The business culture, while it can be cut throat, can also be very endearing. I feel like when someone invites you to a dinner with family, it’s an honour. That seems to happen a lot more often here than it does out in the West. Some levels of communication transcend language. Family is the gold standard of what you mean to someone and it seems like people can be very open to making you family.

Manufacturing is particularly strong here. That makes sense, everything is made in China. But it’s slowly creeping away from China and that’s scaring a lot of people here. China is no longer cheap to manufacture in, so folks are starting to move their factories elsewhere. Southeast Asia, India, etc. In commodity markets, where many Chinese players make their living, operational efficiency is king. China is going to move to a service based economy and it’s going to shake the world. That said, that transition may take time. Strong value chains have been established in China. It’s hard to move and justify the cost when your supplier goes from being right down the street to 1000 KM away. Transportation costs may end up making China the best option in the short term, but not forever.

The strong manufacturing base here deserves a special mention. If you want to do anything physical, be it a cell phone or athletic wear, you can have it made here relatively quickly. If you were in North America and wanted to do the same, you’d have to find a factory in China. Being here seems to dramatically lower the barriers for getting a product into the wild. There are entire networks of expats who’s expertise is finding what sells on Amazon, improving it, and finding a supplier in China who will make those designs.

You might think of China as one country but it’s incredibly diverse and fragmented. There are 8 culinary cuisines, some 200 dialects spoken, $6,800 USD average GDP per capita but 1.3 millionaires living in China. You could fill Montreal (or almost 2 San Franciscos) with the number of millionaires in China. There is no one size fits all here. 

The societal issues are deep, complex, and interesting. China has 6,000 years of values and customs that it has to contend with in a modern day context. Traditionally, the financial burden of a family falls onto the kids. Today, because of the 1 child policy, we have 1 kid to 2 parents and 4 grandparents. Unmarried by 30? You’re considered “left over”. From my understanding, women always have had a strong role in the work force, but nothing as it is today. The traditional roles of women, as they are in the West, are being challenged.

There is a silver lining, however. It seems in many ways, China is further ahead in the discussion (if you can call it that). Talking to students here, it seems like 40% of engineering classes are women. When I go to a muay thai class in Hong Kong, more than half the time there are more women than men. There’s no “Lean In” movement here to be spoken of, it just seems like a byproduct of culture. China, on some level, seems more meritocratic, more results driven.

Religion, as with all cultures, seems to have played a very strong role in forming Chinese values and attitudes. Confucianism, Buddhism, and Taoism are all practiced here. They all seem to have a few core beliefs that are commonplace in China and it affects everything from relationships to raising children. Everything has it’s place. Resistance against nature (the way) is futile. Repetition is the mother of skill. And so on.

One area where that seems to be readily evident is China’s education system. It seems like China’s education system is very much a byproduct of Confucianism. Repetition is king here. So much to the point where many Chinese graduates are criticized for lacking the creativity that we value so much in the West. 

The Chinese Communist Party’s leadership is composed 90% of engineers. The way the party acts is a reflection of their craft. Engineers are efficient. Engineers tend to think in terms of systems. Engineers are incredibly good at focusing on specific metrics. Most engineers, however, are not associated with being incredibly compromising. The West’s leadership is composed primarily of lawyers. Lawyers, like engineers, are logical. But where engineers build systems, lawyers build rules. China is has been purpose built to grow. The same cannot be said about the West where compromises are commonplace. In California, taxes are high, the infrastructure is horrid, and debate on housing, banal. None of these issues would exist in China. 

You could write entire volumes on what China is, was, and will be, and only scratch the surface. China is deep, vibrant, quirky, and beautiful in it’s own way.  

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